The Tactics of Consumer Resistance: Group Action and Marketplace Exit

Robert O. Herrmann, Penn State University
ABSTRACT - One of the alternatives open to discontented consumers is to exit the marketplace. Group exit actions may take the form of boycotts or the creation of alternative providers of needed goods and services. These market exit groups have sought both functional goals (changes in the marketing mix) and structural goals (broader social and economic changes). In recent years, boycotts have come into increasing use and increasingly have sought structural goals but may be losing their impact. The alternative providers considered include food buying clubs and consumer co-ops; the product information provider, Consumers Union; credit unions and the mail-order drug and insurance operations of the American Association of Retired Persons. Because of their origins these consumer-controlled organizations have faced special goal conflicts and financial problems. The organizations which have succeeded best have emphasized conventional business principles and functional goals even when this conflicted with their structural goals.
[ to cite ]:
Robert O. Herrmann (1993) ,"The Tactics of Consumer Resistance: Group Action and Marketplace Exit", in NA - Advances in Consumer Research Volume 20, eds. Leigh McAlister and Michael L. Rothschild, Provo, UT : Association for Consumer Research, Pages: 130-134.

Advances in Consumer Research Volume 20, 1993      Pages 130-134

THE TACTICS OF CONSUMER RESISTANCE: GROUP ACTION AND MARKETPLACE EXIT

Robert O. Herrmann, Penn State University

ABSTRACT -

One of the alternatives open to discontented consumers is to exit the marketplace. Group exit actions may take the form of boycotts or the creation of alternative providers of needed goods and services. These market exit groups have sought both functional goals (changes in the marketing mix) and structural goals (broader social and economic changes). In recent years, boycotts have come into increasing use and increasingly have sought structural goals but may be losing their impact. The alternative providers considered include food buying clubs and consumer co-ops; the product information provider, Consumers Union; credit unions and the mail-order drug and insurance operations of the American Association of Retired Persons. Because of their origins these consumer-controlled organizations have faced special goal conflicts and financial problems. The organizations which have succeeded best have emphasized conventional business principles and functional goals even when this conflicted with their structural goals.

INTRODUCTION

Consumer discontent which manifests itself as consumerism and other forms of consumer resistance may grow out of concern both with particular business practices and with the broader societal impact of business behavior. A variety of responses are available to consumers concerned about lapses in business performance. Hirschman (1970) has classified these into exit (refusals to buy), voice (complaining actions) and loyalty (continued patronage in hope of change). This paper deals with two broad categories of exit responses, boycotts and the creation of alternative, consumer-controlled providers of goods and services.

Historically, consumer groups seeking change in business practices have focused both on changes which will benefit them directly and on more fundamental structural changes in the social and economic environment. Jensen (1989) has labeled efforts to change the composition of the marketing mix as functional goals and efforts to change the broader competitive environment as structural goals. This paper will focus on the pursuit of both functional and structural goals by organized groups of consumers who have exited the mainstream marketplace. The activities examined thus fall at the collective end of Penaloza and Price's (1992) organizational dimension and range along the radical-reformist continuum of their goals dimension. The focus of this paper suggests the possibility of an exit-no exit tactical dimension and perhaps also a voice-no voice dimension.

BOYCOTTS

The consumer boycott has a long history of use as a device to force changes in marketing practices and to promote broader social and political change (Friedman 1985, Garrett 1987). The tactic has come into increasing use in recent years. One recent estimate suggests that there were some 200 boycott actions in place in the early 1990s (Putnam and Muck 1991). A major proportion of these boycott activities seem to involve structural goals (Garrett 1987, Friedman 1991). This represents a change from the supermarket boycotts of the 1960s which were motivated by the functional goal of bringing down prices (Friedman 1971).

Boycotts seem to work best when the target is readily accessible. Producers of frequently-purchased consumer goods and retailers are particularly accessible and vulnerable. When the offender is less accessible, it may be necessary to target some surrogate who, it is hoped, will apply pressure on the offender (Friedman 1991).

As a protest tactic, the boycott seems to have several advantages and to have achieved increasing acceptance in recent years. In 1992 16 percent of grocery shoppers questioned said they had joined in a boycott as compared to 8 percent eight years earlier (Opinion Research Corp. 1992). Boycotts are a flexible tactic, adaptable to the resources available. Thus, a group with limited resources may choose to mount a short-term boycott to obtain media coverage for its views and embarrass the target. Friedman (1991) has labeled this tactic the media-oriented boycott.

Alternatively, if more resources are available, an organization may decide to mount a full-scale marketplace boycott aimed at the sales of the target corporation. This tactic is most appropriate when the target has been particularly resistant, but does require the commitment of substantial resources. During a survey of boycott principals, one respondent told Garrett (1987) that an organization needs to be prepared to commit the time of five people for a full year in order to mount an effecive marketplace boycott.

Another advantage of the consumer boycott is its apparent effectiveness. A 1977 survey found that business leaders considered boycotts to be more effective than other forms of consumer protest (Harris 1977). The heavy use of boycotts as a protest tactic in recent years may, however, have reduced their newsworthiness and, as a consequence, their effectiveness.

ALTERNATIVE PROVIDERS OF GOODS AND SERVICES

The creation alternative providers of goods and services is another time-honored tactic of consumer resistance. Consumer co-op leader James Warbasse (1942) suggested that there was a role for cooperatives wherever "... things are not done well, where needs are not supplied, or where profit business is failing." Warbasse's list of precipitating factors seems to apply to a wide range of consumer-controlled enterprises. All of the organizations to be examined were formed with functional goals (e.g., better prices, access to needed goods and services and provision of an alternative to unreliable ad claims) and structural goals (enhancement of the welfare of the group served and their empowerment through information and educational services and political action).

Consumers Union

The creation of a consumer-controlled organization to provide objective product information has provided a market exit device reducing dependence on business advertising. During the 1920s there was a flood of advertising for new and unfamiliar products along with new and extravagant claims for familiar ones. The result was growing confusion and uncertainty about ad claims, concern over the wasteful proliferation of brands and over money wasted when products which did not live up to their claims (Herrmann 1982). One result was growing interest in the use of laboratory testing and product standardization as ways of assuring product quality. In 1927 a new book by Stuart Chase and F.J. Schlink (1927) described an existing "Consumers' Club" which was conducting product tests and preparing product ratings using published research results and the help of local high school science teachers. Their report produced a surge of interest and resulted in the formation of a national organization, Consumers' Research Inc. (CR).

By 1932 CR had 42 thousand subscribers for its magazine and was, in addition, publishing a variety of books and pamphlets promoting functional and structural goals. The CR board soon, however, split on the allocation of resources between its political and educational activities and its testing program (Silber 1983). Tensions grew under Schlink's autocratic management, a low wage policy and a forced move to rural New Jersey. The organization split after a bitter strike in 1935 with the breakaway staff members forming Consumers Union (CU). In the first issue of its magazine (Consumers Union 1936), the new group set out to provide product test information and also committed itself to such structural goals as aiding in creating and maintaining decent living standards, working with other groups to promote consumer welfare and reporting on the working conditions under which tested products were produced.

Along with its testing program, the young organization was involved in testifying before government bodies, joining in labor movement picketing, supporting anti-fascist boycotts and conducting promotional drives among the poor (Silber 1983). Testing had to compete with these activities for attention and conflict developed as some became concerned that unsystematic and unscientific test procedures were being used. One result in 1939 was the development of new laboratory facilities and new efforts to obtain outside technical advice (Silber 1983). CU gradually moved away from the radicalism of the 1930s. In 1938 it ceased its coverage of labor conditions in firms producing rated products (Silber 1983).

Over time CU realized that most of its members were middle and upper income and that its efforts to interest low-income and blue collar people were a failure. The emphasis to be given to activistic goals was, however, a continuing source of conflict within the organization. New conflicts arose in the 1950s between the activists and those more committed to the product testing program. Board president Colston Warne pushed for more involvement in both areas (Silber 1983, Gordon 1980, Warne 1980a). One result was the creation of a Washington office to represent the consumer interest there and a variety of new public service projects.

As Consumer Reports became increasingly successful in the 1950s and 1960s there were continuing struggles over the appropriate allocation of expenditures. Under Internal Revenue Service pressure to justify its not-for-profit status, CU began a program of assistance to outside organizations. Major beneficiaries were the Council on Consumer Interests (now the American Council on Consumer Interests) which Consumers Union helped found in 1953, the International Organization of Consumers Unions (a worldwide federation of consumer product testing organizations and consumer interest groups) which CU helped found in 1960 and the Consumer Federation of America founded in 1968 (Warne 1980a). CU also poured substantial resources into its consumer education program promoting the use of Consumer Reports in the classroom.

Despite this extensive program of grants and projects, some activists felt that CU was not realizing its full potential as an engine for social change. After he joined the CU board in the late 1960s, Ralph Nader made repeated efforts to get the organization to take a more activistic stance. He had some successes, but was exasperated by his failure to win over the CU board and ultimately resigned in 1975 (Warne 1980b).

While financial strains in the late 1970s and early 1980s slowed CU's structural change activities, they were expanded as the subscriber base grew rapidly in the 1980s and 1990s (5 million at the end of 1991). The three advocacy offices were expanded, focusing on health care, banking and housing issues with special attention to the problems of low-income consumers. A new grants program for grassroots consumer organizations in the U.S. and new consumer groups abroad was begun along with a new policy research group and a revitalized consumer education program for children.

Silber (1983) has argued that the strength of CU's approach has been that its calls for structural reforms are based on objective scientific evidence of product failures and safety risks. While CU's subscribers seem to value Consumer Reports principally for its product reports, they also value its coverage of broader structural issues such as auto safety and health care policy (Thorelli, Becker and Engledow 1975). As a result, the promotion of functional goals remains CU's primary mission and its promotion of structural goals is dependent on the success of this primary mission.

Food Buying Clubs and Consumer Co-ops

The cooperative idea dates from 19th century Rochdale, England where a group of unemployed weavers banded together to obtain food at the lowest possible cost. Their principles of open membership, one-member one-vote, sales at market prices with the return of surplus to members on the basis of patronage and the use of a portion of surplus earnings for educational purposes continue to guide all types of co-ops. Today's consumer cooperatives continue both to seek savings for members, to foster a sense of community and to promote shared social goals (Sommer 1991). One such goal is to encourage the improvement of business offerings and to serve as a yardstick against which they can be judged. Because American retailing generally is more efficient than that in Europe, there is less need for alternative providers here and American consumer co-ops have not enjoyed the success of their European counterparts.

Interest in the simplest form of consumer co-op, the food buying club, has surged when cost-of-living pressures have mounted. The recession of the early 1980s resulted in a surge of interest as has the current recession. Contemporary food buying clubs' over-riding interest has been lower prices, while access to natural foods also has been a significant motivating factor, especially in college communities. Food co-ops also have been developed in inner-city areas as a solution to the limited or high-cost retail operations there. Food politics, ecological issues, and food safety are continuing interests in many food buying clubs (Sommer 1991).

The typical food buying club has about 40 member households, although the number may range from 10 to 40. The clubs operate on a pre-order basis, with members indicating in advance what they wish to buy. Emphasis typically is on dry groceries, although some clubs move into the provision of produce and meat. Deliveries are distributed from a member's garage, a church, a community center or other non-commercial facility. Members contribute labor and management effort to help cut costs. Studies in the 1970s and 1980s found that the cost savings produced amounted to 20-40 percent of retail (Cotterill 1982).

Food buying clubs generally are not long-lived, typically lasting only a few years (Cotterill 1982). Clubs often are formed by financially-pressed young families which over time find themselves both better off and more time-pressed and less able to contribute labor to the club. Those who have watched the development of food buying clubs believe that while cost savings motivate the formation of clubs, their survival depends on commitment to cooperative ideals. Some more successful clubs move to the next stage of development, the opening of a store-front operation. This often proves to be a risky step.

Cooperative food retailers range in size from small store fronts to supermarket operations. Operations of all sizes have been dogged by fierce competition, financial problems, difficulty in getting needed capital and capable managers, and by conflicts within their boards of directors and between the board and management. Another chronic problem has been balancing the co-op commitment to a high level of service to members with the need to make a profit.

The consumer welfare and service activities of co-op supermarkets have taken a variety of forms. Co-ops have been leaders in providing unit price and product information and supporting consumer protection legislation (Sommer 1991). The Berkeley Co-op was notably active in providing testimony on consumer issues at both the state and federal level. As a part of their efforts to promote structural goals, co-ops also may support consumer boycotts or provide information on them to their members. Refusals to stock items which are judged to be over-priced, nutritionally-inferior or environmentally-injurious or which are under boycott, of course, conflict with both profitability goals and the commitment to serve members.

Two of the largest co-op supermarket operations in the country failed in the 1980s. The Greenbelt Co-op (Washington DC) closed down in 1984 (Mayer 1984) and the Berkeley Co-op, which had been a flagship operation for the entire movement, closed its last stores in l988 (Bishop 1988). The Berkeley stores were hurt by the high wage costs of a senior labor force, the diseconomies of a limited sales volume and problems in adapting to the changing tastes and variety preferences of their customers (Pollack 1985). Another problem seems to have been the decline in group spirit and commitment due to the large size of the co-op.

Maintaining member involvement and democratic control while operating within a capitalist business system and pursuing the growth, efficiency and profitability goals essential to survival is a continuing concern of co-op leaders. Sommer (1991) also has pointed out "the paradox of size": "small idealistic cooperatives lack the resources for formal advocacy and protection programs, while the larger and economically more powerful organizations ... possess the resources but lack the idealism."

Consumer Credit: Credit Unions

By the late 1800s there was growing awareness of the problems working people experienced in getting access to credit. Banks and credit grantors did not deal with most working people leaving them to high-rate lenders and pawnshops charging 30 to 50 percent interest rates. To some, the credit unions which had grown up in Europe and in Canada seemed a solution. Member-controlled credit unions emphasizing self-help and cooperation first appeared in New England in 1909 (Moody and Fite 1971). The idea spread slowly, hampered by the lack of anyone to promote it actively. However, with the support of Boston department store owner and philanthropist Edward Filene, the concept gained momentum and by 1920 had established itself nationwide.

The credit union movement was grounded in the Rochdale principles of cooperation. To these was added the principle that members should share some common bond C a common occupation, place of employment or church, lodge or union membership (Dorfman 1984). This common bond was expected to make it easier to judge the character of prospective borrowers and to discourage default. These ideals were joined with insistence on sound business practices. There was early recognition that the growth of credit unions would depend on maintaining a solid reputation. Despite this, growth was hampered by public skepticism C the credit union idea sounded too much like another "wildcat" banking scheme.

In 1934 the growing movement banded together to form a national association charged with providing services to the member credit unions, promoting legislation favorable to credit unions and promoting the organization of new credit unions (Moody and Fite 1971). The national association has been instrumental in promoting such structural goals as the formation of new groups in less-developed countries and in promoting legislation to protect credit consumers (e.g.,truth-in-lending). The credit unions have succeeded chiefly among wage and salary workers. They have had little success among the hardcore poor who lack the means to repay. Efforts to organize credit unions among the poor, most notably during the 1960s "war on poverty," typically have failed even when federal aid has been available. Credit unions are one of the notable successes among the alternative institutions discussed. Currently there are some 15,000 credit unions nationwide with some 62 million members (NCUA 1991). One indication of their roles in credit markets is the fact that in 1990 they provided over 12 percent of all consumer credit and over 16 percent of all car loans. While credit unions have not solved the problem of access to credit at reasonable rates for everyone, they have shown commercial lenders the potential for consumer credit, helped to keep interest rates down and provided access for many whose only option previously had been loan sharks.

Despite their success, credit unions are faced with a continuing problem of finding the right balance between service and the need for sound management. From the earliest days of the movement it was clear that professional management was essential to deal with the financial complexities of operation. With the resulting emphasis on business-like management has come continuing concern about preserving the original ideals of self-help, cooperation and democracy.

Services for the Elderly: AARP

From its founding in 1958, the American Association of Retired Persons (AARP) has provided products and services to its members and promoted social change which will benefit older people. One of its major benefits is its mail order drug service, whose price advantages have made it a top mail-order drug outlet. AARP also has served as a price negotiator for its members who are eligible for discounts on hotel rooms and rental cars. Another early benefit was access to health insurance coverage at a time when such coverage was not easily available to older people.

AARP's most serious internal conflicts are of a different type than those of the other consumer-controlled organizations discussed above. Funding is a problem for all consumer-controlled organizations due to the absence of corporate funding mechanisms and the reluctance of lenders. AARP dealt with this problem by obtaining funding from its insurance providers who were given exclusive access to the membership. By the mid-1970s, health insurance for the elderly had become more widely available and the policies being offered came under increasing criticism from Consumers Union and others. This lead AARP to sever its exclusive arrangements with Colonial Penn Insurance and open up its insurance business to open competition. The faith of some of AARP's members in its offerings may not be fully warranted. A 1988 review of AARP services by Money magazine (Time-Life 1988) suggests that while most were competitively-priced, better deals often were available elsewhere.

AARP's success in delivering on its functional goals, its modest membership fee (currently $8 a year) and its easy membership requirements (membership is open to anyone 50 or over and spouse) have attracted a huge membership. In 1992, the organization had over 32 million members and is likely to continue to grow. In 2015, when the last of the Baby Boomers reach 50, 46 percent of the adult population will be eligible for membership. Some have questioned whether the AARP discount program will still be workable when almost half the adult population is eligible for a discount (Time-Life 1988).

The membership of AARP has, in fact, become so large and diverse that it constrains the pursuit of structural goals. Partisan political activity is not feasible. AARP does, however, work to inform its members about the records of candidates and encourage voting. Despite these constraints on partisan activity, AARP has become an important voice for other structural changes of concern to older people. The expertise of the AARP policy analysis staff is recognized and appreciated on Capitol Hill (Smith 1988). This expertise coupled with AARP's sizable lobbying staff have given it unusual influence in issues affecting older people.

CONCLUSIONS

While many discontented consumers have simply voiced their concerns, others have chosen to exit the marketplace altogether. Some of this group have chosen to boycott offending sellers in hopes of forcing functional and structural change. And some have joined in developing new, consumer-controlled organizations to serve as alternative providers of goods and services.

While most boycott groups have pursued both functional and structural changes, in recent years the relative emphasis on structural goals appears to have increased. The boycott tactic appears to have come into increasing use, but may be less effective than formerly. The more intangible goals being pursued may make it harder to win adherents and the frequent use of the tactic may be causing it to lose its news and shock value.

Those exiting the conventional marketplace have organized themselves to provide a wide range of needs,including the pursuit of functional and structural goals. Conflict between these goals has been both common and frequent. The organizational forms which have proven most effective, Consumers Union, AARP and the credit unions, appear to have emphasized conventional business and scientific principles even when these principles and functional goals conflicted with some of the structural goals of the organization. The consumer food co-ops faced with continuing internal conflict and tough competition from mainstream retailers have had a harder time of it.

Organizations of this type seem to experience other types of problems which also are linked to their consumer-controlled status. Access to needed capital and capable managers has been a frequent problem. Board-management conflicts arising from board members' lack of business knowledge and their insistence on activistic and service goals which conflict with financial goals also are common. Because of their ties to labor, these organizations frequently have found it difficult to control labor costs. Efforts to recruit and to serve lower income consumers typically have been a disappointment despite the best of intentions.

The organizations of the alternative marketplace have been innovators in fulfilling unmet consumer needs. They have pioneered in providing unit price information, product test information, health insurance for seniors and consumer credit for ordinary working people. Frequently they have seen their ideas adopted by business and provided by mainstream sellers. Typically this is viewed philosophically as a way of forcing needed changes on business rather than as a threat or usurpation.

As they have grown and developed, all the organizations discussed have had increasing difficulty in maintaining member involvement and commitment. For some, such as the consumer co-ops, this deterioration in interest has been fatal. For others, committed as they are to consumer-governance, lack of member interest is simply a cause of concern and embarrassment.

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