2015-inovation

International Journal of Humanities Social Sciences and Education (IJHSSE)

Product Innovation and the Market at the Bottom of the Pyramid: Study at the Capital of São Paulo

Gustavo BenevidesMasters and Doctorate in Business, Administration, Methodist University of Piracicaba, Piracicaba, Brazil,

[email protected]

Antonio Carlos GiulianiMasters and Doctorate in Business Administration, Methodist University of Piracicaba, Piracicaba, Brazil,

[email protected]

Volume 2, Issue 4, April 2015, PP 29-42ISSN 2349-0373 (Print) & ISSN 2349-0381 (Online)

www.arcjournals.org

©ARC Page | 29

AbstractThe present article aims to analyze the characteristics of intensity and adoption of innovation in the market of the bottom of the pyramid. The literature underlying the research is based on the concept of innovation, specifically in the intensity and adoption of innovation. Firstly, the intensity of the innovation can be classified as incremental and radical. Radical innovations are represented by products that present unprecedented performance or known characteristics that provide significant improvements in performance or cost. Whereas incremental innovation presents characteristics of adaptation, with the inclusion of changes, refinement and simplicity consolidating the improvement of existing products. Because it is a research focused in the market at the BOP, the meaning of innovation transcends the purely technological connotation and starts to contemplate socially constructed relations. To perform the study of descriptive quantitative nature, data collection was carried out through a survey with 390 respondents. Six points of convergence were stablished in the surveyed city in street commercial hubs format where there is a large concentration of consumers of the BOP. In this study, the threshold to define the public to be researched was family income between R $ 700.00 and R $ 2,500.00. The results showed that women, by having greater decision power in low-income families, tend to pay more attention to marketing stimulus and have better understanding of time-saving benefit of home appliance products. In regards to innovation, they also tend to be more traditional. Regarding income, little difference was found between the groups. In relation to age, it was clear that younger people tend to adopt the products considered radical innovations earlier and older people tend to purchase products with less innovation and late.

Keywords: Innovation, Bottom Of The Pyramid, Non-Parametric Tests.1. IntroductionThe intense consumption from the population at the bottom of the pyramid (BOP) was doubtful, since the poor people consumed to meet their basic needs, making the low-income families to be excluded from the consumer market the past (Barros and Rocha, 2009). Nowadays this scenario is changing, besides buying basic needs products, the consumers of the BOP also search for products and services with greater added value, creating a potential consumer that became looked-for by large companies (Varadarajan, 2009). This relation is bidirectional, in other words, not only the consumer looks for a greater added value, but companies also end up offering such value once they realize that the segment of the upper classes is saturated (Nogami et al., 2012).Having in mind that the financial situation of developed economies like United States, Japan, and countries from Western Europe suffered more than the emerging economies like Brazil, China and India during and after the financial crises of 2008 (Kaplinsky, 2011), as well as the consumer market of these developed economies reached a saturated point, large companies are considering to invest in unexplored markets in the bottom of the pyramid of emerging economies (Nakata & Weidner, 2012; Nogami et al., 2012).Although the studies of consumption of low-income population are not recent, scientific research that aims to comprehend the consumer’s behaviour of this portion of the population are not as common, yet. In addition, there is no academic integration between the researchers of this topic in Brazil (Nogami and Pacagnan, 2011; Hemais et al., 2013), having in mind that the terms ‘bottom of

International Journal of Humanities Social Sciences and Education (IJHSSE) Page | 30

Gustavo Benevides and Antonio Carlos Giuliani

the pyramid’s consumer’ and ‘low-income consumers’ are considered synonyms in the Brazilian literature. As suggested by Rocha and Silva’s (2008) study about the meaning of consumption between the low-income consumer and their behaviours in the point of sale must be intensified, as well as to comprehend how the diffusion and adoption of innovations by low-income consumers is fundamental to develop studies in the area (Nogami, 2012; Hemais et al., 2013).It is possible to find uncountable gaps in the studies related to the BOP market (Berti and Bittencourt, 2012). By rising with great strength in the last few years, there are many factors that justify these gaps: (i) the focus of most of the companies still relies in the market with greater power of consumption; (ii) the unknown behaviour of this consumer still inhibits the companies to invest in the bottom of the pyramid; (iii) there is lack of Research & Development (R&D) for products and services for these consumers; (iv) to achieve high profits, the criteria ‘quantity without losing quality’ must be focused; and even (v) the own prejudice, also, inhibits major businesses to this public. All these aspects, somehow, directly or indirectly, can lead into less innovations in the products for the BOP market (Nogami et al., 2012).Conventionally, the conception of innovation is related with areas attached to technology, modernity, electronics and hi-tech products (Kuczmarski, 2003). In this manner, it is associated to this conception an idea of high-cost production, R&D, reflecting in high prices to the consumer (Wolfe, 1994; Nakata and Weidner, 2012). However, to research and manage innovation in the academy and in the market goes beyond laboratories of R&D spread out by universities, large companies and technological centers.With all these gaps, the major contribution of the present article is supported in the approximation of the detachment between the development of innovative products and the market of BOP, as well as the adoption of these innovations. This gap exists, because it is conventionally accepted that only high-income consumers can afford to buy innovative products, therefore, the innovation barely reaches the BOP (Viswanathan and Sridharan, 2011). In a general way the literature about innovation and the bottom of the pyramid point out several ways of imminent innovation in the process and in the business model (Prahalad and Hart, 2002), in other words, in the organization (Prahalad, 2005). Considering that the development of a product is a fundamental activity to the market-based economy and that the wellbeing of the bottom of the pyramid consumers requires innovation in the accessibility of goods and services, there are a substantial gap in the literature concerning the development of products in the bottom of the pyramid (Anderson & Billou, 2007; Viswanathan and Sridharan, 2011).In regards to innovation, two perspectives will be addressed in the article. Firstly, the intensity of innovation, in the product, in the process or in the organization, that varies in a continuum between radical and incremental (Leifer et al., 2002; Tidd et al., 2008). The second approach is the adoption of innovation that points that people can be in diverse stages of adoption that goes from the most initial to the latest one (Rogers, 2003; Antioco and Kleijnen, 2010). Furthermore, all these theoretical apparatus have as empirical focus the market of the bottom of the pyramid, that also has its theoretical peculiarities in the matters of consumer behaviour and in the choice of products and services (Varadarajan, 2009; Prahalad, 2011; Barki and Parente, 2010; Hemais et al., 2013).

In the product or in the service this intensity is related to the user of the innovation, which could be the organizational or the end of the chain consumer. Consequently, the innovation has a strict connection with the area of Marketing in the organizations, inside areas of product development and R&D (Levitt, 1990). Thus, the aim of the article consists into analyze, with sociodemographics basis, the characteristics of intensity and adoption of innovation in the market of the bottom of the pyramid.Besides this introduction that contextualizes the innovation inside the market of the bottom of the pyramid, the article presents posteriorly a technical support founded in the intensity and adoption of innovation. Followed by that, it will be presented the methodological procedures


Product Innovation and the Market at the Bottom of the Pyramid: Study at the Capital of São Paulo.

that involved a survey for the data collection and the execution of non-parametric tests to ana-lyze the results. Afterwards, the research results will be presented and analyzed having in mind the support literature. In the end, the final considerations will enclose the text with its due weights, limitations and suggestions from future researches. 1.1. Intensity of innovation in the bottom of the pyramidThe intensity of innovation is directly related with the manner it is measured, in other words, what it means something to be new in relation with how to measure innovation. In a general way, innovation is not a directly measured, the most common ones are the numbers of patents or amount of financial investment in R&D (Moreira and Queiroz, 2007). A broadly, but direct way to measure innovation is both qualitative and quantitative evaluation of the generation process, diffusion and incorporation of the innovation (Rogers, 2003).In relation to the way it is measured, the intensity of innovation is usually classified as incremental and radical. The radical innovations are represented by a product, process or organization that present unprecedented performance or well-known features that provide significant improvements in the development or cost (Leifer et al., 2002).The radical innovation presents theoretical convergences with the concept presented by Schumpeter (1984) of creative destruction. The concept of creative destruction is developed in a competitive and monopolized strong economical context, due to a rigid system of the capitalistic logic. To small companies and new organization being able to entry the market and compete with the well-established and large companies, the incoming need creatively destroy the products or business model well-known, distributing the participation in the market between more agents, allowing a higher competitiveness index (Schumpeter, 1984). Despite the fact that it is more valued and causes more impact, only 6% to 10% of innovations are radical, within mind its complexity (Tidd et al., 2008).Another point of view from the same concept is the incremental innovation, i.e. the subject is still intensity of innovation, but with the inclusion of modification, refinement, simplicity that consolidate the enhancement of products, processes and existing organizations. The incremental innovations present less rupture intensity with the entrepreneur’s practices and activities. Levitt (1990) points innovative imitation those innovations that present competitive differences in the products, processes and organizations, but are not innovations effectively radicals.A concept of incremental innovation is related with the concept of continuity, i.e. incremental innovation occurs little by little periodically, aiming to achieve goals in a long term period (Anderson & Billou, 2007). An incremental innovation can be developed posteriorly to a radical innovation. Having in mind that a radical innovation occurs and destroy creatively a product, process, organization or market, the incremental innovation gives continuity to the initial concept inserted by the radical innovation, this way, the incremental occurs more frequently and with less impact than the radical (Anderson & Billou, 2007). Therefore, the incremental innovation is characterized by adjustments to suit the needs of people’s consumption. Additionally, it can be considered that the intensity of innovation is arranged on a continuum where the extremes are composed of incremental innovation and radical innovation.Prahalad (2005) present 12 principles of innovation for large companies interested in the BOP market. These principles are briefly arranged in the Table 1. In accordance with the author, a combination of scales, technology, price, sustainability and usability are the components to develop innovations in this market.By analyzing from another standpoint, it is possible to observe two main principles that orientate all the 12 principles: the quantity and the consumer. With the quantity in mind, the practiced prices for this market need to be accessible, once they show low profit margins (1), as well as it is necessary the maximization of the utilization of the resources, once the planet can not



supply all the population of the bottom of the pyramid in the same fashion it was supplied for the upper class in the last century (4). The economy in scale is the focus, because the low-income consumers are spread all over the world (3) being a necessary requirement to the wide diffusion (11), even with the BOP having heterogeneous characteristics. The principles (12) shows a paradox, because the BOP characteristics are heterogeneous, but with a focus on the quantity, homogeneous similarities are sought to achieve greater amount of consumers. Finally, the principle (6) suggests innovation in the process, to optimize the production and distribution process, maximizing resources and reducing the final price, i.e. focus in the quantity.

The second component that guides the principles for the market in the BOP are the characteristics, necessities, and behaviours of the low-income consumers. In a general way, the functionality of the product or service is the benefit that the BOP consumers search (5), that are easy to handle (7) and that adapt itself to unleveled environments, with little space exposed to humidity and sunlight (9). That is why, the product appearance must be have a friendly interface (10), as well as educating the consumer in the use of the products is essential (8). Finally, the technology must be hybrid (2), i.e. the cutting-edge technology must be used with moderation, because in certain moments the consumer will not be able to master its use, as well as it can increase the price of the product, in a way that is necessary the hybridization of advanced technologies and less advanced technologies.

For such, as pointed by Prahalad (2006) the innovation for low-income class can be metaphorically compared as a sandbox, once the low-income class shows a gigantic population and consequently different segmentations around the world. Sand, because of it fluid characteristics that can move frontiers. Box, because it requires rigid delimited targeting clippings. Thus, it is not possible to develop an innovative strategy for the whole BOP population, but the adjustments must be done for the respective segments in the market, characterizing the innovation as incremental (Prahald, 2006; Anderson and Billou, 2007).

Bringing back the concepts of intensity of innovation, i.e. how radical or how incremental is the innovation, it is undebatable that radical innovation has a fundamental role in the formation and guidelines of the market. However, the companies that intend to work in the

BOP market cannot afford to ignore the incremental innovation in the portfolio of the products (Varadarajan, 2009). The incremental innovations are suitable to the low-income market, once they are manifested with adjustments, enhancements, improvements, extensions or reductions

Table 1: Principles of Innovation in the Bottom of the Pyramid MarketPrinciples of the Innovation in the Bottom of Pyramid Market Characteristic1 Accessible Prices Quantity2 Hybrid Solutions of Technology Customer3 Scale economy, large quantities, accessible in the whole world Quantity4 Maximization of Resources (Sustainability) Quantity5 Benefit of Functionality Customer

6 Innovation in the process is so important as the innovation in the product Quantity

7 Easy Handling Customer8 Educate the Consumer Customer9 Adjust the Product to the Hostile Environment Customer10 "Friendly" Appearance (Interface) Customer11 Wide Distribution Quantity

12 Even with BOP being heterogeneous, it is needed a wide diffusion and adoption Quantity

Source: Modified from Prahalad (2005)



incorporating new features that provide additional benefits. Thereby, even in small proportions, the incremental innovations can posteriorly reflect in radical innovations (Kuczmarski, 2003; Varadarajan, 2009).As the consumer in the bottom of the pyramid do not seek for exclusivity, but inclusivity in the consumer society (Azevedo and Mardegan Jr., 2009), the products for low-income class do not need the most advanced technology in the market with the best quality as possible, but enough quality to supply the customer’s necessities. This factor will certainly increase the ratio of adoptions of innovations. Because it is not characterized as a sector of cutting-edge technology, the radical innovation is not common in the low-income market (Nascimento et al., 2008). No company positioned for the low-income market perform advanced researches in new technologies to attach to popular products. This technology hybridization happens for the price of the final product to be accessible to the consumer.1.2. Adoption of Innovation in the bottom of the pyramidBecause it is a targeted researched to the market in the bottom of the pyramid, the mean of innovation transcends the connotation of the technological determinism and starts to contemplate the relations with the social constructionism. It is in this perspective that the social character of innovation differs the most from the technological determinism approach, because the innovation with the social character can assume certain degree of relativism (Nogami et al, 2013). The social term of innovation involves not only the social aspects, but also the cultural, human, politic, and organizational, getting detached from the technological determinism and getting close to the multi- and interdisciplinary characteristic (Prajogo and Ahmed, 2006).

In this manner, the phenomenon can be consider as an innovation in a region, in an environment or in an organization and can be considered as innovation in other locations (Nogami et al, 2013). However, the concept of innovation in products to the high-income consumers is different from the concept of innovation to the low-income consumers, making the variability of this concept even stronger (Varadarajan, 2009; Antico and Kleijnen, 2010). Thus, the intensity, adoption and diffusion of innovation must follow the behaviour of the markets in this sense.

The innovation is diffused based on the consumers’ characteristics, in the products attributes, in the social context and marketing environment. Therefore, the diffusion can be defined as a process in which the innovation is communicated by certain channels through time between members of the social system (Rogers, 2003; Antioco and Kleijnen, 2010). The communication channels of innovation are the process that the participants create and share information with the other part to reach a mutual understanding that are not necessarily the media. In this sense, this study seeks to interact between the knowledge areas between Marketing and Innovation, specifically regarding consumer behavior with the intensity and adoption of innovation.The temporal dimension that involves the diffusion of innovation addresses: (a) the decision process of the innovation, (b) the capacity of individuals to adopt the innovation and (c) the ratio of adoption of the innovation. The first involves the knowledge, the persuasion, the decision, the implementation and the confirmation of the innovation, for then to be decided upon innovation or not. This step is more related to the R&D of the companies responsible for the areas of products development.

Followed by that, it is necessary to know the categories of the innovation adopters, dividing in 5: innovators (2.5%), initial adopters (13.5%), initial majority (34%), late majority (34%), and laggards (16%). These numbers were presented by Rogers (2003), they are really used to describe the curve of adoption of the innovation. Although they are not absolute values, they are directed to orientate the company’s management. Factors that can boost the adoption of the innovation among the consumers are the respect among pairs and the influence of leaders of opinions in the social environment (Rogers, 2003). Finally, the innovation ratio, that is defined



as the relative velocity, which the innovation is adopted by the members of the social system. Precisely because this velocity is relative, it is necessary to know what the social system is in the referring context. In this case, the low-income market.

Others factors that proportionate efficiency in the adoption of innovation are the quantity and quality of the transmitted information to the potential adopters, with the presence of content to decrease uncertainties and increase compatibility among those who offers the innovation and those possible adopters. The opposite is also valid, i.e. less information increase the uncertainty, increase incompatibility and proportionate smaller ratio of adoption (Antioco and Kleijnen, 2010; Nakata and Weidner, 2012).

Among those empirical cases of innovation in home appliance products to low income class, it is possible to find the stove (Prahalad, 2011) and the washing machine (Sobral et al., 2007). In the case of the stove, it was developed a smaller product than the conventional stoves known with 4 or 6 exits (“burners”). The stove with a unique exit was developed targeting thousands of families that still live in the rural areas of India, without heating the food of their meals.

The fact that the product is small allowed it to be shared among families and neighbors. Another advantage of the lightness of the product was the easy to carry. The easy to carry for this public can be a determinant factor for the sales or not, due to the difficulty in locomotion. If the stove is portable, it facilitates the locomotion of the consumers to purchase the products. The last innovative characteristic in this stove is the use of biomass as energy source. The biomass is a combustion process made from organic material that has as an advantage the low cost, allowing the reuse of residuals and polluting less than the fossil fuels.

Another home appliance that presents specific innovations in the product is the washing machine (Sobral et al., 2007). Considering the gap between automatic machines and the non-automatic ones, it was developed a cheaper washing machine than the automatic ones, but with the function of spinning, which is not found in the non-automatic machines. According to Sobral et al. (2007), besides spinning, other innovative characteristics are identified within this product directed to the BOP. The first is the mechanical bottoms, that describe the function instead of digital electronic boards; the top of the machine is transparent, because it was identified in previous researches that the housewives liked to watch the clothes being washed; the design conveys modernity and rusticity, differently from the wash-tanks that look fragile, and the supports of the washer are adjustable, ideal for adjustments on uneven surfaces in the houses on the outskirts of large cities and rural areas.

To achieve the success in the development of products for low income classes and increase the ratio of adoption, it is fundamental that the companies know the way and conditions of the consumer’s life, therefore, the social immersion is fundamental for the market research that seeks to comprehend the buying behaviour of this public (Viswanathan and Sridharan, 2011). These cases of success of the oven in the rural areas of India and the washing machines in the outskirts of the city of São Paulo were only possible after studies, which the researchers stayed weeks among the low income consumers and could deeply comprehend their behaviours and needs (Prahald, 2011; Nogami et al., 2012).

Furthermore, the adoption and acceptability refers to the adaptations that need to be done in the products and services to supply the peculiar necessities of the BOP consumers. It is not enough to put the prices down, reduce the attributes of products positioned to high-income classes, and offer them to low income classes, as their lifestyle and buying behaviour must be

taken into consideration (Varadarajan, 2009). In the end, the consciousness of the consumers is also fundamental for the adoption, because considering that the access and the understanding



of the traditional communication can not be easily accessed by the BOP consumers (Bark & Parente, 2010), the companies need also to innovate in the way to communicate their products and services (Anderson and Billou, 2007; Nogami et al, 2012).2. material and methodsFor realization of the study it was performed a data collection, survey style, in the city of São Paulo, south region of Brazil with the application of 400 questionnaires, of which 390 were validated, once the other questionnaires were incomplete or with an ambiguous response. It was stablished 6 convergence points in the researched city in the format of street commercial hubs where there was a large concentration of retail stores, public transport stops, banks and other elements that characterize the place as a concentration point and transition of people (Parente et al., 2007). Furthermore, these points were stablished based on the people’s income. Considering the census data of the Brazilians Institute of Geography and Statistic (IBGE) of 2010 it was possible to track which suburbs had families of low income. Therefore, the choice of 6 points of data collection of the research also considered this criterion. Taking into consideration the magnitude of the low-income class and of the bottom of the pyramid, it is common to happen misunderstandings in the definition about the consumers in this type of research (Nogami and Pacagnan, 2011). In this study, the cutout to define the sample to be studied was the monthly income of the family between R$700.00 and R$2,500.00. Regarding the products selected to compose the research, refrigerators (fridges), washing machines, stoves and microwaves were chosen. These products were considered first necessity home appliances, being present in the researches performed by the IBGE, the National Research per Household Sample (PNAD), and the Household Budget Survey (POF). These products were also chosen because they have in more than 10 different brands in the market, because the higher competitiveness in the market, the higher is the probability of innovations being developed (Levitt, 1990).The language, size, order, and approach of the questions were panned in details considering that the data collection with the consumers of low-income class is more difficult, since they have lower levels of education and inferior habit of reading. Therefore, the questionnaires were in a not self-fillable way, i.e. all questions were pronounced by the interviewers, to guarantee higher data reliability (Rocha and Silva, 2008).

This option of personal and individual collection, although it is more laborious than sending questionnaires via online sources it proportionate a better control of the sample, decreasing the random error as well as proportionating a better reliability of the data. On the other hand, because it involves greater financial effort, the number of questions was minimized to have a higher number of validated questionnaires, since the research was performed in the streets. For such, it was performed 3 pretests until it was reached an appropriate questionnaire. Additionally, considering the difficult in interpreting the questions, it was developed an answer card to assist the respondents during the collection, presented in Figure 1. Considering that this card resulted in labels for each point of the scale, the variables in the analyses are not considered intercalated as they are conventionally treated in the marketing research, which are ordinals, as pointed by Gaito (1980). To evaluate the research’s results, it was primarily observed the answers distribution of 390 individuals in each of the questionnaires performed. Followed by that, the answer distributions were evaluated according to the social demographics characteristics and were executed hypothetical tests to identify the differences between the distributions by group of interest: gender, income and age group.To analyze the results, non-parametric tests of Mann-Whitney and Kruskal- Wallis were used (Siegel, 1975). Both test presented as null hypotheses, the equality of the studied levels. The use of the non-parametric tests is necessary when the premises about the data distribution (specific and known, in general, Normal) for the parametric test – most commonly used- are not valid

(Neter et al., 1996). Because the answer obtained with the research of the ordinal type, not intercalated, there is no indication for the use of these tests.

The Mann-Whitnney test was used to test the hypothesis for the gender and income groups. In contrast, to assess the differences among age groups, it was used the Kruskal-Wallis test; this happened due to the quantity of groups in each category. As it happens in the Analysis of Variance, the result of this test indicates the rejection or not of the null hypothesis, however, when there is a rejection, there is no note of which levels have differences of equalities. In the study, it was of interest to identify the differences between each one of the levels, then, for the cases that there was rejection of the null hypothesis according to the Kruskal-Wallis test, it was performed tests of multiple comparisons (Campbell and Skillings, 1985). Therefore, the software used to analyze th results was the IBM-SPSS 20.3. resultsConsidering the premises of the non-parametric tests, the results will be presented according with the differences of segmented distribution by social demographics information, respectively gender, income, and age group. Nevertheless, the first 5 variables of analysis are referent to the consumer behaviour, related to the consumer attention to both stores and brands advertisements; by noticing that there is a time saving advantage of the home appliance product; and in relation to the fidelity, also in terms of both stores and brands. The other 4 variables are referent to the attributes of innovation referent to the intensity and adoption. The initials in Table 2 correspond to the levels of the agreement scale presented in the Figure 1.Initially, it can be noticed that the larger degree of agreement between the respondents was in function of the understanding of the time saving that the home appliances proportionate to the work to be done (87.5% partially or completely agreed with this characteristic). Nevertheless, the consumers demonstrated greater attention to the advertisements of the home appliance stores (46.2% of CC and CP), since the retail exert a fundamental role in this market, being an intermediate facilitator between manufacturers and consumers, in the market of low income class (Parente and Barki, 2008; Nogami et al., 2012).

Figure 1: Answer CardANSWER CARD

5 4 3 2 1Completely

AgreedPartially Agreed

Do not Agreed,Do not Disagreed Partially Disagreed Completely

Disagreed5 4 3 2 1

Absolutely Yes

Partially Yes

Sometimes Yes, Sometimes No Partially No Absolutely No

Source: Elaborated by the authors

Table 2: Distribution of the agreement ratio CA (%) PA (%) DADD(%) PD (%) CD (%)Advertisement of the Stores 48.7 13.1 14.4 7.2 16.7 Advertisement of the Brands 34.4 11.8 14.1 13.6 26.2Time Saving 72.6 14.9 6.2 1.8 4.6Fidelity to the Store 15.1 7.2 15.4 12.3 50.0Fidelity to the Brand 23.6 7.7 16.9 10.3 41.5Incremental Innovation 45.4 13.3 7.9 10.5 22.8Radical Innovation 16.9 7.7 18.2 16.9 40.3Initial Adopters 8.7 8.7 15.4 14.6 52.6Late Adopters 30.0 12.1 25.1 12.3 20.5

N= 390 Source: Research data



In regards to fidelity, the role are switched: even with the difference being minor, there is a greater fidelity in relation to the product brand than to the retail stores (31.2% versus 22.3%, adding CC and CP). This imply to affirm that the low income consumer seek to always buy products of the same brand, however, they try to keep updated in relation to the products through advertisements of the retail stores. As the competitive in the retail market of the home appliance is high, considering the number of companies, stores and channels of access to the consumer, the fidelity is minor. In contrast, the fidelity in relation to the product brand, the fidelity is higher.Moreover, regarding the attribute of innovation, the empirical results met fully with the theoretical foundation. When the low-income consumers buy home appliance products they chose for products with incremental innovations (58.7% CC and CP) instead of products with radical innovation (24.6% CC and CP), as pointed by the literature (Prahald, 2011; Viswanathan and Sridharan, 2011; Nogami, 2013). This often happens due to the accessibility of the products (Prahalad, 2005; Varadarajan, 2009). Regarding adoption, the empirical evidences also corroborate with the theory, since 42.1% (CC and CP) of the interviewees adopt innovative products late and 17.4% (CC and CP) that adopt the same products initially.4. discussion4.1 GenderTo perform the non-parametric tests in two groups, the correct analysis is Mann Whitney, once the groups in this study are compose by men (32.8%) and women (67.2%). By observing the results in the Table 3, in a general way, in respect to home appliances, there are significant differences in terms of attributes of innovation.As previously discussed, the cultural subject is critical, with the women having the organizational role at the house, mainly in the low-income market (Azevedo and Mardegan Jr., 2009). Therefore, as expected, they are the one who pay more attention to the advertisements, both of stores and brands, as well as they are loyal to brands. In the subject of product attribute of the home appliance product that save time, it was possible to find more significant p-values (<0.000), since they are the ones who use the discussed products more often.Observing the answer distribution regarding intensity and adoption of innovation, it can be noticed that despite there is no statistical difference between men and women, in the collected samples it was the women that are often presented as late adopters admitting difficulties in the understanding


Table 3: Distribution of the agreement ratio per Gender CA (%) PA (%) DADD(%) PD (%) CD (%) Sig.Advertisement of the Stores

Women 53.1 12.2 13.7 5.3 15.6 0.019**Men 39.8 14.8 15.6 10.9 18.8Advertisement of the Brands

Women 39.7 11.1 11.8 12.6 24.80.014**Men 23.4 13.3 18.8 15.6 28.9

Time Saving Women 79.0 13.7 5.7 1.1 0.4 0.000***Men 59.4 17.2 7.0 3.1 13.3

Fidelity to the Store Women 15.3 5.7 15.6 14.5 48.9 0.934Men 14.8 10.2 14.8 7.8 52.3

Fidelity to the Brand WomenMen

25.619.5

7.38.6

17.914.8

11.57.8

37.849.2 0.062*

Incremental Innovation Women 47.7 14.5 7.3 9.2 21.4 0.107Men 4.6 10.9 9.4 13.3 25.8

Radical Innovation Women 16.4 7.6 21.0 18.7 36.3 0.155Men 18.0 7.8 12.5 13.3 48.4

Initial AdoptersWomen 6.9 8.8 15.3 16.0 53.1

0.380Men 12.5 8.6 15.6 11.7 51.6

Late Adopters Women 30.5 13.7 24.4 12.6 18.70.265Men 28.9 8.6 26.6 11.7 24.2

*** p < 0.01; ** p < 0.05; *p < 0.1Non-Parametric Test: Mann-Whitney

Source: Research DataInternational Journal of Humanities Social Sciences and Education (IJHSSE) Page | 37

of new technologies (44.2% adding CC and CP, against 37.5% of men), as well as incremental innovation is more common among them (62.% adding CC and CP, against 51.5% of men).These data point that women are more cautious and less inclined to take risks, as pointed out by Azevendo and Mardegan Jr. (2009); the low-income consumer does not take these risks and afford to purchase a product by mistake, since their income is limited. As the woman is main decision make in the family for home appliances, she presents a late adoption of the innovations as well as incremental innovations in the chosen products (Azevedo and Mardegan Jr., 2009).4.2. Income For the analysis between the incomes, the non-parametric test was also Mann Whitney since the analyzed groups were consumers of C1 class (54.6%) and the consumers of C2 and D class were altogether (45.4%), to balance the sample size. Observing the results at Table 4, there is little difference in the opinions among the income groups. This social demographic characteristic pointed out the smaller number of significant rates (p<0.01). This is understandable since this public, in a general way, shows homogenous characteristics in some subjects. As the increase consumption of this segment is recent, the heterogeneity of buying behaviour is not still being discriminated.Regarding the attention to the stores and brands’ advertisement, it is possible to note that there is a slight difference between the groups. The consumers of smaller income (C2 and D) demonstrated to be attentive, since they have a lack of extra information for decision-making. The consumers of C1 class are more secure to purchase, looking for other determinants that will assist in the decision-making.In relation to the intensity of innovation, the consumers with smaller income (C2 and D) are more likely to buy incremental product yet, given the high prices, the difficulty of handling and especially the fear of buying something that is not useful and having to throw away and buy another (Azevedo and Mardegan Jr., 2009). Moreover, although it is not significant, the C1 class consumers are more likely to be initial adopters than C2 and D class consumers are.4.3. Age groupTo perform the non-parametric test with more than two groups, the pertinent analysis is the Kruskal-Wallis, since young people (26.4%), adults (41.8%), and elderly (31.8%) compose these


Table 4: Distribution of agreement ratio per Income

CA (%) PA (%) DADD(%) PD (%) CD (%) Sig.

Advertisement of the Stores C1 46.5 10.8 13.1 9.4 20.2 0.060*C2/D 51.4 15.8 15.8 4.5 12.4Advertisement of the Brands

C1 31.0 11.3 15.0 13.6 29.1 0.077*C2/D 38.4 12.4 13.0 13.6 22.6

Time Saving C1 75.6 12.7 6.6 0.9 4.2 0.160C2/D 68.9 17.5 5.6 2.8 5.1

Fidelity to the Store C1 12.7 7.5 17.8 12.2 49.8 0.752C2/D 18.1 6.8 12.4 12.4 50.3

Fidelity to the StoreC1 24.9 8.5 17.4 11.7 37.6

0.151C2/D 22.0 6.8 16.4 8.5 46.3

Incremental Innovation C1 41.8 12.7 7.5 12.7 25.4 0.060*C2/D 49.7 14.1 8.5 7.9 19.8

Radical InnovationC1 15.5 9.4 22.5 14.6 38.0

0.308C2/D 18.6 5.6 13.0 19.8 42.9

Initial Adopters C1 10.8 10.3 16.4 11.7 50.7 0.110C2/D 6.2 6.8 14.1 18.1 54.8Late Adopters C1 27.2 13.6 23.9 12.7 22.5 0.221C2/D 33.3 10.2 26.6 11.9 18.1

*** p < 0.01; ** p < 0.05; *p < 0.1Non-Parametric Test: Mann-Whitney

Source: Research Data


groups. The cutout criteria was young people under 30 years old, between 31 and 50 for adults, and over 50 for elderly. Observing the results in table 5, in a general way, regarding the purchase of home appliance products and its respective characteristics referent to innovation, the age group was the criteria that presented significant statistical ratios (P<0.1), for the difference among the groups, since it was presented 3 groups.When the attention to advertisement is evaluated, both stores and brands, the young people and adults had the same degree of agreement, in relation to the greatest value of the elderly. This points out that the elderly consumer could be considered less confident and would need more information for decision making, especially when innovation-related issues are involved. Regarding time saving, the group that differs among the others is the young people. Due to the dynamic and constant agitation lifestyle, mixing professional life, student life, married life and social life, the time saving attribute is more important to the group.In regards to the fidelity to the store, none of the 3 groups presented a high level of agreement, however, the elderly demonstrates to be more loyal, since they still preserve the purchase of products in the same store, providing a sense of nostalgia and credibility in relation to traditionalism, more common among people at this age group.Starting from the innovation analysis, specifically when the adoption (significant p-values), it is possible to conclude that the consumers with less age are more likely to take risks, being initial adopters and not late adopters (Nakata and Weidner, 2012). In contrast, the consumers with more experience are more cautious when the subject is innovation and tend to adopt these products later (Anderson and Billou, 2007).



Table 5: Distribution of agreement ratio per Age Group CA (%) PA (%) DADD(%) PD (%) CD (%) Sig.

Advertisement of the Stores

Younga 38.8 13.6 17.5 9.7 20.40.002**Adulta 46.6 11.7 15.3 7.4 19.0

Elderlyb 59.7 14.5 10.5 4.8 10.5

Advertisement of the Brands

Younga 26.2 11.7 11.7 22.3 28.20.000***Adulta 29.4 9.2 17.2 12.9 31.3

Elderlyb 47.6 15.3 12.1 7.3 17.7

Time SavingYounga 58.3 21.4 11.7 0.0 8.7

0.0001***Adulta 78.5 12.3 4.9 1.8 2.5Elderlyb 76.6 12.9 3.2 3.2 4.0

Fidelity to the StoreYounga 14.6 4.9 15.5 17.5 47.6

0.069*Adulta 10.4 5.5 16.6 13.5 54.0Elderlyb 21.8 11.3 13.7 6.5 46.8

Fidelity to the StoreYounga 19.4 7.8 18.4 16.5 37.9

0.9230Adulta 25.2 6.7 14.7 10.4 42.9Elderlyb 25.0 8.9 18.5 4.8 42.7

Incremental InnovationYounga 38.8 12.6 13.6 11.7 23.3

0.229Adulta 42.9 17.8 4.9 11.7 22.7Elderlyb 54.0 8.1 7.3 8.1 22.6

Radical InnovationYounga 20.4 9.7 17.5 20.4 32.0

0.149Adulta 14.7 5.5 22.1 18.4 39.3Elderlyb 16.9 8.9 13.7 12.1 48.4

Initial AdoptersYounga 7.8 12.6 18.4 20.4 40.8

0.067Adulta 8.0 8.6 9.8 17.2 56.4Elderlyb 10.5 5.6 20.2 6.5 57.3

Late AdoptersYounga 14.6 9.7 28.2 20.4 27.2

0.000***Adulta 29.4 16.0 26.4 9.8 18.4Elderlyb 43.5 8.9 21.0 8.9 17.7

*** p < 0.01; ** p < 0.05; *p < 0.1; a determine the similarity groups; b determine the different group.Non-Parametric Test: Kruskal-Wallis

Source: Research Data

5. Conclusion The current study seek to theoretically contribute in regards to the conceptual interaction between the subject innovations and consume in the bottom of the pyramid. The term ‘innovation’ is directly linked to advance, technology and modernity. However, these elements are not directly found in the concept of innovation for the low-income class (Viswanathan and Sridharan, 2011). Therefore, it was possible to study the concepts of innovation and point them out in the low-income market, theoretically contributing to the academic advance.A second contribution of this study is related to the utilized method to analyze the data. Taking into consideration the difficulties of the data collection due to the questionnaires and the complexity of the question, an alternative to enable the collection was the use of an answer card, which made the scales to not be intercalated but ordinals. Thus, the non-parametric statistic turns to be more suited for the data analysis.All in all, it was possible to confirm the empirical evidences in relation to the theoretical foundation utilized. The low-income consumer is more likely to acquire incremental innovations with adaptations in the products instead of the radical Innovations (Varadarajan, 2009; Antioco and Kleijnen, 2010). Still, the adoption of innovation tends to be late and not early, given the care that consumers have to have in relation risks of poorly done purchases.In addition, before the analysis of the non-parametric test it was possible to observe that the woman, by having a greater decision making role in the low-income families, is more aware of the marketing stimulus and the benefits of time saving in the home appliance produts (Azevedo and Mardergan Jr., 2009). Regarding innovation, they tend to be more traditional. In relation to income, there is little difference among the groups. In regards to age group, it was clear that the group of the youngest tends to adopt the products initially radical and oldest tends to acquire products with less innovation and later.References[1]. Anderson, J. and Billou, N. Serving the world's poor: innovation at the base of the economic pyramid. Journal

Of Business Strategy, 28(2), 14-21 (2007). doi:10.1108/02756660710732611.

[2]. Antioco, M., and Kleijnen, M. Consumer adoption of technological innovations. European Journal Of Marketing, 44(11/12), 1700-1724 (2010). doi:10.1108/03090561011079846

[3]. M. Azevedo and E. Mardegan Junior, E. O consumidor de baixa renda. Rio de Janeiro: Elsevier, 2009.

[4]. Barki, E., and Parente, J. Consumer Behaviour of the Base of the Pyramid Market in Brazil.Greener Management International, 2006(56), 11-23 (2006). doi:10.9774/gleaf.3062.2006.wi.00004.

[5]. C. Barros and E. Rocha. Lógica de consumo em um grupo das camadas populares: uma visão antropológica de significados culturais. In A. Rocha & J. Silva, Consumo na Base da pirâmide – estudos brasileiros (1st ed.). Rio de Janeiro: Mauad X, 2009.

[6]. Berti, A., and Bitencour, C. A dinâmica das competências organizacionais na operação de venda de calçados por catálogo: o caso da Azaleia, Colômbia. Revista Espacios, 33(4), 2012.

[7]. Campbell, G., and Skillings, J. Nonparametric Stepwise Multiple Comparison Procedures.Journal Of The American Statistical Association, 80(392), 998, 1985. doi:10.2307/2288566.

[8]. Hemais, M., Casotti, L., and Rocha, E. Hedonismo e moralismo: consumo na base da pirâmide. Rev. Adm. Empres., 53(2), 199-207, 2013. doi:10.1590/s0034-75902013000200007.

[9]. IBGE. Sistema IBGE de Recuperação Automática – SIDRA, 2010. Retrieved 24 July 2013, from http://www.sidra.ibge.gov.br/bda/orcfam/default.asp?t=4&z=t&o=23&u1=1&u2=1&u3=1&u4=1&u5=1&u6=.

[10]. Kaplinsky, R. “Bottom of the pyramid innovation” and pro-poor growth, 2011. Retrieved from http://www.bndes.gov.br/SiteBNDES/export/sites/default/bndes_pt/Galerias/Arquivos/empresa/download/inovacao_paper_02.pdf.

[11]. P. Kotler and K. Keller. Administração de marketing (12th ed.). São Paulo: Pearson Prentice Hall, 2006.



[12]. Kuczmarski, T. What is innovation? And why aren’t companies doing more of it?. Journal Of Consumer Marketing, 20(6), 536-541, 2003. doi:10.1108/07363760310499110.

[13]. Leifer, R., O'Connor, G., and Rice, M. A Implementação de inovação radical em empresas maduras. Revista De Administração De Empresas, 4(2), 17-30, 2002.

[14]. T. Levitt. A imaginacao de marketing. Sao Paulo: Atlas, 1990.

[15]. D. Moreira and A. Queiroz. Inovação: conceitos fundamentais. In D. Moreira & A. Queiroz, Inovação organizacional e tecnológica (1st ed.). São Paulo: Thompson, 2007.

[16]. Nascimento, P., Yu, A., and Sobral, M. As orientações estratégicas da inovação em produtos populares. Revista De Administração Contemporânea – RAC, 12(4), 907-930, 2008.

[17]. Nakata, C., and Weidner, K. Enhancing New Product Adoption at the Base of the Pyramid: A Contextualized Model. Journal Of Product Innovation Management, 29(1), 21-32, 2012. doi:10.1111/j.1540-5885.2011.00876.x.

[18]. J. Neter. Applied Linear Statistical Models (4th ed.). McGraw-Hill, 1996.

[18]. V. Nogami. Produção Simbólica e Reprodução Cultural do Conceito de Inovação no Mercado da Baixa Renda. (Masters). Programa de Pós-Graduação em Administração da Universidade Estadual de Maringá PPA/UEM – Maringá, 2012.

[19]. Nogami, V., and Pacagnan, M. Produção Acadêmica sobre o Consumo na Base da Pirâmide na Área de Marketing: uma Pesquisa Bibliométrica. Revista ADM.MADE, 15(3), 100-122, 2011.

[20]. Nogami, V., Vieira, F., and Medeiros, J. Reflexões acadêmicas e de mercado para o Marketing na base da pirâmide. Revista De Negócios, 17(4), 2012. doi:10.7867/1980-4431.2012v17n4p55-73.

[21]. OCDE - Organização para Cooperação e Desenvolvimento Econômico. Manual de Oslo(2nd ed.). Paris: Eurostat, 2004.

[22]. Parente, J., Miotto, A., & Barki, E. Polos comerciais na rua. Gvexecutivo, 6(6), 49-54, 2007.

[23]. J. Parente and E. Barki Valor no Varejo direcionado ao segmento de baixa renda. In E. Parente, T. Limeira & E. Barki, Varejos para a Baixa RendaVarejos para a Baixa Renda (1st ed.). Porto Alegre: Bookman, 2008.

[24]. Prahalad, C. The innovation sandbox. Strategy And Business, 44, 1-11, 2006.

[25]. Prahalad, C. and Hart, S. The fortune at the bottom of the pyramid. Strategy And Business,26, 1-14, 2002.

[26]. C. Prahalad. The fortune at the bottom of the pyramid. Upper Saddle River, NJ: Wharton School Pub, 2005.

[27]. Prahalad, C. Bottom of the Pyramid as a Source of Breakthrough Innovations. Journal Of Product Innovation Management, 29(1), 6-12, 2011. doi:10.1111/j.1540-5885.2011.00874.x.

[28]. Prajogo, D. and Ahmed, P. Relationships between innovation stimulus, innovation capacity, and innovation performance. R & D Management, 36(5), 499-515, 2006. doi:10.1111/j.1467-9310.2006.00450.x.

[29]. Rocha, A. and Silva, J. Inclusão social e marketing na base da pirâmide: uma agenda de pesquisa. RAE Electron., 7(2), 2008. doi:10.1590/s1676-56482008000200007.

[30]. E. Rogers. Diffusion of innovations (5th ed.). New York: Free Press, 2003.

[31]. J. Schumpeter. Capitalismo, socialismo e democracia. Rio de Janeiro: Zahar Editores, 1984.

[32]. Siegel, S. Estatistica nao-parametrica para as ciencias do comportamento. Sao Paulo, 1975.

[33]. Slappendel, C. Perspectives on Innovation in Organizations. Organization Studies, 17(1), 107-129, 1996. doi:10.1177/017084069601700105.

[34]. Sobral, M., Oliva, F., Yu, A., Grisi, C., and Santos, S. Desenvolvimento de produto popular: estratégia, inovação e decisão. Revista De Ciência Da Administração, 9(19), 81-102, 2007.

[35]. Tidd, J., Bessant, J., & Pavitt, K. Gestao da inovacao. Porto Alegre: Bookman, 2008.

[36]. Varadarajan, R. Fortune at the bottom of the innovation pyramid: The strategic logic of incremental innovations. Business Horizons, 52(1), 21-29, 2009. doi:10.1016/j.bushor.2008.03.011.

[37]. Viswanathan, M. and Sridharan, S. Product Development for the BoP: Insights on Concept and Prototype Development from University-Based Student Projects in India. Journal Of Product Innovation Management, 29(1), 52-69, 2012. doi:10.1111/j.1540-5885.2011.00878.x.

[37]. Wolfe, R. Organizational innovation: review, critique and suggested research directions. J Management Studies, 31(3), 405-431, 1994. doi:10.1111/j.1467-6486.1994.tb00624.x.



AUTHOR’S BIOGRAPHY



Citation: Gustavo Benevides and Antonio Carlos Giuliani (2015) Product Innovation and the Market at the Bottom of the Pyramid: Study at the Capital of São Paulo. IJHSSE 2(4), pp: 29-42.

Gustavo BenevidesGraduated in Economic Sciences at the Methodist University of Piracicaba (UNIMEP) in 1999. Masters in Business Administration (FGN – UNIMEP). Doctorate in Business Administration at the Municipal University of São Caetano do Sul (USCS). Professor at the University of Sorocaba (UNISO) and the Methodist University of Piracicaba (UNIMEP).

Antonio Carlos GiulianiGraduated in Business Administration at the Methodist University of Piracicaba (UNIMEP), Specialization in Marketing by the Getúlio Vargas Foundation (FGV), and by the University of California Berkeley. Masters and Doctorate in Business Administration and Marketing in the UNIMEP. Head of Masters and Doctorate of the Program of Business Administration in the UNIMEP.

2015-inovation

Documents

adoption of innovation

incremental innovation

meaning of innovation

concept of innovation

pyramid bop

basic needs products

consumer market

characteristics of intensity