Imagine walking into a retail store to purchase a pair of shoes. You browse the shelves, searching for a shoe with the perfect fit. "I am looking for a leather shoe in size 7, preferably black", you announce. The salesperson lays before you an array of moccasins, oxfords, derbies and loafers, observing what piques your interest. You carefully examine their price labels, design and quality of stitch, narrowing your choice to two moccasins. "Is there any quality difference between these two shoes? Why is one costlier than the other?", you ask. "I will consider buying the shoe on my right if you could offer a discount. At least 15%". This conversation goes back and forth until you are convinced of having got a good deal.
This seemingly uncomplicated activity of purchasing shoes demands an assortment of knowledge and skills. First, you require higher-level knowledge about the kind of shoe you want to purchase, the utility of its attributes and how to go about purchasing it. Next, you need specialised knowledge to assess product quality and compare prices. You have to match this knowledge with the skill to check product labels, interact with the salesperson and negotiate for a better deal. The collection of knowledge and skills that relate to what, how and why to participate in marketplace exchange as consumers or entrepreneurs is called marketplace literacy (ML). All individuals need ML to effectively and gainfully engage in marketplaces. Most consumers like me and you-the readers of this article-will have developed ML organically through the experience of repeatedly engaging with marketplaces since childhood.
However, hundreds of millions of individuals living in subsistence settings do not have the financial resources, infrastructure or literacy levels required to access marketplaces or confidently participate in marketing interactions. Such individuals have limited means to develop ML organically. Their lack of ML constrains their ability to effectively assess product benefits, appreciate the value of new products and brands and make optimal decisions in the marketplace. This is detrimental to the growing number of companies that develop products and services targeted at low-income consumers in emerging economies. This is also detrimental to the well-being of subsistence consumers, who need these products and services to improve their quality of life.
In our recent article in the Journal of Marketing, we conduct a series of field experiments to unpack the downstream effects of ML on consumers and entrepreneurs. The participants of our experiments belonged to remote villages in South India and the Masai tribe in Tanzania, who live far away from marketplaces and have few means to develop ML. We developed a 6-hour video-based training programme that teaches marketing basics from consumers' and entrepreneurs' standpoints. Our objective was to provide ML training to randomly selected participants and observe its effects on their behaviour and decision-making.
We developed and validated a novel scale to measure ML. Pre-experiment measures supported our prediction-the higher the access to marketplaces, the higher the ML. Individuals living in villages with good road access or located near a town had higher ML than individuals living in remote villages, supporting the notion that ML develops organically through repeated exposure to marketing interactions.
Our second set of findings relate to how ML improves consumer-related outcomes. We found that an increased ML is associated with an increase in psychological well-being, meaning individuals feel more empowered and autonomous to make their own life choices. We also found that externally providing ML through the training programme increased consumer confidence to make marketplace decisions such as assessing the product quality and comparing prices. Furthermore, we measured participants' actual consumer skills, such as checking prices, matching prices with volume, calculating discounts and bargaining for a better price. We found that an improvement in these skills consequent to the training programme was highest for participants with the least access to marketplaces. This finding indicates that externally providing ML benefited individuals with poor marketplace access the most.
Finally, we investigated how ML relates to microenterprise formation. Our findings show that an increase in ML leads to increased entrepreneurial intent and actual enterprise startups. However, in contrast to consumer-related benefits, entrepreneur-related benefits are higher for individuals with high marketplace access. This is because entrepreneurship requires recognition of business opportunities from the market and access to market infrastructure.
What is the importance of these findings? Primarily, we introduce to marketers a concept often taken for granted in affluent consumers, ML. We show that a lack of this critical form of literacy can lead to suboptimal decision-making, impacting consumers' ability to correctly assess the value of products and services. These negative effects are particularly severe for individuals living in remote areas with low access to markets. We also demonstrate that companies and policymakers can engender ML through brief training programmes. Alternatively, our research offers a scale to measure ML that can help companies target such training programmes at disadvantaged consumers with few means to participate in marketplaces. Finally, our research offers a pathway to augment the creation of microenterprises in rural areas.
In summary, the main takeaways of our research are the following:
ML is the sum total of knowledge and skills required to effectively participate in the marketplace and make optimal decisions.
ML is gained through repeated market participation. Hence, consumers with low access to marketplaces (due to financial constraints, physical distance, low literacy) may lack ML.
ML can be measured. It can also be instilled in individuals through a training programme.
An increase in ML improves consumers'confidence and skills.
An increase in ML also increases the probability of enterprise startups, as long as the individual has access to market infrastructure and awareness of business opportunities.
You can read the full paper at: Viswanathan, Madhubalan, Nita Umashankar, Arun Sreekumar, and Ashley Goreczny. "Marketplace Literacy as a Pathway to a Better World: Evidence from Field Experiments in Low-Access Subsistence Marketplaces." Journal of Marketing 85, no. 3 (2021): 113-129.