Rural Markets become attractive to corporate companies

A variety of factors have rendered the rural market quite attractive to corporates in recent years.

The Growing Opportunity One Main Driver:

The growing opportunity in the rural markets is no doubt the prime factor. The rural demand has been growing rapidly and its composition has been changing for the better in recent years. The increased income/purchasing power of the rural consumer and the improved income distribution have enhanced rural demand for several products. Better access to many modern products/brands have added to this growth.

Heat of competition in the Urban Market, A Stronger Driver:

The opportunity in the rural market becomes all the more rosier when the corporates see it in juxtaposition with the growing competition in the urban markets. The heat of competition in the urban market actually serves as the stronger driver behind the growing interest of corporates in the rural Market. The fact that the rural market is still largely an untapped and virgin market and the fact that the early entrants can tap it without having to face intense competition as in the case of the urban market, makes the rural market all the more attractive to them.

Corporates have been finding the going increasingly tough in the urban market, especially for products in respect of which penetration levels are already high. For example, penetration level for toothpaste in the urban market has now reached close to 80 percent. In contrast, it is below 30 percent in the rural market. Obviously, any substantial further growth in the product can come only from the rural market. Moreover, in the urban market, many consumers have been using a particular toothpaste for quite some time and have settled down to the brand, its flavor and other characteristics. They cannot be expected to switch their brands very easily. In contrast, in rural areas, there are a lot of first-time users of toothpaste whom the companies can tap from the scratch.

Toothpaste is but one example. Corporates find that the highly penetrated urban markets allow little room for volume growths for most of what if what are called ‘necessity products’ toothpaste, bath soap, washing products, tea etc. Growth opportunity for many of the ‘emerging products’ (coffee, shampoo, biscuits, talcum powder etc) too is rather low in the urban market. Thee rural market thus becomes essential for companies with strong growth aspirations. Not competing in the rural market will keep them out of about half of the country’s market for, ‘necessity’ products and one third of the market for ‘emerging’ products by value. It is but natural that in these circumstances, corporates set their sights on the rural market.

Many Companies have already taken to the rural Market in a big way

It can be seen from the exhibit that many companies/industries have already taken to the rural market in a big way.

It can be seen from the FMCG category, half of the revenue of Hindustan Lever and Colgate comes from the rural market. In the case of many other companies too, the countryside accounts for a substantial part (25-30 percent) of the total sales. It can also be seen that about one-fifth of pharma sales occur in the rural India. For Glaxo, the proportion is slightly higher at about 25 percent. In respect of high – priced durables, about one-fourth of the television sales happen in rural India; Kinetic sells about 30 percent of its scooters, Toyota nearly half of its vehicles and Hero Honda 40 percent of its bikes.

Tapping the Rural Markets:

While rural India does constitute an attractive and sizeable market, firms have to strive hard for securing it. For, the market bristles with a variety of problems. The firm has to grapple with them and find innovative solutions. Practically in every task of marketing, rural marketing poses some unique problems.

The major tasks that need unique handling in rural marketing are:

1. Segmentation and targeting
2. Product management
3. Physical distribution
4. Channel management
5. Sales force management
6. Marketing communications