Rural is more about doing it the right way: Effective Execution of Strategies

The Event Theme:

Rural India is the next growth destination. The aspirations of today’s rural consumers, who are “better-connected” and “more-aware”, are rising. They are fuelled further by their increasing incomes. “Why” marketers should go rural is not a question anymore… The task now is to devise strategies that can seize this opportunity. The “how” of it!

To help marketers navigate this future effectively, Rural Marketing Association of India organized a Conclave with the theme “From why rural to how rural”.

The event saw an amalgamation of two generations of the rural marketing fraternity. Experienced industry veterans joined the new age professionals to share the best practices and preview the next practices through panel discussions, presentations and case studies.

My Session Theme:

While some marketers have hopped on to the rural bandwagon early, many have started exploring more recently. Strategies that worked in rural markets, as also those that didn't, have been well documented. Riding on the increasing penetration of mobile devices and internet, social media and e-commerce are no longer the things of the future in rural India.

Coming well after the mid-point of the event, on Day 2, my job was to pick a few widely recommended “hows” (the strategies) from the preceding sessions, and share my thoughts on “how exactly” does one go about implementing them.

I picked four “hows” and went on to prescribe “how exactlies” based on the lessons from ITC e-Choupal experience… 

How 1: Because rural is a ‘connected community’ and the rural people are ‘social’, you must work through “Opinion Leaders” to influence the buying decisions of rural consumers.

Such Opinion Leaders could be Panchayat Presidents, Large Farmers, Shop Keepers, Teachers, and so on…

How Exactly does one go about finding the right Opinion Leader relevant to my offering and my context?

Step 1 is to figure out the exact role such a person would play in your business model, and accordingly determine the relevant profile.

For example, it could be a Value Chain Intermediary who is making up some missing infrastructure to improve efficiency.

Like the way the village money lender knows whether or not to extend an additional loan when the previous loan has not been repaid. Despite the missing credit rating infrastructure, he would know what to do because he knows whether the crop has failed, or if an unforeseen domestic expense has come up, or if the farmer simply wants to renege despite having cash on hand.

Or the way an Adathiya in the Mandi knows if the lot of agri produce has to be priced higher or lower than the average. Despite the missing laboratory infrastructure, he would know whether the lot has more of good, bad or ugly material. With one look!

That’s how the role of Samyojak came into being in ITC e-Choupal system. One of the roles of Samyojak, located at Choupal Saagar (the hub of the hub & spoke e-Choupal architecture) is to disburse cash to farmers. While the Banks offered to do this job at a cost of 1.0% of transaction value (accounting for the cost of a bill clerk, a cashier, and a security person, working in two shifts to service our working hours of 0700-2100), the adathiyas were ready to do this at 0.25% by combining all three roles into one! We found a Samyojak in the adathiya. He was making up for the missing cash-less transaction ecosystem. One day, when the infrastructure is in place, Banks will be able to do this more effectively.

Other example could be an Influencer who demonstrates the value of an offering through personal usage. Sort of a “lead consumer”.

It is important that the rest of the consumers perceive this person as “one amongst them”. Not the Agent of a Company, promoting their offerings. Nor should the companies see him as a Leader of the farmers / consumers as in a Trade Union context.

Thus, a medium sized farmer became a Sanchalak in the e-Choupal system. Not a large farmer, nor a shop keeper or a teacher with whom the majority of the farmers cannot identify with.  

The Choupal Sanchalak was the “go to” person for both the villagers (when they had an issue with the companies riding on the e-Choupal platform) as well as the companies (when they had an issue with the villagers). Sanchalak was “one of us” for both the parties!

To my mind, this unique institution of Sanchalak is a bigger innovation in the ITC e-Choupal model than bringing Internet to the villages when most of them hadn’t even seen telephones!

The social capital of the Choupal Sanchalak is further enhanced through a public oath he takes in front of the whole village that he would act a like trustee etc.

How 2: Although the rural consumer’s aspirations are more urban-like, you must tailor-make products for rural consumers and their contexts because rural is heterogeneous (eg. single razor vs multi-blade systems) 

You must co-create with rural consumers, because you can’t otherwise keep up with the speed with they are changing. They are not urban consumers with a standard time lapse, as someone said.

How Exactly do you co-create? This is an often-used but hardly understood phrase!

It may be easier to understand co-creation, if we first understand what is not J

Co-creation is not more research. It is not bringing consumer voice to the boardroom.

Co-creation is not crowd-sourcing ideas.

Co-creation is not even marketers immersing with consumers and developing empathy.

Co-creation is not testing company-centric product designs with the consumers.

Co-creation is giving consumers the tools and structure that allow them to become designers!

Sanchalaks – as lead consumers (of crop management knowledge, for example) – were integral part of the e-Choupal web portal design team. It was at their instance that a typical “best practices’ content was structured as “current practices, what is right or not right with them” and “why some practice needs to be changed, and then the recommended practices”. This helped add credibility to the portal that the scientists panel understood their context and then only were recommending something else, rather than a conventional expert style instruction…

The structure of periodic village meetings with all the farmers, further rolled up into Sanchalak Sammelans, helped embed their insights and inputs into the continuously evolving design of e-Choupal on an ongoing basis instead of an occasional feedback system…

We pleasantly realised that the brand “e-Choupal” was owned by the community, and that ITC was a mere trustee, when such a co-creation process articulated the brand tagline as “kisanonke hithme, kisanonka apna” in the very second year of the initiative.  The highest level any brand can attain, to my mind J  

When everyone was looking for a low-cost-last-mile to reach the rural markets, ITC e-Choupal was working on an intelligent-first-mile by working together with the communities.

How 3: You must forge partnerships to win in the “high-cost-to-reach but low-ticket-size” rural markets

Partnerships are relevant from many angles, how exactly do you determine what kind of a partnership does one forge?

I have a product, you have the channel. Let’s partner to expand outreach?

I have a product targeted at a market. You have a non-compete product for the same market. Let’s partner and go to market together and cut costs?

All such partnerships are eminently worthwhile. But the best partnership potential is in creating what is called a meta-market.

There is a fundamental disconnect in the conventional markets. Consumers think in terms of activities; companies think in terms products / services. For example, a car buyer would think in terms of information to understand the features of cars available in the market, source of credit, dealer in the vicinity, insurance, RTA etc. Each of these belong to a different industry, each trying to reach the consumer independently!

What a meta-market does is to cluster such complementary products / services and offer a complete solution to the consumer.

In the context of agriculture, farmers think in terms of weather forecasts, market prices, access to farm inputs, credit, insurance, markets for the produce, and so on… The ITC e-Choupal ecosystem assembled all these players from diverse set of industries on one platform to offer a seamless market experience to farmers / consumers at one place, right in the village! As many as 160 organisations ride on this platform today!

How 4: You must leverage technology to operate in the rural markets, because it can cut costs through remote delivery as well as personalise offerings

There is so much technology around me, how exactly do I use technology? Mobile advertising, geo-coding?

Simple! You understand the unfulfilled consumer needs and the current business processes first, and then see what role technology can play. Not the other way round.

For example, when the farmer goes to a mandi to sell his produce, four transactions are rolled into one. Price discovery, Sales, Delivery, Cash Collection. The sunk cost of transportation he has incurred even before discovering the price forces him to sell at whatever he is offered. Taking the produce back doubles his transportation cost with no guarantee that he would fetch a better prices next time he comes to sell.

ITC e-Choupal brought price discovery process to his doorstep using Internet (supplemented by the quality testing by the Sanchalak) empowering him to decide when and to whom he would sell without the pressure of a sunk cost.

When he sells to ITC, we have the ability to stack the produce of different farmers in different lots pooled as per our quality norms rather than the random aggregation done by the adathiya in a mandi. This helps preserve identity and maintain product integrity, so critical for the success of our brands.

A win more + win more solution enabled by technology J

 

Marketing to the Bottom of the Pyramid

Earlier this week (7 Dec), I spoke to the members of the six winning teams of ISB’s iDiya initiative (http://www.isb.edu/iDiya/). My topic was “Marketing to the Bottom of the Pyramid”. Actually, I conducted the session much like an MBA class. I just asked the questions, got the participants to respond based on their experiences, and I put it all together as a synthesized output. Here it is:

A. Why is marketing to the consumers at the BoP different from marketing to the consumers at the ToP or MoP?

• What is different about these consumers?

1. By definition, income of these consumers is low
a. Incomes are seasonal for farmers. There is also variation in incomes across seasons
b. Most of the money is spent on Food. Purchasing power for discretionary products is low
c. People prefer single serve products. Low unit cost products.

2. Awareness levels of these consumers about most products / services is low (primary focus is on subsistence)

3. Acceptance of new products is low.
a. There was also a counterpoint that acceptance of new products is actually high, if the product is relevant and the value is communicated effectively)
b. New products are accepted when opinion leaders in the community use them and demonstrate value
c. Word of Mouth is a better communication channel among the BoP consumers

4. Urban BoP is more homogenous than their rural counterparts
a. Urban BoP has lower disposal income as their cost of living is higher than that of their rural counterparts
b. A number of urban BoP consumers may not have a permanent address, as they keep migrating for jobs and / or change addresses when they come back to towns seasonally

• What are the challenges in marketing to these consumers?

1. Reaching products to them is a challenge. Supply chain costs are high and unviable, compared to product margins, as they are scattered (especially rural consumers)

2. Communicating with them is also a challenge, due to low media penetration. Difficult to reach consumers other than top socio-economic segment in the village

3. Competition from the local middleman is a problem. Because he lends, he has a grip on the consumers. He pushes high margin products, not necessarily products that are relevant to the consumers. Alternative channels (eg Banks) have the risk of defaults, as they don’t know the consumers as well as the local money lender does. Their documentation processes are rigid, and borrowers prefer easy access from the money lenders.

B. In light of these differences and challenges, how should we approach marketing to these consumers? (Answers largely revolved around rural consumers)

1. We must offer Products relevant to these consumers. These are (a) those that raise their incomes and reduce their risk (b) low cost products
i. Reach R&D to people at grass roots to increase their productivity and improve quality
ii. Reach finance. Actually complete range of financial services credit, savings, remittances, insurance
iii. Bring Crop Insurance, Health Insurance, Commodity futures
iv. Information about new investment & employment opportunities is an important service that can be provided
v. Reduce dependence on agriculture, through allied activities like livestock or even BPO. Facilitate some primary processing activities in the villages.
vi. Build capacity for these other activities

2. We must leverage technology to create such products and also to overcome the infrastructure barriers
i. Technologies include mobile phones, radio, internet
ii. Apply basic & appropriate technology to solve problems, many times learn from the BoP people themselves

3. Organise people at BoP into groups to reduce transaction costs in dealing with them
i. Thereby build scales of economy in farm inputs sourcing
ii. Collective farming or cooperative farming also examples
iii. Reduce role of traditional middlemen, by bringing educated rural youth back to villages
iv. Leverage the discipline characteristic among women to be the new intermediaries, as demonstrated by SHGs

4. Multiple organizations must come together in a collaborative way to deliver complete solution to these consumers
i. PPP is a good way. Government financial support is crucial to many projects, especially in agriculture & employment
ii. Partnerships with Not-for-Profits are useful in establishing relationships with the community, and in communication

C. What are some of the challenges you visualize while executing these strategies?

1. Many execution challenges are cannot be anticipated; so be adaptable

2. Customising products and services to the local needs; understanding the local needs itself is a challenge
i. Delivering after sales services is expensive
ii. Acceptability of new products / technology / ideas will take time to build awareness and educate people about the benefits

3. Competition with middlemen and other local players isn’t easy.
i. If the products / services improve market transparency, there may be resistance too from these people
ii. Competing with counterfeit and look alike products at substantially lower prices will be a challenge too

4. Identification of right leaders within the village will be a challenge in itself

5. Retaining talent is also challenge, as most people would like to work in urban areas
6. We need a pipeline / platform to connect companies with BoP consumers (right from consumer understanding to distribution of products)
i. Such a pipeline could be built in a collaborative mode (Government could pitch in with some subsidy, especially for services like agri extension and other capacity building activities)

Here is a picture of a part of the White Board I scribbled on; this helped in putting this note together :-)