Chronicle EditorVijay Mahajan—
NEW YORK. – Consumer markets in the developing world are an enormous but still-untapped opportunity for companies seeking new sources of growth. Within that group is an even more overlooked opportunity: the rural consumer.By its sheer size, it has huge potential. Worldwide, there are 3,4 billion rural consumers and about 3 billion of them live in developing countries in Asia and Africa. They are not all poor; in many countries, a rural middle class is emerging or expanding. Technology is making it easier to connect with rural consumers in so-called media dark areas.
The challenges – market development, product design, logistics, communication — deter many companies from even considering rural markets in developing countries. But some companies have what I call rural DNA — the ability to recognise the rural opportunity and to develop innovations to tap those markets along with their urban markets.
While researching my new book, Rise of Rural Consumers in Developing Countries, I conducted interviews with executives at both multinational and local firms, and talked with and observed rural consumers in the 10 countries with the largest rural populations. Seven of these are in Asia (India, China, Bangladesh, Indonesia, Pakistan, the Philippines, Vietnam) and three are in Africa (Ethiopia, Nigeria and Egypt). I also visited Thailand, Myanmar, and Bhutan, which also have considerable rural populations.
One of the stand-outs was Unilever. Particularly in Asia, Unilever has pioneered a number of innovations that it has exported to other regions in its focus on addressing rural market opportunities.
Tap into women sales
With its Shakti initiative, Hindustan Unilever Limited (HUL) pioneered the concept of training local women as rural sales agents who sell Unilever products door to door in their communities. As of 2015, the initiative had grown to 70 000 sales agents serving 165 000 Indian villages, and HUL had equipped them with smart-phone apps to help them manage inventory and other aspects of their business. The company has created variations in Bangladesh, Vietnam, Sri Lanka, Egypt, and other countries.
In Pakistan, Unilever took the concept to a new level, training hundreds of village women as beauticians, working out of their homes. During a three-month programme, the women, called Guddi Bajis, or “good sisters,” learn to apply makeup, shampoo hair, and provide other beauty services, as well as how to sell Unilever products to their customers.
They charge for their services and earn commissions on those sales as well as points toward incentives such as salon tables or mirrors.
Ehsan Malik, former chairman and CEO of Unilever Pakistan told me that underlying the initiative is research showing that rural women have a high interest in beauty but little access to advice or products. The Guddi Bajis provide that access and become brand ambassadors for Unilever products.
The initiative also provides incomes for women who have few opportunities to make money and cannot freely travel outside of their homes. The market potential is significant: 4,5 million women in 5 000 villages, Unilever told me.
Find grassroots distribution strategies
The Philippines is a nation of small retailers. About 95 percent of the 1 million retail locations are small variety shops, called sari-sari stores. Despite their small size, some of the stores sell as many as 200 different items. Nielsen has estimated they account for 36 percent of the country’s fast-moving consumer goods sales.
Distributing goods to these mum-and-pop operations would be complicated and expensive, so about six years ago, Unilever landed on an idea: recruit some of the larger stores to do double duty as sub-distributors.
At one such store I visited in Rizal province, southeast of Manila, the owner had purchased two motorised tricycles to make deliveries. In another, the store was a distribution point for sari-sari shopkeepers from a nearby island.
Owners of the superstores, as they are called, get discounts on Unilever products, while the sari-sari stores get better access to more Unilever brands. The superstores also serve as venues for activations, called fiestas, which combine product demonstrations and giveaways with games and entertainment. Unilever organises about 500 fiestas a year, and said sales of highlighted brands typically jump 30-80 percent during fiesta weeks.
Unilever told me that the initiative had doubled its rural coverage in the Philippines while also reducing distribution costs. They use other direct-distribution models in other countries, including Pakistan, Bangladesh and India to increase the rural reach of its brands.
Create new channels for advertising
One challenge in tapping the rural market is how to reach consumers in remote areas with limited electricity and little access to mass media.
In India, Hindustan Unilever has used mobile technology to create audio entertainment for rural areas, adapting a common practice among frugal cellphone users – the missed call. To conserve talk time, mobile phone users dial a number, then hang up before they are charged, although the other person can see who called.
It’s a way of letting someone know you want to reach them. In 2011, HUL exploited the practice in a pilot promotion for its Active Wheel detergent in some of India’s poorest and most rural areas. People were asked to call a number that cut off after two rings, so it cost them nothing. An automatic free callback provided some comic dialogue from Bollywood star Salman Khan and ads for Wheel. In four months, HUL got 16 million calls and Wheel sales tripled in the region.
HUL expanded the concept to offer 18-minute blocks of audio entertainment interspersed with ads for Unilever brands. The cost is less than 2 cents per impression. By 2015, it had grown to 35 million subscribers and was adding 25 000 a day. Unilever was planning to create versions in Pakistan, Bangladesh and some African countries.
Design products (and set prices) for rural consumers
Years ago, HUL pioneered the use of low-cost, single-use packets to make its products affordable for lower-income consumers who often shop daily for necessities (think of a ketchup packet, but filled with soap). Now these packets are ubiquitous in developing countries around the world. HUL itself sells 27 billion sachets a year.
In the Philippines, they turned out to be the answer to increasing rural sales of the company’s Rexona deodorant. Unilever faced a tough challenge: Only half of Filipinos buy deodorant regularly, and standard package sizes were too pricey for rural consumers.
To lower the price, the company first tried a small size of Rexona in stick form.
The mini-sticks cost 35 cents, but that was not cheap enough for rural consumers. Then Unilever developed a cream version in a single-use-sized packet that cost about 10 cents.
That was the winning formula: Even the smallest mum-and-pop shops began stocking them, and Rexona cream overtook the roll-on version as the product’s biggest seller. With a push from Rexona, deodorant penetration nationwide doubled to about 60 percent.
Help managers
adopt a rural mindset
Underlying HUL’s success in rural India is a programme that requires
managers to spend a month during their first year living in a village. They see how rural consumers live, and get a first-hand perspective on their needs and aspirations.
That personal experience gives them insights that they could never gain from reading reports or conventional market visits.
Several HUL executives told me they credited their success in part to that programme.
These ten countries in Asia and Africa host almost two-thirds of the world’s rural population, 2,2 billion inhabitants.
Because of Government interventions, remittances from rural migrants, and works of NGOs and social organisations in developing better farming and sustainable living skills, these rural markets present a huge, global opportunity.
Accelerated penetration of mobile phones, internet, and satellite TV is making these rural consumers aware of the product and service options that they aspire to have for themselves and their families.
Urban markets are becoming saturated — competition there is growing ever-more fierce. Forward-looking companies like Unilever cultivate an inclusive growth strategy that considers rural consumers as part of their plans for growth.
Vijay Mahajan holds the John P. Harbin Centennial Chair in Business at The University of Texas at Austin’s McCombs School of Business. He is the author or editor of a dozen books, the most recent being The Arab World Unbound (Jossey Bass, 2012).
Online Reporter