Decoding Customer Value at the Bottom of the Pyramid

An Urban India Marketing Perspective

Ritu Srivastava

• Publisher: Business Expert Press
• Year: 2019
• ISBN:
  9781948976121
• Topic: Business
• Subtopic: Marketing internazionale
• Index: Business

Mature businesses across all advanced countries are struggling to find new markets. Indian market has been estimated huge in size, approximately $1.2 trillion in purchasing power parity for the households earning an annual income of less than $4, 000. This comes to almost 880 million of Indian population of which 22 percent is urban India and 78 percent rural India.

Referred to as bottom of the pyramid/low income/subsistence markets, while these markets offer immense business opportunities they also pose challenges. The needs of this segment have to be addressed by the corporate world but it might need a new approach with new business frameworks for implementation. The companies must understand what constitutes value for this segment, how it is different from other segments and how firms can offer value through their market offerings; accordingly what could be the successful business models.

Decoding Customer Value at the Bottom of the Pyramid: An Urban India Perspectiv e answers these questions through a practical, rigorous and research oriented way. This book is a must read for business executives across the globe with an interest in the low income customers in India.

CHAPTER 1

Value—Multiple Perspectives

Introduction

The concept of “Value” is not new to business and society. Over major civilizations and business revolutions the concept of value has undergone change. This chapter introduces different perspectives on value finally bringing to customer perceived value (CPV) by uniquely positioning it for Urban Bottom of the Pyramid context in an emerging market like India.

The Role of Business in Society

A society can be simply defined as a group of individual human beings making a living together. Over years to streamline live processes and channelize energy in a positive direction it takes a structure and is bound by certain rules to maintain discipline and decorum. History has seen several societies in the form of human civilizations. A society has a set of needs which comprises of individual and group needs. The individual needs can be best explained by the framework developed by Abraham Maslow 1943. Maslow’s hierarchy of needs (Figure 1.1) is a motivational theory in psychology comprising a five-tier model of human needs, often depicted as hierarchical levels within a pyramid.

Decoding Customer Value at the Bottom of the Pyramid

Figure 1.1 Maslow’s hierarchy of needs

McLeod (2017) explains the theory where he mentions that needs lower down in the hierarchy must be satisfied before individuals can attend to needs higher up. From the bottom of the hierarchy upwards, the needs are: physiological, safety, love and belonging, esteem and self-actualization. This five-stage model can be divided into deficiency needs and growth needs. The first four levels are often referred to as deficiency needs (D-needs), and the top level is known as growth or being needs (B-needs). Deficiency needs arise due to deprivation and are said to motivate people when they are unmet. Also, the motivation to fulfill such needs will become stronger the longer the duration they are denied. For example, the longer a person goes without food, the hungrier he will become. Maslow (1943) initially stated that individuals must satisfy lower level deficit needs before progressing on to meet higher level growth needs. However, he later clarified that satisfaction of a needs is not an “all-or-none” phenomenon, admitting that his earlier statements may have given “the false impression that a need must be satisfied 100 percent before the next need emerges” (1987, p. 69).

When a deficit need has been “more or less” satisfied it will go away, and our activities become habitually directed toward meeting the next set of needs that we have yet to satisfy. These then become our salient needs. However, growth needs continue to be felt and may even become stronger once they have been engaged. Growth needs do not stem from a lack of something, but rather from a desire to grow as a person. Once these growth needs have been reasonably satisfied, one may be able to reach the highest level called self-actualization. Every person is capable and has the desire to move up the hierarchy toward a level of self-actualization. Unfortunately, progress is often disrupted by a failure to meet lower level needs. Life experiences, including divorce and loss of a job, may cause an individual to fluctuate between levels of the hierarchy. Therefore, not everyone will move through the hierarchy in a uni-directional manner but may move back and forth between the different types of needs. Maslow (1943, 1954) stated that people are motivated to achieve certain needs and that some needs take precedence over others. Our most basic need is for physical survival, and this will be the first thing that motivates our behavior. Once that level is fulfilled the next level up is what motivates us, and so on. The original hierarchy of needs five-stage model includes;

1. Physiological needs—these are biological requirements for human survival, for example, air, food, drink, shelter, clothing, warmth, sex, and sleep.
   If these needs are not satisfied the human body cannot function optimally. Maslow considered physiological needs the most important as all the other needs become secondary until these needs are met.
2. Safety needs—protection from elements, security, order, law, stability, and freedom from fear.
3. Love and belongingness needs—after physiological and safety needs have been fulfilled; the third level of human needs is social and involves feelings of belongingness. The need for interpersonal relationships motivates behavior. Examples include friendship, intimacy, trust, and acceptance, receiving and giving affection and love. Affiliating, being part of a group (family, friends, and work).
4. Esteem needs—which Maslow classified into two categories:
   (a) esteem for oneself (dignity, achievement, mastery, and independence) and
   (b) the desire for reputation or respect from others (for example, status and prestige).
   Maslow indicated that the need for respect or reputation is most important for children and adolescents and precedes real self-esteem or dignity.
5. Self-actualization needs—realizing personal potential, self-fulfillment, seeking personal growth and peak experiences. A desire “to become everything one is capable of becoming” (Maslow 1987, p. 64).

Maslow continued to refine his theory based on the concept of a hierarchy of needs over several decades (Maslow 1943, 1962, 1987). Regarding the structure of his hierarchy, Maslow (1987) proposed that the order in the hierarchy “is not nearly as rigid” (p. 68) as he may have implied in his earlier description. Maslow noted that the order of needs might be flexible based on external circumstances or individual differences. For example, he noted that for some individuals, the need for self-esteem is more important than the need for love. For others, the need for creative fulfillment may supersede even the most basic needs. Maslow (1987) also pointed out that most behavior is multi-motivated and noted that “any behavior tends to be determined by several or all of the basic needs simultaneously rather than by only one of them” (p. 71).

As far as needs are concerned they are all the same at an individual level but there is difference in the ecosystem which is defined by the context. The group related needs comprise of feelings of belongingness, attachment which begin at an elementary level of a nuclear family moving into extended family, caste, geography, and so on. To meet the needs of societies and life, individuals take up roles and form organizations to implement those roles to meet the human needs. Thus the concept of enterprise is born. In its broadest sense an enterprise is an entity, organization, or undertaking that is created for commercial purposes or business ventures and requires human efforts for functioning. It is focused on providing goods and services keeping in view various aspects, such as financial, commercial, and industrial. An enterprise is composed of individuals and physical assets with a common goal of generating profits. As businesses evolve with time they compete and fight for their sustenance and survival along with time. Thus companies benefit society by nurturing relations with its multiple stakeholders, of which there may be many. Some stakeholders have a strong influence and are of fundamental importance to the survival of the company: these include employees, customers, and suppliers. The media, authorities, trade unions, and local residents are other stakeholders with a wide ranging influence. The stakeholders are thus classified as primary and secondary stakeholders. It is important for organizations to identify and understand their needs and relationship with each other so that the organization is able to sustain itself in the long run.

The basic objective of business is to develop, produce, and supply goods and services to customers. This has to be done in such a way as to allow companies to make a profit, which in turn demands far more than just skills in companies’ own domains and processes. Astute entrepreneurs often demonstrate an almost intuitive understanding of the synergies that create success. The social skills of company owners, together with relationships maintained with customers, suppliers, and other business people, are always vital if companies are to be run well and developed with a view to the future. Companies improve their resources by developing materials and ideas. The goods and services produced must meet demands made by customers, other companies, or public institutions if companies are to survive. Profitability results when customers are prepared to pay more for goods and services than it costs to produce them. The ability to produce this kind of added value—profit—is the basic prerequisite for business, but it is also a foundation for prosperity in society. Only profitable companies are sustainable in the long term and capable of creating goods, services, processes, return on capital, work opportunities, and a tax base. This is what business does better than any other sector. Hence, companies’ basic commercial operations are the primary b...