Rural Marketing – 6 Laws to success

Introduction: I have been pondering over the subject matter of “Rural Marketing” for quite a while now. It has almost been eight months and over since I picked up my first book on rural marketing and got thoroughly confused. But, ever since then, a closer look at the subject matter revealed to me the importance it has in the present day context. During my discussions on the subject about six months back, one of my colleagues commented “I feel sorry for the rural folk, that they are differentiated by the marketing people. I feel that they are left out, while the urban consumer keeps on getting bombarded by message after message and product after product from marketing. The rural urban divide is most visible here as well.” Well affluence hadn’t hit the rural guy hard. Or is it that the marketer doesn’t know the rural affluence levels? The marketer seems to know practically nothing under the given circumstance. It was only when I started reading about ITC and its business strategy that I got very interested in this phenomenon called Rural Marketing. I am really awe struck at YC Deveshwar’s keen sense of doing business in the rural areas. Well, all players who come to India with the hope of selling their “taboo” to the one billion and odd people living around, find that they are all scattered in small groups and they don’t speak the same language. They also watch different TV Channels, read different news papers, vote for different parties, are employed in different means of livelihood, have different incomes during different parts of the year and so on and so forth. In short, one agrees fully that marketing to these guys is not at all the same game as that in the developed countries. Firms that have got global knowledge of marketing thought that they were better at it, but did not really get the point which we call “diversity”. A bit of history: The failure of traditional practices of marketing with rural folk of our country, have led many multinational companies to alter the traditional 4Ps of marketing to suit to the rural areas. This over time has come to be known as Rural Marketing. Innovations were made in the areas of distribution, packaging, branding and brand communications. The sachet revolution in the shampoos, stands tall as a classic example of product adaptation to rural markets. Similarly, the success of brands like Colgate, Dalda, Surf, Nirma, Amul amongst others led both academicians and the industry experts to consider the adaptive practices as a separate branch of study. But, yet the penetration that these companies have achieved through a few brands is very little. The hinterland still remains unconquered and the saturation of the urban markets is pushing most multinationals towards product adaptations for the rural markets. Present Scenario: One might get into the misconception that today that professionals are better off in doing marketing jobs. What with business education and with investments flooding in from global capital markets, one might easily get the feeling that its all there and we need to just say “Howdy Pardner?” to the average farmer. Believe me, the job is tougher today. The environment of carrying out business in the rural areas has become more complex, rather hostile. Look at what happended to Reliance Fresh retail outlets in Uttar Pradesh. Surfacially it might look as if it is the protest of a few mandi workers. Does a government succumb to a few protests by mandi workers and middlemen and order the closure of the outlets of an influential business house? All over the country, the industry is meeting the resistance of the rural folk, be it tribals occupying the native land or be it farmers who are unwilling to part with their traditional occupation (which they consider as sacred). The issues they fight on range from simple neglect of their rehabilitation to complex things such as rights and ownership of land and the minerals subsumed in the land. Some might call it a political gimmick, but I believe it to be true angst against the corporate practices that is taking the shape of violence in many cases. The support of Naxals in areas like Orissa and Jharkhand seems only incidental and the rural folk seem to be equally capable of showing destructive force even without their help. A small look at the statistics will tell us the whole story. Naren Karunakaran with Ashish Gupta and Rajiv Bhuva, reports in an article in Outlook Business, dated December 15, 2007 that “over 21 million people have been displaced from 1951 and 1990 in various projects across the country. Over 8.54 million were tribals, and of these only 2.12 million have been resettled so far – a poor record.” This means that a complete lack of trust exists in these areas on the industry, which further means that any brand backed by these industries is going to be seen in a suspicious fashion. The old style missionary model to show-case social responsibility will no longer work in these areas. What is needed is a solution to the problems being faced by people in the rural areas because of industrialization. The Hypothesis: The only way out of this conundrum is to view the “Exchange” process as involving two distinct transactions and not one. The “Buying” transaction and the “Selling” transaction. The hypothesis that one has to keep in mind is that the firm has to find out ways and means of participating and adding value to BOTH THE TRANSACTIONS instead of one. The following laws that I have framed help the firms to do the same thing. Through out I have used ITC as an example to show how these laws are going to lead to ultimate marketing success. Laws of the Rural Marketing Game Law 1: Don’t give’em a fish! Teach’em fishing! That is where ITC scored better compared to others. ITC used its e-Choupals to provide valuable information to farmers on the rates in the Mandi, the weather, knowledge related capsules on irrigation facilties and latest farming technologies. It also spend time, effort and money, in creating a network of farmers who can come together to make informed decisions and thereby directly contributed to their profits. Farmers are reporting more affluence in the villages in which the project has been carried out. This affluence has naturally pleased the farming community and is making them feel more contemporary, because of the usage of the computer and the internet. They feel they are a part of the contemporary world which resulted in a positive attachment with ITC as a corporate entity. Now, after the success of this model and its popularity with villagers, ITC has started the Choupal Sagars. The rural equivalents of gigantic retail outlets. It is surprising that the farmers all over the country protested the entry of Wal-Mart and Reliance Fresh, but have quitely accepted Choupal Sagars’. This is why “Corporate Brand Equity” become important for the rural markets. To trust you, they must believe that you are genuinely interested in their welfare. ITC silently demonstrated this fact through its e-Choupal and Choupal Sagar strategy. Instead of giving them a fish, they taught them the technique of fishing. Now, they are selling fishing rods to the farmers and buying the fish caught by them. Not all company’s can do this, but if you have to survive in the rural markets, then you need to figure out how you are going to participate in that community and add value to the lives of people. Only then, people might be willing to buy from you. It is hard to believe that, people in these areas would buy Tata’s cars, unless the Tata Group solves the local problems and adds value to the local community. Short-run push-to-the-rural-bugger strategies will no longer work! Law 2: Don’t block ‘em! Give a piggy back! Ever wondered what are sold in the Choupal Sagars. Right from farming equipment and ITCs’ own brands, ITC is letting others ride its distribution channel. Result, better shelf space utility, more customer value and a chance to partner strategically with some of the non-competitive brands. Ultimately, you can always claim that you add value to the customer who comes to your store, instead of posing as though your products are superior. This attitude is tough to develop, but that is what a “Retailer” really does. Many analysts feel that this is a dangerous trend, but one has to remember that one cant make all those things that the customer wants at the price he/she wants it. So, forming partnerships with others who can make them and using the same distribution channel to reach the customer, not only gives cost advantages to both the firms, but also allows the customer to believe that ITC is not pushing its own brands all the time. Law 3: Keep sourcing and selling “markets” separate Many organizations may find it lucrative to buy wheat from the farmers, process it into “atta”, brand it and sell it to the same farmer. This, might seem a very logical choice, but is dangerous. The seller of wheat is also, no doubt, a buyer of “atta” but, (s)he may not want to be your customer. If you offer to buy wheat AND sell “atta” to the same target group, your motives become very suspicious. Thus, selling farm equipment and house-hold appliances through Choupal Sagars is not as risky as selling finished atta or other types of farm related finished/prcoessed products. Keeping the markets for sourcing and selling as separate as possible is therefore a tricky job and the marketer has to be careful not to fall in the “consolidation trap”. Law 4: Integrate Logistics Logistics of your firm is invisible to both the buyer as well as the seller. You may use the same truck to ship agri produce from the farmer’s land to your factory and then send it back to unload a cargo at your retail-store. Better, if a farmer brings in his load to your factory, pay him to take back a supply of products to be delivered at your stores on the way home! Logistics & Reverse Logistics is going to result in a low-cost distribution network, which adds value to two groups. First, it adds direct value to the customer in terms of lower prices. Second, it also adds value to those who are piggy-backing on your channel because of the difficulties involved in building capacity of intermediate storage and transportation. The value addition for piggy backers creates a sort of an interdependence which is tough to break. Law 5: Frame the seller and the buyer It is essential to develop two profiles for the same person when riding on such a strategem. The buyer profile that details on what the rural folk are buying, where are they buying it from and why are they buying it there, would form the basis for taking well-informed decisions on what you are going to bundle into your channel. One has to always keep the “consolidation trap” in mind before deciding on the product mix. The seller profile, is also an important document, which keeps track of the earning patterns and income rises of those who are participating in the sourcing process. When both the profiles are combined, then a wholistic and accurate picture of the individual emerges which helps the firm to design suitable strategies to keep the buying and selling “markets” as distinct as possible in the minds of the people. It is also possible, if correct data is captured and processed, to achieve a cultural fit of the goods and/or services being exchanged between these two markets. Law 6: Let’em know that you are adding value on both the ends! Branding is a key issue in doing the above. The product/services you offer at the sourcing end when you are trying to buy rural produce, must be co-branded with the products/services you offer at the selling point. This lets the buyer/seller to connect the two faces using which you are adding value. This association is important because the investment that has gone into building trust with the community has to be realized in one or the other way. The relationship thus developed between the firm and the market, will be stronger because of this “dual” participation in the community. Nostalgically, this is why the “trading” communities that used sea-routes to ship goods across international borders thrived in their businesses. So, there we are! At the end, let me say, that this game is not upto all companies. Small firms and big firms alike have to figure out how they are going to put up their “dual” faces to the rural mass of the developing world.