abhishreshthaa
Abhijeet S
Around 700 million people, or 70% of India's population, live in 6,27,000 villages in rural areas. 90% of the rural population is concentrated in villages with a population of less than 2000.
The rural India offers a tremendous market potential. A mere one percent increase in India’s rural income translates to a mind-boggling Rs 10,000 crore of buying power. Nearly two-thirds of all middle-income households in the country are in rural India. And close to half of India’s buying potential lies in its villages.
Thus for the country’s marketers, small and big, rural reach is on the rise and is fast becoming their most important route to growth. Realizing this Corporate India is now investing a sizeable chunk of its marketing budget to target the rural consumers.
Rural India accounts for over 70 per cent of the country’s population. With urban markets saturated for most categories, it has become imperative for all players to increase their penetration levels in rural markets. There has been a rapid expansion of the consumer majors’ distribution networks into the rural regions.
Companies like HLL and Colgate-Palmolive (C-P) have made sustained efforts through various programmes like ‘Operation Bharat’ (HLL) and ‘Operation Jagruti’ (C-P) to make inroads into the rural economy, in order to drive growth.
For the past three or four years, the bottom lines of most of the companies have improved due, on the one hand, to reduced excise duties and, on the other, to declining commodity and raw material prices. Besides, companies introduced cost rationalization measures, which helped them improve their operating margins.
Reasonably high operating margins are necessary, in order to sustain the high ad-spends. However, stabilized commodity prices may put pressure on the margins in the future.
With increasing competition, the players have had to absorb a lot of price cuts to boost volumes. In the past one year, however, the industry has been reeling under a demand crunch.