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Can India’s rural consumers be a source of top- and bottom-line growth for your organization? If your company is still grappling with this question and unsure about rural markets, think again. Your business may be missing its next big opportunity. In this research study, Accenture found that rural markets account for a significant portion of revenues and profits for many companies.
Accenture research reveals that making real profits in India’s rural markets is possible, even in the short term. The key: Companies must build and maintain efficient sales and distribution networks tailored to rural India’s unique characteristics.
How can you become masters of the rural marketplace? View this infographic to find out. [PDF, 209 KB]
The New Rural Market Reality
Rural economy is now being led by manufacturingToday, agriculture accounts for only approximately one-fourth of rural GDP . A decade ago, it represented nearly half. About 55 percent of manufacturing GDP today is rural and nearly 75 percent of new factories built during the last decade were in rural areas. Rural factories account for 70 percent of all new manufacturing jobs. The industrial development in rural India has also increased household purchasing power and income stability.
Rural markets are growing faster than urban marketsSince 2000, per capita rural GDP has grown faster in rural India than in its urban areas: 6.2 percent compound annual growth rate versus 4.7 percent.
Rural consumption is on the riseRural incomes are growing, and consumers are buying discretionary goods and lifestyle products, including mobile phones, television sets and two wheelers. Between 2009 and 2012, spending in rural India reached US$ 69 billion, significantly higher than the US$ 55 billion spent by urban populations. Nearly 42 percent of rural households owned a television in 2009-2010, up from 26 percent five years earlier.
Accenture research reveals that companies are experimenting with various go-to-market models to garner their share of this growth. But the results have been mixed. Our research revealed that an efficient sales and distribution model is the most critical factor for successful rural expansion in India: nearly 60 percent of our survey respondents ranked it as the top imperative.
To understand why—and what to do about it—Accenture conducted an extensive research study to discover how companies are responding to India’s rural market opportunities and what selling and distribution-related challenges they are encountering.
Accenture’s research and experience with clients have demonstrated that success in India’s rural markets hinges on the performance of companies on two key measures:
Rural Performance Index—the degree to which rural markets are strategically important to a company’s growth agenda, defined by the contribution of rural markets to the enterprise.
Rural Innovation Index — the level of innovation in a company’s product, packaging, pricing, channels and operating models.
With these two measures in mind, we have classified companies into four categories of success: Rural Masters, Rural Performers, Rural Voyagers and New Entrants.
Rural Masters are profitable companies that have secured a significant rural market share by focusing on execution excellence, implementing novel strategies to serve rural consumers and drawing on a deep understanding of consumers’ cultures and needs.
Rural Performers are profitable entities that have established a strong rural footprint by using conventional approaches or by emulating Rural Masters. They often lack an innovative streak.
Rural Voyagers have adopted disruptive approaches to serve India’s rural markets. For example, they create unique products and services, customize pricing or packaging, or develop new channels to reach “the last mile.” However, they have yet to make profits.
New Entrants are companies that have recently made forays in rural markets. Conservative in nature, many of these enterprises have limited operations and have not generated the profit needed to create economies of scale.
This report offers insights into how companies can achieve mastery across the full rural customer lifecycle—reaching, acquiring and retaining customers.
Drawing from our survey and interviews, we have identified three enablers that are central to rural strategy success: adapt organizational structures and secure leadership buy-in, create a winning talent management strategy and use technology to create advantage.
March 15, 2013
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