India’s Rural Markets

India’s rural market has been discussed for long amongst marketers, researchers and academicians. Almost a decade ago, management expert C.K. Prahalad talked about the revenue potential of bottom-of-the-pyramid customers. In the past few years, many companies have started depending on the rural economy to provide a cushion for any slowdown or turbulence experienced in urban India.

A recent study by management consulting firm Accenture titled, “Profitably Selling to India’s Rural Customers: Hidden Lessons From the Masters,” suggests that more than two-thirds of companies in India are planning to rapidly expand their businesses in rural markets. 

Rural markets account for a significant portion of revenues and profits for many companies.  The key suggested in report for making profits from Indian rural markets in short term through building and maintaining efficient sales and distribution networks tailored to rural India’s unique characteristics.

Rural Performance Index (the degree to which rural markets are strategically important to a company’s growth agenda) and Rural Innovation Index( the level of innovation in a company’s product, packaging, pricing, channels and operating models) were identified in the report as key  measures of success in rural markets.

With the above two measures in mind, companies have been classified in four different success categories: 

• Rural Masters are profitable companies that have secured a significant rural market share by focusing on execution excellence, implementing novel strategies to serve rural consumers and drawing on a deep understanding of consumers’ cultures and needs.
• Rural Performers are profitable entities that have established a strong rural footprint by using conventional approaches or by emulating Rural Masters. They often lack an innovative streak.
• Rural Voyagers have adopted disruptive approaches to serve India’s rural markets. For example, they create unique products and services, customize pricing or packaging, or develop new channels to reach “the last mile.” However, they have yet to make profits.
• New Entrants are companies that have recently made forays in rural markets. Conservative in nature, many of these enterprises have limited operations and have not generated the profit needed to create economies of scale. 

The report highlights that companies that have been most successful in rural markets have also helped to improve the rural consumers’ standard of living in terms of  creating jobs, building social infrastructure or providing business opportunities. It suggests that to foster these kinds of improvements, companies need to align their long-term interests with the community’s development to gain its trust and commitment. This alignment builds synergistic relationships based on shared goals and aspirations.

Full report on Profitably Selling to India’s Rural Customers: Hidden Lessons from the Masters can be accessed from:

http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Masters-of-Rural-Markets-Selling-Profitably-to-Rural-Consumers.pdf