In spite of a slew of bottlenecks on the ground, more than two-thirds of companies doing business in India have plans to rapidly accelerate the expansion of their businesses in rural markets, according to new research released by Accenture, a global management consulting, technology services and outsourcing company,
The Accenture study, however, identified a number of hurdles to profitably serving customers in rural markets. More than half of the respondents cited the high cost to serve rural customers as a key factor that limits profitability; around 43% identified recruiting and selecting channel partners and 38% identified sales force competency as key limiting factors.
The research includes qualitative surveys of 40 business leaders and 20 industry experts and academicians, and a quantitative survey of 70 businesses operating in rural Indian markets across sectors. Businesses represented are both MNCs and local Indian.
Sanjay Dawar, senior managing director for Accenture's business consulting practice in India, said, "Rural markets lack adequate physical and social infrastructure and therefore distribution of goods and services across these markets is very costly and challenging. The companies expanding in rural markets should therefore focus their geographic reach and more effectively invest in understanding the segment-specific nuances in those areas. They should then prioritise their channel partnership strategy to strengthen the capabilities and reliability needed to reach customers in the last mile.”
According to the survey, three-quarters of respondents indicate that developing collaborative channels — partnering with non-competing companies or other entities to share the cost of distribution — will be the key for growth in rural markets in the near future. To incentivise channel partners, 47% of respondents provide recognition awards from senior management, 43% provide monetary rewards and incentives while 40% run specific programmes to improve the livelihood of channel partners.
Customer service and product awareness also are imperatives, each identified by 40% of respondents. However, 32% of respondents indicate that developing an after-sales network to provide consistent and reliable services in rural areas is a challenge. And when it comes to product awareness, 75% of respondents rely on engaging local influencers to gain the trust of rural consumers, which becomes challenging without consistent support from channel partners.
"Most brands have a relatively short history in rural India, and word of mouth plays a much stronger role in acquiring rural customers than it does in urban markets," said Dawar.
Engaging individuals with a high standing in rural communities as influencers must be a key component