Understanding Rural and Low Income Customers in Asia
Wednesday, October 7, 2009
An important segment that marketers cannot ignore in Asia is the bottom of the pyramid and those Asian consumers living in rural areas. The challenges, marketers face in trying to address these consumers are high and risky due to the fragmented nature of the rural market and the low margins of this trade. There is no denying though that rural consumers want to access brands, if only because they are a promise of quality. For Asian marketers interested in tapping the huge rural markets in Asia, there are important issues to consider.
First, rural consumers have less purchasing power. In China, the income gap between urban and rural residents, which is around five to one, greatly restricts rural people’s consumption of products. There is also a significant difference in the way wages are earned, with a majority of the working population in rural markets being paid daily instead of weekly or monthly wages. This means that consumers in rural markets will generally spend their daily wage on necessities such as food, and have little left to spend on items for personal care and other relatively luxurious items.
This has driven companies like Unilever to sell sachets in rural China and India, instead of the normal sizes of detergent and shampoo. One-third of India’s shampoo sales come from sachets in rural districts, with Unilever, the British-Dutch company accounting for 70% of those sales of sachets. The company is increasingly relying on Asian rural markets to drive its sustained growth. Hindustan Lever, Unilever’s Indian subsidiary, is now a major force in the Unilever network of subsidiaries with many strategies emerging from India.