The challenges experienced by companies can be classified into three major categories— reaching, acquiring and retaining India’s rural customers.
1. Rural Customer Reach:
Rural markets have huge obstacles in terms of poor distribution networks, partners with limited capabilities, long payment cycles and weak marketing channels. This makes the ‘high cost to serve the rural markets’ unsustainable. Higher costs are driven by higher logistics costs in rural areas. Recruiting and selecting channel partners is an additional critical challenge they face in reaching rural customers.
This can be overcome by:
i. Reaching ‘the Last Mile’:
Companies have to use a multi-pronged approach to reach rural consumers for deeper penetration. They find channel partners who can help them. Hybrid models of distribution are used rather than extending conventional urban models to rural areas. Some companies have adopted the village entrepreneur (‘feet-on-street’) model. Others have added layers to their distribution to reach dispersed rural customers. Still others are leveraging e-commerce and alternate channel partners.
ii. Market Expansion:
Using detailed market scanning and segmentation, GIS mapping and other technologies, companies build a comprehensive, multidimensional picture of target segments. Adopting a variable cost model gives them the flexibility to change course if they are not getting desired results.
iii. Channel Relationships:
Rural areas require that companies train and upgrade channel partner skills to implement their sales strategies. They create sustainable channel partner relationships and ensure that their partners remain motivated. In many instances, they also build familial bonds with their partners to strengthen trust.
2. Rural Customer Acquisition:
To acquire rural customers, businesses must understand the cultural, economic and demographic dimensions, which:
i. Define a Unique Value:
Successful companies continuously attempt to know rural customers and delivering experiences tailored to their needs, values and preferences. They invest in developing capabilities such as customer analytics to gain insights into rural consumers and their needs.
ii. Engage Influencers:
Word-of-mouth plays a strong role in acquiring rural customers than it does in urban markets. Companies engage individuals with high standing in rural communities as ‘influencers’. Key stakeholders are ranked according to their influence and support. Influencers shape rural customers’ perceptions of their business and offerings, boost brand image and customer satisfaction while reducing customer acquisition costs.
3. Rural Customer Retention:
Because of the high cost of customer acquisition in rural areas, customer retention is important to succeed. Building trust and providing after-sales service with local communities can result in better customer retention.
This can be done by:
I. Developing Low-Cost Models for After-Sales Support:
Companies must try and build a dedicated low-cost after-sales infrastructure using local resources who provide ‘no-frills service’ or leverage technology to decrease the costs of delivering that service. After-sales support provides customer feedback, generates market intelligence and strengthens a company’s rural bonds, which increases customer loyalty.
II. Build Trust:
Companies often make the mistake of treating rural consumers as those in urban areas, and offer them the same value proposition they offer to urban markets. These value propositions pay little attention to how the product meets the unique needs and wants of specific rural customer segments. The emphasis is on selling products to new areas.
This does not work in the long run, so companies have to integrate into the strong rural social fabric in rural areas by:
i. Engaging with Stakeholders to Create Trust:
Companies build symbiotic relationships with a large set of stakeholders that focus on consumers’ needs. In the process, they build an ecosystem of stakeholders.
ii. Investing in Community Development:
Companies align their long-term interests with development of local communities to build synergistic relationships. Strong relations are built by integrating local populations into their value chains as partners with a vested interest in the company’s survival.
It becomes clear that rural masters go beyond merely supplying goods to rural areas but try to do things differently. Their attempt is to solve some problem faced by rural people, and by addressing problems they gain their trust. The case of Jain Irrigation shows how companies expand the definition of textbook marketing to penetrate rural markets.
Problems of rural customers can be solved if companies tackle one or all three aspects of marketing. A rural marketing strategy can succeed if it addresses some need of the consumer, in terms of reach, affordability or service. All these are geared towards one objective – providing solutions to rural consumers. If the consumer realizes that his life is made simpler by the company, a trust and a long-term relationship will result.
a. Reach:
Reach means placing products in proximity to consumers in the right package, at a right location and at the right time. Companies have to focus on developing strong relationships with their customers to know the ‘right’ products that should be kept in stock. Reach is achieved by developing an effective distribution network consisting of depots that can serve surrounding villages. But innovative approaches are needed as well. For instance, HUL hiring female entrepreneurs in villages and Tata Sky working with village repairmen are innovative ways in which these companies have improved their reach.
b. Affordability:
Issues of affordability are addressed by re-engineering products so that prices are reduced without sacrificing functionality. Companies resolve affordability issues by making available premium quality products in packages at affordable price points. Developing products specifically for rural markets, such as Godrej ChotuKool, not only helps make the product affordable but also solves a problem for rural consumers. Affordability also gives rise to activities enhancing farmers’ incomes and has fostered a whole new industry of microfinance.
c. Service:
The third aspect is providing service in remote areas, which is another daunting task. Very often machines lie useless in rural areas because service is not available. Unrepaired refrigerators are good only for storage, for instance. Providing service at the doorstep helps solve a major problem for rural consumers. Banking services through BCs also solve a problem while achieving rural penetration at the same time.
Once we understand that all rural marketing must have problem solving at its heart, we realize that rural marketing must go beyond a narrow understanding of business that only seeks profit maximization, but instead become a kind of social business.