Think Local to Win in Rural Developing Markets

SMITH BRAIN TRUST -- Economists point to the rural parts of Africa, India, China, Eastern Europe and other developing markets as the next frontier for big multinational corporations. But the challenges of selling products and services to consumers in these environments go way beyond effective marketing campaigns. And it’s more than just swapping out features to suit local tastes. To be successful in rural developing markets, companies need to customize their approach to the local market in all aspects of their business strategies. That’s the finding of new research from Judy Frels, clinical professor and academic director of the online MBA at the University of Maryland’s Robert H. Smith School of Business.

Frels and coauthors from SDA Bocconi School of Management worked with executives from General Electric Healthcare. The research examined GE’s efforts to understand the secrets to success in rural developing markets from other multinationals that have figured it out. GE had 33 executives split into cross-functional teams, who spent five weeks examining what 15 multinational corporations were doing right in rural regions of Africa, Eastern Europe, India and China.

“The big takeaway is not that you have to customize, but the depths to which you have to do that,” Frels says. “Every element of your go-to-market strategy has to be localized to the market you’re entering. For example, in many case studies we examined, distribution channels were so important to success. In rural markets, you have to be really creative about how you get your product to customers.”

Consumers in rural developing markets are almost always living in poverty. Many do not know how to read and might even lack access to clean water and electricity. This means companies need new ways to reach consumers, distribute products and build relationships. The key takeaway strategies:

Localize solutions. Consider more than just products. Companies must also think about service, pricing, packaging, financing, and human resources and talent management.

Stay flexible. Create adaptive distribution systems and go-to-market solutions. Invest in local partners to help the firm go local and act as a guide to local tastes and norms. Sales structures need to be flexible to meet local needs.

Build trust. Develop trusting relationships with all stakeholders. Customers and employees are critical because word-of-mouth is most trusted and many times the only marketing available. Government and NGO forces are strong factors in shaping developing markets so relationships with those entities are critical.

Frels points to Coca-Cola as one of the best examples of success. The food and beverage giant built a network of micro distribution centers in rural Africa. The company recruited and trained local people and let them figure out how to distribute Coca-Cola products to customers — by hand, bike, donkey or whatever works best.

Coca-Cola established a successful chain by making sure everybody down the chain can earn a living by being involved with Coca-Cola. The model is so successful that the company partners with the U.S. Agency for International Development, the Global Fund and the Bill and Melinda Gates Foundation to distribute medicines and aid supplies.

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Winning in Rural Emerging Markets: General Electric’s Research Study on MNCs, was published in California Management Review in summer 2014.

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