OREANDA-NEWS. December 19, 2012. With consumption in hinterland rising at a faster clip, companies that until now were content with opening a few stores and painting a few walls in the name of branding are going the whole distance to entice the newly arrived rural consumer.

The monthly per capita consumption expenditure in rural areas is growing at 17.5% as against 16% in urban areas along with the rural incomes that are set to double to USD 1.07 trillion by 2015-16 from USD 572 billion now, said Siddhartha Roy, economic advisor, Department of Economics and Statistics, Tata Group.

Sniffing a huge opportunity, firms of all hues, from consumer goods to durables to automobiles are lining up new and innovative strategies to grab a bigger share of the pie.

Instead of exploiting marketing methods, Titan Goldplus, Titan Industries' jewellery division, as it would do in malls in the metros, is relying on events such as quizzes, rangoli competition and so on to drive footfall in stores in Tier 3 and 4 cities.

Goldplus also runs loyalty programmes which involve trips to the factory.

N Vaideeswaran, head-retail (Goldplus), Titan, said the idea is to increase footfalls and brand awareness via unconventional medium. "Once you get the customer to visit the store, it results in a conversion rate of about 80-90%," he said.

Tata Chemicals, the fertiliser company, offers free discount, free accidental insurance and lucky draws to rev up the market share. It has employed brand agents and technical knowledge experts to reach out to the farmers.

With the mobile internet users growing seven-fold since 2010 to 3.6 million users from 0.5 million, there's a scramble among telecom firms to capture the potential.

Tata Teleservices is running several innovative programmes for its Tata DoCoMo brand. It has tied up with Hindustan Unilever for a distribution alliance. The company is also running several low-cost rural marketing programmes, including Saral Rozgar (employment news) and English learning on mobile to hook the youth.

Automakers, too, see hinterland driving future growth.

Tata Motors, the biggest commercial vehicle manufacturer, is running a pilot programme in rural areas (places with less than 50,000 population), wherein small commercial vehicles (SCVs) are sold in a cost-effective way.

The company is building an indirect presence through partner organisations on a variable cost model. It has tied up with companies such as IOC and ITC, which help it generate leads for the potential SCV customers. The company is also tapping postmen in these areas to create leads.

Tata Motors is running the pilot in six states and has managed to sell additional 13,000 units through this programmes in one-and-a-half years. Once the programme goes pan India, the company is expecting the number to touch 17,000 units.

And it's not just Tata Motors, a significant chunk of volumes for several other players such as Maruti Suzuki, Hero MotoCorp, Hyundai India come from rural India.

About 46% of sales of Hero MotoCorp, country's biggest two-wheeler manufacturer, come from the rural markets. "We always had strong rural initiatives, which we consolidated under the 'Har Gaon Har Aangan' umbrella platform in 2007. We have already covered more than 100,000 villages under this programme – reaching out to opinion-makers in these villages. With 'Service Har Jagah' (SHJ) initiative under this platform, we are providing service to customers’ bikes in their villages itself,” said a Hero MotoCorp spokesperson.

To address the service issues in villages, there are currently over 1,100 specially-designed Hero MotoCorp motorcycles, fitted with customised boxes, moving across the country for SHJ camps.

Even players like Toyota Kirloskar Motor (TKM), that has more premium and semi-premium vehicles in their portfolios, the next phase of growth will come from rural markets.

The company started its rural initiative called 'Sambandh' from March to increase connect with the potential rural customers and create brand awareness. The company is targeting rural markets to contribute around 40% of its sales from current 25%, going ahead. "We are yet to get deeper in this market. But our next phase of expansion will be mostly in semi-urban and smaller cities," said Sandeep Singh, deputy managing director of marketing at TKM.

Currently, about 70% of cars sold in the market is through loans, out of which the current share of rural is low. And, seeing an increasing trend in credit borrowing from the rural customers, bankers and auto companies have come up with attractive schemes and offers to push such sales.

"Rural market is one of the major areas of focus for automakers today. And their strategy to expand the network is working very well for the companies. As far as lending is concerned, a lot of it still does not happen through organised lending with significant sales happening in cash. However, slowly the customers are moving to banks. We have also come up with different measures and tools to understand rural income capabilities and give spot loan approvals," said Sumit Bali CEO of Kotak Prime, a car loan provider.

For fast moving consumer goods (FMCG) firms, increased brand awareness is driving growth.

As a result, companies have now started distributing not only essential but even premium products in the rural market.

"Our interactions with retailers also suggested that the villagers are keen to consume branded products even if they are available at a premium over local brands. Further, the trend of premiumisation in FMCG products has also picked up, with demand for a premium fabric wash brand like Surf Excel witnessing traction against a economy brand like Wheel," said Abhijeet Kund, analyst with Antique Stock Broking in a research report titled 'Hello India'.

ITC has been extending its rural push and FMCG products via its e-choupal initiative.

Under this system, the company sets up a service support system for the farmers through a 'sanchalak'. ITC uses the internet to disseminate information about price, weather, market and so on, which helps the farmers to improve their productivity and efficiency. This gives the company a procurement advantage and also helps in extending its consumer goods products in these markets.

And with the rural incomes expected to hit USD 1.80 trillion by 2020-21, the hinterland is set to turn further greener for firms.