Rural and Low Income consumers in Asia
An important segment that marketers cannot ignore in Asia is the bottom of the pyramid and those Asian consumers living in rural areas. The challenges that marketers face in trying to address these consumers are high and risky due to the fragmented nature of the rural market and the low margins of this trade. There is no denying though that rural consumers want to access brands, if only because they are a promise of quality. For Asian marketers interested in tapping the huge rural markets in Asia, there are important issues to consider,
First, rural consumers have less purchasing power. In China, the income gap between urban and rural residents, which is around 5 to 1, greatly restricts rural people's consumption of products. There is also a significant difference in the way wages are earned with a majority of the working population in rural markets being paid daily instead of weekly or monthly wages. This means that consumers in rural markets will generally spend their daily wage on necessities such as food, and have little left to spend on items for personal care and other relatively luxurious items.
This has driven companies like Unilever to sell sachets in rural China and India, instead of the normal sizes of detergent and shampoo. One-third of India's shampoo sales comes from sachets in rural districts, with Unilever, the British-Dutch company accounting for 70% of those sales of sachets. The company is increasingly relying on Asian rural markets to drive its sustained growth. Hindustan Lever, Unilever's Indian subsidiary, is now a major force in the Unilever network of subsidiaries with many strategies emerging from India.
For example, the company used the expertise of its Indian managers in the rural markets to help develop the Chinese market for shampoos and soaps. Another example is Coca-Cola which began to sell 200-milliliter bottles of Coke in India in 2003 to increase demand among consumers who cannot afford bigger portions.
The income disparity between rural and urban consumers can therefore drive companies to innovate to answer these differences.
A second element of difference between rural and urban consumers is density. The number of villages in countries across Asia is extremely high, pushing companies like to develop extensive distribution networks.
In the Indian market, the detergent maker Nirma adopted a strategy of developing a base in the hinterland and the rural areas before attacking the big metropolises. Nirma's founder knew chemicals well enough to develop an effective low-priced detergent of good quality but did so starting in his home state of Gujarat before launching in other regions. He called the yellow powder detergent Nirma after his daughter. He started by selling to his neighbours for a small profit and built his consumer base slowly. Because a strong distribution network is so important in emerging markets like India, he concentrated on widening his distribution network. Nirma began surfacing all over Gujarat, in small shops in the remotest villages.
Another great example of a company with rural expertise is the Indian company Asian Paints. The company has almost 50% of the market for house paints in India, despite the presence of major foreign multinationals. The company has succeeded among other things by developing a very extensive distribution network in the rural market. Its products are priced low and as such, have been very successful in other developing countries such as Nepal and Fiji. Asian Paints has developed an expertise in dealing with low-income, often illiterate consumers who only buy small quantities of paint that they later dilute to save money.
Companies like Asian Paints and Nirma have understood that the key to succeeding in markets like China and India is a good understanding of the rural consumer and a vast distribution network.
Overall, while Asian countries are very diverse and need to be understood in their own context, there are similarities and threads that cut across the region. Companies like Unilever, Asian Paints or HSBC have captured some of these similarities in the development of brands that address segments with similar needs in different countries. Consumers in rural China and India buying small doses of detergent or shampoo. Rural consumers in Fiji and India buying low-cost quality paints. Muslim consumers turn to Islamic banking.
As Asian companies venture into new markets and try to appeal to consumers from other Asian countries, an understanding of these similarities as well as the specificities of Asian consumer psychology, remain essential.
First, rural consumers have less purchasing power. In China, the income gap between urban and rural residents, which is around 5 to 1, greatly restricts rural people's consumption of products. There is also a significant difference in the way wages are earned with a majority of the working population in rural markets being paid daily instead of weekly or monthly wages. This means that consumers in rural markets will generally spend their daily wage on necessities such as food, and have little left to spend on items for personal care and other relatively luxurious items.
This has driven companies like Unilever to sell sachets in rural China and India, instead of the normal sizes of detergent and shampoo. One-third of India's shampoo sales comes from sachets in rural districts, with Unilever, the British-Dutch company accounting for 70% of those sales of sachets. The company is increasingly relying on Asian rural markets to drive its sustained growth. Hindustan Lever, Unilever's Indian subsidiary, is now a major force in the Unilever network of subsidiaries with many strategies emerging from India.
For example, the company used the expertise of its Indian managers in the rural markets to help develop the Chinese market for shampoos and soaps. Another example is Coca-Cola which began to sell 200-milliliter bottles of Coke in India in 2003 to increase demand among consumers who cannot afford bigger portions.
The income disparity between rural and urban consumers can therefore drive companies to innovate to answer these differences.
A second element of difference between rural and urban consumers is density. The number of villages in countries across Asia is extremely high, pushing companies like to develop extensive distribution networks.
In the Indian market, the detergent maker Nirma adopted a strategy of developing a base in the hinterland and the rural areas before attacking the big metropolises. Nirma's founder knew chemicals well enough to develop an effective low-priced detergent of good quality but did so starting in his home state of Gujarat before launching in other regions. He called the yellow powder detergent Nirma after his daughter. He started by selling to his neighbours for a small profit and built his consumer base slowly. Because a strong distribution network is so important in emerging markets like India, he concentrated on widening his distribution network. Nirma began surfacing all over Gujarat, in small shops in the remotest villages.
Another great example of a company with rural expertise is the Indian company Asian Paints. The company has almost 50% of the market for house paints in India, despite the presence of major foreign multinationals. The company has succeeded among other things by developing a very extensive distribution network in the rural market. Its products are priced low and as such, have been very successful in other developing countries such as Nepal and Fiji. Asian Paints has developed an expertise in dealing with low-income, often illiterate consumers who only buy small quantities of paint that they later dilute to save money.
Companies like Asian Paints and Nirma have understood that the key to succeeding in markets like China and India is a good understanding of the rural consumer and a vast distribution network.
Overall, while Asian countries are very diverse and need to be understood in their own context, there are similarities and threads that cut across the region. Companies like Unilever, Asian Paints or HSBC have captured some of these similarities in the development of brands that address segments with similar needs in different countries. Consumers in rural China and India buying small doses of detergent or shampoo. Rural consumers in Fiji and India buying low-cost quality paints. Muslim consumers turn to Islamic banking.
As Asian companies venture into new markets and try to appeal to consumers from other Asian countries, an understanding of these similarities as well as the specificities of Asian consumer psychology, remain essential.
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