Our Economic Roots: the Harm Done to Consumer Research

ABSTRACT - The recent ACR Conference in Tucson encouraged consumer researchers to Abreak out of the box.@ This paper discusses the box, in this case, the restrictive influence of our economic roots on perspectives at the very micro level (consumer search, price consciousness, and marketing relationships) as well as our view of the global environment. Further, we note that the prevailing Economic paradigm has emphasized those two extremes, while showing benign neglect for alternative units of analysis such as the extended family and the community.



Citation:

William E. Kilbourne and James W. Gentry (1998) ,"Our Economic Roots: the Harm Done to Consumer Research", in E - European Advances in Consumer Research Volume 3, eds. Basil G. Englis and Anna Olofsson, Provo, UT : Association for Consumer Research, Pages: 247-250.

European Advances in Consumer Research Volume 3, 1998      Pages 247-250

OUR ECONOMIC ROOTS: THE HARM DONE TO CONSUMER RESEARCH

William E. Kilbourne, Sam Houston State University, U.S.A.

James W. Gentry, University of Nebraska-Lincoln, U.S.A.

ABSTRACT -

The recent ACR Conference in Tucson encouraged consumer researchers to "break out of the box." This paper discusses the box, in this case, the restrictive influence of our economic roots on perspectives at the very micro level (consumer search, price consciousness, and marketing relationships) as well as our view of the global environment. Further, we note that the prevailing Economic paradigm has emphasized those two extremes, while showing benign neglect for alternative units of analysis such as the extended family and the community.

INTRODUCTION

Milbath (1984, p. 7) defines a culture’s dominant social paradigm as consisting of "...the values, metaphysical beliefs, institutions, habits, etc. that collectively provide social lenses through which individuals and grups interpret their social world." Cotgrove (1982) further adds that a paradigm is dominant, not because it is held by most people in a culture, but because it is held by dominant groups and serves to legitimize and justify prevailing institutions. Fallows (1993, p. 70) summarizes the prevailing social paradigm in the US in the following manner: "The Anglo-American view focuses on how individuals fare as consumers and how the whole world fares as a trading system. But it does not really care about the intermediate levels between one specific human being and all five billionCthat is, about communities and nations." This paper will discuss the harm that the prevailing economic theory has done to consumer research in those two extreme areas. First, we will discuss how our economic roots have limited managerial policy and consumer research at a very micro level. Second, we will evaluate the free market economy approach’s failure to deal with global environmental concerns.

FOCUS: THE MICRO LEVEL

At the very micro extreme, the fundamental focus of economic theory on the transaction has resulted in a number of misconceptions which marketers have had to overcome.

Consumer Search

Traditional economic perspectives of search, and much of the resulting work in Marketing, has focused on purchase occasion specific search (POSS). POSS takes place once a purchase goal is defined, or when a "problem is recognized." For example, Srinivasan and Ratchford (1991, p. 235) define external search as beginning when one first considers the purchase seriously and ending with the actual purchase.

In general, the empirical work in this area has several general features. Most notably, the search behavior is often circumscribed and contextually specific; the behavior pertains to a predetermined (researcher-imposed or assumed) produced need, and the issues of importance are basically defined in product/brand terms. Little attention is given to the presence and influence of on-going or even prior search activity. In general, research has found that little prepurchase information search is conducted (Claxton, Fry, and Portis 1974; Dommermuth and Cundiff 1967; Granbois 1977; LeGrand and Udell 1964; Muse and Hutt 1971; Newman and Lockeman 1975; Newman and Staelin 1972, 91873; Newton and Gilmore 1969; Riter 1966-1967; Rothe and Lamont 1973; Srinivasan 1990; Williams and Dardes 1972).

The research supporting low levels of pre-purchase search has been criticized as understating the amount of search since it has largely overlooked memory stores from earlier search episodes (Bettman 1979; Hirschman and Wallendorf 1982). The view of consumer choice which results from studies of external information processing is one which portrays the consumer as someone who purchases each item for the first time, time after time. The traditional search paradigm implicitly asserts that consumers learn solely from a cognitive learning process and ignores that many consumers learn from experience (product trial) and from vicarious or incidental learning (from conversations, from observation of others, from word-of-mouth given rather than sought). To be certain, measurement of the learning taking place either from experience or observation is more complex than store visits or printed sources seen, but failure to consider alternative forms of learning yields an irrelevant conceptualization of search.

A necessary supplement to the purchase occasion specific view of search is to acknowledge that search can occur on something other than an "as needed" basis. Information is not only acquired reactively, or in the words of Bettman (1979), confrontationally; information acquisition can be proactive and anticipatory. Bloch, Sherrell, and Ridgway (1986) label this second form of search "on-going search." As they noed, search (or "shopping") behavior can serve recreational motives that yield satisfaction well beyond the acquisition utility that has been the focus of economic theory. Many motives have been identified (cf. Tauber 1972; Westbrook and Black 1985), suggesting far greater complexity than is recognized in the search literature.

Price Misperception

No variable is more central to economic theory than price, but it too has caused marketers problems when they relied on their economic roots. Specifically, the Law of Rational Man has been interpreted by Marketers to mean that those with fewer resources will guard them more carefully. Thus, many marketers have assumed incorrectly that lower income/lower class consumers would be the most price conscious, even though consumer behavioralists have repeatedly pointed out that it is the middle class which is the most price conscious. The middle class is the primary market for economical sub-compact cars and for generic brands. Discount stores were located first in lower class areas, and were dismal failures. Once they moved to the suburbs, they were more successful. Unit pricing was intended to aid low income consumers, but it was the middle class who took advantage.

To some extent, the price/quality tradeoff mentality of the middle-class reflects the normative bent of consumer economists, and it ignores that all consumers, regardless of social class, seek "affordable luxuries." The notion of a "luxury" is a complex one (Dubois and Laurent 1994), as there is both approach and avoidance (due to guilt). When someone’s luxury is viewed, especially by an other with different social class norms, it is often viewed as reflecting poor consumption habits. In the US, the poorest segment is much more likely to have imported ale and flavored milk in their refrigerator than are the income segments above it (Donnelly 1989).

The utilitarian focus of economic theory retarded (for many marketers, anyway) the realization that products have symbolic meanings as well. An imported beer may be a special (and affordable) reward to one individual, while a BMW may play the same role for someone with abundant resources. While consumer research has recognized this symbolic aspect to products and, thus, the convoluted relationship between resources and price consciousness, it has not filtered to other areas of marketing. For example, virtually all International Marketing textbooks in the US state that price must be kept low in developing countries. Explicitly, the texts are saying that low income consumers globally are price conscious, while we know that it is not true in the US. Doran (1994) found that Chinese immigrants to Quebec became more price-quality oriented in their purchases of consumer electronics once they settled in Canada; in the PRC, they were more prone to want the most expensive brands because of the symbolism associated. Belk (In Press) discusses Romanians’ "lust" for Western products, despite their high costs when compared to consumer incomes.

In Japan, Jack Daniels lowered its price on Black Label whiskey only to see its demand drop. Upon investigation, they found that Jack Daniels was being purchased as a gift of the type that creates an obligation for the receiver to reciprocate in kind in the short run. In fact, many would purchase the same item and leave the price tag on it when giving the gift. The lowered price, in the short run anyway, made it a less worthy return gift. Clearly, the emic meaning of the product must be understood before setting its price.

Transactions vs. Relationships

As Webster (1992, pp. 5-6) noted, the traditional microeconomic perspective centers on transactions and not relationships. Schwarz (1986) argues that the Economic paradigm does not provide a sound basis for certain types of exchange, especially those occurring when goods are enjoyed in the family, when they are used by more people than their owners, when they are notexchangeable, and when they are not produced for a profit.

Our economic roots have led marketing researchers to focus on the parameters of the transaction at hand, considering only the decision maker’s utility function. Until recently, the social context surrounding the decision was largely ignored, especially during the 1970s and early 1980s, when choice processes and information processing played a dominant role in consumer research. This phenomenon, in retrospect, is hard to rationalize given that Marketing is the focus of social interactions in most business contexts.

Economic perspectives have broadened in recent years, providing some theoretical bases for a Marketing Relationship framework. For example, Thaler’s (1985) notion of transaction utility adds concern for the circumstances surrounding the transaction. Granovetter’s (1985) notion of social embeddedness certainly adds relationship aspects to the considerations involved in decision making. Frenzen and Davis’ (1990) expansion of these notions into the concept of Exchange Utility provides a basis for incorporating the Other’s satisfaction into the maximization of one’s utility; however, most of Economics still insists that preference functions are exogenous and independent.

The fact remains that Marketing Relationships did not become a pre-eminent topic for research until the 1990s. Given its obvious relevance for doing business globally, one has to wonder what we marketers were thinking about in earlier decades. We suggest that our economic roots were difficult to discard.

THE GLOBAL ENVIRONMENT

Just as our economic roots have limited our perspectives in consumer research at the individual level, we suggest that the framework has engendered short-sightedness among consumer researchers at the global level as well, especially in terms of the global environment.

One issue embedded in the topic of "environment" is the magnitude of the problem. While there is no doubt that rain forests are being depleted and there is general acceptance that the hole in the ozone is getting larger, many enlightened people argue about how serious "global warming" is and whether the earth can sustain its burgeoning population. A recent article in The Economist (November 16, 1996), for example, concludes that Malthusian forecasts of global famine will not come to pass and that innovations in biotechnology will result in the world’s population being fed. At the same time, the article noted that two warnings about "environmental panics" (fish and water) needed to be heeded. About 70% of the world’s fish are being harvested near or beyond what is sustainable. While there is enough fresh water to meet human needs worldwide, obviously its distribution is not uniform, resulting in precarious levels of supply in regions such as the Middle East and parts of Africa. Less conservative sources would assert strongly that real "environmental panics" exist in other areas as well.

The manifestations of environmental degradation have been considered in neo-classical theory to be externalities and the consequences of market failures; i.e., the failure of markets to establish prices for the object of concern. Thus we pollute because there is no cost associated, and we overuse non-renewable resources because they are underpriced. In each case, economic behavior dictates that profits be maximized and anti-ecological behavior has traditionally contributed to that objective. The environmental economist then argues that this situation can be remedied simply by establishing reasonable prices for the resources in question. All that is really required is a method for valuing environmental resources, and this is provided in market proxies like cost-benefit analyses. However, we suggest that environmental degradation and resource depletion are not the product of market failures but of the failure of mrkets to exist.

Environmental Resources in the Traditional Paradigm

Edwards (1987) represents the view of environmental economists as follows: scarce resources are best allocated by impersonal market mechanisms that are governed by the ubiquitous invisible hand. If myriad atomistic individuals are each pursuing their own self-interest unencumbered, then resources will be allocated in the most efficient combinations. Edwards (1987) argues that this will be true so long as the assumptions about egoistic, economic man are justified. He further argues that markets and prices do not have to be evident; only economic behavior is required for the determinants of economic value.

Any external interference with the process will necessarily result in a less efficient allocation. These free markets will automatically arrive at prices which will reflect individual’s preferences for various combinations of goods. The primary criterion by which such institutions are judged is the economic efficiency with which resources are allocated. Under these conditions, profits will be maximized and the greatest benefit will be derived by society. It is the primary and only social responsibility of firms in such an institutional arrangement to increase their profits since this will maximize societal welfare (Friedman 1970). Thus, the essential elements in this perspective are free markets, self-interest, prices, and efficiency.

In the event that markets fail in this process, then intervention sufficient to rectify the failure is required. The most common problem is the failure to establish prices for some resources which essentially become free to the firm and the creation of negative externalities which must ultimately be converted to internalities by intervention. In these cases, the traditional approach has suggested establishing shadow prices for the free goods and to impose some form of tax or other economic policy instrument to minimize negative externalities.

Insufficiencies in the Traditional Approach

Environmental externalities operate beyond the control of the market and policy instruments are infrequently able to bring them under control. The inevitable result of unconstrained self-interest in the pursuit of private goods is the tragedy of the commons (Ophuls 1977). Further, Dietz and van der Straaten (1992) argue that the preferences of future generations cannot be addressed by economic discounting methods.

Contrary to prevailing economic thought, there is not a single set of exogenous preference functions residing within each individual as consumer. Individuals operate variously as consumer and as citizen; in the private interest and in the public interest. Marglin (1963, p. 98) states:

The preferences that govern one’s unilateral market actions no longer govern his actions when the frame of reference is shifted from the market to the political arena. The Economic Man and the Citizen are for all intents and purposes two different individuals....The market and political maps are inconsistent.

And, in a more censorious mode, Sen (1977, p. 336) states, "The purely economic man is close to a social moron. Economic theory has been much preoccupied with the rational fool decked in the glory of his one all-purpose preference ordering."

Sagoff (1988) suggests that the result of this error in logic is that economic analysts confuse judgments with preferences, the differences between what I think ought to be done and what I personally prefer. The self-interested consumer and the concerned citizen exist within and stand in opposition to one another. While there is certainly a personal economic interest in each individual, "People are also interested in social objectives. They believe in ideals to which they ant their society to conform" (Myrdal 1954, p. 199).

Despite the increased attention given to public policy and social marketing in consumer research in the 1990s, the focus has been on the consumption of goods and services that are encompassed in markets. The consumer’s citizen role has been largely ignored, as have issues such as the consumption of air and water. We find these omissions to be a sad commentary on consumer research.

CONCLUSIONS

We have attempted to delineate concerns as to the bounded irrationality that consumer researchers have applied to their discipline, in part due to the assimilation of an economic theoretical base. Free market economics, as noted by Fallows (1993), has focused on the individual consumer and on the world as a whole. Looking at those two extremes, we have noted concerns as to the restrictive perspectives engendered by the prevailing economic theory.

If our economic roots have limited our perspectives at the two extremes which North American economic theory stresses, what about those intervening levels such as family, community, and nation-state? While family and, more recently, community have received attention in consumer research, the attention has been extremely limited. Throughout most of the world, the family is both the consuming unit and the producing unit. Even in the US, family firms account for 40% of its GDP and 60% of its work force (The Economist October 5, 1996). Yet, as the developing world is changing at an amazing rate, where is the concern for its effects on family structure?

The theme of the 1996 ACR Conference in Tucson was "Breaking Out of the Box." This paper is intended to support the value of that philosophy, showing the limitations that consumer researchers have imposed on themselves due to the bounded rationality fostered at times by our economic roots.

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Authors

William E. Kilbourne, Sam Houston State University, U.S.A.
James W. Gentry, University of Nebraska-Lincoln, U.S.A.



Volume

E - European Advances in Consumer Research Volume 3 | 1998



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