Towns & Beyond…

Semi Urban India

Index

Understanding Semi Urban– Definition– List of Towns– Growing States

Potential Markets - Fortuners & Competition in these Markets– Case Study Automobile– Case Study Durable– Case Study FMCG– Case Study Finance– Case Study Telecom

Sales Point Presence– Sales Point – Population Segmentation– Virtual Presence

Opportunities in Semi Urban Why should we go semi urban? Where to go in semi urban India? Who is the Semi Urban customer?

Infrastructure– Lay out of a Semi Urban Town

Definition

Region Definition RC&M Specific

Urban(100+ cities)

All statutory places with a Municipality, corporation,

cantonment board or notified town area committee, etc.

All locations with a population of 5 lac+

i.e. Metros, State Capitals, Top 5 cities of every state

Semi Urban(300+ Towns)

Surrounding residential areas of a bigger city, a group of these can collectively be regarded as the

suburbs”. Generally they pertain to residential districts

All locations with a population of 1 lac - 5 lac

i.e. District Head Quarters, Tehsils

Rural(4000+ Blocks)

Areas with Population density < 400 / sq km , or where 75 % of the

male working population is engaged in agriculture , or areas with no Municipal corporation / board

All locations with a population of less than 1 lac i.e. Blocks , Villages

State No. of Towns

West Bengal 43

Andhra Pradesh 40

Maharashtra 27

Karnataka 26

Tamil Nadu 22

Madhya Pradesh 20

Haryana 19

Bihar 18

Western UP 16

Gujarat 15

Rajasthan 13

Punjab 11

Eastern UP 8

Orissa 8

Central UP 6

Chhattisgarh 6

Kerala 5

Jharkhand 4

Himachal Pradesh 1

Uttaranchal 1

Total 309

Population 1 to 5 lac

List of Semi Urban Towns

Developing States – Growth & Income

State Growth Rate

Bihar 24.33%

Chhattisgarh 19.88%

Haryana 18.39%

Andhra Pradesh 15.56%

Uttar Pradesh 15.27%

West Bengal 14.96%

Punjab 14.90%

Himachal Pradesh 14.60%

Kerala 14.55%

Madhya Pradesh 14.49%

Rajasthan 14.32%

Maharashtra 13.55%

Karnataka 12.76%

Orissa 12.21%

Uttarakhand 11.63%

Tamil Nadu 11.22%

Gujarat 11.02%

Assam 10.68%

Jammu & Kashmir 9.35%

Jharkhand 9.33%

State Per Capita Income (INR)

Haryana 68914

Maharashtra 54867

Punjab 52879

Gujarat 59570

Kerala 49316

Tamil Nadu 45058

Himachal Pradesh 44538

Karnataka 40998

Andhra Pradesh 40902

Uttarakhand 36675

West Bengal 36322

Chhattisgarh 34483

Arunachal Pradesh 33302

Orissa 29464

Rajasthan 27001

Assam 23993

Madhya Pradesh 21648

Jharkhand 21465

Uttar Pradesh 18214

Bihar 13663

Potential Semi Urban Markets

INDUSTRY FORTUNER

Four Wheeler

Two Wheeler

Finance

Insurance

Telecom

Durable/ FMCG

Maruti Suzuki

Hero Honda/ Bajaj

ICICI

Max Vijay

BSNL

LG/HUL

Case Study – 4 Wheelers

Fortuner – Maruti Suzuki

Maruti India generates 10 per cent of its domestic sales from Semi Urban sales, amounting to 32000 cars.

Semi urban markets' share in Maruti's overall sales during April-January 2009 has gone up to 8.5 per cent from 3.5

per cent in the same period last year.

PlanThe company plans to add another 600 people to its present tally of 7,200 employees of which over half will be engaged in sales and marketing.

CampaignMaruti has launched its marketing campaign for semi urban India “Ghar Ghar Mein Maruti” (Maruti in every Household”), 'Mera Sapna Meri Maruti‘

Strategy Tying up with public sector banks that have both a branch network in these areas and the resource base to make loans like PNB, Bank of India to increase finance penetration

Competition – Hyundai

As per Hyundai “almost 50 per cent of the 220 million households in semi urban India are potential care

buyers due to the agricultural subsidies extended by the government and also due to increase in productivity of

agri-based products, thus presenting an attractive market for hi-technology products”.

PlanThe company plans to touch 58% of the semi urban market in India by targeting middle semi urban class.

Campaign Launched promotional scheme for semi urban areas titled “Ghar Ghar ki Pehchan”, under which special schemes for government employees in semi urban areas and members of gram panchayats on the purchase of Hyundai Santro

Strategy Focus on Govt employees and panchayat members as they

belong from well-to-do families

Case Study – 2 Wheelers

Fortuner – Hero Honda Competition – TVS

PenetrationHH has market share of 40 per cent from rural and semi urban areas.

Campaign The company planned to cover 1 lakh towns by end of 2010 financial year through the launch of the promotional campaign called Har Gaon, Har Aangan (Every Village, every Household)

Strategy Hero Honda is expanding its rural reach in India by adding about 500 more dealerships, service centers and other outlets across the country. Hero Honda has set up health care initiatives and services to guide people in getting driving licenses. Coupled with motorcycle tax cuts and economic growth.

ResultHero Honda expects to sell 50 per cent of its motorcycles in semi urban in the next three to five years. Hero Honda could boost sales 24 % in the past 11 months.

Penetration Thanks to their increasing semi urban penetration, TVS reported profit of 335.2 million rupees in the year ended March 31 after posting losses in the previous two financial years according to its website.

PlanTVS Motor Co. Ltd is banking on new launches for a deeper penetration into the semi urban market to fuel growth in 2010, chairman and managing director Venu Srinivasan said. TVS has also launched special marketing schemes for semi urban markets.

Strategy The new Bharat Stage III compliant model TVS Max 4R will be targeted at heavy load carrying riders predominantly found in the semi urban markets.

Case Study – Finance

Fortuner - SBI

PenetrationSBI, has a breathtaking semi urban branch network of 6,600 with 972 specialized branches. These branches have been set up in different parts of the country with the sole purpose of developing agriculture through credit deployment.

Strategy SBI has developed semi urban agricultural business units, education programs for local farmers and “kisan” cards. One of their recent endeavors is the tie-up with National Agricultural Cooperative Marketing Federation (NAFED) to finance farmers for cultivation of various crops like soyabean, paddy, jute and potato.

Results SBI has gradually evolved to become the leader in agricultural finance with a portfolio of Rs. 18,000 crore in loans to around 50 lakh farmers. has 30 Regional semi urban Banks in India known as RRBs.

The semi urban banks of SBI is spread in 13 states extending from Kashmir to Karnataka and Himachal Pradesh to North East. The total number of SBIs Regional semi urban Banks in India branches is 2349 (16%).

Competition - ICICI

PenetrationICICI Bank is the country’s second largest bank,in urban as well as in Semi Urban towns.

StrategyICICI has adopted the franchise model of operation in semi urban markets A one man office (known as “kendra”) in the village forms an interface between the villager and the Bank’s products. Crop loans, housing loans, automobile loans, farm equipment, seed financing and insurance policies are all on offer. ICICI is looking at tying up with micro-finance institutions and local self-help groups (or creating them if already do not exist)

ResultsThe number of borrowers has risen from 130 in 2000 to over 42,000 today, and the semi urban loan book has crossed Rs. 16,000 crore. And the bank’s default rate in the semi urban retail sector is 1 – 2 % as compared to 2 – 3% in the semi urban wholesale sector and 5% for the banking sector as a whole

Case Study – Telecom

Fortuner - BSNL

Penetration – BSNL covers total number of 5,23,532 towns and villages across India. Its the largest telecom service provider in India

Strategy – Grameen Sanchar Sewak (GSS) Scheme was launched in 2002 which provides Door-t-Door facility by Delovery agents in rural and and semi urban markets.

Results – At present, 2685 GSS are covering more than 11997 towns and villages. Across India, the scheme has been launched in most of the states

Competition – Bharti Airtel

Penetration – about 55% of Airtel’s 100-million customer base is from the semi urban areas

Strategy – Has set up 14,000 Airtel Service Centres and initiated self-service options like Start Stop to buildtrust amongst customers .Focus on Value added services (VAS) as, Music and SMS constitute significant part of Bharti’s Rs 3500-crore VAS revenue

Results – Company expects this share to reach 65% very shortly, bringing renewed focus on VAS for the semi urban customers

Case Study – Consumer Durables

Fortuner - LG

PenetrationLG has set up 45 area offices and 59 semi urban and remote-area offices. semi urban market accounts for 60% of new CTV buyers for LG

Strategy“Thinking locally, succeeding globally”

ProductLG Electronics launched a customized TV ‘Sampoorna’

PlanA more important aspect of customization was to make TV set which can appeal to local needs, it facilitated on screen display in vernacular language like Hindi, Tamil and Bengali.

ResultsIt is selling 1,00,000 sets in the very first year.semi urban market for LG grew at 25% over the last year as compared to 15% urban

Competition - Samsung

PenetrationTo counter LG’s strong semi urban presence, Samsung visited 48 small towns in 100 days in an effort to increase brand awareness of its products.

Strategy“Samsung Guru comes to your town with Lots of excitement and valuable prizes”

Product Guru 1105, Guru 1080, Samsung Dholak (E-1160), E-2120 and Samsung Tabla (E-2130)

PlanSamsung rolled out its 'Dream Home' road show, to provide recreation in the entertainment starved semi urban areas.

ResultsIt has created an awareness in the semi urban areas and today in mobile phones category, it’s the leading brand in semi urban

Case Study – FMCG

Fortuner – Sunsilk (HUL)

PenetrationCompany launched Chik shampoo to target the low segment people . Chik shampoo has a penetration of about 22% of semi urban market

Strategy launched shampoo in several sachets – 5ml,10ml,2ml etc and also launched low priced bottles in several sizes

PlanDirect media promotions, free sampling helped majorly to build knowledge about product categories.

ResultsThe shampoo brands like Chik, Nyle (herbal category) contribute 50% of the company’s turn over

Competition – Vatika (Dabur)

PenetrationLG has set up 45 area offices and 59 semi urban and remote-area offices. semi urban market accounts for 60% of new CTV buyers for LG

StrategyDabur conducted Beauty Contests to make women conscious of how their looks, to encourage them to use beauty and hair care products. It re-named products as per language used in regions

ResultsDabur is fourth largest It is selling 1,00,000 sets in the very first year.semi urban market for LG grew at 25% over the last year as compared to 15% urban

Sales Point Presence

Sales Point Presence

10 lac +

5lac – 10 lac

1lac – 5 lac

Below 1 lac

Automobile -Dealerships, sales and Service outlets

Finance-Branch Offices, Finance institutions, Banks

FMCG-Shops, Retail Outlets

Durables-Small Outlets, Dealers

Automobile – Salesmen, Monthly service camps

Finance-Regional Rural branches, post offices

FMCG-Small Shops with limited supply

Durables-Salesmen

Virtual Presence - Automobile

Virtual Presence - Retail

Virtual Presence - Finance

Virtual Presence - Durables

Going the Semi Urban Way..

Why?? Where?? Who??

Why should we go Semi Urban???

The total number of semi urban households is expected to rise to 153 million in 2009-10 from 135 million in 2001-02, suggesting a huge market

Estimated annual Industry size FMCG – 65,000 Cr Agri Inputs – Rs.45,000 Cr 2 / 4 Wheelers – Rs.8,000 Cr Durable – Rs. 5,000 Cr

42 million house holds in semi urban and rural areas are availing banking services

Of the 20 million Rediffmail signups, 60% are from small towns

50% of online shopping transactions, are from semi urban towns

% age of BPL families has declined from 46% to 27%

Rural literacy level has raised from 36% to 59%

Low penetration rates make it an open and high opportunity market with substantially less competition

Growing Industry Size

More than 50% of the villages today have cinema, stars fan associations,mahila mandals, youth clubs, self-help groups, angan wadi centres and ration shops More than 80% of villages have community TV and cable connection, separate place of worship and general provision stores In all villages, the main source of any information was through television Other available Information sources are:

– wall posters in 55%– publicity by panchayat office meetings in 53%– dandora in 43%– friends and relatives in 22%– announcement by loud speakers in 18%– cable TV in 16% – radio in 10% and – through health workers like VHN/ICDS

workers in 8%

Media Penetration

The graph shows results of a study of more than 50 towns across India

Most of the towns have local associations and place of worship where the people and community members meets and share information

Policy makers and program managers tap all these resources to educate the semi urban community There are local libraries as well in growing towns where people are encouraged to read newspapers and

magazines in local language so that they can stay informative

Information Centers

FMCG Growing Penetration Semi urban consumers spend around 13 per cent of their income, the second highest after food (35 per cent), on fast

moving consumer goods (FMCG), as per a RMAI study

The FMCG industry in India was worth around US$ 16.03 billion in August 2008 and the semi urban market accounted for a robust 57 per cent share of the total FMCG market in India

Moreover, according to an ASSOCHAM study, FMCG sector in semi urban areas is expected to grow by 40 per cent as against 25 per cent in urban areas

A Gartner forecast revealed that Indian cellular services revenue will grow at a compound annual growth rate (CAGR) of 18.4 % to touch US$ 25.6 bn by 2011, with most of the growth coming from semi urban markets.

A joint Confederation of Indian Industries (CII) and Ernst & Young report reveals that of the next 250 million Indian wireless users, approximately 100 million (40%) are likely to be from semi urban areas.

By 2012, semi urban users will account for over 60 per cent of the total telecom subscriber base in India.

Mobile phones in semi urban India also grew by close to 13.72 per cent to reach 70.83 million in April-June 2008

Telecommunications

Automobiles The traditional market for auto sector in semi urban areas has been driven by tractors and two-wheelers

The two wheeler penetration in villages is only 10% as compared to 25% in urban areas

Nearly 50% of the Indian rural market, which includes 220 million households, is potential car buyers. Two-wheeler penetration in rural belts is still very low with less than 10% households owning a two-wheeler. Sensing a huge opportunity many automobile companies are trying to woo the rural consumer

However, seeing a huge potential in villages and smaller towns where incomes are increasing, most of the bigger auto brands are now focusing on expanding their share of rural markets

Where should we go in Semi Urban???

UP, Haryana, Punjab, MP, HP, Rajasthan

ReasoningUP, Haryana, Punjab, MP, Rajasthan

» People are very flamboyant, enjoy festivals and spend lavishly during festivals

» Most expensive weddings take place in these states, also the gatherings are enormous

» HP is a state with high educational preferences and only sources of development as usually research work is undertaken there (agri studies)

Congregations

Markets University/College areas Hotels/Tourist Complexes NRI Defence AreasPotential Congregations

Bihar, Jharkhand, Maharashtra, Kerala, Tamil Nadu, Karnataka, Orissa

Industrial Govt. Offices Banks Fisheries/Beach IT BeltsPotential Money Belts

Money Belts

ReasoningBihar, Jharkhand, Kerala

» Extremely rich people, coal and diamond mines, rubber plantations(Kerala, Maharashtra, Karnataka)

» IT Hubs, Industries in all sectors (Orissa, Tamil Nadu)

» Bank chains, posh residential societies

Finance

South (AP, Karnataka, Kerala)

Dhanlaxmi TVS Sundaram Vijaya Bank South India ICICI

North (Rajasthan, Haryana, MP)

Kotak Mahindra IDBI HDFC ICICI Regional State Banks (Eg: Rajasthan- Bank of Rajasthan)

Potential Areas

Who is the Semi Urban Consumer???

Semi Urban Consumer

Male Profile

He is aware about myriad products that are on offer in the market place, thanks to television

He is a responsible, family person and starts looking for employment at an early age

He looks for respect more than anything else

He could be a bank clerk, an accountant, a factory worker, small shop owner, a teacher etc.

His annual income is pretty low as compared to an urban male but he is recognizing better lifestyle needs & aims for a higher income

Female Profile

She is coming out of her closet and is exercising her choice in selected categories

She is literate, but now transforming as a career oriented woman

Mostly women seek work in Home Sciences

She is comfortable going out in groups and tries to find similar company

She is a content woman, happy with her changing lifestyle and recognition

They buy daily usable things in large quantities like wheat flour, edible oil etc. Besides the daily use items; they buy things in small quantities and are not concerned with economy

They recognize the need of advanced quality products but buy them only on special occasions like wedding or festival

They like to show what they have bought when in groups, or evening meets, very common in semi urban

The samples or small quantity bottles, in FMCG, is more often preferred by women

There is a general perception that if more quantities are bought, it would lead to more wastage

They are also flamboyant at times with their purchases so often they go to their neighbors after shopping or take them along

Buying Habits

Influence Customs - They believe in old customs and traditions which influencesa lot on the purchasing decision. They look at functionality than on the style, brand and features

Packaging and Color - The size, color, shape, and packaging of the product matters a lot. For example, in the south people prefer yellow as good, but in the North it is a sign of a disease

Retail Outlet Friendly - More retail outlet friendly customers, and there are fewer stores available per 1000 population

Long Term Usage - They buy the product if they feel that the product will sustain for long term usage

Economical with Good Quality - There is a saying in Hindi "sasta, sundar, mazboot” They buy the product if it is in their budget. But if the product is good in technology, quality and adds value to their role and status in the society then they do not look at money to buy it. If it is good and long lasting then there is no go back from the consumers

Society - They are driven by society. Word of mouth is the key factor in purchasing a product

Purchase Patterns

Decision Making Pattern in Semi Urban

The Male Member in the family exercises the right to make purchase decisions

Only decisions with respect to the eatables are chiefly contributed by the woman in the family

The neighbors, friends and peers play a crucial role in the decision making for a semi urban consumer

As he is a society man primarily, he also wants to buy what his neighbor or his friends have purchased

Category Influencer Decision Maker User

Automobile Peers, Neighbors

Finance Peers

Durables Peers, Neighbors

FMCG Friends, Acquaintances, Relatives

Telecom Peers, Friends, Neighbors

Infrastructure

Layout of a Sub Urban Town

No. of Households – 9893Total HH Population – 39255

*The Table shows Education and Health Facilities available in Semi Urban Towns

*The survey was conducted in more than 50 towns in South India

Marketers’ Infrastructure - Sub Urban Towns across India

The availability of Infrastructure in 50 towns surveyed in south India

Marketers can make use of large Infrastructure , enhancing today at a greater pace

Thank You