Product launches in Bottom-of-the-Pyramid markets: Why consumer opinion matters
When a company communicates their BoP efforts, this could, in turn, impact how these mainstream consumers perceive the company, and potentially harm the company's standing in the mainstream market
While mainstream (non-BoP) consumers have a negative opinion of companies that treat poorer customer segments unequally in the marketplace
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Consumer Segments and “Permissible consumption”
How do consumers react to a company’s marketing efforts to lower-income segments in emerging countries? Can reactions vary depending on the product, culture, and company?
Reetika Gupta, Deputy Dean and Associate Professor of Marketing at ESSEC Business School Asia-Pacific, along with Deepa Chandrasekaran from the University of Texas at San Antonio, Sankar Sen, from Baruch College, City University of New York, and Tanvi Gupta from the Indian Institute of Management Ahmedabad, analyze the implications of marketing to the “bottom of the pyramid” in today’s globalized world.
“Bottom-of-the-Pyramid” (BoP) consumers are consumers living in a state of extreme poverty and deprivation. Numbering 4 - 5 billion people, they make up the largest and poorest part of the world population, living on less than $2 a day. Nowadays, an increasing number of companies launch products and market them to BoP consumers. These could be products like “Minute Maid Vitingo”, a drink by the Coca-Cola Company addressing malnutrition in rural India, or Shiseido’s “Les DIVAS” make-up line for women in rural Bangladesh.
While mainstream (non-BoP) consumers have a negative opinion of companies that treat poorer customer segments unequally in the marketplace, they also have beliefs about what the poor should be consuming. When a company communicates their BoP efforts, this could, in turn, impact how these mainstream consumers perceive the company, and potentially harm the company’s standing in the mainstream market.
A new globalised and connected era of communication
Researching this topic helps us understand how companies should communicate their BoP efforts to mainstream consumers. In fact, a good BoP communications strategy could even lead to a competitive advantage.
The increasing significance of an effective communication strategy is highlighted by the growing importance that mainstream consumers place on companies’ purpose and actions. Moreover, due to global social media and news, as well as increasing cross-border movements, consumers in both emerging and developed countries are now easily informed about companies’ global and local activities. In the future, companies will need to involve these consumers in their strategic considerations, as any company activity has the potential to impact the opinions and attitudes of mainstream consumers.
The studies conducted by the authors show that US consumers have a less positive attitude towards companies launching hedonic BoP products (products typically associated with fun, pleasure, and excitement) than their Indian counterparts. Meanwhile, Indian mainstream consumers do not have a significantly different attitude between companies launching a hedonic, or a utilitarian product (practical and functional products)
These findings can be traced back to the concept of permissible consumption, where mainstream consumers believe that utilitarian products should be prioritised over hedonic products, as the latter fulfil higher-order needs. Research has shown that mainstream consumers view a consumer who receives government assistance as less moral and ethical if they choose to spend money on non-essential goods (even if they themselves spend money on perceived “luxury goods”). With consumers increasingly viewing companies as moral agents with moral responsibility, their judgements on BoP consumer consumption affect their expectations of the kinds of products companies should launch in the BoP marketplace.
However, these beliefs may not be based on an actual understanding of BoP consumer wants, needs, desires or their overall life situations. This is why consumers from developed countries are more susceptible to these stereotypes, as they are less equipped to take the perspective of a consumer segment both culturally and physically very distant from them. This is also why Indian mainstream consumers have a less negative opinion of hedonic product launches – they are more empathetic to the situation of their fellow BoP citizens and, therefore, have different expectations of product launches, which are met.
Empathy and Expertise: How country of origin and profitability affect perception
Furthermore, Prof. Reetika Gupta and her co-researchers found that mainstream Indian consumers had a slightly more favourable reaction to domestic companies launching a hedonic product compared to a foreign one. They also perceived for-profit companies more positively than non-profit ones when launching a hedonic product.
The research found that the country-of-origin of a company is central as it shapes the expectations of emerging market consumers of how well that company can understand the needs and desires of BoP consumers. Especially when launching hedonic products, consumers perceive domestic companies as more empathetic than foreign companies.
Similarly, consumers perceive for-profit companies as being more suitable for launching a hedonic product to BoP consumers, and their efforts are better received.
Managing company and product expectations in a globalised world
What does this study imply for companies’ communication strategies? Firstly, the research suggests that mainstream consumers who are more culturally distant will evaluate companies more positively if their BoP products address utilitarian needs. Secondly, Prof. Reetika Gupta and her co-researchers found that mainstream consumers who are culturally closer to the BoP markets have a similar judgment of companies, regardless of whether they are marketing utilitarian or hedonic products.
In order to prevent potentially negative attitudes from culturally distant mainstream consumers, companies should communicate their hedonic BoP product launches neutrally and draw less attention to them.
At the same time, specifically international and/or foreign companies should engage with local communities in emerging markets to prevent negative publicity while introducing hedonic products. For example, they could directly involve target BoP consumers in their product development and communication campaigns, to be perceived as more genuine and empathic in their efforts.
All in all, companies would be wise to adjust their communication strategies for BoP product launches, and take their mainstream consumers’ expectations into account.
Reetika Gupta is the Deputy Dean, and Associate Professor of Marketing at ESSEC Business School Asia-Pacific.