Efficacy of Promotional Offers in Poor Households: Insights from the Bottom of the Pyramid

Research in the area of sales promotion has shown that a combination of tactics that include but are not limited to cash discounts, coupons, product premiums, rebates etc. is effective in driving consumer action such as purchase, new product trial, stock up, encourage habitual purchase, and brand switching. In studying the efficacy of promotional offers, some research has attributed deal proneness to a number of sociodemographic and personality traits. Though traditional economic theory predicts deal proneness to be positively correlated with income, research in marketing has instead supported a negative relationship where low-income consumers tend to be more price sensitive, instead. Despite this consumer marketers continue to spend marketing funds in promotional offers in the fast moving consumer good (FMCG) category targeted toward low-income consumers. A growing stream of research under the labels of bottom of pyramid (BoP) and subsistence consumers has increasingly pointed out the market attractiveness of this low-income population to multinational companies especially in the FMCG sector. These poor consumers are individuals who earn approximately $2 per day. The largest BoP market in the world by size of population is in India where, according to a 2011 World Bank estimate, 69 % of the country’s total population (approximately 1.2 billion) earns $2 per day. Companies that compete in the FMCG market aggressively target the BoP consumer where, according to several industry sources, companies have seen a double digit growth in spending on advertising and promotional offers.