Product and Market Development for Subsistence Marketplaces: Volume 20

In my forty years of academic research, I have seen the scope of consumer behavior expanded in many directions, both theoretical and practical. One direction has been a dramatic growth beyond behavioral responses to marketing efforts and simple decision making to include the understanding of how consumers process and internalize information and respond to market stimuli at both conscious and subconscious levels.

We are grateful for the privilege of editing this book and organizing the conference that it celebrates. We thank our universities, departments, and organizations for their generous support, the many people who helped organize the conference, and the reviewers acknowledged below. Most of all, we thank our presenters, participants, and authors for their interest and energy.

In August 2006, 85 academicians and practitioners from industry and the nonprofit sector came together on the campus of the University of Illinois at Chicago for a conference unlike others in recent management research history. This conference focused on the subsistence marketplace and its constituents – the billions of individuals and families living in substandard housing, with limited or no education; having limited or no access to sanitation, potable water, and health care; and earning minimal incomes. Subsistence consumers and entrepreneurs have been largely ignored by contemporary marketing and management research and practice, but are poised to become a driving force in 21st century economic and business development. It is expected that as many as 1 billion new consumers wielding discretionary income will enter global markets before 2020. In addition, even among those consumers who lack discretionary income, it is expected that they will be much more active in the marketplace in the near future, because of expanded access to products and information through the Internet and wireless technologies (Davis & Stephenson, 2006). Moreover, the combined purchasing power of these consumers, already in the trillions of dollars, is likely to grow at higher rates than that of consumers in industrialized economies. These factors come together to suggest that consumer markets will need to adjust radically to the needs and demands of these emerging markets over the next 2 to 3 decades, even though companies and scholars across the business disciplines know very little about subsistence consumers. It was this need for knowledge about subsistence marketplaces that inspired the conference and the research presented here.

This chapter examines the marketplace activities of subsistence customers in South India. It presents a picture of the day-to-day behaviors and interactions of subsistence customers in terms of the products they purchase and their interactions with sellers and outlets. The method involved observations and in-depth interviews of a variety of buyers and sellers over several years in urban and rural South India. Needs, products, and market interactions, as well as typical budgets in subsistence contexts are described. These descriptions are used to derive broader characteristics of product and market interactions in terms of uncertainty, complexity, and lack of control; one-on-one interactions; transactional fluidity; and make or buy decisions.

How do people with few material resources manage their consumption lives? We address this question by investigating the consumption practices and processes of 27 subsistence consumers in South Africa. These individuals are economically active, underserved consumers who either had in the past or have today few resources in terms of income, employment, and education; most of these consumer–informants grew up in and/or live in urban townships populated by poor black South Africans. Our interpretation is based on family systems theory and centers on analyses showing that subsistence consumers enact strategies to cope with the chronic stress of resource allocation needs for the family that outpace resource generation. The repertoire of strategies includes: (1) adhering to resource generation opportunities, (2) accessing new resources, (3) talking to family members, (4) trying and striving, (5) sacrificing, and (6) risking. These strategies are discussed in light of family systems theory, consumer behavior research, and marketing to subsistence consumers.

A significant share of U.S. subsistence consumers is both poor and functionally low-literate. A key question that marketers and public policy makers must ask is how vulnerable these consumers are to the persuasiveness of marketing communications. We address this question by identifying who subsistence consumers in the United States are likely to be, exploring what it means to be vulnerable, with an emphasis on cognitive vulnerability; examining two theoretical frameworks for analyzing subsistence consumer vulnerability (elaboration likelihood model and persuasion knowledge model); and offering several propositions incorporating the select cognitive constructs of self-esteem, locus of control, and powerlessness.

This chapter presents an overview of participatory action research and explores how this approach can inform the study of subsistence marketplaces. The diverse historical roots of action research are traced from Kurt Lewin's research on workplace democracy and Paulo Freire's conceptual ideas forged from working with low-literate peasants. We illustrate the potential of action research approaches by exploring in detail a more contemporary form of action research, participatory rural appraisal, and we show the usefulness of this approach to understanding consumer well-being in resource-poor areas. Special emphasis is given to the discussion of the methodology of this popular form of action research and its various applications.

This paper assesses the impact of a pioneering and unique initiative by Hindustan Lever Ltd, the Indian subsidiary of Unilever Ltd through its Project Shakti program. The study used qualitative interviews of women microentrepreneurs participating in this program about personal and occupational issues. Our analysis suggested several themes such as entrepreneurial development, economic empowerment, and social empowerment.

Most of the people in the world are poor, so if we knew the economics of being poor we would know much of the economics that really matters.T.W. Schultz, Nobel Prize Lecture 1980

Microcredit programs, which provide unsecured credit to individuals or groups, have often been viewed within the development field as a panacea for empowering women in developing countries and improving their families’ socioeconomic status. Some of these programs, such as the Grameen Bank in Bangladesh, have made great strides toward improving the living conditions for the poorest of the poor. However, the beneficial outcomes of many of these programs to participants, and especially women, are often constrained by local cultural values/traditions and the imposition of masculine business models derived from the developed world's conceptualization of capitalism.

In this paper, we explore some of the root causes of the inability of many microcredit programs to deliver on their expected benefits, specifically to women borrowers in developing countries. We focus on universal shortcomings of microcredit programs that impede the success of all borrowers and on gender-specific shortcomings that negatively impact women borrowers. We highlight these shortcomings with the use of examples from our own experiences with microcredit programs in developing countries. Based on our critique, the final section of the paper presents five key recommendations for improving the structure and delivery of microcredit programs targeted at women in developing countries that recognize their unique needs and opportunities.

Billions of people around the world live in subsistence conditions. While this has traditionally been treated as a humanitarian challenge, it also represents a business opportunity. Academic research has yet to explore this notion adequately, particularly from the perspective of marketing. In this chapter, we draw on social capital theory to show how rich social ties in otherwise poor populations constitute assets that can be leveraged for the benefit of firms and consumers alike. Building on these ideas, we contend that a decentralized and externalized marketing structure should be more effective in subsistence contexts. Implications for research and practice are discussed.

This study examines the effects of market orientation on the performance of retail outlets in Zimbabwe, a low-income country (LIC). LIC retailers operate at the nexus of subsistence marketplaces and the market economy. Socioeconomic, cultural and regulative institutions are more dynamic and differ substantially from the industrialized West. This provides an interesting context in which to test the generalizability of market orientation theory. A covariance structure model of the hypothesized relations indicates that market orientation improves performance. Reward systems have a positive effect on market orientation and a positive indirect effect on performance through market orientation. However, consistent with the characteristics of Zimbabwe, which are not unexpected in the LIC institutional context, interdepartmental conflict, centralization, and formalization do not have significant effects on market orientation. The results suggest that the market orientation–performance link generalizes but that some antecedents of market orientation identified in previous research may not apply in LICs.

This paper argues that corporate efforts to serve subsistence economies must be integrated rather than disparate. Focusing on the efforts of Unilever's Indian subsidiary, the paper draws out four key lessons for businesses in low-income regions – availability, branding, convergence, and development. Four Unilever case studies are used to demonstrate how Unilever built on existing strengths, integrating diverse interventions to create Shakti, a unique pro-poor business model. The paper then analyzes the impact of the business intervention on the poor, calling for a wider convergence and cooperation between the private and the development sectors.

Adoption of innovations by the people of a nation typically contributes to its economic development. Cultural resistance to new products and technologies sometimes hinders widespread adoption. The resulting tension may result in a number of outcomes within a society. This paper uses behavioral theory in organizations and the economic development literature to explore ways in which local cultures in subsistence economies negotiate the adoption of innovations. Propensity to adopt innovations and resistance to cultural change are two dimensions that are proposed to impact the strategies that societies use to balance the competing interests of economic development and cultural integrity. Secondary data are used to explore the general relationship between various types of IT investment and economic development across a variety of nations, and a taxonomy is offered as a framework for future research.

This chapter develops and examines a model of the relationship between consumption and environmental degradation, using per capita gross domestic product (GDP) as the proxy for consumer behavior and per capita carbon dioxide emissions as the indicator of pollution. The time paths of emissions and consumption are modeled within a dynamic framework representative of ever-changing global economic and social conditions, and the result is expressed as an optimization problem from which Hamiltonian conditions are derived. Optimal control theory can be used to solve problems in dynamic economic analysis, and the Hamiltonian approach is one way of solving this class of problems. These conditions are analyzed through the use of a phase diagram, and the empirical section of the chapter reveals the relationship between CO2 emissions and GDP values for the aggregate of 148 nation states studied by the United Nations, as well as for developed, developing, and underdeveloped countries as classified by the United Nations. The results of our analysis are not encouraging unless significant changes are made to the policies of leading nations, and the chapter closes with a discussion of alternative policy paths that may ease the identified trends in environmental degradation.

Does participation in Fair Trade (FT) coffee marketing deliver added value to small-scale producers in developing countries? Is FT fair to producers as promised? The present study adopts a survey methodology designed to measure a combination of socioeconomic impact indicators as well as measures particular to the FT coffee-growing and marketing experience. We surveyed over 1,200 small-scale coffee producers in Nicaragua, Peru, and Guatemala, of which about two-thirds participate in coffee marketing schemes sponsored by TransFair USA. The study reports selected results related to production, marketing, material quality of life, education, health, and general well-being. Results show that producers participating in TransFair USA-supported FT cooperatives are indeed capturing more value than nonparticipants. This benefit transfer translates into modest but measurable improvements in quality of life, health, education, material comforts, social participation, technical and social assistance, and even sustainable agricultural practices. Consumers can have confidence that the FT scheme works. Retailers may be assured that by selling FT coffee they can defend the position that they are participating in a social change campaign.