The way rural markets are growing, it won’t be long before they start contributing substantially to profits of companies. A proactive approach is the best available tool
INNOVATIVE RURAL DISTRIBUTION: The biggest challenge in rural India remains reaching your product to 600,000 villages compared to 5,000 towns in the urban areas. A few new rural distribution and procurement models have been innovated by ITC e-choupal and HUL project, Shakti. But much more needs to be done in this area. One possibility is the use of the social infrastructure being created by the government. For example, there are 5 million women’s micro-finance groups in existence and by the year 2011 the number of such groups is expected to jump to 15 million. Thus, 150 million rural women or 150 million of the 200 million total households in the rural would be linked to self-help groups. Can this channel be used innovatively to reach products and services to rural homes?
DEDICATED RURAL TEAMS: Companies need to shift power to where growth is by dedicating empowered teams for the rural markets so that they can develop their own strategies and products. A separate sales force is also desirable as the regular force will avoid covering the more difficult and small off-take rural markets. MBAs from B-grade small town institutes should be hired. They will not only work at much lower salaries but will also stick around.
INCLUSIVE MARKETING: This is a new concept I have created which goes much beyond BoP. Inclusive marketing looks at poor not only as consumers but also as producers/ suppliers of products contributed by the poor. It can therefore impact poverty positively. ITC’s e-Choupal is a perfect example of inclusive marketing. The business model ensures that farmers as producers get better value for their produce. Once their income is enhanced the model then uses the same channel that was created to procure produce to push relevant products needed by the farmers as consumers. Government and private sector need to work together to promote inclusive marketing and grow the size of the rural pie through the development of reverse distribution channels rather than fighting amongst themselves.
NEW OPPORTUNITIES: Rural markets now offer a number of new opportunities.
Healthcare: Total rural spending on health care currently is Rs.700 billion and expected to reach Rs.3.5 trillion by 2025, an impressive five-fold increase. Despite the launch of the National Rural Health Mission, 80% of health spending will be in the private sector.
Durables consumer financing: In the 90s’, consumer finance became available easily which led to high growth in sale of durables. Rural consumer finance has become a big opportunity only now with rapid electrification of rural households.
Banking: According to a World Bank study, bankable people in rural India is 185 million.
Construction and Housing: Currently, there is shortage of 40 million houses in rural India.
In conclusion, I would say the next growth will come from rural market and companies that ignore this segment will do so at their own peril.
INNOVATIVE RURAL DISTRIBUTION: The biggest challenge in rural India remains reaching your product to 600,000 villages compared to 5,000 towns in the urban areas. A few new rural distribution and procurement models have been innovated by ITC e-choupal and HUL project, Shakti. But much more needs to be done in this area. One possibility is the use of the social infrastructure being created by the government. For example, there are 5 million women’s micro-finance groups in existence and by the year 2011 the number of such groups is expected to jump to 15 million. Thus, 150 million rural women or 150 million of the 200 million total households in the rural would be linked to self-help groups. Can this channel be used innovatively to reach products and services to rural homes?
DEDICATED RURAL TEAMS: Companies need to shift power to where growth is by dedicating empowered teams for the rural markets so that they can develop their own strategies and products. A separate sales force is also desirable as the regular force will avoid covering the more difficult and small off-take rural markets. MBAs from B-grade small town institutes should be hired. They will not only work at much lower salaries but will also stick around.
INCLUSIVE MARKETING: This is a new concept I have created which goes much beyond BoP. Inclusive marketing looks at poor not only as consumers but also as producers/ suppliers of products contributed by the poor. It can therefore impact poverty positively. ITC’s e-Choupal is a perfect example of inclusive marketing. The business model ensures that farmers as producers get better value for their produce. Once their income is enhanced the model then uses the same channel that was created to procure produce to push relevant products needed by the farmers as consumers. Government and private sector need to work together to promote inclusive marketing and grow the size of the rural pie through the development of reverse distribution channels rather than fighting amongst themselves.
NEW OPPORTUNITIES: Rural markets now offer a number of new opportunities.
Healthcare: Total rural spending on health care currently is Rs.700 billion and expected to reach Rs.3.5 trillion by 2025, an impressive five-fold increase. Despite the launch of the National Rural Health Mission, 80% of health spending will be in the private sector.
Durables consumer financing: In the 90s’, consumer finance became available easily which led to high growth in sale of durables. Rural consumer finance has become a big opportunity only now with rapid electrification of rural households.
Banking: According to a World Bank study, bankable people in rural India is 185 million.
Construction and Housing: Currently, there is shortage of 40 million houses in rural India.
In conclusion, I would say the next growth will come from rural market and companies that ignore this segment will do so at their own peril.
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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