Well-informed, discerning and aware of their rights, today's customers are a force companies can ignore only at their own peril. Products and services must meet the specific needs of urban and rural customers. As competition grows fiercer, companies will be forced to scour the globe for new customers and markets, and the Indian rural markets will see more action than they have ever done in the past.
There are profound differences between urban and rural areas; but there are also important, and striking, similarities. Till recently most companies concentrated their attention on the urban customer and ignored the rural populace and those at the bottom of the pyramid. Now companies are finding that there is substantial latent buying power in the rural areas.
People in rural areas are actually buying FMCG products, such as shampoos and cosmetics, earlier considered the preserve of urban consumers. Packaged in smaller sizes to suit the purchasing power and buying habits of rural consumers, branded products are beginning to feature as regulars on rural shopping lists.
As we move forward, we will need to look at how we can make products that are high-quality as well as affordable for this burgeoning market.
Technology as trouble-shooter
The big problem facing rural India today is connectivity and infrastructure, especially for those living in remote areas. Because of poor infrastructure (power, roads, etc), companies face hurdles in catering to these consumers. What do you do in such a scenario? Here lies a tremendous opportunity, which can be addressed through effective use of IT and telecommunications.
Look at the Western world, the US for instance. Here, the revolution in telecommunications has made it possible for people to live and often work away from the big cities. IT connectivity through broadband and mobile telephony can be enablers in assisting the rural consumer to buy things via the internet.
Progress can be made in other areas, such as education, healthcare and improving the availability of credit facilities, through the effective use of these technologies. If the production of energy is decentralised and we use alternative forms of energy such as bio-fuels and agri-mass based energy, the dependence on power connectivity can be reduced.
If we have to reach out to the rural customer of the future we will have to think of ways to overcome the hurdles and this can be done by creating a backbone through IT and telecom; technological innovations can drive down costs and regional partnerships can produce economies of scale. We can then help rural consumers leapfrog a generation into what urban customers are doing. Overcoming socio-economic hurdles
The fundamental challenge companies face in rural areas involves distance and the cost associated with overcoming that distance. One possible solution is the use of interactive technologies, which overcome the problems of distance.
The other challenge is related to affordability and social factors. For example, rural women are horribly disadvantaged; they grow up without proper healthcare, education or even proper nutrition. We can look upon these problems as opportunities by seeking and finding ways of providing high-class education, healthcare and nutrition.
Some companies are actively looking at providing nutrition to women and children. They can achieve more through networking and partnerships with public as well as private sector organisations working in these areas. We need to adopt both the for-profit and non-profit approaches.
Tata Chemicals is currently addressing a small part of the rural population by reaching out to farmers. Our approach has so far been limited to providing all the inputs that farmers need, including a host of agricultural inputs, and with others to provide finance and implements.
We are engaged in working with farmers in some areas to facilitate marketing of their produce, which is a big problem for them. If you look at their hierarchy of needs, their biggest problem is where to find markets and fair prices. Today there is no transparency in price discovery because of various hindrances, which the government has begun to remove.
We are also looking at offering some low-cost Tata products to rural customers through our Tata Kisan Sansars (TKS) — we are running pilots, with Titan for selling their low-cost watches and with Tata Indicom and Tata BP Solar for telephone and energy services. A plan is being explored with Indian Oil to provide packaged kerosene to rural customers.
Biofuels is another area we are considering — with a hub and spoke model where we get farmers to grow certain crops and give them a good return, use a part of the crops to generate fuel for that area and sell the rest outside. It's important to assure a certain amount of energy security.
The other thing I'm convinced about is that through the TKS we can provide good quality primary education. Through the scheme we are developing an IT backbone, and if we can work with Tata Indicom, there is an opportunity there as well.
Before we talk of progress in the rural areas, we need to connect the Indian farmer to the national market. Farmers often do not know the prices of farm produce in the next village, just a few kilometres away. They just go to the mandi (market) and sell their produce to a middleman who determines the price. One of the things organisations like e-Chaupal and TKS do is to make farmers aware of prevailing prices in the country. Each of our initiatives, such as TKS, which is social-service oriented in the beginning, will become self-sustaining and a business opportunity for us. I don't think you can divorce a commercial opportunity from the social needs of a community — the two need to work in tandem.
If we can improve the quality of life of farm families, by providing products and services at affordable rates, they will be willing to pay. They may not be able to pay much; and that's where the challenge lies, which can be addressed by technological innovations. A start has been made.
The future looks very bright for our rural economy. The imminent boom in retail will boost demand for both fresh and processed foods. We will see a complete backward integration, which will bring in transportation, cold chains and other companies investing in increasing the productivity of the farmer.
This will ensure that 90 per cent of the produce is stored properly and hence goes directly into retail. The difference between the price the consumer pays and what the farmer gets will be reduced and this will improve farmers' profit margins. Consumers will be prepared to pay more for better quality produce. This will result in better products being grown for the market; the seeds, and pre-cultivation and cultivation practices will improve.
In the final analysis, all this will improve the lives of the rural poor. And as India increasingly moves towards a service-oriented economy, rural India will take off too.Related articles: