Mobility for rural wallets

     Print Edition: May 30, 2010

Travel into the deepest hinterland of India and you will still spot the unmistakable red-andwhite Airtel logo. Bharti Airtel, the brand's owner and India's largest mobile telephony player, has got to where it is today largely on the back of its rural growth. But Airtel executives admit that the plan to 'go rural' wasn't actually a plan, it was a necessity.

"Opting out is not an option if you wanted to be a leader," jokes Sanjay Kapoor, Bharti Airtel's Chief Executive in India. In 2004, Airtel realised that, with the entry of additional operators across the country's telecom circles, competition for urban consumers would only intensify. But, while tapping the vast riches of India's rural heartland is every marketer's dream, it is not easy.

Key Challenge
To keep its leadership position intact by expanding into rural markets, which needed a totally different strategy, products and service standards.

Innovation
The right mix of product and pricing, strengthened by a vast and unique network of over 25,000 centres to serve customers.

Why rural in the first place? In aggregate terms, rural India represents a material opportunity across many categories—and its salience is on the increase, driven by a wide range of stimuli. Initiatives like higher minimum support prices for crops, the farm loan waiver and the National Rural Employment Guarantee Scheme, and factors like generally good monsoons, have all helped. The increasing prosperity of such a large population—some 700 million—creates an enticing growth potential.

But rural comes with its own set of challenges — distribution, service, product knowledge, affordability, and so on. Still, Airtel has successfully cracked the code. As the brand began its rural push in 2004, there were some things it learnt almost instantly. Globally and in Indian cities, mobile telephony helps consumers travel while they talk: It is a mobility solution.

In rural India, the need was more basic: Communication. An industry belief, for example, was that rural Rajasthan with its poor infrastructure, sparse population and large open desert spaces could not be a good telecom market. However, the very factors that did not lend themselves to 'mobility' supported a 'communication' paradigm, Airtel found.

Even so, Airtel had to cross many hurdles to become #1. First, while it had no problem putting up telecom towers in rural areas, it found that handset makers had a scant distribution presence there. Airtel entered into what turned out to be a crucial partnership with Nokia to bundle a handset with a connection. It helped that both Airtel and Nokia had the same, immensely popular brand ambassador, Shah Rukh Khan. Why Nokia?

MONITOR'S TEN TYPES OF INNOVATIONTM FRAMEWORK: BHARTI AIRTEL


1. Networking: Forming relationships with Nokia to bundle handsets with its offer, and other alliances for distribution.

2. Core Process: Airtel Service Centres help widen service, a roaming distributor helps acquire consumers. 3. Product System: Introduced affordable bundled handset offers.

4. Service: Created service options appropriate to the consumer segment; service in the village, SMS-based systems, vernacular IVR systems, etc., through effectively outsourced systems like the Airtel Service Centres.

5. Channel: Created a cost-effective, young entrepreneurled distribution channel. Effectively worked around the issue of handset manufacturers not having the relevant distribution networks.

6. Customer Experience: In addition to the freedom to communicate, rural consumers are also provided with support to their livelihood through job alerts, weather and price-related information.

Organisations that achieve breakthrough innovation usually cover at least 3-4 types of innovation included in the framework. Bharti Airtel fulfils six.

"Rural consumers are extremely brand aware, they would pay a bit more and get a top brand rather than a cheaper brand," Kapoor points out. Then there was the 'validity' hurdle. Rural consumers could ill afford to pay the steep validity charge—the money they had to pay just to stay connected on the network. In 2004-05, a typical monthly prepaid recharge cost Rs 333, of which Rs 33 was tax, Rs 175 the validity charge and the airtime only Rs 125.

Something had to change. Airtel began playing around with its recharge schemes, prodded no doubt by pronouncements from the government and regulators. Recharge rates came down, eventually culminating in 'lifetime validity' connections for as little as Rs 99 and micro-recharges where consumers could top up as much as they needed in multiples of Rs 10.

To increase reach and distribution (not just for initial consumer acquisition, but for recharge and service requirements), Airtel created a two-tiered structure with Rural Super-stockists (approximately 2,000) and Rural Distributors under them.

The Rural Distributors were effectively young entrepreneurs (around 30,000 at last count), who were allocated territories around a few mobile towers and were responsible for consumer acquisition. Airtel also entered into alliances with Indian Farmers Fertiliser Cooperative Ltd, or IFFCO, which helped it sell connections through 35,000 agricultural societies.

Similar alliances were also set up in various microfinance institutions. It built an enabling system that allowed 700,000 rural retail outlets to sell recharges through a mobile device. For service requirements, in addition to the challenge posed by distance, consumers had a fear of technology.

They weren't willing to deal with call centres. Airtel created 25,000 Airtel Service Centres (ASCs) across rural India. This involved training a specific retailer in a village to handle service requirements in addition to selling new connections and recharge—the retailer gained higher credibility leading to increased walk-ins while Airtel provided a face to customer service interactions.

Moreover, a dedicated helpline or call centre in each circle provided real-time back-up support to these ASCs. "This says a lot about the rural Indian's entrepreneurial spirit," argues Kapoor. Airtel's growth throughout rural India has been powered by local talent.

This has allowed it to cross the challenges posed by languages and dialects and even the 'shyness' of some consumers. As products are sold, serviced and maintained by local people, it is even argued that this enhances Airtel's brand loyalty in highly competitive times.

Over time, Airtel continued to innovate to drive more value from its rural initiative. It introduced value-added services like fixed duration music radio, job alerts and for consumers buying connections through the IFFCO joint venture—information about produce prices and tips on crop management, among other things.

On the service aspect, Airtel has introduced SMS-based self-service systems in nine vernacular languages. It is now piloting call centres dedicated to rural customers in Tier III and IV towns with interactive voice response or IVRS options in 16 local languages. "The massive pent-up demand for value-added services in rural India surprised us pleasantly... the rural consumers are quite aware of what is available and what they want," Kapoor points out.

There are a number of elements that need to work in tandem for such an initiative to succeed. It required a network presence before Airtel could put up a distribution and customer service system. Similarly, the rural distributors had to demonstrate some level of demand generation before additional effort in setting up the ASC could be expended.

The alliance with Nokia and the ability to provide a bundled offer was critical to address the affordability and comfort with handset aspects. Progressively reducing the total cost of ownership for the consumer by moving towards "lifetime validity" was critical in this regard.

The impact of Airtel's rural initiative has been phenomenal. Not only has penetration in rural India increased manifold, given that two out of three net subscriber additions in India today come from its villages, the drive has also placed Airtel in a strong position.

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