Research For Consumer Policy Formulation: an Exploration of Dimensions of Household Economic Management

Johan Arndt, University of Missouri-St. Louis
Oddvar Holmer, Norwegian School of Economics and Business Administration
ABSTRACT - This study addresses a fundamental aspect of consumer behavior: administrative routines in the management of the economic affairs of the household. Several dimensions of economic management were uncovered, but the linkage of these dimensions to antecedent variables was weak.
[ to cite ]:
Johan Arndt and Oddvar Holmer (1978) ,"Research For Consumer Policy Formulation: an Exploration of Dimensions of Household Economic Management", in NA - Advances in Consumer Research Volume 05, eds. Kent Hunt, Ann Abor, MI : Association for Consumer Research, Pages: 702-703.

Advances in Consumer Research Volume 5, 1978      Pages 702-703

RESEARCH FOR CONSUMER POLICY FORMULATION: AN EXPLORATION OF DIMENSIONS OF HOUSEHOLD ECONOMIC MANAGEMENT

Johan Arndt, University of Missouri-St. Louis

Oddvar Holmer, Norwegian School of Economics and Business Administration

ABSTRACT -

This study addresses a fundamental aspect of consumer behavior: administrative routines in the management of the economic affairs of the household. Several dimensions of economic management were uncovered, but the linkage of these dimensions to antecedent variables was weak.

INTRODUCTION

To date, most research on consumer behavior has been marketing management oriented and concerned with pre-purchase decision processes for brands. The relevant input to consumer policy formulation, however, is research with a more explicit "consumer economics" orientation. The study to be reported here is an example of such research, as it focuses on the fundamental problems in the administration of the economic affairs of the household. The study represents the pilot phase of a more comprehensive project.

THE HOUSEHOLD AS A SMALL BUSINESS FIRM

The conceptual framework underlying this study implies viewing the economic affairs of the household as a resource conversion process, in which the inputs are time, economic resources (income and capital), human capital, and service resources such as labor-saving appliances. The open-system organization of the household copes with the uncertainties and complexities of its market environment by developing information systems and by protecting its "technical core" with buffers of reserve money and reserve goods. To economize on time and effort, the household establishes, more or less formally and explicitly, administrative routines. These routines include rules for information acquisition, storage, and retrieval, and control procedures such as account keeping, budgeting, and advance planning, as well as mechanisms for conflict resolution. An important aspect of administrative routines is the organization of the household, particularly the delineation of authority and responsibility among its members for planning and implementation of purchases, contacts with finance institutions, etc.

The efficiency of the resource conversion process depends on the ability and willingness of the members of the household to plan and organize. And, in turn, this ability and willingness is believed to be related to background characteristics or antecedent variables of the household.

METHOD

The sample was not selected by any direct probability mechanism, but chosen in the following way: Four districts within the metropolitan area of Bergen, Norway were selected on a judgmental basis in order to ensure sufficient heterogeneity of the sample. In each district, a starting point was determined as a basis for selecting some 70 dwelling units by means of systematic sampling. Each household in the units selected received a structured questionnaire, which was collected on the following day. Of the 273 households contacted, 222 returned completed or partially completed questionnaires.

In the questionnaire, measurements were obtained for a set of 11 antecedent variables believed to be determinants of administrative routines. These variables included employment status of wife, age, household income, etc.

There were a total of 93 questionnaire items relating to administrative routines, categorized into three groups: convenience goods shopping, appliance purchasing, and items relating to financial management.

FINDINGS

In this case it was desirable to search for the natural groupings occurring in the data rather than to rely on an a priori classification scheme. Therefore, factor analysis was used to track patterns of relationships and to reduce the data into basic dimensions of administrative procedures. The program used the VARIMAX in the SPSS package, extracted 32 factors, accounting for 73 per cent of the variance in the 93 items. However, as the contribution to explained variance dropped discontinuously after factor 7, only the first seven factors are included in the analysis.

These seven factors, which explained 36 per cent of the variance, were next related to the set of 11 antecedent variables using the factor scores for each factor as the dependent variables. This analysis was not successful, as the average proportion of the variance explained (in terms of the adjusted R2's) for the seven regressions was only .06. In the discussion of the factors below, antecedent variables not showing Beta coefficients significant at the 1 per cent level will not be discussed.

Factor 1 was clearly concerned with use of word of mouth information in appliance buying. High scores on this factor were positively related to the number of persons in the household and to the level of education, and both are possible indicators of a need for planning and the ability to plan.

Factor 2 covered cases in which neither husband nor wife was involved in administrative procedures.

The items loading highly on factor 3 were concerned with the use of shopping lists as a planning instrument. The factor was positively related to the number of persons in the household and to education.

The items showing the highest loadings on factor 4 related to spousal role differentiation in the financial management of the household.

The key dimension underlying factor 5 was the financing of major purchases "liberally", i.e. through installment or bank credit rather than through saving or reducing other expenditures. Households living in the cheaper dwelling unit types such as small apartments were more inclined to use installment credit, confirming that it is the economically less privileged consumer groups who tend to rely on credit. The negative correlation between scores on factor 5 and income adds further support for this interpretation.

Factor 6 seemed to reflect a "Make or buy" dimension, while the items loading highly on factor 7 related to the regular use of price deals or bargains in convenience goods shopping. The bargain hunters had smaller fixed expenditures per month (and were hence perhaps more likely to have more money at their disposal for bargains) and larger families.

CONCLUDING COMMENTS

The findings of an exploratory study such as the present one would be a shaky foundation on which to build sweeping generalizations. Instead, the results should be treated as hypotheses for future more rigorous study.

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