describe the major clusters of countries or regions based on their similarities and ... changes in consumer behaviors within a country; and (7) Conduct experimental studies to ... the dual mode phone affords (Proctor et al., 2011). How may ..... puts it, âThe poor are forced into a situation in which they either have to spend what.
Culture and Consumer Behaviors — 1 Culture and Consumer Behavior1 Chi-‐yue Chiu, Letty Y-‐Y. Kwan, Dongmei Li, Luluo Peng, & Siqing Peng Submitted to Foundations and Trends in Marketing An ACI-‐funded project
1 We wish to thank the Institute on Asian Consumer Insight for supporting the empirical work presented in this monograph.
Culture and Consumer Behaviors — 2 Abstract Understanding how culture influences consumer behaviors is crucial to success in international marketing. In this monograph, the authors present a conceptual and empirical framework for understanding how culture impacts consumer behaviors, and recommend 7 analytical steps for understanding similarities and differences between cultures as well as within-‐culture variations in consumer behaviors. These analytical steps are: (1) Identify the key components of culture; (2) Find out and describe the major clusters of countries or regions based on their similarities and differences in consumption behaviors; (3) Relate similarities and differences in consumption behaviors to key components of culture; (4) Develop and test specific hypotheses regarding the joint effects of different components of culture on consumption behaviors; (5) Track the changes in consumption behavior within a country in response to social and economic development; (6) Formulate and test specific hypotheses regarding the joint effects of different components of culture on changes in consumer behaviors within a country; and (7) Conduct experimental studies to understand when consumers will follow cultural norms and when they will not. In the present monograph, we illustrate the utility of the proposed conceptual and analytical approach by combining business analytic and experimental methods to model tourist consumption, although this approach can be applied to explain behaviors in other domains of consumption. The authors close by suggesting several directions for future research on culture and behavior.
Culture and Consumer Behaviors — 3 Table of Contents 1
The Importance of Cultural Literacy in Marketing
2
What Is Culture? 2.1
Definition of Culture
2.1.1 Consumer Culture As a Specific Culture
2.1.2 Generic Culture
2.2
Major Components of Culture 2.2.1 Natural and Social Ecology 2.2.2 Levels of Development 2.2.3 Subjective Culture
2.3
Joint Influence of Ecology, Development and Subjective Culture
2.4
Contextual Variations in Consumer Behaviors
3
Cultural Variations in Consumption Patterns
3.1
Categories of Consumption Patterns
3.2
Level of Development and Consumption Patterns
3.3
Values
4.
Size Matters! Ecology, Culture and Consumption
4.1
Land Area, GDP and Leisure Trips
4.2
Cultural Effects of Land Area and GDP
4.3
Impact of Land Area and GDP on Consumption
4.4
Summary
5.
Within-‐Cultural Variations
5.1
Within-‐Country Changes in Consumption Pattern
5.2
Cultural Values Moderate Within-‐Country Changes in Consumption Pattern
5.3
Putting the Pieces Together
6.
When Do Consumers Behave Culturally?
Culture and Consumer Behaviors — 4 7.
Conclusions and Future Directions
7.1
Multilevel, Multi-‐Method Analysis of Consumer Behaviors
7.2
Future Directions
References
Culture and Consumer Behaviors — 5 Chapter 1 The Importance of Cultural Literacy in Marketing Cultural literacy is important to marketers. For example, shortly after Apple’s 3GS iPhone was introduced to the Japanese market, the product topped the bestselling list of smart phones in Japan in July 2009. Yet, five years earlier, Nokia’s dual mode (W-‐CDMA/GSM) phone failed miserably in Japan. Nokia’s failure is attributable to its lack of awareness that the Japanese handset users value mobile Internet (which is more available in iPhone) more than the low monthly talking time the dual mode phone affords (Proctor et al., 2011). How may culture affect consumer behaviors? First, culture can bias preferences and decisions. A Chinese consumer may like a cup of coffee that sells at 28 yuan more than an identical cup of coffee from the same coffee shop that sells at 24 yuan, because 4 is an unlucky number and 8 is a lucky number in Chinese culture. There is consistent research evidence for this phenomenon, which seems to defy economic rationality. In the stock markets in Hong Kong, Shanghai and Shenzhen, the prices of A-‐shares traded are more than twice as likely to end with 8 than with 4, suggesting that the Chinese prefer stock prices that end with “8” to those that end with “4” (Brown, Chua, & Mitchell, 2002; Brown & Mitchell, 2008; Rao, Zhao, & Yue, 2008). In one study (Block and Kramer 2009), Taiwanese consumers were presented with a package of 8 or a package of 10 tennis balls, and asked to offer a price for the package. The average price offered for the package of 8 tennis balls was higher than that offered for the package of 10 tennis balls. It is not a co-‐incidence
Culture and Consumer Behaviors — 6 that the Beijing Olympics was scheduled to open at 8:08 pm on August 8, 2008. The preference for the number 8 and the aversion to the number 4 are also reflected in the preferred messages in marketing communication among Chinese consumers. Consistent with the belief that 8 is a lucky number and 4 is an unlucky one, the number 8 is used much more frequently and the number 4 much less frequently than expected in Chinese consumer product advertisements (Simmons & Schindler, 2002). In the domain of product design, mixing elements of different cultures is a frequently used strategy to create innovative products. In 2006, Starbucks Coffee Singapore introduced a range of handcrafted snow-‐skin moon cakes—Caramel Macchiato, Cranberry Hibiscus and Orange Citron—to the market. In their news release, the company states that these new, innovative moon cakes will make a delicious complement to their customers’ favorite coffee, as well as great gift for friends and family in the Mid-‐Autumn Festival. Many Singaporean consume Starbucks coffee moon cakes when they celebrate the Mid-‐Autumn Festival (Chiu, 2007). However, when the consumers’ attention is drawn to the implications of a marketing practice for the purity and integrity of a sacred cultural tradition, consumers may react negatively to culture mixing (Chiu, Mallorie, Keh, & Law, 2009; Torelli & Alhuwalia, 2012). For example, one study (Peng, 2012) shows that although Chinese consumers react favorably to a book on how Western cuisines inspire improvements in Chinese cuisines, they respond negatively to one on how Western philosophies inspire revision of Confucianism. This is the case particularly
Culture and Consumer Behaviors — 7 among Chinese consumers who strongly support preservation of cultural traditions. These Chinese consumers react negatively to the mixing of Western philosophies with Confucianism because these consumers believe that Confucianism is an identity-‐defining philosophical tradition in Chinese culture and that its purity should be protected.
Cultural illiteracy in international marketing could evoke strong negative
emotions toward global brands among local consumers. In 2008, tens of thousands of Chinese netizens demanded the removal of the Starbucks Coffee in China’s Imperial Palace Museum, because they found the presence of Starbucks as an icon of Western culture in the Museum (an icon of Chinese culture) offensive (Chiu & Cheng, 2007). In 2012, Starbucks once again faced tremendous pressure from the Chinese consumers to remove its store near Lingyin Temple, a sacred Buddhist temple in Hangzhou, China. A study by Peng (2012) shows that Chinese consumers’ negative reactions to the presence of Starbucks in Chinese heritage sites are particularly strong after Chinese consumers have been directed to think about something they hold to be sacred (vs. functional) in their daily life. Presumably, this manipulation draws the Chinese consumers’ attention to the sacredness of their cultural tradition. In contrast, cultural literacy in marketing communication can cool down the angry reactions to the presence of foreign businesses in the sacred heritage sites of a local culture. In an experiment (see Chiu, Wan, Cheng, Kim, & Yang, 2011), when Chinese consumers were assigned to read a fictitious advertisement that McDonald’s would open a restaurant in the Great Wall (a Chinese heritage site), they were upset if the tagline in the advertisement was “Freedom, independence,
Culture and Consumer Behaviors — 8 American culture: All in McDonald’s”—a message that drew attention to McDonald’s as a symbol of American culture. In this condition, having a McDonald’s in the Great Wall was perceived to be an intrusion of American culture into Chinese culture. Importantly, the results of the experiment show that this perception of cultural conflict and its attendant negative reactions to McDonald’s can be avoided easily by replacing the culturally loaded tagline with a culture-‐neutral one: “Fast, convenient, delicious: All in McDonald’s”. The importance of cultural literacy in marketing communication is further illustrated in an experiment carried out with Indian consumers. In this study, Li (2013) showed that inappropriate use of humor in a culturally loaded message by a foreign brand in international marketing could create the impression of disrespect and sarcasm. In this experiment, Indian consumers reacted negatively to an unknown foreign brand of mineral water, when they saw an advertisement of it with a picture of the Ganges River (a sacred symbol of Indian culture) together with the tagline “Only from clean water,” implying that the water of Ganges River is not clean. In contrast, having a culturally respectful message in the same ad evoked positive responses from Indian consumers. When the tag line was changed to “Water of life”, Indian consumers evaluated the foreign brand favorably. In short, cultural literacy is of critical importance to success in international marketing. The cultural dimension deserves serious consideration in the design of every element of the marketing mix.
Cultural literacy is important to marketing. However, how could marketers
Culture and Consumer Behaviors — 9 become culturally literate? In this monograph, we will illustrate how insights on the relationships between culture and consumption patterns can be gained by combining business analytic and experimental methods in cross-‐cultural marketing research. Rich cross-‐cultural data are available in the public domain, which if carefully analyzed, can reveal important similarities and differences in consumption patterns between countries and regions, as well as persistent or shifting trends in consumption within a country or region over time. For example, rich cross-‐cultural data on consumption patterns are available from sources such as GMID Euromonitor and the World Bank. Three positive features of these datasets are noteworthy. First, they contain annual consumption data from many countries or regions over an extended period of time. These data allow marketers to compare consumption patterns across countries/regions and to track changes in consumption pattern within the same country/region. Second, the data are based on objective recordings of actual consumption activities instead of consumers’ subjective appraisal of their consumption activities. Third, because the data are available in the public domain, conclusions drawn based on the analysis of these data can be verified independently by different researchers. Cross-‐cultural data are also available for understanding the cultural factors that predict variations in consumption pattern between countries and within a country. As will be discussed Chapter 2, a national culture consists of three major components: the country’s natural and social ecology; level of economic, social and technological development; and value system. These three components of culture
Culture and Consumer Behaviors — 10 influence the characteristic pattern of consumption in a country. The United Nations, GMID Euromonitor, the World Bank, the CIA World Factbook, and other organizations collect data on the ecology and level of development of many countries or regions. Annual data on the socioeconomic indicators are also based on objective recordings and are available for an extended period of time. Data on value systems for a smaller number of countries or regions can be obtained from sources such as the World Value Survey. Unfortunately, longitudinal cross-‐cultural data on cultural values are generally not available. Most cross-‐cultural value data are survey data based on the respondents’ self-‐reports. This is not a serious problem given the subjective nature of values. A major challenge of consumer insight analysis is to examine the joint effects (as opposed to the independent effects) of the three components of culture on consumption. To meet this challenge, we need a theoretical and empirical framework, which will be introduced in Chapter 2. This framework is used to guide the analyses presented in Chapters 3-‐5. The analyses presented in this monograph assume that each country/region has its characteristic pattern of consumption, which is explicable by examining pertinent cultural factors. Our analytic strategy may hence give rise to the erroneous perception that all consumers in the same culture behave in the same way in all situations. Therefore, it is important to emphasize upfront that the characteristic pattern of consumption of a country or region is the expected pattern of behaviors of
Culture and Consumer Behaviors — 11 a representative consumer in the country or region.2 We recognize that there are substantial behavioral variations among consumers within the same country. In addition, the same consumer may behave in a culturally typical manner in some situations and act in a culturally atypical manner in other situations. Marketers who need to make global predictions about the average pattern of consumption in a certain country or region will find the macro-‐level analyses introduced in Chapter 3-‐ 5 useful. To make nuanced predictions regarding when consumers’ behaviors would conform to the culturally typical pattern in concrete consumption situations, marketers will need to combine macro and micro level analyses. It is beyond the scope of the present monograph to include a comprehensive review of the micro level consumer behavior literature. 3 Nonetheless, in the next chapter, we will acknowledge the presence of situational variations in consumer behaviors. In Chapter 6, we will use several examples to illustrate when consumers are inclined to behave culturally. In Chapter 7, we will close by suggesting several future directions in culture and consumption research.
2 In the present context, a representative consumer in a certain country or region refers to someone whose consumption pattern resembles the statistical average in the country or region. 3 For a recent comprehensive review of this literature, see Chiu, Ng, and Au (2013).
Culture and Consumer Behaviors — 12 Chapter 2 What Is Culture?
The objective of this chapter is to provide a working definition of culture, and
a conceptual framework for understanding the relationship between different components of culture and consumption. In the next three chapters, we will apply this framework to analyze similarities and differences in consumption patterns across countries and regions as well as changes in consumption patterns within a culture. 2.1
Definition of Culture Broadly speaking, culture is network of ideas and practices shared (albeit
incompletely) among a collection of interconnected individuals (Chiu & Hong, 2007). Culture is a polysemous term, with both a generic sense and a specific sense (Chiu & Hong, 2006). A set of ideas and practices can be a culture or just a fad. In its generic sense, culture refers to the common characteristics (sharedness and continuity) that separate a culture from other similar constructs (a fad, a fashion). Culture also has a specific sense, which refers to the constellation of ideas and practices that is characteristic of a certain human population (e.g., rural vs. urban culture). 2.1.1 Consumer Culture as a Specific Culture Consumer culture is a specific form of culture that is popular in developed countries. In a consumer culture, most people
Culture and Consumer Behaviors — 13 •
consume at a level that exceeds the subsistence level considerably;
•
obtain their goods and services through economic exchanges;
•
regard consumption as appropriate and desirable;
•
signal their values, personality and lifestyles through the products and services they consume and through the way they consume products and services (Rassuli & Hollander, 1986); and
•
view acquiring goods and services that they do not need for subsistence as a life goal and a reflection of their self-‐identity (Stearns, 2002).
Consumer culture is unpopular in pre-‐industrial societies and hardly exists in subsistence economies, although there is some demand for luxurious and lifestyle goods and services in poor countries (Belk 1988). In China, consumer culture prospers in the post-‐Mao era. In post-‐Mao China, even Maoist symbols and communist jargons are often used to create indigenous artworks for marketing, although China is officially a Communist state (Zhao & Belk, 2008). An example is Cola-‐cola’s successful and controversial “Red Around the World” campaign during the 2008 Beijing Olympics, which has been criticized for paying tribute to Communism and to Mao himself. 2.1.2 Generic Culture
A set of ideas or practices could be a culture or a fad, depending on whether
it possesses the defining characteristics of culture. The generic sense of culture refers to the common characteristics of all forms of specific cultures. For example,
Culture and Consumer Behaviors — 14 consumer culture and other forms of culture share many features. As illustrated in Figure 2.1, these shared features define what a culture is (Chiu, Leung, & Hong, 2010). First, a culture consists of a set of shared values and practices. For example, consuming for consumption’s sake is a shared value in consumer culture. Using consumption to construct and signal one’s self-‐identity is an accepted practice in consumer culture. Figure 2.1 Defining characteristics of culture in its generic sense
Low
High
Low
Idiosyncratic ideas or practices
High
Fad
The tradition of small group (e.g., a family) Culture
Extent of
Extent of sharedness
continuity
Insiders of a culture know what values and practices are considered to be important in the society (Chiu, Gelfand, Yamagishi, Shteynberg & Wan, 2010). Insiders of a culture also possess nuanced knowledge of what people in the culture know, believe and mean, their theory of the code being followed, as well as the game being played in the culture (Keesing, 1974). Such knowledge allows individuals in the culture to communicate effectively with others and coordinate their joint activities. The communicative function of cultural knowledge is reflected in the cultural competence of bicultural individuals (Chiu & Hong, 2005). A study (Leung, Lee, & Chiu, 2013) shows that bicultural individuals who have insider knowledge of
Culture and Consumer Behaviors — 15 the prevalent values in Taiwanese and American cultures can customize their communication messages for Taiwanese and American customers. For example, when promoting life insurance policies to a Taiwanese customer, knowing that Taiwanese tend to focus on potential losses, a culturally competent sales agent would emphasize how the policy can buffer risks. In contrast, when promoting life insurance policies to an American customer, knowing that Americans tend to focus on potential gains, a culturally competent sales agent would emphasize the financial benefits of the policy. However, not all consumers would behave in a culturally typical manner, and few individuals would follow cultural norms in all situations. Consumers who possess insider knowledge of what others in the culture value also have their personal goals and preferences. When deciding whether to act culturally in concrete situations, these individuals would weigh the benefits and costs of following cultural norms. The decision to adhere to cultural norms is easy when they are consistent with one’s personal agenda (Zhang & Chiu, 2012). However, when personal objectives deviate from cultural expectations, following cultural expectations is a strategic decision (Tong & Chiu, 2012). We will return to this issue when we discuss when consumers would act culturally in Chapter 6. A culture is not a fad. A faddish practice is popular for a short time. A cultural practice has continuity; it is transmitted from one generation to another. In the domain of consumption, families and the media are two major socialization agents responsible for reproducing the shared consumer values and practices in the culture. For example, parents transmit cultural values to their children by engaging them in
Culture and Consumer Behaviors — 16 personal storytelling. In American Midwest, when young children spontaneously narrate their personal stories, they seldom mention past transgressions. When they do, their parents tend to downplay the child’s wrongdoing. In contrast, in Taiwan, young children mention past transgressions more frequently when narrating their personal stories. When children in Taiwanese families talk about their past transgressions, their parents, who play the role of a co-‐narrator, often invoke moral and social rules repeatedly to feature the child’s transgression as the point of the story. Apparently, American parents encourage their children to use a self-‐ affirmative stance and Taiwanese parents a self-‐critical one to frame their children’s personal stories. This cultural difference in parenting styles help to transmit and reproduce a culture of self-‐expression in the US and sustain a culture of self-‐ criticism in Taiwan (Miller, Fung, & Mintz, 1996). The media is another socialization agent. Powerful marketing messages such as “Just do it!” could have played an important role in strengthening a culture of immediate gratification (a key value in consumer culture) as opposed to a culture of perseverance and thrift. In Chapter 3, we will analyze how countries or regions with dissimilar cultures differ in their characteristic consumption pattern. However, culture is not static. As mentioned, in the Mao era, consumer culture hardly existed in China, but has prospered after the country started to experiment with “market socialism”. Culture is reproduced, but every reproduction of culture has some unique aspects. For example, some Generation Y values such as freedom, critical thinking, integrity and innovation are core values in American culture. However, the heavy emphasis on speed and customization in Generation Y
Culture and Consumer Behaviors — 17 reflects adaptation of the prevalent value system to advances in information technology. Improvements in the healthiness of a country can also change its citizens’ cultural values. According to a recent discovery in cross-‐cultural psychology, cultural differences in values emerged in part as a mechanism for containing the spread of infectious diseases. Based on a careful review of archival data, Schaller and Murray (2011) discovered that countries or regions that prioritize conformity to ingroup norms are often found in geographical regions with historically higher levels of pathogen prevalence. Because strict adherence to ingroup behavioral norms, particularly those that prescribe self-‐regulation of health behaviors, reduces the likelihood of pathogen transmission, these norms are more likely to emerge and be strictly enforced in countries with higher levels of pathogen prevalence. The average number of Internet users in a country or region had increased from 141 per 1000 citizens in 2002 to 388 per 1000 citizens in 2011, and the number of mobile phone subscriptions had increased from 265 per 1000 citizens in 2002 to 969 per 1000 citizens in 2011. Likewise, the average life expectancy in a country or region had increased from 68.0 in 2002 to 70.4 in 2011, and the average infant mortality rate had dropped from 36.3 in 2002 to 28.9 in 2011.4 Would the improvements in a country’s telecommunication, Internet connectivity and healthiness change its citizen’s consumer behaviors? We will address this question in Chapter 5. Nonetheless, as we will point out in Chapter 7, a major research
4 Data are available for 201 to 208 countries or regions. Source: GMID Euromonitor
Culture and Consumer Behaviors — 18 challenge in culture and consumption research is to understand how culture changes. 2.2 Major Components of Culture
Culture is a complex system, consisting of a few interrelated subsystems. In
this monograph, we focus on three major subsystems of a national or regional culture: its natural and social ecology, its level of development, and its value system. 2.2.1 Natural and Social Ecology The natural ecology of a country is stable and relatively non-‐malleable. A country can increase its total land area by through reclamation from sea, and territorial expansion. However, territorial expansion does not occur very frequently, and reclamation of land is expensive. The natural ecology of a country can affect the evolution of the country’s economy, social institutions and behaviors. First, the natural ecology of a country or region may incline people living in this ecology to engage in different types of economic activities for subsistence. For example, fishing is likely to be the economic activities for people living in coastal countries or regions, farming for people living in regions with moderate levels of precipitation, and herding for people living in arid grasslands. Second, people living in hostile environments develop behavioral and institutional defenses to ensure their physical safety. As discussed in the last section, in countries or regions with high levels of pathogens, to contain the spread of
Culture and Consumer Behaviors — 19 infectious diseases, people are expected to comply with hygiene-‐related norms. In the frontier areas in the Old South in the US, the law was weak, and citizens were expected to depend on themselves to protect their own life, families, and wealth. In this region, the use of violence for self-‐defense was acceptable. In fact, tolerance of insults and aggression against the self and one’s families was regarded as a symbol of cowardice, which might invite further aggression toward the self and one’s families. In contrast, violence, or the threat of it, in response to aggression and insults was seen as a means to communicate publicly one’s toughness and determination to get even with the aggressor. These shared beliefs and practices are symptoms of a cultural syndrome that have been referred to as culture of honor. Time has changed. Now the Southern states are as law-‐abiding as other regions in the US. Nonetheless, pockets of culture of honor still persist in the South (Cohen & Nisbett, 1997). Compared to northerners, southerners in the US still consider the use of violence for self-‐protection to answer an affront or to socialize children more acceptable (Cohen & Nisbett, 1994). The law in the Southern states is more tolerant of the use of deadly weapons for self-‐defense. Only 25% of the states in the South have statutes requiring an individual to retreat before using deadly force for self-‐defense, compared to 48% of the states in the North (Cohen, 1996). Insurance spending provides another illustration of how the ecology of a country affects consumer behavior. When the income of a country or region increases, its citizens should feel a stronger motivation to insure their good life against unexpected hazards. Hence, people in richer countries or regions should be more willing to buy insurance, and the relationship between national income and
Culture and Consumer Behaviors — 20 insurance spending should be particularly strong in countries where people feel unsafe. Data on the percent of non-‐life insurance premium to GDP5 are available from the World Bank for 156 countries or regions from 2001 to 2011. For each country, we took the average of its non-‐life insurance spending across the 11 years. A reason for using the 11-‐year average to form a summary index is to reduce the impact of extraneous fluctuations in insurance consumption on the measure. For example, insurance spending in a country might drop following the Lehman Brothers crisis because many consumers in the country lost confidence in financial institutions after the crisis. The impact of the crisis on the measure of insurance spending in the country was reduced because we measured insurance spending of the country using the 11-‐year average. However, when using a summary index of expenditure over a relatively long period of time, it is important to assess how stable the expenditure pattern of a country/region relative to those of other countries/regions was during this period. We used the Kuder-‐Richardson Formula 20 to measure temporal stability. The value of this index, which is referred to as the alpha coefficient, can range from 0 (no stability at all) to 1 (perfect stability). The alpha coefficient for the summary index of insurance spending is .992. Countries or regions that had relatively low percentages of non-‐life insurance spending in 2001 also had relatively low percentages in other 5 We focus on non-‐life insurance expenditure because past research shows that buying life insurance is both a consumption behavior as well as an investment, and GDP and inflation are the best predictors of country differences in life insurance consumption (Beck & Webb, 2003).
Culture and Consumer Behaviors — 21 years. Likewise, countries or regions that had relatively high percentages of insurance expenditure in insurance spending in 2002 continued to have relatively high insurance expenditure in other years. Data are also available from GMID Euromonitor for the number of homicides per 100,000 citizens for 98 countries or regions from 2002 and 2011. Again, we took the average homicide rate across 10 years for each country or region to form a summary index of physical safety in the country or region. The alpha efficient of this index was .993. Finally, per GDP data are available from GMID Euromonitor for the same period. The alpha coefficient of average per GDP across the 10 years was .998. As shown in Figure 2.2, although richer countries spent more on non-‐life insurance, the increase in non-‐life insurance spending was much more pronounced when the homicide rate was 15 per 100,000 citizens than 5 per 100,000 citizens. This example shows that homicide rate, as a proxy of physical safety of a country or region, can moderate the relationship between economic development and consumption. In Chapter 4, we will further illustrate how the total land area of a country or region, another aspect of natural ecology, moderates the relationship between the economic development and consumption.
Culture and Consumer Behaviors — 22 Figure 2.2 Estimated Non-‐Life Insurance Spending for Countries or Regions with Varying Income Levels and Homicide Rates
% of Non-‐life insurance premium to GDP
5
10
15
12 10 8 6 4 2 0 1,000
10,000
50,000
100,000
GDP per capita (in US$)
2.2.2 Levels of Development
Consumption is an economic activity. Not surprisingly, the levels of economic,
social and technological development of a society have significant impact on its characteristic pattern of consumption. As mentioned at the beginning of this chapter, consumer culture is likely to emerge in rich, developed countries. In these countries, people allocate a larger percentage of their expenditure to consumer goods that confer pleasurable gratification and opportunities for self-‐expression. In contrast, in a subsistence economy, people focus on finding opportunities to make ends meet, and obtain resources to ensure the survival of oneself and one’s significant others. In these societies, people distribute a larger percentage of their expenditure to basic necessities. Consumers in these societies may sometimes give up “necessities” in
Culture and Consumer Behaviors — 23 order to afford some “luxuries,” but this is not an easy choice. As Shrestha (1997) puts it, “The poor are forced into a situation in which they either have to spend what little money or resources they have on senseless consumer objects rather than basic necessities in order to deflect total social humiliation or face the prospect of being teased and laughed at.” (p. 26) In the next chapter, we will illustrate the influence of economic and social development on consumption pattern with more examples. 2.2.3 Subjective Culture
Subjective culture refers to the ideas and practices that are widely shared in a
society, including prevalent beliefs, values, and behavioral scripts (Chiu & Hong, 2006). Subjective culture provides individuals in the society with a widely accepted way of perceiving the self and the world, or a common frame of reference for making sense of the reality.
The most extensively researched component of subjective culture is values. A
value system is an organized configuration of values that express what the desired end states are for the society and its citizens. Most values can be placed on the two-‐ dimensional map shown in Figure 2.3. The horizontal dimension of this map is growth versus protection, and the vertical dimension is social versus individual. Growth values champion the attainment of higher social and moral standards for the individual and the society, whereas protection values prioritize order, stability, and safety of the individual or the collective. Individual values prescribe differentiation of the self from the collective and emancipation of the individual from normative control, whereas social values prioritize embedding the self in the collective (Fischer,
Culture and Consumer Behaviors — 24 2014). Figure 2.3 A 2-‐Dimension Model of Cultural Values
As a society attains higher levels of economic, social, and technological
development, its citizens are liberated from the social constraints in traditional societies and have more freedom to pursue autonomously chosen goals and personal growth. The values that support the pursuits of self-‐chosen growth goals include friendship, leisure, happiness, health, imagination and openness. In contrast, in societies with lower levels of economic, social and technological development, people are tied to the social obligations in traditional societies and are preoccupied
Culture and Consumer Behaviors — 25 with assuring basic survival of oneself and one’s significant others. People in these societies prioritize social and protection values such as religion, work, family and conformity (Fischer, 2014). In short, as a society achieves higher levels of economic social, and technological development, its value priorities will shift from society-‐ protection to individual-‐growth, as illustrated by the arrow in Figure 2.3.
World Value Survey data are available for 80 countries or regions. The World
Value Survey consists of over 300 items, but only 12 are Society-‐Protection or Individual-‐Growth values. These 12 values are friends; leisure time; happiness; health; imagination; tolerance and respect for other people; hard work; work; religion; religious faith; obedience; and family. The first 6 values are Individual-‐ Growth values and the remaining values are Society-‐Protection values. For each country or region (e.g., S. Korea), we calculated the average level of endorsement of each of these 12 values by its citizens (e.g., the average level of endorsement of each of the 12 values by the Korean respondents). Next, we performed factor analysis on the average endorsements of the 12 values in the 80 countries/regions.6 Factor analysis is a statistical procedure used to identify the value dimensions that can adequately summarize the similarities and differences in value endorsements among the 80 countries or regions. The results of the analysis, which are presented in Table 2.1, show that the similarities and differences among countries or regions in the endorsement of the 12 values can be summarized as similarities and differences in the levels of endorsement of two 6 Because different response formats (e.g., Likert-type scales, multiple choice) were used in the measures of the 12 value items, we standardized each value item before performing factor analysis on the items. For each value item, its mean level of endorsement across countries/regions is 0, and its standard deviation equals 1.
Culture and Consumer Behaviors — 26 clusters of values. The first cluster consists of 5 Society-‐Protection values: religion; religious faith; work; obedience and family. The second cluster consists of 7 Individual-‐Growth values: friends; leisure time; happiness; health; imagination; tolerance and respect for other people; and de-‐emphasis of hard work. Table 2.1 Factor Analysis Results of World Value Survey
Society-‐Protection Individual-‐Growth Values Values Religion 0.96 -‐0.21 Religious faith 0.92 -‐0.22 Work 0.73 -‐0.09 Obedience 0.65 -‐0.06 Family 0.58 0.31 Happiness 0.04 0.80 Health 0.18 0.75 Tolerance and respect for other people -‐0.08 0.62 Imagination -‐0.36 0.61 Leisure time -‐0.13 0.59 Friends -‐0.02 0.44 Hard work -‐0.02 -‐0.44 Notes. The numbers shown in the table are factor loadings. The possible values of factor loadings range from -‐1 to 0 and 1. If a certain value item (e.g., religion) has a high positive loading on a factor (e.g., Society-‐Protection values), there is a strong positive association between the item and the factor. If the factor loading of a certain value item on a factor = 0, there is no association between the item and the factor. If a certain value item (e.g., hard work) has a high negative loading on a factor (e.g., Individual-‐Growth values), there is a strong negative association between the item and the factor. Based on these results, for each country or region, we calculated the levels of endorsement of Society-‐Protection values by taking the average endorsement of the five Society-‐Protection values. Similarly, we took the average endorsement of the 7
Culture and Consumer Behaviors — 27 Individual-‐Growth values to represent the level of endorsement of Individual-‐ Growth values in the country or region.7 Aside from Individual-‐Society and Growth-‐Protection dimensions, subjective cultures also differ along other dimensions. Inglehart and Baker (2000) selected 16 items in the World Value Survey to form two dimensions of cultural values: Traditional vs. Secular-‐Rational Values and Survival vs. Self-‐Expression Values. Traditional values are similar to Society values; they both emphasize the importance of religion, family, national pride, respect for authority, protectionist attitudes against foreign trade, and social conformity. In contrast, Secular-‐Rational values deemphasize the importance of religious and traditional values and promote the use of reason and logic in problem solving. Survival values are similar to protection values; they both emphasize economic and physical security above all other goals, defense against the threat of foreigners, ethnic diversity and cultural change, an intolerance of gays and other outgroups, an insistence on traditional gender roles, and an authoritarian political outlook (Inglehart & Baker, 2000). In contrast, Self-‐ Expression values emphasize trust, tolerance, subjective well-‐being, political activism and self expression8 (Inglehart & Baker, 2000).
Hofstede et al. (2010) used 6 dimensions to differentiate cultural value
systems in different countries or regions. These 6 dimensions are: Power Distance, 7 We reversed the scoring of “hard work” in the calculation of the Individual-‐Growth values. 8 The scoring of Traditional vs. Secular-‐Rational Values and Survival vs. Self-‐ Expression Values are complicated. It requires computation of indices (e.g., the Autonomy index and the Post-‐Materialist index) and combination of the indices with individual items. Hence, it is difficult to evaluate the psychometric properties of these two value dimensions. For details, see Chiu, Chia & Wan, in press).
Culture and Consumer Behaviors — 28 Individualism-‐Collectivism, Masculinity-‐Femininity, Uncertainty Avoidance, Long-‐ Term Orientation, Indulgence versus Restraint. We list the definition of these dimensions in Table 2.2. Data for these dimensions are available for 69 to 92 countries or regions. 9
As shown in Table 2.3, the World Value Survey dimensions are related to the
Hofstede dimensions. Countries or regions that endorse society-‐protection values also tend to accept unequal power distribution (have high power distance), be collectivistic, and have a short-‐term orientation (respect tradition, have high face concerns, and value fulfillment of duties). Countries or regions that endorse individual-‐growth values and secular-‐rational values prefer equal power distribution (have high low power distance), are individualistic, and enjoy immediate hedonic gratification (value indulgence). Indeed, most countries or regions that privilege secular-‐rational values also emphasize individual-‐growth values and de-‐emphasize society-‐protection values. Countries or regions that endorse self-‐expression values tend to favor gender role differentiation, short-‐term orientation, and indulgence.
9 See Chiu et al. (in press) for review of the reliability and validity of the cross-‐ cultural measures of values, beliefs and personality, including the World Value Survey and the Hofstede dimensions.
Culture and Consumer Behaviors — 29 Table 2.2 The Hofstede Cultural Dimensions Value Dimension Power distance
Data Definition available for 69 countries The extent to which unequal power distribution or regions is expected and acceptable from the perspective of the less powerful members of institutions and organizations in the country. Individualism 69 countries Individualism: The extent to which ties between versus or regions individuals in the society are loose, such that collectivism everyone is expected to look after oneself and one’s immediate family. Collectivism: The extent to which people are integrated into strong, cohesive in-‐groups since birth and expected to exhibit unquestioning loyalty throughout one’s lifetime Masculinity 69 countries Masculinity: The extent to which the society has versus or regions clearly differentiated emotional gender roles, femininity with men expected to be assertive, tough, and focused on material success, and women modest, tender, and concerned with the quality of life. Femininity: The extent to which the society’s emotional gender roles overlap, such that both men and women are supposed to be modest, tender, and concerned with the quality of life. Uncertainty 69 countries The extent to which the members of a culture Avoidance or regions find ambiguous or unknown situations to be threatening. Long-‐term vs. 92 countries Long-‐Term Orientation: The extent to which short-‐term or regions virtues oriented toward future rewards, such as orientation perseverance and thrift are valued in the country. Short-‐Term Orientation: The extent to which virtues related to the past and present, such as respect for tradition, preservation of “face”, and fulfilling social obligations are emphasized in the country. Indulgence 92 countries Indulgence: The tendency to permit relatively versus restraint or regions free gratification of basic and natural human desires related to enjoying life and having fun Restraint: the extent to which people in the country believe that immediate gratification and enjoyment need to be curbed and regulated by strict social norms. Source: Hofstede et al. (2010)
Culture and Consumer Behaviors — 30 Table 2.3 Relationships of the World Value Survey Values with the Hofstede Value Dimensions
Society-‐ Protection Values .38*
Individual-‐ Growth Values -‐.68*
Secular-‐ Rational Values -‐.64*
Self-‐ Expression Values .18
Power distance Individualism -‐.31* .57* .69* -‐.26 Masculinity -‐.01 -‐.13 -‐.08 .29* Uncertainty .20 -‐.25 -‐.20 .07 Avoidance Long-‐term -‐.65* .04 -‐.04 -‐.83* orientation Indulgence -‐.12 .64* .57* .48* Secular-‐ -‐.59* .79* Rational Values Self-‐ .67* -‐.18 Expression Values Notes. Correlation is a measure of the strength of association between two variables. A positive correlation with an asterisk indicates the presence of a reliable positive association between the two variables. A negative correlation with an asterisk indicates the presence of a reliable negative association between the two variables. 2.3
Joint Influence of Ecology, Development and Subjective Culture
The ecology, level of development and value system of a country or region
jointly influence its people’s consumption pattern. As we will argue in the next chapter, consumer culture that emphasizes consumption for leisure and pleasure is more vibrant in countries or regions that have attained higher levels of economic, social and technological development. In addition, consumer culture and its attendant values co-‐evolve; countries or regions with strong consumer culture also tend to privilege individual-‐growth values and deemphasize society-‐protection values.
Culture and Consumer Behaviors — 31
Consumption is an economic activity. Hence, it is not surprising that
consumer culture is best developed in rich countries or regions. However, wealth does not rigidly determine consumer behaviors. As mentioned at the beginning of this chapter, the value system of a culture provides an interpretive framework for its members to make sense of the reality. Accordingly, different value systems and consumer behaviors have emerged in countries or regions with markedly different experiences with economic development. In Chapter 4, we will present evidence for this argument, focusing on the joint effect of natural ecology and economic growth on consumer behaviors and their attendant values. Very briefly, big countries with abundant resources (e.g., USA, Saudi Arabia) may develop by exploiting its abundant natural resources. When these countries become rich, their citizens tend to be confident that the growth of their countries is sustainable as long so their countries continue to own the growth-‐ sustaining natural resources. Consumers in these countries are inclined to enjoy the fruits of economic development. They pursue personal goals and seek self-‐ expression. They focus on enjoying life now rather than saving for the rainy days. They spend, do not save, and borrow from the future using their credits. In contrast, countries of small sizes and very limited natural and human resources may develop through calculative optimization of their resources, manpower development, importation of growth-‐sustaining natural resources, and recruitment of foreign talents. For example, Singapore is a small country. It attains its rapid economic growth in part by preserving and recycling water; importing water from Malaysia and building materials from Indonesia; developing its human
Culture and Consumer Behaviors — 32 resources through education, and attracting talents from developed countries. Countries that small and rich need to balance personal aspirations with the collective well-‐being of their countries and curtail self-‐expression in order to maintain social harmony. They value perseverance and thrift, exercise moderation in spending and borrowing, and are willing to save for the rainy days.
Cultural change is a dynamic and path-‐dependent process (Hatt, 2009). The
development of consumption patterns in different countries may follow different paths, depending on the prevalent values in these countries. For example, the US and Saudi Arabia are both rich countries with abundant growth-‐sustaining resources. Nonetheless, the changes in consumption patterns in these two countries when they get rich are very different, reflecting the different core values in Christianity and Islam. Thus, when the economic, social and technological conditions in a country improve, the consumption pattern in the country is expected to change. However, the change may follow very different paths depending on the dominant values in the country. In Chapter 5, we will review the evidence for this argument. 2.4
Contextual Variations in Consumer Behaviors
The foregoing analysis suggests that every country has a characteristic value
system and consumption pattern that can be predicted from pertinent cultural factors. This may create the erroneous impression that culture is a homogeneous monolith: people in a country or region think, feel and behave in the same way all the time. However, recent advances in research on culture science show that cultural behaviors are malleable. First, in a concrete situation, individuals who have
Culture and Consumer Behaviors — 33 experiences in and are familiar with two cultures may display the characteristic behaviors of one or other culture, depending on which culture is more salient (Hong, Morris, Chiu & Benet-‐Martinez, 2000). For example, consumers in Singapore, a multicultural country, are familiar with the consumption norms in Asian and Western cultures. Compared with people from Western cultures, people from Asian cultures are more concerned about losses and less concerned about gains (Aaker & Lee, 2001). In one study (Chen, Ng, & Rao, 2005), Singaporean consumers were reminded of the Asian or American cultural tradition. After having been reminded of the Asian tradition, the participants were willing to pay more for expedited consumption of a product purchased online when they were faced with the threat of a delay in receiving a product (a loss concern). However, after having been reminded of the American tradition, Singaporean consumers were willing to pay more for expedited delivery when they were faced with the threat of not being able to enjoy a product early (a gain concern).
In addition, a consumer who knows the cultural norms in their country may
choose to follow the norms in some situations and deviate from the norms in other situations. In Chapter 6, we will illustrate this phenomenon with more research examples.
In summary, culture is a multi-‐faceted and dynamic process. To understand
the cultural basis of consumer behaviors, it is important to (a) identify the key components of culture, (b) understand how these components interact to influence consumption pattern, and (c) explain when consumers who are aware of the behavioral norms in their culture would choose to follow these norms.
Culture and Consumer Behaviors — 34 Chapter 3 Cultural Variations in Consumption Patterns In this and the next two chapters, we will analyze how ecological factors, levels of development and the subjective culture of a country or region jointly influence consumption. We will illustrate our analysis with the following practical problems: Imagine that you own a resort business for international tourists. You are formulating a marketing plan to attract tourists from various countries to your resort. A few questions come to your mind: 1. Which countries should you target at? 2. Once you have decided on the target countries, what messages would you include in your marketing communication to attract the tourists from the target countries to your resort? For presentation purpose, we use tourist consumption to illustrate our analysis. However, our conceptual model and analytical approach are applicable in other domains of consumption as well. In this chapter, we focus on how the level of development influences consumption behaviors and their associated values. In the next chapter, we will discuss how an aspect of the natural ecology (total land area) moderates the effect of national income on consumption pattern and values. In chapter 5, we will analyze how the prevalent values of a country influence the consumption pattern of a country undergoing technological changes. The analyses presented in chapter 3 and 4 are based on comparisons of the average characteristics of multiple countries or regions. The analysis presented in chapter 5
Culture and Consumer Behaviors — 35 is based on changes in consumption patterns within the same country over a period of 10 years (2002-‐2011). 3.1 Categories of Consumption Patterns To determine which country you should target in the promotion campaign for your tourist resort, you may decide to study the pattern of consumption in different countries. To decide on the themes in your marketing communication, you will have to consider what citizens in different countries value and believe in. There are over 190 countries in the world. Gaining an in depth understanding of global variations in consumption patterns and consumer values/ beliefs could be challenging. Fortunately, there are systematic variations between a country’s consumption pattern and its level of economic, social and technological development. In this chapter, we will analyze the similarities and differences in consumption patterns across countries and classify countries and regions based on their characteristic patterns of consumption. Next, for each category of countries, we will relate its characteristic consumption pattern to its level of economic, social and technological development as well as its prevalent values and beliefs. GMID Euromonitor provides data on 14 categories of consumption for 82 to 86 countries or regions from 2002 to 2011. These categories are alcohol, clothing and footwear, education, food and non-‐alcoholic beverage, health goods and medical services, hotels and catering, household goods and services, housing, leisure and recreation, communications, services, tobacco, transportation, and accessories such as jewelry, silverware and timepieces. It is likely that people in richer countries or
Culture and Consumer Behaviors — 36 regions will spend more on all consumption categories. Thus, to understand how people in a country allocate their total expenditure across the 14 consumption categories, we analyzed the percentage of total expenditure in a household that was allocated to each consumption category. For example, to understand how consumers in Brazil allocated their total household expenditure across the 14 consumption categories, we focus on how an average resident household in Brazil distributed its total household expenditure into the 14 categories. To make sure that the data capture relatively long-‐term pattern of consumption, for each country or region, we calculated the average expenditure percentage in each consumption category across 10 years (2002-‐2011). As shown in Table 3.1, between 2002 and 2011, the stability indices ranged from .990 to .998 across the 14 categories. That means, countries or regions that had relatively low percentage of expenditure in any of the 14 consumption categories in 2002 also had relatively low percentage of expenditure in the same category in other years. Likewise, countries or regions that had relatively high percentage of expenditure in any of the consumption categories in 2002 continued to relatively high percentage of expenditure in that category in other years.
Culture and Consumer Behaviors — 37 Table 3.1 Categories of Consumption Patterns
Stability coefficient 0.998
Number of countries 82
2002-‐2011
0.990
86
2002-‐2011
0.998
86
2002-‐2011
0.998
86
2002-‐2011
Consumer Expenditure on Health Goods and Medical Services as % of Consumer Expenditure by Resident Household
0.998
86
2002-‐2011
Consumer Expenditure on Hotels and Catering as % of Consumer Expenditure by Resident Household Consumer Expenditure on Household Goods and Service as % of Consumer Expenditure by Resident Household
0.996
86
2002-‐2011
0.99
86
2002-‐2011
Consumer Expenditure on Housing as % of Consumer Expenditure by Resident Household Consumer Expenditure on Leisure and Recreation as % of Consumer Expenditure by Resident Household Consumer Expenditure on Communications as % of Consumer Expenditure by Resident Household Consumer Expenditure on Services as % of Consumer Expenditure by Resident Household Consumer Expenditure on Tobacco as % of Consumer Expenditure by Resident Household Consumer Expenditure on Transportation as % of Consumer Expenditure by Resident Household Consumer Expenditure on Jewelry, Silverware, Watches and Clocks, Travel Goods as % of Consumer Expenditure by Resident Household
0.996
86
2002-‐2011
0.998
86
2002-‐2011
0.990
86
2002-‐2011
0.996
84
0.996
84
2002-‐2011
0.990
86
2002-‐2011
0.996
84
2002-‐2011
Consumer Expenditure on Alcoholic Drinks as % of Consumer Expenditure by Resident Household Consumer Expenditure on Clothing and Footwear as % of Consumer Expenditure by Resident Household Consumer Expenditure on Education as % of Consumer Expenditure by Resident Household Consumer Expenditure on Food and Non-‐ Alcoholic Beverages as % of Consumer Expenditure by Resident Household
Source: GMID Euromonitor
year
2002-‐2011
Culture and Consumer Behaviors — 38 We used a statistical procedure called cluster analysis to identify major categories of countries or regions with similar patterns of consumption. Very briefly, this procedure involves evaluation of the extent of similarity in consumption pattern of each country or region to that of every other country or region. Based on these pairwise comparisons, countries or regions with similar consumption patterns were placed into the same category and countries or regions with dissimilar consumption patterns were placed into different categories. Three major clusters of countries or regions were identified in the analysis. Table 3.2 lists the countries or regions that belong to each category. Countries within each category had a similar pattern of consumption that is different from those in the other two categories. Category 1 consists of 26 countries or regions, including Algeria, India, and Peru. Category 2 consists of 29 countries or regions, including Argentina, China, and South Africa. Category 3 consists of 27 countries or regions, including Germany, Australia and Singapore.
Culture and Consumer Behaviors — 39 Table 3.2 Countries and Regions in the Three Categories of Countries and Regions
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