Rural India: Driving Sales for Automobiles!
These days, we hear a lot about the rural economy and its contribution to India’s GDP which is in the range of 25 to 30%. The economic growth in rural India is extremely important if we have to become a $5-trillion economy by 2025. After all, 65% of the population lives in rural parts of India. Rural revitalization is very much essential and it requires a transformative approach if we have to make the rural areas a better place to live and work.
While Agriculture used to be the main source of income and employment in rural areas, the non-farm sector is also playing an important role in the rural economy. First of all, achieving food security is on top priority, Agriculture will continue to have its importance, where the technologically advanced system of farming needs to be ensured. Secondly, growth in agricultural production will pave way for agro-based industrialization, which will augment job creation in the rural markets. Government initiatives such as the latest agri-laws, introduction of Agriculture Infrastructure Fund, etc., would definitely help the morale of the rural population involved in the agri-sector.
MSMEs also play an important role in rural industrialization. While the government is focusing on extending all possible support for MSMEs to increase their contribution in the gross value added to 50% and in exports to 75%. This requires a lot of support in terms of technology, finance, skill development in manufacturing, business planning, and marketing.
Strengthening of Rural-Urban connectivity in terms of communication, transportation, etc., is another critical area in Rural Development. It will benefit rural labor, production, distribution, marketing, and other related services. The government is committed to ensuring a better road network, education, power, health care, drinking water, sanitation, and social safety net.
According to reports, the FMCG market, which mainly constitutes Food & Beverages, Health-care and household & Personal care, in the rural areas grew by 14.6% in the last quarter of FY 20-21, compared to just 2.2% growth in the urban market. This double-digit growth in the rural market can be attributed to various rural-centric schemes, such as increased fund allocation for MGNREGA, wage increases, revised MSP of key crops, etc. Expected Good monsoon for 3rd consecutive year also a morale booster for the rural mass.
Now, let’s look at how the automobile sector is performing in the rural market. Taking the example of car market leader, Maruti Suzuki India Ltd (MSIL), the company that has revolutionized the automobile industry in the country. Their success story has in fact lured many other global manufacturers to India. Despite competition from various automobile giants, MSIL is continuing its successful journey holding a lion share of the 50% passenger car market.
In addition to the product up-gradation from time to time, MSIL strategized its dealer network expansion targeting the rural market with an aim to move closer to the customers. They identified taluka-level markets for their E-outlets (emerging outlets) across the country that has helped them to achieve about 10 to 15% of their sales in the initial years. MSIL’s network expansion did not stop there, they moved to the remotest potential rural locations and set up R-outlets (Rural outlets).
A rural customer may possible have a few doubts, like:
Why should I buy a car & which car to buy?
Is it affordable to own a car or how is it beneficial?
How to get finance? And what are the repayment options?
Do I get after-sales service at my location?
What if I have to sell the car later? Etc..
Smaller outlets (compared to city outlets) at the rural locations with a local sales & service team are the only answer to the above questions. Let’s look at a few major key success mantras:
Recruiting the sales & service teams from the rural markets. It not only helps in job creation but also to build the trust of the rural mass.
Creating the need for a car among the rural mass through various sales promotional activities; may not give you an immediate result, but it definitely helps to seeding.
Providing after-sales service to the rural customers at their doorstep is essential.
Since it is more of relationship sales in rural areas, one can also create local brand ambassadors for your product.
Most of the OEMs also offer buy-back options.
Today, MSIL is able to generate about 27% of their business from these rural outlets, which is equivalent to the total passenger vehicle sales of some of the leading OEMs, in a year, in the Indian automobile industry. No wonder, if the rural contribution to India’s GDP is about 25 to 30%, why not such a contribution (or more) for the market leader from the rural market.
(The author Mr.KVN Sharma is retired from Maruti Suzuki India Ltd, as State Head for Rural Sales in Karnataka. A Marketing & Sales professional having more than 20 years of experience in this field, with Maruti Suzuki, at their Regional Office in Bangalore. Set up the office for the company in Bangalore. Other Areas of operations include Distribution/Channel Management in Andhra Pradesh and Karnataka, Marketing & Sales Operations, Institutional Sales, Client Relationship Management, Team Management, and Rural Marketing & Sales.)