Unit3 by ChandraMohanty1



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

        3.0 OBJECTIVES
        This unit deals with consumer environment which influences consumers' buying deci-
        sions. 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
        a     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
        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.
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.

 1    E
      :       ,    11yLinz~I?.y,    AND

                          LIFE STYLES             LEADERSHIP
                                                                        INCOME, SAVING
                                     FACTORS -


                     Figure 3.1 : The Complex Consumer 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                                                                            Consmer Environment

    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 im-
    mediate 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,
r   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 tradi-
    tions 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 re-
    sult of socio-economic and political developments. There is greater economic, political,
    professional and social freedom of movement. This has undoubtedly changed the tradi-
    tional 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-wid-
    ening area of buying may be expected and marketers keep this information in their sell-
    ing 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.

                       3) What is a family life cycle ?

                       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 prod-      Consumer Environment
ucts that might benefit them.
Packaging which imparts benefits such as protection, economy and convenience, also in-
fluence 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.
         ii) Check your answers with the model answers given at the end of the unit.
1) Personal disposable income refers to:
    a)   income earned on a monthly basis
    b)   income minus taxes
    c)   income minus (taxes and savings)
    d)   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 vari-
ables 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
                       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      Consumer Environment
of products, such as domestic labour saving equipments (Washing Machines, Ivficrowave
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
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.

The consumer environment all over the world and particularly in Ind~a undergoing a
sea chmge. Globalisation has placed the consumer in the wider international market.
Liberalisation, privatisation and economic reforms in India have brought in multi-
nationals 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
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
and services. The consumer environment, today is not static, but highly volatile and fast

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

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 soci-
ety 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
                                   -             -   -    -                -       -           - - -

                       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
                       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
                       Sethi Mobini and Premavathy Seetharaman (1994), Consumerism :A Growing Concept,
                           Phoenix Publishing House, New Delhi.

                                 -      -

                       3.9     ANSWERS TO CHECK YOUR PROGRESS
                       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

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