If you live in the national capital and want to buy a Sony Bravia flat screen television set for just R16,900 do not venture into any of the outlets in the metro. Just zip down to a nearby small town such as Loni or Meerut and pick up the Sony Bravia 24R402 up from there. And in case you are based out of any of the small towns and cities across the country which suffer long power outages every summer, pick up the new LG Power Cut Evercool refrigerator which retains freshness and keeps food and vegetables fresh for seven hours.
If the economic slowdown in 2008-09 forced marketers to hunt for greener pastures, the hunt has gained momentum in the last few years with marketers beginning to take consumers living in micro-towns and their demands rather seriously. Sony India set the tone last month with the launch of its small screen Bravia brand TV sets for R16,900 onwards to tap growing demand in tier 2 and tier 3 cities and towns across the country. Consumer goods company LG India has introduced a new range of refrigerators – Power Cut Evercool (R12,850 onwards) and flat panel television
set?Jazz TV (R37,000 onwards). Meanwhile, three years after launching Chotukool refrigerators at R3000, Godrej Appliances is now planning to enter other categories such as water purification and washing solutions. In water purification, the company is planning to sell storage-based purifiers which do not require running water or electricity. And the list does not end here: After entering the mass market last year with the launch of its 110 cc bike Dream Yuga at R45,101 (ex-showroom Delhi), Honda Motorcycle and Scooter India (HMSI) has launched a cheaper version called Dream Neo. The entry-level price of the Neo is almost R3,000 less than that of the Dream Yuga. Again, auto company Hyundai Motor India which has seen its Santro ride into small towns across the country with much success, has now begun to push its other brands such as the i10, Eon and i20 in these markets.
The wellness industry, particularly, seems to be smitten with consumers in small towns. VLCC Health Care, which runs 167 wellness centres in 109 cities across the country, has more than 50% of these centres located in small towns and cities. Shahnaz Husain has centres in towns such as Panchkula, Raipur and Saharanpur and gets about 20% of group sales from the tier2 and tier 3 towns. L’Oreal’s mass haircare brand Matrix is the largest distributed haircare brand in the country, reaching 25,000 salons in big and small towns. Its two other haircare brands?luxury brand Kerastase and premium priced L’Oreal Professional?have also found loyal patrons in small towns.
Once known for their frugality, consumers in tier 2 and tier 3 towns are now splurging on brands they have always wanted to own. Hyundai claims that in the last two years there has been a noticeable upward trend in sales. ?In 2011, around 15% of sales came from the rural and semi-urban markets. In 2012, it grew to 16.9% and we expect it will increase to over 20% by 2014,? said Nalin Kapoor, senior general manager and group head, marketing, Hyundai Motor India. Bike maker HMSI last year sold 3 lakh Dream Yuga bikes and the company claims that 50% of sales came from cities beyond the top 100 markets. Sony India too claims such towns account for 50% of its sales in case of entertainment products, while in case of mobile phones, consumers in these cities have started to make the transition from feature phones to smartphones and soon these cities are expected to take over from the metros. Currently, metros account for more than 50% of sales in case of smartphones. ?Unlike metros, consumers in small towns, that is those living in the deep pockets, are not affected by the ups and downs of the stock market. Their buying power remains the same and they will continue to buy what they would want to buy,? said Pinaki Ranjan Mishra, partner and national leader – retail and consumer products with consulting firm EY.
Access to the internet via the mobile phone as well as broadband, apart from the surge in the number of e-commerce portals has also helped fuel the increased interest in branded goods and services.
?Penetration of 2G and 3G services on mobile handsets, apart from the growing number of e-commerce portals which allow consumers in small towns to access the latest brands and models have ensured that consumers now aspire to own these brands,? added Mishra of EY. Additionally, home-shopping channels have played an important role in bringing brands closer to consumers in these cities. ?India has 4000-5000 such cities and towns and, of these, only 2800 cities have the required infrastructure that allow brands to set retail outlets. Therefore, television and e-commerce are the next best alternative route for brands to reach consumers in such markets,? said Sundeep Malhotra, CEO, Homeshop 18.
The Digital Commerce 2013 report by Internet and Mobile Association of India (IAMAI) says the e-tailing category touched R6,454 crore in 2012 and is estimated to cross the R10,000 crore mark in 2013. At present, laptops/net-books/tablets contribute 24.5% (R1,579 crore) to the e-tailing segment while consumer durables and kitchen appliances, books and home furnishings contribute R500 crore. According to the eBay 2012 Census report, the top 10 rural hubs in India are Guntur (Andhra Pradesh), Choryasi (Gujarat); Kunnathunad, Karthikappally and Chirayinkeezhua (Kerala); Villupuram and Kuttalam (TamilNadu); Dindori (Madhya Pradesh), Jalgaon (Maharashtra) and Kadma (Jharkhand). Interestingly, electronic items account for 54% of total sales from such cities, followed by lifestyle products which stood at 36%.
Even as these consumers continue to discover new brands and gadgets, companies seem to have understood the kinds of products that tend to do well in such kinds of markets. Gone are the days when consumers living in towns beyond the top 100 markets would only buy cheap mass-market brands or go for loose, unbranded products. It is no longer a homogeneous market. ?While introducing a new range of Bravia TV specially for small towns, we ensured that we did not reduce the price drastically. The new range of flat screen TV sets are available at a price starting from R16,900. The idea while fixing the price for such kinds of markets is that Sony as a brand should be able to command the premium, it otherwise commands in metros, yet its product remain affordable. We understand that the consumer here is brand conscious,? explains Tadato Kimura, head, marketing, Sony India.
?Companies are trying to meet the requirement of these consumers by introducing products that suit their needs. For example, 75% of single-door refrigerators sales are in small towns and cities, whereas frost-free refrigerators account for 25% only. Also, these markets account for 70% of sales in case of semi-automatic washing machines, while only 30% consumers prefer fully-automatic machines,? said Kamal Nandi, executive vice-president, marketing and sales, Godrej Appliances. Nandi goes on to say that the fact that consumers living in micro-towns and beyond are ready to try and test new kinds of appliances was first noticed by the company at the annual Baliyatra trade fair held at Cuttack in Odisha, where the company sold as many as 22 pizza makers to people living in villages.
As of now, marketers are targeting tier 2, 3 and 4 towns and not beyond. While the Indian hinterland has a lot of potential, marketers are treading with great caution. ?We are targeting markets with rising disposable personal income,? said Hyundai?s Kapoor. Agrees Yadvinder S Guleria, vice-president, sales and marketing, HMSI who says that while these markets do offer huge opportunities, HMSI usually targets areas where there is a minimum guarantee of return. ?We identify the markets that we want to be present based on two or three parameters ? right from the sales volumes that particular market can generate to whether we will be able to provide after sales service to nearby towns and cities,? he said.
In fact, providing after sales service is one of the biggest challenges that is faced by these companies as lack of infrastructure facilities not only makes it difficult for company representa- tives to reach a specific destination on time, finding an engineer who is ready to work in remote areas is also difficult. To get around this problem, companies are looking at training local mechanics and mobile service vans even as they increase the spread and number of service centres. Sanjay Chitkara, head, corporate marketing, LG India claims that the company currently runs the largest after sales service network in the country, and in the smaller towns it has mobile service vans to resolve customer complaints in remote areas.
If consumer durable companies are busy introducing new products to fit the needs and pockets of the small-town consumer, companies in the business of personal care are continuously toying with pack sizes to ensure that their products make it to the homes of rural consumers irrespective of the distance these have to cover. ?We have introduced these specially designed pack sizes for the consumer in small cities as well as people on the move who would like convenient forms of packages. We have price points below R10 in almost all brands. For example, Navratna Oil is available in a Re 1 sachet, Zandu Balm and Menthoplus balms are available in Rs2 sachets,? said N Krishna Mohan, CEO, sales, supply chain and human capital, Emami Ltd.
Beverage makers such as Coca-Cola India too have launched entry-level pack sizes ? 200 ml returnable glass bottles which the company is selling at a special promotional price of R8. ?The 200 ml pack, being the entry point in the category, is recruiting new consumers since it is innovative and a very attractive price point,? said Anupama Ahluwalia, vice president, marketing, Coca-Cola India. The wellness category has witnessed its share of frenzy too, with brands such as VLCC, Kaya Skin Clinic entering markets such as Patna, apart from Bhatinda, Tirupur and Ahmednagar. ?All these markets are not dependent on agriculture. Rather, most of the people are small and medium sized entrepreneurs (SMEs) who are still in the process of discovering new brands. They have just woken up and have started to acknowledge brands. These people still have fire in their belly and hence make a perfect customer,? said Priya Monga, business head, RC&M India, a rural marketing agency.
Innovative marketing programmes have been the vehicle for brands driving into the tier 2 and 3 cities. Companies have been launching market specific campaigns from time to time to attract eyeballs keeping local culture and customer behaviour in mind. Annual trade fairs, festivals and local melas have been the favourite hunting ground for brands trying to convert the rural consumer into an avid shopper. Various melas such as Shravan Mela, Shivratri Mela in Andhra Pradesh, Baliyatra in Odisha, Kumbh Mela in Allahabad have seen brands vying for the consumer?s attention. Experiential marketing solutions also play a big role in attracting the customer in these towns. ?It is very easy to attract consumers in these markets since such initiatives are unique experiences for them. One just needs to zero in on the right target group,? says Monga. For instance, Monga?s RC&M recently organised a show in 43 cities and towns across India that included Bhopal, Jabalpur, Nashik, Raipur, Bareilly and Jhalandhar to promote the TVS Apache bike from TVS Motors, where stunt men performed various manoeuvres to showcase the features of the bike. ?We were targeting consumers in the 15-30 years age bracket. Therefore, we conducted the stunt shows at colleges, markets and BPOs/call centres. One also needs to be careful with the timing as students are mostly available in the morning or in the afternoon while the employed are free only in the evening,? she added. The initiative attracted 400-500 consumers on a particular day.
Godrej Appliances has been organising cookery shows across the country in co-ordination with media groups to provide a platform where consumers can sample their products. ?Depending on the scale, the space and the place such events attract 300 to 3000 women customers. The programme also allows us to spread awareness about Godrej?s products and technology. These events are not organised from the point of generating sales. Rather, these help in connecting with consumers. Depending on the queries we generate, the team later tries to convert them into actual sales,? said Godrej?s Nandi.
LG too uses events and roadshows to get close to its consumers. ?We have launched an innovative LG brand shop called Experience On Wheels. Under this initiative, flagship models are placed in a bus which goes around rural areas and provides an opportunity to consumers to experience the latest LG products,? said Chitkara.
?Marketers are targeting approximately 4000 towns with a population of 1 lakh to 10 lakh people. This they are doing in a phased manner. They plan to target 1000 towns first, followed by the rest. In another five years they should be able to cover all these markets and after that they will go deeper and deeper. The micro-town story for brands in India has just begun,? said Monga.
