Building Inclusive Channels for Delivering Impactful Innovations to Rural India
Ever wondered what impact innovations mean to rural customers, and how we can sell it to them?
When trying to drive sales for impactful innovations in rural areas, communicating impact alone, in most cases, may not be an effective pitch. Place this in the context of the agro-climatic zones and the demography one’s operating in, the strength of the local marketplace, access to products and services, perceived market trends, personal financial status and more than that; a rural customer’s decision to pay for a certain product that is useful for them, is guided by a lot of internal and ambient factors.
As the operative cash flows of rural customers are largely inconsistent, and considering the lack of forecasting capability to farm incomes and other entrepreneurial ventures inside a village ecosystem, the purchase decision is more hard and complex.
One thing that is clear is that the rural customer must have a felt need or a visible gap that these innovations can address.
For example, solar powered hydroponics fodder units have a unique value proposition and convenience for dairy farmers. However the perception largely is that ‘green grass is available outside for free, so why spend thirty thousand for this?’ This response when placed in the right context shows that dairy today in India is not even viewed as a business activity, as much as it is a household activity. Misplaced and unaccountable cost heads that are in dairy, also causes a lot of drudgery for women involved in managing cattle within the households.
But when you take an example of an organic cloth based sanitary pad that provides better health advantages for women, the felt need is stronger and we see rural women who do not have access to these products (of good quality) reciprocate quite warmly to test these innovations.
It is important to understand the felt needs, and clearly communicate the value of an innovation to solve for that. To communicate the value right, dedicated and customized distribution ecosystems are required.
For this particular purpose, Villgro and Essmart have partnered to take innovations in the agriculture value chain which have a positive impact on climate and innovations that improve women’s health, to rural communities.
Understanding Challenges
The challenges in rural sales are multifaceted.
First and foremost, there is a pressing need for awareness and education among rural consumers. Many rural residents, including farmers, are unaware of the potential benefits that innovative products can bring to their lives, such as improved productivity and energy savings.
Overcoming this hurdle requires substantial on-the-ground efforts to educate communities about the advantages of adopting these technologies. As mentioned earlier in the hydroponic fodder example, the value that gets into the sales pitch is very important and critical to be able to communicate the value that aids a customer in a purchase decision.
Secondly, addressing the challenges of communicating the value of an impact innovation in the market. This involves tailoring our approach to the specific needs of each key player. For example, when engaging with rural retail shops, the approach is offering distinctive products that not only draw customers to their shop but also set them apart from competitors. The question then is; in this general approach, how does impact innovations fit in?
For example: Essmart’s strategy when engaging with rural retail shops differs from when approaching FPOs, end-users or farmers directly. One compelling proposition for shop owners is Essmart’s offering of distinctive products, which not only draw customers to their shops but also set them apart from competitors.
Equally significant is the opportunity for shop owners to earn substantial margins, ranging from 10% to 20% on each product sold. Given that Essmart products hold higher value, a single sale can yield shop owners between Rs. 100 and Rs. 200, a noteworthy increase compared to their current per-product earnings from fast-moving consumer goods. Additionally, shop owners increase their monthly income by 22% on average, and up to 60% per month.
In contrast, when communicating with end-customers, the approach requires explicit detailing of the product’s value proposition. This entails conveying the potential energy savings, increased agricultural productivity, and income-generating opportunities it offers. For this reason, it’s important to develop case studies and provide educational resources to help customers fully comprehend the value our products can bring to their lives.
Doing just this is not enough to garner a sale. One needs to also solve for affordability.
Access to financing represents a significant challenge for rural end-users. A majority of marginal and smallholder farmers grapple with limited or no access to formal credit. This can be attributed to the absence of established credit histories or low credit scores among rural customers. The lack of accessible financial services not only hinders economic growth but also restricts the potential for investments in agriculture, livelihood enhancement, and other critical areas of development in rural communities.
Financing institutions really like a capital that revolves with the same customer base as against asset financing for the impact innovations in discussion, which is one time. The first principles followed in providing credit also limits the financing institutions to provide credit for impact. The unit economics of the innovations, customer’s repayment capabilities, investment monitoring structures and more are yet to be in place. This needs an entire market ecosystem to come together for one purpose.
Building Inclusive Channels
In the quest to make high-impact livelihood products accessible at the village level, Essmart and Villgro understood that simply pushing products into the market isn’t enough. It is essential to conduct inspirational and educational marketing, distribution, and localized after-sales service support, addressing the challenges these high-impact goods face in traditional supply chains.
Creating an inclusive sales channel means understanding and meeting the unique needs of rural customers. For example, Essmart’s strategy to sales is one vital aspect in offering flexible purchasing options. This means that rural customers can buy individual product pieces instead of being required to purchase in bulk. This flexibility is crucial because it allows customers to make smaller, more manageable purchases that align with their preferences and financial capacity. By providing such options, we ensure that our sales channel is accessible and accommodating to the diverse needs of rural businesses and end-users.
Villgro has supported Essmart in recognising the significant potential of working closely with Farmer Producer Organizations (FPOs) as a prominent sales channel.
In 2022, Essmart intensified their engagement with FPOs, and are currently on board about 100 FPOs into their network. This strategic expansion not only grants them an alternative sales channel but also direct access to farmers, the ultimate end-users of their products.
There are also inherent advantages of partnering with FPOs, like these organizations often boast well-established governance structures and credit histories as compared to an individual farmer, having previously secured loans for their operations. This stability enhances their ability to work with FPOs, mitigating potential risks compared to partnering with less stable entities like individual farmers and/or individual rural retail shops. In partnership with FPOs, Essmart can also promptly engage farmers in various initiatives, such as trade activation campaigns. This approach accelerates the tangible benefits to deliver on the ground.
By engaging with FPOs, Essmart now has the flexibility to ‘plug and play,’ swiftly organizing activities and leveraging their extensive network to facilitate and enhance the adoption of products like cold storage, that might not be suitable for direct sales to rural retails shops due to its unique nature. This strategic shift allows them to directly communicate the specific needs and benefits of their activities to end-users through the FPO channel, providing them with a significant advantage in achieving their mission.
More solutions
To leave a long-lasting impact on the socio-economic wellbeing of rural communities, Villgro and Essmart also do the following:
- Trade Activation Events: A hyperlocal trade activation event brings together interested end users to display impact innovations and give them a touch and feel of the product, enabling them to first hand see and learn about the value addition of the product. An event can be perceived to be a one-off intervention, hence we bring together different stakeholders like Go to Market (GTM) channel partners like FPOs, Rural distributors and financing wherever possible to make it sustainable. The GTMs conduct hyperlocal events in their communities to generate leads and convert them into sales. In this process, we ensure to bring in different kinds of blended finance instruments like guarantees, interest subventions or FLDG wherever required to enable end-user loans.
- Pilots and Demonstrations: A GTM partner like Essmart places pilots and demonstrations of the impact innovations with end users to give them a touch and feel of the product. The GTM can rotate the product amongst different individuals to see the value addition of the product, and insights from end users, create interest and make sales for the product. This gives the end user a touch and feel of the product.
- Market Testing and Validation: Essmart’s strategy when engaging with rural retail shops revolves around ensuring a clear business proposition, demonstrating how our products can enhance the shop’s offerings and allowing them to sell a range of products with a profitable margin. Therefore, our message to shopkeepers centers on the value they can bring to their business. We can further support them by keeping demo pieces in the shop for customers to interact with and providing assistance with product demonstrations when needed.
- Experience Centers: Villgro supports the set up of an on ground infrastructure run by a GTM, housing impact innovations act as a channel to conduct the above-mentioned pilots, trade activation events, demonstrations, market testing and validation to generate sales.
- Financing instead of subsidy: Villgro works with various financing institutions and designs creative financing options for innovations. By bringing in some form of risk capital via blended finance options that can leverage the flow of higher level of credit to end users. What works for the FPO may not work for the individual farmer. By extending this model to more innovations and establishing successful use cases, we envision a future where transformative innovations become readily accessible to rural communities
