The Power of Tiered Towns

In his column Media Mantras, Annurag Batra talks about MNCs increasingly banking on the potential of Tier II and Tier III towns and how this trend eventually means good news for regional media

07 Jul, 2014 by admin

Following the fall of the Lehman brothers in 2008, it was evident that economic slowdown was to visit India soon. Indian organizations then began looking at markets other than the metros for better bottom-line growth in the face of adversities.


Now, even MNCs are banking on the tiered towns. After Mercedes Benz and BMW opened their showrooms in Lucknow in the second half of FY12, Audi followed suit early last year. Niraj Srivastava, Head Sales, Audi India, was quoted saying that the luxury carmaker would add nine more showrooms to its then 25 showrooms, most of which would be in Tier II cities. The German luxury carmaker has had a steady growth – from 5,511 vehicles sold in 2011 to 9,003 units the following year. In 2013, Audi became the first-ever luxury car manufacturer in India to sell more than 10,000 units in a single year.


Even brands, including Uninor, India’s fastest growing telecom operator; SanDisk,  a global leader in flash memory storage solutions; and, Apple, are going beyond the metros to grab market shares. Uninor, concentrating in regions other than metros, such as western Uttar Pradesh, has a slew of initiatives and continues to offer ‘cheap and best’ tariffs to its subscribers. SanDisk, having experienced success and growth fiscal after fiscal, is taking its India footprints to an altogether new high with geo-expansion.


Apple was in the news recently with, as Economic Times described it, “its plans to go local with a vengeance, setting up small, neighbourhood shops in big cities and Tier II markets, in a bid to get closer to potential buyers as it pushes ahead with an India specific strategy aimed at trying to grab market share…” In this kind of a hopeful and grow thoriented situation, it is unlikely that the media in Tier II and III towns won’t get its own booster. According to a Deloitte forecast, 2014 will see regional print industry continue to surge “primarily driven by factors such as under penetration in regional markets, rise in regional ad-rates and sustained pressure on English print advertising by digital media.”


According to Kamini Keshav, a media observer, the fact that the $4.2 billion Indian print industry is second largest after China and is continuing to grow at a Compounded Annual Growth Rate (CAGR) of 7% online rubbishes earlier doomsday predictions following the industry’s downslide in the West. “Obviously, this growth is not just coming from the metros. Further, we see that the regional print media is growing at a faster pace than English language print media,” she adds.


Attributing a linkage between brands turning to tiered towns for growth to the growth of print media, Keshav says that media planning today is driven by a focus on tiered towns. Even a luxury brand has to cater to the aspirational value in these towns and it’s no more a choice between languages. Obviously those companies investing in these towns will need to be known locally too which where tiered town media players have an advantage.


Also, there’s much to be done regionally – read tiered towns too – as far as media is concerned. In its report in the current fiscal, Deloitte says that there’s a huge potential for newspapers to expand with respect to their readership base, particularly with a regional push, as “average penetration of newspapers is low in the country and stands at approximately 15% (this is despite the fact that there are more than 70,000 newspapers printed in India with about 90% published in Hindi and other vernacular languages).


However, the penetration numbers are as high as 70% in cities while as low as 5% in the countryside. India’s literacy stood at 73%, according to the 2011 Census and is expected to continue its upward growth. Even among the literate population, the penetration of newspapers is low.”


Deloitte goes on to explain why these numbers are what make the opportunity for the media: “With its continued march towards higher literacy, the country is witnessing upward mobility along the class lines. This will make newspapers important for the aspirational middle class. Further, such consumers in smaller cities, towns and villages would continue to consume news in their local languages rather than English.”


As per the latest study by Internet and Mobile Association of India (IMAI) and IMRB International, regional content availability is likely to boost the growth of Internet in India by 24%. This is indicated by the fact, the study said, that regional content users grew by 15% to 71.8 million last year from 45 million in 2012.


Interestingly, what makes the case stronger for tiered towns is that accessing regional content is not restricted to rural India. Almost 60% of users in urban India access online content in Hindi, followed by Tamil and Marathi. Similarly 27% users from rural India use Hindi to access online content.


So, apart from tapping into the hitherto untapped – to a large extent – Tier II and III markets, brands are also getting to realise these towns, apart from taking care of higher operating costs prevalent in the metros, expanding their horizons and reaching out to larger audience, can give them the advantage of their own media as well.



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