Chapter 4 Institutionalizing Customer Engagement at the Urban Bottom of the Pyramid in India: Research Insights – Decoding Customer Value at the Bottom of the Pyramid

CHAPTER 4

Institutionalizing Customer Engagement at the Urban Bottom of the Pyramid in India: Research Insights

Introduction

This chapter builds on the relationship between customer engagement (CE) and customer perceived value (CPV); the two customer side marketing constructs that lead to satisfaction. The earlier three chapters detailed on the concept of value, CPV at bottom of the pyramid, and marketing framework for delivering value. This particular chapter takes a long term view to value and talks of how firms can institutionalize CPV and engagement at the bottom of the pyramid in India.

Customer Engagement

CE can be seen as an important success factor for business organizations in the fast paced, dynamic, and contemporary business environment (Verhoef et al. 2010, Kumar and Pansari 2016). It is mostly in the last seven to eight years that the construct has received scholarly attention as organizations realized that engaging with customers is a viable way for enhancing brand and firm performance (Gartner 2014). Gallup research found that on a per-trip basis, fully engaged customers in the consumer electronics industry spent $373, compared to $289 by the actively disengaged customers (Sorenson and Adkins 2014). Thus with the scope for creating successful financial performance outcomes firms tend to be more inclined to engage with their customers. CE denotes “a psychological state that occurs by virtue of interactive customer experiences with a focal object (e.g., a brand) in service relationships” (Brodie et al. 2011). CE has been held as a strategic imperative facilitating sales growth, superior competitive advantage, and profitability (Bijmolt et al. 2010). Engaged customers not only show display greater brand loyalty and satisfaction (Jaakkola and Alexander 2014) but are also more likely to contribute to new product development (Haumann et al. 2015), service innovation (Kumar et al. 2010), and viral marketing activity by providing referrals for specific offerings to others (Chandler and Lusch 2015). The concept has been included in the Marketing Science Institute’s 2014–2016 and 2016–2018 Research Priorities (MSI 2014 2016) which emphasizes the relevance and importance of the topic. Additionally, leading journals have brought out Special Issues addressing CE, including the Journal of the Academy of Marketing Science (2017), Journal of Service Research (2010, 2011), and the Journal of Consumer Psychology (2009). Broadly research till date has presented CE conceptualizations (Hollebeek et al. 2014), fundamental propositions of CE (Brodie et al. 2011), measurement instruments applicable to particular CE contexts (Sprott et al. 2009), initial insight into CE antecedents, dynamics and consequences (Van Doorn et al. 2010), and the effect of CE on firm performance (Kumar and Pansari 2016). While CE has been studied in the developed countries and organized business contexts, there has been only one study in the Emerging Markets context that includes India but none on India exclusively or on BOP. The Base of the Pyramid (BOP) segment in India is estimated to be a USD 1.2 trillion market, out of a global USD 5 trillion BOP market excluding China (study by IFC and World Resources Institute). In purchasing power parity terms, the Indian BOP market contributes to about 85 percent of the total national household market (Sinha and Sheth 2017). While the opportunity is huge, the challenges of an informal economy have not let businesses utilize this potential to the full. Managing and overcoming the typical characteristics of emerging markets, such as market heterogeneity, sociopolitical governance, unbranded competition, chronic resource shortages, and inadequate infrastructure, require deep market insights. These insights can be developed through research specific to the Indian BOP market and cannot rely on findings obtained from research on the developed economies or in a different BOP context (Barki and Parente 2006). Poor people are inclined to be more loyal because they cannot afford to make mistakes with their small disposable incomes. As the per capita income and aspirations of this segment increases, it is important that the customers remain loyal to the company and thus Brands and Engagement would play a vital role in the journey. There definitely needs to be a desire in the marketer’s mindset to accept this segment as a legitimate target along with a profit orientation. The poor can serve both as creative entrepreneurs/producers and consumers through which companies can cocreate solutions and reduce costs (Karnani 2007). As already mentioned CE and experience has been one of the market research priorities of MSI and though literature has covered several engagement concepts in the discipline, it is important to understand and apply them in the BOP context.

This initiative is the first one that would extend the CE construct to the Indian Urban BOP, with an implementation framework. The first major contribution of the study would be to include CPV in the CE framework developed by Kumar et al. (2017). CPV has been identified as a central mediating construct between firm value and customer value (Kumar and Reinartz 2016) but CPV is different in different income segments including BOP as seen in the earlier chapters. This has been established through a quantitative study based on a staple product brand in the wheat flour category which is consumed by both the segments. The study then builds the drivers for CPV at the BOP which would lead to satisfaction and emotional attachment thus contributing through the direct and indirect contributions of CE provided the firm would have an interaction and omnichannel orientation considered along with the moderators. This would be the second major contribution in terms of extending the CE framework. Only once these are done the study considers the third contribution through proposing a model built on institutional theory that could help firms implement engagement in a long term with this segment. In the last part through different case illustrations from different sectors how the framework can be implemented is described.

Evolution of Customer Engagement

The SD logic is inherently relationship oriented. Based on SD Logic Customer engagement goes beyond cognition and unlike involvement requires the satisfying of experiential value, as well as instrumental value that should result in willingness of both the firm and the customer to continue interactions with each other. Despite Engagement been studied in social sciences, its admission into the Marketing Literature has been a recent one and is still undergoing conceptual refining. As cited by Brodie et al. 2011 in the extensive literature review of CE, the most wide-ranging definitions acknowledging the existence of cognitive, emotional, and behavioral dimensions comprising the CE concept have been provided by authors including Patterson, Yu, and de Ruyter (2006), Vivek, Beatty, and Morgan (2012), Hollebeek (2011), and Mollen and Wilson (2010). The authors have drawn from literatures from related fields (e.g., social psychology) to develop their definitions. Developing on organizational behavior research, Patterson, Yu, and de Ruyter (2006) propose four specific CE components, including (a) absorption: the level of customer concentration on a focal engagement object, such as a brand/organization, thus reflecting the cognitive dimension of engagement; (b) dedication: a customer’s sense of belonging to the organization/brand, which corresponds to the emotional dimension of engagement; (c) vigor: a customer’s level of energy and mental resilience in interacting with a focal engagement object; and (d) interaction: the two-way communications between a focal engagement subject and object. The latter two dimensions (i.e., “vigor” and “interaction”) reflect the behavioral dimension of engagement. In contrast, Vivek, Beatty, and Morgan (2012), view CE from a primarily behavioral perspective by focusing on specific actions and interactions. Specifically, the cognitive and emotional dimensions of engagement identified in the literature review are implied only by the term “connection” in the authors’ proposed definition. Mollen and Wilson (2010) view online “brand engagement” to comprise the dimensions of “sustained cognitive processing,” “instrumental value” (i.e., utility and relevance), and “experiential value” (i.e., emotional congruence with the narrative schema encountered in computer-mediated entities). The authors also distinguish the concept from “involvement.” Specifically, CE is suggested to extend beyond involvement in that it encompasses a proactive, interactive customer relationship with a specific engagement object (e.g., a brand). Bowden (2009) describes CE as “a psychological process” driving customer loyalty, while Van Doorn et al. (2010) and Pham and Avnet (2009) focus on specific CE behaviors by defining the concept primarily with reference to the specific types and patterns of focal engagement activities. Thus literature review indicated a prominence of the multidimensional (i.e., cognitive, emotional, and behavioral) perspective of engagement. However, despite the prominence of the multidimensional perspective, over 40 percent of the definitions reviewed in the academic and business practice literature expressed engagement as a unidimensional concept and as such, focused on either the emotional, or cognitive, or behavioral aspect of engagement. The behavioral dimension in particular, appears dominant within the unidimensional perspective. However, although the unidimensional approaches possess the merit of simplicity, they fall short in reflecting the rich conceptual scope of engagement. All the different ways of customer value contribution to the firm have been accommodated in the conceptualization of CE (Kumar et al. 2010; Van Doorn et al. 2010). Within the CE concept, studies have investigated topics such as a customer’s direct and indirect contributions (Pansari and Kumar 2017), interactive and cocreative experiences (Brodie et al. 2011), value cocreation (Jaakkola and Alexander 2014), and consciousness (Grewal et al. 2017), among others. In defining/explaining CE, studies have adopted various perspectives. For instance, Kumar et al. (2010) adopt a value-based perspective and define CE as active interactions of a customer with a firm, with prospects, and with other customers, whether they are transactional or non-transactional in nature. Van Doorn et al. (2010) adopt a behavioral perspective and define CE as a customer’s behavioral manifestation toward a brand or firm, beyond purchase, resulting from motivational drivers. Brodie et al. (2011) adopt a multidimensional perspective and define CE as a psychological state that occurs by virtue of interactive, cocreative customer experiences with a focal agent/object (e.g., a brand) in focal service relationships. Finally, Hollebeek et al. (2016) extends Brodie et al. (2011) definition by adopting a S-D logic perspective to define CE as “a customer’s motivationally driven, volitional investment of focal operant resources (including cognitive, emotional, behavioral, and social knowledge and skills), and operand resources (e.g., equipment) into brand interactions in service systems.” This definition of CE is adopted for the study. As detailed by Kumar et al. (2017), the CE concept has been effectively adapted and developed to conceptualize and investigate several topics. Table 4.1 displays representative CE studies in the marketing literature. CE has been conceptualized in scientific literature as a context specific phenomenon (Hollebeek 2011 and Brodie 2013). It was found that the expression of particular CE dimensions depends on the subjects of engagement and the context, defined by specific circumstance. So various research on this topic in various service settings and different countries are necessary in order to know the CE phenomenon in more detail.


Table 4.1 Representative CE studies in marketing

Author

Context/orientation (developed markets/emerging markets/ base of the pyramid)

Nature of the study (conceptual/empirical)

Research focus

Outcome

Patterson et al. (2006)

Developed markets

Conceptual

Drawing on literature from management, marketing, applied psychology and practitioner’s viewpoint a working definition of CE is formed

CE is conceived as a higher order construct consisting of 4 components; vigor, dedication, absorption and interaction

Vivek, Beatty, and Morgan (2012)

Developed markets

Conceptual

Explores the nature and scope of CE

Define CE as the intensity of an individual’s participation in and connection with an organization’s offerings and/or organizational activities, which either the customer or the organization initiate

Mollen and Wilson (2010)

Developed markets

Conceptual

Reconciles the practitioners’ view of

engagement as central to online best practice and the scholarly view that tends

to use other constructs to assess consumer experience. Building on research in

e-learning as well as online marketing

Construe engagement as a cognitive and affective commitment to an active relationship with the brand as personified by the website, and propose S dimensions of this construct

Bowden (2009)

Developed markets

Conceptual

Propose a CE framework based on the extent to which customers are either new or repeat purchase customers of a specific service brand

Account for the depth of customers’ emotional responses to consumption situations that lead to loyalty and repeat purchase

Kumar et al. (2010)

Developed markets

Conceptual

Propose that the customer’s engagement value (CEV) is comprised of their purchase behavior, incentivized referral of new customers, behavior to influence other customers’ purchase behavior, and value added to the firm by feedback

Suggest appropriate metrics for measuring the various components of CEV, and propose relationships between the different components of CEV

Van Doorn et al. (2010)

Developed markets

Conceptual

Develop a conceptual model of the antecedents and consequences of CEBs that relate to customer, firm, and society

Propose a CEB management process where firms identify, evaluate and react to key CEBs

Brodie et al. (2011)

Developed markets

Conceptual

Explore the theoretical foundations of CE based on the relationship marketing theory and the S-D logic

Identify five fundamental propositions of CE, and distinguish the concept from other relational concepts

Vivek et al. (2012)

Developed markets

Conceptual

Propose that CE is composed of cognitive, emotional, behavioral, and social elements, and identify the antecedents and consequences of CE

Highlight the importance of understanding individuals’ connections with each other relative to the brand, regardless of whether they are purchasing or even considering purchasing the brand

Hollebeek (2011a)

Developed markets

Conceptual

Propose a conceptual model to explain the relationships between customer brand engagement (CBE) and other marketing constructs

Identify potentially differential consumer behavior outcomes across the proposed segments of customers

Hollebeek (2011b)

Developed markets

Empirical

Conceptualize CBE using literature and research techniques

Define CBE as the level of a customer’s cognitive, emotional and behavioral investment in specific brand interactions

Hollebeek (2013)

Developed markets

Empirical

Explore how CE may contribute to generating customer value (CV) and ensuing loyalty for utilitarian and hedonic brands

Found (a) a curvilinear relationship between CE/CV for utilitarian and hedonic brands; and (b) up to a level, increasing CE generates greater CV for hedonic, than for utilitarian brands

Jaakkola and Alexander (2014)

Developed markets

Empirical

Conceptualize CEB in value cocreation within a multi stakeholder service system

Proposes that CEB affects value co-creation through customers’ resource contributions toward the firm/stakeholders that augment the offering

Hollebeek et al. (2016)

Developed markets

Conceptual

Develop an integrative, S-D logic-informed framework of CE comprising three CE foundational processes

Develop a set of revised S-D logic–informed FPs of CE, and apply the revised FPs to CRM to generate managerial insights

Harmeling et al. (2017)

Developed markets

Empirical

Define customer engagement marketing, and propose a framework to show how engagement marketing drives long-term CE

Identify universal characteristics of engagement marketing, differentiate it from other marketing strategies, and offer a typology of two types of engagement marketing (task-based and experiential) that can drive long-term CE

Grewal et al. (2017)

Developed Markets

Conceptual

Propose that consciousness as a foundational philosophy can be used by firms to create a more engaging and meaningful customer experience

Propose that companies can enhance their customer engagement by building on foundations of consciousness, and presents an approach for firms to develop business strategies.

Pansari and Kumar (2017)

Developed markets

Conceptual

Propose a CE framework, and identify its antecedents (satisfaction and emotion) and consequences (tangible and intangible outcomes)

When a relationship is satisfying and has emotional connectedness, the partners become engaged in their concern for each other, as evidenced through direct and the indirect contributions of CE

Kumar et al. (2017)

Developed and emerging

Conceptual

Develop a framework to ensure CE in services by adopting a customer-centric approach

Explores how interaction orientation and omnichannel model can lead to the creation of positive service experience, and identifies the moderators of service experience. Also proposes that the perceived variation in service experience moderates the effect of service experience on satisfaction and emotional attachment

Gupta et al. (2018)

Developed and emerging

Conceptual

Develop a framework for engaging customers globally

Discusses how cultural and economic factors, play a key role in creating global CE for MNCs

Present study

Emerging and BoP

Conceptual

Develops a framework to implement customer engagement at the bottom of the pyramid that is, low income consumers by extending the institutional theory and taking the customer perspective by putting the construct of customer perceived value

Incorporate the customer perspective in CE framework by including the customer perceived value construct as an antecedent to CE in the framework developed by Kumar et al. Based on this the framing of the offering to the BoP can be done, where 3 models have been illustrated


*Adapted from Kumar et al. 2017


While there has been only one study in the developing countries context there has been no CE study in the BOP context which may be different not only in terms of business and academic context but also in terms of research design and methodology context. For the purposes of this study the urban Indian BOP comprises of participants primarily engaged in the unorganized sectors and belonged to the 20 percent of the Indian BOP population, but immediately next to the consuming class in metros. The average household size was 5–6 members and average household income per month was INR 25,000–30,000 in 2018 that is, around 30$ a day. The household owned basic facilities such as a rented accommodation either with a television set/refrigerator, a mobile phone per person.

Research Gap, Propositions, and
Organization of the Study

Kumar et al. (2017) have developed a framework for CE based on Hollebeek 2016 definition of CE aligned to the Service Dominant logic (that inherently believes that service is the fundamental basis of any exchange and matches with the researcher’s orientation). The framework can be applied in both developed and developing countries context. The framework elaborates how interaction orientation and omnichannel model can be used to create positive Service Experience that can lead to CE based on Satisfaction and development of Emotional Bonds, breaking into direct and indirect contributions from Engagement; the latter part developed by Pansari and Kumar 2017. The study also identifies the factors that moderate Service Experience categorized as; Offering Related, Value Related, Enablers Related, and Market Related. While the researchers have mentioned that Market Type plays a moderating role and adopting the framework in the emerging markets context may pose certain challenges while also having considered the Perceived Service Offering Complexity yet it stops there. The research has been done on a global scale using Grounded Theory Methodology. However, one major limitation of the study is that though it is customer oriented in nature it has only approached CE through the firm’s point of view. CE is a two way process and necessarily needs to be seen from the perspective of the customer for two reasons. First following the cocreation logic customer has to be a part for creating value for himself and thus engaging with the firm. His perspective has only to come from him and not through the organization’s perception of his understanding. A good point to start on this is CPV. Second, while studies have built link between CPV and Satisfaction there are many studies that highlight gaps created in satisfaction because of the gap in company’s perception of CPV and their drivers. A case in the point is proven by the Knowledge Gap in the Gaps model of Service Quality (Parasuraman, Zeithaml, and Berry 1985) and accordingly gaps have been created in designing and delivery to customer expectations. Kumar et al. 2017 (Figure 4.1) study though scientifically robust and rigorous faces this limitation as nowhere does it highlight the care taken to remove this bias that may have set in. In fact unless until, the customer’s concept of value from the concerned product/brand is considered and their drivers understood by the organization there would continue to be gap in customer satisfaction and repeat purchase intentions. It becomes imperative thus to involve the customer side also in the CE framework across segments, including BOP. This study starts from this perspective.

Figure 4.1 Customer engagement framework, Kumar et al. 2017

Customer Engagement Is Linked
to Customer Perceived Value

The construct of CPV is not new to the Marketing literature. In fact it has been studied in both goods and services setting till the advent of SD Logic in 2004. One of the most important tasks in marketing is to create and communicate value to customers to drive their satisfaction, loyalty, and profitability. Value is a dual concept with the customer perspective on one side and firm on the other. While the CE framework developed by Kumar et al. does take the firm side of it which is customer oriented in an emerging market context, CE essentially is a two way phenomenon and the customer side also needs to be build in it. The construct of CPV is the construct from the customer side that is linked to long term CE. The subject of CPV, has been studied with different perspectives in Marketing where there has been a strong emphasis on the unidimensional conceptualization of value around utility maximization mainly because of its simpler implementation and assessment (Sanchez-Fernandez and Iniesta-Bonillo 2007), but the multidimensional proposition has gained wider acceptance. The multidimensional conceptualization is a richer one that postulates that consumption experiences involve more than one type of value such as affective or emotional dimensions along with cognitive and economic aspects (Sheth et al. 1991; Babin, Darden, and Griffin 1994 and Holbrook 1994); CPV can thus be summarized as the customer’s net valuation of the perceived benefits accrued from an offering that is based on the costs that they are willing to give up for the needs that are seeking to satisfy (Kumar and Reinartz 2016). This definition would consider the multidimensional nature of CPV. There has been a conscious debate over the third stage of conceptualization of CPV over the nature of indicators formative vs. reflective. CPV is considered as a consequence and antecedent to satisfaction in literature Mollen and Wilson (2010), Hollebeek (2013), Brodie et al. (2013). This is because of the difference in the conceptualization where some researchers have considered it at the fulfillment stage and some right from the start stage but there definitely is a linkage between CPV and CE. For the purpose of this study we would consider the process of CPV from the prepurchase stage itself that begins on the get component when the customer starts looking for a specific set of consumption values and builds expectations around them with fulfillment happening at the Satisfaction stage. CPV is the basis for all marketing decisions. Analysis performed by Gummerus (2013) and Khalifa (2004) revealed that CPV is a complex, context specific phenomenon, which still requires attention from the researchers. CPV in marketing literature is being analyzed twofold: as a ratio between customer’s value received and cost experienced when purchasing and/or using service/product (e.g., Petrick 2002; Wang et al. 2004; Smith and Colgate 2007) or as a multidimensional construct incorporating various CPV dimensions (e.g., Sweeney and Soutar 2001; Smith and Colgate 2007; Park and Ha 2015). The number of dimensions and their expression depend on the research context and on the purpose of the researcher. However, the majority of research on CPV assumes that value perceptions affect all buyers equally. Few studies have examined consumer heterogeneity in relation to value (Ruiz, Castro, and Armario 2007; Floh, Zauner, Koller, and Rusch 2014), and its explanatory power regarding behavioral intentions. This is surprising, as an aggregate analysis of CPV, disregarding heterogeneous consumer preferences (sub-populations), might result in misleading parameter estimates and inferior managing decisions (Desarbo et al. 2001). One of the key characteristics of Emerging Markets such as India is market heterogeneity apart from sociopolitical governance, unbranded competition, chronic resource shortages, and inadequate infrastructure. Since the Urban BOP has never been studied formally in India the study starts by attempting to understand what constitutes Perceived Value for them.

Customer Perceived Value Is Different Across Segments

The subject of Marketing is about satisfying customer needs profitably. To undertake this task it must be able to understand customer needs and expectations. It is equally important to have an understanding of the customer resources that can be sacrificed to meet those needs. Thus the difference between the “get vs. give” component is what should constitute value for him that may lead to satisfaction. This concept is covered under the “Perceived Value” construct in the Marketing Science. The construct is the same in the BOP context as well as detailed in the previous chapters but the difference would be in the value elements and the context. The CPV framework talks of different value elements as benefits that a customer expects with reference to his purchase context, dependent on the product category minus the cost elements. Scholars have highlighted that CPV is contextual and thus should be different even for the same product categories in different contexts such as lifestyle, lifecycle stage, geography, income, and so on. It typically includes values such as functional, social, emotional, epistemic, and conditional (Sheth et al. 1991). To start with it becomes imperative for the firms targeting the urban metro centers in India for the BOP customer to identify what would constitute Perceived Value for their specific product(s) on these elements and importance given to each one of them. Firms that may not do this may suffer because of marketing myopia and would also not be able to make use of the opportunities available in the urban Indian BOP segment. An exploratory comparative study of 30 Urban Indian BOP (per annum salary around INR 30,00,000) and middle and upper middle income groups (INR 40,00,00 and above) was done in the city of Gurugram India in May–June 2018, to identify the difference in the perceived value. It was decided to do the study on a product category that was relevant and common to both of the segments. Wheat Flour commonly referred as “Atta” forms the staple food in North India which is consumed by both segments. Branded Atta is new category in India, whereas earlier it was sold as loose commodity item which was purchased by user as per his requirement rather than standard packages. Food is a big business in the organized set up which has huge growth potential. Many FMCG majors have entered the segment with branded variants. ITC, the popular FMCG company in India and a leader in the Branded Atta category with major sales from North India partnered for the study. Since branded atta is still in the growth stage, the company was keenly interested in understanding the urban BOP segment as this was the immediately next segment after the SEC A segment which was consuming their products. ITC wanted to identify the opportunity and understand what would constitute Perceived Value for this segment and how does it contrast with its present target segment. Due to exposure to similar lifestyle and conditions for living, the Urban BOP segment which had aspirations to become like the upward classes and work for them have similar needs of convenience and ease of access which makes branded products such as ITC Aashirwaad valuable for them. It also catered to their esteem related needs. ITC wanted to explore this particular segment to continue being the market leader in this segment and catch them young to build brand loyalty. The company shared the attributes related to lifestyle that it used for marketing to current target segment which cut across the five consumption values. Although the customers in the urban BOP segment were catered to mainly by the unorganized or local businesses, but there was availability of infrastructure which could be shared between both the segments by organized businesses. This was different than the rural markets where infrastructure was not developed or present at all in certain locations. 45 percent of the Indian households, 121 million households or around 600 million population is Urban BOP referred to as the next billion by BCG report 2015. The similarities in exposure result in them being aware and having a similar set of expectations around the benefits of atta as a category with their middle and upper middle income group counterparts. Thus the reasons to buy were similar. The difference was in the associated customer costs with each reason which was a constraint for them mainly because of lower incomes as compared to the other group. While they had high expectations on all items related to functional benefits, emotional benefits, service and personnel benefits, image related psychological benefits, there was a difference in their payment capabilities, which could be because of willingness or ability to pay as their income was different. Companies would thus have to rework their cost and resource structures as existing structures would not be able to provide value either to the customer or to the firm itself. Thus to generate value for both the customer and the company, companies will have to start by identifying the CPV and its elements in the specific context and then find innovative ways to incorporate them in business models that are implementable. In a long term CE context companies not only need to understand CPV but also need to work out the drivers for CPV so that the customers remain satisfied and engaged in the long term. This is exactly the stage of urban BOP in India. Thus to build an implementable CE framework CPV has to be included as an antecedent in the CE model developed by Kumar et al. along with the interaction and omnichannel orientation in the presence of moderators.

Figure 4.2 Modified customer engagement framework, Kumar et al. 2017

The Drivers for CPV Are Important

To understand the drivers for CPV at the Urban BOP, a grounded theory study was done amongst a select sample of 15 participants in the urban Gurugram, a part of NCR of Delhi. Semi-structured in-depth interviews were conducted with them in their native language that is, Hindi. The details of the study are mentioned in Chapter 2. The two drivers for the CPV identified for the bottom of the pyramid Indian urban customer were “concern for family” and “concern for price.” For any product including wheat flour, whether ITC Aashirwaad or any other they derived satisfaction when their needs related to these two were fulfilled. To develop CE, these two concerns have to roped in the market offering of the firm. The family dimension in the bottom of the pyramid urban customer tilted toward economic well-being rather than subjective well-being as observed in other upper income segments. After the drivers have been identified implementation frameworks needs to be built for CE which is what has been developed in the next section on institutionalizing CE at the BOP.

Institutionalizing Customer Engagement
at the Bottom of the Pyramid

Prabhu et al. (2017) elaborate how Marketing has been defined as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and values with others. Kotler et al. (2008) and essentially marketing is the study of how firms create and maintain exchanges with customers (Bagozzi 1974, 1975; Hunt 1983; Houston and Gassenheim 1987; Vargo and Lusch 2004), but, marketing to the poor in emerging markets poses significant challenges that do not exist in developed economies (Mahajan and Banga 2006; Wu 2013). They have further illustrated how the institutions required for the creation and maintenance of exchanges are often nonexistent or fragmented in emerging markets (Khanna and Palepu 2000). Specifically, these markets frequently lack the institutions that help with assessing customer preferences (e.g., market research firms that specialize in poor segments) and responding to customer preferences (e.g., the absence of a distribution and sales infrastructure that reaches the poor) (Prahalad 2010). The attempt to create and maintain exchanges with the poor in emerging economies therefore requires a different approach to marketing than in developed economies (Pauwels et al. 2013). Prabhu et al. 2017 have developed a model to examine the creation and maintenance of exchanges with the poor in emerging economies that has the possibility of being extended to CE in the Urban India BOP context to work out an implementation framework. The authors have first tried to identify why marketing to the poor in emerging markets entails a unique set of challenges relative to marketing in developed economies. To respond to these unique challenges (e.g., the lack of institutions that facilitate formal exchange) would require the creation of new business models through institutional entrepreneurship, namely working with existing institutions to create an environment that enables the business model. The authors have adopted an institutional lens to build a framework that would facilitate marketing exchange to the poor in developing economies and the same holds true for CE. There are large numbers of low income consumers who have an increasing ability and desire to consume and are thus attractive customer segments to serve and engage in long term. But, marketing to these segments presents firms from both developed and emerging economies with some severe difficulties because of which their existing models face market failure. Market failure has been described as a situation in which there is inefficient allocation of goods and services in a market (Ledyard 2008), which could be because of demand side failures: lack of awareness, lack of accessibility, and lack of affordability (Prahalad 2010; Anderson and Markides 2007; Anderson et al. 2010; Kashyap and Raut 2006; Mahajan 2008; Mahajan and Banga 2006). The authors have also identified three supply side reasons for market failure: lack of awareness of a given market opportunity, lack of the means to reach poor consumers, and the lack of an economical means of initiating and fulfilling exchange with such consumers (Prahalad 2010; Anderson and Markides 2007; Anderson et al. 2010; Kashyap and Raut 2006; Mahajan 2008; Mahajan and Banga 2006). Thus, there exist other forms of exchange and engagement which would leave buyers better off than the existing forms available. It is here that firms like ITC will have to become Institutional Entrepreneurs to affect institutional change so that they can enter into long term CE. Based on institutional theory the following steps need to be undertaken to build an implementation framework at BOP (Figure 4.3).

Figure 4.3 An Integrated Institutional Model for Implementing CE at BoP in Urban India

  1. Framing: Frames are shared interpretive schemes or systems of meaning that help actors make sense of the world and provide templates for organizing (McAdam et al. 1996), which may be taken for granted by the constituent actors in that context. On the other hand, institutional entrepreneurs can challenge dominant frames through the development of strategically constructed alternatives. This essentially has to be done on the CPV with a long term CE orientation in mind. The modified CE conceptual framework (Figure 4.2) would be converted to the implementation stage (Figure 4.3). As reiterated by Prabhu et al. institutional entrepreneurs would need to engage in three main framing tasks when seeking to alter a particular system of meaning (Benford and Snow 2000). The first task is diagnostic framing, in which a particular problem is articulated along with the attempt to identify the causes of the same. The second task is prognostic framing, in which a potential solution to the articulated problem is identified along with the steps. The third core framing task is motivational framing. This stage provides the rationale or justification for a particular course of action through which institutional entrepreneurs can galvanize support and convince others to commit time and effort toward a particular goal. Thus the companies can use a framework that can guide them right from design till implementation of CE in an urban India BOP context. This insight and the framing task is the most critical for building long term CE. It has been elaborated through three cases in the subsequent section.
  2. Network construction: The next step in the implementation process is network construction which is a political process characterized by competition and cooperation between the relevant actors in a given institutional setting (Hargrave and Van de Ven 2006).
  3. Enactment of institutional arrangements: the third step is enactment of institutional arrangements which entails working with powerful state and other regulatory actors in order to create or enact the formal and informal institutions necessary for a given business model innovation to become viable, and
  4. Legitimation: Through collective action processes, legitimation would involve proving that the business model works by getting consumers and other stakeholders committed to the new form of exchange and ensuring that the resources needed to sustain the model continue to flow toward it.

Cases

FMCG: Hindustan Unilever Ltd.

If correct framing is done then companies can identify needs around existing practices to come up with new models. This is what Hindustan ­Unilever did in Project Shakti across rural India. The customers in rural India were denied day-to-day FMCG products because of the supplier bottleneck. The rural infrastructure was very poor in the year 2009 in India. FMCG companies that require intensive distribution faced major challenges here because it could not channelize the urban machinery of sales force to rural India. Thus “Accessibility” was an important ­dimension for CPV. In such a context through prognostic framing, Hindustan ­Unilever decided that instead of replicating the urban distribution infrastructure in rural India, it should develop a new model using resources from amongst rural India. This is a very important point, instead of fitting one model in another frame, develop model that arouses out of that frame. It launched the innovative project Shakti—using rural women. The key idea was that women is a strong influential force in rural households and tapping the women would work in favor of the company as she would be able to convince her household and community. Second and even more important element that Hindustan Unilever considered in this project was the problem of unemployment and livelihood. Project Shakti opened a new avenue of employment of not the men but the women folk who was not even considered for employment in the traditional structures and systems of this society. There was also an underlying logic that rural folks also needed these products with a slight difference in their needs but were denied because of a lack of suitable infrastructure. Thus the company clubbed two unrelated needs and worked out a solution that offered greater CPV with long term engagement and resolved both the supply and demand side issues. The HUL team selected few women leaders who were called Shakti Ammas. These Shakti Ammas were actually women entrepreneurs attached to a Self Help Group. The Shakti Ammas were trained for familiarization with the products and basic tenets of distribution management and basics of management that would enable them to run their business effectively. Project Shakti now has nearly 80,000 micro-entrepreneurs across 18 states.

Voluntary Sector: The Art of Living

NGOs or not for profit societies are organizations with a cause but not for commercial reasons (profits) alone. The “Art of Living” organization promoted by Sri Sri Ravishankar, a spiritual and humanitarian leader, is such an organization. The mission of the society is to create and empower peace and humanitarian values in the society through the Indian ancient technique of yoga and seva (service). Though the basic nature of the organization may seem to be spiritual in nature yet the organization undertakes regular activities covered by business and government otherwise in the sectors of rural development/women empowerment, health/education, and so on broadly catering to the development of the underdeveloped regions across the world. Their target regions include the bottom of the pyramid customer; both urban and rural. They take up causes that relate to human development in a holistic approach. People from well-to-do segments are given the responsibility of executing development projects related to the BOP customer. Thus the organization also fills an important psychological gap in the well to do people. Through a community based approach they integrate well to do segments that can devote time, money and effort in their projects in rural areas (education/health etc.) on the demand side. Thus through diagnostic, prognostic, and motivational framing a community based model works that offers greater perceived value to the BOP people while also meeting the needs of the suppliers.

Informal Sector: Urban Domestic Household
Help in Urban India

The Indian culture being collectivist in nature was used to living in joint families. With the change in employment opportunities, being now available only in the metros for both skilled and unskilled labor the urban lifestyles have changed. In the earlier traditional model, families for generations used to continue at their native places in the same jobs whether agriculture or service. The proportion of agriculture/farming related jobs was higher and spread throughout the country. With the opening of Indian economy the Indian urban centers grew disproportionately and both skilled and unskilled labor was drawn to these leaving other places. In such a scenario with both spouses working there was a new need of Household care for dependents. These families could afford to pay but did not have time. Thus they could either outsource by sending the dependent to a day care or old age home or in source by hiring domestic help on a full time or part time basis. Many middlemen were involved but ­basically the workers were immigrants from undeveloped areas that lacked employment opportunities. They were not professionally educated, some had a level of school education mostly basic and a significant proportion was illiterate. Whether hired through middlemen or directly they worked in the category of household care doing regular cleaning, cooking, and nursing of dependents (young or old). Though unorganized in nature, apart from the regular salary their working terms included stay and meals. This model is now a common feature in all urban metros with MNC employees. The traditional model only paid for the labor against a specific task but here they were paid for their time and availability at the home in case a need arose. Thus the engagement happened through innovations in the framing part of CPV that clubbed two unrelated needs.

It is not only unorganized sectors but on relating this to e-commerce space we would find support that even those organizations are reaping success because of Framing the unrelated needs in their business model through technology. All e-commerce business value propositions are framed on the need of removing the physical travel to the store/home delivery through anytime anywhere convenient ordering. Thus even organized businesses would innovate but identifying the innovations around a specific need is the first important step. The context of BOP customer is different than upper and middle income customer in India and therefore the CPV is also different. Only after this step is undertaken under Diagnostic framing can firms be able to deliver and engage with the customers in the long term. The focus of organized business both because of opportunity and implementation has been based on some specific segments that could afford to pay for the costs involved or benefits received. This can continue but for the urban BOP they will have to start by identifying what constitutes CPV as there is no existing practitioner or academic literature specifically for them. This has been done in an isolated manner but has to be taken forward in a more structured manner from now by both business and academia.

Discussion and Conclusion

CE has been recognized as one of the most important contemporary marketing topics. Researchers globally are trying to study the topic and its related dimensions in detail with reference to business practices in different contexts. One such context is low income consumers in developing and underdeveloped countries commonly referred to as the Base/bottom of the pyramid customer. The challenges in this segment are unique and huge for established corporate which makes it difficult to replicate their business models. Marketing as a science has its origin in the developed markets but the BOP market offers immense scope against their saturating existing markets. To cater to this market, marketing scholars and practitioners have started acknowledging and understanding this market. The process has just started. While the importance and uniqueness of this market is appreciated it is also required to be studied in its own right. The urban Indian BOP market is also one such context which has been studied in this book through a fresh perspective and is the need of the hour. The characteristics and novelty of the market demand a novel research approach as opposed to structured approaches. While statistical methods would be used more as the research matures in these market but the present phase calls for a qualitative focus using certain unconventional methods and a combination of them such as, interpretative phenomenology, grounded theory, case method, and so on which have been used in social sciences research. The present study follows a mixed method approach using a combination of quantitative descriptive study coupled with grounded theory and case study method. The first important contribution of the study is the inclusion of the CPV, CPV in the CE framework developed by Kumar et al. for institutionalizing CE, that is, working out an implementation framework in Urban India BOP the first important step for organized business is to identify what constitutes CPV for their particular offering. CPV is essentially net benefits minus costs. Due to a difference in lifestyle and living conditions because of income difference the low income consumers differ in their consumption and spending habits. This does not mean they are unaware or less aware or are less in their aspirations but this mainly because of the difference in their resource availability and disposition. This leads to a difference in the CPV of the customers in this segment vs. other segments. Major FMCG companies in India are interested in understanding the BOP urban India segment as this forms the immediate next segment with opportunity for their products and is currently being served largely by unorganized business. The importance can be witnessed by the fact that the company ITC, whose product Aashirwaad is a market leader in branded wheat flour category in North India, where this forms the staple diet got involved right from the problem formulation stage and worked continuously through research design and findings stage. The findings established that CPV is different for the brand across BOP and other higher income groups. The difference primarily is on the costs side than the benefits side which was similar in terms of customer expectations from the brand. Thus for a long term CE the brand will have to start investing in framing their offerings to appeal to this customer segment. The main drivers for CPV were two in this segment that led to customer satisfaction as revealed in the next phase of the study through grounded theory. The two main drivers were “concern for family” and “concern for money.” They were different in terms of their orientations as compared to other segments which focused on the “subjective well being” of the family whereas BOP focused on “economic well being.” Once this part is incorporated in the existing CE framework by Kumar et al., companies can start building their offerings for CE through the extension of institutional theory integrated with this. Prabhu et al. have developed a marketing implementation model based on Institutional theory for creating marketing exchanges with poor customers in developing economies/emerging markets. The new CE framework developed is integrated with this framework to develop a long term implementation CE framework for Urban India BOP customer. Once CPV is determined organizations will have to start playing the role of institutional entrepreneurs. They would now have to do the task of framing their market offering for CE. Through case illustrations three successful case studies from different sectors highlight how organizations challenged the fitment of existing frames through diagnostic framing, generated new frames by essentially clubbing two unrelated needs that would bring the organizations more close to the customers and use his resources differently to give him returns more than the immediate product. This step is called prognostic framing and is inherently aligned with the SD logic which treats customer resources differently. The next step is motivational Framing where the customer is convinced and motivated to not only purchase the firm’s products but is engaged to give his resources and cocreate value to satisfy his direct/indirect needs which is way beyond his expectation. The next steps of network construction and enactment of institutional arrangements are more process related. Thus a long term implementation framework of CE is established in the urban India BOP context.

Future Research

The present study may be seen as the start of a journey and not as an end in itself. It is an attempt to study the vast population at the BOP in a specific country context. The implementation framework developed may be tested empirically. Also there is a need to test it in other BOP segments in other emerging markets context.