UNIT 3 CONSUMER ENVIRONMENT

Structure
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3.0 Objectives 3.1 Introduction 3.2 Meaning of Consumer Environment 3.3 Family Environment
3.3.1 Structural Aspects 3.3.2 Family Life Cycle 3.3.3 Family Roles and Decision Making

3.4

Dimensions of Consumer Environment

3.4.1 Economic Environment 3:4.2 Social Environment 3.4.3 Cultural Environment

3.5 3.6 3.7 3.8 3.9

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Changes in the Consumer Environment Let Us Sum Up Key Words Some Useful Books Answers to Check Your Progress Exercises

3.0 OBJECTIVES
This unit deals with consumer environment which influences consumers' buying decisions. A study of the environmental factors affecting consumer behaviour should enable you to: recognise the influence of the family environment. explain the economic factors affecting consumer behaviour. identify the social classes which exercise a considerable influence on buyer's behaviour. appreciate the impact of cultural environment. analyse changes in the consumer environment brought about by economic reforms and globalisation.

3.1 INTRODUCTION
All consumers are subject to the influence of several environmental factors and these have an important bearing on their behaviour. The family, as well as economic, social and cultural forces taken together constitute the consumer's environment. Thus, the economic activities of a consumer are conditioned by several internal and external influences. In a dynamic and complex socio-economic environment, the consumer of today is exposed to a large variety of new products and services. Consumers to-day are also conscious of their rights a& wants to be assured of right quality of goods being available at the right price. It is in this context that the concept of 'Caveat Vendor' - let the seller beware - is replacing the term 'Caveat Emptor' - let the consumer beware. Besides, market conditions have been changing with technological changes, innovations

a,

befoe. ThecoSe of developing new producfs have also been imeasing en0mous1y each year, while the risk of failure haunfs the dreams of enmpeneurs.

3.2 MEANING OF CONSUMER ENVIRONMENT

A comprehensive approach to consumer environment should recognise that man is a complex being, and that any explanation of his economic decisions which does not take note of his psychological make-up, the society in which he lives, and the cultural background that flavours his orientation towards life, is likely to result in unsound business decisions by manufacturers and distributors of a very wide range of goods.

The consumer environment can be broadly classified as external and internal. The external environment to be discussed in detail in this unit comprise the various economic, social and cultural forces that are beyond the control of individual consumers. The psychological factors that are internal to the consumer include cognitions, attitudes, motivation, personality and interpersonal response traits.

LE E Ii :

11yLinz~I?.y,
AND LIFE STYLES LEADERSHIP PSYCHOLOGICAL FACTORS COGNlTIONS ATTITUDES MOTIVATIONS

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INCOME, SAVING TECHNOLOGY

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CONSUMERS BUYING DECISIONS

Figure 3.1 : The Complex Consumer Environment

3.3 FAMILY ENVIRONMENT

The influence of a family on its members is pervasive. The effect of traditional attitudes, interests, motivations, etc. is appreciable not only in the formative years, but is likely to extend throughout the life span of its members. During their early years, children often acquire consumption habits - including learning brand aames of certain types of products - which become part of their way of life. The life-style of a family largely sets its status in society. People's aspirations, professional opportunities, general behaviow and expectations are deeply affected by the traditional living style of their families. Through the family, individuals are introduced to society; they learn acceptable standards of behaviow. Within the family, cultural values are transmitted &d specific roles are assumed in the household. Members of a family interact with one another, and this m y lead to conflict on occasions, particularly when those in authority constrain the behaviour of dependents. A mother may decide that she knows best, what type of clothing to buy for her young children and refuse to purchase garments which she thinks are unsuitable,

3.3.1 Strrirtm~ral Aspects

Consmer Environment

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The term 'family' is used to describe several kinds of households. Broadly these can be divided into two types of family structures: the 'Nuclear' family which refers to the immediate family circle made up of father, mother and children who live together, and the 'Extended' family in which the nuclear fami';i lives with other relatives such as grand parents, uncles, aunts, cousins and in-laws. In western societies, marriage generally leads to a new household being established; new housing, furniture, kitchen equipments, etc. are required. The impact on consumer needs, is therefore, considerable. If a new home is not immediately set up and the newly married couple continue to live with the joint family, a different pattern spending will result. In nuclear households it has been seen that the wife's mother or mother-in-law is the person to advice. Her influence is considerable in the initial stages of setting up the home. As the young housewife acquires experience and self confidence the influence of the elder as an advisor tends to decline. The personality characteristics of the housewife affect the rate at which she is able to become independent in her shopping behaviour. Her motivational influences, for example, the strength of her need for achievement, or for dominance, are likely to contribute significantly to her style of house-keeping. The social and cultural environment of the joint family exert consistent informal pressure to conform to-the norms of the household. It also offers mutual help to the members. The clustering of families spanning several generations has undoubtedly had a profound effect on the behaviour of individuals. Strong family links may discourage the adoption of new life-styles, and patterns of personal expenditure may be inhibited by the cultural traditions and taboos of the family.

3 3 2 Family Life Cycle ..

The stages at which families find themselves is course of their life cycle (bachelors + newly 'married + young married couple with children + older mamed couple with children + older married couple without children + older single individuals) affect the nature of goods and services they demand and there are likely to be marked changes in the volume of expenditure on specific products. Decisions are also likely to be arriGed at in different ways at different stages in the family life cycle. A life cycle' analysis must allow for variables of age group, marital status, number and ages of children, social class and sources of income.

.3.3.3 Family Roles and Decision Making

The assignment of roles to specific members of family has an impact on its social development and on its buying behaviour. The duty of providing funds for the welfare of the family is customarily assumed by the husband (especially in Indian traditional and rural households). The wife tends to be the custodian with responsibilities particularly related to purchasing food, and household goods. But these traditional roles assigned to family members, have undergone changes as a result of socio-economic and political developments. There is greater economic, political, professional and social freedom of movement. This has undoubtedly changed the traditional views on dual income or working couple families and the dominant role of the husband as sole income earner has been challenged. Greater participation in an ever-widening area of buying may be expected and marketers keep this information in their selling strategies.

Check Your Progress 1 Note : i)

Use the space below for your answers.

ii) Check your answers with the model answers given at the end of the unit. 1) Marketing management is primarily concerned with a) identification of consumers and their needs b) evaluating competitors strategies c) keeping pace with technological changes
d) Enabling the business unit to earn profits

Consumer :The Bnslcs

2) Give three examples of individual psychological factors.

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3) What is a family life cycle ?

3.4 DIMENSIONS OF CONSUMER ENVIRONMENT

After analysing at length, the influence of the family as an important constituent of the consumer environment, we may now describe the economic, social and cultural dimensions of the environment.

3.4.1 Economic Environment

Consumers' buying decisions are the outcome of economic influence which comprisc income, price, technology, economy of purchase, dependability, quality and operational effectiveness of the product. These factors significantly affect the consumers' decision making process. The more important among the factors are the following : a) Income Income is a primary economic influence determining the consllmption expenditure of individuals. The personal disposable income is the amount of money people are left witli after paying the taxes. Although money income per capita has grown steadily in most economies, real income levels have not increased substantially due to a fall in the purchasing power of money. Consumers, on the basis of income, are grouped as upper-class, middle class, working class and the low income groups. In India, there exist considerable disparities in the income and wealth distribution. Increases in income influence the buying habits of the consumer. To quote Engle's law, "As family income rises the percentage spent on food declines and the percentage on other categories (clothing, recreation, health, education) and savings increases." b)
Savins and Debt

Consumer expenditures are also affected by savings and debt patterns. In India, people hold savings in the fonn of bank saving accounts, bonds, shares, real estate, jewellery and other assets. These savings are a major source of financing purchases. Consumers can increase their purchasing power also through borrowing. 'The availability of consumer credit due to the development of banking and financial institutions has been major contributor to the growth of the Indian market. It has enabled people to buy more than their current income or salaries allow, thus creating more jobs and still more income and more demand.
,c)

Product Considerations

A product can be defined as anything that can be offered to a group of consumers for attention, acquisition, use or consumption that might satisfy a need or a want. It includes physical objects, services, persons, places, organisations and ideas. Products are packaged and labelled and various customer services may be offered along with the product. All these criteria exert a considerable collective influence on buyers. Brand names, for example, tell the buyer something about product quality. Brand names

also increase the shopper's efficiency and help to call consumers attention to new products that might benefit them. Packaging which imparts benefits such as protection, economy and convenience, also influence buyers' decisions. d) Price Considerations Inspite of the increased role of non-price factors in influencing consumer behaviour, price remains an important factor. The consumer decides whether the price is right for the product a company is selling. The consumer, before purchasing, weighs the price against the perceived values of using the product. Consumers differ in the values they assign to different product features and marketers often vary their pricing strategies for different consumer segments. Sales at concessional price, price reductions, discount offers and free gifts are commonly used as sales promotion tools by marketers. Consumers sometimes defer purchases to avail of price reductions during an off-season sale. Advertisements today have an important influence on consumers. Advertising has emerged as a potent promotional tool in enhancing sales of existing products and introducing new products. Companies use advertising to increase the awareness of consumers through the communication of persuasive information about their products, services or organisations. e) Influence of Technology The most dramatic force shaping people's consumption is perhaps technology. Technology has released wonders such as penicillin, open heart surgery and the birth control pill. It has released forces of change in production processes and nature of products. It has revolutionalised the world of media entertainment and communication. Many of today's common products were not available a hundred years ago. The consumer today, is, therefore, constantly subjected to the advent of new products, which claim features of greater efficiency, comfort, speed and reliability. The consumer today has not only a wider range of products to choose from; he also has an enhanced variety and brands of products available for purchase. Check Your Progress 2 Note : i) Use the space below for your answers.

Consumer Environment

ii) Check your answers with the model answers given at the end of the unit.
1) Personal disposable income refers to:

a) b) c) d)

income earned on a monthly basis income minus taxes income minus (taxes and savings) income minus borrowings

2) In purchasing a product, the consumer considers: a) product quality b) after sales service c) branding and packaging d) All of the above
3) Technological innovations have brought about a) better after sales service b) wide range of products c) production of high quality goods d) lowered prices

3.4.2 Social Environment

The social class comprises a large group of people who possess something common in values, interests, life-styles and behaviour. The social classes are formed when people feel empathy with others sharing similar values and economic circumstances. The variables like status, wealth and power are commonly used to stratify the society socially. The social classes are by no means entirely homogenous and each class blends into its adjacent classes. Nevertheless, the people in each class share many of the same goals and

Consumer :The Bas~cs

hold similar views about tht; appropriate means of reaching theln. ~vlarkedng Manager's therefore study in detail the charzcteristics of the social class hefore designing marketing strategies for it.
A member of any social class would normally select items that conform to the notion of good taste and fitness held by the class. Families of the upper middle class, for instance. including fairly successful professional men and executives are likely to buy particular kind of houses, furniture, clothing, recreation and luxuries that coincide with what their class thinks is the proper way to live. Indicators of changes in social stratification are more equal educational opportunity, greater social mobility, the impact of modem communication, mass media, etc., and they cause simfiv blurring of rigid social d~v~sioiis and attitudes. In addition to social classes, there are social and occupational groups which have a bearing on consumer behaviour. The social group differs from a social class in the sense that the group is narrower and restricted in memberships. Thcs a class inay compromise of several groups. The groups that affect a consumer's behaviour are discussed below.
Reference Group is a relatively small social group to which a consumer belongs or aspires to belong and that acts as a guide to acceptable beliefs, values, attitudes and behaviour. Membership of such groups consist of small but intimate members who are frequently meet and interact with each other. Suitable examples of such g 7 - s u , ~ friends, peer groups, fmi!y, work associates, professional associations and c ? on. Membership groups play a significant role in the transmissioil of beileis. AInong membership groups, the family is considered the most powerful influenlfal group becziusc of its unique role in early childhood socialisation. Aspirational groups are groups of which an individual makes maximum effort to r~cquire membership. Sports heroes and movie stars are examples of aspirational Eraups. Dissociative groups are groups which an individual avoids relating to. Such groups equally contribute to shape the behaviour of consumers, because individuals :>void the actions or consumption behaviour that characterise the dissociative or avoidanc,' 1 oups. Face-to-face groups are groups of people small enough for the i n d i v ~ ~ b a l to communicate with. Such groups have a direct influence on an individual's ideas, tastes, values and behaviour.

An individual is influenced by a reference group in the following manner:

a) These groups expose the persons to possible new behaviours and life-styles.
b)

They also influence the individual attitudes and self concept because the persdn normally desires to fit in.

c) They create pressure for conformity that may affect the choice of actual product and brand name.

3.4.3 Cultural Environment

To understand the behaviour of people as consumers some knowledge of the influence of cultural values and norms is also necessary. Consumption habits, which are part of the behaviorir pattern of individuals are deeply affected by the prevailing culture of the society to which people belong. Also society develops distinctive cultures which reflect the many facets of human behaviour that ha* been learned and accepted by groups of people so that these form part of their traditional way of life, their life-style. Individuals may react quite differently to the same situation according to their cultural background and their general experience. Bank Managers, for zxample, are expected by the society in which they live to be reliable, honest and serious minded individuals. Traders, on the other hand, are suspected to be greedy and bent on making profit by exploiting customers. In addition cultural values in society find expression in the products and services that are demanded; the acceptance of new products, for example, may be dependent on the cultural implications involved in changing the prevailing pattern of consumption.

The &ratusof ~ o m e fln a particular culture may affect the con$~:rnpbonof certain types i of products, such as domestic labour saving equipments (Washing Machines, Ivficrowave Ovens). In a big country like India, several sub-cultures can be identified on me basis of religion, rural-urban origin and geographical distribution. Further, as population of an increases, the broad ideals of culture no longer satisfy certain minority groups and sub-cultures emerge. Cultural changes are the outcome of social, political and economlc factors, changes in technology, changes in the literacy rates and so forth. Cultural trends are used as a basis for market segmentation, product development, advertising and other aspects of marketing sttategy.

Consumer Environment

3.5

CHANGES IN THE CONSUMER ENVIRONMENT

The consumer environment all over the world and particularly in Ind~a undergoing a is sea chmge. Globalisation has placed the consumer in the wider international market. Liberalisation, privatisation and economic reforms in India have brought in multinationals and have also ushered in technical collabori?tion md joint ventures. These changes have resulted in a host of new products flooding the Indian market. Consumers have a wider range of products to choose from; anc marketers are constantly competihg for higher sales through advertising and innovative c:!:~s promotion tools. Quality consciousness and cost consciousness are also growing. i'ompanies are constantly struggling to improve quality, reduce costs and provide better aftcr-sales services to their clients. Consumer awareness has consa!cr;lbly increased and consumer forums are providing prokctlon to consumers a,oct:nst ~ i l f x practices of the producers and suppliers of goods r and services. The consumer environment, today is not static, but highly volatile and fast changing.
Check Your Progress 3 Note : i) Use the space below for your answers. ii) Check your answers with the model answers given at the end of the unit. 1) Identify the incorrect statement about reference groups: a) a reference group is a small social group b) the family c) movie stars and cricket players d) distant relatives 2) Cultural trends ate a good basis for: a) market segmentatim b) product development c) advertising management d) All of the above

3.4 LET US SUM UP

The consumer-environment comprises the family and the cultural, sociological and economic factors. The family environment is an important factor influencing the behaviour of individuals. It is through the family that individuals are introduced w society and imbibe standards of consumption habits. The economic forces of income, savings, credit availability, product considerations; price considerations and technology exert pressure on the reasoning capacity of buyers. The social classes and reference groups can also be potent sources of influence. The cultural values of a society also play an important role in this regard.

Consumer :The Basics

The consumer todav is also a more rational, aware and discerning individual than he was in the past.

3.7 KEY WORDS

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Entrepreneur: A person willing to take up a new business with risks. Strategy: It refers to courses of action designed to achieve success in the face of difficulties. Role Model: A person who exerts a considerable influence on the life-style and behaviour of another person. Marketing Mix: It is a system comprising the sub-systems of price, product, promotion and distribution. Norms: Standards, Patterns or types.

3.8 SOME USEFUL BOOKS

Subha, Mehta C, (1973) Itudian Consumers :Studies and Cases for Marketing Decisions, Tata McGraw Hill Book Co., Bombay. Kotler, Philip, (1987), Principles of Marketing, Prentice Hall of India, New Delhi. Mc Gown, K.L., Marketing Research - Text and Cases, Winthrop Publishing House, Cambridge, Masachusetts. Sehaf, M.A., (1989), Marketing : Principles and Practice, Anmol Publications, New Delhi. Sethi Mobini and Premavathy Seetharaman (1994), Consumerism :A Growing Concept, Phoenix Publishing House, New Delhi.
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3.9

ANSWERS TO CHECK YOUR PROGRESS EXERCISES

Check Your Progress 1

2) Cognitions, Attitudes and Motivation

3) A family's life cycle comprises the following stages. (Bachelors + newly married + young married couple with children + older married couple with children + older married couple without children + older single people.) Expenditure on specific products varies considerably during specific stages of the life cycle.
Check Your Progress 2 Check Your Progress 3

1) D 2) D