March 5, 2011


[Rural India used to seem like Mars to market researchers, but now they are arduously combing through the countryside to scrutinize the consumption habits and aspirations of villagers like Rehman. Their findings, gathered over the past three years, promise a new frontier that could transform the way domestic and foreign businesses look at the Indian market and could offer them hundreds of millions of potential consumers.]

By Rama Lakshmi
IN NIMALIPURI VILLAGE, INDIA Battling the heat and dust in this remote village, a market researcher showed up at farmer Abdul Rehman's door, plying him with questions about which brand of shampoo, toothpaste, hair oil, television, stereo system and cellphone he uses.

Then the researcher asked Rehman, 35, something most companies want to know about the rural Indian consumer: "What new products do you want to buy in the next six months?"

Rehman perked up and said, "I want to buy a refrigerator, and my wife wants a microwave oven."

Rural India used to seem like Mars to market researchers, but now they are arduously combing through the countryside to scrutinize the consumption habits and aspirations of villagers like Rehman. Their findings, gathered over the past three years, promise a new frontier that could transform the way domestic and foreign businesses look at the Indian market and could offer them hundreds of millions of potential consumers.

Already companies from South Korea's LG Electronics to U.S.-based GE Healthcare are starting to tailor their marketing strategies and even their products to reach this rural frontier.

Rehman's village, in the southern state of Andhra Pradesh, has no high school for girls, and most residents have bathrooms made of dried palm fronds. But hundreds of dish antennas sprout from thatched-roof homes. Rehman rides a shiny, black Honda motorcycle, watches soaps and pro wrestling on his flat-screen television, and has switched to a low-fat cooking oil after watching a TV commercial.

Analysts say that with rising rural incomes, new roads, better education, televisions and cellphones, India's sleepy countryside of 740 million people is ready for takeoff.

"Rural India is the real emerging market. A number of favorable factors are falling into place now. It's going to catch everybody by surprise. Many will say they were not prepared," said Pradeep Kashyap, who heads a consultancy called MART and is regarded as the guru of rural marketing in India.

Tailoring of products

About 70 percent of India's villages are now connected by all-weather roads; more than 200 million villagers use cellphones; and 60 percent of rural homes have electricity connections.

According to the National Council for Applied Economic Research, rural India accounted for about 22 percent of computers sold, 29 percent of refrigerators, 32 percent of cars and 46 percent of televisions. Average rural family income is expected to rise by 27 percent in the next five years, most of it from non-farm sources.

"For a long time, researchers felt that researching rural Indian consumers was not worth the effort," said Ashok Das, managing director at Hansa Research India, which specializes in studying rural India. His company jettisoned urban-centric research tools and developed a new grid to map and measure rural aspirations. "Understanding rural India is no longer difficult. Sampling is easier because census data and voter lists are now available online. You can even do phone-based interviews and sampling."

As marketing efforts in big cities near the saturation point, many companies are reworking their strategies to tap rural markets.

"Earlier, the villagers traveled several miles to the nearest market town to buy our TVs. But six months ago, we began displaying our TVs, refrigerators and washing machines in the rural grain markets where villagers come to sell their harvest. They have cash in their hands at this time," said Y.V. Verma, chief operating officer of LG India, a multinational company that sells consumer appliances. He said that the urban consumer mostly buys on credit but that the villager pays cash.

Companies are also tailoring their products for the hinterland.

Last April, GE Healthcare launched a hand-held, portable heart-rate monitor at $500, a fraction of the price of its large, premium machines.

"We predominantly sold products made in the Western world, but could I take the same thing out to rural India? We have to bring health care to the masses at the prices they can afford," said V. Raja, president of GE Healthcare South Asia.

'Sachet revolution'

In the mid-1990s, Indian companies began packaging shampoo in small, plastic single-serve sachets for rural consumers who could not afford to pay for the whole bottle at one time. In what came to be called the "sachet revolution," products such as toothpaste, hair oil, skin cream and cooking oil took on the same packaging.

But researchers now say the rural consumer has moved beyond the sachet.

"The war for the consumer's wallet is far more intense now with so many brands available across categories in India. Where is the next huge wave of growth going to come from? The small-towners and villagers are watching the same movies, soaps and product advertisements as the urban consumer now," said Amit Rangra, associate vice president of the advertising agency JWT, which set up a separate rural business team seven months ago called Rootmap.

The agency conducted a nationwide sample survey of rural markets last year. "Until recently we had data that told us about what the villagers had access to - drinking water, roads, electricity, a bank account or a post office. But now we want data that tells us about their aspirations as well," Rangra said.

Rangra's team learned that the male in the village family is still the dominant decision-maker. But rural consumers also like to emulate the brand that the village chief uses - they are not blinded by celebrity endorsements. And more and more people want non-farm jobs, but they want to hold on to their family farmland, too.

A few years ago, an advertisement for a car emphasized that it was tall enough inside to accommodate a villager wearing a turban.

These days, Rangra said, that sort of advertising is no longer necessary, with products more likely to be marketed using aspirational images of young people wearing Western clothes.

@ The Washington Post



BEIJING: China's government vowed Saturday to clamp down on inflation and urgently raise incomes as it pushes to spread the benefits of economic growth at a time when living standards are rising but so are popular calls for greater change.

In a speech that is
China's equivalent to the American president's annual State of the Union address, Premier Wen Jiabao said there would be more assistance to working class and rural Chinese who have not benefited from the country's rapid growth.

"Happiness" is a key theme for the authoritarian government this year, as it seeks to pull down inflation that has caused public grumbling and deliver more sustainable growth rather than the breakneck pace that has fouled the environment and widened a yawning rich-poor gap.

"We must make improving the people's lives a pivot linking reform, development and stability ... and make sure people are content with their lives and jobs, society is tranquil and orderly and the country enjoys long-term peace and stability," Wen said at the opening of the National People's Congress, where the country's social and economic goals will be laid out for the next five years amid lower growth targets and concerns about inflation and asset bubbles.

Security, always high during the congress, is extreme this year following anonymous calls posted on the Internet for Chinese to imitate the popular protests that unseated autocrats in
Tunisia and Egypt. A new appeal called for more protests Sunday, the third in a row, though the previous two have attracted onlookers, journalists and swarms of police, but few outright demonstrators.

Police were seen Saturday taking away at least two woman from
Tiananmen Square, possibly several of the many petitioners who flock to Beijing during the 10-day congress to seek help with their grievances.

In a country where many people spend a large part of their salaries on food, inflation is a serious concern, hitting 4.9 percent in January despite government efforts to reduce it.

"This problem concerns the people' s well-being, bears on overall interests and affects social stability," Wen told the nearly 3,000 national legislators, adding the government would impose price controls as needed and promote food supply, including building up reserves of key items to be released into the market when needed.

Price supports for wheat and rice will also be raised.

The centerpiece of Wen's program — certain to be approved by the Communist Party-controlled congress — is a five-year plan that outlines an ambitious transformation: moving the economy from its dependence on state investment and exports to one driven by consumption.

If accomplished, the change would boost household spending power through higher wages, level the playing field for private companies and end policies that have effectively shortchanged consumers and channeled savings to the favored state-owned enterprises. The move would also likely reduce friction with the
United States and other trading partners as China imports more.

Getting there, however, would require altering the successful formula that has helped propel
China to the world's No. 2 economy. It would also challenge deep-seated interests — from state companies and real estate barons who have benefited from cheap bank loans to politicians whose careers have benefited from the resulting high rates of growth.

Just when it needs cohesion, the leadership is also in the midst of an always contentious transition. Wen, President Hu Jintao and most other members of the Politburo Standing Committee are expected to begin stepping aside late next year for a new generation of technocrats.

In a sign of friction, Wen's program sets economic growth for this year at about the normal 8 percent, but ratchets back the figure for the whole 2011-15 period to 7 percent annually, hoping to downshift to better quality growth. But most provincial and other local governments have set higher rates, some in double digits.

Perhaps the biggest challenge for
Beijing is empowering consumers without encouraging them to demand greater political rights. Protests have proliferated in pace with affluence over the past decade. Chinese scholars, extrapolating from state media reports, estimate that large-scale demonstrations, strikes and other mass disturbances reached 180,000 last year — a doubling in five years.

Wen said the government would move to stop illegal seizures of farm land and illegal demolitions of houses, common causes of protests as local governments try to boost growth through construction.

Aware of social fracturing, the government has spent heavily strengthening the military and police and other domestic security agencies. A spokesman for the national legislature told reporters Friday that defense budget would rise 12.7 percent this year, resuming the double-digit increases of much of the past decade.

A task force from elite
Tsinghua University reported last year that spending on internal security nationwide was on par with the official defense budget and was expanding much faster. Some members of the task force have questioned that smothering security — evidenced in recent weeks in Beijing in response to calls for a Middle East-style "Jasmine Revolution" — saying it risks alienating the public and stifling appropriate demands for greater accountability and less government waste and corruption.

The government is not counting on muscle alone to forestall those demands.

"We will adjust the income distribution in a reasonable manner. This is both a long-term task and an urgent issue we need to address now," Wen said, adding the government would steadily increase the minimum wage, pensions and welfare payments, and boost spending on health care.

"Through unremitting efforts, we will reverse the trend of a widening income gap as soon as possible and ensure that the people share more in the fruits of reform and development," he said.

Behind the shift to greater economic and social fairness is a demographic change. State media have in recent days reported that
China's labor pool is expected to peak during the five-year plan before shrinking as the population ages. The reports note that when South Korea entered that phase in the late 1980s, the government and companies were forced to raise wages. The reports did not mention the labor strife and surge in democratic protests against the authoritarian South Korean government.