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CHAPTER 4
The Changing World of Consumption
Chapter Summary
This Chapter outlines the basic contours of the global market economy and identifies
opportunities and constraints created by the global economy. Average GNP per capita is a useful
indicator of aggregate purchasing power, but it has many limitations, as a tool in estimating
consumption (e.g. does not take government welfare programs into account). Important trends in
global consumption include the move toward a service economy, global concern for the
environment, a growing gap between the rich and the poor, and a number of earthscaping
processes.
A global perspective of consumer behavior is important because both marketers and consumers
face a global marketplace. In North America and Western Europe, consumers thrive in an
information-rich environment. Consumption patterns and preference are defined by the
enormous consumption possibilities that exist in these countries, and consumers are accustomed
to making fine distinctions between similar brands. Experts predict important trends and changes
in consumer behavior as we move into the twenty-first century. Perhaps most important is the
fragmentation into smaller subcultures and customized consumer segments.
Consumption patterns in Japan and the newly industrialized countries of the Pacific Rim differ
somewhat from those in the western world. Japan in not a newly industrialized country, but it is
such a dominant influence in the Pacific Rim that the success of this region is closely tied to
Japan. Cultural values and economic problems and opportunities differ greatly across these
nations, but it is still possible to characterize some of the commonalties in this region of the
world. Access to market information is expanding dramatically with the introduction of new
telecommunications satellites and the Internet. Consumption patterns and preferences are
extremely diverse. In a number of NICs, the focus of consumer spending has, until quite
recently, been on consumer durables. In other markets, especially, Japan and Hong Kong, a wide
variety of luxury goods and services enjoy healthy growth.
One of the most dramatic changes in the late twentieth century was the shift of the centralized
command economies in former communist states to market economies. Each of these countries
has its own special economic problems and differs in its evolution to a market-driven economy.
The transformation has been dramatic, but the future remains unpredictable. Consumers are
definitely learning to discriminate quality and now have access to the same explosion of media
options as North America and Western Europe.
Many developing countries and Third World nations have ancient and well-developed market
institutions but lack modern marketing infrastructures. The recent spread of global satellite
communications has had a dramatic effect on access to marketing communications. Third World
consumers are remarkably loyal to local values. In these countries, the future is likely to be
mapped by the continued clash between foreign goods and values and local traditions and
beliefs. An especially interesting aspect of consumption in these countries is creolization adapting foreign products and services to local needs and tastes.
The purpose of this chapter is to set the tone for thinking about marketers and consumers
interacting in a very fast-paced, creolized, global world.
Teaching Objectives
After completing this chapter, your students should be able to:
1. Discuss how economic indicators and global markets shape consumption.
2. Outline some basic global trends influencing consumption.
3. Define the major world consumption areas including North America and Western
Europe; Japan and the newly industrialized countries, transitional markets in eastern and
central Europe, and developing and Third World countries.
4. Explain something about consumption patterns and preferences in major world areas.
5. Describe some patterns in cultural values in major world areas.
6. Identify trends and likely changes in consumer behavior for several different parts of the
world.
Chapter Outline – Lecture Notes for Instructors
Overview
The purpose of this Chapter is to describe consumer behavior within a global context.
Globalization is a social process where geography’s effect on social and cultural relations and
actions is diminished. Localization is about preserving a sense of identity, home and
community. There is a revival of local culture. Consumers are expressing a return to their roots
and adapting global consumer goods and meanings to fit their local cultures.
Global Market Economy
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Understanding consumers requires a basic understanding of the distribution of economic
power and potential around the world.
The nature of the economic system within a country affects nearly every facet of consumer
behavior. As economies grow, markets become different, larger and more demanding.
With improved economies, the range of tastes, preferences, and variations of products sought
by the consumer increases.
Economic Indicators
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Gross domestic product (GDP) and gross national product (GNP) are two measures of a
country’s economic activity. GDP is a measure of the market value of all goods and
services produced within the boundaries of a nation. GNP includes the market value of
goods and services produced by all that nation’s business operations including those in
foreign countries.
Another useful indicator is the average GNP per capita, which can be represented as the
dollar value of a country’s final output of goods and services in a year, divided by its
population. While the United States ranks first in the world in GNP, average purchasing
power is greatest in the European Community. Average GNP per capita provides very
important information about consumer demand, but it can be misleading. It depends
further on how GNP is distributed, how and what infrastructures support GNP, and what
kind of growth in GNP is expected.
Infrastructure represents capital goods that support the activities of many industries.
This would include paved roads, seaports, energy supplies, and so on. If infrastructure
does not develop with an expanding population and economy then countries begin to lose
economic ground. Another limitation of average GNP per capita is that it does not take
into account government welfare programs that provide services to consumers. Such
programs free up individual income for discretionary consumption expenditures.
Income Distribution within countries is also important in determining demand. Income
distribution gives us a better idea of the size and purchasing power of potential market
segments than per capita income. One way of comparing the distribution of income
within countries is called the Gini index. It measures the extent to which the distribution
of income deviates from a perfectly equal distribution. A Gini index of zero represents
perfect equality while an index of 100 implies perfect inequality. Thus, the higher the
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index, the more unequal is income distributed. Variations in the Gini index imply
different aspirations and possibilities for consumers in different nations.
Another useful measure of purchasing power is Engel’s Coefficient. This coefficient
measures the percentage of an average household’s income spent on food. As economies
develop, Engel’s coefficient goes down, indicating an increase in disposable income to
spend on other things than food.
Global Markets
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The globalization of markets, restructuring of Central and Eastern European economies from
command to market-driven, trends toward economic cooperation such as the North American
Free Trade Agreement (NAFTA) and the European Union (EU), and increased global
competition make it important to view the global economy in the context of regions of the
world.
There have been economic links between almost all parts of the world since the 16th century.
However, it is only in the latter half of the 20th century that the world has truly become a
global marketplace.
The world of the 21st century is divided not into countries, but into market areas. Three
global regions—Europe, the Americas and the Asian Pacific Rim—constitute a new
economic order for trade and development. Global companies that are triad powers have
significant market power in each of the Triad Regions. At the economic center of each
Triad region is an economic industrial power. In the European Triad, it is the European
Community; in the American Triad, it is the United States; in the Asian Triad, it is Japan.
Each of these regions has strong single-country markets or multi-country markets that are
bound together by economic cooperative agreements.
APEC was formed in 1989 and is the Asia-Pacific Economic Cooperation. The APEC
provides a formal structure for the major governments of the region (including the U.S. and
Canada) to discuss mutual interests for trade and economic collaboration.
In addition to these Triad Powers, there are emerging trading powers in the southern
hemisphere such as the Newly Industrialized Countries (NICs) of Southeast Asia (Singapore,
South Korea, Thailand, Indonesia, Taiwan), South Africa, Brazil, Nigeria, and Saudi Arabia.
These developing countries now also contain important consumer markets. NICs are
impressive exporters of many products such as steel, machine tools, electronics, and clothing.
Brazil offers a great example of the growing importance of NICs in world trade.
Goods, services, and information are produced and consumed in every nation. The flow of
goods, services, and information is global, but the distribution of production and
consumption varies greatly. The developed countries consume more than twice the value of
imported goods and services than do the developing countries ($33.6 versus $14.7 trillion
dollars).
Global Trends
This section briefly outlines four trends that influence consumption patterns around the world.
They represent areas of opportunity for consumer marketers.
The Service Economy
It is often said that the Triad powers (European Community (EC), USA, Japan) are
moving toward a service economy. In fact, of the 1000 largest corporations in the world today,
almost 200 of them are service firms. North America, followed by Japan and the European
Community, dominates the world market for the services that are consumed in the other nations
of the world. Services include a wide range of activities, including: accounting, management
and engineering services provided by firms such as Arthur Anderson, Deloitte and Touche, and
Bechtel; insurance on a super oil tanker; logistics functions provided by firms like Mitsui Lines
or Consolidated Freight lines; global information nets being designed by Time Warner or AT &
T; and fax and photocopying services provided by manufacturers like Xerox and neighborhood
copy centers like Kinko’s or Alphagraphics.
Green Marketing
Increasingly, global concern for the environment extends beyond issues like industrial
pollution, hazardous waste disposal, and deforestation to include issues that focus directly on
consumer and industrial products. By one estimate, only 20 percent of Triad nation companies
can be described as proactive in their commitment to improve environmental performance.
Industry is faced with the fact that raw materials resources are finite. Many companies
have adopted the concept of eco-efficiency including 3M, Proctor & Gamble and SC Johnson
Wax.
The recycling industry is another response to the recognition that resources are finite.
Nearly 90% of the raw materials that go into an average automobile are recyclable, and firms are
scrambling to do more.
In some cases, environmental activists have moved aggressively against corporations
with a poor “green” profile. More and more, companies must contend with green marketing
legislation that addresses the problem of what happens to goods after purchase. Germany has
passed stringent green-marketing laws that regulate the management and recycling of packaging
waste, called “take-back requirements.”
Growing Gap Between Rich and Poor
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Another trend of significant concern is the growing gap between rich and poor nations of the
world, and between the rich and poor within nations of the world.
While an increase in marketing activity has the general effect of delivering goods and
services to consumers more effectively, market economies are not necessarily effective in
providing for an equitable division of consumption possibilities. Thus, one response of
marketers to the widening gap between rich and poor has been the development of two-tier
marketing. That is, brands and retail formats are developed to cater to the top and the bottom
of the market.
Earthscaping
The final and perhaps most dramatic trend concerns earthscaping. This refers to the
accelerated movement of people, ideas, goods, capital, information, services, and popular
culture around the world. This accelerated movement has led to the uprooting of many
consumption habits from their local context and their commercialization on a global scale.
Global earthscaping also results in the emergence of global consumer institutions that
become creolized, with a blend of local and global meanings.
Some global consumption forms like Christmas or the beauty pageant become what some
have called a global structure of common difference – a consumer performance or ritual that
enables people to play out different, yet related values through a shared collection of cultural
practices.
Despite the fact that customs and behaviors are moving very quickly from one culture to
another, consumer behavior researchers must be careful not to fall into the trap of selfreferencing. Self-referencing refers to using your own experiences or intuitions to try and
understand the behavior of others.
Consumption in North America and Western Europe
The discussion of consumer behavior and consumption norms in North America and Western
Europe should probably also make reference to Australia, New Zealand and other nations with
substantial populations of European origin such as Argentina, Chile, or South Africa. However,
we generally limit our discussion to countries with average annual per capita incomes ranging
from $5000 as in Spain to over $18,000 as in Sweden.
Consumption Patterns and Preferences
Four main topic areas are discussed to highlight the consumption patterns in this group of
nations: (1) consumer skills, (2) recreational shopping, (3) leisure shopping, and (4) luxury fever.
These regions are distinctive in terms of the prevailing consumption ideology, as well as the
trends and changes in consumer behavior.
1. Consumer Skills
Choice making, even for complex products such as pharmaceuticals, is a highly developed skill
amongst consumers in North America and Western Europe. As a result, many consumers are
extremely price and value conscious. Highly developed choice-making skills fuel the growth of
retail discount chains and do-it-yourself outlets.
2. Recreational Shopping
Ever since the invention of the department store in the 19th century in France, there has been a
growing trend towards recreational shopping. The modern, self-enclosed shopping mall in all its
variant forms has become a site to which consumers make frequent pilgrimages to satisfy a wide
variety of needs, including those for aesthetic enjoyment, problem-solving, and personal display.
3. Leisure Shopping
A distinctive feature of North America and European consumers is the importance of leisure and
tourist consumption in these economies. Organized gambling is commonplace in Europe and
North America. It has quietly become one of US consumers’ favorite forms of entertainment,
generating more revenue than movies, spectator sports, theme parks, cruise ships and recorded
music combined. Now, thirty-seven states sponsor lotteries and 27 offer casino gambling. The
motives that inspire tourist consumption are diverse, ranging from nostalgic visits to “historic”
towns and villages, to escapist entertainment at Mardi Gras, to romance at the Club Med or a
cruise, to extraordinary adventures through African safaris, Himalayan trekking, or Outward
Bound trips.
4. Luxury Fever
Some experts argue that luxury is experiencing an incredible boom. In 1999, luxury spending in
the USA was growing four times as rapidly as spending overall. Family size has gone down, but
house square footage has gone up. The average U.S. house at the end of the 1990’s is nearly
twice as large as its counterpart from the 1950’s. Consumers in the U.S. eat fewer meals at
home, but do so on more elaborate cooking equipment.
The U.S. is not the only economy suffering from luxury fever. For example, Japan, with fewer
that half as many people as the United States, consumes over half the U.S. volume of luxury
goods. Luxury spending is not just a trend among the rich, but middle and lower-income earners
as well.
Trends and Changes in Consumer Behavior
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Some experts predict that a move out of the Industrial Age and into the Information Age will
alter culture and lifestyles in important ways. Some call it the era of fragmentation, or the
culture of sub-cultures, where people can take a menu approach for their lifestyle—picking
and choosing from day to day according to their mood and current fashion.
Because of advances in technology, marketers can cater to smaller and smaller niche
segments, customizing products and services to individual taste. In some ways, the
Information Age connects people with each other; in other ways, it leads to isolation.
Tens of millions of people around the world are connected to electronic bulletin boards and
this number is growing at 10% monthly. These cyberspace lifestyles have the potential to
make centralized offices obsolete.
More and more people are beginning to work at home. This trend may make homes and
neighborhoods much more important in developed countries than they have been for the last
several decades. This trend also makes home shopping via the Internet and television a
growth industry.
Consumption in Japan and the Newly Industrialized Countries of the Pacific Rim
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The Newly Industrialized Countries (NICs) of the Pacific Rim usually refer to South Korea,
Taiwan, Singapore, and Hong Kong. These four countries are also referred to as the “Asian
Tigers.” However, driven by aggressive investment from Japanese and Chinese among
others, Malaysia, Thailand, Indonesia, and the Philippines too are candidates for joining this
group.
As one of the wealthiest nations of the world, Japan represents a huge market, changing
quickly toward a culture of consumption. Nevertheless, the direction of Japan’s economic
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progress since World War II foreshadows the changes we now see expanding in other
countries of the Pacific Rim.
Japan shares many values with other countries of the Pacific Rim, where Confucianism forms
the foundation for ethics and morality in business as well as in social and personal lives.
For international businesses attempting to penetrate the Pacific Rim, it is tempting to lump
the regions together, as we have done. Nevertheless, culture and values and related
opportunities differ across these nations. Such differences complicate segmentation,
positioning, and marketing communications.
Most consumers in the NICs are rapidly becoming more educated and their household
incomes are growing. More women are entering the work force, especially in Japan,
increasing the number of dual-income families.
With the acceleration of economic affluence, consumer interests are moving beyond basic
necessities to include consumer appliances, electronic products, cars, and cosmetics.
Consumption Patterns and Preferences
As in North America and Europe, the general attitude toward consumption is extremely
diverse. Two powerful ideas that have underwritten much of the development of markets in the
NICs are the twin themes of modernization and rationalization.
In recent years, there has been a rapid adoption and domestication of Western
consumption styles, often in forms westerners might consider highly artificial. Nonetheless,
Japanese appreciate artificiality for its own sake and for its beauty.
In a number of NICs, the focus of consumer spending has, until quite recently, been on
consumer durables.
Consumers want information about products and brands rather than fancy packaging,
displays, or promotional gimmicks.
Consumers in the NIC countries are open to foreign goods, but as in Europe and North
America, consumers are selective in their choices.
Trends and Changes in Consumer Behavior
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Dramatic changes are underway in the NICs of the Pacific Rim. Many of these nations are
made up of youthful consumers; and, in many of these countries, the populations are growing
rapidly.
In almost all, we see a shift away from a savings orientation that has characterized the years
since World War II toward a new consumption orientation. As a result, personal bankruptcy
has been increasing dramatically among young people.
Many leaders of Asian countries are concerned that the new influx of Western culture will
undermine traditional values. As a result, while Thailand, the Philippines, and Indonesia are
moving to deregulate broadcasting, China, Malaysia, Singapore, and Vietnam continue to
ban private ownership of satellite dishes.
Consumption in Transitional Economies: Eastern Europe
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By transitional economies, we are referring primarily to the countries formerly dominated
by centralized command economies. These countries include Albania, Bulgaria, the Czech
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Republic, Estonia, Hungary, Lithuania, the Slovak Republic, Poland, Rumania, the former
Yugoslavia, eastern Germany, Russia, and the ten republics of the Commonwealth of
Independent States. This sector represents a population of 430 million and about 15 percent
of global GDP.
The most advanced in the creation of market led economies include Hungary, Poland,
Turkey, and the Czech and Slovak Republics.
Marketing executives in Hungary, Poland, and Bulgaria agree that consumers are becoming
more demanding. More demanding consumers require that companies develop more refined
market segmentation and develop customized products.
Consumption Patterns and Preferences
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After the fall of communism in 1989, protected and subsidized economies began to
liberalize. Industries were privatized, there was a dramatic influx of foreign goods and
foreign investment, and national economies experienced a long period of inflation. In these
transitional economies, consumers’ standards of living eroded under the impact of price
inflation and the loss of guaranteed employment.
Consumers have responded through a variety of strategies. For example, they get second
jobs, spend more time producing their own food for consumption, and sell private products
and produce directly to other consumers.
Engel’s law states that as real income goes down, so does the share devoted to luxury
products. However, in1990 as real income decreased in Czechoslovakia, Hungary, and
Poland, the demand for perceived luxury products increased. This may be explained by the
non-availability of luxury goods in the past or by the luxury boom gripping the US, Japan
and other countries. This trend continues.
Competitive pricing is most important in those countries where market transition is most
advanced such as Hungary. Product quality issues figure importantly in successful marketing
as well. As competition between local and foreign products increases, product quality issues
become important.
Trends and Changes in Consumer Behavior
At this stage, multinational consumer products companies like Unilever, Nestle’s,
Proctor & Gamble, and Colgate-Palmolive and numerous European firms like the German
publishing Giant Bertelesmann have experienced dramatic growth in Eastern Europe. However,
the buying binge of 1989-1992 has settled. Real household incomes in much of this region are
stagnating and penny-pinching is the norm. Moreover, shoppers in these transitional countries
no longer view imported brands as necessarily superior. Perceptions of “made in Poland” are
increasingly positive and many shoppers in Central and Eastern Europe are looking for
homegrown quality products. Media are revolutionized; scores of consumer-oriented magazines
are now available, as is commercial satellite television.
One clear trend is that the priorities of western Europe, which include the
emergence of “green” segments and a voluntary simplicity movement, are not likely to
characterize this part of the world in the short run.
Consumers in transitional economies have been denied things for such a long time
that there is a large demand for consumer products. Simplified, more resource conscious
packaging may be a trend in Western Europe, but in transitional economies, consumers want to
taste first the privileges of a better standard of living, before they work to save the planet. The
growth of Internet use is dramatic in Eastern Europe. The Internet is predominantly used by
business people, technical specialists, and students. The majority of access (approximately 38
%) is at universities and schools.
The advertising industry has grown dramatically in transitional economies in the past
decade. Nonetheless, consumers remain skeptical of heavy-impact, high frequency advertising,
as it reminds them of communist propaganda techniques. While Western Europeans expect to be
informed about brand differences, Eastern Europeans expect advertising to provide information
about products per se and expect variety in product range.
It is difficult to predict the future of consumer behavior in the transitional economies, and
some will fare better than others. Privatization has taken hold in at least some of these countries
such as Hungary, Poland, and the Czech Republic. A distribution infrastructure is evolving in
some cities. If consumers can survive the inflation, recession, unemployment, and political
turmoil surrounding them, they may soon begin to realize Western European consumption
lifestyles.
Consumption in Developing Countries and the Third World
By the terms, “developing world” and “Less Affluent (LAW) countries,” we primarily
refer to countries in the Southern Hemisphere in Asia, Africa, and Latin America. We somewhat
arbitrarily define the developing countries as those in which the annual per capita income is
greater than $1500 and less than $5000. These countries are primarily in Latin America and
Asia. Some of these markets are attractive because of their large populations—535 million in
Africa alone.
In many of these nations, basic necessities, adequate food, clean water, appropriate
clothing, and sanitary housing are unavailable to a large part of the population, creating
opportunities for sales of basic infrastructure to local companies and governments. However, the
distribution of consumer incomes tends to be highly skewed creating small segments of very
wealthy and large segments of very poor consumers. For example, in Peru, one percent of the
population accounts for nearly half of the national income! This pattern is referred to as dual
income distribution.
Consumption Patterns and Preferences
Marketers seeking to do business in the LAW must be prepared to deal with
less stable economic environments than in developed countries, the NICs, and even some
countries with transitional economies. Sales tend to follow a boom and bust cycle. The pay-offs
for investing in developing countries can be great, but so can the risks.
Many “white goods,” like microwaves, which are in the mature or decline
phase of the product life cycle in North America or Europe, are in the growth phase of the
product life cycle in Brazil and other developing countries. Thus, only 15% of Brazilian
households own a microwave oven, compared to 91% in the U.S.
Marketers must be prepared to meet the needs and respond to the
particularities associated with traditional consumption sets, complexes of goods preferred in
these countries. It may be useful to separate market strategies for different types of consumption
behaviors involving subsistence necessities, social investments, and luxury expenditures. Many
third world people produce a larger share of their subsistence necessities for direct consumption
than do those in the first world.
Wealthy consumers in developing countries often aspire to Euro-American
consumption patterns. Among the more numerous poorer segments, consumption choices are
often faithful to patterns that are perceived to be highly traditional. These patterns do represent
marketing opportunities.
Another distinctive type of consumption behavior in many developing or third
world nations is the tendency to devote considerable amounts of disposable income to social
investments designed to contribute to social status and prestige.
Finally, developing country consumers make important purchases of luxury goods of
foreign origin (especially consumer electronics and motorbikes) that may symbolize a
cosmopolitan orientation to them.
Trends and Changes in Consumer Behavior
The developing countries are in the throes of a dramatic mutation. Changes in macroeconomic and demographic factors (e.g., economic liberalization, the growth of a monetary
economy) have transformed customary modes of acquisition. Populations are growing rapidly,
and there is a visible gap between basic needs and the ability to meet them.
Expansion of commercial radio and satellite TV results in new desires for novel
consumption goods. In many LAW nations, marketers must proceed with care in promoting
exotic consumer goods in order to avoid becoming the target of anti-foreign sentiments. Some
consumers in Latin America and Asia see the sudden recent miraculous explosions of EuroAmerican consumer goods as evidence of cultural imperialism, the imposition of foreign values
and practices through the power of advertising hype.
One interesting third world trend is the creative recycling and re-consumption of goods
produced in the first world. These examples often provide instances of the movement of goods
on the wheel of consumption from disposition to consumption. For example, kerosene lamps
made of caste-off Pepsi cans are common in rural Malaysia.
In many parts of LAW, civil servants and other new elites act as a relay for the diffusion
of Western styles of consumption. Elite consumers in LAW often adopt “modern” or EuroAmerican consumption orientations.
Because nationalism, the idea of the nation state as the sovereign authority, often
developed at the same time as former colonies achieved their independence, consumption
preferences often take on blended or creolized styles. Such consumption patterns combine
elements of local, traditional consumer behavior with cosmopolitan or imported consumer
behaviors.
Creolization is an outcome of the acculturation of people to different cultural settings that
is discussed more fully in Chapter 5.
Review/Discussion Questions
1. Discuss likely advantages and disadvantages of introducing strong U.S. brands in
developing country markets.
This is a review question that requires students to summarize the pros and cons of the
market, economic, social, cultural, and political factors presented in the chapter.
With respect to market opportunities potential advantages include product or market
expansion. Companies must analyze the market potential in relation to company
resources considering the extent to which they have to customize the product. They must
also consider the state of the economy, social and cultural values, and the political
climate.
Potential disadvantages involve losses that may result from not understanding the culture,
unavailability of infrastructure to support the marketing effort, unforeseen economic
downturns, and political changes and unrest. Negative consumer response such as
perception of cultural imperialism could also potentially undermine a brand’s image.
2. Collect three or four examples of green marketing. What messages are being
communicated by the manufacturer? What claims support those messages?
This is a research question examining students’ awareness of environmental products as
well as their ability to gather product information.
Marketers can communicate green messages through all elements of the marketing mix.
These messages will reflect manufacturer strategies that either reduce the amount of
resources used to produce products or lower the level of pollution created in any stage of
the circle of consumption.
With respect to product strategy, messages communicated might include specific product
claims (e.g., CFC free), product endorsements by environmental organization (e.g.,
Rainforest Alliance’s Good Wood), government specified claim (e.g., 50% recycled
content), general claim (e.g., all natural), or cause-related (e.g., Patagonia’s grants to
grass-roots environmental projects). Distribution strategy related to green marketing
might include the provision of a reverse channel (Hewlett-Packard’s used printer
cartridge take-back) or supply-chain requirements (e.g., Patagonia buys only naturallydyed cottons). Pricing for environmental products may reflect a higher cost (e.g.,
Patagonia’s prices for naturally-dyed cotton clothing). Promotional claims may be
communicated in advertising, public relations (e.g., annual reports and newsletters), or,
personal selling.
3. Outline five or six ways in which the information age is likely to change aspects of
consumer behavior.
Some examples of how the information age is likely to change consumer behavior
include: (1) creating global personal values, (2) providing opportunities to customize
products, (3) providing means for instantaneous communication with companies, (4)
gaining timely information on product changes, (5) giving personalized service such as
tracking shipments, (6) allowing consumers to make product purchases from home, (7)
increasing personal isolation, (8) establishing virtual consumer information/word-ofmouth communities, and (9) providing access to information for consumer data bases.
4. Outline some consumption behaviors characteristic of a trend toward green
consumerism.
Student answers to this question must relate the four phases from the circle of
consumption to environmentalism. Some possible examples with respect to production
are that consumers make or grow their own products; for acquisition that consumers lease
rather than buy products, consider environmental claims in product purchases, or be
environmental opinion leaders; with respect to consumption that consumers adopt a life
of voluntary simplicity; and, for disposition that consumers refurbish products, do lateral
cycling, or buy only products that can be recycled, reused, or naturally disposed of (e.g.,
composted table scraps).
5. There seems to be a growing preference among many women in Budapest, Hungary for
Avon cosmetics. Avon is a U.S. company that offers a full line of moderately priced
women’s cosmetics products. An unusual feature of the company is that the product
line is distributed through Avon representatives who are most often women who sell the
product to friends, relatives, and acquaintances as a part-time job. Considering the
information you have about consumer behavior in eastern and central Europe, analyze
Avon’s success.
Hungary is a transitional economy — a country that was formerly dominated by a
centralized command economy and, now, adopting a free market. Industry Insight 4.1
summarizes research findings for marketing factors of success in transitional economies.
Both competitive pricing and product quality are critical factors for success.
Additionally, while consumers are interested in having the privileges of a better standard
of living, they no longer view imported brands as necessarily superior.
Consumers are skeptical of heavy-impact, high-frequency advertising, because it reminds
them of communist propaganda techniques. Consequently, as Avon representatives sell
to family and friends the existence of interpersonal trust can overcome this skepticism.
Also, Avon’s use of part-time sales representatives allows women to generate a second
source of income.
Avon’s direct distribution strategy is an advantage, given the lack of marketing
infrastructure. Also, the Internet offers an effective means of communication, as its
growth has been dramatic in Eastern Europe.
6. What recommendations would you offer to a U.S. company planning to introducing
computer games in China?
This is a review and application question requiring students to summarize general
considerations for multi-national marketing with country-specific ideas noted in the
chapter.
General considerations for international marketing include economic [e.g., per capita
income (see Exhibit 4.2)], income distribution (see Exhibit 4.4), infrastructure, political
(e.g., leaders’ attitudes toward Western values), and cultural (e.g., values towards the use
of sex in advertising) issues.
Specific consumer information for the Chinese market includes the fact that successful
marketing involves redefining products in ways that make them compatible with the
national cultural heritage and identity. Chinese leaders are concerned that the influx of
Western culture will undermine traditional values. Relatedly, given the strong
collectivist value in China, the company should use different forms of reference group
and interpersonal influence in its promotion along with sponsorship of social and cultural
events. Also, Chinese families tend to “shower money on their children,” even when the
average per capita GNP is $3,300 (compared to US $28,020). Finally, China has a poor
or non-existent distribution system for products.
7. What recommendations would you offer to a U.S. company planning to introduce its
brand of toothpaste in central and Eastern Europe? (Assume that the toothpaste is
commonly available in U.S. markets.)
This is a review and application question requiring students to summarize general
considerations for multi-national marketing with country-specific ideas noted in the
chapter.
General considerations include economic [e.g., per capita income (see Exhibit 4.2)],
income distribution (see Exhibit 4.4), infrastructure, political (e.g., leaders’ attitudes
toward Western values), and cultural (e.g., values towards the use of sex in advertising)
issues.
Country-specific considerations for transitional economies are summarized in Table 4.1.
Important critical factors for success include competitive pricing and product quality.
Also, the current formula should be tested in Central and Eastern Europe to make sure
consumers accept the taste/consistency of the toothpaste.
8. What recommendations would you offer to a U.S. company planning to introduce its
brand of toothpaste in the Third World? (Assume that the toothpaste is commonly
available in U.S. markets.)
This is a review and application question requiring students to summarize general
considerations for multi-national marketing with country-specific ideas noted in the
chapter.
General considerations include economic [e.g., per capita income (see Exhibit 4.2)],
income distribution (see Exhibit 4.4), infrastructure, political (e.g., leaders’ attitudes
toward Western values), and cultural (e.g., values towards the use of sex in advertising)
issues.
Country-specific considerations for developing and less affluent countries include lack of
economic stability, particularities associated with traditional consumption sets (e.g.,
Hara’s use of wooden stick to clean his teeth), tendency of Third World people to
produce their subsistence necessities for direct consumption, loyalty to traditional
consumption patterns, and tendency to spend disposable income to enhance social status
and prestige rather than to acquire necessities. Also, the current formula should be tested
in targeted countries (the Third World represents a culturally diverse market) to make
sure consumers accept the taste/consistency of the toothpaste. Finally, given the lack of
marketing infrastructure, promotion and distribution will be challenging.
Chapter Case Notes
You Make the Call — “U.S. Hospitals Seek Opportunity with Mexican Patients”
1. Assume that you are the business development director at a major hospital in Houston,
Texas. What steps would you recommend for exploring and developing
opportunities in Mexico?
The business development director at a major hospital in Houston, Texas would
recommend a thorough, long-term (five to ten year) analysis of the marketing, political,
economic, and cultural institutions in Mexico. A complete market segmentation analysis
of the medical care market in Mexico is also advised. The political analysis would
include investigation of politicians’ attitude toward American business and American
hospitals in Mexico, political stability, and medical welfare support. The economic
analysis would include measures of GDP, GNP, income distribution, infrastructure, and
purchasing power of Mexican consumers. The cultural analysis would focus on
determining the value Mexican people place on health, diet, exercise, health care, hospital
care, doctors, and other values related to hospital care. The market segmentation analysis
would identify geodemographic demand for hospital services, behavioral segmentation
information (hospital care benefits sought, usage rate, and occasions for use),
competitors, and consumer-product relationship for different types of American health
care.
2.
Would you recommend marketing services directly to Mexican consumers or going
through other channels? Explain.
Due to the substantial economic and marketing risks, the business development director
would not recommend building a full-service, free-standing hospital to market services
directly to Mexican consumers at this time. She would recommend other channels that
could service target markets such as tourists, travelers, and business professionals
presently in Mexico. The hospital would build a limited-service facility that would offer
emergency care and some surgical services (e.g., performance of an appendectomy). The
facility would be linked to a resort or built in a resort town (e.g., Cancun), an American
corporate headquarters, or a university (the facility could also serve as a medical teaching
school). The facility would also be available to Mexican consumers and marketing data
collected to determine the advisability of expanding the hospital to a full-care facility.
Another option would be to partner with an existing hospital in Mexico. Finally, the
hospital could initiate a medical information web site in Mexico and monitor the nature
of questions that consumers ask to identify potential hospital services that might be
economically viable.