CNV1-I1-4-Marketing Eclipse

The inertia of Indian Rural markets have evolved over the past decade into a state of perpetual motion. Habits of rural consumers are a complex jigsaw of aspirations resulting from their increased exposure, better connectivity, growing ambitions and heightened knowledge. Rural consumers demand products that are made for their unique needs and have the purchasing capacity to pay for quality and best in class services. The stereotypical distinctions between the Rural Bharat and Urban India have blurred and are now an exciting masala mix of demand drivers impatient to be tapped.

CATALYSTS OF THE RURAL DEMAND MAKEOVER

One of the key catalysts for this radical makeover of rural demand is the changing food plate of Indians everywhere. With the supply side of food deeply rooted in the hinterland, as the Indian food plate has evolved from staples to a more balanced meal, cropping patterns have moved to favour cash crops at the cost of traditional cereals and grains. This change has led to large units of land under cultivation moving towards cash crops including fruits, vegetables, oilseeds and pulses. This has changed the economics of Indian farming and placed increasingly more disposable income in the hands of many rural Indians. With more money to spend and increased exposure, rural Indians have embarked on their own journey of discovery, indulging in conveniences and luxuries that are now within their reach. One of the key catalysts for this radical makeover of rural demand is the changing food plate of Indians everywhere. The hunt for conveniences began with the mobile revolution. Rural India went from having no phones to mobile phones and now smart phones in record time, leapfrogging many stages in between. The deep penetration of smart phones has gifted a whole new world at rural fingertips. The spread of cable and satellite television, also at breakneck speed, added to the floodgates of communication that created hitherto unheard of market opportunities.

CASH TO LESS CASH TO CASH LESS?

However, throughout this revolution in thought and continued phase of rising (through fiercely cyclical) income, cash was king. The rural economy transacted by instinct using cash as it was a convenient, fuss free medium of exchange that gave rural citizens a reliable store of value and was forever liquid. With income from agriculture being tax free, there was negligible direct tax incidence. Banks grew in their spread and outreach, but footfalls were opportunistic and not every rural Indian chose to open a bank account. Cash hoarding was commonplace, but increased consumption led to proportionately lower savings. This ‘normal’ changed with the demon of recent demonetisation. The thrust to create a cashless economy, though idealistically utopian, is an idea way ahead of its time for the current Indian rural society. Overnight, cash, which for farmers was certainly not black money, threatened to lose its value. The expected scramble to open accounts temporarily paralysed the rural economy and uncertainty became commonplace. Rural citizens in many unbanked villages faced even more hardship as the transaction cost of travelling several miles away to the nearest bank became an added challenge. Thereafter, restrictions on cash withdrawals was an added shocker as farmers. In the beginning of the winter agricultural season, they had their money locked in mint fresh bank accounts but their cash flows ran dry. With a rudimentary digital payments infrastructure in place in their villages, cashless payments remained a distant dream.

Despite 92 of the country’s reservoirs being full of water, cash shortages artificially depressed demand patterns as consumption was limited to only what was most essential for survival. The challenges of the forced digital age suddenly became all the more real. It will be many months and perhaps years before the digital divide is bridged. The cash backbone of the rural economy was broken and getting to a ‘new normal’ will require several structural imperatives, none of which can be gained overnight.

NAVIGATING THROUGH THE DIGITAL DARK HOLES

To be digital, continuous, reliable access to electricity is a prerequisite. 100% electrification of rural India is still a few years away and until then, being completely digital is impossible. Even in areas with electricity, literacy and more importantly, basic technological literacy, is gaping peaks and valleys in India. If a person is not comfortable using the smart phone for using the digital gateways, either they will not use it and delay consumption or, even worse, provide their private login information to someone in the village who is technologically adept, simply because this is the only way they can enable a transaction. This opens up major challenges of security and privacy. On the positive side, the penetration of affordable smart phones has certainly risen in the past few years but internet data bandwidth and speeds are ridiculously poor. With slow, overloaded internet connectivity being the norm not only in rural but also in many urban pockets, digital transactions remain cumbersome to execute. Add to this the multi layered payment authorisation process, with a maze of one time passwords, transaction IDs, CVVs, PIN numbers for internet authentication, the acceptance of digital payments in rural areas is still in its infancy. Until the rural consumers are trained and comfortable with seeing their money as numbers on a screen and not as physical cash that they can touch and feel, realising a cashless economy remains a fairly distant dream.

To be digital, continuous, reliable access to electricity is a prerequisite. 100% electrification of rural India is still a few years away and until then, being completely digital is impossible.

In the interim period, the challenges add up rapidly. Rural buying patterns are getting altered not because of a funds problem but because of the immediate cash flow problem. Consumers buy only what they have cash for and struggle with learning to use digital money. For those buying on credit – a common practice for most rural buyers – the companies tend to be wary of extending credit for fear of their consumers having no cash available when the bills fall due. With no comparable precedent, forecasting is as good (or horribly bad) as shooting in the dark. Inventory is unplanned and corporate strategies are reactive and hence, unplanned. There is no logical benchmark for comparison and way too many variables to regain control of.

Solutions are slowly emerging. With Kisan credit cards all set to get soon converted into RuPay cards that can be used directly at electronic point of sale terminals, a major relief is visible on the horizon. Eliminating taxes and duties on the import of POS terminals will reduce their costs and improve availability of these terminals at a rapid pace, especially since there is currently a long waiting list. Converting digital payment platforms to a simplified Aadhar based fingerprint authentication interface instead of the current multi-stage PIN based authentication system will reduce the

Rahul Mirchandani, Ph.D., Executive Director of Aries Agro Limited, which is India’s one of the largest and most respected specialty plant nutrition companies, selling its 65 brands to over 9 million farmers in India and abroad. Rahul is the Past National Chairman of CII’s Young Indians and Founder President of the Commonwealth-Asia Alliance of Young Entrepreneurs.

literacy requirement and speed up access for rural consumers. The rapid spread of payment banks and digital wallet services using hybrid access points like neighbourhood stores and post office locations instead of brick and mortar bank branches is also a useful push towards ushering in a truly cashless era in rural India.

EMPOWERING THE NEW AGE RURAL INDIAN

With or without the demonetisation rumbles, the digital connect of the rural Indian due to communication, television and telephony had modified behaviour and expectations. No longer was it adequate to provide just a quality product. Rural ‘Customer-isation’ was a means to secure consumer empowerment. ‘This is made specifically for you’ was the cherished positioning that aggressive brands chose for their rural product offerings. This was achieved by unbundling the products and retaining only the value adding features and eliminating all cost adding features.

Cost adding features are features that a consumer rarely (if ever) uses or features which the user does not understand nor need. Its presence in the product’s design adds to cost but the user does not perceive an equivalent value. ‘Feature rich’ thus becomes a source of avoidable waste. In contrast, value adding features are ones that a customer routinely uses or enjoys having in the product. He is therefore willing to pay for them, sometimes even at a premium.

A product can be as simple or as complex as its creator intended. Technology will decide the interface with which the consumer will touch, feel and use the product. However, certain rural demographic groups will not be able to afford every piece of technology on offer. Some may find it complicated. Some may believe certain features are unnecessary and discard the product’s design as excessive. Thus, it becomes key to decode demographic variables which will help segment what rural consumers expect to see in the product being offered to them.

Look at the erstwhile Nokia 1100 phone models. The product was designed for a specific segment that included India’s multitude of rural truck drivers. The phone was stripped down to basics – it would make a call, had a rugged exterior that wouldn’t break with every fall, dust proof cover to suit the rural environment, long battery life and a torchlight that was usable during common power outages and for use while stopped on a dark highway. It did not have a fancy high megapixel camera, did not have smartphone features, could not access the internet, did not have a touch screen, and no such features which its user – the truck driver – would neither use nor appreciate. The product was not low on quality but was redesigned to include restricted features thus bringing down its market price significantly. Less was being bundled in to align with the target rural consumer’s habits and hence less was being charged.

A truck driver was told that he had to now pay double the price, because the phone came with a 20 megapixel front, selfie camera with a forward flash, this feature would be considered an unnecessary ‘cost adding feature’ as it would have very limited usage among truck drivers driving for days on dusty roads. They rarely stop on the highways for selfies.

The lack of certain habits therefore allowed for customization of a feature rich product into a frugal, bare basics version that would discard cost adding features and retain only value added features. Thus, the variant would align with the target group’s habits and they would believe – and rightly so – that the product was re-designed for them, creating a lasting feeling of empowerment. ‘They made this product keeping me in mind’ is a key to gaining long term rural consumer loyalty. Those who pay love being at the centre of the seller’s universe and who doesn’t like to feel that everything revolves around them!

With word of mouth being the primary influencer for rural demand, digital media strongly amplifies this empowerment into bytes that shatter the glass ceiling of consumer perceptions. The challenge is to gain influence over the talking points that are working to create mindshare for your product. Empowering consumers with ‘Made for You’ products and services that provide utility and a better deal will always create positive sound bites that enlist many more potential buyers, enlarging the market. Mass media can never create the kind of impact that such digitally empowered consumers can provide in their close knit rural communities.

These are certainly exciting, though challenging times, for rural marketers. Once the ‘new normal’ after re-monetisation is achieved in the coming months, a razor sharp focus on the fast evolving rural consumer needs will make the difference between a ‘smart’ rural marketer and a ‘me-too’ copycat.

Tax Deduction as ‘Plant’ expenses for ‘Heart’ surgery?

Shanti Bhushan, a lawyer was seeking approval from the Court for the allowance of income tax deduction for the expenses made on heart surgery. He claimed that a heart is a plant and the medical expenses should be treated as current repairs. As he has suffered heart attack due to his professional work, he claimed that the expenditure incurred on medical treatment must be allowed as deduction under Section 31 of the Income Tax Act. On rejection of claims by IT department, Mr. Bhushan appealed to the Delhi Court which dismissed the appeal on the following ground

“The claim for deduction u/s 31 is not acceptable because; (a) In widest meaning of plant, ‘Heart’ does not satisfy the ‘functionality’ of plant as it is for human survival and not used as a tool of trade. (b) If expenses on repair of plant are admitted as a deduction, the plant would necessarily have to be reflected as an asset in the books of accounts and which is not reflected in the past financial records of the assessee

The Court also views that the assessee’s claim under section 37 of the IT Act does not fulfil the condition which is that the expenses in issue have been incurred wholly and exclusively for the purposes of the assessee’s profession. {Source: Shanti Bhushan vs. CIT (2011) 199 Taxman 280 (Del)}