Brands see big markets in small towns

Rapid advancement in technology and better connectivity have significantly increased the scope of business in Tier I & Tier II and rural markets

e4m by Dolly Mahayan
Updated: Apr 24, 2018 9:00 AM

Rapid advancement in technology and better connectivity have significantly increased the scope of business in rural geographies and small towns. Digitization in India is happening at an unprecedented pace and these markets have been benefitting from it.

Brands are now aggressively focusing on Tier 1 & Tier II and rural markets. Whether it is FMCG or consumer durables, everyone has tapped into these markets as they find more opportunities there and are trying to encash them. Over the years, these markets have witnessed a tremendous transformation. Tier I and Tier II markets are showing a strong momentum with an improved demand and some brands are already enjoying a good penetration. 

The same goes for the rural market. Here it becomes crucial to understand that a lot of rural income is disposable. The ability and willingness to consume are constantly evolving and that is how rural India represents wider opportunities for the consumer goods sectors.

The other big change in these markets over the last few years is the awareness about brands due to the penetration of television and an increased use of smartphones. Nowadays, consumers watch the advertisement of brands well before they actually use the products. So, by the time brands reach these markets, consumers already have a sense of it. Word-of-mouth and billboards also play a major role in these markets, making it relatively easy for brands to reach out to a mass audience. 
According to Sushil Matey, Director- Marketing, Livpure, increased digital penetration can be counted as a major reason for the growth of business in these cities.

“It is true that the urban market has become too cluttered, with a lot of existing varieties. However, there are many more reasons that have attracted brands to dive into rural markets. Corporates and government bodies have made several efforts to bridge the gap between rural and urban India. The increased digital penetration is a major reason for the growth in rural areas as consumers are now seeking world-class products because they're better informed. Also, with the increase in the purchasing power of the consumers, the disparity between urban and rural India is reducing manifold,” he said.

“Livpure is spending heavily in non-metro cities. There is an increase of more than 50 per cent in marketing and advertising spends from last year as the brand focuses majorly on Tier II and Tier III cities,” said Matey.

These markets clearly hold a lot of promises and wider opportunities for consumer goods companies. Also, it might be a myth that rural consumers look for cheaper products. 

While Clinic Plus is the largest selling shampoo in rural India, last year, the volume of Clinic Plus shampoo sold in bottles was more than that sold in sachets, said a report published by the Confederation of Indian Industry (CII).

It must be noted that urban consumers switch from one brand to another quite easily. But brand loyalty stands for active involvement of a consumer with a brand. There is no doubt that the Indian consumers change their minds very often, are more connected than ever and are savvier and better equipped to benefit from an ever-changing marketplace.

Tropicana, the beverage brands in the PepsiCo portfolio, is also looking to ramp up the distribution of the brand with a strategic focus on smaller towns and rural regions.

According to Vineet Sharma, Marketing Director, Tropicana aims to double its business by 2020.

“As part of our strategy for growing the brand, we have entered into a strategic partnership with Varun Beverages (VBL) to scale distribution in North and East regions, with a particular focus on rural and rest of urban (RoU) market expansion,” he said.

“Currently, rural and RoU segments contribute approximately 60 per cent of the juice market in India and we see tremendous opportunity to unlock the potential of the brand in these segments. We primarily use outdoors and television mediums to reach out to the consumers in rural markets while digital will give us an added impetus with consumers in urban markets,” he said.

According to a report published in Nielsen, FMCG market in India is expected to grow at a CAGR of 20.6 per cent and is expected to reach USD 103.7 billion by 2020. Whereas, the rural FMCG market in India is expected to grow at a CAGR of 14.6 per cent between 2016 and 2025 and reach USD 100 billion by 2025.

Companies are focusing on the rural market segment which is growing at a rapid pace and contributes around 50 per cent to the total FMCG market. Companies like Patanjali, Dabur, HUL, Britannia, Nestle, etc. are trying to increase its penetration in rural areas to generate more revenue from rural India.

Meanwhile, it is also important to see that the marketing strategy for rural and small towns differs from the urban ones. 

“Marketers need to communicate the right message to develop the desired mindset among the consumers. Brands need to understand that rural (and smaller) towns have similar aspirations as the urban towns and if one makes the ownership and buying experience customized for them with easy financing and customer support, it can make a huge difference in brand loyalty,” said Chandrahas Panigrahi, CMO, Acer.

According to Mansoor Ali, CMO, Hamdard India, “The main reason for brands focusing on the rural market is the growth in consumption of the rural consumers, deeper within the categories that they buy and wider into newer and more premium categories. The potential of rural markets in terms of contributing to sales of a brand is immense today. However, the behavioural pattern of consumers is different vis-à-vis that of metro cities.”

“Considering these reasons, the marketing strategies would differ to stay valid to the rural consumers. A multi-pronged marketing strategy focusing more on local/vernacular communication and activation for rural markets is more suitable. This ensures connect with the local consumers and trade. Success in these regions will depend on innovative marketing strategies, as they witness rapid demographical changes,” said Ali.

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