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Cracking the rural retail code

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Amit Srivastava
Amit Srivastava
Chief executive officer of Smollan India

Strategies for brands to successfully penetrate India’s rural markets

The rural market in India is rapidly expanding, creating an opportunity for brands to establish themselves among rural consumers. Small towns and villages are surpassing cities and propelling the demand for consumer goods, ranging from every day groceries to electronics. In fact, rural commerce in India is expected to grow at a Compound Annual Growth Rate (CAGR) of about 20%.

This impressive growth can be attributed to several factors like rising income levels, improved standard of living, increased urban and rural interaction, and increased accessibility to mobile phones among the rural population.

However, penetrating the rural retail market is not an easy task. The challenges and opportunities of the rural retail market differ from those of the urban market. Brands need a deep understanding of rural consumer needs, behaviours, and preferences to make themselves relevant to the rural landscape of India.

So, while the rural market presents immense growth opportunities, brands need actionable strategies to crack the rural retail code and effectively reach this consumer base.

Product strategies

To penetrate the rural market, brands must adopt strategies that cater to the unique needs and preferences of rural consumers. This involves several steps, from mapping the buyer personas to localising product design and launch within the rural context, keeping in mind languages, gender norms, infrastructure and traditions.

As rural consumers often have less access to formal education and have strong ties to their communities, easily recognisable, symbolic, and culturally relevant branding can help build an emotional connection and improve brand acceptance.

For example, a brand of soap with bright red packaging is known in the rural market as ‘lal saboon’ (red soap). Its distinctive colour makes it memorable for rural consumers and easy to describe, making it stand out against competitors. Additionally, because the soap is associated with its colour and not its brand name, retailers in this segment must be knowledgeable about local and relevant terms when selling.

Pricing strategies

Brands must also focus on affordability by offering products at prices suitable for the rural market’s purchasing power.

To achieve this, brands can consider several pricing strategies, such as offering smaller pack sizes that are affordable for rural consumers, reducing the profit margins, and optimising the supply chain to reduce the cost of goods sold.

In 2002, a leading carbonated soft drink company successfully decoded the pricing challenge in rural India. The company achieved this by reducing the size and price of its bottles by half compared to the urban markets. This astute strategy enhanced the brand’s reach and boosted its sales in rural India. HUL also adopted the same strategy when it introduced the concept of sachets in hair care.

Brands can also explore offering financing or instalment payment plans to make their products more affordable to rural consumers. For instance, a multinational electronics brand introduced a unique ‘marriage package’ catering to the rural market. The bundle comprised an entry-level TV, washing machine, and refrigerator—all popular purchases or gifts during weddings in rural areas. The package gained widespread popularity, proving to be a massive success for the brand.

Distribution Strategies

One of the primary challenges brands face in making products available in rural markets is the last mile. Rural consumers can be challenging to reach. The population is disbursed, the density of shops per village is low, and there is a lack of reliable product storage systems.

Given these characteristics of the rural market, how do rural consumers access a steady supply of products? Feeder towns are the best for many people living in remote villages; they are slightly larger, better connected by transport, and located near more rural areas, making them a good location for brands to situate their supply chain management.

However, last-mile retail and delivery can also benefit from innovative solutions for overcoming these challenges. Brands can establish local warehouses and partner with local distributors to ensure their products’ timely and reliable delivery to rural consumers.

In areas with limited access to retail shops, companies may also need to explore alternative distribution channels such as mobile vans or door-to-door selling.

A large dairy cooperative based in Gujarat operates a fleet of mobile vans to distribute its products to rural areas. Their vans have refrigeration facilities to ensure the products remain fresh during transport. Mobile vans have helped this brand reach millions of customers across the country.

Promotion strategies

One key difference between marketing in rural and urban areas is the channels and media that are most effective in reaching consumers.

Word-of-mouth marketing is highly effective in rural areas. Hence, brands can engage with local influencers and opinion leaders to build brand awareness. Additionally, organising events and activities that align with local cultural and social events can help to create a strong emotional connection with rural consumers.

Another way to build relationships with rural customers while simultaneously overcoming last-mile delivery challenges is through door-to-door selling and personal demonstration. It gives brands opportunities to provide a detailed explanation of their products, which may not be possible in other forms of marketing.

HUL, under its flagship programme Shakti, devised an innovative strategy to reach every corner of the rural villages. The company identified suitable local rural women and trained them to sell its products door-to-door. Since the women had a deeper understanding of the local needs and preferences and held greater trust in their community, they could promote the products effectively.

Brands can also support local causes and charities to build goodwill and amass a loyal consumer base. For example, the same brand of red soap ran a programme in several villages in rural India to spread awareness of the importance of washing hands using demos, competitions, and other engaging activities.

Similarly, HUL continues to regularly engage with rural consumers through various innovative activities across the length and breadth of the country, creating awareness on nutrition and healthy diet among women and children.

Ultimately, brands must ensure that their marketing messages reflect the values and aspirations of rural consumers.

The takeaway

Rural markets differ significantly from their urban counterparts, presenting unique challenges that require extensive market research. These challenges are primarily related to low literacy rates, limited financial means, and lower awareness levels.

Merely creating a marketing approach and attempting to adapt it to rural markets will not suffice. Brands must understand their target audience and develop strategies that resonate with the cultural subtleties.

The need of the hour is to adopt technology faster to provide solutions both on the supply chain side as well as in the trade.  On the supply chain angle, HUL has introduced a B2B app called Shikhar, wherein the Shakti entrepreneurs can directly order their requirements without waiting for a salesperson to come and collect their orders.  Direct Bank Transfer is another initiative through which brands can directly incentivise the trade.

As strategists predict that rural markets will drive retail growth in the next decade, brands must focus on rural marketing strategies to tap into the untapped rural market. This requires them to have a firm foot in the ground. Brands must be well-versed in the rural market in order to devise the right strategy, get real-time insights about consumers and competition, and innovate to adjust the approach constantly.

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