Wednesday, August 08, 2007

Rural Marketing Programmes: Growing the Pie, or Pie in the sky?

First, acknowledgments. This topic was given by Ms. Deepti Potnis, budding consultant, as a sample of her spectacular skills at delivering customised solutions to undeserving petitioners. No, seriously, she gives good solutions. And her blog is not too bad either. Visit it here. Now that my mandatory commercial is done, back to the topic!
Rural Marketing and products for rural markets are wonderful things for companies. For one thing, everyone insists that you just cannot ignore a market of close to 600 million people. It has to be profitable surely!
Another reason is the wonderful idea that companies are socially responsible if they bring out products for the Indian rural chap. After all, by doing this favour, they manage to educate the rural masses about the world outside, which is a great thing after all!
It cannot be denied that 600 million people is one huge market opportunity. At the same time, if it was so easy to crack the market, it should have been cracked already. And strangely enough, it has been opened up, and for a long time too. Many people have ooohed and aaahed over Hindustan Lever's (Now Hindustan Unilever) amazing distribution network. But the fact of the matter is that if the largest FMCG player in India is actually ITC, with its cigarettes available across the length and breadth of the country (of course, cigarettes are not an FMCG product, don't ask me why).
Coca Cola and HUL have certainly done a fantastic job of opening up the rural markets. HUL's project Shakthi has been an unqualified success, as has the chota coke campaign of the soft drink maker. But these amazing successes have not come free. Coca Cola spent a decade in India before it could make the rural breakthrough. And HUL has been around for donkeys years. And something is interesting about both of these companies. Neither have really brought out separate products for the rural markets. In the case of Coca Cola, it was a case of reducing the unit quantity and thereby the price, while for HUL, it was more of a distribution chain improvement.
Kotler has 4 P's, which are Product, Price, Place and Promotion. This brings me to my point. Rural marketing seems to essentially be a problem of price and Place(distribution). Promotion in the cable connected and aware rural markets does not really seem a huge problem. And products designed for the Urban market seem to do decently in rural India as well. Perhaps the Urban rural divide is not as large as most people believe it to be. The problem for most companies is that Product and Promotion is strangely enough, the easiest to redo or remake. Cost competencies which affect Price, and Distribution and supply chains, which make Place irrelevant are far more difficult to obtain. They take experience, and initial investment.
So simply put, I think it is fair to say that unless companies get their cost and distribution act together, that beautiful rural market is going to remain a mirage, or a pie in the sky. The companies that have successful products will have to find that most difficult of things; an efficient distribution system, in order to ensure that they grow the pie! Or else, they will just end up eating Humble pie.
Well, that is it for this post. More management topics are invited, cause I am running out of too many cool new ideas. I promise credits for all topic submitters!

3 comments:

blogerazzi said...

now THAT is incentive.

Abinash said...

Dude, a good post. But wud like to point out that Coke has accepted that its chhota coke concept was a wrong decision. Reason was the huge increase in COSTS incurred. Wudnt like to go into the details of tht 1 !! However, no doubt the segment provides huge opportunities for today's Marketeers.

Anonymous said...

Rural marketing is just supply chain optimisation for a huge distribution area. Rural and Urban India don't differ very radically in terms of what works and what doesn't.

People who think it does are confusing Page 3 Pricks for Urban India. The middle class straddles both Rural and Urban India. Focus on them and cut your distribution costs.