marketing interactions in subsistence marketplaces: a bottom-up approach to designing public policy

Journal of Public Policy & MarketingVol. 31 (2) Fall 2012, 159–177

© 2012, American Marketing AssociationISSN: 0743-9156 (print), 1547-7207 (electronic) 159

Marketing Interactions in SubsistenceMarketplaces: A Bottom-Up Approach to Designing Public Policy

Madhubalan Viswanathan, Srinivas Sridharan, RobinRitchie, Srinivas Venugopal, and Kiju Jung

In many developing countries, buyer–seller exchange among the poor occurs mainly in unique, sociallyembedded environments that are essentially informal markets. This article describes the findings of anin-depth, in situ study of an informal-economy subsistence marketplace in South India. Throughinterviews with consumers and owners of survivalist microenterprises, the authors identify seventhemes that characterize the subsistence marketplace context, buyer–seller interactions within them,and specific elements of exchange. Drawing on these findings, along with theories of social capital andconsumption in poverty, they make the case that business policy in developing countries should aim toempower subsistence entrepreneurs and consumers, embrace emergent solutions, help build bridgesbetween informal and formal economies, and adopt a bottom-up orientation to policy development.The study’s findings offer important insights into policy that can help microenterprises of the informaleconomy become engines of economic growth in these countries.

Keywords: subsistence marketplaces, bottom of the pyramid, informal economy, social capital,marketing exchange, public policy

Madhubalan Viswanathan is Diane and Steven N. Miller Professor ofBusiness, Department of Business Administration, University of Illi-nois (e-mail: [email protected]). Srinivas Sridharan is SeniorLecturer in Marketing, Faculty of Business and Economics, MonashUniversity (e-mail: [email protected]). Robin Ritchieis Associate Professor of Marketing, Sprott School of Business, Car-leton University (e-mail: [email protected]). Srinivas Venu-gopal (e-mail: [email protected]) and Kiju Jung (e-mail:[email protected]) are doctoral students, Department of BusinessAdministration, University of Illinois, Urbana–Champaign. The firstthree authors contributed equally to this article. The authors aregrateful for the support and involvement of several nongovernmentalorganizations and community-based organizations in South Indiaand the invaluable assistance of S. Gajendiran and R. Venkatesan.The research was supported by the Center for International BusinessEducation and Research, University of Illinois, Urbana–Champaign,funded by the United States Department of Education (Award Nos.P220A60003-98, P220A020011, and P220A060028). LaurenBlock served as associate editor for this article.

According to the World Bank, approximately 2.7 billionpeople—more than 40% of the world’s population—currently live on less than US$2 a day, mostly in

developing countries. However, most remain untouched bythe economic benefits of modern business innovation (Pra-halad 2005). Recent research on “bottom-of-the-pyramid”(BoP) markets and “subsistence marketplaces” hasattempted to shed light on how businesses can participate in

alleviating poverty, the latter from a particularly marketing-oriented perspective (Hart 2005; Prahalad 2005; Vis -wanathan and Rosa 2007). However, little contribution hasbeen made to the area of public policy of governments andallied organizations.

One reason may be that marketing exchange within manypoor communities in developing countries falls outside theformal market economy (De Soto 2000) and beyond thescope of current forms of policy regulation (Harriss-White2002), thus rendering mainstream business and marketingtheory less useful in guiding policy insights. With the formaleconomy failing to meet their needs, people instead resort toa parallel, informal economy governed by a different—andlargely unstated—set of rules that are embedded within thesocioeconomic relationships of the community (Chen2007). Such “unofficial economies” are estimated toaccount for 40%–50% of gross domestic product in devel-oping countries and therefore are substantially important.Marketing theory’s paradigm of exchange (Bagozzi 1975),however, has largely derived from phenomena observed inthe formal markets of advanced economies—that is, thosegoverned by rules and contracts established by formal insti-tutions and enforced by policy and regulation (studies ofimpoverished consumer behavior included). Thus, its con-clusions must be treated with caution when considering thesubsistence-level marketplaces of developing countries.

The current research addresses this theory gap by propos-ing a conceptual framework of marketing interactions thatis more reflective of subsistence-level, informal-economy

marketplaces. We adopt a bottom-up orientation, focusingon the micro level of individual consumers and entrepre-neurs and their marketing interactions in the local market-place, with the goal of identifying higher-level policyinsights in a grounded manner. Our model is based on find-ings from an immersive study in one such context in SouthIndia, exploring exchange from the perspective of bothsides of the buyer–seller dyad. The work was guided by twofundamental research questions. First, how do impover-ished people living in the informal economies of develop-ing countries interact within the marketplace to survive andachieve socioeconomic progress? Second, what lessonsdoes this offer for the formulation and implementation ofeffective public policy? Our goal in studying day-to-daymarketing interactions in these markets was not only toenhance conceptual understanding of subsistence environ-ments but also to provide new practical directions for busi-ness policy in such markets.

After conducting and analyzing the content of 30 in-depth interviews of buyers and sellers, we conclude that (1) two fundamental features of subsistence society—interdependence and orality—underpin the marketplacecontext in these settings; (2) interactions occur within anintensely relational marketplace subcontext that is charac-terized by enduring relationships and interactional empathy;(3) the specific exchanges themselves are fluid, constantlycustomized, and composed of highly responsive transactionsbetween consumers and owners of survivalist microenter-prises; and (4) this self-evolved marketplace frameworkyields reserves of “social capital” for people that is tradablein the informal economy, thus affording some economicmobility.

We begin with a review of marketing and other relevantliterature that addresses contexts of poverty and identify theconcepts and arguments most useful in building the platformfor our study. Next, we present the findings of our study,which consist of insights from interviews with people livingin subsistence and a conceptual framework based on thoseinsights. We conclude with a discussion of the implicationsof this framework for public policy pertaining to subsistencemarketplace contexts in developing countries.

Marketing and Consumption in Poverty: A Brief Review

Marketing research has addressed issues of poverty sincethe 1960s, largely within two broad substantive domains: (1) macro-level research on marketing systems that influ-ence both the occurrence of impoverished conditions andtheir consequences and (2) micro-level research on market-ing tactics and issues of consumer disadvantage (Andreasen1975). Although a full account of this literature is beyondthe scope of this article, we offer a brief review, focusing onsome core insights and patterns of findings most directlyrelated to our own research goals. In each instance, weidentify conceptual strands that provided the main founda-tions for our work, as well as gaps that we aim to address.

Marketing Systems and Poverty AlleviationAt the macro level, marketing research on poverty and itsalleviation has taken several forms, including studies (both

160 Marketing Interactions in Subsistence Marketplaces

positive and normative) of the impact of marketing activi-ties (e.g., channel infrastructure, pricing, communications)on the economic development of nations and regions (Dho-lakia 1984), comparative studies that search for universallyapplicable marketing principles (Bartels 1981), and analy-ses of the role of government and public policy in stimulat-ing wealth-creating marketing activities (e.g., Wood andVitell 1986). In general, this research suggests that a well-defined marketing system is essential for economic devel-opment and the prevention of poverty. Practitioner users ofthis research have commonly taken this to mean that thesystem-building principles developed in the United Statesand other Western economies offer the best blueprint forpoverty avoidance everywhere in the world (see Joy andRoss 1989). Yet there are many caveats in the literaturecautioning against the temptation to merely “transfer” mar-keting know-how from developed to developing countries(Hosley and Wee 1988) and advocating a need to under-stand how distinct consumer populations navigate their ownunique economic systems (e.g., Samli 2008). This elusivesensitivity of “policy in practice” hints at the importance ofcomplementing the macro focus with a micro alternativerooted in ongoing, indigenous marketing interactions—agoal that we adopt in this study—that can then guideground-level policy and decision making in developingcountries.Consumer Research on PovertyA separate stream of studies in consumer research hasaddressed poverty at a micro, behavioral level, albeit pri-marily in the United States, producing rich and highlydescriptive accounts of the lives of impoverished people.Hill and Stamey (1990) use ethnographic techniques todocument how homeless people in the United States usepossessions and consumption behaviors as the basis for cre-ative survival strategies. Hill and Stephens (1997) examinethe lives of mothers living on welfare income and propose athree-dimensional model of impoverished consumer behav-ior, consisting of the restrictions on marketing exchange,the consequences of such restrictions, and the coping strate-gies employed by individual consumers in response to theirsituation. Hill and Gaines (2007) also consider the ethicalimplications of having severely impoverished consumers inthe midst of an affluent society and provide an integrativesummary of this body of work. A broad conclusion is thatthe dominant paradigm in the global marketing systemworks to place myriad restrictions on the ability of impov-erished consumers to participate equitably in marketingexchange but also that consumers themselves cope ininventive and often socially embedded ways.

Evidence of such systemic unfairness appears in a varietyof sources. Caplowitz (1963) was one of the first to sub-stantiate the notion that the poor pay more for ordinarygoods and services. Sturdivant (1969) further defined the“ghetto marketplace,” highlighting the differences betweendisorganized local marketing systems in impoverishedinner-city areas of the United States and the much moreorderly national marketing system. Race and ethnicity werefound to be particularly associated with poverty in thiswork, a conclusion that Holloway and Cardozo (1969) cor-roborate in their study of U.S. census data. More recent

studies have added nuance and further credence to thesefindings, including Alwitt and Donley’s (1997) analysis ofChicago’s retail landscape, which indicates that consumersin poor neighborhoods suffer serious access problemsbecause they are served by fewer and smaller stores andoften deprived of essential services (e.g., drugstores). Addi-tional insights arise from research on the link betweenpoverty and low literacy. For example, studies have foundthat low-literate consumers engage in concrete and picto-graphic thinking (Viswanathan, Rosa, and Harris 2005) andadopt decision-making and coping strategies to compensatefor their limitations (Adkins and Ozanne 2005; Viswana -than, Rosa, and Harris 2005). Such findings shed light onthe challenges poverty creates in matters ranging from retailshopping to consumer memory to the processing of infor-mation on labels (Chakravarti 2006).

Furthermore, such findings mainly address the “what” and“how” questions of poverty—that is, what restrictions poorconsumers experience and how they cope with these restric-tions. Recently, scholars have also begun paying increasedattention to “why” questions, in particular why certain expe-riences, and not others, result from restrictions. Much insightin this regard has come from work on consumer vulnerability(e.g., Baker, Gentry, and Rittenburg 2005), the study ofwhich has brought into sharper focus the psychological andsocial experiences of consumption restrictions. Defining con-sumer vulnerability as “a state of powerlessness that arisesfrom an imbalance in marketplace interactions,” Baker, Gen-try, and Rittenburg (2005, p. 134) prescribe a theoreticalframework to understand the marketplace dependence thatcan result from a prolonged impoverished condition and theconsumer-perceived deprivations associated with poverty(e.g., social stigmatization). In their work, they make threesignificant contributions to the poverty discussion, which weleverage in our study: (1) Rather than viewing vulnerabilityas a permanent condition attached to the state of being poor,they regard it as something that can be overcome; (2) ratherthan taking an outside-in view of poverty, they emphasizeindividually felt perspectives; and (3) rather than focusing onone trigger, they acknowledge that vulnerability is often theresult of interactions among enduring individual traits, transi-tory individual states, and external factors, some of whichmake consumers vulnerable to marketplace exploitation andothers that enable consumers to be resilient in the face ofsuch exploitation (Baker and Mason 2012).

In broad terms, then, consumer and marketing research onpoverty has helped establish that poor consumers (1) facemyriad restrictions in marketing exchange, (2) deploy avariety of behavioral and emotional coping strategies to man-age these restrictions and their consequences, and (3) transi-tion into and out of vulnerability as a function of many com-plex person–situation interactions rather than remainingvulnerable merely by virtue of their poverty. The disciplinehas likely made a unique contribution to the poverty discus-sion, through its conceptualization of the poor as “consumersof goods and services.” Viewing impoverished people in thislight has allowed consumer scholars to readily appreciatetheir inventiveness, hard work, and resilience in the face ofrestrictions on their marketplace exchange opportunity, acontrast to the more common view of the poor as helpless,undeserving, or prone to social deviance.

Journal of Public Policy & Marketing 161

Marketing, Consumption, and Poverty inDeveloping CountriesAlthough the consumer perspective has added a micro-levelunderstanding of poverty, conclusions from these studiesderive mainly from empirical contexts from the UnitedStates and other developed economies. This is restrictive,because it incorporates hidden assumptions about both theoverall marketing systems that poor consumers negotiateand the felt experience of poverty by those consumers.Although poverty has many universal features, its expres-sion in developing countries differs in several importantrespects. First, and most obviously, poverty in these settingsis not consigned to a marginal underclass but rather is a per-vasive and widely acknowledged phenomenon. Second,whereas the poor in advanced economies typically rely onlow-wage employment and/or welfare payments for sur-vival, many people in developing countries operate microbusinesses that are embedded in the social fabric of the sur-rounding community. Finally, although the economicunderclass is isolated from the mainstream in developedcountries, they remain protected by (and beholden to) thebroader legal and financial system; in developing countries,the poor are often fully disenfranchised from the formaleconomy (Norton, Conway, and Foster 2001). All these dif-ferences serve to underscore the need to understand aspectsof poverty that are unique to, or operate differently in, thedeveloping world.

Like poverty itself, the consumer vulnerability it engen-ders is also likely to emerge with distinct nuances in thelow-income settings of developing countries. Althoughmany aspects may vary minimally by setting (e.g., bio-physical factors, such as age extremes; psychosocial traits,such as the fear of being victimized), others may well varyas a result of a different marketplace context. For example,it is widely documented that people’s access to resourcesfor coping in such settings is at once more extensive (well-developed social networks; Narayan and Pritchett 1999)and more constrained (weaker legal protection, fewer gov-ernment programs; De Soto 2000). Even with factors com-monly presumed to be invariant, such as individual bio-physical characteristics, there may be different vulnerabilityoutcomes based on the social norms attached to those char-acteristics. For example, disabled people in societies withwell-developed public policy and systemic accessibilityinfrastructure related to their condition may perceive a dif-ferent sense of vulnerability than disabled people in poorercountries where such infrastructure is not developed. Thisdifference may further be complicated by local marketplacenorms that such people confront as consumers or producersof goods. Accordingly, scholars have called for greatereffort to understand the role of the poverty condition indeveloping countries in helping shape public policy there(Vis wanathan, Sridharan, et al. 2009). Two recent researchstreams explore this distinction in detail: research on BoPand subsistence marketplaces.

The most prominent business research on marketing tothe poor in developing countries adopts the BoP approach.Building on Prahalad’s (2005) seminal book, this workexplores the premise that serving the needs of impoverishedconsumers constitutes a viable business opportunity for

profit-driven firms (e.g., Hart 2005). Filling the gapbetween macro and micro levels, BoP research is at themeso level and focuses on organizations, with propositionsthat link business strategy and poverty alleviation. Researchon BoP advocates strategic action, executed on a platformof technology and managerial innovation on a large scale.Typically, the prescription calls for executive vision and apassion to “do well while doing good,” juxtaposing the tra-ditional yardsticks of corporate and philanthropic success.

A separate but complementary investigative stream is thesubsistence marketplaces literature (for a review, see Vis -wanathan and Sridharan 2009), which emphasizes a bottom-up orientation by analyzing the micro level of daily market-place circumstances of consumers and entrepreneurs insubsistence-level economic communities. Its emphasis on“subsistence” reflects the importance of the survivalist con-sumption needs of people with low to extremely lowincomes, while the reference to “marketplaces” alludes toits focus on the exchange transactions and relationships onwhich people on both sides of the marketing exchange relyto satisfy their livelihood needs. Research has examined theneeds, strategies, strengths, and vulnerabilities of con-sumers and the microentrepreneurs in subsistence settings(Viswanathan and Rosa 2007), as well as the potential ofmarketplace literacy interventions for ironing out the dys-functions of these environments (Viswanathan, Sridharan,et al. 2009). This literature has also used these micro-levelinsights to develop implications for product design anddevelopment (Viswanathan and Sridharan 2012) and forenterprise models that incorporate social good (e.g.,Viswanathan, Seth, et al. 2009).

In effect, this approach augments the BoP perspective of“marketing to the poor” by also considering “marketing bythe poor.” Viswanathan, Rosa, and Ruth (2010) examinehow subsistence “consumer-merchants” negotiate vendor,customer, and family relationships with activities thatengender various forms of commitment. This study high-lights the fine balance required across the three relationshipdomains and concludes that subsistence entrepreneursproactively manage the form and degree of their commit-ment across these domains to stay afloat. One of the mostimportant contributions of the subsistence marketplaces lit-erature is its delineation of the marketing capabilities oflocal entrepreneurs in impoverished market settings indeveloping countries (Viswanathan and Rosa 2007). This isimportant because such entrepreneurial activities, executedin the form of microenterprises, are unseen engines of eco-nomic growth in developing countries. Hill (2010) furtherpoints out that such indigenous marketing exchanges may beable to accomplish, in “organic and dynamic ways” (p. 602),the remarkable task of “harmonizing profit seeking andprofit sharing” (p. 606) within the subsistence ecosystem.

Despite the many valuable insights that have arisen fromthis research, there remains a pressing need to understandthe big picture. Most notably, this includes the importanttasks of observing and interpreting how these exchangescreate mutual and enduring value and keep the ubiquitousinformal economy running. Viswanathan, Rosa, and Ruth(2010) outline the roles and activities of microentrepreneursand the outcomes produced from their point of view. How-ever, research is needed to understand how their “internal


balancing system” interacts with that of consumers on theother side of the marketing exchange dyad. Viswanathan,Sridharan, and Ritchie (2010) outline how consumers copein the informal economy by leveraging their social net-works. However, further research is needed to explore hownegotiated outcomes are produced. More generally, this lit-erature does not yet specify the mechanisms through whichindividual or dyadic outcomes, skills, and assets becomeaggregated to produce larger systemic features of a market-place community or economy.

Social Capital ResearchIn attempting to build such understanding, it is useful tocross disciplines and highlight the research attention onsocial networks of the poor in developing countries that israpidly gaining currency in many social disciplines throughdiscourse on social capital (Woolcock and Narayan 2000).Loosely defined as the social norms and networks thatenable collective action in people (Woolcock and Narayan2000), social capital theory (Bourdieu 1986; Coleman1988; Portes 1998) provides a lens for understanding theinstrumental value of social resources (i.e., a person’s rela-tionships with others) to the poor. This literature offers animportant theoretical platform for our own research quest tounderstand the big picture.

Social capital theory views the social networks of peopleas capital in an economic sense, owing to their ability tofacilitate information flow and act as a store of value forfuture repayment of social obligations (Herreros 2004). Insubsistence contexts, the influence of social networks onthe events and outcomes of everyday life has been widelyacknowledged (e.g., Narayan and Pritchett 1999; Woolcock1998). Using ethnographic data from many poor countries,for example, the World Bank finds that social networkshelp people cope with problems such as voicelessness andpowerlessness by enhancing their social identity (Narayanand Petesch 2002). Along with other intangibles, such ashuman and natural capital, researchers have also acknowl-edged social networks as one of several important classes of“assets” owned by the poor in what are variously called“asset vulnerability” (Moser 1998) and “sustainable liveli-hood” (Scoones 1998) frameworks. Finally, social capitalhas figured prominently in recent prescriptions for socialpolicy in developing countries (Woolcock 1998).

Despite the popularity of the social capital construct, itsrelevance to marketplace phenomena, such as entrepreneur-ship and marketing exchange, remains understudied (for anexception, see Westlund and Bolton 2003; we alsoacknowledge the broad but informal coverage in consumerresearch of the terrain of social networks as copingavenues). A possible reason is a general predilection inmarketing theory for an atomistic view of consumers andmarket competitors—entities pursuing incremental benefitsthrough a market, acting independently of and largelyregardless of the cost to others (Frenzen and Davis 1990).Another possible reason is that the social capital literaturehas generally paid little attention to spatially bound rela-tionships, preferring instead to think of groups and net-works across time and space (Westlund and Bolton 2003).Regardless, the concept offers theoretical power in explain-

ing the emergence of informal economy structures throughmarketing interactions.

Research MethodResearch SiteWe conducted our field research in Chennai, South India,over a period of five years. The research site, both countryand specific city, offered a context that was especially wellsuited to the research problem. Given our study’s focus oninformal markets, India was an appropriate site countrybecause recent estimates suggest that the informal economyaccounts for a 60% share of net domestic product and 92%of the labor force (Sinha 2010). As one of the largest devel-oping countries in the world, India also accounts for a sig-nificant proportion of the world’s poor. We selected the cityof Chennai as the data collection site, in part because of theabundance of low-income, informal marketplace settings.With substantial in-migration during the past severaldecades (21.57% of the Chennai population in 2001; Guptaand Nair 2011), the city is now home to many “urbanenclaves” of poor, migrant consumers and entrepreneurs,living in close proximity and transacting with each other ina time- and space-bound marketplace ecosystem. Thisenabled us to observe localized marketing interactionsinfluenced heavily by space-bound social capital, a keyobjective of the study. In addition, three of this study’sauthors originally hail from Chennai, which minimized lan-guage problems and gave us deep insight into the culturalnuances operative in the city. According to Corbin andStrauss (2008), cultural familiarity enhances researcher sen-sitivity to the research context, yielding a better likelihoodof preserving the authenticity of the perspectives of thestudy informants.

Data Collection and InformantsData collection for this study occurred within the context ofa broader, long-term investigation of the subsistence popula-tion in the chosen research site. This larger investigationoriginally began with the first author conducting initial inter-views and observations with a general objective of under-standing the marketplace dimensions of subsistence living.The first author also trained two research associates torecruit study participants, conduct interviews, and transcribeand translate the interviews into English. One of these asso-ciates had previously been part of the urban subsistence-level demographic being studied, and both had developedlong-term relationships with the local community throughextensive social work. This made them uniquely sensitiveto the perspectives of our informants.

In total, 30 interviews of subsistence consumers andentrepreneurs (16 entrepreneurs; Table 1) were adminis-tered by the first author with the help of the two researchassociates. The interviews were conducted in Tamil (thelocal language), transcribed, and then translated intoEnglish for analysis. Our informants were recruited fromboth sides of the marketing exchange relationship (i.e., theywere either consumers or owners of microenterprises), pos-sessed moderately to extremely low, spanned a range of lowincome, and included both men and women. In general, the


sampling process accounted for both demographic andtheoretical considerations, as is advised for qualitativeresearch in business and marketing (Goulding 2002). It isalso worth noting that our seller-side respondents wereentrepreneurs and not wage workers, thus distinguishingour work from the vast literature on the “wage labor” ele-ment of India’s informal economy (Breman 1996). This lat-ter perspective does not allow for marketing agency byinformal entrepreneurs and thus potentially yields very dif-ferent policy prescriptions. As a metropolitan setting, Chen-nai also enabled us to draw our sample of entrepreneursfrom diverse subcultures ranging from the migrant region tothe ethnic category engaged in everyday businesses such asselling flowers and food and tailoring clothes. Yet becausevirtually all interviewees had undergone a rural–urban lifetransformation (typically in response to a life-changingevent such as marriage), there was similarity in the motiva-tions that had led them to become entrepreneurs. Invariably,the process also involved livelihood diversification andretooling of skills from previously held jobs (e.g., agricul-ture to housemaid, carpenter). This is in contrast with ruralsettings in which caste rigidities and other inequalities inthe local society can cause systematic barriers to entrepre-neurship (Epstein 2007).

Interviews were conducted at community centers near theresidences of our informants. In exchange for participating,the informants received a plastic pail (deemed useful formanaging water during times of shortfall) or equivalentmonetary compensation. Recruitment was done through alocal nonprofit organization that worked with several con-tiguous low-income communities and through community-based organizations, such as neighborhood women’s wel-fare associations. Both avenues ensured that the samplingprocess employed people with intimate knowledge of com-munities to help us reach interviewees especially suited forour research purpose.

For all our interviews, we used a “long interview”approach, beginning with broad discussions about infor-mants’ life circumstances and their evolution and then nar-rowing down to more specific inquiry about their customeror entrepreneur experiences and recent buyer–seller inter-actions (see Moustakas 1994). We developed and used aninterview protocol that served as a broad guide in terms oftopics to address, including probe questions (e.g., how busi-ness priorities changed between when first starting out andat the time of the interview, how one would attract new cus-tomers, how a consumer would overcome a confrontationalsituation). However, rather than strict adherence to this pro-tocol, the emphasis was on allowing the interviewees to telltheir stories and take the conversation in any direction theywanted. Whereas the emphasis on marketplace-related top-ics afforded focus, the purpose of the conversational free-dom offered to the interviewees was to ensure authenticity.Interviews typically lasted 45–90 minutes. AnalysisWe analyzed the data in accordance with standard guide-lines for grounded theory construction (Goulding 1998).This approach is widely prescribed for research in novel orunconventional settings, in which existing theoretical per-spectives may not be appropriate. Rather than beginning

with a hypothesis, the first step is data collection, with keypoints extracted from the text, coded, and grouped intosimilar themes. These themes then form the basis for thecreation of a theory that can then be revalidated on the phe-nomenon being studied.

Interpretation was done through repeated readings of thetranslated and transcribed interviews over an extended


period (Corbin and Strauss 2008). The process was as fol-lows. The first author conducted the initial “deep dive”into the data, contemporaneous with data collection. Thisinitial coding effort, done with few preconceptions, laid astrong platform for subsequent reinterpretations of the databecause of its detailed and in situ characteristics. Next, allthe authors undertook subsequent inquiries into the data

Table 1. Informant Background Information

Description of Entrepreneurial

Informant Activity (if Applicable) Sex Age Marital and Family Status EducationAnnalakshmi Snack sales Female 46 Married with three children No formal educationBalaraman Male 31 Married with two children No formal educationBhairavan Goldsmith Male 32 Married with two children Ninth gradeBhargavan Male 37 Married with three children Fifth gradeChamundeswari Female 28 Married with two children No formal educationCharulatha Door-to-door sales of Female 34 Married with three children Fifth grade

cleaning powder and perfumeGomathi Female 28 Married with two children Third gradeJanani Milk delivery Female 34 Married with three children Sixth gradeJayalakshmi Female 50 Mother of four children; one of Second grade

the children and husband deceasedJegadeeswari Homemade pickle sales Female 34 Married with two children Tenth gradeKala Female 38 Married with three children Fifth gradeKalpana Female 44 Mother of three children; husband Eight grade

deceasedMadhavan Male 40 Married with four children; one Eighth grade

of the children deceasedMala Daily flower delivery Female 40 Mother of four children; husband Fourth grade

left family 16 years agoMalarvizhi Female 32 Married with three children Intermittently

up to third gradeMalini Female 35 Married with three children No formal educationMuthamma Female 37 Married with three children No formal educationMythili Flower seller Female 49 Married with two children Fifth gradeNatarajan Neighborhood small Male 32 Married with two children Tenth grade

store ownerPalaniamma Sale of worship items Female 32 Married with two children Second gradeParimala Tea and food sales Female 36 Married with two children Third gradePavithra Tailor Female 32 Married with two children Sixth gradeRatna Food shop owner Female 30 Two children; husband

recently died of AIDS Second gradeSangitha Female 32 Married with two children No formal educationSelvi Food sales Female 45 Married with three children Fifth gradeShantha Female 46 Mother of two children; No formal education

husband deceasedShenbagam Wood handicraft sales Female 45 Married with two children Fifth gradeSugandhi Female 30 Married with three children Fifth gradeValli Door-to-door sales of snacks Female 35 Married with two children Eighth gradeVelamma Utensils reseller Female 40s Married with three children Fifth grade

and cares for sister’s child

spontaneously rather than on a predetermined schedule,often triggered by some particular insight an author wouldfind intriguing. This was consistent with recommendationsto be “relaxed and flexible” when interacting with qualita-tive data (Corbin and Strauss 2008). Furthermore, the useof multiple investigators was designed to meaningfullycover the analytical requirements of the grounded theoryapproach (O’Callaghan 1996). A perspective from whichto build the analysis (subsistence) and an awareness of thesubstantive issues to guide the research questions (market-place dimensions of life) were common across all authors.To complement the initial efforts of the first author, twoother authors with personal experience with the local con-text of the study joined the analysis. A final pair of authorscompleted the team, contributing specific knowledge ofparticular theoretical schools of thought (e.g., social capi-tal), albeit without the personal context experience. In theanalytic process, the various authors independently con-structed concepts and themes from data that they deemedrelevant to the research problem. Two of the authors alsodrew on their own in situ experiences from subsequent,separate projects conducted in the same location to informtheir interpretation of the data in this study. We then held afinal series of discussions to identify commonalities andconflicts among the independent interpretations of the data,particularly in reference to the initial interpretation by thefirst author. To ensure that our interpretation was reasona-bly complete and authentic, we also shared a version of thecurrent study with our research associates (who did notparticipate in the conceptual development) for reading andcommenting.

We describe our findings in the following section, usinga narrative approach (see Sandelowski 1991) in which wepresent a selection of quotes from the study’s informants,organized by theme. Amid this narration, the analysis revis-its relevant pieces of literature, in keeping with a basic tenetof grounded theory construction to treat existing theories asif they were another informant (Goulding 1998).

FindingsOur analysis suggested seven themes that characterized themarketplace experience for our informants (see Figure 1).We categorize these themes according to the specificity ofthe phenomena they describe. Our examination of thelarger marketplace context, reflecting the backdrop of sub-sistence life in which marketplace activities occur in thesesettings, revealed two essential themes: “pervasive inter-dependence” and “pervasive orality.” Within this largercontext, we also considered the interactional marketplaceenvironment, which reflects the norms governing all inter-actions, and observed two themes, which we label “interac-tional empathy” and “enduring relationships.” Finally,within this interactional environment, we characterized theessence of buyer–seller dealings, or marketplace exchange,with three themes: “buyer–seller responsiveness,” “fluidtransactions,” and “constant customization.” Next, we elab-orate on each of these themes and illustrate them withquotes drawn directly from our interviews with informants.(We use fictitious names to preserve anonymity.) Whennecessary and possible, we also include the adjacent discus-sion to provide context for the reader.


Larger Marketplace Context

Pervasive InterdependenceSocial interdependence is a condition that exists “when theoutcomes of individuals are affected by each other’sactions” (Johnson and Johnson 1989, p. 287). One of thefirst observations from our data was that informants exhib-ited an unusually high degree of interdependence in boththeir economic and noneconomic dealings. Interdependencewas so widespread that it was the presumptive norm in vir-tually any situation, encompassing not just buyers and sell-ers engaged in marketplace exchange but also family,friends, neighbors, and other members of the person’ssocial network. Given the extreme uncertainties of livingwithout the occupational guarantees afforded by a goodeducation, relying on each other had become a life strategy.Such interpersonal reliance had the potential to influence awhole range of personal outcomes, from shaping overalllivelihood options to yielding a more productive shoppingexperience.

One of our respondents, Natarajan, a 32-year-old man,described his movement through a chain of jobs during thepast ten years, each of which had been facilitated by a sit-uation in which he and another person simultaneouslyrelied on cooperation from the other. Initially, when visit-ing a shop in which his brother worked as a paidemployee, he reported how the owner’s need for someonetrustworthy landed him a casual labor position. Later,

Figure 1. Marketplaces in Subsistence: EmbeddedInteractions and Exchange

! !

"! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

! !

Elements of exchangeInteractional environmentMarketplace context

when this job became dysfunctional, he spoke of goingaway to live with a brother in another city for a fewmonths to “relax and recharge.” Upon returning to the city,he took a commuter transport job that provided much-needed economic relief, while also resolving a logisticalproblem for a friend—in other words, both partiesdepended on the other to act in a way that positivelyaffected their own outcomes. This scenario played outagain when Natarajan found himself “buying out” hislandlord’s shop to give the landlord a way out of a trickyeconomic situation. In turn, the landlord relaxed the termsof payment, which proved to be the only way Natarajancould afford this step up the economic ladder.

Other respondents reported relying on neighbors andfamily members for frequent help in executing their every-day roles as consumers and income earners. Interdepen-dence also included trusted professionals who were clearlyin a higher socioeconomic class but practitioners within thelocal community.

Ratna (30-year-old woman, food shop owner, second-gradeeducation): I would ask [the doctor] to prescribe. I can’t toleratewhen my children are affected by cough and wheezing. Theywould be shivering with high fever and crying. I am strugglingall for the children. I should take care of them so I would askthe doctor to prescribe medicines and tell him that I would buyit outside. He would prescribe within Rs.20 to Rs.30.Interviewer: Where would you buy those medicines?Ratna: Nearby there is a medical shop. I would buy it there.Interviewer: You buy at the medical shop? Okay. Are youchecking whether they are giving the same medicine prescribedby the doctor?Ratna: I would take it and show it to the doctor and say, “Doc-tor, please take a look and check whether these are the correctmedicines.” After checking, he would advise doses to be takenand timings in a day.

Ratna relied on her local doctor not only to prepare a pre-scription suited to her low income but also to verify itsaccuracy after purchase. The doctor was willing because hewas dependent on the continued patronage of low-incomepatients in the community, despite being from a differentsocioeconomic sphere. The pharmacist was also a memberof the circle of interdependence, in that his professionallegitimacy hinged on the doctor’s approval of the medicineshe dispensed. It is a cooperative system, which Deutsch(1962) likens to a relay race, in which the doctor expendseffort (by inspecting the pharmacist’s dispensation of medi-cines) to ensure compliance by the pharmacist, becauseboth depend on the patronage of individual patients for theireconomic well-being.

In this case, it is likely that Ratna herself was unaware ofher power to influence their fortunes. However, other entre-preneur respondents were keenly aware of their interdepen-dent status with their local clientele. They reported oftenemploying tactics to maintain and leverage that interdepen-dence. Some noted that, though they would extend credit tospecific customers in their times of need, they would alsodemand immediate repayment if a customer who owedmoney bought elsewhere. A consumer corroborated thisinference.


Yes, we cannot buy there [the large reseller] after buying here[the neighborhood retailer who offers her credit]. We should buyin the same shop. We can get acquainted if we buy in the sameshop. If we skip this shop without buying here and go to thatshop, this shop owner would get angry. If I skip them and don’tbuy regularly, he would be upset. So, we buy in the same shop.(Chamundeswari, 28-year-old woman, no formal education)We noted that the consumer was not without power in

this interdependent relationship. In the extreme, she couldcovertly move out of the neighborhood without making herrepayment. More typically, she could engage in widespreadword of mouth about the unfairness of the seller’s creditterms, thereby influencing his reputation—perhaps his mostvaluable asset.

In summary, all parties seemed keenly aware of theneed to channel individual efforts toward a common goalof economic survival. Thus, it is not dependence (i.e., theoutcomes of one person affected by the actions of a sec-ond, but not vice versa) or independence (i.e., one per-son’s outcomes unaffected by the actions of others) butrather mutual interdependence (Johnson and Johnson1989) that offers the best framework for interpreting mar-keting exchange in the subsistence context. Viswanathan,Rosa, and Ruth (2010) present similar observations, but ofspecific interdependencies built up as outcomes of “con-tinuance commitment” demonstrated by individual buyersor sellers. Our observations suggest that this is a pervasivequality of the marketplace as a whole (i.e., almost a cul-ture of using and relying on an interdependent circle formarketing interactions, as in Ratna’s example). Most peo-ple in the system seem to have both the means and themotivation to influence those around them. In the end,vendors survive only if customers are able and willing tobuy from them, while customers’ daily lives rely on thepresence of local vendors who can respond and adapt totheir needs. This is different from competitive situationsin conventional marketing contexts, in which retailers tryto extract maximum profit from customers (because doingso does not jeopardize most customers’ financial viability)and customers strive to maximize benefits at minimumcost (because there is a broad choice of retailers and a rea-sonable substitute is always available if one retailer fails).Conceptually, marketing scholars have noted that inter-dependence is important to achieve a stable and mutuallyoriented economic system (Achrol 1997). However, ingeneral, these discussions of interdependence in formalmarketing systems have been limited to financial and/orknowledge dimensions and have not encompassed theintense and pervasive variety we describe. Pervasive inter-dependence serves as a systemic lever that participantscan use within a spatially bound context to overcome indi-vidual vulnerabilities.Pervasive OralityCommunication is a basic requirement of interpersonalexchange. In our study setting, low levels of literacy meantthat spoken language, and particularly the local vernacular,was the communication mode of choice to navigate market-place exchanges. This is consistent with the concept of“orality,” or the predominance of oral-verbal literacy thatexists in some cultures (Ong 2002). In general, orality is

understood as a cultural expression of groups that aresocially and politically dominated by other groups that havegained ascendancy using other formal means of communi-cation (e.g., texts, policy documents, contracts). Our studycontext had a dominant oral tradition, in which literacytended to be an unfamiliar experience, and reading andwriting tended to be the preserve of the literate. Therefore,the spoken word predominated and, combined with aunique form of vernacular, emerged to create a culture ofvernacular, oral-verbal literacy, which permeated all localmarketplace exchange situations. Furthermore, India’scolonial heritage has made English the language of social,political, and economic advantage, an advantage largelyunavailable to the respondents in our study (with the excep-tion of a few practical words or phrases). Accordingly, pro-ficiency in the local mother tongue Tamil meant that commu-nication opportunities were spatially bound, and ven turingoutside these boundaries caused difficulties. One of therespondents spoke of the dangers of visiting establishmentsbelonging outside the community of orality, even if only inunforeseen circumstances.

Suppose we visit a shop for something urgent, they speak inEnglish; we have difficulty if we could not understand that. Wecan adjust if they speak in Tamil, when they speak in English,we have a kind of feeling that “oh, we don’t have education,and we can’t understand what they say.” (Kala, 38-year-oldwoman, fifth-grade education)In contrast, even marketplace interactions with higher

economic classes were feasible and productive as long asthe exchange occurred within a spatially bound communityand the exchange partner also communicated in Tamil. Aflower seller explained how she deftly handled a potentiallydamaging interaction featuring an irate customer with ver-bal abilities.

That is all depending on our talk and our approach. Few mayask suddenly, “why are you bring[ing] the flower for this time,when we asked for 6 o’clock, you are bringing at 8 o’clock.”By the time we should say with a smile that, “what to do, itbecame late after visiting the market, knitting the flowers andrushing to deliveries. I was unable to come on time. Even theboy was not sleeping. I would have sent through him, if hewould have arrived.” As we respond very politely and we areconvincing with nice talk and smiling, without anger, theywould get into a better mood. (Mala, 40-year-old woman,fourth-grade education)In this case, orality served as a cultural strategy of over-

coming vulnerability through the myriad discriminationsthat are possible in the interaction of hierarchically differenteconomic classes. Overall, the vernacular oral-verbal lit-eracy of subsistence marketplace participants frequentlyafforded them instrumental value from which to leveragemarketplace transactions at least somewhat in their favordespite the limitations of textual and English literacy.

I have no literacy. However, I would learn these things. If you sayany accounts, I would calculate orally and tell you the answer.They would say that I don’t know and I don’t know anything. ButI would do my level best. I have little difficulties to spell out thecalculations. I don’t know [how] to read. I could write my signa-ture alone. If I say that I am an illiterate, none would believe it.(Jayalakshmi, 50-year-old woman, second-grade education)


The predominance of oral communication also heavilyinfluenced negotiation tactics. Because contracts betweenbuyers and sellers were made without written agreement,exchange partners were forced to rely on the memories ofindividuals. Accordingly, offers tended to be accepted orrejected on the spot, and sellers who extended credit tendedto collect the receivable relatively quickly, to avoid prob-lems arising from forgetting and inaccurate recall.

Reliance on oral, rather than written, communicationalso created some challenges. Financial dealings wereconstrained among individuals who were unable to per-form complex calculations or keep extensive accounts.However, this did not necessarily translate into an inabil-ity to perform everyday calculations. Respondents wholacked formal training in mathematics or writing used anoral system (commonly referred to in the local market-place as “mouth arithmetic”) to perform calculations bytalking their way through the process.

I can say the income and expenses orally. I could say theincome received, expenditure incurred, and balance to be paidor received, all through oral calculations. I couldn’t keep it inwriting. It is difficult for me. It is good to keep in writing,which could be useful to refer at any time. Yes, it is one of thedifficulties to me. (Muthamma, 37-year-old woman, no formaleducation)

Some of our respondents seemed particularly fearful ofsituations in which their literacy shortcomings could beexposed or leave them vulnerable. They talked about steer-ing clear of conversations with unacquainted shopkeepersfor fear of being asked questions they could not answer,avoiding making demands because they did not know theirrights, and avoiding unfamiliar products because they didnot understand how they were priced or feared they wouldbe unaffordable. In other words, the visible stigma stem-ming from low literacy became temporarily concealable bylimiting their scope of economic activities or giving up theirrights, even though this perpetuated the stigma.

Strong oral-verbal abilities can flourish in some popula-tions that are low literate and socially marginalized. Forexample, a thriving oral-verbal tradition is considered inte-gral to African American culture and the maintenance ofcohesiveness in these communities (Harris, Kamhi, andPollock 2001). In other words, it can be a useful lever in amarketplace context with consumption restrictions. Spokenlanguage is generally simpler than writing in content, struc-ture, and word choice but concurrently more complex inhow it conveys meaning, aided by nonverbal cues, such asgestures, intonation, volume, pitch, and pauses, and visualcues, such as appearance and movement (Liberman 1995).Oral communication also invites creativity in the sound,rhythm, and memorability of utterances (Goody 1987). Theability to use spoken language colorfully, persuasively, andeven playfully is a useful marketplace interaction tool.

In summary, the orality we observed seemed to constitutea unique form of literacy that was neither correlated withnor subjugate to text-based literacy (Ong 2002). From amarketing perspective, this underscores the importance of“building dialogical foundations in marketing” (Varey2003, p. 273). In conventional marketing environments inwhich the written word has a more central role, marketing

efforts by sellers have typically been unilateral and infor-mation driven. However, our data suggest that people in asubsistence economy who excel most in oral-verbal literacyexperience the greatest discomfort when confronted bywritten communications. Their frustration arises from diffi-culty with reading but is perhaps accentuated because theirfacility and flair with spoken language stands at odds withtheir struggles with the written word. The result, as the pre-vious quotes demonstrate, is often a feeling of powerless-ness and an enhanced sense of psychological distance frompeople and stores in which reading and writing areinvolved.

Interactional EnvironmentEmbedded within the marketplace context are two themesthat characterize how interactions play out in day-to-daycommercial activities: interactional empathy and enduringrelationships (Figure 1). We describe both of these, in turn,next.Interactional EmpathyA central feature of interaction in the subsistence setting weobserved was its strong emphasis on the human dimensionand the needs and circumstances of each person.

Business is not that important but first, the human being is veryimportant….“How are you now?” You should inquire aboutme. “What happened, you usually speak freely but appear dullnow.” You should ask me in this manner and I should ask youin return…. This comes first, money comes next. Yes, first weshould approach each other with love and care like our rela-tives. (Mythili, 49-year-old woman, flower seller, fifth-gradeeducation)

This quote reflects the high degree of consideration that sell-ers often give to their customers’ daily life circumstances.Focusing on their role as people, and not just economicactors, helps them constructively channel their interdepen-dence, as the abstract rules that typify formal marketplacestake a back seat. In contrast with developed markets, theinformants in our study indicated that buyer–seller negotia-tions regularly included references to the need for each partyto make a living and survive. Among the buyers we inter-viewed, a common refrain was “the seller needs to make aliving as well”—a sentiment that contrasts sharply with thezero-sum-game perspective of conventional buyer–sellerdealings. Sellers, for their part, commonly varied prices inresponse to their acute understanding of the specific life cir-cumstances of their customers.

If you ask me how we fix the rate…. One of my customers isfrom a poor family and the other one is from a rich family [theinformant is speaking in relative terms because her clientele areof low-income background]. I charge Rs.22 from the customerswho belong to middle-income families, charge Rs.25 fromthose who come from rich families and charge Rs.20 fromthose poor people who are attending jobs like housemaid …and getting low wages. (Pavithra, 32-year-old woman, tailor,sixth-grade education)Buyers told us that when a seller charged prices that

seemed unreasonably high, they would frequently remindhim or her of the need for everyone to survive. Conversely,sellers reported that when customers asked for additional


quantities, they would often explain business costs and theproblems involved in providing these extras in terms oftheir personal situation. One instance was reported by aseller dealing with customers who failed to pay for already-consumed products/services.

Some people would come and order and after having the foodthey would say that they have no money and would pay ittomorrow or in the evening. It would frustrate me. I would tellthem, “Don’t come to eat on credit. I am not rich, I can’t affordto extend credit. After all, I am solely depending on my busi-ness. Hereafter don’t come for credit.” (Ratna, 30-year-oldwoman, food shop owner, second-grade education)Having uttered some angry statements to make her per-

sonal situation clear to her customers, this seller reportedsubsequently allowing them to continue in the economicrelationship, in essence “forgiving” them. In anotherinstance, when asked if she checked prices before buying,one informant (a customer of a neighborhood retail store)explained that it would not be right to inquire about theprice of a product with a seller who had helped her in timesof need. She wondered aloud how the seller “would feel”about such behavior.

Such explicit use of understanding, consideration, andforgiveness at a human level in marketplace exchange isreflective of considerable empathy. Empathy involves Per-son A viewing Person B’s situation from the perspective ofB, allowing A to feel as if the situation is personally affect-ing him or her rather than someone else (Basil, Ridgway,and Basil 2008). Empathy has been extensively studied inthe psychological literature (e.g., Toi and Batson 1982) andis directly applicable to marketing exchange relationships.Yet, although empathy in relationship marketing contexts(e.g., sales, business-to-business, international trading orpartnering situations) has been widely assumed to improvecooperation and enable buyers to feel more participative inthe exchange process (Evans and Laskin 1994), empiricalevidence of this within formal marketing systems has beendifficult to detect. One explanation is that the large socialdistance that can occur between buyer and seller in a formalsystem inhibits empathy. Studies have shown that for empa-thy to occur, there must be psychic and social proximitybetween actors (Basil, Ridgway, and Basil 2008; Conwayand Swift 2000). Therefore, empathy may be more commonin subsistence environments in which marketplace actors areheavily invested in their common futures and simultane-ously socially isolated from other formal marketing systems.

The central role of empathy in subsistence marketplacedealings does not imply a benign environment. Rather, theopposite is true. Explicitly acknowledging the person’s lifecircumstances in the process of navigating the marketplacebecomes an overt part of the negotiation. In this sense, thehuman and the economic are blurred.Enduring RelationshipsThe other hallmark of the interactional environment in thesubsistence marketplaces of South India is the emphasisthat buyers and sellers place on cultivating long-term rela-tionships. As the lifetime value of loyal customers multi-plies their economic importance to the seller (Jain andSingh 2002) and loyalty to a seller reduces choices and,

thus, the costs of choosing, for a consumer (Sheth and Par-vatiyar 1995), this is grounded in familiar economic logic.For many of our informants, the potential need for credit intimes of hardship was a powerful motivator of customerloyalty to neighborhood retailers (see also Viswanathan,Rosa, and Ruth 2010). Unless the buyer exhibited contin-ued patronage, the seller would tend to withdraw credit andpress for repayment of loans, an untenable situation for con-sumers when navigating phases of extreme vulnerability.Conversely, because sellers also required a stable source ofincome to subsist and survive, they worked hard to beresponsive to and maintain a loyal clientele.

A few good customers are among the families who are livingin rented houses. They would pay cash, buy more quantityand buy good items regularly. Suddenly they may not havecash, they would ask credit for Rs.50 and assure that theywould settle the bill on the first date of the coming month.Like that, first I would test few customers by providing creditfor Rs.100 or Rs.200. They too would settle the bill promptlyas they assured. They would become our regular customergradually and we would provide them on credit. (Natarajan,32-year-old man, neighborhood small store owner, tenth-grade education)The similarity to conventional markets ends, however,

with the realization that strategies and studies in those con-texts mainly emphasize financial loyalty (e.g., Berry 1995).In the subsistence marketplace we observed, social inter-dependence of the actors seemed to motivate the cultivationof more multifaceted, longer-term relationships. Thus, whatdevelops is relationship marketing at a deeper, social level(for a discussion of financial, structural, and social levels ofrelationship marketing, see Berry 1995).

In addition to fostering trust and the economic value ofindividual customers, long-term relationships can impartspecific transactional advantages, such as increased sellerwillingness to accept product returns, extend credit, andoffer better service and higher-quality goods. Our inter-views suggested that this brought about both tangible (i.e.,economic) and intangible (i.e., psychological) benefits forthe parties involved.

We will not change the shop. We will buy in a single shop. Thethings in this shop will be good. We will buy the things contin-uously in the same shop. If there are any differences in theshop, we will return it to them. We will boldly go and ask asthese things are not good and up to expectations. He will imme-diately change the item…. Even when we open it and see if thegoods are not good, immediately we will put in a bag and takeit to the shop and give it back to him. For me, he will give thebest goods after weighing. I would say, “I am buying it fromyou continuously, how can you give me this?”… I have notbeen cheated by anyone so far. (Kalpana, 44-year-old woman,eight-grade education)These advantages need to be viewed in the context of

their significance to be fully appreciated. For example, thefollowing comment is anchored on the common practice ofdeliberate improper weighing of commodity products.

If you buy regularly, they would give extra and won’t miss theweight [weigh improperly]. If you do business with a singleshop they would give extra and won’t make any mistake in theweight. (Mala, 40-year-old woman, daily flower delivery,fourth-grade education)


Sometimes, the trust engendered by long-term relationshipscan be a strong driving factor because it reduces the per-ceived need for consumers to carefully scrutinize productinformation, thus countering the potential negative effectsof their low literacy.

We visit the same doctor…. We get cured when he administersthe injections, and we get quick remedy. He is a kind of luckyand auspicious person. We are cured if we get treatment fromhim, hence we visit him. Suppose it is other doctors, they wouldprescribe costly medicines for one hundred rupees and ask us tovisit again and again. He won’t do this; he would administer aninjection and tell us that it would be cured in one visit. (Kala,38-year-old woman, fifth-grade education)These same relationships can provide a basis for

exploitation and abuse as well, emphasizing how the effectsof social networks are not necessarily benign. In this regard,our informants reported how public humiliation is regularlyemployed to enforce repayment of noncollateral loans. Forexample, Shantha, a 46-year-old woman with no formaleducation related an incident in which a moneylender, pre-viously a friend of her husband’s, used expletives loudly toenforce repayment of a loan.

Elements of ExchangeWe have described both the larger context and the interac-tional environment that characterize the subsistence market-place. Next, we discuss three themes that describe the spe-cific interactions through which marketplace exchangeoccurs: the responsiveness of buyers and sellers, the fluidityof transactions, and the constant demand for customization(Figure 1).Buyer–Seller ResponsivenessIn a marketplace frequented by one-to-one interactions,sellers are well acquainted with their customers’ prefer-ences. Retailers are usually small, locally owned shops thatserve a limited number of regular customers with whomthey interact personally. As local residents, they also bene-fit from easy access to current word-of-mouth informationabout their customers. Their customer interactions arehighly responsive to individual circumstances, whichenables them to offer a product-and-service mix that iscarefully tailored to local situations.

Since they prefer that particular brand, I buy and keep it instock. I would arrange it immediately. Suppose I noticed in themorning that it is not available in my shop, I would rush imme-diately and make arrangements to have the parcel ready withinthe evening. Since the rate is given (competitive) … customers,too, feel comfortable that “Okay, they are either stocking every-thing or arranging it within the evening.” So, customers…won’t go out of the area to buy, they would go only if wedon’t have stock. (Natarajan, 32-year-old man, neighborhoodsmall store owner, tenth-grade education) Such responsiveness—even if it involves stocking a

product for just one consumer—is central in cultivating atrusting relationship befitting one’s position as the con-sumer’s primary retailer. Responsiveness, however, is notmerely about proactive trust building but also about reac-tive trust restoring. Because product complaints can beraised immediately and directly, the seller faces significant

pressure to manage and address them. Being responsivehelps signal and/or restore credibility.

Interviewer: You buy rice, dhal, and so on, from the shop. Howdo you check quality?Ratna (30-year-old woman, food shop owner, second-gradeeducation): We can’t find out by looking. We would find out atthe time of cooking. In the case of rice, the quality can be deter-mined. While cooking, it may look very nice, but it may besomething different after filtering the boiled water. In such acase, we would inform the shop owner that the rice was notgood. We would question him about the quality he supplied.“Please change the rice.” He would say that the rice bag waschanged today and that we could buy another variety of rice.

As the previous quotes about relationships and interdepen-dence illustrate, such responsiveness is from both sides ofthe exchange because buyers strive to be responsive to sell-ers as well.Fluid TransactionsA striking finding of our research was the fluidity of trans-action terms, in the sense that they were neither standard-ized across people nor fixed over time. This was perhapsmost aptly demonstrated in the frequent potential for theadjustment of product quantity (i.e., weight) by sellers onthe spot unobserved by customers, in response to the pricenegotiated.

If we go and ask them [shopkeepers about weighing], theywould say, “No, no … it is the same price. I would have giventhem [other customers] a bit more quantity, that is why I hadquoted them a slightly higher price. But, I would have givenyou a little less in weight, hence, I had given it to you for alower price.” (Chamundeswari, 28-year-old woman, no formaleducation)The weight depends on the weighing method. You can do tricks.The person who weighs the scale can keep the fingers open. Ifthey push a finger to the right side it [that side] would fall down.The innocent would think that they are getting more than theweight and the amount of supply is high and accept it. The expe-rienced person should see the top of the scale. Mala, 40-year-oldwoman, daily flower delivery, fourth-grade education)Compared with those in more affluent societies, subsis-

tence consumers buy a greater proportion of their food asraw materials rather than finished or packaged goods. Thismakes transaction fluidity even more important because itapplies to product quality as well as quantity. In times ofhigh costs, for example, sellers will often substitute alower-quality generic item for their usual offering.Constant CustomizationA fundamental tension exists between the demand for cus-tomization and the pressure to treat everyone the same. Ifthe seller accedes to a buyer’s request, the offer is acceptedquietly—a nonverbal signal to the buyer to keep the dis-counted exchange confidential, lest it be withdrawn. Thefollowing exchange illustrates the nuances involved inagreeing to replace one item with another but not renegoti-ating the price or giving a refund.

Velamma (40-year-old woman, utensils reseller, fifth-gradeeducation): Suppose they don’t want this item, I would agree toexchange it with another item, but the price won’t be costlier.


The item can be a different one as they wish. But no differencein the price of the item.Interviewer: Would you give them the costlier item? Could yougive the item worth Rs.300 because they come and questionyou?Velamma: We can’t encourage this, others may follow it. Theymay go and announce to others that she got the money backfrom the chit woman [herself]. So the others would follow suit.Hence, I would give the material only. Whatever item, they canask, but no money. I would not give the money back.Sellers manage word of mouth by ensuring that they are

seen as adhering to a single price and not writing off loans.They also use the fluid nature of transactions to their advan-tage—charging higher prices for credit purchases, replacinga lower-quality generic product for a higher-quality one,and weighing differently. This reflects the idea of multiplerealities in marketplace exchange relationships rather thanhomogenizing their content.

DiscussionThe research described herein was motivated by a need tounderstand how marketing interactions occur in subsistencemarketplaces and, more pragmatically, the lessons for moreeffective public policy that can be drawn from theseinsights. Yet, when we attempted to answer these questions,two others arose: What does it mean for a community to belargely excluded from the formal economy? and What doesthis imply for the nature of life in general and marketingexchange in particular? We begin our discussion with theseimportant issues.

The Informal Economy and Marketing ExchangeAlthough we interviewed a broad range of people, all ourinformants lived their lives for the most part outside theofficial economic system. They typically had little to noconventional stores of wealth, lacked the credentials toobtain a formal bank loan, and rarely interacted with peoplebeyond their own community. Yet being excluded fromthese things did not translate into helplessness; rather, ourinformants used available resources to create alternativesfor the objects and systems they lacked. In place of a formalcredit history, interactions with specific merchants formedthe basis for reputation formation and loan granting. Ratherthan saving money as a financial hedge against difficult cir-cumstances, they cultivated relationships with family andfriends who could help them in their times of need. Finally,instead of one-dimensional relationships with large num-bers of people, the informants developed deep relationshipswith a smaller group of peers. In this context, entrepreneur-ship acted not only as a source of income but also as a foun-dation for relationships and social networks that themselvesbecame resources. Because of the predominance of thesemicro businesses over larger enterprises, people often findthemselves in the role of consumer one moment and of ven-dor the next, thus blurring the line between marketingexchange and other forms of interaction.

In formal economies, marketing exchange follows rulesthat are usually explicit and consistently applied. Transac-tions are frequently conducted between social aggregates(e.g., organizations) rather than individuals and governed

by institutions whose guidelines make these transactionshighly predictable. Our interviews revealed that informalsystems are not rule free as might be expected; rather, therules tend to be tacit and more flexible. For example, termsof individual money-lending arrangements were based onthe relationship between lender and borrower, in conjunc-tion with the life circumstances of both parties, rather thanany kind of fixed policy. This is understandable when weconsider (1) the difficulty of applying consistent termsacross loans without a standardized accounting system; (2) that subsistence marketplaces provide much richersocial information on which to base such decisions; and (3)that absent an effective legal system, social sanctions arelenders’ main tool to enforce repayment, making socialinformation the best predictor of creditworthiness. Transac-tions are conducted through direct social interactionbetween people, and market expectations are informedmainly by the nature of the relationship between marketactors. The literature on social exchange describes suchtransactions as “direct exchange,” especially suitable forsmall social systems, in which interactions occur face-to-face, remain flexible and informal, and are guided by ashared general understanding of what is acceptable behav-ior (Blau 1964). Such discussions of direct exchange arerare in the marketing literature, which is mostly based onthe study of formal economies.

In terms of mechanisms for consumers to cope withpoverty and vulnerability, the people we interviewed reliedmainly on social skills rather than technical capabilities. Ininformal economies, in which legal protections are weak,transaction terms are fluid, negotiation is the basis for mar-keting exchange, and the most critical assets are social influ-ence and information about the exchange partner. Being ableto relate socially not only provides an advantage in one-to-one negotiations but also helps form personal relationshipsand access social networks. This contrasts with formal sys-tems in which social skills, though obviously an asset, areless critical to marketplace coping than basic literacy,numeracy, and information-processing ability. Overall, anintriguing aspect of our research is the strong contrast itoffers to the perception of developing country subsistenceconsumers as helpless, parasitic, and overwhelmed by theirenvironment. With few exceptions, the people we spoke towere resilient, resourceful, and motivated to make a betterlife for themselves and their families. Although they typi-cally lacked skills, most worked hard to cope and find waysto overcome the challenges posed by poverty. This was evi-denced by their general willingness to start their own busi-nesses, leverage social networks to gain access to neededexpertise and information, and negotiate creative solutionsto enable both sides of the transaction to meet their needs.The informal economy reflects marketing ingenuity in theface of great hardship.

Implications for Public PolicyInsights into buyer–seller interaction in subsistence market-places are important for the contributions they make tounderstanding poverty in developing countries. Practicallyspeaking, however, it is important to ask what this researchindicates about (1) what can be done to alleviate poverty


and vulnerability in such environments and (2) who shoulddirect the effort. The determination and adaptability ofinformal economy actors augurs well for poverty alleviationefforts.

We hold the view that governments, as servants of thepeople, bear primary responsibility for developing publicpolicy to address the needs of people living in subsistence.As such, a key question revolves around what governmentpolicy makers can do to empower their poorest citizens,engage the informal economy, and cultivate context-sensitive solutions to meet the needs of local communities.Another critical issue centers on the process by which suchpolicy can and should be developed. Given our philosophi-cal inclination toward bottom-up approaches, it makessense for policy makers to begin by understanding the livesof the people they seek to help.

Although governments need to take the lead in develop-ing and guiding poverty alleviation policy, they are not theonly players in the process. Businesses (those in the formaleconomy) also must deepen their understanding of subsis-tence marketplaces to develop economically and sociallyprofitable ways to engage these markets. Likewise, non-governmental organizations working with the poor in devel-oping countries must have a clearer sense of their role in theprocess—specifically, how to support the efforts of govern-ment by helping implement policy in the field. In thatregard, we next identify four broad recommendations thatemerged from our research, which can help inform policymaking and offer specific direction to governments andmanagers responsible for designing and implementing it.Empowering People in SubsistenceIn many countries, even as poverty-related public policyhas invested heavily in health, education, and infrastructure,it continues to attract criticism of not “empowering” peopleto achieve self-sufficiency (Lopes and Theisohn 2003). Onereason may be that little attention has been paid to cultivat-ing marketplace skills. In contrast, a key benefit of ourframework lies in its potential to reveal skills that con-sumers use to cope successfully with the demands of sub-sistence marketplaces. The implication is that investing inmarketplace literacy education would be a useful way forpublic policy to help people overcome shortcomings andincrease their own capacity for economic welfare and inde-pendence (Viswanathan, Sridharan, et al. 2009).

In developed contexts, in which there is an abundance ofchoice, desirable consumer skills consist mainly of the lit-eracy and numeracy needed to make sense of advertising,calculate discounts, and identify the best value for money(Wallendorf 2001). Our examination suggests that the skillsemployed to successfully navigate subsistence environ-ments are quite different, such as negotiating, recallingobligations, making meaningful promises, asking for andaccepting concessions, and so on. From the standpoint ofthe policy maker, acknowledging and adapting to theserequired skills in marketplace literacy programs pose newchallenges. However, the features of the marketplace wedescribe herein can facilitate policy implementation innovel ways. If the interactive nature of the marketplace,along with its constituent elements of trust, networks,empathy, and altruism, became a policy goal in and of

itself, the interconnectedness between people could serve asa grassroots conduit for the communication and acceptanceof public policy. Support and investment in nourishingthese elements and inhibiting destructive ones, such asdeception and abuse, can improve the effectiveness of thesubsistence marketplace. However, pervasive orality maypose unique challenges for communication of public policy.In an oral-verbal marketplace, it could be more difficult toensure completeness, accuracy, timeliness, and consistencyof information presented by policy makers. This suggeststhat public policy practitioners should employ an iterativeprocess of communication monitoring to ensure informa-tion quality and minimize information distortion. Moreimportant, our findings indicate that communication appre-hension stems not only from struggles with written lan-guage but also from worries about marketplace literacy(e.g., counting, negotiation skills; Viswanathan, Sridharan,et al. 2009), resulting in a contagion effect on oral commu-nication. To make a difference in the subsistence market-place, public policy must take its cue from what the playersin this setting actually do, rather than from preconceivednotions of what they “should” do, and engage in meaningfultrust building with these players by consulting with them onall aspects of the process, from program design to evalua-tion to adjustment and redesign. Doing so would requirepolicy makers and practitioners to be empathetic listenersand could culminate in a collaborative relationship betweenpolicy practitioners and the poor capable of enlisting a highdegree of engagement and support from the commons.Embracing Emergent SolutionsThe subsistence marketplace we describe has a distinctlysurvivalist flavor, as people place their immediate needsahead of what might be characterized as their long-terminterests. This is consistent with statistics showing thatdeveloping countries, such as India, have one of the highestproportions of necessity entrepreneurs—that is, peoplepushed into entrepreneurship because other work optionsare closed to them (8 of every 100 working-age Indianadults are entrepreneurs; Reynolds et al. 2001). Reportsalso indicate that survivalist entrepreneurship grows in con-ditions in which governments fail to emphasize economicsecurity (Reynolds et al. 2001). For example, the Indianpolicy solution to poverty has centered on “fixing” distribu-tion channels to enhance access to essential services, suchas education, finance, and health care. Yet this is insuffi-cient for environments with unpredictable incomes, non-tradable assets, low literacy levels, and geographical dislo-cation. Centrally designed policies based on standardizationand replication are rule based and may not adequatelyleverage preexisting marketplace relationships. The subsis-tence marketplace in our study, however, with a large num-ber of micro enterprises that collectively met the needs ofthe poor, represents an emergent solution to a local prob-lem. The characteristics outlined in our framework enablethe informal microenterprises to mitigate risk and meetbasic needs on a sustained basis in a severely constrainedcontext.

This is an issue that often goes unacknowledged by for-mal business models. A case in point is microfinance.Despite its popularity as a financial solution for the poor,


microfinance has not been able to replace the informal lend-ing sector. Indeed, informal moneylenders have been shownto thrive precisely in regions in which microfinance institu-tions have established apparently successful lending pro-grams (Jain and Mansuri 2003). Research reveals oneexplanation. Because microfinance institutions impose theirwell-documented “regularly scheduled, tightly structuredinstallment payments,” the informal lenders, who are betterinformed of the local borrowers’ personal circumstances,are able to step in and offer informal loans, which borrow-ers then use to repay their debt.

From a public policy standpoint, it would be important toencourage such site-specific, nonstandardized solutions toproblems. One self-evolved mechanism common amongour informants—namely, chit funds—provides cash flow tomembers in times of emergency. Though less efficient thanformal financing models, it meets a very important need—cash in hand when all other options have been depleted.The Chit Fund Act of India recognizes and promotes thislargely informal activity because nonlicensing of suchenterprises of the poor would otherwise leave them vulnera-ble to exploitation (Tsai 2004). It is an example of policythat has worked, despite going against received wisdom ofcomparing the informal economy with the formal sectorand judging its output as inferior on purely economicvariables, such as productivity and growth. Thus, we con-tend that public policy measures that acknowledge thevalue and innovations within the emergent environment ofsubsistence marketplaces and create an enabling policyenvironment can go a long way in reducing uncertaintiesand promoting growth.Engaging the Informal EconomyThe subsistence marketplace we describe herein is an infor-mal economy. Relevant literature has drawn attention to theexistence of a significant body of “income-earning activi-ties that are not regulated by the state in social environ-ments where similar activities are regulated” (Castells andPortes 1989, p. 12). The informal economy consists mainlyof small, unincorporated businesses (i.e., fewer than 20employees, but often none) that are established by individu-als or households primarily to generate survival income(Harriss-White 2002). In countries such as India, it has his-torically been able to meet the needs of the poor even in theface of failing institutional efforts by government and busi-ness. A key reason is the ability to offer a locally optimalresponse for addressing the unique set of marketplace chal-lenges produced by subsistence conditions. Our frameworkdemonstrates that there are countless contextual realities;the unique characteristics of the informal sector position itto serve the poor effectively.

Driven by beliefs that the informal sector survivesbecause of factors such as tax evasion and labor exploita-tion, received wisdom urges its replacement by the formalsector as a means of economic development (Hart 1973).However, the notion that industrialized economic growthshould be the policy objective, and that poverty alleviationwill occur through a trickle-down effect, seems debatablegiven the expansion of the informal sector even in coun-tries with a high rate of economic growth (Dasgupta andSingh 2005). Because most informal sector microenter-

srinivas

Highlight

prises are small and operate within a local economy, theylack the resources and scale to undertake activities thatwould bring about enhanced economic outcomes. A solu-tion may be to establish linkages with formal sector entitiesrather than replace them entirely with the latter. Such link-ages should strive to empower subsistence marketplacesrather than impose what is predetermined to be good forthem or for society. Formal sector organizations wouldbenefit from the characteristics of microenterprises, suchas fluidity, constant customization, and enduring relation-ships, which are operationally difficult for them to emu-late. In addition, they would benefit from the social capitalreadily possessed in such economies. Conversely, theinformal sector entity would gain technology, qualityassurance, and expanded market access—all factors thatwould be difficult to obtain otherwise given their scale andresources. Also from a social capital perspective, the infor-mal sector could gain access to “bridges” to other formal orinformal economies through the reach of the formal sector.Such exchanges of social capital have been argued to bemutually beneficial to formal and subsistence enterprises.For example, by linking with a large number of microretailers and offering them technology support in the formof pushcarts and coolers, Coca-Cola has been able to sup-port the informal enterprises in enhancing their businesswhile increasing its own sales by leveraging the social rela-tionships and flexibility offered to consumers (Nelson,Ishikawa, and Geaneotes 2009).Bottom-Up Orientation to Public PolicyThe policy implications we outlined previously togetherimply a bottom-up orientation to developing policy. Guidedby a marketing mind-set, our research has examined mar-ketplace interactions at a micro level. If policy makers wereto begin from this level and then move up, their policieswould be more grounded in the reality subsistence popula-tions face. Such policies would also be less likely to fail,because they would leverage the one-to-one marketplacerather than attempting to supplant it. For example, a rule-based approach is premised on assumptions and relativecertainties about institutions and contexts. In subsistencecontexts, however, fluid and uncertain outcomes are thenorm, as we illustrate with our data. Bottom-up policy mak-ing can also be justified through the tenets of marketing asexchange discussed previously, as the exchange process insocieties can operate at two levels of complexity—directand indirect (e.g., Blau 1964; Homans 1958). The frame-work we present herein accentuates this direct form ofsocial exchange, often overlooked in the formulation ofmodern marketing systems and business policy.

It is also true that most social science research on policyhas taken a rational decision-making approach by treatingpoverty as an issue that can be resolved by improving thedesign of programs, objective collection of data, and betterapplication of technical decisions (Schram 1995). In con-trast, our framework argues for marketing-oriented publicpolicy that is more democratic (i.e., involving businesses,communities, and nongovernmental organizations), morecontextually oriented (i.e., observing the specific marketingexchange mechanisms that operate locally and adjusting tothem), and more interpretive.


Implications for Theory Development

At the level of theory, a key contribution of our study ofbuyer–seller interactions is its resonance with work in thearea of social capital. The study thus helps establish therelevance of social capital for marketing theory and market-ing phenomena for social capital theory. Whereas socialcapital has generally relied on a collective level of analysis,our seven themes help unpack its creation at the micro levelof the marketplace and its instrumentality in establishinginformality at the macro level of the economy. In thisregard, although the microenterprises we observed relied onsocial capital, it was not so much from the preexisting link-ages the informants might have had (e.g., community orclan in native villages) but rather was space bound anddeveloped in the locality through marketplace interactions.

This is illustrated by buyer–seller responsiveness, a mar-ketplace phenomenon that engenders feelings of gratitude,respect, and friendship and, thus, the mutual social obliga-tions that form one type of social capital. These feelingsfacilitate reciprocating behaviors as people strive to restorebalance in the relationship (Coleman 1988). For example, ifsellers take pains to quickly obtain an out-of-stock item for acustomer, as in our previous example, customers will tend tofeel an obligation to reciprocate with a similarly helpfulbehavior in a future exchange. Coleman (1988) likens thisphenomenon to a credit slip held by one social actor forfuture performance by another. Such credit slips are analo-gous to financial capital and provide an opportunity for eco-nomic value exchange when the holder elects to invoke them.

When relationships develop through repeated interaction,they induce a sense of identification (Merton 1968), trust(Granovetter 1992), norms that both parties feel compelledto follow, and mutually agreed-on sanctions to deter oppor-tunistic behavior (Coleman 1988). These dimensions ofrelational social capital are particularly salient in the subsis-tence context in enabling people to fulfill both social (e.g.,sociability, approval, security) and economic (e.g., credit,low prices, accurate weighing) goals they might otherwisebe unable to attain.

Respondents in our study made frequent reference to thecircumstances of exchange partners when discussing theirmarketplace interactions, indicative of both a concern withand an awareness of the needs of others. Such empathy isconducive to the formation of social capital (Preece 2004).Studies of networks of entrepreneurs have found that, busi-ness dimensions aside, it is the understanding and apprecia-tion of the personal aspects of others that leads to socialcapital (Anderson and Jack 2002). The work even cites aninformant who contends that he is indistinguishable fromhis business and that knowing him personally is what giveshis customers the confidence to rely on the services hisbusiness provides. Though perhaps unusual in developedeconomies, this blurring of personal and commercial identi-ties is considered quite normal in the subsistence market-place in many developing countries.

In transactions involving social capital, there are no for-mal contracts, exact terms of the exchange are rarelydefined, and the amount and timing of payback is uncertain(Portes 1998). The customized transactions and fluid out-comes we observed in the subsistence marketplace embody

this kind of flexibility, even when the exchange is funda-mentally commercial. For example, if a person helpsanother in a time of need by providing food at less thanmarket value, the “currency” in which the latter is obligedto return the favor is unspecified—it could be food, shelter,a valuable product, or practically anything else. Moreover,it is unclear whether the latter will or will not ultimatelyrespect the implicit reciprocity obligations. Similarly, if aperson lends money to another from social capital consider-ations, the expectation of the latter’s repayment is not tiedto a strict schedule.

In summary, both buyers and sellers in subsistence mar-ketplaces are bound by trust, interdependence, and sharednorms and empathy. By relying on preexisting social ties(i.e., transacting with someone they know or someonereferred by someone they know), both buyers and sellers insubsistence marketplaces gain such economic benefits ofinformation acquisition, credit approval, and customerretention as well as the psychological benefits of socia-bility, security, and a sense of community.

Despite this, it is worth noting that social capital is a dou-ble-edged sword, with the potential to be harmful as well ashelpful (Portes 1998). Our findings are consistent with thishypothesized mixed role of social capital in subsistence mar-ketplaces (Woolcock and Narayan 2000). For example,overdependence on relationships, combined with literacyshortcomings, creates disincentives to engage in potentiallyvaluable information-search behavior. Pervasive interdepen-dence enables people to rely on the skills, knowledge, andresources of acquaintances but also reflects their systemicinability to achieve self-sufficiency. Similarly, pervasiveorality encourages social exchange and learning but alsoopens the door to abuse, such as that by unscrupulous sellerswho use verbal trickery to capitalize on the absence of writ-ten contracts or by bullying moneylenders who subject theirmost vulnerable borrowers to public humiliation. Enduringrelationships may engender trust, but they also create thepotential for sellers to take advantage of buyers, or viceversa. Similarly, the benefits of interactional empathy mayflow to those with the best bargaining skills rather than thosewith the greatest need. Buyer–seller responsiveness, thoughuseful, can perpetuate unhealthy favoritism and discrimina-tion on the part of sellers and advantages to the mostdemanding customers. Fluid transactions can be slanted tounfairly benefit the seller, meaning that consumers who lacksocial connections—and, thus, information and word-of-mouth influence—can find themselves in a chronically dis-advantaged position. Finally, demands for customizationmay represent proactive behavior on the part of customersbut can be disadvantageous for the seller. Larger trends mayimpose additional negative effects. The global trend istoward industrialization and urbanization and the conse-quent subordination of social phenomena, such as norms andtrust, into autonomous market systems—a phenomenonreferred to as “disembeddedness” (Polanyi 1944). Informalcourtesies may evolve into rigid imperatives, reciprocatedobligations between sellers and buyers may become explicitrather than implicit, repayment may be scheduled eventhough it is not strictly required, and so on.

Other contributions of our research include sheddinglight on direct exchange and the nuances of consumer


behavior in subsistence settings. Most policies aimed toenhance consumer welfare and economic development aregrounded in an indirect exchange mind-set—that is, a high-level, normative orientation built around an abstract notionof “economic welfare” (i.e., quantum of consumption ofgoods and services; Lipton and Ravallion 1995) that isremoved from the everyday realities that people face; ourstudy urges the investigation of direct exchange settingsand their implications for business policy. In relation toconsumer information-processing research, the challengefacing subsistence consumers is to make sense of what littleinformation is available, to remember it without the aid ofwritten information, to recognize when more information iscalled for, and to know whom to ask. Our findings also sug-gest that the notion in the literature of what constitutes“information” or how value is perceived will need to bebroadened. For example, whereas research in consumerbehavior has examined several types of product and trans-actional information and its influence on perceived value(Adaval and Monroe 2002), people in the subsistence con-texts we studied assessed the perceived value of anexchange on the basis of qualities of the relationship inaddition to the product. They consistently factored in con-siderations such as a desire to maintain cordial relationswith the retailer so that he or she would deal fairly withthem, be sympathetic when considering life circumstances,and be willing to extend credit in their times of need.

In summary, we take much that is offered in consumerand marketing research—including the lens of consump-tion, the phenomena of marketing exchange restrictions andconsumer coping, and the notion of people actively employ-ing contextually and socially determined strategies to over-come vulnerability—and expand the vision of the disciplineby examining marketing interactions in a developing coun-try, informal economy context. In doing so, we also createtheoretical synergy between multidisciplinary social capitalresearch and marketing exchange phenomena. What hasemerged is a framework of marketing interactions thatexplains both the overcoming of vulnerability at the indi-vidual marketplace actor level and the eventual emergenceof an informal economy driven by social rather than formalcontracts.

As do all scholarly investigations, this work has limita-tions that should to be addressed in further research. Mostnotably, we conducted the work in a specific setting(urban and rural South India). Further research shouldexamine other subsistence contexts to determine theextent of applicability of the one-to-one framework. Theinsights this research provides, as well as the questions itleaves unresolved, underscore the general need for a bet-ter understanding of subsistence marketplaces and thedesign of marketing-oriented public policy based onmicro-level bottom-up insights that engage and empowerthese marketplaces.

ReferencesAchrol, Ravi S. (1997), “Changes in the Theory of Interorganiza-

tional Relations in Marketing: Toward a Network Paradigm,”Journal of the Academy of Marketing Science, 25 (1), 56–71.

Adaval, Rashmi and Kent Monroe (2002), “Automatic Construc-tion and Use of Contextual Information for Product and PriceEvaluations,” Journal of Consumer Research, 28 (4), 572–88.

Adkins, Natalie R. and Julie L. Ozanne (2005), “The Low LiterateConsumer,” Journal of Consumer Research, 32 (1), 93–105.

Alwitt, Linda F. and Thomas D. Donley (1997), “Retail Stores inPoor Urban Neighborhoods,” Journal of Consumer Affairs, 31(1), 139–64.

Anderson, Alistair R. and Sarah L. Jack (2002), “The Articulationof Social Capital in Entrepreneurial Networks: A Glue or aLubricant?” Entrepreneurship and Regional Development, 14(3), 193–210.

Andreasen, Alan R. (1975), The Disadvantaged Consumer. NewYork: The Free Press.

Bagozzi, Richard P. (1975), “Marketing as Exchange,” Journal ofMarketing, 39 (October), 32–39.

Baker, Stacey Menzel, James W. Gentry, and Terri L. Rittenburg(2005), “Building Understanding of the Domain of ConsumerVulnerability,” Journal of Macromarketing, 25 (2), 128–139.

——— and Marlys Mason (2012), “Toward a Process Theory ofConsumer Vulnerability and Resilience: Illuminating Its Trans-formative Potential,” in Transformative Consumer Research forGlobal Welfare: Reviews and Frontiers, David Mick, SimonePettigrew, Connie Pechmann, and Julie Ozanne, eds. NewYork: Taylor & Francis/Routledge.

Bartels, Robert (1981), Global Development and Marketing.Columbus, OH: Grid Publishing.

Basil, Debra Z., Nancy M. Ridgway, and Michael D. Basil (2008),“Guilt and Giving: A Process Model of Empathy and Efficacy,”Psychology & Marketing, 25 (1), 1–23.

Berry, Leonard L. (1995), “Relationship Marketing of Services—Growing Interest, Emerging Perspectives,” Journal of theAcademy of Marketing Science, 23 (4), 236–45.

Blau, Peter M. (1964), Exchange and Power in Social Life. NewYork: John Wiley & Sons.

Bourdieu, Pierre (1986), “The Forms of Capital,” in Handbook ofTheory and Research for the Sociology of Education, John G.Richardson, ed. New York: Greenwood Press, 241–58.

Breman, Jan (1996), Footloose Labour: Working in India’s Infor-mal Economy. Cambridge, UK: Cambridge University Press.

Caplowitz, David (1963), The Poor Pay More. New York: TheFree Press.

Castells, Manuel and Alejandro Portes (1989), “World Under-neath: The Origins, Dynamics, and Effects of the InformalEconomy,” in The Informal Economy: Studies in Advanced andLess Developed Countries, Alejandro Portes, Manuel Castells,and Lauren A. Benton, eds. Baltimore: Johns Hopkins Univer-sity Press, 11–37.

Chakravarti, Dipankar (2006), “Voices Unheard: The Psychologyof Consumption in Poverty and Development,” Journal of Con-sumer Psychology, 16 (4), 363–76.

Chen, Martha A. (2007), “Rethinking the Informal Economy:Linkages with the Formal Economy and the Formal RegulatoryEnvironment,” DESA Working Paper No. 46.

Coleman, James S. (1988), “Social Capital in the Creation ofHuman Capital,” American Journal of Sociology, 94 (Supple-ment), S95–S120.

Conway, Tony and Jonathan S. Swift (2000), “International Rela-tionship Marketing: The Importance of Psychic Distance,”European Journal of Marketing, 34 (11/12), 1391–1413.


Corbin, Juliet and Anselm Strauss (2008), Basics of QualitativeResearch: Techniques and Procedures for Developing GroundedTheory, 3d ed. Thousand Oaks, CA: Sage Publications.

Dasgupta, Sukti and Ajit Singh (2005), “Will Services Be the NewEngine of Indian Economic Growth?” Development andChange, 36 (6), 1035–1057.

De Soto, Hernando (2000), The Mystery of Capitalism: Why Cap-italism Triumphs in the West and Fails Everywhere Else. NewYork: Basic Books.

Deutsch, Morton (1962), “Cooperation and Trust: Some Theoreti-cal Notes,” in Nebraska Symposium on Motivation, Marshall R.Jones, ed. Lincoln: University of Nebraska Press, 275–320.

Dholakia, Nikilesh (1984), “Marketing in Less Developed Coun-tries: Its Nature and Prospects,” in Marketing in DevelopingCountries, Gurprit S. Kindra, ed. New York: St. Martin’s Press,10–28.

Epstein, T. Scarlett (2007), “Poverty, Caste, and Migration inSouth India,” in Moving Out of Poverty: Cross-DisciplinaryPerspectives on Mobility, Deepa Narayan and Patti Petesch,eds. Washington, DC: World Bank and Palgrave Macmillan.

Evans, Joel R. and Richard L. Laskin (1994), “The RelationshipMarketing Process: A Conceptualization and Application,”Industrial Marketing Management, 23 (5), 439–52.

Frenzen, Jonathan K. and Harry L. Davis (1990), “PurchasingBehavior in Embedded Markets,” Journal of ConsumerResearch, 17 (1), 1–12.

Goody, Jack (1987), The Interface Between the Written and theOral. Cambridge, UK: Cambridge University Press.

Goulding, Christina (1998), “Grounded Theory: The MissingMethodology on the Interpretivist Agenda,” Qualitative MarketResearch, 1 (1), 50–57.

———(2002), Grounded Theory: A Practical Guide for Management,Business and Market Researchers. London: Sage Publications.

Granovetter, Mark S. (1992), “Problems of Explanation in Eco-nomic Sociology,” in Networks and Organizations: Structure,Form and Action, Nitin Nohria and Robert G. Eccles, eds. Cam-bridge, MA: Harvard Business School Press, 25–56.

Gupta, Anil K. and Sreeja S. Nair (2011), “Urban Floods in Ban-galore and Chennai: Risk Management Challenges and Lessonsfor Sustainable Urbana Ecology,” Current Science, 100 (11),1638–45.

Harris, Joyce L., Alan G. Kamhi, and Karen E. Pollock (2001),Literacy in African American Communities. Mahwah, NJ:Lawrence Erlbaum Associates.

Harriss-White, Barbara (2002), India Working: Essays on Societyand Economy. Cambridge, UK: Cambridge University Press.

Hart, Keith (1973), “Informal Income Opportunities and UrbanEmployment in Ghana,” Journal of Modern African Studies, 11(1), 61–89.

Hart, Stuart (2005), Capitalism at the Crossroads: The UnlimitedBusiness Opportunities in Solving the World’s Most DifficultProblems. Upper Saddle River, NJ: Wharton Publishing.

Herreros, Francisco (2004), The Problem of Forming Social Capi-tal: Why Trust? New York: Palgrave Macmillan.

Hill, Ronald P. (2010), “A Naturological Approach to MarketingExchanges: Implications for the Bottom of the Pyramid,” Jour-nal of Business Research, 63 (6), 602–607.

——— and Jeannie Gaines (2007), “The Consumer Culture ofPoverty: Behavioral Research Findings and Their Implicationsin an Ethnographic Context,” Journal of American Culture, 30(1), 81–95.

———and Mark Stamey (1990), “The Homeless in America: AnExamination of Possessions and Consumption Behaviors,”Journal of Consumer Research, 17 (3), 303–321.

——— and Debra L. Stephens (1997), “Impoverished Consumersand Consumer Behavior: The Case of AFDC Mothers,” Journalof Macromarketing, 17 (2), 32–48.

Holloway, Robert J. and Richard N. Cardozo (1969), ConsumerProblems and Marketing Patterns in Low-Income Neighbor-hoods: An Exploratory Study. Minneapolis: Graduate School ofBusiness Administration, University of Minnesota.

Homans, George C. (1958), “Social Behavior as Exchange,”American Journal of Sociology, 63 (6), 597–606.

Hosley, Suzanne and Chow H. Wee (1988), “Marketing and Eco-nomic Development: Focusing on the Less Developed Coun-tries,” Journal of Macromarketing, 8 (1), 43–53.

Jain, Dipak C. and Siddhartha S. Singh (2002), “Customer Life-time Value Research in Marketing: A Review and Future Direc-tions,” Journal of Interactive Marketing, 16 (2), 34–46.

Jain, Sanjay and Ghazala Mansuri (2003), “A Little at a Time: TheUse of Regularly Scheduled Repayments in Microfinance Pro-grams,” Journal of Development Economics, 72 (1), 253–79.

Johnson, David W. and Roger T. Johnson (1989), Cooperationand Competition: Theory and Research. Edina, MN: InteractionBook Company.

Joy, Annamma and Christopher A. Ross (1989), “Marketing andDevelopment in Third World Contexts: An Evaluation andFuture Directions,” Journal of Macromarketing, 9 (2), 17–31.

Liberman, Alvin M. (1995), “The Relation of Speech to Readingand Writing,” in Speech and Reading: A ComparativeApproach, Beatrice de Gelder and José Morais, eds. Hove, UK:Lawrence Erlbaum Associates, 17–32.

Lipton, Michael and Martin Ravallion (1995), “Poverty andPolicy,” in Handbook of Development Economics, Vol. 3, Hol-lis Chenery and T.N. Srinivasan, eds. Amsterdam: North-Holland, 2551–2657.

Lopes, Carlos and Thomas Theisohn (2003), Ownership, Leader-ship and Transformation: Can We Do Better for CapacityDevelopment? London: Earthscan Publications.

Merton, Richard K. (1968), Social Theory and Social Structure.New York: The Free Press.

Moser, Caroline O.N. (1998), “The Asset VulnerabilityFramework: Reassessing Urbana Poverty Reduction Strategy,”World Development, 26 (1), 1–19.

Moustakas, Clark E. (1994), Phenomenological Research Meth-ods. Thousand Oaks, CA: Sage Publications.

Narayan, Deepa and Patti Petesch (2002), From Many Lands:Voices of the Poor. Washington, DC: World Bank and OxfordUniversity Press.

——— and Lant Pritchett (1999), “Cents and Sociability: House-hold Income and Social Capital in Rural Tanzania,” EconomicDevelopment and Cultural Change, 47 (4), 871–97.

Nelson, Jane, Eriko Ishikawa, and Alexis Geaneotes (2009),Developing Inclusive Business Models: A Review of Coca-Cola’s Manual Distribution Centers in Ethiopia and Tanzania.Cambridge, MA: John F. Kennedy School of Government, Har-vard University.

Norton, Andy, Tim Conway, and Mick Foster (2001), “SocialProtection Concepts and Approaches: Implications for Policyand Practice in International Development,” Centre for Aid and


Public Expenditure Working Paper No. 143, Overseas Develop-ment, London.

O’Callaghan, Jean (1996), “Grounded Theory: A PotentialMethodology,” Counselling Psychology Review, 11 (1), 23–28.

Ong, Walter J. (2002), An Ong Reader: Challenges for FurtherInquiry. Thomas J. Farrell and Paul A. Soukup, eds. Creskill,NJ: Hampton Press.

Polanyi, Karl (1944), The Great Transformation: The Politicaland Economic Origins of Our Time. Boston: Beacon Press

Portes, Alejandro (1998), “Social Capital: Its Origins and Applica-tions in Modern Sociology,” Annual Review of Sociology, 24,1–24.

Prahalad, C.K. (2005), The Fortune at the Bottom of the Pyramid:Eradicating Poverty Through Profits. Upper Saddle River, NJ:Wharton School Publishing.

Preece, Jenny (2004), “Etiquette, Empathy and Trust in Communi-ties of Practice: Stepping-Stones to Social Capital,” Journal ofUniversal Computer Science, 10 (3), 294–302.

Reynolds, Paul D., S. Michael Camp, William D. Bygrave, ErkkoAutio, and Michael Hay (2001), “Global EntrepreneurshipMonitor 2001 Summary Report,” London Business School andBabson College, (accessed Feb 25, 2011), [available athttp://www.gemconsortium.org/download/1302403478987/Summary%20Report%20Version%208%2002%20April%2002.pdf].

Samli, A. Coskun (2008), “Entrepreneurship EconomicDevelopment and Quality of Life in Third-World Countries,”Applied Research in Quality of Life, 3 (3), 203–213.

Sandelowski, Margarete (1991), “Telling Stories: NarrativeApproaches in Qualitative Research,” Journal of NursingScholarship, 23 (3), 161–66.

Schram, Sanford (1995), Words of Welfare: The Poverty of SocialScience and the Social Science of Poverty. Minneapolis:University of Minnesota Press.

Scoones, Ian (1998), “Sustainable Rural Livelihood: AFramework for Analysis,” IDS Discussion Paper No. 72,University of Sussex, Brighton.

Sheth, Jagdish N. and Atul Parvatiyar (1995), “Relationship Mar-keting in Consumer Markets: Antecedents and Consequences,”Journal of the Academy of Marketing Science, 23 (4), 255–71.

Sinha, Anushree (2010), “Global Meltdown and Informality: AnEconomy-Wide Analysis for India—Policy Research Brief,” inPoverty and Sustainable Development in Asia: Impacts andResponses to Global Economic Crisis, Armin Bauer and MyoThant, eds. Mandaluyong City, Philippines: Asian DevelopmentBank, 131–40.

Sturdivant, Frederick D. (1969), The Ghetto Marketplace. NewYork: The Free Press.

Toi, Miho and C. Daniel Batson (1982), “More Evidence ThatEmpathy Is a Source of Altruistic Motivation,” Journal of Per-sonality and Social Psychology, 43 (2), 281–92.

Tsai, Kellee S. (2004), “Imperfect Substitutes: The Local PoliticalEconomy of Informal Finance and Microfinance in Rural Chinaand India,” World Development, 32 (9), 1487–1507.

Varey, Richard J. (2003), “A Dialogical Foundation for Market-ing,” Marketing Review, 3 (3), 273–88.

Viswanathan, Madhubalan and José A. Rosa (2007), “Product andMarket Development for Subsistence Marketplaces: Consump-tion and Entrepreneurship Beyond Literacy and Resource Barri-

ers,” in Product and Market Development for Subsistence Mar-ketplaces, Advances in International Management, Vol. 20,José A. Rosa and Madhubalan Viswanathan, eds. Oxford: Else-vier, 1–17.

———, ———, and James E. Harris (2005), “Decision Making andCoping of Functionally Illiterate Consumers and Some Implica-tions for Marketing Management,” Journal of Marketing, 69(January), 15–31.

———, ———, and Julie A. Ruth (2010), “Exchanges in MarketingSystems: The Case of Subsistence Consumer-Merchants inChennai, India,” Journal of Marketing, 74 (May), 1–17.

———, Anju Seth, Roland Gau, and Avinish Chaturvedi (2009),“Ingraining Product-Relevant Social Good into Business Pro-cesses in Subsistence Marketplaces: The Sustainable MarketOrientation,” Journal of Macromarketing, 29 (4), 406–425.

——— and Srinivas Sridharan (2009), “From Subsistence Mar-ketplaces to Sustainable Marketplaces: A Bottom-Up Per-spective of the Role of Business in Poverty Alleviation,” Ivey Business Journal, (March–April), [available at http://wwwold.iveybusinessjournal.com/article.asp?intPrintable=1&intArticle_ID=816].

——— and ——— (2012), “Product Development for the BoP:Insights on Concept and Prototype Development from Univer-sity-Based Student Projects in India,” Journal of Product Inno-vation Management, 29 (1), 51–68.


———, ———, Roland Gau, and Robin Ritchie (2009), “DesigningMarketplace Literacy Education in Resource-Constrained Con-texts: Implications for Public Policy and Marketing,” Journal ofPublic Policy & Marketing, 28 (Spring), 85–94.

———, ———, and Robin Ritchie (2010), “Understanding Con-sumption and Entrepreneurship in Subsistence Marketplaces,”Journal of Business Research, 63 (6), 570–81.

Wallendorf, Melanie (2001), “Literally Literacy,” Journal of Con-sumer Research, 27 (4), 505– 511.

Westlund, Hans and Roger Bolton (2003), “Local Social Capitaland Entrepreneurship,” Small Business Economics, 21 (2), 77–113.

Wood, Van R. and Scott J. Vitell (1986), “Marketing and Eco-nomic Development: Review, Synthesis and Evaluation,” Jour-nal of Macromarketing, 6 (1), 28–48.

Woolcock, Michael (1998), “Social Capital and Economic Devel-opment: Toward a Theoretical Synthesis and Policy Frame-work,” Theory and Society, 27 (2), 151–208.

——— and Deepa Narayan (2000), “Social Capital: Implicationsfor Development Theory, Research, and Policy,” World BankResearch Observer, 15 (2), 225–49.

Copyright of Journal of Public Policy & Marketing is the property of American Marketing Association and itscontent may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder'sexpress written permission. However, users may print, download, or email articles for individual use.

marketing interactions in subsistence marketplaces: a bottom-up approach to designing public policy

Documents