Rural consumers constitute a significant market as the rural area makes up 60pc of the country’s demography. This 130m plus consumers segment has witnessed a significant increase in its purchasing power as a result of higher crops prices, remittances and development projects in the last ten years.

The expansion in the spending power of the rural segment, coupled with increased awareness (through mass media), has largely benefited the consumer goods, telecom, electronics, textile, food and automotive sectors. However, consumers residing in rural areas have not been able to fully enjoy the benefits of different products due to several constraints.

The first issue being faced by the rural consumer is the presence of fake products in their markets. Fake products have been able to easily penetrate into rural markets due to weak state enforcement mechanisms and the distribution of products by companies through non-reliable channels. Imitation products destroy the image of a brand thereby losing revenues for the original products.

The second problem for is the absence of promotional schemes; something that is normally done in urban areas. These schemes offer savings on product prices and special discount on national and religious events. This deprivation is due to only big stores and large malls, situated in cities, focusing on such programmes.

The third issue is the lack of access to financial networks which facilitate consumers by providing loans in the form of instalments for the purchase of a particular product. The rural communities lack these financial networks and the presence of informal money-lenders complicates the buying pattern in a way that results in higher prices for the consumers due to the charging abnormal interest rates.

The fourth issue is the non-establishment of repair and maintenance centres in rural areas. The absence of such service centres practically erodes the warranty and guarantee claims attached to a product. Ultimately, rural consumers have to bear the travel cost to repair their product or claim warranty by visiting a nearby city. Networks of authorised dealers or agents are generally appointed in big cities.

The fifth issue is the absence of reliable distribution networks which increases the costs of products. Consumers in rural areas usually get their products through retailers — the last agents in the entire delivery chain. Each of these middle-men charges a profit margin that falls to the consumer and therefore results in high product prices.

Lastly, rural consumers are kept out of loyalty programmes and customers engagement activities. These programmes offer a way for customers to convey their needs and requirements to businesses. The absence of such programmes and activities weaken their relationship with the brand and create a class of consumers who regularly switch to alternatives.

These issues can be addressed by industry participants as rural markets are growing at fast pace and offering exciting margins.

International best practices can be employed by different companies in addressing the issues of fake products, lack of promotional schemes, absence of financial intermediaries, lack of service centres, non-reliable delivery channels and lack of customer loyalty programmes.

— The author is an assistant professor at AIOU, Islamabad.

Published in Dawn, Business & Finance weekly, January 30th, 2017