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Professor Vijay Mahajan

McCombs School of Business, University of Texas

Professor Vijay Mahajan

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"The digital leapfrog in rural Indian has been simply amazing"

Professor Vijay Mahajan, McCombs School of Business, University of Texas

Oct 12, 2017 13:14

Professor Vijay Mahajan holds the John P. Harbin Centennial Chair in Business at McCombs School of Business, University of Texas, Austin. He has authored numerous books, including Rise of Rural Consumers in Developing Countries: Harvesting 3 Billion Aspirations. In this interview, Prof. Mahajan highlights why India’s burgeoning rural consumer sector is a treasure trove that businesses cannot afford to ignore.

Why have India’s rural consumers recently become a focus for various sectors? Do you expect this interest to continue growing, or should we expect a slowdown?

In terms of size, there are 3.4 billion rural consumers in the world. And almost one-third of the world’s rural population lives in South Asia. Therefore, the Indian rural consumer segment has become a very big deal for conglomerates. One important distinction to make is that rural does not mean poor. In fact, more than 35% of the Indian rural consumers fall under the middle or upper-middle class brackets. The sheer size of the market and the consumer’s disposable income are factors that cannot be ignored. To top it all off, the urban marketplace is becoming increasingly saturated and the rural consumer offers a new avenue for companies to expand and grow into.

What role has technology, especially ease of access to the Internet, played in the country’s rural consumption patterns?

The digital leapfrog in rural Indian has been simply amazing.Thanks to technology, rural consumers are fully aware of the products and services that are available.First, satellite TV did wonders as it gave access to the same commercials that consumers in the urban areas were seeing. Now, the proliferation of smartphones and mobile internet has greatly changed things—India is one of the world’s biggest markets for mobile marketing, and for services like Facebook and WhatsApp.Companies have figured out how to reach the consumers via this new technology, even in areas where there are issues with electricity.Rural consumers have always had the money, but now they have greater access to knowing what is available. For companies, availability is one thing, but distribution to rural consumers also matters, which is where technology comes in to the foray.

Will the rise of rural consumerism help in delivering other avenues of greater prosperity?

It is really an interesting space to explore. In certain segments, rural consumers are already spending more money than their urban counterparts. Consider gold, for example. The rural consumer buys far more gold than an urban consumer does,especially during religious festivals. Even the packaged-goods industry is seeing a more rapid growth rate in rural areas than elsewhere. Does this translate to greater prosperity? Yes, it does, and to greater pride as well. Rural consumers now have access to everything that is available in urban areas as well, and this provides a massive boost to the perceived level of prosperity.

What should brands keep in mind when catering to the rural market? What marked differences should we expect to see from their urban strategies?

Good brands always keep the ‘customer is king’ mantra in mind,regardless of whether the customer is urban or rural.No matter where people are situated, their aspirations are almost always the same. Addressing and satisfying these aspirations while keeping their realities in mind is where the challenge lies. Once again, it should be remembered that ‘rural’ by no means insinuates ‘poor’. Numerous major international brands, like Coca Cola, have always been well attuned to what the rural consumer desires. This, of course, is true not just for India, but from rural consumers everywhere—from South America to Africa to Asia. Even if the rural consumer can afford to buy a branded good as much as an urban one can, the brand value is significantly higher in the former case. As mentioned before, availability and distribution is what matters more; this is where the real strategy is needed. The rural consumer is catered to more than sufficiently in terms of brand exposure.

As the rural consumer becomes ever-increasingly brand conscious, should international brands be taking notice?

Previously, international corporations such as Procter & Gamble and Coca Cola used a market segment classification system that put urban and rural consumers under different categories. This system takes numerous factors into consideration and was fine, for a while. Now, the same organizations have switched to a different system that does not distinguish between urban and rural consumers, especially those in the same financial brackets. What this signifies is that brands have already begun taking notice and are tweaking their strategies accordingly.

Will we see rural to urban migration stemming in the future? If not, what does this mean for the rural consumer market?

Migration patterns differ from country to country, and in India, rural to urban migration is huge. Over time, people have come to realise that migrating to urban centres often comes with a decrease in lifestyle. It isn’t necessarily negative, but it’s not an ideal situation either. Of course, migration does not mean that people forget their roots or their aspirations change. Instead, the lessons learnt from migrating to urban areas are transferred to the rural ones. The key factor to consider here is ‘urbanisation’. As this spreads across rural areas, there will be fewer incentives to move to a big city. The government is doing an excellent job building and expanding infrastructure in rural areas, and this will have a major positive effect on people’s lifestyle expectations as well. As such, the rural consumer market is only expected to get even stronger.

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