Almost half the world’s population is non-urban. More than three billion people live in the sprawling rural regions of Asia, Africa and other developing countries. Companies and governments cannot afford to ignore these consumers if they want to be successful, writes Vijay Mahajan in his recent book, Rise of Rural Consumers in Developing Countries: Harvesting 3 Billion Aspirations. Mahajan, a professor of marketing at the University of Texas at Austin, examines the main factors driving growth in rural markets, its major barriers, and how these can be overcome.
In a conversation with [email protected], Mahajan notes that because of increased information flow thanks to rural migrants and communications technology, rural consumers have similar aspirations as their urban counterparts do. Still, there is a lot still left to understand about consumer behavior in rural areas, like family relationships and the importance of religious and social events.
An edited transcript of the conversation follows.
[email protected]: What inspired you to write this book?
Vijay Mahajan: When I was working on my last book The Arab World Unbound, it was the first time I had gone to 18 countries, including the Persian Gulf countries. I kept seeing the organizations and the infrastructure. And the moment I got out of the Gulf countries and went to Jordan and then to Egypt and Morocco, it hit me that I had missed a very important component of the developing countries. This was the fact that apart from the Gulf countries, the rest of the world was predominantly rural.
I started talking to companies, especially in Egypt and in Morocco, about what the consequences are of the urban versus rural divide. Although I gained some data I really did not investigate much. I also realized that for my book titled The 86% Solution, as well as for Africa Rising, I had mostly gone to major urban centers because that’s where the headquarters are [of companies like] Coca-Cola and Unilever. They took me to all the major urban centers because they wanted to showcase what they were doing.
When I came back and started looking at some other data, I realized this is a very major issue. India alone has a 70% rural population. The more I dug into that, I realized that almost half of the world’s population is non-urban. And interestingly, more than 3 billion people live in rural regions in Asia, Africa and the developing countries.
What also surprised me was that even the U.S. was ninth in terms of the largest rural population. I started digging a little bit about the U.S. in terms of health care, education and so on. But then, I moved back to the developing countries and decided to focus on 10 of them. I realized that out of the 3 billion who live in Africa and Asia, 1 billion were just in South Asia — in Pakistan, Bangladesh, India and the small neighboring countries.
[email protected]: If you were to look at the 10 major rural markets you have identified in the book, what are the main factors driving their growth?
“Rural aspirations are very much the same as in urban areas.”
Mahajan: Three or four factors underlie their growth. One, there is a dedicated movement from the governments. I saw that with China, with Vietnam, with Thailand and also, to some extent, with India. Governments are trying to develop policies to help eradicate poverty. The second most important aspect I noticed was rural migration. All migrants from rural areas send money back home. But it’s not only the money; it’s also the impact [they create]. Many of them have gone outside the country – from India to the Middle East for example, as cooks, drivers and maids and they talk to their families back home on Skype, on mobile phones. So rural migrants are becoming major influencers in their villages and towns.
Also, as compared to urban centers, rural centers are still very much into religion and culture and the most amazing things happen during the religious and social holidays like the Chinese New Year, Tet [New Year] in Vietnam or during Ramadan. Technology is also playing a major role in spreading information in farming, in health care, etc. So several factors are creating a lot of excitement, which I probably would not have seen 10 or 15 years ago.
[email protected]: When you talk to companies and chief marketing officers, have they tapped into the rise of rural consumers? Or is this an underserved market?
Mahajan: Almost all the companies I met are aware that urban centers are saturated. They also know that urbanization is not going to happen overnight. India is where the U.S. used to be in the 1880s. China is where the U.S. was in the 1920s. It took the U.S. 90 years to get to this urbanization of 81%.
I think companies are aware of the fact that governments would like to have urbanization, sometimes artificially. But the rural population is not going to go away. Unilever, for instance, simply cannot survive in South Asia if they ignore 1 billion rural people. Out of the 6 billion people in the developing countries, almost one-sixth or one-third are rural consumers. The companies know that this much population cannot be ignored and they have to find ways to approach them. I did see different strategies, for example, with P&G. But there’s also a lot of work that needs to be done to develop these markets. Some [companies] are doing better than others, but they are all fully aware that there is a huge market that cannot be ignored.
[email protected]: In addition to companies like Unilever and P&G, which other companies are furthest along in understanding the potential of rural markets?
Mahajan: Mobile companies and entertainment companies have done well in understanding rural markets. [For example, in the entertainment sector] there is now a big wave to develop television shows based on rural centers and small towns, which also appeal to the urban population. There is a realization that there are a lot of aspirations in rural areas and we have to develop content around that. This point about aspirations in fact influenced the title of my book. Rural aspirations are very much the same as in urban areas. When you talk to the young people like drivers in Mumbai or construction workers in Shanghai, they are fully aware of the brands, which is a good brand, cost-wise, they are aware of all that. They send that information back home, thanks to mobile phones, Skype, FaceTime, etc.
“Rural migrants are becoming major influencers in their villages and towns.”
The information flow is very fast between urban and rural consumers. Also, there is satellite television — some countries are ahead of others in this area. I think they are different maybe because of their electricity [availability]. The Chinese are 100% electrified, which gives them a big advantage. Vietnam is trying to do the same. In India, electricity is an issue. Ethiopia has a major issue, Nigeria has a major issue.
[email protected]: You have a chapter on how technology can seed innovation that transforms rural markets. Could you offer some examples of how companies like FINO [a