Friday, June 05, 2009

Why sachets are popular in Rural India?

Rural people consume most products such as shampoo, biscuits, tooth powder, etc in micro units. This is majorly linked to the fact that they earn in daily or weekly wages. The following discussion is to reason out why do they prefer daily/weekly wages in turn to explain the popularity of shampoo sachets (and not a shampoo bottle).

If you visit any rural household or a surrounding retail stores please observe what kind of things they have. Tooth powder in sachet, Coconut oil in sachet, Fail & Lovely in sachet, only one soap bar (though they might be using multiple soaps in a month), small biscuit packet (Do you know the very popular Britannia Tiger?? it just contains 3 pieces instead of regular 10 pieces), the telephone usage with a 1 Re coin box, mobile phone usage in small top-ups (10/- or so), chota pepsi, etc. Basically consumption world is a miniature here.

Basic reason for this micro-units of consumption is to use them for a day or for at most a week. Their consumption budget is just about a week or less. That is because their earnings fall under in similar periods. Typically in rural locations, the work contract period is about a week or less. In fact, it is day-contracts which rules here.

Before proceeding further discussion on these consumption patterns, let me talk about an interesting topic and it is about you (Yes, I am talking about you, the reader). Assume, after a shopping exercise, you came out of a shop to return your home. As you are with some luggage, you wanted to return home with a auto-rickshaw. You found 3 autos standing on the road and you know it takes about 45/- to reach your home. When you asked each auto driver, you were told 3 prices, first guy – 100/-, second guy – 50/- third guy – 10/-. Then which one will you take to reach home? and why? Think for a while before reading further.

Coming back to our original discussion, rural people plan weekly budgets unlike the Indian government which does 5-year budgets. As we have seen before that is because rural people earn in similar periods. And surprisingly, it is their choice to earn in daily but not monthly. Yes, you read it right, it is their preference. Why is that so? It is because, their logical capability to think is very limited. Just like birds, they can do additions up to 10, beyond which it is difficult for them to count. To understand things for a year period, you need to foresee a lot of things, and plan accordingly. This requires arithmetic skill-set. So it is skill-set deficiency that makes an issue with them. Again, what exactly is the issue??

By the way, did you find out which auto you would prefer? I am damn sure that it is not the one which charges 100/-. Moreover, it is not the auto that charges 10/- either. Second guy who charges 50/-, which is a little more than the usual charge of 45/-, is the one you prefer. Why is that so? Why do you wish to pay higher, when there is a guy who would take you as cheap as 10/- (and in fact, you are willing to pay more than the usual charge)? The reason is simple. You know that it is not economically feasible for him to run at 10/-. Because you know if the usual charge is 45/-, then any auto must be making 10-15/- (or 25%-40% margin). This means actual cost is about 30/-. Then you would start doubting the guy who just charges 10/- instead of some price more than the actual cost of transportation, that is 30/-. You would believe that he would make money in another fashion perhaps by robbing you or so and not by direct charge. That’s what is known as fear of uncertainty. No one likes to take unknown risk.

Rural Indians can’t take decisions beyond a week or more is due to their incapability of logical thinking or arithmetic calculations. Beyond anyone’s capability falls under uncertainty. Rural people don’t wish take those unknown risks. This is the reason for their earnings in short periods, and so, they spend on micro-units of consumable goods.

As you see, arithmetic or logical skill-sets are so much important in life.