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After completing this chapter, you should be able to:

1. Characterize organizations using six main dimensions: membership structure, organization, resources, motives and goals, roles, and culture.
2. Understand how organization structure and characteristics relate to consumption activities.
3. Identify the major segments of organizational buyers and the basic types of purchases.
4. Explain how household structure and characteristics relate to consumption activities.
5. Recognize the important role of family life cycle in consumption activities.
6. Distinguish decision roles and decision-making styles in households and organizations.
7. Describe a variety of consuming collectives besides households and business organizations.

• A group simply refers to two or more individuals who have certain implicitly or explicitly defined relationships to one another such that their behavior isinterdependent. In this chapter we talk about two categories of groups: organizational consumers and families and households.
• Understanding groups is crucial in understanding consumer behavior because many consumption activities involve groups rather individuals. In fact, almost all consumer behaviors involve groups at one or more of the stages in the circle of consumer behavior. For example, an individual acquisition decision may be followed by group consumption (e.g., individual purchase of the ingredients of a meal for a dinner party, or group acquisition by individual consumption (Mom decides to purchase a pet for Junior), and so on. Even decisions that appear on the surface to be individual decisions often are not.
• Groups vary in terms of their membership structure. There are many different kinds of consuming entities, including business organizations, households, buying clubs and even gangs. Households made up of family members are significant consumption groups cross-culturally. Groups vary in terms of their decision-making style or organization. Family participants in the group decision may vary. Groups mobilize resources in order to realize their consumption choices. Group consumption choices often involve a mix of motives or goals. Group consumption choices include practical and powerful behaviors, symbolic and status concerns, as well as habits of which consumers are often unaware. Group members play different roles in the purchase process. Groups have a culture that influences their purchase and consumption behaviors. In seeking to understand, predict, and manage group purchase behaviors, these elements need to be understood regardless of whether we are dealing with households and families, or purchasing groups within business organizations. Marketers and consumers advocates should be aware of these factors and anticipate their influence on group consumption decisions, as illustrated in Industry Insights 14.1, for example.

Selling Pianos in Rural Montana (50.0K)

• In the first section of this chapter we review some of the general characteristics of organizational and domestic groups that are significant in analyzing consumer behaviors.
• The next major section of the chapter focuses on families and households.
• The chapter concludes with a brief description of consuming collectives other than organizational consumers and domestic groups.

• One way to think about groups is in terms of their membership structure and characteristics. Important structural considerations include size, formality, voluntary or involuntary membership, primary or secondary interpersonal contact, and affect.

1. Group Size
• Group size is a structural dimension that may vary over the phases of the circle of consumption. One family member may be the sole decision-maker for routine purchases. In a large organization, a small purchasing group or even a single individual may also have decision authority for a variety of purchases, even though they constitute a significant outlay of funds.
• For marketers, another aspect of size is the purchasing power of the group. For example, firms are often interested in identifying large groups that make large aggregate purchases.
2. Group Formality
• Another way in which we can classify the structure of consuming groups is in terms of formality; groups may be more or less formal or informal.
• Formal groups are bound together by a contractual relationship. For example, marriage, birth and baptismal certificates, wills, and titles to property provide formal bases for the existence of families and households. Employees of business organizations are often bound by contracts specifying their duties. Other documents stipulate compensation, health benefits, pensions and other items of value they receive from the organization.
• Informal groups are not bound by such formal ties, but may be identified by regular interaction, common lifestyle or interests. Market segments constitute informal groups. Informal groups may be significant to consumers or as consuming entities.
3. Voluntary or Involuntary Membership
• Membership in consuming groups may be voluntary or involuntary. All people are involuntary members of at least some groups. You did not choose your culture, race, social class, and family. However membership in involuntary groups, groups that might also include a church or school, may influence your consumption patterns and preferences. The impact of involuntary group membership on consumption patterns is extreme in the case of military personnel, prison inmates, nursing patients and other members of total institutions. Total institutions make their members' most basic as well as discretionary consumption choices. Such groups have often attracted the interests of marketers hoping to cater to their aggregate needs, or social policy advocates eager to change their consumption regimes.
• Exhibit 14.1 indicates that voluntary and involuntary groups can be either formal or informal.
• For example, corporate employees belong to formal organizations where membership is voluntary. Public school students belong to a formal organization and sometimes participate involuntarily in consumption behaviors, such as wearing school uniforms. Members of families and market segments are informal groups in which membership is involuntary. Fans are voluntary members of an informal group, unless of course they join a fan club, which is a formal group.

Kinds of Groups (50.0K)

4. Primary and Secondary Groups
• The structure of consumption groups may be distinguished by whether they are primary or secondary. Groups characterized by frequentinterpersonal contact are referred to as primary groups. Groups characterized by limited interpersonal contact are called secondary groups.
• Primary consumption groups include the household and family. Primary groups play an important role in consumer socialization, discussed in depth later in the chapter; they instill core values that guide a person's consumer behaviors throughout his or her life. Secondary groups like corporations, social clubs, professional organizations, or groups like supporters of summer arts program influence values and consumption behaviors but not so fundamentally as primary groups.
5. Affect
• One additional aspect of groups that should not be neglected is the important cement provided by affect between group members. Affect softens the role of personal self-interest in purchase consumption decisions; group members compromise self-interest to maintain long-term relationships.
• Love, attraction, commitment, and emotional support are characteristics that motivate considerable consumer behavior in households. Affect plays a role even in relationships between industrial buyers and sellers.

1. Organizational Culture
• Organizational culture refers to the meanings organizational members share about the organization - how individuals make sense of the organization. We can define group or organizational culture as the pattern of shared values and beliefs that help individuals understand organizational functioning and thus provide norms for behavior in the organization. Organizations are not simply economic group teams but vary in their expressive and symbolic aspects as well. Understanding organizational culture, like the culture of other consumer groups, is useful in developing strategies to target organizational buyers.
• An organization's culture often manifests itself to outsiders in terms of its reputation or image. For example, the corporate images of the largest automobile manufacturers-General Motors, Ford, Daimler Chrysler, Toyota, and Volkswagen-are distinct and diverse. The different images reflect different organizational philosophy and culture with regard to product, quality, styling, and marketing.
• Organizational culture often reflects more general cultural values.
• Any given organization is likely to comprise multiple cultures. As an example, professional company employees in the Silicon Valley of California illustrate that multiple cultures cut across an organization. Looking for multiple cultures within organizations can be useful for ensuing effective targeting and positioning.
2. Organizational Stories, Group Rituals and Performances
• Organizations socialize new members into the culture to achieve a sense of organizational identity and commitment and enable coordinated action. This socialization occurs through mechanisms that create and convey organizational culture. Mission statements, organizational stories, slogans, rituals, and other symbolic processes help create the organization's culture.
• Three tools for creating and conveying culture are worth some special attention: 1) corporate mission statements, 2) organizational stories, and 3) rituals and performances.

Mission Statements

• Corporate mission statements help create and convey organizationalculture. Contrast the mission statements of two familiar apparel companies that offer casual and well-styled clothing, The Gap and Espirit. The business mission of The Gap is to offer well-styled clothes at affordable prices in a friendly environment. The culture at The Gap encourages responsibility to society through a company-wide commitment to an in-house community program, but the focus of the culture is on consistent quality, low price and helpful service. The business of Espirit de Corp. is quite different. Susie Tompkins, founder of the company, was quoted as saying, "Profits are a means for Espirit to stay socially responsible, my aim is that Espirit inspires good values." When asked what the aim of Espirit was Tompkins stated, "To have a solid business with a strong emphasis on humanistic values." The commitment reflected in Espirit's mission statement both to employees and customers is "Be informed. Be involved. Make a difference." How might these differences in mission affect marketing to these two organizations?

Organizational Stories

• Organizational stories are another important way of conveying organizational culture. Stories, like the myths discussed in Chapter 5, explain and give meaning to the everyday world. Stories help maintain cohesion and provide guidelines by sharing legends of the company to new employees in a powerful way. Stories often portray the organization in heroic terms to members and outsiders. Stories don't typically tell about values and feelings directly. Instead, their meaning is couched in symbolic terms.
• Both households and companies with strong cultures are adept at recognizing and creating situational heroes. Heroes are those individuals who do extraordinary things under the circumstances and who embody the culture's ethic of success. An example of a story that features a situational hero and also embodies household values and beliefs is provided in Consumer Chronicles 14.1.
• The business press often portrays successful CEOs' in heroic terms.

Performance and Rituals

• Groups need a sense of identity (in addition to other kinds of resources) for their survival. Like individuals, they require tangible symbols of their status and well being. To this end, groups typically engage in expressive consumption activities through which members communicate to one another and to others information about their status and well being. Thus, groups engage in performances and ritualsespecially life transition rituals. Performances help to express values, beliefs, status and well being at different times during the year in different ways. Life transition rituals acknowledge changes in status and reassures its members' continued well being.
• Among U.S. business organizations, a good example of a performance that reflects organizational culture is casual dress on Fridays.
• Annual performances include corporate retreats, dinners, and parties. Among selling organizations, such as Avon or Amway, award celebrations for top sellers are not uncommon. The presentation involves a ceremony where all work comes to a halt. Although the ceremony involves some humor, it is a very serious event that makes corporate values clear to everyone and provides signs of belonging to the culture. Roasts, "retirement parties, Outward Bound excursions, and the like provide examples of life transition rituals undertaken by organizations. By paying attention to organizational performances and rituals, marketers can gain insight into values that may influence purchase behavior.

• Organizational consumers constitute enormous, diverse, and complex markets. They may be categorized in a variety of ways as we discuss below.
• Organizational consumers also share a number of characteristics. Typically organizations rely on a small number of buyers to fill their needs. Recent moves by big organizational buyers to consolidate suppliers through on-line auctions are the latest example of this characteristic. Within organizations, buyers are often organized into temporary or permanent buying centers or buying task groups. The buying center includes all those persons involved in the buying decision process, such as the
1. Initiator - the member who identifies a need
2. Gatekeeper - the member who collects and controls information about the purchase
3. Decider - the member who determines what product or service to purchase
4. Buyer or purchasing agent - the member who physically acquires the product or service, and
5. User - the members who consume the product or service.
• To market successfully to organizations, salespeople must identify and communicate with the participants in the organizational buying process.
• Organizational buyers display other characteristics. Organizational buyers are sometimes geographically concentrated in a region of a country. Good examples include Silicon Valley in northern California, home to many computer and information processing companies; Rotterdam in the Netherlands, home to many computer and information processing companies; and, Milan, Italy, home to a number of fashion and design firms.
• Another characteristic of organizational buyer is professionalism. Industrial goods are purchased by professional purchasing agents; in the U.S. many belong to the National Association of Purchasing Managers (NAPM), and there are similar organizations in other nations. Associated with professionalism is heightened formality in organizational purchasing and the use of a variety of buying instruments, such as quotations, proposals, purchase contracts, bids, and so forth.
• Organizational consumers are often relatively price inelastic. But why should they be relatively insensitive to minor price changes? First, they often buy customized products that are inherently more expensive. Second, many buyers are more concerned with long term service and supply relationships with their sellers. These relationships help ensure a minimum of costly production down time, and reduce the costs of finding supplies. Third, organizational customers often require certain raw materials regardless of price fluctuations -- no matter what, makers of aluminum cans require aluminum and governments require military uniforms, for example. Fourth, organizational demand is derived from the demand for finished consumer goods -- petroleum refiners must buy oil to meet consumer demand for gasoline and heating oil.
• A final characteristic of organizational buyers that is taking on increasing importance in the global marketplace is close customer-supplier relationships. In business-to-business marketing, buyers and sellers seek to extract advantage in the purchase process. However, many firms are finding that to compete effectively internationally, they must build inter-organization alliances to confront similar organizations. Because of the changing marketing environment, on-going buyer-seller relationships (known as relational exchanges) have become more common.
• Close supplier-customer cooperation is the norm in many nations and provides the industries and governments of such nations with competitive advantages. NICs in the Pacific Rim provide good examples of strong inter-organizational alliances.
• Inter-organizational relationships may become critical to company success in different ways. For example, many buying organizations want greater certainty in their relationships with suppliers. In addition, the need for increasingly rapid response to shifting patterns of demand and rising consumer concern with quality mean that industrial consumers must work more closely with suppliers to ensure built-in quality.
• If organizations are to develop lasting exchange relationships they must adapt to each other's needs. Organizations adapt to each other because of power and/or trust. The role of power in inter-organizational relationships is very important. Powerrefers to the ability of one partner in an exchange relationship to impose its preferences on the other party. Power does not have to be used to be possessed; it is the potential that is important. Power derives from having critical resources and from controlling alternative sources of those resources.
• Organizations respond to the demands of other organizations that control resources critical to them. We can refer to this as a power-dependence situation. Thus, big global retailers like Wal-Mart and Carrefour have the power to impose requirements on their suppliers because of their financial and logistical resources.
• Firms also adapt to each other to show their trust and commitment to the relationship. Trustrefers to one party's belief in the reliability and integrity of an exchange partner. Commitmentrefers to an enduring desire to maintain a valued relationship. Commitment by industrial buyers to sellers is maintained both by the costs of leaving, a perceived lack of alternatives to replace the relationship, and relational and social norms that build trust between buyers and sellers.
• Trust and commitment-based adaptations are often reciprocal: buyers and sellers adapt to each other. One organization may adapt a product to satisfy a customer. Another organization will adapt production processes to show commitment. These adaptations are also called asset-specific investments. They help to maintain buyer-seller relationships because it becomes costly to switch suppliers when such investments have been made. Reciprocal commitments to shared problem solving and information sharing, for example, are not based on power-dependence, but instead are investments that strengthen relationships between organizations in expectation of positive future outcomes. Informal inter-organizational relationships supplement and reinforce formal contracts.

• Organizational purchases can be distinguished by what is called their buy class. We discuss three basic buy classes: new task buys, modified rebuys and straight rebuys.
• New task buys are relatively rare, but the sales can be very large in dollar terms. The buying center for these buys tends to be large, solution of the problem is of paramount concern and economic considerations are secondary. New buys are considered risky, and buyers are willing to consider many alternatives. Engineers often play a key role in these decisions.
• The straight rebuy is the most common purchase situation. The purchasing agent is the primary influence and the buying center is very small and quick to decide. To minimize purchase costs (information search, proposal solicitation and evaluation, etc.) buying organizations may also seek to engage in straight rebuys by identifying reliable sellers who deliver goods of consistent quality on time and for an agreed upon price, thus minimizing their uncertainty. Loyalty plays a role in the process as well. Selling firms will work to convince their organizational customers of the virtue of engaging in straight rebuys, routine replacement of standardized items on a stable schedule at a stable price. Computerized automated order systems have enabled firms to automate the straight rebuy process in many cases.
• The modified rebuy has a mix of new task and straight rebuy features. The buying center is somewhat larger and the purchasing agents somewhat less influential than for the straight rebuy. In modified rebuy situations, buyers sometimes revert to straight rebuy behavior, choosing known suppliers and thereby closing off opportunities for outside suppliers.
• The extent to which organizations engage in each type of buy class depends on factors including environmental (e.g., the rate of technological change in the industry), organizational (e.g., the degree of hierarchy and centralization), and interpersonal (e.g., quality and character of interaction between organizations' selling and buying representatives).
• Features of the purchase situation, including the newness of the problem to the buyer and the need for information, are the most important determinants of the buy class decision. Recent research suggests that the size, formality, and membership of the buying center will vary depending on purchase risk, how frequently the organization encounters new tasks and high information needs.

• Organizational buyers can be divided into three main parts, two in the private sector-industrial markets and resellers markets-and one in the public sector-governmental consumers. More detailed classification systems exist, such as the Standard Industrial Classification (SIC) system, that are of value in segmenting business markets but we do not discuss these finer distinctions here.

1. Private Sector: Industrial
• The industrial market consists of all the individuals and organizations that acquire goods and services to use in the production of other goods or services that are sold, rented, or supplied to others. Industrial markets, also called business markets, include firms involved in agriculture, forestry, fisheries, mining, manufacturing, construction, communications, utilities, banking, finance, insurance, and other services. These customers spend more dollars and consume more different kinds of things than do households and individual consumers.
• Industrial buying centers and the individuals who make them up are concerned with a number of factors when making purchase decisions. Like households and other organized consuming groups, they are influenced by environmental, organizational, interpersonal, and individual factors when making buying decisions. For example, a downturn in an index of economic indicators can lead purchase managers to delay purchases of capital equipment, while regulatory tightening in the waste disposal industry can lead firms that manage landfills to invest in liners, monitoring equipment, and high tech separators and chemical clean-up products.
• Interpersonal factors such as authority, status, empathy and persuasiveness influence the purchase process in industrial firms. Information about these processes within the buying center is difficult for salespeople to discover except through long-term relationships with buyers. Finally, individual differences among members of a buying center play a role in the buying process. Buyers can be old-time industry insiders who have heard it all, cost-conscious penny pinching deal seekers, loyal buyers, cautious quality buyers, information seeking comparison buyers, etc. In short, personal factors vary widely; industrial sellers need to know their customers and adapt to their personal styles.
2. Private Sector: Reseller Market
• The resellers market consists of hundreds of thousands of wholesale firms and millions of retail firms in the U.S. alone, with many U.S.$ trillions purchased annually. Much of what was said above about industrial buying centers applies to resellers as well. They too are affected by environmental, organizational, interpersonal and personal factors.
• One difference between industrial and reseller markets is the importance of assortment to resellers. Resellers handle a variety of products for sale, and do so in part to satisfy consumer expectations of what particular resellers handle. Resellers may compete for customers by opting to carry exclusive assortments, carrying only Gucci or Joan & David shoes or Komatsu or Caterpillar heavy equipment, for example. Resellers may compete for customers by opting to carry a deep assortment, such as specialized boutiques that carry entire product families produced by several suppliers. Office supply stores, beauty products outlets, and kitchenware boutiques are good first world examples. Resellers may compete for customers by opting to carry a broad assortment--several product lines--consistent with their particular niche.
• Resellers use roughly the same buying process as industrial buyers. For standard items, resellers simply reorder when inventory gets low. If margins or market share erode, buyers may shop around to renegotiate prices with sellers, initiating a modified rebuy process. One organizational difference between industrial buyers and resellers is the important roles played by buyers, such as those in the grocery business. These individuals are key decision-makers who make numerous modified re-buys and who can make or break new products in new buy situations.
• A.C. Nielsen reports that for new buys resellers are influenced by: evidence of customer demand, well-designed advertising and sales promotion plans (cooperative advertising, advertising aids, sponsorship of in-store demonstrations) and generous financial incentives (return and exchange privileges for the reseller, stockless/just-in-time purchasing that reduces reseller inventory costs, cash discounts, lengthy payment periods, and allowances for merchandise markdowns by the reseller).
3. Public Sector
• Governmental markets include units at the national (federal or national), regional (state, province, department, canton autonomous, region, tribe) and local (county, parish, city, commune, town, arrondissement, etc.). In many, if not most countries, governments are the largest organizational customers.
• Government buying practices are complex, and often frustrating to suppliers. The buying process and bidding practices are often highly formalized. Considerable paper work is required. The buying center includes multiple layers of bureaucracy, potentially diluting influence. Government buyers' decisions are subject to public review in some nations, especially those of first world, and sensitive to policy shifts brought about by changing administrations. Low price bids (subject to considerable post-contract revision) are sometimes prioritized at the expense of quality. Delays in government buying decisions are common but once made, rapid fulfillment is expected.

1. Description
• Domestic groups are perhaps the most widely distributed social unit. They comprise a primary, involuntary unit of social life between the individual and the community. Domestic groups vary in formality and the role of affect. Domestic groups are the most important unit of analysis for consumer behavior because they make most acquisition, consumption, and disposition decisions. Consumers in domestic groups decide how to choose household products and services, and the amount of time to spend on different tasks and leisure activities. Because so many decisions are made in domestic groups, consumer market segmentation and targeting schemes should take domestic group structure and activities into account.
• Domestic groups, families, and households differ. Families comprise individuals related by blood, marriage, adoption and emotional commitment. However, we know from our own experience that family includes a broader range of people than the domestic group with whom we regularly reside, interact, and make consumption decisions. Households are another group, defined as a co-resident, activity group. Although the terms domestic group and household are closely related, they are not necessarily the same. Some domestic groups may not share a home yet share consumption decisions. And households are often made up of family members, but may also include fictive kin-individuals informallyadopted into a household as family members and non-kin. One research team found that seventy percent of African American mothers surveyed in the U.S. had "fictive kin" as children. Does your household include any fictive kin? In the rest of the chapter we will use the term households rather than family or domestic group.
2. Membership in Households
• Membership in households varies depending upon culture, class, ethnicity, and environmental influences. For example, the nuclear family, composed of a married couple and their children, is a common household form in many first world contexts and is becoming a prevalent option in many developing countries. However, the nuclear family was only briefly, if ever, the dominant form of domestic unit, even in the U.S. The percentage of nuclear families in Triad nations varies substantially. About 27% of U.S. families, 33% of Kiwi families (residents of New Zealand), and 62% of Japanese families could be described as nuclear families.
• In many places in the world, households are often composed of multiple generations of family members, and in some contexts, joint households are composed of the families of married adult brothers. These are termed the extended family households. The three-generation family was the norm until after WWII in much of East Asia, and the joint household persists in parts of South Asia.
• In many parts of LAW, poor households do best by engaging in extending strategies to increase their members. Nieces, nephews, brothers, sisters, and cousins are brought into the household around a married couple or a woman and her children. While extending is difficult and requires strict budgeting to meet expenses on food, the incremental productive labor of family members makes extended family household survival possible.
3. Coresidence and Dwellings
• Coresidence or cohabitation is one common way of defining households. In many U.S. states, lengthy co-residence is legally used to bind individuals together as family and define financial and other obligations. However, it is by no means uncommon to send members of the household on extended migrations. For example, long distance, long-term male labor migration to obtain resources for household use is a fact of life for many poorer families in the LAW nations. Hence, co-residence alone cannot be used to define the household.
• Coresidence is significant for marketers because it implies acquisition and maintenance of a dwelling - a home. The home is an increasingly important focus of consumer spending around the world.
• As average household sizes shrink in the developed world, consumers furnish and maintain more dwellings. Households vary in the focus of their spending.
4. Family Life Cycle
• A useful conceptual tool for marketers and consumer policy activists is that of the developmental cycle of domestic groups or, as marketers term it, the familylife cycle (FLC). This is the idea is that domestic groups typically undergo a cyclical process of birth, growth, decay and dissolution over time. The important point of the life cycle concept for marketers is that domestic groups at each stage of this cycle can be grouped into market segments with distinct needs, attitudes and desires. Exhibit 14.2 illustrates a developmental cycle for North American households. A person begins a s a dependent then moves through a sequence of household arrangements over their life span. Household types vary with the age of their members and the presence or absence of children. The frequency and sequence of stages varies across various North American subcultures.

The Family Life Cycle (50.0K)

5. Changing Household Segments and Demographic Trends
• A number of demographic trends have emerged in the last decade in North America and other Triad nations. These trends have important implications for domestic unit structure and consumer behavior. One trend is towards smaller households, including young people, the old, and the very old. This trend is observed in Great Britain where 27.4% of households are comprised of single persons and in Japan where 20% are singles. It can be observed in New Zealand and Australia, as well as many European countries. Larger households are still the norm in many LAW countries, although a shift towards smaller households may be discerned in the NICs like Taiwan. This trend increases demand for basic household goods and services.
• Another demographic trend for first world countries is towards increasing numbers of single parent households. Single parent households now account for at least 8.1 percent of all households in North America, 6.4% in Great Britain, and 9 percent in Australia. About 16.5 million never-married American women are now mothers, accounting for part of the growth in women-headed households. They make up almost one-quarter of all unmarried women ages 18-44. Although poorer, less educated, minority women constitute the greatest numbers of unwed mothers, the largest rates of increase are among white women, college-educated women, and professional managerial women who choose unwed motherhood. Demand for childcare, other services and convience goods is linked to this trend toward single parenting.
• A third trend in First World countries is an overall aging of households. In many parts of the first world, declining birth rates, growing life expectations, and youthful desires for independence have led to the emergence of a market segment that has grown in importance throughout the 90's.
• Finally, later age at marriage and high rates of divorce (50% of first marriages) in the U.S. are also resulting in a diversification of household forms. A big increase in the category of "other households," including all sorts of blended and non-family arrangements will challenge marketers who wish to target them. For example, in the U.S., there has been some interest in boomerang kids, adult children who have returned to their parents' homes for reasons of financial insecurity or divorce. Forty percent of young adults have experienced this boomerang.
• U.S. households can be divided into nine main segments. Exhibit 14.3 shows the nine main household segments and how these have changed in the 10 years between 1980 and 1990. These changes are consistent with changes elsewhere in the Triad nations.

US Household Lifestyle Shifts in the Early 1990s (50.0K)

6. How Marketers Use the Family Life Cycle
• For marketers, households differentiated by FLC represent different potential market segments. Households' needs across FLC stages vary. Typically, households representing a small proportion of all households spend disproportionately on certain categories of goods and services. A few examples are provided below.

Married with Children

• In the U.S. married couples with children accounted for 41.4% of grocery store sales in 1990, although they represented only 27% of the households. Married couples with children 6 to 17 years of age account for 49% of total spending on children's clothing and furnishings. Meanwhile couples with school-age children comprising 14.3% of U.S. households account for 21% of new vehicle purchases. Having children in the family makes a difference to a household having a computer or not. In 1997, 51% of the households with children owned computers compared to 30% of households without children.

Empty Nesters

• A segment whose importance has grown throughout the remainder of the last century is the category of empty nesters and mature couples who tend to have a disproportionate share of disposable income. In the U.S., 12.5% of U.S. households are comprised of empty nesters, middle aged adults ages 55-64, mostly married (63.7%), living in households of three or less (71.2%), and without dependant children and the financial obligations they bring. Moreover, empty nesters have the highest net worth of all U.S. households, since many are homeowners. This segment is growing fast and is attractive because of high disposable incomes. These households spend proportionately less on clothing and services, food and transportation, and proportionately more on retirement programs, life insurance, medical care products and services and leisure entertainment including travel. Childless couples are a significant target for the automobile industry. In the U.S., they purchase 25% of new vehicles.

Single-Parent Families

• Single-parent households have increased dramatically in numbers. Single parent households face stretched budgets and severe time constraints; convenience goods appeal to them. Sole parents tend not to be brand loyal, and tend to be more experimental, impulsive, and style-conscious in their purchases than the average consumer. Single parent households rely heavily on time saving, microwaveable and convenience food products. Single parents, comprising 5.8% of households, also accounted for 13% of expenditures on children's clothes. Research has shown that children exert significant influence in single female-headed households. However, their influence is product specific, varying with convenience foods, household maintenance products, and snack foods.

Dynamic Households

• We can expect to see more diverse household forms and consumption patterns. For example, co-housing, which first emerged in Denmark in the 1970's, is a form of cluster living in which residents have their own homes, but share meals, durable goods, labor, and other activities. Already there are 50 co-housing communities in the U.S. and hundreds more in the planning stages. How would you target a household in such a community?
• The family lie cycle is useful for market segmentation in many cultural contexts, since some needs and some patterns of decision-making vary systemically between life cycle stages. At the same time, the characteristics associated with various FLC stages vary from nation to nation and within nations as well.

• Households organize themselves to carry out a range of activities, many of which have implications for marketers. These activities include socialization, production, resource pooling, acquisition, consumption and disposition. Here we discuss consumer socialization, production, pooling and acquisition.

1. Consumer Socialization
• Households are the primary sites for the socialization of young people. Products and services are often positioned to appeal to this household activity such as the ad for music schools, clipped from an Australian weekly magazine.
• In addition, much consumer socialization occurs within domestic groups. Consumer Socializationrefers to imparting the values, norms, beliefs, and procedures associated with behaving as competent consumers in a given cultural setting. Typically we speak of parents of adults as the agents of socialization and the children as the recipients of socialization. For example, young adults may often feel they are imparting to their parents, behaviors and beliefs associated with the changed consumer marketplace (with which their parents have lost touch). This is especially true with regard to the Internet and other aspects of the information economy. Children's influence increases with child's age, a finding consistent with research showing U.S. children's consumer decision-making skills are quite highly developed by adolescence.
• In developing countries and NICs and even in Europe, which is more wedded to tradition than the newer nations of North America and the Pacific, young people are often more innovative than their parents and lead the way in the adoption of new goods and services.
• Consumer socialization takes two forms: direct socialization in which parents purposively train children in consumer knowledge; and indirect socialization, which involves more passive learning through modeling of children's behaviors based upon parental models. Although parents are not the only influence on children, they do determine the degree to which their children will be exposed to other socialization sources such as television, salespeople and peers. Consumer Chronicles 14.4 indicates that U.S. households vary in their use of direct and indirect consumer socialization efforts.

Parental Style and Consumer Socialization (50.0K)

• Research in a First World context suggests that direct consumer socialization may be characteristic of more upper class households, while lower class households may focus on discussions about brand names. Middle class households may focus on attributes of products such as price. Experience in African contexts suggests that indirect socialization is characteristic of the majority of consumers. Based on these differences in socialization style, marketers may wish to direct different kinds of communication at different household segments. For example, preserving brand quality by associating it with stable brand names may be consistent with lower class household socialization.
• Many studies have explored advertising and other types of mass media as socialization agents. Another way in which consumer socialization occurs is through co-shopping. Co-shopping involves children accompanyingtheir parents on shopping trips. It is a good example of indirect socialization. Visiting market places, boutiques, and malls provides children with enormous opportunities to absorb the taken-for-granted understandings of products, prices, negotiating behaviors, market settings, times and locations for consumption so necessary to effective consumer behavior.
• U.S. parents who engage in more frequent co-shopping with their children also place more value on their children's input in family consumer decision making and take a more direct role in guiding their children's consumer development.
1. Production Activities
• Most households engage in direct or indirect production activities directly or indirectly to acquire goods for their own sustenance. In the LAW, direct production of goods for household survival might involve building a shelter, growing food, or raising sheep for meat or wool. Many households, especially in more developed economies, engage in production activities that indirectly produce sustenance for the household. That is, the production activities are used to acquire resources that are then exchanged for needed goods.
• In First World households, not all direct production activities have disappeared, and some are actually moving back in. For example, as in the Mrs. Smith's advertisement shown here, family meal preparation is am important production activity to many households.

Appealing to the Productive Function of Household Consumption (50.0K)

2. Resource Pooling
• Consumer researchers have focused on two aspects of the problem of household acquisition: pooling (resource mobilization and allocation) and decision roles in the purchase process. Understanding the mobilization and allocation of resources within domestic units is useful in targeting goods and services and marketing communications to households.
• There are big differences both between cultures and within cultures about how households allocate resources. Below we describe several different household resource allocation modes that are typical for some different cultures. We show these resources models using a technique called household resource mapping. Household resource mapping recognizes that all households face the problem of allocating scarce resources to competing consumption projects that benefit members of the household differentially. Mapping can help marketers distinguish between various kinds of household pooling models that householders often take for granted. A combination of mapping household funds and flows could help us tailor marketing programs to the needs and decision-making styles of particular types of households.
• The following descriptions of resource models will give you an idea of how much variety there is in how households manage funds. As you review these models consider how your household pools resources.

Anglo-American Household Resource Model

• Exhibit 14.4 illustrates what we might call the Anglo-American model of household resource allocation. In this model all cash and labor resources flow into a general fund. A portion of this fund is drawn on for necessaries, determined by Engle's Law (introduced in chapter four). The household head apportions the leftover to other uses. Investments, for example, include the purchase of a home, securities, education expenses, or even exchanges that link household types, including patriarchal households (e.g., lower income extended African-American households that may be headed by a matriarch and entrepreneurial overseas Chinese households). If positioning products for market segments characterized by this model, the household head should be targeted.

Anglo-American Household Resource Management Model (50.0K)

Ashanti Household Resource Model

• Another common model, the Ashanti resource allocation model, is named after the Ashanti people of Ghana. Ashanti spouses maintain a high degree of autonomy and do not necessarily share a dwelling. Husbands earn income from farming; wives from trading. Each decides on some proportion of their funds that will be committed to the "household's" operating expenses. Wives usually contribute more to household maintenance, while husbands contribute to the household's capital equipment and durable goods. In addition, both husbands and wives should "invest" in their children, but wives and their lineages have much greater responsibility in this regard than do husbands. Spouses' commitments to households vary with the emotional bonds between the two.
• Something like this "Ashanti model" of pooling might apply to some dual income no children (DINK) households, non-family households shared by roommates, or gay households. If positioning products for market segments characterized by this model, adult householders could be targeted separately.

Working Class English Household Resource Model

• Exhibit 14.5 shows what we can call the working-class English household resource model. Here the husband splits his income, keeping part, but giving most to his wife as a housekeeping fund. A small part of his discretionary income goes to personal expenditures and some occasional purchases of durable goods and investments. Husband's contribution and wife's wages go to housekeeping, with an overflow returning for wife's personal expenses. Children's earnings are turned over to their mother, who allocates some back to the children as their allowance and the rest is used for housekeeping expenses. This model of resource flows and decision points suggests targeting the female household "manager" for many products, but that there is scope for the exercise of interpersonal influence over decisions based on contributions to household resource pools.
• This model is not so different from the traditional Japanese household model, in which "salarymen" turned over their earnings to their wives for management.
• Most of the world's households probably lie somewhere between a resource model with one fund managed by the household head and one with no household fund. These models neglect the fact that resources are sometimes pooled across households. This is also true of the poor, of single parent households, and also of old and young family members who live in different households. Little consumer research has examined the impact of inter-household pooling on purchase and consumption behaviors.

Working-Class English Household Resource Management Model (50.0K)

3. Acquisition Strategies
• Marketers and consumer policy activists alike have a compelling interest in understanding domestic group's acquisition of goods and services, the how, what, when, and where of it all. Unfortunately, research on household acquisition strategies is fragmentary. Most of the academic marketing research has focused on purchase of households' durables and services, and expenditure patterns (especially related to convenience foods).
• Industry studies of purchase decisions include a range of products and have recently been advanced by the availability of scanner data based on universal product codes (UPC). However, these studies are primarily limited to packaged goods purchases in the most developed economies. From household budget studies conducted in many countries, there is quite a bit of aggregate data on expenditures. Unfortunately, very few studies from any source allow getting inside the household to see how acquisition decisions are actually made and to see the roles members play in acquisition. Research is just beginning on household shopping behavior.
2. Household Decision Making
1. Moral Framework for Decisions
• In contrast with other organizations, household resource allocation and consumption decisions are often based on altruism and kinship-that is, they are moral rather than economic decisions. Institutionalized kinship ties modify market-based constructs of individualism in the direction of a moral economy of resource sharing, altruism, and mutual accommodation in purchase and consumption.
• One moral criterion for resource allocation that is particularly important in many households is fairness or equity. Of course, what is fair is likely to be defined quite differently between different cultures. Nevertheless, individual consumption decisions are evaluated in terms of household members' estimations of the overall fairness or equity of consumption decisions taken. Thus, perceptions of members' relative preference intensities play an important role in household decision-making.
2. Decision Roles and Decision Making Styles
• Each household member is influenced by background conditions including culture, social class, ethnicity, and so on. These background conditions tend to determine individuals' attitudes concerning both lifestyle norms such as valued ends and acceptable means of achieving them as well as sex and age-role norms. These norms interact with specific situational factors at points of time to determined appropriate behavior for each person. In every culture and economic setting, households negotiate purchase and consumption decisions in different ways using different rules.
• More household members are likely to be involved with significant household consumption decisions in more developed societies. In these societies, the number of market-based consumption choices is greater and household income is higher. Consumer knowledge is also more widely distributed.
• In general, households act as cooperative groups. They are cooperative groups because the members' primary goals are compatible. In a family, these shared primary goals are likely to concern affiliation, security and trust. Studies of family decision making emphasize couples' cooperative concern for each other's preferences and for fairness. Families compromise either overtly or subtlety to maintain long term relationships. One sort of solution is the "second choice" solution. If household members cannot agree on a first choice, they may settle for each other's second choice. The underlying logic is that the group chooses the product alternative that perturbs individual's preferences the least.
• In looking at household members decision roles in the acquisition process, we can distinguish both roles and decision-making styles. The roles include the five roles identified for organizational buying centers, as well as the caretaker role of the household member who services, cleans and maintains products or services sometimes across generations.
• Household decisions are well captured in the Calvin cartoons shown here. In the first, Calvin is playing the role of initiator, hoping that his "goo-goo"eyes will persuade his mother, the decision-maker, of the legitimacy of his desire for a flame-thrower. In the second, Calvin's mother plays initiator and gatekeeper, persuading Calvin's father of the wisdom of a joint purchase decision, a VCR. The intended VCR consumer, Calvin, is seemingly unaware of the decision-making going on around him.

Illustrating Household Decision Roles (50.0K)

• Household members' decision roles vary by authority structure, product category, and stage of the decision-making process. Distinguishing these roles helps marketers more effectively tailor marketing communications to the preferences and values of particular role players within the household.
• Consumer researchers ask what kinds of decisions are made by a group or coalition in the household, called syncratic or joint decisions, and what kinds are made by a single household member, usually the husband or wife alone, called autonomicdecisions, and what kinds are made with one spouse dominant in the process.
• Past research has shown that whether a decision is syncratic or autonomic depends upon two types of variables. The first type consists of variables such as family life cycle, socioeconomic status and life styles. The second type consists of situational factors such as perceived risk, importance of purchase, and time pressure. Households mention that the greater competence of one partner, preference for dividing responsibilities in household management, greater importance of the decision to one of the spouses, being too busy to decide together and peer group norms are primarily responsible for autonomic decisions.
• Decisions tend to be autonomic for households with either no children or grownup children, in low or middle socio-economic classes, and with the wife's employment in some blue-collar occupation.
• Social class, education, income, family size and the wife's employment status are all factors that influence whether a family makes syncratic or autonomic decisions. Attitudinal variables such as gender role orientation and locus of control (whether or not members believe that events are dependent on their own behavior) also influence decision-making.
• Within different product categories, role structures vary by the nature of the decision to be undertaken or the phase of the decision process. Products in the decision-making domain of men and women partners tend to be quite stable over time; as gender roles become more flexible, decision making becomes more complex across households.
• Decision making styles will vary with the quality of household interactions between parents and children: authoritarian, democratic, permissive, or neglectful. Children play influencing roles in democratic and permissive households, for example. Decision making also vary with communications styles within the household: socio-oriented or concept oriented, for example.
• Socio-orientedcommunication styles favor adherence to conventional norms of authority and preservation of the domestic status quo. Socio-oriented communications may be found in authoritarian households. Concept-orientedcommunicationis more egalitarian and favors a flow of information between all household members. Democratic and permissive households favor concept-oriented communications. Household decision-making and communication styles also vary with culture, class, situational factors, gender role orientation, and product category.
• When household members' perceptions and attitudes differ conflict arises and the household employs conflict-management strategies. These strategies may include conflict-avoidance or conflict-resolution techniques that may affect decision-making, purchase decisions, and satisfaction.
3. Role Specialization
• One way households cope simultaneously with individual interest and potential disagreements in purchase and consumption decisions is through role specialization. That is, in certain product or service domains, household members agree that they may make autonomic decisions without consulting other household members.
• Household members' role specialization in consumption choices is likely to be more highly developed in first world contexts where there are more consumption choices to be made in the marketplace. However, there is ample evidence of specialization of tasks between husbands and wives in the most national contexts.
• Role specialization may be differentially distributed over roles in the buying process. In U.S. households, children between the ages of 6-11 are considered "experts" in categories for which they are the primary consumers. Marketers need to tailor their targeting and promotional activities to match household role specializations.
• Perceived role overload is a situation in which competing demands on the consumer's time and energy become overwhelming. Role overload may influence participation in particular purchase decisions and may lead to handing over some purchase decisions to another family member. The point is that marketers must require a clear understanding of which household members are involved in an acquisition decision in order to tailor marketing communications to appeal to all concerned household members.
4. Gender-role Orientation
• Gender role orientation, the behavior standards and cultural norms that define appropriate behavior for men and women in their society, influences the household decision making process. Where inegalitarian gender role orientation prevails we find a higher incidence of autonomic or one spouse dominant decisions, typically male dominance. This reflects a higher level of sex role specialization in the household. In the first world, it is possible to identify a trend: women's influence in household decision-making is increasing. As sex role orientation becomes more egalitarian, a higher incidence of joint and one-spouse dominant (male or female) purchase decisions occur.
• Some generations may be drawn with respect to household decision making cross-culturally. In every cultural context, some decision situations are believed to conform to either masculine or feminine roles. In more developed consumer societies, the resources that a spouse brings to a marriage affect his or her relative decision-making power. Variations in a nation's economic and social development can also explain some variations in household decision-making. That is, LAW nations tend to exhibit greater male bias in household decision-making, while Triad nations tend to exhibit more egalitarian household decision-making. Joint decision-making is more common in more developed consumer societies.
• In attempting to define household purchasing decisions cross culturally, researchers need to investigate a number of product categories, since decision-making behavior varies across categories.
3. Other Consuming Collectives
• Examples of consuming collectives other than business organizations, households and families are endless. In the U.S., a "Pop Warner" football league raises money by selling 4^th of July fireworks to purchase uniforms and equipment for their team. Or a family reunion group rents a large block of hotel rooms at a rural conference center. In Sierra Leone, West Africa, a women's saving association takes up a collection so that each woman in turn can purchase cloth to make matching dresses for a public celebration. In Indonesia, male members of a neighborhood congregation give 10% of their earnings to support a popular cleric and build a modest mosque.
• One interesting and prevalent buying collective is the home shopping party, typically organized among women, but sometimes including both men and women. Originating in the U.S. in the 1950's by companies like Tupperware and Avon; however, these firms have found new success in LAW markets such as Mexico, Asia and the mid-East. At the same time, these collectives are declining in First World markets, although home lingerie parties have given the form a boost.
• There are several important points to be made about buying collectivities. First, all of them can probably be described in terms of the six main dimensions we mentioned at the outset of this chapter. For example, some of these groups may be formal organizations with a written charter, such as a Boy Scout or Girl Guide troupe; others may be purely informal networks such as the home shopping group or alumnae of a particular school or graduating class. Groups are likely to exhibit an internal division of labor in regard to roles in the purchasing process.
• Finally, policy makers and consumer activists' might be interested in such groups for the uniqueness of their expertise and collective vulnerability to persuasive appeals.