There is enormous potential for businesses to thrive in developing countries but it requires a different approach than in developed markets.
Through his research, Srinivas Sridharan, Assistant Professor of Marketing at the Richard Ivey School of Business, has discovered a few key differences.
Instead of dictating prices, firms have a greater chance for local buy-in if they seek input from local communities in pricing their products, according to Sridharan.
“Although economic theory argues that local input will drive prices down, that is not the case in subsistence markets,” he says. “Very poor people don’t have time or appreciation for game theory. If you sell a product they really value, they will likely agree with your price, or even reward you with a higher one.”
It’s also important for firms to provide opportunities for local employment, such as involving small local businesses in their product production.
In fact, local entrepreneurs, with their rich social networks, may have a better understanding of customers and be more customer-focused, which can boost business, he says.
Businesses should also try to understand their markets in developing countries so they’ll have insight into unexpected ways their products might be used and how to engage consumers with marketing materials.
“For business to successfully engage the enormous markets at the base of the pyramid, it needs to better understand the rich and complex relationships between consumer behaviour and entrepreneurship,” Sridharan says. “Although very low income imposes consumption constraints, it also produces an undying entrepreneurial spirit – a strong foundation for economic progress.”
Details of Sridharan’s research were released in the June edition of impact, an online monthly publication featuring new research from faculty at the Richard Ivey School of Business. To read the full article, click here: https://www.ivey.uwo.ca/publications/impact/vol15no6-sridharan.htm
Roger More, Associate Professor of Marketing, Ivey Business School, also discusses the importance of market focus, and how a lack of market focus has hurt General Motors Corp., in the Faculty Focus feature. For the full article, click here: https://www.ivey.uwo.ca/publications/impact/Vol15No6-FF-More.htm