Marketing Concepts and their Relevance at the BoP - Consolidating Research on Entrepreneurship to Alleviate Poverty
Marketing Concepts and their Relevance at the BoP - Consolidating Research on Entrepreneurship to Alleviate Poverty
One promise of entrepreneurship at the Base of the Pyramid (BoP) is its contribution to alleviate poverty. This study focuses on marketing concepts underlying recent publications at the intersection of entrepreneurship and BoP. Our content analysis considers prominent marketing concepts (4p’s, service-dominant logic, and commitment-trust) and reflects their relevance in research challenging the entrepreneurial activities at the BoP. The classical marketing mix is as often adapted as modern facets of the service-dominant logic. Market access as well as designing and maintaining customer interactions are challenging. Contrasting the previous state of research, we conclude a need for marketing support in opportunity creation rather than the traditional emphasis on recognition and exploitation on the firm level. The diversity of BoP contexts and the dynamics of environmental conditions call for robust relationship mechanisms of relating the entrepreneurs to their business networks.
Keywords: Base of the Pyramid, Entrepreneurship, Literature Review
Track: Social Responsibility, Ethics, and Consumer Protectio
- 1. Entrepreneurship to Alleviate Poverty at the BoP
Billions of people living in abject poverty dominate many parts of the globe (Stiglitz, 2002). They live at the BoP in developing countries and emerging economies with a local purchasing power below $3,000 annually (Hart, 2007), or with a per capita income of less than $2,000 annually (Hall, Matos, Sheehan, & Silvestre, 2012). Prahalad (2004) divides BoP-related research into the topics: (i) untapped purchasing power, (ii) bringing prosperity to the poor, and (iii) local versus multi-national companies (MNCs). The interactions and relationships among the BoP, companies, and other stakeholders are frequently treated in marketing theories and concepts. Building upon the recent review of co-creation at the BoP by Nahi (2016) that underlines this importance, we proceed in a deductive way by assessing the articles using a coding scheme covering prominent concepts of 4p’s, service-dominant logic, and commitment-trust. This systematic procedure allows us to synthesize the progress that has been achieved in the contributions under consideration.
The market access is one of the main barriers for the BoP’s participation in market-driven environments. Access in selling goods and services is differentiated into two roles, that is, offering mainly unskilled labor to companies and offering goods and services to customers, both of which are business-to-business or business-to-consumer. Furthermore, it is a challenge to communicate with and selling to illiterate customers who do not have access to e.g., TV and who live in rural areas without proper infrastructure such as transportation and shopping facilities (Tasavori, Zaefarian, & Ghauri, 2015). This shows traditional marketing approaches are hard to establish and implement (Anderson, Markides, & Kupp 2010). However, alignment to Western business models can lead to employment or self-employment of sales representatives, like the village telephone ladies, etc., and it opens opportunities for business model innovations as well.
- 2. Methodology
To cover the topic, we selected scholarly publications referring to the prominent conceptualization of entrepreneurship by Shane and Venkataraman (2000). We defined the intersection of entrepreneurship with the BoP by applying the following search term to cover all of the various common phrases for BoP: bop OR “bottom of the pyramid” OR “base of the pyramid” OR “at the baseline.” We conducted our keyword search in Google Scholar and Thomson Reuter’s ISI Web of Knowledge and identified 253 articles. If the topic BoP, entrepreneurship, or both were missing, we excluded that study from further analysis. After this filtering our corpus consists of 53 articles.
A well-established approach in social sciences is the appraisal of content by trained raters to retrieve data for a content analysis. Each of the publication was assigned to three out of 5 trained raters (PhD students). Krippendorff’s alpha coefficient is used to measure the extent of agreement the raters achieved (α = 0.9013). In line with Krippendorff (2004), the result can therefore be interpreted as highly reliable (threshold α = 0.8).
The marketing mix (Borden, 1964), has been proven to be a useful management concept in several contexts. Later the pure focus on the marketing mix management has been partially replaced by relationship marketing in various industries. Ansari, Munir, and Gregg (2012) allude to the fact that in recent research concerning the BoP, social capital and relationship-building replace the classical exchange-based perspective of economic theory. A modern milestone in the academic discussion of marketing is the service-dominant logic (Vargo & Lusch, 2004), from which we adopted (i) service is the fundamental basis of exchange, and (ii) the customer is always a co-creator of value.
A major challenge in the seller-buyer relationship at the BoP is creating trust (Zahra, Wright, & Abdelgawad, 2014). This is hampered because entrepreneurs cannot take advantage of an established reputation in their industry. Institutional deficits (Kafouros, Wang, Piperopoulos, & Zhang, 2015; Kistruck, Webb, Sutter, & Bailey, 2015; Newman, Schwarz & Borgia, 2014; Parmigiani & Rivera-Santos, 2015), corruption, and criminality are typical problems of BoP markets (Webb, Kistruck, Ireland, & Ketchen, 2010). In our classification, we assess commitment and trust-building, following Morgan and Hunt (1994).
- 3. Findings
Anderson et al. (2010) state that the traditional marketing approaches are hard to establish and implement at the BoP. This is partly supported, looking at the main findings of our content analysis presented in the following.
Price. Webb et al. (2011) link the entrepreneurial activity of exploiting an opportunity to the creation of new information that disrupts the price system and, as a consequence, influences the other elements of the marketing mix. The promise of this approach for entrepreneurship at the BoP lies in the reduction of information asymmetries rather than undercutting costs due to the lowered opportunity costs of not competing for low-paid jobs. Concerning the pricing of products, it must be taken into account, that many poor simply do not have enough money to buy the products. There are different possibilities to solve this issue. Tasavori et al. (2015) refer to the possibility of microcredits to buy a specific product, which helps the poor to increase their living standard. On the other hand there is the possibility of split pricing. A product is partly paid by the poor and partly donated (e.g., Lim, Han & Hiroshi, 2013). Other companies, mainly MNCs, offer their products very cheap (under cost price) to have access to the market (e.g., Arnold & Valentin, 2013; Tasavori et al., 2015).
Place and Promotion. Khoury and Prasad (2015) emphasize that place and promotions in low developed country environments need to be adjusted because of the limited access to communication technologies and the BoP cultural programming that leads to deal with face-to-face social conventions. Consequently, the place and promotion of the BoP’s entrepreneurial endeavors are more likely to be limited to their in-group networks. This is in line with the example given by Webb et al. (2011) of community walker instead of TV commercials to be more sufficient for doing good marketing. Already persons with a different accent are not accepted by those groups to be influencer. Customized manipulations target on the key persons of the BoP community. Although this is not different to Western cultures, the way of approaching them is different. Anderson et al. (2010) provide several examples of MNCs using either self-employed (e.g., Danone-ladies) or entrepreneurs (Grameen-phone ladies) for overcoming their distribution problem when targeting the BoP. Here, reputation and access to informal networks of individuals living within the BoP is exploited. The question of the extent to which capabilities are built at the BoP remains open. On the negative side, the BoP entrepreneurs are more likely to restrict themselves to business with poor peers from their family or kinship-based connections. On the positive side, this barrier opens the door for cooperation with MNCs, who face difficulties in adapting their traditional marketing mix. Furthermore, it must be considered that many poor cannot read traditional advertisements, therefore distinct pictures must be used. Tasavori et al. (2015) gives the example of a company selling soap in rural areas. First, the people needed to be educated why they benefit from the use of soap and second, they put pictograms on the walls for the usage. In this case educating the people was much more helpful than traditional advertising
Product. The discussion of the marketing mix often focuses on product adaptation (e.g., Hall, Matos, & Martin, 2014; Hudon & Sandberg, 2013). This are either package size (Tasavori et al., 2015) or adapted products, like cheaper mobile phones (Webb et al., 2010). “The proliferation of cell phones and the rate of adoption is just the start of the process of BOP-led growth and innovation” (Prahalad, 2012, p.12). Tata Nano car is an example of creating a market opportunity (Pervez, Maritz, & De Waal, 2013). According to Prahalad (2012), low-cost products can increase growth in most sectors. Through an appreciative and effectively participation in the BOP markets, businesses have the potential to a better understanding of innovation and market dynamics. To conclude, it still remains a vast challenge to offer tailored products of multinational enterprises (MNEs) to serve people living at the BoP under acceptability and affordability criteria.
Service-dominant logic. This modern concept by Vargo and Lusch (2004) seems to suit for analyzing entrepreneurial activities and contributing to theory-building because one of the basic research premises is that services are core values delivered to the customers, and the products are the vehicle to tie the customer to the vendor’s services. Ghauri, Tasavori, and Zaefarian (2014) discuss the collaboration of BoP entrepreneurs with MNCs and NGOs attempting to build a service-related network aiming at social change for the BoP.
Since the development of innovative services is likely to be less capital intensive, and because services usually are delivered in interactions with the clients, BoP entrepreneurs naturally fit into this rationale. In this vein, George, Rao-Nicholson, Corbishley, and Bansal, (2015) demonstrate how service platforms (e.g., public private partnerships of hospitals and political actors) can provide a cheap and open solution for bringing welfare services to consumers. Arnold and Valentin (2013) explicitly discuss the empowerment of the BoP and the building of capabilities by tying together products and services in a multi-stage assessment process. The capacity to provide services is covered in the Indian context by Ghauri et al. (2014) and in the social alliances between business and social enterprises by addressing the context of social problems is explored by Sakarya, Bodur, Yildirim-Öktem, and Selekler-Göksen (2012). The latter emphasize a compensation for institutional deficits by service delivery through non-governmental channels. Reynoso, Valdés, and Cabrera (2015) subdivide the service perspective into six research streams that might support the poor in their entrepreneurial activities in business and beyond in relevant sectors of society. Building upon Jagtap and Larsson (2013), we define product service systems as “customer-oriented bundles made of physical products and services, which offer highly adaptable options for emerging markets, and provide a good structure for designing solutions at the BoP” (p. 701). In line with Ghauri et al. (2014), they emphasize the suitability of service design to foster social entrepreneurship at the BoP.
London and Hart (2004) provide the background of “building local capacity” services as potential opportunities, and flexibility and allocation of entrepreneurship can facilitate the launch of products or services. As a result, organizations re-designed their strategy to enter new markets. This perspective contains the probability of reducing BoP entrepreneurs and bridging the “last mile” by substituting them for Western-style retailers. In this vein, Tasavori et al. (2015) discuss the challenge of communicating with and selling to illiterate customers who do not have access to TV and who live in rural areas without proper infrastructure such as transportation and shopping facilities.
Commitment-Trust Theory. Trust is a relevant issue across BoP markets, and their fragmented structure due to different norms, values and beliefs (in short cultures) creates an atmosphere of distrust (Karnani, 2007). Therefore, especially the informal and personalized networks influence at the BoP are based on trust (Silvestre, 2015). A strategy (of many MNE’s) to deal with the situation is the use of local individuals travel among the communities with the purpose of spreading knowledge and news via WoM (Webb et al., 2010; Webb et al., 2011). Doing so, companies may get the needed trust to get preferential access to the resources and capabilities at the BoP. Newman et al. (2014) refer to a similar point by highlighting the relational capital. They target the interaction of entrepreneurs in the social network to be able to develop trust and get access to information and resources. In this vein Zahra et al. (2014) highlights the importance and different aspects of social capital to be able to become successful on the market. Anderson et al. (2010) point out, that companies need to go beyond transactional partnerships. They shall seek for unorthodox partners to win community trust and buy-in, to get further benefits.
- 4. Conclusion and Contributions
In summary, ten of the 53 papers (18%) are framed in the marketing mix paradigm. The modern service-dominant logic (Vargo & Lusch, 2004) view of marketing has been recently adopted by the same number of articles. Rather than “just” exploiting the opportunity arising from the inability of MNCs to communicate with the BoP and the last mile distribution challenge, service-dominant logic turns out to be more suitable for providing a perspective that focuses on supporting the whole range of entrepreneurial activities and related business model innovations.
Thus, many MNCs are likely to end up selling to the poor in transaction marketing modes rather than they are to build sustainable capacities among the BoP. In cooperation with the few MNCs and the relatively numerous (potential) entrepreneurs, a systemic transformative change remains unaffected (Reynoso et al., 2015). One core problem is that MNCs might attempt to copy any functional business model. Contrasting this state of research with the results of the seminal papers by Kohli and Jaworski (1990) and Narver and Slater (1990), who pioneered the integration of entrepreneurship and marketing, we see a strong need for opportunity creation rather than the traditional emphasis on recognition and exploitation on the firm level (Webb et al., 2011). Both the diversity of contexts and the dynamics of environmental conditions (Kiss, Danis, & Cavusgil, 2012) provide challenges for practitioners and call for more robust mechanisms of relating the entrepreneurs to their business networks. In the marketing literature, the concept of relationship marketing is not limited to building and maintaining relations with customers. Besides all of the technical and functional divergences of diverse marketing gestalts, a basic premise is trust-building to facilitate faithful cooperation (Morgan & Hunt, 1994). The concept of relationship marketing has been developed and refined in affluent Western-type markets; however, marketing literature provides evidence for its relevance in transitional and emerging economies as well (e.g., Dadzie, Johnston, & Pels, 2008; Wagner, 2005).
Moving to the context of entrepreneurship at the BoP, entrepreneurs can create or exploit opportunities arising from institutional deficits by implementing business models that enable trust-building. Notably, Anderson et al. (2010) conclude that companies “need to go beyond transactional partnerships” (p. 26) by establishing trusted relationships within the BoP environment. The concept of social capital is a sound theoretical framework that has been successfully adopted to explain the success or failure of community-building (Ansari et al., 2012; Zahra et al., 2014).
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