Customer expectations at the urban bottom of pyramid in India: A grounded theory approach

Abstract

The marketing discipline has evolved through the context of the industrialized or developed world. However, the largest group of consumers are also the poorest. Prahalad and Hart (2002) refer to them as the Bottom of the Pyramid (BOP). They divide the world’s population into four tiers. At the very top of the World Economic Pyramid are 75 to 100 million affluent Tier 1 consumers from around the world. This is a cosmopolitan group composed of middle- and upper-income people in developed countries and the few rich elite from the developing world. In the middle of the pyramid, in Tiers 2 and 3, are the poor customers in developed nations and the rising middle classes in developing countries. The remaining customers, approximately 4 billion people, are in Tier 4. This group has a per capita income of less than $2 a day, the minimum required to sustain a decent human life. Prahalad and Hart’s article highlighted that the extreme inequity of wealth distribution reinforces the view that poor cannot participate in the global market economy, even though they constitute the majority of the population. However, the bright spot was that here lies a vast opportunity that multinational corporations (MNCs) have typically ignored. Because of their familiarity with Tier 1 customers and certain assumptions about the BOP consumer group, the MNCs have ignored this population. Prahalad and Hart, however, illustrated in their article the immense potential of this consumer group to be profitable if the business models are changed. Tier 4 was not a market that allowed for traditional pursuit of high margins; instead, profits were driven by volume and capital efficiency. Margins would be low, but unit sales extremely high. The idea is that managers who focus on high margins will miss opportunity, but managers who innovate and focus on economic profits will be rewarded at the BOP. Thus, to serve these customers it is important to understand their expectations and what controls them.