Helping the Corporate Enter Rural World

Rural markets have always been the final frontier for marketers-remote, little


More Picturesknown and sometimes forbidding. Confidently familiar with buying habits and preferences of urban consumers, most brand owners falter when it comes to grappling with the last mile in the consumer goods (and services) value chain. Help is at hand, though. A bunch of small rural marketing firms has been helping companies, particularly in the FMCG and consumer durables businesses, address this challenge. Now these firms are set to take the next leap forward as new companies in emerging sectors like telecom, IT, automotive and financial services are gearing to tap rural consumers in a big way. "We are overbooked...the biggest corporates like Intel, Unilever, Microsoft and others are chasing us," says Pradeep Kashyap of MART, among the earliest entrants in this space. The New Delhi-headquartered MART, founded in 1993 by Kashyap, offers services like research, strategy formulation, doing pilot launches and hand-holding clients though their rural forays. Kashyap is of the opinion that firms like his will play a pivotal role in helping corporates tap into the over-Rs 200,000 crore opportunity-the rural market. "Consumption patterns in rural areas have not been affected by the slowdown. Rural India is still very lucrative," he adds. Pradeep Lokhande couldn't agree more. In the current economic downturn, Lokhande, who heads Rural Relations out of Pune, says these are the best of times for him and his team. The firm recently carried out one of its biggest activation events recently, where it identified 1,800 franchises across 10 states to sell Reliance Money's financial products. "Earlier, the market for financial services was restricted to urban centres but liquidity-wise, the rural customer is very stable, as he's insulated from market fluctuations, unlike his urban counterpart," says Lokhande, adding, "Most top-of-the-line companies today are trying to understand rural audiences and their needs. I have sold everything from soap to a Tata Sumo. With satellite channels penetrating India's heartland, the rural consumer today is every bit as important as the urban one. After all, while there are 5,000 towns in India, the number of villages is 6.5 lakh. Going ahead, this vast market will drive revenues for our clients," he says. Since the mid-eighties, making inroads into rural markets was considered a big priority for leading consumer goods companies. However, rural demographic data was hard to find. And with even the tier-I and tier-II cities relatively untapped, the thrust on promoting brands in villages hadn't really taken off. This gave rise to entrepreneurs, such as Lokhande who offered to go where no city-bred marketer had gone before.
A native of Wai (Maharashtra), Lokhande started with an 18-month stint with Johnson & Johnson, which introduced him to large parts of the hinterland. Rural Relations was born in 1993 out of Lokhande's Pune residence after he figured an under-tapped opportunity in rural marketing and research. Hi company did business worth Rs 1.5 crore last year. Says Lokhande, "Marketing a product or service in a rural centre is like sowing a seed. You have to wait for it to take root." Indeed, the seeds of some of the foremost innovations in rural marketing were sown by FMCG companies like Hindustan Lever (now HUL) that were looking for new ways to reach rural consumers. In 2001, when HUL embarked on a mission, titled Project Shakti, to reach out to villages with a population of 2,000 and less, it brought MART on board to help. Kashyap recalls that his solution was typically a grassroots one and simple: "We decided to target women's self-help groups spread across the country and began training women who were to act as distributors of Lever's products." This concept of a risk-free micro-enterprise in small villages was a global first and won multiple awards. Today, the project covers over 46,000 villages across the country.
Another old players in this segment is Mumbai-based Sampark Solutions which came on the rural marketing scene in the 1970s. Initially, Sampark used


More Picturesthe most influential medium of the time-radio-to connect with rural audiences. Tracing the history of Sampark-and by effect that of rural marketing-its managing director RA Patankar says those days clients were mainly companies that made fertilisers, pesticides and seeds. But with saturation in the urban markets, consumer goods companies started focusing their attention on rural avenues. Sampark was the first firm in India to introduce mobile video vans as a media in the early 1980s. The demand for rural marketing services is coming from across industries now. For quite some time now, the Indian government has been trying to put a number of public services on high-technology platforms for the rural populace. While it wasn't too difficult to get technology solution providers onboard, ensuring that rural consumers actually avail of these services in large numbers remains a challenge. Spanco Telesystems & Solutions is one such provider deploying rural marketing firms to communicate better with the locals about the efficacy of its services. It plans to set up 3,689 communication service centre kiosks in Maharashtra (Konkan and Pune areas), a project that's slated to start in December 2008. These kiosks will enable villagers to participate in e-governance activities, such as registering births, deaths or land purchase and also engage in B2C activities like buying banking and insurance. "We had the technology, but we wanted someone who understood the ground realities in order to get franchises for this model. That's when we decided to rope in Rural Relations." Rural Relations will handle the local print, outdoor and radio advertising for Spanco, customising messages so as to speak to the customer in his/her own language. That is the advantage free-standing rural marketers offer, compared to the rural marketing arms of ad agencies or companies themselves-intimate knowledge of local markets. Take Khurram Askari, for example. Askari is the CEO of four-year old Insight Connect, a rural marketing agency focused on Andhra Pradesh and Karnataka. Earlier this year, Insight Connect teamed up with Tata Motors to sell Tata Magic, a passenger vehicle modelled on the Tata Ace. "We used burra kathas or folk art to communicate with the locals and help them understand the product," he recalls. Askari hired a professional troupe to perform burra kathas to promote their clients' offerings. "The medium used depends on the product or service sold," Askari says. For selling Max Vijay, a low-cost insurance policy by Max New York Life insurance, Insight Connect teamed up with a local NGO to reach out to potential buyers. His firm, says Askari, has been growing at a robust 70% year on year since it was started four years ago. "We are a niche player and we don't plan to expand beyond the South India. There are larger marketers and ad agencies that have a pan-India presence, but we prefer to be known as experts in this specific territory," he affirms, adding, "The challenges we face are primarily logistical and also getting people who can traverse remote areas and connect with people there." When asked if smaller rural marketers face competition from in-house marketing divisions of corporates or ad agencies, Kashyap counters, "In the case of ad agencies, the rural marketing arms focus largely on communication strategies, while in the case of in-house departments, the focus is more on the physical distribution of products. We do not compete with them; in fact, we play a complementary role." However, he cautions that making inroads into the rural market needs a sustained effort and companies adopting a ad-hoc strategy in the face of the current slowdown to explore the rural market will not be successful unless they go there with long-term plans.

IOC : Rural Retail

Apart from urban retail one can see a lot of activity on the rural front too. A host of companies have started their rural retail/procurement initiatives in the last few years. ITC's echoupal initiative is one which has received a lot of media coverage and recognition. echoupal was initially conceptualized as a procurement model, but with the addition of Choupal Sagars ( Rural Malls) they are also planned to be used as a reverse supply chain to supply back to villages.Retail and Petroleum Companies Apart from various corporate houses which have ventured into the rural retail scenario, some of the oil PSUs have also started their retail ventures in villages. In the urban areas many oil comapnies have started leveraging their real estate advantage to set-up retail outlets. Like Bharat Petroleums In&Out.KSK IOC the fortune 500 oil PSU has started a rural retail venture in 2005. They have started their rural petrol pump cum retail stores in many villages. The idea is to become a one-stop shop for the needs of a villager, and provide him with quality products including fuel. Earlier the consumers in villages had to rely on either the unauthorized petrol diesel dealer in the village or travel for 10-15 Kms to buy fuel for his tractors or the pump sets. With the setting up of pumps in villages you are able to reach the customer at his door-step.Today there are more than 2000 of these rural retail outlets in rural areas across the country and a lot of recognition has also come for the intiative. In September 2007 the initiative was awarded the ‘Most Admired Retailer of the Year’ Award in the category of Rural Retailing, by the India Retail Forum (IRF), and the ‘Retailer of the year- Rural Impact Award’ given by the Asia Retail Congress (ARC).Model The rural retail outlet is a low investment model for IOC, wherein it looks at a investment of 6-9 lakh rupees vs an investment of 1-1.5 crores for a dealership in urban areas, with a quick pay back of 3-4 years. The dealer has to sell not only fuel but non fuel items like, seeds, fertilizers, and FMCG products. This revenue from non-fuel sales is expected to supplement the income of the dealer.The models has been rolled out rapidly across the country, but there are certain bottlenecks which are coming up.
Tie-Ups
The combination of the pump and the retail outlet is what drives this model. IOC has gone ahead and tied-up with many FMCG and farm implements companies for an exclusive access to these rural outlets. One of the first FMCG companies to tie-up with KSK was Dabur, now they have recently tied-up with AIRTEL for mobile. The other tie-ups include National Seed Corporation and Indo Gulf Fertilizers. There many similar tie-ups in the pipeline and the company is working on the modalities of the deal.Ground RealitiesAfter listening about the initiative i decided to visit some of the KSK outlets in UP. The photos below are from one of the KSK outlets which I had visited recently...At the ground level there are many operational difficulties with managing the retail outlet. The fuel sells on its own and the villagers are happy that they are able to buy diesel and petrol at their doorsteps. Earlier they had to travel atleast 10 kms to the nearest petrol pump to buy fuel.... But the dealers feel that they don't have the expertise of dealing with the wide range of products that they are expected to sell, ( from Fertilizer to note books) and because they don't have the whole range which a typical grocery shop would have they find it difficult to attract customers, and with the limited sales they are unwilling to put in a separate person for the retail shop , which is essential. Then there are issues related to credit and the market visits one has to make to keep maintain the stocks.

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