Which of the following is true of the buying behavior of organizational customers?

Introduction

Consumer behavior encompasses mental and physical activities that consumers engage in when searching for, evaluating, purchasing, and using products and services. In the marketplace, consumers exchange their scarce resources (including money, time, and effort) for items of value. A consumer researcher studying how consumers buy long-term care insurance might investigate (1) the characteristics of consumers who buy this type of insurance (e.g., income, age, lifestyle), (2) where they buy it (e.g., from an agent vs. from an 800 number listed in an advertisement), (3) when they buy it (e.g., after a critical event such as a parent's illness or after seeing an ad), (4) how they buy it (e.g., comparing many policies vs. selecting the same one that a friend has), (5) why they buy it (e.g., fear of depleting life savings vs. desire for excellent care in old age), and (6) what happens after they buy it (e.g., satisfaction with the decision and the company).

Consumer behavior refers to the acquisition, consumption, and disposal of products, services, time, and ideas by decision-making units. This behavior is pervasive, involving choices made by virtually all human beings in all societies and cultures. Consumer psychology, as a disciplinary focus, involves the use of distinctively psychological concepts and methods to study consumer behavior. After briefly discussing the various facets and importance of consumer behavior in contemporary life, this article describes the history of the field, indicating its changing emphases over the nineteenth and twentieth centuries. Next discussed are the principal emphases in current theory and research, including salient methodological issues and problems. Last, anticipated future directions are briefly noted.

2.1 Consumers

Consumer behavior is one of the most extensively researched areas in microeconomics. Initially, the field was dominated by approaches based on neoclassical economics. The most fundamental of these early approaches was expected utility theory, which argued that consumers have complete information about each product, evaluate that information in a deliberate and exhaustive manner, and ultimately choose the product that has the greatest utility (subject to constraints of money, availability, etc.). Critics argued, however, that it is unrealistic to assume that consumers choose the brand with the maximum utility because, as noted previously, individuals have limited information processing and make errors in judgment. Consumers are also unlikely to have all of the information about all brands, and the information they do have is subject to perceptual and motivation biases. For instance, one well-documented effect is that consumers place higher value on products that appear to be in short supply (a phenomenon that Brehm in 1966 explained as psychological reactance to the loss of freedom). Similarly, consumers’ reference point for deciding whether the price for a product is fair is not only the absolute price, as neoclassical economics posits, but also the change in price and frame of reference (i.e., prospect theory).

Consequently, the field of consumer behavior now largely draws on psychological insights. That is, although some recent consumer decision-making models do leave room for extended rationality (e.g., expectancy value theory), other models recognize that consumers do not maximize expected utility and might simply compare brands on a single attribute (e.g., the lexicographic model). The neoclassical economic approach to consumer behavior also assumes that consumer preferences are stable and makes no mention of where consumers derive their preferences in the first place. Hence, consumer socialization and social influence are major areas of study by economic psychologists. Psychological approaches to understanding consumer behavior also investigate the roles of emotions, motivations, lifestyles, and the self-concept that have largely been absent from the neoclassical view of the consumer.

Internationalization and Culture-Specific Consumption Preferences

Consumer behaviour theory assumes that consumers usually do not focus on the product as a whole, but on a combination of different product characteristics or attributes, which can be either concrete or abstract. Concrete product attributes are defined as being measurable in physical units (e.g., colour), whereas abstract attributes are an aggregation of several concrete attributes. Because of the consumers’ selective and subjective allocation of cognitive resources, abstract attributes are perceived differently by each consumer. Thus, the main element of abstract attributes is that they are subjective in nature, as with style or taste (Olson and Reynolds, 1983; Reynolds and Gutman, 1984).

Whether the consequences brought about by attributes are positive (benefits) or negative (risks) depends on the consumers’ personal values, which are defined as enduring beliefs that specific modes of conduct or end-states of existence are personally or socially preferable to opposite modes of conduct or end-states of existence. The expectation of achieving a personal value through the usage of a certain product is the actual buying motive (Grunert, 1994; Reynolds and Gutman, 1979).

Therefore, the formation of several preferences for certain products depends on values which people acquire during the process of socialization. Through this process, which starts within the family and continues through school and then throughout life, people develop their values, motivations and habitual activities. Furthermore, humans learn through imitation and by observing the process of reward and punishment to discover which values and what kind of behaviour is approved by a society (Engel et al., 1995). This process of socialization usually takes place against the cultural background, so that socialization also is the process of absorbing a culture (Kroeber and Kluckhohn, 1952).

The cultural level includes all kinds of different manners people learn while being brought up in certain society (e.g. the language, the physical distance from other people we keep to feel comfortable, the kind of food people eat, the drinks that people pair with food, how the food is prepared and the way food is eaten at a particular time of the day) (Hofstede, 1984; Hofstede and Hofstede, 2005). Hence, consumers from varying cultural backgrounds perceive food differently (Osinga and Hofstede, 2004).

Even if, through the globalization of markets, migration and worldwide web usage, cultural differences seem to decrease, culture-specific consumption patterns still exist (Craig et al. 2005; Watson et al., 2002). One extreme example of culture-specific consumption patterns is that of ethnocentrism. This behaviour is often motivated by patriotism and apparently rational, economic reasons in that the purchase of domestic products stimulates the economy and creates jobs, whereas purchasing foreign made products is viewed as harmful to the local economy and causes domestic unemployment (Orth and Firbasová, 2003). The recent OIV data (2015) indicates that more Chinese wine is drunk, possibly replacing imports.

All in all, consumers’ respective cultural backgrounds have some impact on market entry strategies as more or less all marketing instruments are affected by culture. For example, consumers’ willingness to pay is especially affected by their cultural background (Rewerts and Hanf, 2009a). The willingness to pay represents the valuation of products. Because consumers learned during the process of socialization which products they should approve of and which they should not, the socialization and thus the transmission of culture influences the appreciation of certain products as well as the willingness to pay (Rewerts and Hanf, 2009b). Another example is that culture can have an effect on the choice of certain types of wines which are preferred due to (religious) beliefs. Therefore, culture-specific preparations of food and culture-specific usage situations generally have to be considered in product development (Rewerts and Hanf, 2009a).

11 Empirical Validity

Do data on consumer behavior reflect the properties that theory postulates? In the case of demand functions for a single good the properties of interest are the negativity in the response to a change in the own price for the good in question and the homogeneity condition, implying no response to an equiproportional change in income (budget) and the prices. Usually negativity does not create serious problems and the demand equations in estimated form readily display this property.

Statistical tests tend to be less lenient for the homogeneity condition. This is somewhat puzzling because of the plausibility of this property, which is sometimes interpreted as the absence of a monetary veil. Homogeneity justifies the proposition that allocation of means is based on relative prices rather than on absolute ones, which is a central issue in microeconomics. Many reasons have been advanced to explain away this dilemma such as inappropriate data, specification errors (absence of explicit dynamics, for instance), and the use of incorrect test statistics. Correction of some of these shortcomings appears to have achieved some success.

In the case of systems of demand equations explaining demand for a set of goods simultaneously, negativity does also not create a serious validity problem, but homogeneity is less easily accepted. Additional properties of empirical interest here are Slutsky symmetry and separability. Symmetry appears to agree with the data. This may be more a matter of the wide confidence intervals of the estimates of the estimated Slutsky coefficients than of the truth of the symmetry hypothesis itself. Separability of preferences has such attractive properties for applied work that it is frequently used in spite of its demonstrated lack of empirical validity.

Also in consumer analysis, theory and application are being handled in a balanced way, reflecting doubts about both theory and facts and about the procedures to reconcile them.

Behavioral Economics: Nudges

The economic understanding of consumer responses to prices and income and the policy proposals for new subsidies or taxes and supply interventions all rely on an economic theory of consumer choice. A lively body of current economic research investigates situations where consumers do not behave rationally, perhaps leading to opportunities for ‘nudging’ consumers toward more healthful choices (Thaler and Sunstein, 2008).

Neoclassical theory predicts that consumers will eat less when the marginal cost of an additional unit – the price to the consumer – is higher. They will tend to overeat at an all-you-can-eat restaurant, because the marginal cost of additional food is zero, no matter what the entry price of the meal. Yet, surprisingly, recent research found that consumers of an all-you-can-eat pizza meal actually consumed more pizza if the price of the meal was higher (Just and Wansink, 2011).

These differences between actual consumer behavior and traditional economic assumptions about rational behavior do not mean consumers are irrational or foolish in the everyday sense of the term. Instead, these behaviors may show that consumers need to simplify the cognitive burden of difficult decisions by following predefined heuristics or ‘rules of thumb.’ Some of these heuristics are the subject of considerable research:

Default offerings may affect consumer choices. For example, if a quick service restaurant chain includes milk by default in children's meals, customers may agree to purchase the milk with the meal. Yet, if the chain includes soda by default, the customers may more frequently keep the sugar-sweetened beverage rather than make a special effort to request milk.

Distractions also may affect consumer choices. For example, it has been found that consumers who were required to make other decisions at the same time were more likely to choose cake over fruit salad, whereas consumers who were not distracted were more likely to choose the healthier offering (Shiv and Fedorikhin, 1999). Hunger or time stress also may affect people's decisions.

This new approach to behavioral economics has raised some hopes for inexpensive nutrition improvements, by making subtle changes to the setting or environment in which choices are made. For example, some suggest that students in school meals programs might make better decisions if the location of the salad bar were altered, or if a different tender (cash or school meals program card) were required for different products. This approach also has generated renewed scrutiny of the empirical evidence for other health policy proposals, such as taxes on less healthy food or new labeling rules for restaurants (Loewenstein, 2011). Of course, many of the same lessons can also be used by food marketing professionals to promote food options with any health profile. Future research will determine whether these new tools of behavioral economics make a small or big difference for consumer choices. And, if the effect is big, future developments in both social and commer cial marketing will determine whether the changes are helpful for dietary quality. In either case, the willingness to scrutinize assumptions and follow the empirical evidence in new directions is entirely good news for future research on the economics of nutrition.

3 Social Movements and Green Parties

Environmental concern and green consumer behavior do not directly engage the individual in the political process. This is different where people support particular pressure groups and parties, or join in protest activity, to campaign for specific environmental policies or for a general green worldview. The analysis of environmental politics thus includes environmental political behavior at the individual level, but it also focuses on the behavior of groups and parties.

The politicization of the environment in Western Europe was chiefly the role of a new generation of protest movements that started to emerge in force in the 1970s. This new phenomenon attracted the academic attention of a fairly wide range of social scientists. At first, descriptive case studies of specific incidents of protest or environmental conflict were the main approach. But by the late 1970s and early 1980s, the notion of ‘new social movements’ had emerged as the dominant paradigm. The 1980s and 1990s saw a very substantial development of this field. The cross-national comparison of environmental social movements became a major focus; the reception of key elements of US social movement theory, in particular the ‘Resource Mobilization’ approach, led to more sophisticated research designs and theoretically informed empirical studies.

Methodologically, the study of protest events became a very influential approach, particularly for cross-national comparisons. Another key feature of empirical research was the study of individual movement participants and group members, their social backgrounds and motivations. Studies of environmental groups as organizations, based on national and cross-national surveys of such groups, focused inter alia on network formation and interrelationships with other political actors (Dalton and Kuechler 1990, Della Porta and Diani 1999, Rootes 1999, Rucht 1991).

One of the most significant aspects of the politicization of the environment is the rise of ecological and green parties. After party formation in the 1970s and 1980s, such parties entered parliament in most West European countries during the 1980s and 1990s (the main exceptions being Norway, Denmark, and Spain); by the late 1990s, green parties had entered national government in Italy, Finland, France, Germany, and Belgium.

Green parties have attracted substantial research efforts, both in the form of major national case studies and cross-national comparisons. Much of the cross-national analysis has focused on the influence of aggregate factors such as electoral systems and economic conditions on the green parties' development. There is also a wealth of empirical national and cross-national studies on green ideology, the internal structure of green parties, their members and activists, and green voting (Delwit and De Waele 1999, Kitschelt 1989, Richardson and Rootes 1995).

Introduction

Since the inception of the economic reforms in 1978, China has become one of the world’s fastest growing economies. According to China’s National Bureau of Statistics, it has experienced economic growth with an average GDP of 9 per cent every year since 1990. Its GDP per capita doubled to $6100 (38,354 yuan) from 2009 to 2012, confirming its status as a middle-income nation, according to the World Bank’s standards set in 2011. In 2012 its GDP reached 51.93 trillion yuan (US$8.28 trillion) – the second largest in the world (China National Bureau of Statistics).

After years of rapid growth generated by investment and exports, more recently China has been looking to restructure its economy. In May 2012, the government shifted its top priority from taming inflation to stabilizing growth by encouraging domestic spending and consumption. The focus on domestic economic growth has driven a dramatic rise in consumer spending. Retail sales for 2012 increased to 20.7 trillion yuan (US$3.3 trillion). Urban residents spent 17.9 trillion yuan in 2012 while rural residents spent 2.8 trillion yuan (China National Bureau of Statistics).

This rapid economic growth has resulted in a transformation of consumer behaviour, and the subsequent rise of consumerism in China has garnered worldwide attention, particularly from business and marketing. The world’s leading research and consulting companies have released a number of reports on China’s rising consumerism, particularly on China’s newly emerged middle class.1 These reports highlight China’s growing middle class and expanding consumerism, suggest potential strategies for global corporations to tap into the Chinese market, and predict sales growth in China. The middle class is hailed as the new and growing market force for both Chinese and global markets. According to a PriceWaterhouseCoopers (PWC) report, China was the world’s second-largest online retail market, after the United States, in 2011, with sales totalling $120 billion (MGI, 2013). Meanwhile, the term ‘middle class’ has become ubiquitous in popular media, with discussions of ‘being middle class’ primarily focusing on the economic aspirations of the middle class themselves. The media and business sector’s fascination with China’s middle class has also constructed it on economic grounds.

A small number of studies about Chinese consumer behaviours have noted that professional middle-class status and identity are increasingly shaped around a new set of collective interests related to access to resources and modes of consumption.2 This chapter examines consumer behaviour among the middle class from the findings of a survey initially conducted by the author in Beijing in 2005 and continued in subsequent years.3 It discusses how consumption of commodities and cultural products enables the display of a middle-class identity. The study does not argue that consumerism is the sole factor in defining cultural and social practices and the attributes of middle-classness; rather it explores how middle-classness is constructed through rising consumerism and middle-class consumption of specific commodities.

The primary concern of this chapter therefore is the role consumerism plays in the lives of the middle class through everyday practices and experiences. Consumerism is used as a lens through which to interpret middle-class identity, culture, and values. Following this broad line of inquiry, this chapter specifically raises the following questions: What factors decide the consumption of middle-class consumers? What particular patterns do they show in consumption? Has a consumer culture formed among the middle class? If so, will consumerism allow middle-class individuals and groups to create their identities? Though consumption is not the sole factor through which to interpret and understand China’s middle class, it sheds light on everyday practices and experiences that shape people’s culture. Ultimately, through discussions of middle-class consumption of print media, cultural productions (e.g., television programmes, films, exhibitions), commodities, and housing, this chapter intends to understand how consumerism (in addition to family, cultural, social, and economic values) shapes the collective identity of the middle class and their articulation of middle-classness. How is middle-classness realized through consumerism alongside cultural practices and everyday life? How does access to global goods and commodities shape discourses on middle-class ways of life? And how and why has being middle class become desirable and possible?

By way of setting the scene, it is important to note that China’s emerging middle class, which numbers around 100 million people, is borne out of the recent economic reforms and the restructuring of the labour market, and represents a wide range of professions (Lu Xueyi, 2004). However, it primarily includes intermediate-level business professionals, mid-level managers, and private business owners. Business professionals, also known as the so-called ‘white collars’ (bailing), are office workers of businesses and enterprises in China. They often have a high level of education and professional training, and a high standard of living. The middle class also includes a public servant stratum, which consists of government employees, who exert a strong influence in public and social sectors as a result of administrative reform in the Chinese government system. Some government cadres have transferred from administrative positions to managerial positions in business and the economic arena. They are referred as the ‘quasi middle class’ due to their employment status and their social ties with the state and the ruling party (Li Qiang, 1999). Some of them are senior managerial staff of state-owned enterprises (SOEs) who gained income and control over state properties and production materials as a result of the privatization of state enterprises. Often regarded as ‘red capitalists’, they are shareholders of transformed state enterprises and control the production materials of the SOEs (Dickson, 2003). Meanwhile, a wide spectrum of professions has emerged in the transition towards a market-oriented economy. New professionals with knowledge in special areas, such as certified public accountants, lawyers, biotech and IT engineers, judicial workers, and medical staff, are regarded as the typical middle class. They have a stable income, a high level of education and professional training, and promising career prospects. In addition, China’s intellectuals, including university professors, writers, and artists, are recognized as middle class (Zhou Xiaohong, 2005: 6, 16, 227). In the post-Mao reform era, this intellectual group has gained political recognition and social prestige as well as financial privileges.

What can be noted is that China’s new middle class represents a wide range of people, all of whom are part of the middle class due to different factors – their occupations, economic capital (income, business ownership, and property ownership) and social capital (education, and social and political network). Chinese scholars agree that occupation is indicative of income levels and socioeconomic status and, therefore, can be used as the main denominator by which to identify the middle class.4 In contrast to the lower-income stratum, which includes rural residents, the urban working class, and laid-off labourers, China’s middle class possesses a relatively high level of education and professional skills and a relatively stable and high income. Chinese Academy of Social Sciences (CASS) research shows that about 73 per cent of respondents have post-secondary education or above, which gives this group an advantage in acquiring other social, economic, cultural, and political capital (quoted in Lu Xueyi, 2004). The 216 respondents of my own survey reflect a diverse range of professions defined as middle-income occupations, including civil servants, school teachers, researchers, technology and computer engineers, business professionals, administrators and managers, medical and legal professionals, small business owners, and independent freelancers such as actors and writers.

Cultural Dimensions

It is acknowledged that culture has a significant impact on consumer behaviour (De Mooij, 1998). Cultural boundaries often act as criteria for market segmentation while research often focuses on culture as an underlying determinant of consumer behaviour. In general, culture can be defined as an “evolving system of concepts, values and symbols inherent in a society” (Yau et al., 1999, p. 98). To understand a culture and the behaviour of its members, one has to understand the underlying values. Cultural values refer to conceptions of the desirable, of the good and true, the bad and false. They act as guiding principles in life within the specific society (Schwartz, 1999).

The most established concepts to compare national cultures originate from Hofstede and Bond (1984), Hofstede (2011) and Hall (1976). Hall (1976) differentiates between high-context and low-context cultures. A key element in his theory is the context in which communication in a certain culture takes place. In high-context cultures such as China, many things are left unsaid as a few words in combination with gestures or objects can communicate a complex message very effectively (Kim et al., 1998). In low-context cultures such as the United States, communication is more explicit and the context has minimal importance.

Hofstede’s (2011) framework of national culture has been applied in a wide and diverse range of consumer marketing and strategic marketing contexts. In Fig. 4.1, Hofstede’s (2011) six cultural dimensions are defined. Although a number of researchers has criticized the validity of Hofstede’s cultural instrument (e.g., Blodgett et al., 2008; Brewer and Venaik, 2012; McSweeney, 2002; Shenkar, 2001; Smith et al., 2002), the framework is widely recognized as one of the most important applications of national culture types. Fig. 4.2 compares the Chinese value-structure with the most typical representative of Western culture, the US-American value-structure. As the sixth dimension “Indulgence and Restraint” lacks empirical data, this will not be compared.

While there are minor differences between China and the US regarding the dimensions MAS and UAI, there are significant differences regarding IDV, PDI und LTO (Hofstede, 2013). The US represents a typical individualistic and low-context culture; China is a typical collectivistic and high-context culture (Hall, 1976; Hofstede and Bond, 1984).

Confucianism has shaped Chinese culture and society for centuries and favours the collective well-being of a society and virtues such as courtesy, selflessness, respect, communal obligation and social harmony – as compared to individual self-fulfilment or individual rights. In such collectivistic cultures, people live in networks and groups. They are deeply involved with each other and have closer and more intimate relationships than people in individualistic societies. These relationships are structured within a strong social hierarchy, which is also reflected by China’s very high score on the PDI dimension. A person’s identity is deeply embedded in familial, cultural, professional and social relationships (Wong and Ahuvia, 1998). Inner feelings are kept under strong self-control, even when the individual’s desires are conflicting with the group’s goals. There should be no (explicit) differences between the goals of the individual and the group and the desire for conformity and harmony within a group is of paramount importance.

In individualistic cultures like the US, the notion of nonconformity is often regarded positively as being authentic (Kim et al., 1998). It is a person’s inner self including his or her preferences, tastes, and personal values that regulates one’s behaviour as opposed to the social hierarchy within the group. In contrast, an individual’s social status in collectivistic cultures depends very much on the social position of the groups he or she belongs to (Wong and Ahuvia, 1998). It also influences the extent to which group members identify with their task group’s goals (Chatman et al., 2015). In a similar vein, Triandis (1995) argues that high-context and collectivistic societies emphasize social norms and duty defined by the group.

It can be summarized that China’s specific cultural values, including high levels of collectivism, power distance and masculinity, make it a true luxury (addicted) culture. It can also be deduced that social influence is an important determinant of luxury consumption as reported by Zhan and He (2012) in a study of Chinese middle class consumers. The specific combination of cultural values explains why several consumer surveys show especially positive attitudes towards luxury in China (KPMG, 2013).

9.1.2.1 Behavioral continuity and discontinuity

The extensional BPM is not able to offer an explanation of consumer behavior when no stimulus field is empirically available. The bounds of behaviorism discussed in Chapters 5–7Chapters 5Chapters 6Chapters 7 are operative in this domain as well as in behavioral science generally. For instance, consumer innovativeness exemplifies the inability of radical behaviorism to cope with behavioral continuity and discontinuity in the realm of consumer choice. In order to account for a consumer’s trialing a new brand in an established product class, a behavioral interpretation would have to assume stimulus/response generalization or functional equivalence of stimuli. However, these are just descriptions at best and have no causal force. How do they, in any case, come about, how are they efficacious? Not only is behavioral interpretation intellectually dishonest: it is explanatorily inadequate. Advertising might well lay down rules suggesting that the new brand is equivalent to existing brands, but we still need a mechanism to explain how an individual integrates such rules and acts accordingly. In new brand trial, there is no learning history, no stimulus field. There is no mechanism for learning stimulus generalization or equivalence in the absence of a learning history or stimulus field—no discriminative stimuli can have formed. The learning takes place without these. It is cognitive. Even a similar learning history or consumer behavior setting requires a mechanism: analogizing, for instance. In the case of a new product which inaugurates a new product class, there is not even a similar learning history or consumer behavior setting. Purchasing such an item relies entirely on verbal description, observation: we must invoke symbols and intentionality in order to explain this.