How CPG companies overcome challenges to reach thriving rural markets

This recent Harvard Business Review article points out that despite a slowdown in urban demand for consumer products, rural markets are growing faster than ever in some of the world's largest emerging economies, spurred by rising wages that are helping grow the middle class in these areas.

India, in particular, is seeing this trend play out. Between 2009 and 2012, spending by India's rural residents eclipsed that of its urban counterparts by about 25%, and according to Neilson projections, consumption in rural areas is growing 1.5 times faster in urban areas.

Not only is spending increasing in these markets, but rural consumers are increasingly buying branded products, and more-expensive goods are replacing entry-level versions.

The authors, all with Accenture, undertook a study to better understand the challenges that businesses face in these markets and determined a set of market leaders who are being innovative in their approach to gaining rural market share. They found:

What sets these organizations apart is their superior understanding of how to forge viable distribution paths into the countryside, identify profitable new customer segments, earn the loyalty of channel partners and create durable ties with customers to build a strong first-mover advantage.

Rural market leaders are forgoing traditional distributors, instead relying on smaller-scale subsidiaries who carry a narrower assortment of products tailored toward local tastes. Rather than using distributors, they are using vans as a way to get products to retailers directly, and retailers are using mobile technology to order appropriate stock levels for their local customers. For micro-markets, where there are no paved roads for vans, companies are innovating by using two- or three-wheelers to deliver goods to retail kiosks. Some companies are adopting the village entrepreneurship model as a way to distribute to these remote markets; partnering with, and in some cases establishing, independent businesses that are run by locals.

One of the biggest success factors, however, is a company's ability to establish trust among its rural customers. The authors suggest that in most cases, rural markets differ from more transactional urban ones, and they demand strategies that integrate companies within a region's social fabric. Successful firms are engaging with community members to build a reputation for caring about customers, beyond just trying to grow profits.

Taking an innovative, collaborative approach to the way companies reach these consumers can help not only a company's bottom line, but also help social efforts in these regions as well.

-- Jia Yan Toh

Best management practices for reaching, acquiring and retaining rural customers

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