Mumbai: The concluding lecture at the 2-day Marcus Evans conference on proactive rural marketing strategies was addressed by Arun Malhotra of Mahindra and Mahindra.

Malhotra talked about his extensive experience with the Indian automobile industry in marketing four wheelers to rural India. Speaking largely extempore, and not using any visuals, Malhotra captivated the audience to how rural markets can be harnessed, by paying attention to details and thinking at the micro levels.

He said, ''We can't put all categories of rural markets as one,'' while going on to explain how different rural markets have their idiosyncrasies by product, and by district. He said that 52 per cent of 2-wheeler sales come from rural India, while sales f two wheelers in Delhi over the same period have slid 20 per cent. ''Product life cycles and penetration is changing,'' said Malhotra.

Clarifying that rural markets needs ''low end variants'' developed to suit their market conditions and needs, Malhotra said that India is one, and there is absolutely no divide in product profiles. The only difference is in volumes.

Taking the case of the auto industry, Malhotra said that in the initial stages, automobile companies appointed dealers only in the cities, and rural customers were expected to come to the city to buy, if at all they needed to. Thereafter, the industry started operating ''into the market'', by sending a sales representative into rural markets on tour periodically. Given that this visitation format didn't work too well for business, the industry evolved to an ''operate from the market'' model, choosing to recruit at smaller upcountry locations so that representatives could operate ''from'' that area.

In later stages, network penetration dictated that the economies of setting up a showroom in upcountry locations were non-viable, so extension salesmen came along with local representatives selling some stock. They were later followed by smaller showrooms belonging to the larger dealers of the district or area. However, business did not pick up to the degree anticipated, and the industry realised the need for ownership, or the ''karambhoomi'' concept against the ''jagirdari'' approach that it had been using thus far. Once this realisation dawned, sub-dealers came into being, though they were ineffective to a large extent as dealers under whom they were appointed were keen to ensure that they stayed below them. Thereafter, direct dealers were appointed in upcountry locations.

Malhotra said that one of the biggest problems faced by the industry is that rural data is under reported, and urban data is under rated. He said that servicing a rural customer is a bigger challenge than sales, given the cost of setting up a workshop comprising a paint booth and body shop for a full-service establishment at over Rs20-odd lakhs. However, 90 per cent of the service need has been seen to be basic, routine servicing of the vehicle to keep it in good running condition. ''It is better to have a solution that covers 90 per cent of your customer's need, than to have the ideal solution,'' said Malhotra. He said this has brought about the concept of the mobile service van, which tours rural markets providing basic servicing, and diagnostic services in case bigger service is required wherein the customer is then referred to the closest service station.

Selling vehicles to rural folks is no easy task. ''The sales skew is high in rural areas, and is linked to festivals, monsoons, marriages, etc.'', said Malhotra. Moreover, financing of vehicles in the absence of documentation needed by most financiers is another big challenge. Malhotra cited the example of Mahindra's finanical service arm, Mahindra and Mahindra Financial Services which has come out on top as one of the most profitable companies in rural India, and as a company which has one of the best returns on capital employed.

He said Mahindra Financial's reasons for success in rural markets are quite simple. The person evaluating and approving the financing of an asset, is the same person who collects payments on that loan. Moreover, since that person does not need to refer the case anywhere, he can provide an on-the-spot decision to finance the vehicle. Customising the model to rural markets, Mahindra Financial allows the equated monthly instalments (EMIs) to be varied basis the customer's cash flow, making it possible for a farmer to make three lump sum payments in a year as opposed to monthly payments that are suited more to an urban salary earner. And the final success factor, was that the collection of repayments was offered at the doorstep, in cash, and even in coins.

Malhotra said this recipe has all the ingredients for success. Lower delinquencies, and the chance of spotting a possible delinquency at daily intervals as opposed to monthly, ensured that the system works. Also, he said that rural folk are more community oriented and spend a lot of time interacting with one another, which makes for a better collections environment, as the chances of default are lower when your reputation in the society are tied in, as opposed to the anonymous facelessness of the urban borrower who skips on payments by moving house and changing his phone numbers. Besides the company getting 75 per cent of its payments in case, and financing all products (though there is some preferential treatment for buying Mahindra's products), the company has a less than one per cent rate of bad debts.

Malhotra said that in rural markets, there are a few key people who act as the opinion makers, such as teachers, doctors and medical practitioners, Sarpanch / Panchayat members, the Patwari, and the local bank manager. He said if a marketer is to approach any of these as part of their rural marketing endeavours, they are best approached by appealing to their prestige and esteem, through interactions and seeking their opinions. Financial incentives only sometimes work in these cases. He said that rural customers are more thoughtful and logical in their buying behaviour, and are less impulsive. That makes referrals and opinions and word-of-mouth very important for product reputation to translate into sales.

Reverting back to the automobile industry, Malhotra said that the industry is now looking at the common challenge of providing service to the rural customer, through the implementation of a common, shared service centre that would be independent of the sales network.

Highlighting that rural India is increasingly economically well off, Malhotra said that the market for 3-wheelers is now only 50 per cent urban, down from 90 plus per cent not too many years ago. He said Sholapur in rural Maharashtra is known for its fleet of 115 Mercedes Benz cars, a concentration that surprises many.

Responding to a question from domain-b, on how brand placement in the the movies impacts rural marketing endeavours, Malhotra said that film is a medium that cuts across language barriers, though the cost effectiveness needs to be looked at as a medium of communicating the brand to the rural markets. He said that localised advertising is inherently important, and advised advertisers not to ''think in English''.