Innovating to Increase Rural Reach

The Chinese government's economic stimulus program is giving a shot in the arm to PC sales in the vast but poor rural markets of China. The more than 700 million people that live in these areas have lacked access to the electronic and consumer goods that are now so pervasive in the country's big cities. But in August alone, more than 400,000 PCs were sold under a program that gives rural residents a 13% rebate for select products.

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While such financial incentives have been crucial to increasing sales, PC makers like Lenovo and HP are also tapping into longstanding cultural practices and novel distribution methods to increase their market share in small towns and villages. Lenovo has begun a marketing campaign touting its PCs as betrothal gifts. PCs make appealing gifts in part because the large boxes they are packaged in create a buzz for families when they are delivered. HP, meanwhile, has expanded its reach in rural China by sponsoring entertainment events and sending buses with glitzy product displays to small towns, along with vans that sell PCs and other products. This has allowed the company to overcome the relatively large distances of many villages from electronics stores and helped boost its market share in China from 5% to 14% in just four years. PC makers have also increased their sales to consumers in rural China, where per capita income is only about $700, by offering lower-priced models.

All of these tactics demonstrate how important a tailored approach that considers the local cultural, logistical and economic realities is to successfully penetrating new markets. Many consumers in rural markets are hungry for modern conveniences but may still be attached to tradition, live far from traditional distributions channels and have limited purchasing power. Finding innovative ways to make products culturally relevant, affordable and available to rural consumers can be a recipe for success.

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