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1FEATURED INSIGHTS | TAPPING THE LOCAL HOTSPOTS IN THE GLOBAL BAZAAR Copyright © 2013 The Nielsen Company
F E AT U R E D I N S I G H T S
TA P P I N G T H E L O C A L H OT S P OT S I N T H E G L O B A L B A Z A A RBY: NITYA BHALLA, EXECUTIVE DIRECTOR, NIELSEN INDIA HAZEL SHIRISH, ASSOCIATE DIRECTOR, NIELSEN INDIA
DELIVERING CONSUMER CLARITY
IF WE STOP THINKING OF THE POOR AS VICTIMS OR AS A BURDEN AND START RECOGNIZING THEM AS RESILIENT AND CREATIVE ENTREPRENEURS AND VALUE-CONSCIOUS CONSUMERS, A WHOLE NEW WORLD OF OPPORTUNITY WILL OPEN UP.
- FROM ‘THE FORTUNE AT THE BOTTOM OF THE PYRAMID’ BY C K PRAHALAD AND STUART L. HART
EMERGING MARKETS: THE GLOBAL BAZAAR
EMERGING MARKETS-LOW INCOME COUNTRIES
EMERGING MARKETS-OTHER COUNTRIES
DEVELOPED MARKETS
More than 80 percent of the world’s
consumers reside in emerging markets and
account for nearly 65 percent of the world’s
spending on fast-moving consumer goods
(FMCG). What’s remarkable is that 60 percent
of these consumers are located in rural or
smaller towns. These markets are massive,
particularly as consumer awareness in these
areas grows, disposable income within the
middle class increases and society rallies
around consumption trends. With these
factors in play, these markets are only going to
see unprecedented growth.
2 FEATURED INSIGHTS | TAPPING THE LOCAL HOTSPOTS IN THE GLOBAL BAZAAR
India has seen and felt the impact of the economic downturn. GDP
growth has slowed from a high of more than 8-9 percent to the current
rate of 5 percent. The FMCG industry, considered a bellwether industry,
has also taken a hit, as growth has fallen from 18 percent in 2012 to 10
percent this year. Rural areas, however, continue to beat the overall trend.
Hence the opportunity here is unmistakable, but tapping into these
areas isn’t without challenges. There are more than 600,000 villages,
and granular data for many of them doesn’t exist, increasing the task of
reaching the ones that offer the highest return. So the need of the day
is market prioritization. So how do marketers make the most of these
markets, create effective go-to-market strategies and effectively tap the
bottom of the pyramid (read rural India) in such a situation?
MACROECONOMIC INDICATORS UNDER STRESS
Further, on analyzing over 39,000 brands across the FMCG industry we
observed that less than 10 percent of the brands were successful in the
market and one of the key reasons driving growth was a 4X growth in
Rural compared to Metro over 2 years.
STAND OUT BRANDS
OTHERS
AI METRO TOWN CLASS 1 ROU RURAL
18
10
1014
69
1521
2018
YTD SEP 12
YTD SEP 13
TOWN CLASSAVERAGE GROWTH
RATE (AUG 2013 VERSUS AUG 2011)
METRO 15%
TOWN CLASS 1 25%
REST OF URBAN 32%
RURAL 57%
10%
90%
39K BRANDS
3FEATURED INSIGHTS | TAPPING THE LOCAL HOTSPOTS IN THE GLOBAL BAZAAR Copyright © 2013 The Nielsen Company
The global marketplace is expansive and challenging to navigate,
characterized by a huge expanse of retail outlets, spread across
geographical belts. The world has 20 million-plus traditional trade
outlets and a new traditional retail store opens every 5.5 minutes.
Additionally, the world’s population will increase 25 percent by 2025.
India is home to more than 840 million consumers and over 5.4 million
FMCG outlets.
The biggest challenge in front of marketers and researchers today
is getting their heads around the dearth of data on these emerging
market hotspots. The task lies in procuring data that sales teams can be
equipped with and identifying where marketers can set up distributor
branches or deploy sub-distributor networks.
MACROECONOMIC INDICATORS UNDER STRESS SIZING THE GLOBAL BAZAAR: THE CHALLENGES
70%CONSUMERSRESIDE IN RURAL
THE BIGGEST CHALLENGE IS THE DEARTH OF DATA ON EMERGING MARKET HOTSPOTS.
4 FEATURED INSIGHTS | TAPPING THE LOCAL HOTSPOTS IN THE GLOBAL BAZAAR
ENTER MARKET PRIORITISER
In order to address the challenge, the first step involves evaluating
all available data sets. These include but not limited to Nielsen retail
establishment survey (viz. street by street enumeration of all outlets
in a town or a village referred to as Nielsen Shop Census), Nielsen
retail audit data, secondary data from sources such as government-
conducted population census, government information on household
amenities, town/village amenities, infrastructure, distance from nearest
city etc., and information provided by organisations on distributor area
list, media etc. This information is not available for all markets across
these data sources.
The second step involves in bridging the gaps across the data sources.
Enter Market Prioritiser, a process that bridges the data gaps by
estimating and integrating the data across the various sources. For
example, Nielsen conducted a shop census to assess the FMCG
potential of across 7,000 villages across India. There are more than
600,000 villages in India, so we can use the results from our shop
census and use statistical techniques to estimate the FMCG potential
for all of these markets. Only if we have information for 100 percent
geographies can we prioritize and identify hot spots to target.
NIELSEN DATA
- Retail Shop Census- Retail Panel
INFRASTRUCTURE
- Government-conducted population census- Village facilities- Household amenities
CLIENT DATA
- Client’s Distributor Area List
MEDIA CONSUMPTION
- Media Vehicles
5FEATURED INSIGHTS | TAPPING THE LOCAL HOTSPOTS IN THE GLOBAL BAZAAR Copyright © 2013 The Nielsen Company
Nielsen’s Market Prioritiser is a two-staged model that uses a statistical
technique to gauge the estimated market value potential of all
geographies. By identifying geographic hotspots, the model removes a
significant amount of uncertainty for brands entering new rural regions.
Here’s how they locate them:
Stage 1: Determining the key drivers of market potential.
In the first stage, the model determines the key drivers of market
potential of a village. We carried out the entire analysis among the 7,000
villages where we conducted the Nielsen shop census. For the analysis,
the total FMCG sales collected during the shop census for every store in
that village was the dependent variable, and the key influencers of retail
sales such as population, disposable income, household amenities like
durables/vehicles owned and other infrastructure facilities like banking,
health centres, education facilities, etc. were the independent variables.
With the help of statistical techniques, we derive a relationship (i.e., an
equation) between each of the independent variables with total FMCG
sales for that village.
Stage 2: Estimating the market potential value for 100 percent of
markets.
The next stage estimates the market value potential for 100 percent of
markets. While we would have details on all the independent variables
at a village level for the villages that are not covered by the Nielsen
shop census, we wouldn’t have the FMCG potential for each village.
However, we can estimate the retail sales for all remaining villages
using the relationship determined above. Once the model identifies
the FMCG market potential of all villages, it ranks them in descending
order of importance to identify the key hot spots.
LEARNING THROUGH A CASE STUDY
When we deployed this model for one of our FMCG clients, we found
that rural India is a hugely concentrated market. We observed that
65,000 villages (less than 10% of the villages) in India contribute to
65 percent of FMCG sales. The efficiencies one would have by cherry
picking this prioritized list of villages is phenomenal.
6 FEATURED INSIGHTS | TAPPING THE LOCAL HOTSPOTS IN THE GLOBAL BAZAAR Copyright © 2013 The Nielsen Company
From there, we compiled a list of key action points enabling the client
to streamline its entire marketing and sales strategy in these regions
as follows:
• Easy to focus – The client set up distributor networks to cater to
these 65,000 villages.
• Easy to cover – The client ensured complete coverage of all stores
in these 65,000 villages.
• Easy to synergize – The client used some of these villages as a
platform to conduct awareness and trial activities.
The client then integrated the list of villages with GPS-enabled maps
to help them with real-time route planning. We further leveraged other
variables like distance from nearest distributor, which helped drive
additional distribution efficiencies.
IN A NUTSHELL
While rural regions of emerging markets are a low hanging fruit for
the FMCG industry, there remains a data dearth that marketers need
to deal with. To address this, marketers need ways to enhance their
reach into these markets, such as market prioritisation and technology
integration.
The fact is that 65,000 villages (i.e., 10% of the total number of
villages) are driving 60 percent of the total FMCG business in rural
India. The market prioritisation strategy helps marketers identify
prospective buyers, brings down costs significantly and reduces
uncertainty. This technique and tool can be applied across industries,
markets and categories, making it an ideal way to effectively tap these
hotspots in the global bazaar.
THE TRICK IS TO GENERATE DEMAND BY DIRECTLY CATERING TO THESE VILLAGES WITH THE HELP OF THE RIGHT MEDIA PLATFORMS!
00
50
10
20
30
40
50
60
70
80
90
100
100 150
VILLAGES (‘000S)
Wei
ghte
d D
istrib
utio
n (W
D%)
200 250 300 350 400 450 500 550 600
600K Villages
100% WD
65K Villages
60% WD
135 Mn. Households
1/3rd Rural Households
7FEATURED INSIGHTS | TAPPING THE LOCAL HOTSPOTS IN THE GLOBAL BAZAAR Copyright © 2013 The Nielsen Company
ABOUT NIELSEN Nielsen Holdings N.V. (NYSE: NLSN) is a global information and
measurement company with leading market positions in marketing
and consumer information, television and other media measurement,
online intelligence, mobile measurement, trade shows and related
properties. Nielsen has a presence in approximately 100 countries,
with headquarters in New York, USA and Diemen, the Netherlands.
For more information, visit www.nielsen.com.
Copyright © 2013 The Nielsen Company. All rights reserved. Nielsen
and the Nielsen logo are trademarks or registered trademarks of
CZT/ACN Trademarks, L.L.C. Other product and service names are
trademarks or registered trademarks of their respective companies.
ABOUT THE AUTHOR
HAZEL SHIRISH
ASSOCIATE DIRECTOR,
NIELSEN INDIA
NITYA BHALLA
EXECUTIVE DIRECTOR,
NIELSEN INDIA
8 FEATURED INSIGHTS | TAPPING THE LOCAL HOTSPOTS IN THE GLOBAL BAZAAR