Skip to main content
SpringerLink
Log in

New product introductions for low-income consumers in emerging markets

  • Original Empirical Research
  • Published:
Journal of the Academy of Marketing Science Aims and scope Submit manuscript

Abstract

Facing growth pressures, firms attempt to target the large low-income consumer segment present in emerging markets. This multi-method study develops research insights regarding consumer-, retailer-, firm-, category- and country-level factors that enhance the acceptability, awareness, availability, and affordability of products that facilitate the low-income consumer adoption of and firms’ introduction of new products for low-income consumers. Study 1 uses a qualitative grounded-theory approach by interviewing company managers and low-income consumers in India and Chile. Study 2, empirically tests an integrated multi-level model of several category factors identified in Study 1, combined with country-level factors drawn from the literature, using a unique 12-year longitudinal panel dataset of new product introductions in 27 emerging market countries from Africa, Asia, Eastern Europe, and South America. The research identifies consumer aspirations, region-based versioning, visible packaging and the product demonstrations as critical motivating factors for adoption of products by low income consumers. Consumers’ knowledge of the product category, the concentration of branded products, availability of global brands, and the presence of traditional retail stores motivate firms to launch products for low income consumers in emerging markets.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Notes

  1. Special session at the 2018 AMA Summer Academic Conference, a forthcoming Journal of Marketing special issue.

  2. “Understanding India’s economic geography,” retrieved on March 26, 2018 from https://www.mckinsey.com/featured-insights/asia-pacific/understanding-indias-economic-geography.

  3. Randomly selected transcripts with the coding were given to two independent judges. Their categorization was similar, and the inter-judge reliability was around 80%.

  4. As of March 18, 2019, the currency exchange rate for Indian Rupees and the US Dollars is such that 1 Indian Rupee equals $0.015 USD.

  5. From annual reports of top CPG companies such as P&G, HUL, Emami, Dabur.

  6. “Beyond the Wall,” The Economic Times, March 18, 2015 (https://economictimes.indiatimes.com).

  7. There are low-income consumers who live in urban areas with transportation networks more developed than rural areas. The proxy for the distribution infrastructure is based on the density of the road networks in relation to the geographic size of countries.

  8. https://economictimes.indiatimes.com/industry/cons-products/fmcg/hul-plans-to-let-other-firms-use-its-mobile-marketing-channel-kan-khajura-tesan/articleshow/47823037.cms.

  9. While the remittance flows increase the purchasing power of the low-income consumers in emerging markets, these flows tend to significantly fluctuate. For example, Bahadir et al. (2018) report that in Philippines, standard deviation of remittance flows is 10.82 times as large as the standard deviation of GDP for the 1993-Quarter 1 to 2011-Quarter 3. Due to the significant fluctuations in remittance flows, most of the low-income households receiving international remittances cannot be categorized as middle-income households.

References

  • Abreu, F., Calicchio, N., & Lunardini, F. (2003). Brand building in emerging markets. McKinsey Quarterly, 6–6.

  • Anderson, J. L., & Markides, C. (2007). Strategic innovation at the base of the pyramid. MIT Sloan Management Review, 49(1), 83.

    Google Scholar 

  • Anderson, J. L., Markides, C., & Kupp, M. (2010). The last frontier: Market creation in conflict zones, deep rural areas, and urban slums. California Management Review, 52(4), 6–28.

    Google Scholar 

  • Anderson, S. J., Chandy, R., & Zia, B. (2018). Pathways to profits: The impact of marketing vs. Finance Skills on Business Performance. Management Science. 65(12), 5559-5583.

  • Bahadir, B., & Gumus, I. (2016). Credit decomposition and business cycles in emerging market economies. Journal of International Economics, 103, 250–262.

    Google Scholar 

  • Bahadir, S. C., Bharadwaj, S. G., & Srivastava, R. K. (2015). Marketing mix and brand sales in global markets: Examining the contingent role of country-market characteristics. Journal of International Business Studies, 46(5), 596–619.

    Google Scholar 

  • Bahadir, B., Chatterjee, S., & Lebesmuehlbacher, T. (2018). The macroeconomic consequences of remittances. Journal of International Economics, 111, 214–232.

    Google Scholar 

  • Blei, D. M., Ng, A. Y., & Jordan, M. I. (2003). Latent Dirichlet allocation. Journal of Machine Learning Research, 3(Jan), 993–1022.

    Google Scholar 

  • Bronnenberg, B. J., & Ellickson, P. B. (2015). Adolescence and the path to maturity in global retail. Journal of Economic Perspectives, 29(4), 113–134.

    Google Scholar 

  • Byron, E. (2007). P & G’s global target: Shelves of tiny stores. The Wall Street Journal, (July 16), A1.

  • Cheng, J. M. S., Chen, L. S. L., Lin, J. Y. C., & Wang, E. S. T. (2007). Do consumers perceive differences among national brands, international private labels and local private labels? The case of Taiwan. Journal of Product and Brand Management, 16(6), 368–376.

    Google Scholar 

  • Dabla-Norris, M. E., Kochhar, M. K., Suphaphiphat, M. N., Ricka, M. F., & Tsounta, E. (2015). Causes and consequences of income inequality: A global perspective. International Monetary Fund.

    Google Scholar 

  • Dalton, P. S., Rüschenpöhler, J., Uras, B., & Zia, B. (2018). Learning business practices from peers: Experimental evidence from small-scale retailers in an emerging market. DFID: Working paper.

    Google Scholar 

  • Davis, D. F., Golicic, S. L., & Boerstler, C. N. (2011). Benefits and challenges of multiple methods research in marketing. Journal of the Academy of Marketing Science, 39(3), 467–479.

    Google Scholar 

  • Dawar, N. D. N., & Chattopadhyay, A. (2002). Rethinking marketing programs for emerging markets. Long Range Planning, 35(5), 457–474.

    Google Scholar 

  • Diaz, A., Magni, M., & Poh, F. (2012). From Oxcart to Wal-Mart: Four keys to reaching emerging-market consumers. McKinsey Quarterly, 4, 58–67.

    Google Scholar 

  • Eisenhardt, K. M. (1989). Building theories from case study research. Academy of Management Review, 14(4), 532–550.

    Google Scholar 

  • Gielens, K. (2012). New products: The antidote to private label growth? Journal of Marketing Research, 49(3), 408–423.

    Google Scholar 

  • Gielens, K., Dekimpe, M. G., Mukherjee, A., & Tuli, K. (2016). Global private label convergence: Fact or fiction? In F. Martínez-López, J. Gázquez-Abad, & E. Gijsbrecht (Eds.), Advances in National Brand and private label marketing. Cham: Springer Proceedings in Business and Economics. Springer.

    Google Scholar 

  • Globerman, S., & Shapiro, D. (2003). Governance infrastructure and US foreign direct investment. Journal of International Business Studies, 34(1), 19–39.

    Google Scholar 

  • Golder, P. N., & Tellis, G. J. (2004). Growing, growing, gone: Cascades, diffusion, and turning points in the product life cycle. Marketing Science, 23(2), 207–218.

    Google Scholar 

  • GSMA (2017). Accelerating Affordable Smartphone Ownership in Emerging Markets. Available at: https://www.gsma.com/mobilefordevelopment/resources/accelerating-affordable-smartphone-ownership-in-emerging-markets/. Accessed 1 August 2018.

  • Heckman, J. J. (1979). Sample selection bias as a specification error. Econometrica, 47(1), 153–161.

    Google Scholar 

  • Herstein, R., Drori, N., Berger, R., & Barnes, B. R. (2017). Exploring the gap between policy and practice in private branding strategy management in an emerging market. International Marketing Review, 34(4), 559–578.

    Google Scholar 

  • Jacob, S. (2013). Buy soap, rice from your gas delivery guy. Business Standard. https://www.business-standard.com/article/companies/buy-soap-rice-from-your-gas-delivery-guy-113030900328_1.html.

  • Keller, K. L. (1993). Conceptualizing, measuring, and managing customer-based brand equity. Journal of Marketing, 57(1), 1–22.

  • Khanna, T., Palepu, K. G., & Sinha, J. (2005). Strategies that fit emerging markets. Harvard Business Review, 83(6), 4–19.

    Google Scholar 

  • Kravets, O., & Sandikci, O. (2014). Competently ordinary: New middle-class consumers in the emerging markets. Journal of Marketing, 78(4), 125–140.

    Google Scholar 

  • Kumar, V., Sunder, S., & Sharma, A. (2015). Leveraging distribution to maximize firm performance in emerging markets. Journal of Retailing, 91(4), 627–643.

    Google Scholar 

  • Lee, J. Y., & Bell, D. R. (2013). Neighborhood social capital and social learning for experience attributes of products. Marketing Science, 32(6), 960–976.

    Google Scholar 

  • London, T., & Hart, S. L. (2004). Reinventing strategies for emerging markets: Beyond the transnational model. Journal of International Business Studies, 35(5), 350–370.

    Google Scholar 

  • Mahajan, V. (2016). Rise of rural consumers in developing countries: Harvesting 3 billion aspirations. SAGE Publications India.

  • Mahajan, V., & Banga, K. (2005). The 86 percent solution: How to succeed in the biggest market opportunity of the next 50 years. Philadelphia: Wharton School Publishing.

  • Mandelman, F. S. (2013). Monetary and exchange rate policy under remittance fluctuations. Journal of International Economics, 120(May), 128–147.

    Google Scholar 

  • Narayan, V., Rao, V. R., & Sudhir, K. (2015). Early adoption of modern grocery retail in an emerging market: Evidence from India. Marketing Science, 34(6), 825–842.

    Google Scholar 

  • Pels, J., & Sheth, J. N. (2017). Business models to serve low-income consumers in emerging markets. Marketing Theory, 17(3), 373–391.

    Google Scholar 

  • Peres, R., Muller, E., & Mahajan, V. (2010). Innovation diffusion and new product growth models: A critical review and research directions. International Journal of Research in Marketing, 27(2), 91–106.

    Google Scholar 

  • Pfeiffer, P., Massen, S., & Bombka, U. (2007). Serving the low-income consumer: How to tackle this mostly ignored market. AT Kearney Executive Agenda, 49-57.

  • Prabhu, J., Tracey, P., & Hassan, M. (2017). Marketing to the poor: An institutional model of exchange in emerging markets. AMS Review, 7(3–4), 101–122.

    Google Scholar 

  • Prahalad, C. K. (2004). Why selling to the poor makes for good business. Fortune, 150(10), 70–72.

  • Prahalad, C. K. (2010). The fortune at the bottom of the pyramid. Pearson Education India.

  • Prahalad, C. K. (2012). Bottom of the pyramid as a source of breakthrough innovations. Journal of Product Innovation Management, 29(1), 6–12.

    Google Scholar 

  • Rabe-Hesketh, S., & Skrondal, A. (2008). Multilevel and longitudinal modeling using Stata. STATA press.

  • Rangan, V. K., & Rajan, R. (2007). Unilever in India: Hindustan Lever's Project Shakti-Marketing FMCG to the Rural Consumer (pp. 9–505). Boston: Harvard Business School.

    Google Scholar 

  • Roberts, J., Kayande, U., & Srivastava, R. K. (2015). What’s different about emerging markets, and what does it mean for theory and practice? Customer Needs and Solutions, 4(2), 245–250.

    Google Scholar 

  • Shapiro, F., & Mandelman, F. S. (2016). Remittances, entrepreneurship, and employment dynamics over the business cycle. Journal of International Economics, 103(November), 184–199.

    Google Scholar 

  • Sharma, A., Kumar, V., & Borah, S. B. (2017). Ritualization: A strategic tool to position Brands in International Markets. Journal of International Marketing, 25(2), 1–24.

    Google Scholar 

  • Sheth, J. N. (2011). Impact of emerging markets on marketing: Rethinking existing perspectives and practices. Journal of Marketing, 75(4), 166–182.

    Google Scholar 

  • Sheth, J. N., Sinha, M., & Shah, R. (2016). Breakout strategies for emerging markets: Business and marketing tactics for achieving growth. FT Press.

  • Simanis, E., & Duke, D. (2014). Profits at the bottom of the pyramid. Harvard Business Review, 92(10), 86–93.

    Google Scholar 

  • Sinha, M., & Sheth, J. (2018). Growing the pie in emerging markets: Marketing strategies for increasing the ratio of non-users to users. Journal of Business Research, 86, 217–224.

    Google Scholar 

  • Sorescu, A. B., & Spanjol, J. (2008). Innovation's effect on firm value and risk: Insights from consumer packaged goods. Journal of Marketing, 72(2), 114–132.

  • Steenkamp, J. B. (2017). Global brand strategy: World-wise marketing in the age of branding. Springer.

  • Strauss, A., & Corbin, J. (1998). Basics of qualitative research: Procedures and techniques for developing grounded theory. Thousand Oaks, CA: Sage publications.

  • Talukdar, D., Sudhir, K., & Ainslie, A. (2002). Investigating new product diffusion across products and countries. Marketing Science, 21(1), 97–114.

    Google Scholar 

  • Tellis, G. J., Prabhu, J. C., & Chandy, R. K. (2009). Radical innovation across nations: The preeminence of corporate culture. Journal of Marketing, 73(1), 3–23.

    Google Scholar 

  • Tuli, K. R., Kohli, A. K., & Bharadwaj, S. G. (2007). Rethinking customer solutions: From product bundles to relational processes. Journal of Marketing, 71(3), 1–17.

  • Van Everdingen, Y., Fok, D., & Stremersch, S. (2009). Modeling global spillover of new product takeoff. Journal of Marketing Research, 46(5), 637–652.

    Google Scholar 

  • Varadarajan, R., Jain, S., & Griffith, D. (2011). Conjectures on innovation drivers in an emerging market: India. Handbook of research in international marketing, 117-134.

  • Venugopal, S., & Viswanathan, M. (2015). Developing customer solutions for subsistence marketplaces in emerging economies: a bottom–up 3C (customer, community, and context) approach. Customer Needs and Solutions, 2(4), 325–336.

  • Vila, O. R., Bharadwaj, S. G., & Bahadir, S. C. (2015). Exploration- and exploitation-oriented marketing strategies and sales growth in emerging markets. Customer Needs and Solutions, 2(4), 277–289.

    Google Scholar 

  • Weidner, K. L., Rosa, J. A., & Viswanathan, M. (2010). Marketing to subsistence consumers: Lessons from practice. Journal of Business Research, 63(6), 559–569.

    Google Scholar 

  • Xue, L., Ray, G., & Sambamurthy, V. (2012). Efficiency or innovation: How do industry environments moderate the effects of firms' IT asset portfolios? MIS Quarterly, 36, 509–528.

    Google Scholar 

  • Zaltman, G., LeMasters, K., & Heffring, M. (1982). Theory construction in marketing: Some thoughts on thinking. John Wiley & Sons.

  • Zhu, K., Kraemer, K. L., & Xu, S. (2006). The process of innovation assimilation by firms in different countries: A technology diffusion perspective on e-business. Management Science, 52(10), 1557–1576.

    Google Scholar 

Download references

Acknowledgements

The authors are listed in alphabetical order. The authors wish to thank the editors, Professors V. Kumar and Rajendra Srivastava and three anonymous reviewers for their guidance throughout the review process. The authors appreciate the research assistance provided by Rahul Suhag and also acknowledge the generous research support provided by the Indian School of Business and the University of Georgia. The authors also thank Mr. Mahesh of Nexgenint in helping with the data collection process.

Author information

Authors and Affiliations

  1. Indian School of Business, Gachibowli, Hyderabad, Telangana, 500032, India

    S. Arunachalam & Sundar G. Bharadwaj

  2. Bryan School of Business and Economics, University of North Carolina at Greensboro, 347 Bryan Building, 516 Stirling Street, Greensboro, NC, 27402, USA

    S. Cem Bahadir

  3. Terry School of Business, University of Georgia, Athens, GA, 30306, USA

    Sundar G. Bharadwaj

  4. School of Management, Pontificia Universidad Católica de Chile, Av. Vicuña Mackenna 4860, Macul, Santiago, Chile

    Rodrigo Guesalaga

Authors
  1. S. Arunachalam
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. S. Cem Bahadir
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Sundar G. Bharadwaj
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Rodrigo Guesalaga
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to S. Cem Bahadir.

Additional information

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rajendra Srivastava and V. Kumar served as Special Issue Guest Editors for this article.

Electronic supplementary material

ESM 1

(DOCX 654 kb)

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Arunachalam, S., Bahadir, S.C., Bharadwaj, S.G. et al. New product introductions for low-income consumers in emerging markets. J. of the Acad. Mark. Sci. 48, 914–940 (2020). https://doi.org/10.1007/s11747-019-00648-8

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11747-019-00648-8

Keywords

Search

Navigation