The Children Are Emerging as Major Players in the Decision Making Processes of a Family - Essay Example

? Five Forces Model An Integrated Approach to Strategy Development Using Porter's Five Forces Model and Consumer Socialization Models Paul Tomko school Introduction Various recent researchers clearly indicated that in the last few decades children have exercised a good deal of influence on the parents’ decisions related to buying consumer products which are relevant to the children, such as breakfast cereals, aerated drinks, fruit juices, and also popular electronic goods including mobile phones (Wilson & Wood, 2004). With this research in mind, an assumption is made that children are emerging as major players in the decision making processes of a family, in roles from initiators asking parents to buy products to direct consumers in the market scenario. As such, many market researchers have suggested children as future market constituents for all kinds of consumer goods and associated services (McNeal & Ji, 2003). Ward, Wackman, and Wartella (1977) theorized that the family (measured in two variables, family patterns and family behavior) influenced the consumption pattern of the children, directly affecting the development of the cognitive skills of children, and indirectly affecting the formation of children’s consumer skills. Noting this data, modern marketers and consumer researchers have an imperative to focus their studies generally on the family unit as the shaper of children’s consumption habits, and specifically on the children as the future emerging primary segment within the consumer market. Companies must create new marketing strategies toward this new consumer group, but with awareness that parents also shape children’s consumption habits. In this article, modern marketing necessities will be discussed using Porter's five forces model and consumer socialization models to distinguish an integrated approach that is essential for an effective marketing strategy development. , analysis and synthesis in the learning process of an individual). Consumer Socialization With market dynamics that include the (a) rise in the purchase power of the children’s segment, especially the adolescent group, (b) expansion of the market size, and (c) increase in the extent of family influence on consumer behavior, it has become essential for marketers to comprehend the characteristics of this new and unique market scenario. Understanding these market dynamics in order to design an effective marketing strategy requires comprehension of new consumer behavior patterns, especially of the emerging children-consumer segment. Marketing strategy with these dynamics also requires design strategies to influence the adolescents’ choice behavior, and potentially to affect various stereotypical and prejudiced notions about adolescents (Belk, Bahn, & Mayer, 1982). The processes through which an individual develops consumption-oriented cognitions and behavioral patterns are known as consumer socialization. Researched theories of consumer socialization generally show that an individual develops consumption patterns because of communication with various other socialization agents, and because of internal processes that involve cognitive and biological transformations. Consumer pattern development through socialization agents is generally explained through psychological and sociological theories. The internal processes are based upon biological theories of cognitive development (Piaget 1954). The first discussion is on the concept of consumer socialization and its various theories. Consumer Socialization Models As an area of study in the marketing research field, most early contributions in consumer socialization came from the psychological perspective, rather than viewing the subject from a marketing perspective (Guest 1955; Parsons, Bales, & Shils, 1953; Riesman & Roseborough, 1955). Consumer socialization was seen as a process through which children and adolescents procured knowledge, skills, and behavioral attitudes, which were relevant to their functioning as consumers in the marketplace (Ward, 1974). Three main groups of theories have been used to explain the process of consumer socialization in an individual’s lifetime: (a) developmental theories, (b) theories of social learning, and (c) theories of the social system. Developmental Theories Developmental theories that were focused on psychological changes also included maturational theories about the internal organic development and biological changes (age, sex, etc.) of an individual. Developmental theories were used to understand the modifications seen in the behavioral patterns of an individual consumer, and family consumer decision-making patterns (Hill, 1965). Social Learning Theories Social learning models were focused on external socialization agents, organized around the concept that socialization was the result of various external environmental forces influencing a person rather than internal biological and psychological processes. The theories of social learning were further sub-categorized into “interaction theories” and “connectionist theories.” Connectionist learning theories indicated that the process of socialization was controlled by certain external factors (irrespective of a person's active or passive state). The most famous connectionist learning theory is the classical conditioning theory (Pavlov’s famous Pavlov’s stimulus-response theory) that showed learning as process in which the outcomes were conditioned by certain, externally imposed rewards, thus allowing an external agent to have a superior control over the entire process. The instrumental conditioning theory showed the process of learning occurring through an externally imposed system of punishment and reward, provided by an external agent depending on the state of the learner’s active behavior (Piaget, 1954) Unlike the connectionist learning theory, the interaction theory was focused on the active role of an individual within the socialization process. Individuals were seen as active participants within the entire learning process, in which the growth of one’s beliefs, values, and behavioral attitudes all resulted from the participant’s direct interactions with the people around him or her. Various innuendoes from interactions could also influence a participant’s learning, as a means of feedback regarding the participant’s beliefs and behavioral attitudes (Zigler and Child, 1969). Moschis and Churchill (1978) suggested a consumer socialization model that included both the theories of social learning and cognitive development. The model included both concepts that the age or life cycle (cognitive development theory) of an individual, and the variables constituting social structures such as social class, sex, and race were precursors to the process of socialization. Socialization agents were comprised of various people and institutions that tended to affect a young individual, and were credited as active agents in the entire process of socialization. At the core of this socialization model were the various learning processes socialization agents used as tools to influence the learner. Bandura (1977) identified three types of learning: (a) modeling, (b) learning through reinforcement, and (c) learning through social interaction, which all contributed to the process of socialization. In 1983, Moore and Moschis used the consumer socialization approach to explore primary factors that determine adolescent consumer learning. Various learning traits were studied, including (a) brand specification, (b) attitudes towards advertising, (c) the capacity to recall slogans, and (d) accuracy of prices. The researchers used socialization agents of media and family members. The explored variables of social structure included socioeconomic position, age, and level of intelligence. In this experiment with two sample groups of adolescents (middle school level and high school level), the researchers found that although levels of intelligence and media exposure were important variables in the middle school age range, these became less important variables for high school students. This finding reflected the assumption that the influence of distinct socialization variables changed with age, which is consistent with socialization theory principles. In this research to test In the research conducted by Moore and Moschis, (1983) a consumer socialization model was framed on adolescents aged 12-18 years, using social variables like class, age, and gender were examined with the influences of mass media, parents, peers, and school as the socialization agents. Outcomes of interest were listed as (a) consumer activism, (b) knowledge of the consumer affairs, (c) competency in the management of consumer finances, (d) attitudes toward prices, (e) materialistic attitudes, and (f) the socioeconomic motivations for consumerism. An individual’s level of interaction with the various socialization agents was shown as a determining factor in the levels of variation within the consumer learning outcomes. As per the researchers, the family unit formed the most important agent in teaching adolescent children the financial motives for consumption (the rationality factor), although peers and mass media were involved in teaching social motivations (the materialistic factor), and the school as an institution did not have any perceivably significant role in the process of consumer socialization. Social structure variables of age, and gender were significant, as it was observed that older male adolescents, in general tended to possess more consumer knowledge than other participants. Higher social classes showed higher economic motivation, and also an increased competency in financial management (Moore and Moschis, 1983) In earlier research, Churchill and Moschis (1979) had explored the roles of various socialization agents in the process of consumer learning. In all cases it was consistently observed that the family, mass media, and peers formed the primary variables in adolescent learning. Based on these studies, future research needs to include social structural variables such as age, gender, and social class to fully understand how young people learn consumer skills. Social Systems Theories The social system theories added a perspective that influence factors originated from within the group or organization to which the learner belonged. The assumption in social systems theory was that the learner or individual would acquire the various rules and norms followed by that particular society according to its unique "culture/sub-culture." In this case, socialization was understood as the process by which one internalized one's own culture, a learning process termed “enculturation.” (Moschis & Moore, 1982). Different cultures tended to show different behaviors, values, and norms, thus the subject matter of the learning outcomes varied across cultural/sub-cultural groups. Along with varying norms, varied socialization processes also affected the learning outcomes according to the various cultural setting (Moschis & Moore, 1982). Using the consumer socialization models, socialization variables and influential social agents can be identified for their effects on an individual’s pattern of consumerism. The consumer agents (parents, peers, media) that are in constant interaction with the adolescents, have the scope of inflicting a great deal of influence on the children, thus, one can easily assume that if a business firm targets the social agents and is able to convince them, this would automatically pass on to the actual target group (the adolescents), ultimately benefitting the firm. Business leaders conducting a market survey to create a new strategy for increasing sales outputs and profits, or trying to introduce a new product in the market, would need to focus on these variables and shaping agents for the consumption pattern and habits of the primary emerging consumer segment, adolescents. With the background of consumer socialization models, the next discussion is of Porter’s five forces model, which has become the present standard in market research. Following the analysis of Porter’s model, principles for a business organization’s effective strategic development to further its financial gain through increasing profits will be derived from the integration of these two types of models. Porter's Five Forces Model Porter's five forces model has been a framework for conducting business analyses and strategy development focused on strategic planning. Michael E. Porter (1979) based the model on industrial organization (IO) economics to describe five forces (see Figure 1) that could be used to determine the intensity of present competition within the market scenario, and hence the market’s “attractiveness,” the overall profitability of that particular industry. According to Porter’s theory, an "unattractive" industry is one in which all five forces together have an effect on the industry to decrease the total profitability. Business leaders can use the model for an in-depth evaluation of the industry and the qualitative trends perceived within the market. Figure 1. Porter's five forces model. From “Strategic Planning with the Porter's Five Forces Framework”, by Anything Research, 2011. In the model in Figure 1, Porter showed three of the forces that referred to the competition from external elements, while two were internal threat factors. The external, horizontal three forces of competition are the (a) bargaining power of supplies (fig 1), (b) tbargaining power of buyers (fig 1)and (c) threat of internal rivalry and competition (fig 1) The two internal forces form a vertical competition in (a) the threat of new entrants (fig 1), and (b) the threat of substitution (Anything Research, 2011). Porter (1979) called these 5 forces  a microenvironment that surrounded an organization and affected the firm’s competency in serving customers while also making profits. Modifications in any of the five forces made it essential for a business firm to reevaluate the market scenario to seek the extent of the overall changes occurring within a particular industry. On Porter’s model, the overall attractiveness of the industry did not necessarily translate into the fact that every organization within that industry would gain the same amount of profit. Leaders could use their business models and core competencies in light of the five forces model to bring about profits that would be more than the industry average in order to remain attractive. Each of the five forces next will be described and analyzed for relevance in specific business situations. Rivalry  Rivalry is a measure of the concentration of industries within a single market arena, calculated among the four largest firms. If the rivalry threat is low, the market is disciplined in nature. Even within a disciplined market, rivalry exists between established firms, especially those targeting the same consumer segment, which often leads to competition in the forms of discounts, prizes, attractive offers, and so forth (Strategic Management, 2010) Bargaining Power of Buyers this threat factor is more apparent when the consumer goods bought represent a high percentage of the purchaser’s cost product purchase that is undifferentiated; has minimal switching costs; the purchaser has fewer profit margins, and the buyer has complete information on the availability of all the products.(Strategic Management, 2010). This is a situation where the buyers hold significant power over the business firms to the extent that they become a threat for the business firms. The consumers can decide not to buy owing to availability of certain information (negative feedback) on specific products made by the firms, or can move over to other similar products with not much loss, as regards cost price change, or when the product bought is very expensive and the consumer will then tend to check the item in details before buying. All these may create a barrier to the number of products sold, thus posing threat to the business firms if not managed strategically. Threat of Substitution this threat is evident when there are a large number of products in the market, that are of the same specifics, having same functions, and targeting the same consumer segment, with low-cost alternatives(Strategic Management, 2010) Bargaining Power of Suppliers r=Relevant when the market is dominated by very few companies, there is a lack of supplier substitutes, the industry does not form to be the primary customer for the suppliers; the product from the supplier is of primary importance for the industry to make products suitable for the consumers, high costs for switching, and there is an evident threat of forward integration (Strategic Management, 2010) Here we find that the suppliers that bring in the raw materials for the business firms are in a stronger position, and such conditions may arise when there are very few raw material suppliers in the market and more of the business firms that sell the end products. In such a condition, automatically, the suppliers get an upper hand, which allow them to conduct better bargaining with the corporations. Here the position is such that the supplier may do without a certain firm as there are more firms to choose from, but the corporations would not be able to function without the suppliers help (Strategic Management, 2010). Barriers to Entry This threat comes into being when there are scale economies, proprietary technology, capital requirement, easy access to locations or product materials, product differentiation, switching costs, and government subsidies (Strategic Management, 2010 According to Porter, this five-force model is best used within industry levels.the model fails to function effectively when applied on the total industry sector level or on industry group. Here one must comprehend the view that an industry when seen from a simple perspective appears as a marketplace where same products are made available to the consumer, thus increasing the levels of competition.. Business firms that that operate on only one product line will have to develop more than one five forces analysis strategy for fighting the competition within the marketplace.. For the companies that have diverse products, the first point in their strategy development would be to select the most appropriate sindustry sector where they can suitable compete with the rivals. here each product line sold by the firm must have its own specific five-force analysis, suitable for the market that it operates in (Strategic Management, 2010). Integrating Porter's Five Forces Model and Consumer Socialization Theories In the context of adolescents emerging as a new consumer segment, three main forces must be applied to a company’s strategic planning: . Company leaders working to restrain the effects of these forces must take into account the socialization variables and socialization agents to target the intended market sector more precisely. In attempts to gain new customers while retaining old customers, and keeping rivals at bay ), business leaders may make certain moves. 1. Change the price of a product to gain temporary advantage over a rival. According to consumer socialization theory, generally the family shapes an adolescent’s economic consumerism values, thus a company’s product must first be attractive the family in terms of economic value in order to reach the future consumer segment (the adolescent). 2. Improving features. The perceived or actual materialistic value of any product can be raised by the addition of innovative features. Recognizing the peer and media influence on an individual’s consumer motivations regarding the materialistic factor, upgrading features or adding innovations to a product would be a strategic application of this aspect of consumer socialization theories to reduce the threats of substitutions or rivalry. 3. Improve advertisements and distribution channels to make the product or the news of it reach the intended market segment. The strategy must account for the use of mass media to disseminate news of the new product, or to display the added befits and innovations on an existing product. According to consumer socialization models mass media is a strong influence on younger adolescent consumerism. Firm leaders who utilize the influence of this social agent may combat the threat of rivalry and keep the customer buying power with one’s own company. 4. Utilize social variables of age and gender as crucial factors to gain or retain customer loyalty. To sell goods effectively, one must make products attractive to the correct age group and gender, as for example, trying to sell Barbie dolls to young boys or toy guns to young girls might not be as profitable as the reverse. Marketing managers must recognize the social system theories about the cultures and subcultures in the society. Gender based stereotypes are created by cultural influences, thus if the intended products have gender-specific target consumers, a marketing strategy that involves cultural value awareness could target the correct consumer segment more precisely. In order to make an effective management strategy, business leaders must study the consumer patterns evident within the surrounding market scenario. Once a pattern emerges, applying socialization theories to understand the human psychology behind the buying patterns could give the company a strategic market advantage. With market trends and consumer socialization in mind, the firm’s managers can develop new strategies to apply within the Porter’s five-force model to maximize market position and profits. Conclusion Porter’s five forces model can be used to develop strategies to counteract the various threats that could harm the profitability of a business firm. In developing effective marketing strategies, being mindful of the customer/consumer is crucial. The current market scenario with an emerging adolescent consumer segment is an opportunity for marketing managers to integrate the five forces model with consumer socialization models to develop new marketing strategies. The discussed research has shown that social agents and variables under the consumer socialization theories greatly affect the buying patterns of this consumer population. 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