Page 310 - DMGT509_RURAL MARKETING

Unit 16: Marketing in Small Towns

16.1 Small Towns becoming Important to Marketers: Notes
Ernst & Young Report

According to findings in E&Y’s study, ‘The New Market Shehers: Tapping Potential
Beyond the Metros’, non-metro urban markets are becoming more relevant in India’s
consumption story; and marketers are restructuring their budgets to take advantage of the new
urban consumer.
Ernst and Young (E&Y) has released its report, ‘The New Market Shehers: Tapping Potential
Beyond the Metros’, which identifies trends in consumption patterns and marketing spends in
small-town India. The report deals with the growing relevance of non-metro urban markets in
India’s consumption story, and how marketers are restructuring their budgets to take advantage
of the new urban consumer.
For this report, India was divided into four geographical categories — the top six Metros (Mumbai,
Delhi, Bengaluru, Hyderabad, Chennai and Kolkata); the Key Urban Towns (KUTs), which are
the 22 cities immediately following the metros in their market potential (such as Amritsar, Surat
and Ludhiana); cities in the Rest Of Urban India (ROUI); and rural India.
‘The New Market Shehers: Tapping Potential Beyond the Metros’ highlights consumption patterns
of consumers across KUTs and ROUI. KUTs, for instance, exhibit consumption patterns that are
similar to those in the metros — consumption of premium brands and services in the KUTs has
shown an increase.

The report findings indicate that retail presence in the KUTs and the ROUI through organised
retail chains and malls has increased considerably. Over a two-year period, the percentage
growth in the number of malls in the KUTs (55 per cent) was more than twice that of the metros
(24 per cent).
Consumers in the KUTs show an increasing preference for premium products and services of
established mass brands. For instance, the sale of LCD televisions and wellness services is on the
rise in the KUTs.

There has also been a significant uptake in the leisure and lifestyle spends of consumers in the
KUTs. For instance, men utilise wellness services now more than ever before, not just in the big
metros, but also in Tier 2 and 3 cities. Women in small towns are more willing to pay large
amounts for age-correction products, body sculpting and removing skin imperfections.
The share of the KUTs and the ROUI in newspaper advertising (by volume of activity) in 2009
was higher than 50 per cent across most categories. For categories such as cellular skincare, oral
hygiene, hair care and consumer durables, the advertising share is higher than 75 per cent.

The KUTs and the ROUI comprise more than 50 per cent of total BTL activity in the country, the
report suggests. BTL activities have grown significantly in non-metros (40 per cent in 2009 vis-
à-vis 15 per cent during 2007), as compared to the metros (60 per cent in 2009 vis-à-vis 85 per cent
in 2007), which is another indicator of the importance of KUTs. Furthermore, 60 per cent of BTL
activities are concentrated in the ROUI and in rural India, especially for sectors such as telecom,
consumer durables and certain categories of FMCG products.
Mobile advertising is also catching up more effectively in the KUTs and ROUI, as opposed to
person-to-person marketing, with more 500 million mobile users in these regions.
The metros and KUTs are driving growth in later-stage consumption (higher transaction value
products and discretionary goods); while the ROUI is driving growth in early-stage consumption
(necessities and products with lower transaction value).

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