Insight · StrategyTOFU

Marketing to Tier 2 and Tier 3 India: what changes

The short answer

Selling to Tier 2 and Tier 3 India is less about cheaper ads and more about trust, payment, delivery and language. The audience is large and growing — the IAMAI–Kantar Internet in India 2025 report found 57% of India's roughly 958 million active internet users were in rural areas, growing faster than urban India (IAMAI–Kantar via Business Standard). But the economics of each order can look very different from a metro order.

"Tier" isn't an official classification for marketing, and cities within a tier differ a lot. Use it as shorthand, then plan by state and pincode.

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By PMG Growth TeamUpdated How we fact-check

What tends to be different

  • Trust — newer online shoppers want proof: reviews, a phone number, a real address, clear return terms
  • Payment — cash on delivery stays popular where trust is lower, though UPI is now everywhere; UPI crossed 20 billion transactions in a single month for the first time in August 2025 (DD News)
  • Returns — refused COD deliveries (RTO) are often higher, which quietly raises the real cost of every order
  • Language — regional and mixed-language creative often performs better; see regional-language ads
  • Delivery — serviceability, delivery time and courier reliability vary by pincode
  • Price sensitivity — value matters, but clarity about price matters even more

Cheap reach, expensive orders?

CPMs in smaller cities are often lower, which makes early results look good. The trap is judging on orders placed. If a larger share of those orders are COD and a larger share are refused at the door, the cost per delivered order can end up higher than in a metro. Our RTO cost calculator shows how quickly this adds up, and the RTO problem on your dashboard explains why platform reports miss it.

How to plan campaigns that pay

  1. Start from your data. Pull orders, RTO and delivered revenue by state and pincode for the last few months.
  2. Classify markets. Where do you deliver reliably, with acceptable RTO? Those are your growth markets; the rest need fixes first.
  3. Fix the economics. Consider partial prepaid, OTP or WhatsApp confirmation for COD orders, and minimum order values where returns are high (COD vs prepaid).
  4. Build trust into creative. Show the product in use, the price, delivery promise, ratings and a real contact route.
  5. Localise. Regional-language versions, local creators and references people recognise.
  6. Support on WhatsApp. Many first-time buyers want to ask a question before paying; WhatsApp marketing and click-to-WhatsApp ads help.
  7. Measure delivered revenue. Report cost per delivered order and contribution margin by region, not just ROAS.

Creative that earns trust

Polished studio shots matter less than proof. Real people using the product, unboxing videos, clear price tags, delivery and return promises, and local creators often outperform glossy brand ads in smaller cities. Short video is especially important — see Reels, Shorts and the new discovery funnel.

Services and lead generation beyond metros

The same principles apply to education, healthcare, real estate and financial products. Enquiries from smaller cities can need more explanation and a phone call in the local language before they convert. Fast follow-up, a local-language sales team and clear pricing usually lift conversion more than lower cost per lead.

Mistakes to avoid

  • Judging regional expansion on orders placed instead of orders delivered
  • Running metro creative unchanged in every state
  • Offering COD everywhere with no confirmation step
  • Ignoring delivery times and courier performance by pincode
  • No phone or WhatsApp support for first-time buyers

Reading your data by region (illustrative)

A home-décor brand looks at the last six months by state. Two states show strong orders but high COD refusal; three show fewer orders but low refusal and high repeat purchase. When it calculates cost per delivered order and contribution per order by state, the second group turns out to be the most profitable growth market, while the first needs COD confirmation and partial prepaid before more spend. The point isn't the specific states — it's that delivered economics, not orders placed, should decide where budget goes.

Partnerships that build trust

  • Local creators whose followers live in the cities you target
  • Marketplaces and quick commerce where buyers already trust the checkout
  • Offline touchpoints — local retailers, events or service centres that people can visit
  • Customer stories from the same region, with permission
  • Responsive support on phone and WhatsApp in the local language

Questions to answer before expanding

  • Can we deliver reliably and on time to these pincodes?
  • What is our RTO rate here, and what will it cost us at scale?
  • Do we have creative and support in the languages people prefer?
  • Is our price and offer competitive with what's sold locally?
  • How will we measure delivered revenue and margin by region?

Frequently asked questions

Are ads cheaper in Tier 2 and Tier 3 cities?

Reach is often cheaper, but cost per delivered order or qualified lead may not be, once returns, cash on delivery and conversion rates are included.

Should we disable COD in smaller cities?

Not necessarily — it can unlock demand. Use confirmation steps, partial prepaid or order-value rules where RTO is high, and track delivered revenue by pincode.

Do we need regional-language creative?

Often it helps. Test it against English or Hinglish versions in the same markets and compare cost per qualified result.

Which metrics matter most?

Delivered revenue, RTO rate, cost per delivered order and contribution margin by region — alongside new-customer CAC.

How do we choose which cities to target first?

Start where you already deliver reliably and see repeat purchases, then expand to similar markets once the unit economics work.

Do Tier 2 customers buy less online?

Not necessarily — many categories are growing fastest outside the metros. Order values, payment preferences and return rates can differ, which is why delivered economics by region matter.

Should we use different offers by region?

Sometimes. Free delivery thresholds, COD rules and bundles can differ by region, as long as pricing stays fair and consistent with your policies.

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Terms used on this page

GlossaryRTOOrders that come back undelivered — the hidden tax on COD-heavy D2C.Explore →GlossaryCPMThe price of 1,000 ad impressions — the raw cost of attention.Explore →GlossaryAOVRevenue divided by orders — a lever that makes every acquisition cheaper.Explore →GlossaryContribution marginWhat each order leaves after every variable cost — the true budget for acquisition.Explore →

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