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Market Insight Consultants India [View Profile]
Noida - India
It is felt that getting by on razor-thin margins is the morally correct way to do business among the poor. The idea that a billion-dollar corporation would intentionally aim for high prices and fat margins on the backs of the world's poorest sounds callous and cutthroat. And their intuition isn't baseless: As the bottom-of-the-pyramid concept shifted into the public eye and attracted the criticism of the development sector, the standards for judging the impact of a venture aiming to serve low-income consumers seemed to get a lot tougher. The term "selling to the poor" has become almost a pejorative. Serious discussion about driving profitability and generating competitive returns has been pushed into the recesses of the company, out of the public eye, and it has been replaced with platitudes about "doing well by doing good."
But the reality is that high margins and very strong profitability are necessities for businesses serving what is called D and E consumers, those in the bottom two layers of the economic pyramid. Business cost structures in low-income markets are daunting: Operational expenses such as distribution frequently dwarf the costs that companies face in developed markets, while customer acquisition and retention often demand unusually intense — and costly — levels of consumer engagement. And getting to scale takes a lot longer.
Companies and those that criticize their efforts are not doing D and E consumers any favors by clinging to the low-margin philosophy, which is unable to generate economic returns that are competitive with alternative uses of a company's capital — the true benchmark of business success. Precious few of the ventures that failed to generate such profit levels have survived, leaving low-income consumers without access to products and services that could have improved their lives and stimulated economic activity in poor areas.
Emerging Market opportunities
725 of India is rural- 6.38 lakhs villages- 17 % have population above 2000.
By 2020 Indian rural market will be bigger than South Korea and Canada and worth $577 Billion
Rural Contributes to 43% of Indian National Income.
More than 50% of FMCG & Durable revenue comes from Rural
Rural India accounted for around 35-38% of the total mobile handset sales by 2010.
Challenges in assessing rural
India is among the largest producer of rice, pulses, F&V and Milk. It is the country with largest percentage of population engaged in agriculture
Un co-ordinated logistics & infrastructure
Un co-ordinated payments & credits
Extension activities remain challenging and unviable.
Tax structure Cash management in rural India ( only 53000 bank branches are there in rural India)
Demand Aggregation ( for most of the company, cost of demand aggregation and logistic is very high)
Capacity building (To train people who can service citizen for the products like life insurance of E- learning)
Poor productivity / yields
200-300% mark up in prices from farm to fork
Huge Subsidies to farmers to keep them viable at low prices
High off balance sheet transactions, fueling escalation in land prices making investment in rural infrastructure a challenge.
Market Entry Studies: Profiling of rural and semi urban areas to understand the potential consumer demand drivers and market potential to aid companies in penetrating new markets.
Consumer/ Retailers satisfaction studies: In depth studies to understand the customer satisfaction and potential gaps at the consumer and retailer end.
Usage and attitude studies: Extensive studies to understand the usage and consumption patterns of the consumer in various industry verticals
Market profiling studies: Market Intervention studies to understand the potential segmentation in the market and their demands to develop markets.
Advertisement/ communication research: Research to understand the right modes of communication and the incumbent message for your target groups
Social Research: Indepth studies in the rural heartland to understand the various social and demographic factors affecting development
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