--By Dwaipayan Regmi

For a long time, the Nepali market was supply driven allowing a limited choice for consumers. Demand for a product would be higher than supply. That was when the public sector undertakings and a few businesses dominated the market – which can be termed as the 'Quota and License' period. This era came to end gradually after the liberal system was slowly introduced in the 1980s and speeded up in the 1990s. As a result, new business ventures started to crop up and it gave birth to a number of entrepreneurs. Collaboration with foreign companies increased, and the supply side gradually turned weighty.

Foreign joint venture companies such as Surya Nepal, Nepal Lever Ltd, Standard Chartered Bank started segmentation strategies in their marketing. Homegrown companies too tried to follow their example. And this trend pricked up further as a result of other foreign joint ventures. So, now most of the companies (large, medium or small, family-held or public) have been making an attempt towards proper segmentation of their target markets. 

Increased GDP and remittance income widened the market further, encouraging the companies to go for more professional marketing. 

Thus, the concepts of marketing also gradually changed. The concept of 'we sell what we make' changed into 'we make what we can sell'. Buyer preference started gaining importance. The cigarette companies began segmenting based on the status of the consumers. If we look at recent trends, even mobile phones have been targeted on the basis of buyer identification– their income level, their age group, their interest in mobile phones etc. However, the approach severely lacks research support.  

There is a huge market potential in Nepal, which marketers have not seemingly identified and recognised. On a simple note, a reason to import and a high trade deficit itself acted as an opportunity and window for Nepali producers. The market potential is measured by the size of the population of the respective groups or regions as consumers multiplied by per capita income of the respective groups or regions. 

Rural Vs Urban Market
Nepal has a big rural market which has been overlooked by Nepali marketers. They are adopting urban-consumer-centred marketing strategies. Therefore, all marketing efforts are focused on the urban market only. Rural market is not prioritised. As a matter of fact, they have not accepted rural areas as a market. The main reason is higher per capita income in urban areas than rural areas. But rural markets are qualitatively and quantitatively better than urban markets.  

Although the per capita income of the urban market is Rs 100,486, the number of consumers is only 4.5 million, limiting market size to only Rs 454.6 billion. However, although the per capita income of rural consumers is Rs 41,839, which is less than half of urban consumers, the number of rural consumers is 21.9 million, which means a market size of Rs 919.2 billion. Thus, the size of the rural market is more than double the urban areas. Ignoring the 2.36 times larger market, representing 67 percent of the total market size, seems to be a terrible mistake.  Of the total consumers in the country, 83 percent reside in the rural areas and only 17 percent live in urban areas. Table 1 shows the data of market size based on the types of market:

Though it is clear that the rural market is larger than the urban market in terms of size, sales and profitability, the failure of the Nepali companies to realise this has resulted in the loss of great opportunities. By focusing on these markets, production, sales, investment, employment and income will increase, with the result that Nepal’s economy will pick up pace.

Challenges
But just realising the potential of rural markets is not enough. In fact, it is difficult to formulate proper marketing strategies for rural areas. However, some ideas can be suggested. 

For example, producers should design small size packages due to lower per capita income of rural consumers. One good example is the shampoo being sold by some companies in sachets. This way, the consumer does not need to dish out Rs 100 or more to buy the product – they can buy a Rs 5 pouch/sachet for a single use. The product should be sturdier also due to the different life style and hard working conditions in these areas. Interestingly, brand awareness and brand loyalty both are high in Nepali rural areas. Therefore, branding should be given high importance. 

Another problem in marketing in the rural areas is the distribution channel. So, alternate distribution channels should be used. Cooperative societies can be one effective channel as almost every village has at least one, or in most instances several, cooperatives. The products are sold in rural Nepal during periodical (weekly, monthly) Haat bazaars. The companies can display and advertise their products in such bazaars. In the Terai, bullock carts can be used as display mounts as well as kiosks. 

Effort must be made to set lower prices for the packages targeted at the rural market. Small size packets is one idea, but that may not be enough. Looking at the lower per capita income of the rural consumers, the price of the same quantity should also be lower in the rural areas than in urban areas. That may reduce the per unit margin for the producer company, but that is compensated by the volume. However, the idea of lowering the price should be taken even further. The techniques of value engineering should be adopted. This includes avoiding sophisticated packaging. They may also offer refill packs or use reusable packaging. Products in rural markets may be promoted  by using of mass media such as radio, television and newspapers and magazines, wall painting, advertising on vehicles, display in periodical markets, fairs and exhibitions.

Female Vs Male Market
Females have emerged as the main economic power in the world. Females spend USD 2 trillion annually on consumer goods and 85 percent of the purchases made by consumers are being made by these females. The case is similar in Nepal. 

Of the total population of Nepal, 51.4 percent are females. Thus, as there are more females than men, the female market is a big one which Nepali marketers have ignored till now. Although the per capita income of females is only Rs 40,632, the number of female consumers is 13.6 million, forming a market size of Rs 544.4 billion, which constitutes 40 percent of the total market size. It is not a small market. However, although the male population is only 12.85 million, its market size is Rs 831.6 billion, comprising 60 percent of the total market.

Though females on their own, account for about 40 percent of the market size, their power on the purchase decision on products used by the family, including the males, is growing. The proportion of women who control the family income is growing. Since the female is thus more likely to have control over household resources, they tend to spend more on their children's nutrition, health and education. Naturally, the marketers of these products will benefit by targeting their strategy to women. 

The proportion of females who participate alone or jointly with their husbands in decisions about how to use the family earnings is 93 percent while the proportion of females who participate in the decision about how to use their husband's earnings is 65.9 percent. Thus, the female’s decision-making autonomy has been increasing in Nepal. According to statistics, 65.4 percent of women participate in making decisions regarding their own health care on her own or with her husband and 57.2 percent of women make major household purchase decisions alone or with the husband. 

These indicate that economic power it concentrated on women. Most of the household purchases are made by women and they are the main influencers for the purchasing decisions of goods needed by the family members. Therefore, it is high time for the marketers of Nepal to adopt women-centred marketing strategies by altering the traditional strategies that are still male-centric. 

Nepali producers should adopt distinct marketing strategies for the female market as well. Although women seem to have emerged as a powerful consumer force in Nepal, the Nepali companies have failed to recognise and reach them. They are treating them as a niche market instead of determinants and drivers of most of the purchase decisions. 

Women generally compare products before buying. Therefore, the products targeted at them must be of good quality and available at reasonable prices. Price discounts are one major influencing factor, since they prefer to bargain before buying products. They also prefer to be treated well at the points of purchase. This fact can be seen well capitalised on by the sellers of women’s goods like saris, precious stones and cosmetics. Such shops may be modern or traditional in style, but the shopkeepers treat them as queens by offering tea, coffee or cold drinks. Plus, the modern Nepali woman is present more on social media than men to forge meaningful relationships with relatives and friends. So, it is a good idea to use social media for advertising. Integrated advertising campaign in women specialised magazines, television and radio programmes may be effective.

Ethnic Market
Although small in size, Nepal is an ethnically very diverse country. Altogether there are 126 ethnic/caste groups in Nepal. In such a small market, separate marketing programmess for each ethnic group is not feasible and affordable. However, the market can be divided into four broad groups such as Hill Brahmins/Chhetris, Hill indigenous peoples, Madeshi group, and Newars. The personality and lifestyle of these groups are entirely different. 

Till now, the Nepali marketers are found focusing mainly on the Hill Brahmins/Chhetris, a group that comprises 39 percent of the total market size at Rs 401.8 billion. Ignoring the other groups who jointly constitute 61 percent of the total market size of Rs 625.1 billion is obviously very costly. Now it is high time for the marketers to initiate separate marketing programmes recognising these groups as distinct market segments.

Although the per capita income of different Madheshi groups varies from Rs 27,562 for  Madeshi Dalits and Rs 41,889 for Madeshi Brahmin/Chhetri, they jointly represent 7.3 million consumers of the country, forming a total market size of Rs 241.9 billion, which is 23.5 percent of the total market. 

The per capita income of Newars is the highest among all the ethnic/caste groups, which is Rs 68,060, but they are only 1.6 million comprising a market size of Rs 111.8 billion, i.e. 10.9 percent of the total market. 

Similarly, the per capita income of Hill indigenous peoples is Rs 46,986 and they represent 5.8 million consumers of the country, constituting a total market size of Rs 271.4 billion, which is 26.3 percent of the total market. 

The marketers should initiate the practice of giving brand names in the languages of these groups, printing necessary product information and preparing advertising messages in the languages of at least the Hill ethnic communities as well as in Maithili and Bhojpuri (for the Madhesi communities) and in the Newari language. Doing this does not involve big additional costs. And some products are already being marketed in this way. For example, one noodles brand brought out such an advertisement some time back, though that ad is not so noticed these days. Similarly, one beer brand used to be seen giving different ads on the occasion of ethnic festivals. Such signals make the ethnic groups think that the particular brand belongs to them, thus winning brand loyalty. 

The effectiveness of these segmentation strategies will be positive. The Nepal Census 2011 shows that 11.8 million of the population has 'Nepali' as their mother tongue, which makes it 44.6 percent of the entire population. There are other segmented populations having different mother tongues like Maithali (11.7 percent), Bhojpuri (5.98 percent), Tharu (5.77 percent), Tamang (5.11 percent), Newar (3.2 percent) etc. It is therefore equally important to make promotional materials accordingly.

Adopting distinct marketing strategies for different ethnic groups is necessary as each ethnic group has distinctly different tastes, likes and dislikes. People in a particular ethnic group tend to share the language, customs, values, norms and social views among themselves. Beliefs, motives, emotion and attitude tend to be similar within each ethnic group and differ among ethnic groups. As a result, purchase decisions and consumption behaviour sharply differ among ethnic groups. Ethnic marketing makes companies profitable and builds customer loyalty by creating new opportunities through differentiating a company's market offerings in a saturated, competitive general market.  

Geographical Market
As Nepal is diverse also geographically, Nepali marketers should segment the markets on the basis of geographical regions as well. The market can be divided into two broad groups: Kathmandu Valley and Tarai regions as one market, 65.5 percent of the total market, with a market size of Rs 900.2 billion and the rest of the Hill and Mountain regions as another market with a market size of Rs 473.2 billion, 34.5 percent of the total market. Till now, Nepali marketers seem to have focused marketing efforts on Kathmandu Valley and Tarai regions only, with no separate strategies for the rest of Hill and Mountain regions. A market size as big as 34.5 percent cannot be ignored for long. 

To adopt distinct marketing strategies for different geographical markets, a detailed demographic profile of each area can be developed which helps in predicting the characteristics of those areas.  Markets can be segmented into various further subdivisions to determine marketing strategies for a specific geographical market based on location, topography and climate, and population density. Location of customers also plays an important role in the timing of the purchase decision, provision of delivery services needed, need to stock different product ranges to ensure appropriateness to local conditions, and selection of appropriate channels to suit consumers' needs.

Market Based on Development Region
The Central Development Region is the largest market with a market size of Rs 474.6 billion (43.1 percent), which has a per capita income of Rs 49,128 and 9.66 million consumers. The Western Development Region is the second largest market with a market size of Rs 225.1 billion (20.4 percent), which has a per capita income of Rs.45, 651 and 4.93 million consumers. Similarly, the Eastern Development Region is the third largest market with a market size of Rs 219.7 billion (19.9 percent), which has a per capita income of Rs 37,818 and 5.8 million consumers. Most of the companies are concentrating in these markets when marketing their products. 

But now, the marketers should go beyond these and target the Western and Eastern Development regions as well which jointly hold 40.3 percent of the total market size. They can also tap smaller markets such as the Mid-Western and Far-Western development regions, which jointly hold 16.6 percent of the total market size. In order to increase market share of their products, marketers need to expand the size of the market. For this to happen, the companies should design market offerings considering the distinct socio-cultural identity and behaviour, and economic backwardness of these two regions.

Lessons can probably be learnt from India, where the producers have been equally focusing on entire market segments. Mobile service centres are not only located in big cities, but in equal proportion in small villages as well. Sales distribution is not done only through big marts, but through online means and in every corner of India with equal emphasis, unlike in Nepal where the entire concentration is in the capital and other big cities. Discrimination levels are found to be less in India, because they have been able to identify the needs of a local area, and make promotions accordingly. While a Bollywood star would be promoting something for the whole of India, it would be a local celebrity, who would be kept as a brand ambassador in the regional sectors.

Nepali producers are still following the traditional pattern of concentrating on the market with a high population, without analysing their income level. A clear example can be found in the sales of mobile phones, which has been much higher in rural areas than in urban areas. Had the producers only concentrated on the urban areas, they would have missed a large market share. As the taste and preference of one group from another can be different, the product development strategy should be shaped accordingly. Promotional campaigns have to be carried out differently. Careful analysis has to be done while making decisions upon selecting the distribution channel. The study of segmented market preference can be done through the local wholesalers, retailers and agents working in the local territory. 

For strong organisations, these ignored markets and regions could offer huge prospects, for sure. Analysing them through the PESTEL model or through Porters Five Forces Model would also help. The prime reason for foreign investors’ reluctance to come and work in Nepal could be because large potential factors have yet to be unidentified. Nepal is a tiny nation, with huge diversity and huge opportunities. It's high time we analyse these sectors and start appropriate measures to harness this vast untapped potential to make money.

Regmi is an MBA student at JNTU (A), Andhra Pradesh, India. He has been working as a freelance writer and is a blogger.