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Marketing spends in rural India still low compared to urban market

Marketing spends in rural India still low compared to urban market

Author | Malini Menon | Monday, Mar 21,2005 7:10 AM

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Marketing spends in rural India still low compared to urban market

It is time for India Inc. to concentrate on the 92.2 per cent population in non-metros (B and C towns and villages) rather than pushing their products in metros, where they have stagnated. The bottom of the social pyramid constitutes 74 per cent of India's population or 13.5 crore households of which 58 per cent have disposable income.

Although the social indicators are certainly on an upswing in rural India, yet the marketers have still not tapped the latent demand efficiently. Priya Monga, Business Head, RC&M -- a company that has been handling rural marketing projects for clients like Coca Cola, P&G, HLL, LG etc. said, "The number of pucca houses have almost doubled from 22 per cent to 41 per cent, percentage of BPL families has declined from 46 per cent to 27 per cent and the rural literacy level has improved from 36 per cent to 59 per cent."

However, despite the climb in social indicators, there is certainly a tilt when it comes to marketing spends towards urban areas. Monga said, "The rural industry market size is around Rs 1,23,000 crore (Rs 65,000 crore from FMCG, Rs 5,000 crore from durables, Rs 45,000 crore from agri inputs and Rs 8,000 crore from two wheelers and four wheelers) and on an average the total country spends on advertising and below-the-line activity specifically to rural market is up to Rs 500 crore, whereas the marketing spends that go to the urban market is Rs 12,000 crore."

Interestingly, all the companies that have invested in rural India have seen significant growth too. For instance, in case of Coca-Cola, could anybody imagine that 80 per cent of new Coke consumers are from rural India? Almost 30 per cent of its volumes come from the rural segment. Figures indicate that the rural market grew at 37 per cent over last year against a 24 per cent growth rate in urban market and the per capita consumption has doubled in the last two years.

LG too is looking at the non-metros and villages seriously. Salil Kapoor, Head-Marketing, LGEIL, said, "Thirty five per cent of our turnover comes from rural India and there is definitely a shift in marketing spends from urban India to rural India as most brands are now realising that the volumes come from the masses in hinterland."

Asked on the ratio of spends that go into urban v/s rural from LGEIL's kitty, Kapoor said, "It's a 75:25 ratio that we follow."

But the potential is even larger both in terms of consumption and penetration, pointed out HLL spokesperson. "The fact that 70 per cent of the population accounts for only 50 per cent of even relatively well-penetrated categories like soaps and detergents indicates the enormous scope of consumption-led growth in these categories." More than half of its annual turnover of Rs 9,954 crore comes from the rural market. "In categories, which are relatively less penetrated like personal care products, rural India offers an even bigger growth opportunity through greater penetration and then consumption," he added.

Dr Rakesh Sinha, VP-Marketing, Godrej Consumer Products Limited, agreed to this thought, saying, "Most companies continue to focus on product availability in rural market rather than the marketing aspect." Sinha said that about a third of the company sales are generated from rural India.

On the focus being more on distribution rather than rural marketing, Monga said, "It is very natural for any company who wants to penetrate to rural areas to get their distribution in place. After that there is a demand which is generated and this is created through marketing and advertising. For instance, in case of Nirma, their distribution is present up to 1,000 pop-strata villages and out of this 90 per cent is direct reach and only 10 per cent is through wholesalers. So for such companies keeping their distribution intact is a challenge. However, for companies like Philips lighting it is essential to penetrate more rather than going in for extensive marketing."

Philips is going rural by starting a campaign targeting nearly 100 towns a month, wherein the company is planning to educate the villagers on the requirements of good quality lighting though rural vans, said Nand Kishore, Country Head, Philips. He added, "We plan to run this campaign throughout the year. Since we are just entering the rural areas, our key focus is certainly going to be on distribution."

So how do you strike a balance? Success stories in rural India have been translated from the right blend of distribution, communication and pricing. HLL spokesperson said, "In pricing front, HLL has created low-cost value for money branded products like Wheel. The company has also taken initiative to create markets even for apparently premium products by offering them in pack sizes like sachets. In fact sachets constitute 55 per cent of HLL's shampoo sales." Communication is another front wherein companies have to invest. "In rural-focused brands, we spend more on DD than on satellite channels. In some of our vastly popular rural brands, the spends are as high as 70 per cent of the total media spend by the brand," said Sinha. Interestingly, companies are circumventing the limitation in communication channels in rural India through innovatively leveraging non-conventional media too. P&G for instance uses a mix of marketing tools for spreading awareness in the rural areas, said Rahul Malhotra, Associate Director-Marketing, P&G, adding, "The communication is decided depending on the region and the brand we plan to push." It looks like the ways to communicate to rural India is certainly opening up. However, Monga pointed out, "boost in volumes will only be witnessed if the companies are willing to shelve out more for rural India."

At the end of the day, the question really remains -Will India Inc identify the upcountry potential and really take its marketing out of the towns to villages where a rich harvest awaits them?

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