4/18/2009

MARKETING MANAGEMENT

GLOBAL MARKETING AND CONSUMER

BEHAVIOR

Assignment # 02 | M. Aslam Javed Roll # AB-523810

Marketing Management
Assignment # 02

Global Marketing and Consumer behavior:

Abstract Consumer behavior in international markets is a topic that is still not well understood. Proposes a framework, called the A-B-C-D paradigm. Suggests that a marketer examine four stages access, buying behavior, consumption characteristics, and disposal covering the entire spectrum of consumer behaviors with respect to a product/service. The paradigm is universally applicable to any particular culture or country of interest. Since there has been no comprehensive examination of consumer behavior in eastern Europe and the Third World, focuses on using the A-B-C-D paradigm to gain a better insight into consumer behavior in these countries. Offers recommendations to companies wishing to market their products in these countries.

Introduction In the marketing literature a considerable amount of attention has been devoted to two groups of countries: the Third World countries and the former socialist countries of eastern Europe. Although there is no one term that precisely describes all the countries in this combined set, most of these countries are characterized as less developed countries by the International Development Association (IDA) and as developing markets in prominent textbooks of international marketing (Cateora, 1990). Hence the term developing countries is used in this article when alluding to both groups of countries jointly. New markets Over 40% of US exports of manufactured goods are to developing countries, and prominent companies in the USA, Europe and Japan have made countries like South Korea, Taiwan, Thailand and Poland their top priority for the future (Business Week, 1994a ; Cateora, 1990, p. 289). Despite this trend, consumer behavior in global markets is a topic that is not well understood by marketers. The focus of this article is to provide a comprehensive view of consumer behavior in global markets, especially in relation to the countries of eastern Europe and the Third World. Third World countries, like Brazil, South Korea, Taiwan, Hong Kong, Singapore and India, have made considerable progress in the last few years. The market growth between 1981 and 1986 for selected Third World countries was 24.3% for Brazil, 44.9% for China and 41.3% for India, as compared with 8.4% for the USA and 12.3% for Japan ( Cateora, 1990, p. 321). Several M. Aslam Javed, Roll # AB-523810 Page 2

companies such as PepsiCo, Procter & Gamble, Unilever, Sony and Nestle already operate in Third World countries, and others, like GE, see their entry into Third World markets no longer as a matter of choice (Business Week, 1993a). Eastern Europe, with a population of approximately 430 million, is also an emerging new market. The eastern bloc accounted for 15% of the world gross national product (GNP) in 1989 and the combined GNP of Hungary, Czechoslovakia and East Germany alone was more than that of China (Quelch et al., 1991). In a recent survey, 67% of US executives expected eastern Europe to rival western Europe as a major market in about 20 years (Alpert, 1990 ). Companies like PepsiCo, Coca-Cola, Procter & Gamble, and McDonalds have already established themselves in eastern Europe and the conversion to a market-oriented economy in these countries is bound to offer many more future opportunities. While many articles and books have focused on marketing in the Third World (Dawson, 1988; Kaynak, 1982 ) and eastern Europe (Naor, 1986; Quelch et al., 1991), it is questionable whether marketing findings from the West are directly generalizable to these countries (Akaah et al., 1988). Consumer behavior, in particular, is likely to be somewhat different in developing countries since it is largely influenced by social, political and economic conditions. While research in consumer behavior is a top priority for marketers both in the Third World (Albaum and Peterson, 1984; Kanwar, 1993) and in eastern Europe ( Kaynak and Samli, 1986), most researchers have studied only selected aspects of consumer behavior in one or a few cultures. While such ad hoc studies are no doubt useful, there exists a great need for a comprehensive examination of consumer behavior in order to provide generalizations and recommendations to those wishing to market in the Third World or eastern Europe. However, such a comprehensive examination is made especially difficult in the absence of a framework to study consumer behavior in global markets. The objective of this article is therefore threefold. The first objective is to develop a framework that can be used to study consumer behavior in global markets. The second objective is to apply this framework to examine and understand consumer behavior in countries of the Third World and eastern Europe. Based on this examination, the last objective is to offer generalizations and recommendations to those wishing to market their products/services in the Third World and eastern Europe. In accordance with these objectives, the next section develops the framework, known as the A-B-C-D paradigm, and offers a brief description of this paradigm and its rationale. The following section considers the four stages of the paradigm in detail, illustrating them with examples drawn from eastern Europe and the Third World. Based on this discussion, the final section offers a summary of generalizations and recommendations for marketing in eastern Europe and the Third World.

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Complex models and concepts

The A-B-C-D paradigm Several comprehensive theories/models have been developed within the field of consumer behavior (Engel et al., 1968 ; Engel et al., 1995; Howard and Sheth, 1969; Nicosia, 1966). Models have also been developed for specific contexts, such as for family decision making (Sheth, 1974) and information processing (Bettman, 1979). These theories/models have played an important role by detailing how various factors influence consumer behavior. However, the complexity of these models and the difficulties inherent in the operationalization of the numerous concepts has made their application in the international context especially difficult. An extensive review of the literature reveals that there is no simple framework that lends itself to a comprehensive study of consumer behavior in international markets. Problems with the existing frameworks make it essential to provide some structure to the study of consumer behavior across cultures. The paradigm proposed in this article uses four sequential stages to represent the purchase and consumption processes within any culture. These four stages are termed access, buying behavior, consumption characteristics, and disposal (with the acronym A-B-C-D). A thorough understanding of each stage is essential for the global marketer since the overall effectiveness of the marketing function is contingent on all four stages being facilitated within any culture. Figure 1 represents the four stages of the paradigm and identifies the major factors within each stage.

Four stages of the paradigm These stages are briefly described below:

Access. The first step in global marketing is to provide access to the product/service for consumers within a culture. Access pertains both to physical access as well as to Page 4

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economic access. Buying behavior. This stage encompasses all factors impacting on decision making and choice within a culture. Examples of these factors include perceptions, attitudes, and consumer responses such as brand loyalty. Consumption characteristics. The specific products/services that are purchased and consumed may be different in each culture. The cultural orientation (traditional versus modern) and social class distribution, among other factors, will determine consumption patterns within a culture. Disposal. Most countries, including the developing countries, are becoming more environmentally conscious and moving away from throw-away products. Hence marketers need to design systems to facilitate the safe disposal, recycling, resale, or remanufacturing of products. They must also meet their social responsibilities in other countries, especially in relation to public safety and environmental pollution.

Hierarchical approach The rationale for this paradigm comes from several perspectives. First, since the four stages are universally applicable, the paradigm offers a general framework to understanding consumer behavior within any global market. Second, in order to understand the broadest possible range of consumer behaviors within any culture, the paradigm encompasses all aspects of purchase and consumption within a simple framework. Third, the four stages of the paradigm are arranged in a hierarchical fashion from the consumers viewpoint, i.e. there can be no buying behavior unless products and services can be accessed, and no consumption unless there is buying behavior, etc. If the marketer is able to facilitate every step of the process from the consumers perspective (which is consistent with the marketing concept) then, by definition, the marketing function would become very effective. The hierarchical approach also gives the marketer a systematic way to prioritize the marketing tasks within a country, i.e. access issues should be considered first and disposal issues should be considered last. Note that this does not imply that disposal issues are any less important than access, buying behavior or consumption issues since all four steps must ultimately be addressed. The fourth and final rationale for the A-B-C-D paradigm is that it is consistent with the concept of business process reengineering ( Hall et al., 1993; Hammer, 1990), which encourages businesses to improve corporate performance by using a cross-functional perspective ( Cypress, 1994). The A-B-C-D paradigm encourages managers to examine each stage from multiple perspectives (finance, economics, trade, public relations, etc.), and is therefore consistent with the cross-functional approach.

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Each of these stages will now be discussed in depth and illustrated with respect to the countries of eastern Europe and the Third World.

Application of the paradigm

Access As noted earlier, access can be divided into two types: economic access and physical access.

High inflation rates Economic access. Economic access relates to the issue of affordability of the product/service for the general population. Personal incomes in developing countries are fairly low, although there could be wide disparities as among the countries of eastern Europe ( Peterson, 1990). In addition, high inflation rates in many of these countries make many products and services inaccessible to consumers. Hungary, for instance, was recently reported as having an inflation rate of 30% (Bosze, 1991). While this may not seem encouraging, a marketer can often target the affluent consumers, who are the primary buyers of major appliances and electronic goods in most developing countries. In India, although the per capita national income is only $270 per year (Aswathappa, 1991), there is also a thriving group of upper-middle and upper class consumers ( Gandhi, 1985, p. 62). Although much of eastern Europes population is rural and poor, a third of Hungarys population is considered to be relatively affluent and Poland has a fairly large urban population with jobs in the private sector (Bruner, 1994; Miller, 1993). While the affluent segment might comprise only a small proportion of the population, one might note that the population base is itself quite large in eastern Europe and the Third World. For example, India has a population base of about 850 million (India, 1992) and eastern Europe has a population of about 430 million, 40 million of which are from Poland alone (Miller, 1993; Quelch et al., 1991).

Repositioning and redesign of products Owing to the large population base and income disparities, the ability to sell to different income classes would definitely be an advantage to marketers in eastern Europe and the Third World ( Bruner, 1994). A marketer has several possible options to accomplish this. The first option is to reposition products that are sold in developing countries. While most inexpensive items may not require any repositioning, durable goods and even moderately expensive items would have to M. Aslam Javed, Roll # AB-523810 Page 6

be repositioned to appeal to the affluent consumers. Kitchen appliances and small electrical gadgets which are commonplace in Western households can only be afforded by the upper class in most developing countries. Another option would be to make products functional yet affordable through product redesign. For example, only 15% of Mexican consumers can afford to buy a car, so cars are usually redesigned without many high-tech extras for that country (Business Week , 1994a). A third option, especially suited to developing countries, would be to enhance after-sale maintenance and repair services since consumers in these countries often cannot afford to discard old products. Designating authorized repair centers, having trained service personnel, and monitoring both service quality and spare part inventories are strategies that can be very helpful in building a favorable company image. While economic access is important, the evaluation of different countries on this dimension can often pose a problem to marketers. Marketers have traditionally relied on statistics such as personal income distribution or gross domestic product (GDP) for this purpose. An important point to keep in mind, however, is that traditional GDP figures (based on market exchange rates) can sometimes be quite misleading for developing countries. A newer method, based on purchasing-power parities, appears to be more accurate and shows many developing countries to have much stronger economies than originally envisioned (The Economist, 1993; Terpstra and David, 1991, pp. 234-8). Marketers should therefore exercise caution so that they do not incorrectly dismiss east European or Third World countries as being low on the economic access dimension based on traditional methods. Physical access. Gaining physical access to global consumers is generally a function of three factors: international trade regulations/barriers; the distribution system within the country; the infrastructure of the country.

Trade barriers The first is a rather broad dimension pertaining to trade in the global marketplace. Trade barriers and restrictions may in some cases be direct, such as the existing trade embargo of the USA against Vietnam which is preventing many US companies from gaining access to the Vietnamese market (Business Week, 1994b). In many cases, however, trade barriers could be more subtle. In China, Western companies are forced into joint ventures with local companies because direct import, other than in basic and hi-tech industries, is not encouraged by the Government (Zimmerman, 1986). In Turkey, the Government prohibits the import of caramel coloring although it allows foreign soft drink manufacturers to operate bottling facilities. In India, foreign ownership of companies was previously restricted to 49%, although this constraint has

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now been relaxed to encourage foreign investment. In eastern Europe, the newfound freedom in the former socialist countries is a major attraction to marketers. However, centralized planning and national goals of economic development often pose indirect barriers to trade. Prices of goods may not be determined by market conditions in these countries. The rate of progress toward a market economy also differs from country to country. While Hungary, Czechoslovakia, Poland and eastern Germany are adjusting rather quickly, Bulgaria, Romania and the former Yugoslavia are lagging behind ( Quelch et al., 1991).

Countertrade One way to gain physical access to less-developed countries is through countertrade (Okaroafo, 1992). Countertrade is a market entry strategy involving various types of exchange of goods and is notably used by firms wishing to export to countries which are experiencing shortages of hard currency. Since developing countries often demand to engage in countertrade, the reluctance of a Western company to oblige can result in its being excluded from a specific country market. To complicate matters, many developing countries do not have specific countertrade policies, making this an ad hoc activity that is dependent on the situation at a particular moment. Western companies therefore need to be proactive and know what to expect with respect to trade with a particular country. Motivations of east European countries to countertrade include balance of payments considerations, foreign trade planning, and technology updating (Matheson et al., 1977 ). Often countries can be clustered on their propensity to countertrade based on variables such as the foreign exchange availability and balance of payments. India, Brazil, Iraq, Iran and Mexico belong to the cluster of countries that are not only engaged in countertrade, but also have the highest average countertrade deal (Okaroafo, 1992). On the other hand, Kuwait, Taiwan and the former Yugoslavia can be characterized as noncountertraders. Many other countries fall in intermediate clusters. A company therefore would be well advised to consider countertrade as a possibility when trading with developing countries, especially those that belong to pro-countertrade clusters. One survey of Canadian corporations showed that engaging in countertrade is likely to become a source of competitive advantage since demands for countertrade from eastern European countries are growing ( Kindra et al., 1993).

Mega-marketing Mega-marketing is another concept that is relevant to trade with developing countries (Kotler, 1986). Many bureaucratic obstacles in trade can be overcome only through astute negotiations M. Aslam Javed, Roll # AB-523810 Page 8

with local governments and prominent public officials within a country. The company might be able to offer something that the local politicians and consumers perceive as a definite benefit. Pepsi was able to introduce its product in India over the opposition of domestic soft drink companies and many legislators through the clever use of mega-marketing (Kotler, 1986). As part of the deal Pepsi offered to focus on both rural and urban areas and bring new food processing, packaging and water treatment technology to India. Today Pepsi is one of the leading soft drink brands in India. Coca-Cola has also made a bid to reenter the Indian market with a recent announcement of a $20 million dollar capital investment for soda production and bottling (Business Week, 1993b ). The second dimension of physical access is the quality of the distribution system within a country. It is a well-known fact that distribution systems in eastern European and Third World countries are often not efficient. The Indian distribution system comprises nearly 200,000 wholesalers and 3,300,000 retailers (Gandhi, 1985, p. 72). Dealing with such an extensive and vastly different system might pose a problem for Western companies. In eastern Europe, the weak distribution system restricts the sale of most Western products to the major cities (Quelch et al., 1991). In Poland, companies still have little freedom to develop their own distribution channels in spite of the economic reforms of the early 1980s (Guzek, 1986).

Poor-quality retail outlets The quality of the retail establishments in many developing countries further adds to distribution problems. Retail outlets in eastern European countries are often characterized as insufficient, unattractive, time consuming and frustrating (Quelch et al., 1991). Third World countries share this problem, although there is a slow and gradual trend toward modernization in the form of self-service stores and supermarkets. However, factors such as the small number of potential customers, low income levels, acute income disparities, and traditional lifestyles in Third World countries tend to hinder the acceptance of supermarkets (Kaynak and Cavusgil, 1982). A major obstacle to physical access of goods in many countries is also the attitude of the shopkeepers. In eastern Europe, retailers often do not stock the products that they agreed to stock, but instead stock off-brand products with little advertising support. They apparently take pride in their individuality and the head office is unable to control such behavior ( Bruner, 1994). One way for marketers to overcome the limitations of the distribution systems in developing countries is to devise innovative ways to distribute their products. For example, conditions in Hungary seem conducive to the use of direct marketing techniques ( Gehrt et al., 1989). However, Western retailing practices and marketing institutions should be carefully evaluated for their appropriateness in specific contexts and not be blindly transplanted to developing countries (Gehrt et al., 1989).

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Infrastructure has a huge impact The third factor influencing physical access is a countrys infrastructure, which is comprised of essential services such as transportation systems, communication systems, utilities and banking systems. Infrastructure not only has a tremendous impact on the ease of conducting business in a particular country, but is also vitally important for the future economic growth of developing countries ( Pitroda, 1993). However, Third World and eastern European countries often rate poorly on the dimension of infrastructure. In India, the highway system is poor, utility systems are strained, water is scarce and telephone and banking systems are not efficient. Hungary has only 0.135 automobiles per capita as compared with 0.540 in the USA and it also has many fewer miles of roadway per person. The public transportation system is outdated and inefficient. There are only 140 telephones per 1,000 population as compared with 760 in the USA. Banking and credit operations need reform. Less than 2.5% of the consumer purchases were credit transactions in 1985 ( Gehrt et al., 1989). These factors create great problems for distributing goods and services. Companies therefore have to be creative and learn to work around these constraints. Shipping goods overnight, and using telemarketing and other direct marketing techniques, could pose major problems in developing countries. Also, products might have to be designed to function under less than optimum conditions, such as electrical appliances having to withstand repeated power outages. Since computer technology might also not be advanced, the establishment and maintenance of computerized databases might prove to be more difficult in these countries. However, such obstacles might also present opportunities for Western companies. Developing countries are often eager to negotiate trade with companies which offer to improve their infrastructure in some way. Companies could make such collaborative efforts and deals part of a planned strategy to gain access to eastern Europe and Third World markets.

Market research is necessary

Buying behavior Once a company has ensured both economic and physical access to its products it needs to evaluate the buying behavior of consumers in the country that it is seeking to enter. However, little is known about consumer attitudes, buying habits, purchase motives, lifestyles, etc. in eastern Europe and Third World countries (Kaynak and Samli, 1986). Marketers who seek to enter these markets might therefore find it necessary to engage in some a priori marketing research relating to such issues (Peterson, 1990). It would be beyond the scope of this article to present a comprehensive discussion of all aspects of buying behavior in international M. Aslam Javed, Roll # AB-523810 Page 10

markets. However, we will explore three dimensions of buying behavior that are critical to international marketers and examine them in Third World and eastern European markets. These three dimensions are consumer perceptions, consumer loyalty, and attitudes toward marketing/consumerism. These dimensions can be further broken down into finer concepts, as will be evident in the discussion below. Consumer perceptions. First, perceptions of companies and their products are very different in different countries. Three types of consumer perceptions are especially important to marketers. These are perceptions relating to the country of origin, brand equity, and price-quality relationships. The country of origin, in particular, may be an important cue that creates a first impression and provokes consumers to think more specifically about a products attributes and the desirability of those attributes (Hong and Wyer, 1989). For example, while the phrase made in America is perceived positively in China (Zimmerman, 1986), the same cannot be said of several Middle Eastern countries. The importance attached to the country of origin could also vary among cultures. Eastern Germans do not perceive the country of origin for durable goods to be as important as do western Germans ( Johnson and Johnson, 1993). The emphasis placed on the country of origin in a products advertising and promotion would therefore have to be carefully assessed by the marketer, based on these considerations.

Brand equity Brand equity is another aspect of perception. Many Western and Japanese brands are well known in eastern Europe and the Third World, and consumers often view them as being of higher quality than local brands. For example, one study reported that Hungarian consumers recognized 252 Western brands, while the Poles recognized 175, and the Russian consumers recognized about 100 (The Economist, 1990, p. 71). Purchase and consumption of Western brands may also be used to make a political statement by consumers in these countries. The popularity of American brands such as Marlboro, Colgate and Caterpillar is cited as one reason US companies usually have an easier time entering Third World markets in spite of their late start in countries such as Vietnam (Business Week, 1994b ). It might therefore be advantageous to retain Western brand names, packaging and graphics in eastern European and Third World countries, although companies might want to use the local language on the package itself. One useful technique for marketers is to categorize brands using the two dimensions of country equity and brand equity in order to design marketing strategies uniquely suited to specific brands (Shimp et al., 1993).

Price-quality relationships The third aspect of perception is price-quality relationships. While a positive price-quality M. Aslam Javed, Roll # AB-523810 Page 11

relationship is likely to exist in most cultures, the higher prices in developing countries due to high inflation often force the consumer to discount the impact of price and resort to other means to evaluate quality. Consumers in Turkey, for example, have been found to rely on word-ofmouth communication more than price as a means to judge quality (Yucelt, 1989 ). Similarly, eastern Germans have been found to rely on personal experience and the opinions of friends and relatives to a greater degree than do western Germans in judging the quality of products ( Johnson and Johnson, 1993). The effective use of word-of-mouth communication might therefore be critical to marketing success in developing countries. Consumer loyalty. Consumer loyalty can be broken down into two components: brand loyalty and store loyalty. While there is some disagreement on whether east European consumers are brand loyal ( Bruner, 1994), most evidence seems to suggest that consumers in developing countries are more brand loyal. The brand loyalty of east European and Third World consumers may be due to their risk-averse nature resulting from limited financial resources and the spotty quality of products (Johnson and Johnson, 1993 ; Kanwar, 1993). A second reason for this risk aversion might be the limited brand information available to consumers. This may be caused by the inadequate retail facilities which prevent brand comparisons or the lack of meaningful objective messages about consumption choices. Also, the centralized bureaucratic structure in eastern Europe ( Johnson and Johnson, 1993) and the low literacy rates in Third World countries (India, 1992, pp. 8-9) might make it difficult for consumers to gain access to available information. A third reason for risk aversion may be the more conservative and traditional norms found in developing countries. Many Middle Eastern countries are opposed to the materialistic values implied by the consumption of Western products. This makes them more resistant to change and they might also not be easily persuaded by advertising terms such new and improved, which are commonly used in the West (Kanwar, 1993). Advertising, especially in the case of durable goods, therefore has to be informative and geared toward reducing risk in developing countries. Countries could also be clustered on the basis of product perceptions in an effort to standardize advertising strategies within countries that belong to the same cluster (Sood, 1993).

Store loyalty Store loyalty is the second aspect of consumer loyalty. In India, a considerable proportion of the population shops in neighborhood stores, making location an important factor in store choice. Consumers tend to favor specific local outlets because of prior contact and/or satisfaction with the retailer. Sometimes store loyalty might be even more important than brand loyalty in determining brand choice. It is important for marketers to understand the factors that lead to store loyalty in different cultures. For example, in evaluating retail stores, the Chinese value the manner of salespeople and location more than the quality of the merchandise and return policy

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while the reverse is generally true for Americans (Ettenson and Wagner, 1991 ). Store loyalty might also result from the quality of service provided by the retailer. Service quality is not a well-developed concept in eastern European and Third World countries, and retailers typically pay very little attention to it. In eastern Europe consumers usually have little choice among stores. Most stores have no self-service and often employ the notorious three-line system to select, pay for and pick up items (Quelch et al., 1991). In Third World countries the problem is not as much with store choice as with the tremendous variation in service quality among stores, which makes consumers reluctant to switch from a store they like. One writer attributes the low retail service quality in Third World countries to the general contempt for selling in societies which have historically accorded more importance to production (Thakore, 1993 ). However, recent improvements in retailing such as good manners, customer friendliness, credit assessment, shop layout, and computerized billing systems are evident both in the Third World and in eastern Europe (Quelch et al., 1991; Thakore, 1993).

Consumer status/customer orientation Attitudes toward marketing/consumerism. The status of consumerism and the degree of customer orientation in a culture can give marketers important insights into marketing within a country. For instance, consumer-protection has historically not been given much prominence in India, and the Government has only recently attempted to set up consumer complaint forums. In some countries, consumers are reluctant to complain even when they have a problem. The reluctance of Chinese consumers to complain has been attributed to the values of desire for harmony, moderation, and pao (a fatalistic concept preaching that every action will reap its own rewards) ( Le Claire, 1993). The lack of customer orientation in developing countries is not due merely to economic factors but might also be the result of religious and socio-cultural factors (Das and Das, 1988). One study found a high level of skepticism regarding the operating philosophy of business, and a general dissatisfaction with advertising, complaint handling procedures and information availability among both managers and consumers in India (Varadarajan et al. , 1991). Not surprisingly, consumers preferred government regulation and price controls to address these issues while managers preferred industry self-regulation. In general, consumerism appears to be on the rise in developing countries as these countries acquire more Western expectations (Darley and Johnson, 1993). Marketers might therefore have to allocate sufficient resources and devise specific methods to combat the negative attitudes and skepticism of consumers in these countries.

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Social norms In addition to the three major dimensions of buying behavior discussed above there are also other consumer behavior concepts that have been examined in the literature. However, owing to the limited amount of research that exists at present in the international context these concepts will be mentioned only briefly here. There has been some research which shows that societal norms and values might have a greater impact on consumer behavior in developing countries as a result of the close-knit nuclear and extended family structure in these countries. For example, social norms were found to have a greater impact on the buying intentions of Korean consumers than on those of US consumers ( Lee and Green, 1991).

Psychological orientation Research has also shown that there might be cultural differences in psychological orientation. Japanese consumers were found to be more right-brain oriented and Chinese consumers more left-brain oriented than American consumers (Jacobs et al., 1993). As a result, emotional advertising appealed more to the Japanese while factual advertising appealed more to the Chinese. While Japan is not a developing country, such findings illustrate the importance of studying cultural differences with respect to deeper psychological and sociological variables for marketing purposes. At the same time, similarities among cultures also should not be ignored. For instance, there is considerable similarity between Singapore and US consumers in the way they use various information sources ( Tan and Dolich, 1983). Such similarities might allow the standardization of marketing strategies used in different countries at least to a degree.

Consumption characteristics The service sector is not as large or as well developed in eastern Europe and the Third World as it is in the West. While the developed economies average 60% of their GDP in the service sector, the lesser developed economies average only about 30% of their GDPs from services ( Aronson and Cowhey, 1984). In Poland, for example, telecommunications is still considered only as voice communication between two people and no advanced services such as 800 and 900 numbers or data transmission are offered (Miller, 1993). Services such as communications, financial services, tourism and travel services, etc. are therefore likely to offer considerable future growth opportunities in developing countries (Dahringer et al., 1991). The consumer goods industry in most developing countries is also characterized by poor product quality and mediocre marketing. However, the potential demand for consumer goods is vast despite the lower personal incomes in these countries. With per capital consumption expenditures of only $199 per year as compared with $12,290 for a US consumer (Kanwar, M. Aslam Javed, Roll # AB-523810 Page 14

1993), India still represents a very large market for most consumer goods. In the future, demand for consumer goods like processed foods, toiletries, health care products, and cars is likely to increase in east Europe also, especially after the industrial sector has been restructured ( Quelch et al., 1991). For Western marketers, early entry is essential to gaining a foothold in these markets and ensuring long-term survival (Oliver, 1991 ). However, marketers must also beware of treating eastern European and the Third World countries as a dumping ground for obsolete products. On the other hand, products sold in developing countries must strive for a balance between technical sophistication and affordability (Quelch et al., 1991).

Cultural orientation Cultural orientation, which determines whether a culture is traditional or modern in its outlook, is a factor that can have a major impact on consumption patterns. Most cultures fall into neither extreme but vary on the traditional-modern dimension. Marketers need to be aware that both in eastern Europe and in the Third World there is a segment of consumers that believes in an austere lifestyle and therefore does not share Western consumption values. For this segment, modern conveniences like automobiles, washing machines, blenders, etc. are not necessities but a sign of moral weakness. In eastern Europe, this segment mostly comprises lower-class peasants and less-educated consumers who are relatively unsophisticated by Western standards (Peterson, 1990). In other developing countries, this segment might also include older consumers whose strict religious and moral upbringing might have caused a negative predisposition toward modern conveniences. As a result, this segment is often a challenge for marketers and requires the use of very persuasive techniques to overcome strongly entrenched beliefs and values. On the positive side, the younger and more affluent consumers in most developing countries are positively predisposed toward modern inventions. Differences among countries are also worthy of note. For instance, among the east European countries, eastern German, Hungarian and Czechoslovakian consumers are relatively more sophisticated and Westernized in their consumption patterns (Peterson, 1990).

Social class Another variable that can be used to analyze consumption patterns in developing countries is social class. One study in the Mexican market found that socio-economic variables, particularly social class, had a greater impact on consumer innovativeness than personality, attitude factors or communication variables (Medina and Michaels, 1991). The distribution of social classes in developing countries is often different from that in Western countries. Contrasted with the diamond-shaped (due to the middle class being the largest group) distribution of social classes in Western countries, most developing countries tend to have a triangular distribution. A very M. Aslam Javed, Roll # AB-523810 Page 15

small upper class is followed by a somewhat larger middle class and a very large lower class. For example, in describing the class distribution in Saudi Arabia, one expert described it as resembling a needle stuck in a pancake (Kaikati, 1979). Since the lower classes represent such a large proportion of the population in developing countries, products that appeal to all social classes generally present the greatest opportunity to marketers. This includes necessities such as cosmetics, soap and toothpaste, as well as nonessentials such as toys, which often need very little adaptation for most markets. The middle class in developing countries, as in most other countries, is characterized by a conformity to tradition. This segment presents a major opportunity for Western companies if they can appeal to traditional values and lifestyles. For instance, Indian middle-class consumers appreciate products like grinders, blenders and other food preparation aids which allow more easy preparation of traditional Indian foods. Product adaptation provides one avenue for Western marketers to appeal to these traditional values and lifestyles, and it might be beneficial to seek the cooperation of local manufacturers for this purpose.

Western marketing can be acceptable While the middle class is generally very traditional, the upper and upper-middle classes in developing countries are usually more Westernized in their values and consumption patterns. The demand for durable goods such as refrigerators, televisions, video recorders and hot water heaters is especially high in developing countries ( The Economist, 1989) since these products are considered to be status symbols (Bourne, 1957) by these classes. The upper class is the one that is portrayed most often in advertisements and commercials for upscale fashions and consumer goods (e.g. blue jeans) in developing countries. The trickledown process, although present, is slow owing to the very traditional values of the middle class, which is usually content just observing the nontraditional consumption patterns of the upper class. For example, although Western attire is considered perfectly acceptable for upper-class girls, movie actresses, etc. in India, the use of such attire by middle-class girls is frowned on by society. In countries like Saudi Arabia and Iran, Western television programs are quite popular with the upper class, although traditional middle-class values require women to be veiled in public (Kaikati, 1979). Marketing of Western products and fashions may therefore be acceptable in many developing countries as long as it is done in a manner that is not offensive to traditional middle-class tastes and values.

Rural areas

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A third factor important to understanding consumption patterns in developing countries is the role played by the rural sector in these countries. While studies of consumption patterns typically emphasize the urban middle class, a majority of the population in developing countries resides in rural areas. For example, 76% of Indias population resides in villages (Gandhi, 1985, p. 57). One study identified two major trends in rural consumption patterns in Third World countries (Das and Rao, 1991). The first is the increased amount of income being spent on durable goods as opposed to buying land. The second trend is toward buying goods manufactured in urban centers in contrast to buying goods locally made within the villages. These trends have opened up a tremendous market for goods such as tractors, agricultural implements, radios, televisions, etc. in rural areas. The study of the evolution of rural markets is therefore likely to present significant opportunities for marketers in these countries.

Disposal Product disposal is a critically important area for most developing countries. Since consumers in these countries generally cannot afford to discard used durable goods, resale value is an important consideration in product purchase. Hence, products should be designed for maximum resale value whenever possible. Products which are reliable and have low repair frequency are also ideally suited to developing countries since consumers cannot afford to spend considerable sums on repair and maintenance. As noted earlier, providing adequate repair services and replacement parts could therefore be an essential component of marketing in these countries.

Recycling Another important aspect of product disposal is recycling. Environmental awareness is often lacking in eastern European and Third World countries. In eastern Europe environmental awareness is slowly emerging as an issue as demonstrated by the recent introduction of recyclable and returnable plastic bottles by Pepsi in Hungary ( Wall Street Journal, 1993). Unfortunately, many developing countries have not yet evolved efficient systems to recycle materials like plastics, glass and metal. In India, there are no formal government-mandated recycling programs, although small-scale recycling is facilitated by brokers and door-to-door merchants, who buy items like newspapers and bottles and resell them to consumers or factories. In countries like Ghana, truck and automobile parts have been known to be recycled as mill shafts for grinding corn and as components in lathes used for making nuts and bolts. This type of recycling could be very important for fostering local industries in developing countries. Durable goods in Western countries which are somewhat dated, but in good usable condition, can also be recycled in developing countries. For instance, used medical equipment can be M. Aslam Javed, Roll # AB-523810 Page 17

repaired and resold in countries like Brazil, China and Egypt which have great need for such equipment ( The Courier-Journal, 1994).

Remanufacturing Another option ideally suited to developing countries is remanufacturing, which is defined as a means of production which systematically restores existing equipment to like-new condition (Walle, 1988). Remanufacturing goes beyond making ad hoc repairs and the essential steps comprise disassembling a product, having each part precision tested, restoring defective or weak parts to original specifications or replacing them, and reassembling the parts to meet or sometimes exceed original specifications. Among the many benefits of remanufacturing are lower capital investments, improved cashflows, use of semi-skilled labor and energy conservation, which are all desirable goals for developing countries. Western companies can help developing countries by using the strategy of remanufacturing not only to extend the life of durable goods, but also to make them more affordable. Companies also have a social responsibility to make products which, on disposal, will not harm the environment or health in developing countries. In sharp contrast, companies have sometimes been known to save money by shipping their toxic wastes to Third World countries for disposal. Social responsibility also extends to materials that are byproducts of the manufacture and consumption of the goods. An extreme example of this is the situation Union Carbide faced in the early 1980s with the Bhopal tragedy in India. Safe disposal of byproducts is especially important for developing countries, which often lack stringent policies and controls for hazardous waste disposal as well as the resources needed to handle emergencies like the Bhopal tragedy. The low education level of consumers in these countries often makes them unaware of the dangers inherent in the improper disposal of chemicals, plastics, and other hazardous wastes. Western companies can therefore play an important role in educating consumers in developing countries on the proper methods of disposal of hazardous wastes.

Disposal issues When the definition of disposal is extended to include the byproducts and wastes of product consumption, it becomes apparent that almost all the environmental pollution problem is a disposal issue. It is therefore not surprising that developing countries are becoming increasingly sensitive to this issue. For example, a number of Third World countries are now switching to unleaded gasoline and requiring automobiles to meet stringent antipollution guidelines ( Business Week, 1994a). It is this authors observation that disposal is one of the most neglected areas, particularly in Third World countries. Ironically, even developed countries which once believed in the concept of a throw-away culture are now changing their priorities.

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Conclusions and recommendations The practical application of consumer behavior findings in international markets has often posed a problem for marketers for two reasons. First, most consumer research in international markets has used a piecemeal approach. Second, there has been no comprehensive framework to integrate the findings in a meaningful manner. The A-B-C-D paradigm proposed in this article is an attempt at providing a comprehensive framework that will enable marketers to understand, integrate and apply consumer behavior findings in global markets. The systematic and hierarchical examination of the four stages of the paradigm access, buying behavior, consumption characteristics, and disposal is a process that is universally applicable to any country or culture and yet is simple enough for practitioners to understand and apply. In this article the paradigm has been applied to the countries of eastern Europe and the Third World because of their growing significance for the marketer. Several practical recommendations resulting from this application are summarized in the following list for easy review:

Summary of practical recommendations

Access: o Examine income distribution patterns and affordability of product/ service within a culture. o Exercise caution in evaluating the buying power of developing countries. Standard economic indexes may be misleading since they do not consider international variations in prices. o Reposition products to appeal to all income classes whenever possible. o Redesign products to make them more affordable, such as making cheaper versions of products, and repackaging products in smaller sizes. o Enhance after-sale repair and maintenance services to increase the life of durable goods. Designate authorized repair centers with trained personnel and monitor spare part inventories. o Be proactive in using countertrade and develop specific policies in regard to countertrade with developing countries. o Use megamarketing to counter direct/indirect trade barriers and gain access to markets in developing countries. o Examine the distribution system within a country and use innovative ways, e.g. direct marketing, to overcome distribution problems and gain access to consumers. o Examine the possibilities of improving the infrastructure of developing countries, e.g. setting up a water treatment plant, and offer that as an incentive in trade negotiations to gain access to international markets. Buying behavior: Page 19

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o o

Examine country of origin perceptions in developing countries and emphasize it in marketing strategy only if perceptions are positive. Examine your brand equity and use Western brand names and graphics if perceptions are positive. However, use local language to provide information on packages. Do not overly rely on a positive price-quality relationship, especially for prestige products. The price-quality relationship may not be strong in developing countries. Use other means to emphasize quality and make effective use of word-of-mouth communication.

Meaningful, objective information

Provide meaningful, objective information to enhance brand loyalty and reduce the perceived risk of your brand. Examine any obstacles to consumer access to information, e.g. the bureaucratic structure or illiteracy, and devise methods to overcome these obstacles. Use terms such as new and improved with caution since these may not be effective in developing countries. Location and manner of salespeople are important factors in store choice in developing countries. Train local distributors on ways to improve customer service to enhance store loyalty. Allocate resources and devise methods to combat the negative attitudes and skepticism regarding marketing and consumerism that are generally prevalent in developing countries. Provide effective means to handle consumer complaints and improve consumer satisfaction. Deeper psychological variables and social norms could have a significant impact on consumer behavior in developing countries. Use them effectively in marketing strategy whenever possible. Note cultural similarities in consumer behavior which might allow standardization of marketing strategies across countries.

Product versus service consumption

Consumption characteristics : o Examine product versus service consumption and its implications. o Consider the modern versus traditional orientation of a culture and its impact on consumption as well as adoption of new products. o Social class has a tremendous influence on consumption patterns in developing countries. Study the impact of social class and consider adapting your products to fit the more traditional middle-class values and life styles. Page 20

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Educate consumers about consumption/use of nontraditional and unfamiliar products. o Examine the consumption behavior of the rural sector in developing countries and the opportunities it represents for marketing. Disposal: o Consider durability and resale value in the design of products since consumers cannot afford to discard used durable goods. o Design products and packaging to enable recycling. Provide mechanisms/systems to recycle products more effectively. o Consider the strategy of remanufacturing products to make them durable and less expensive. o Make sure products and byproducts of manufacturing and consumption will not harm consumers health or the environment. Also, consider the impact of longterm use of your products on health and environment. o Educate consumers about proper disposal methods if your product poses any threat to health or environment. o Make your organization socially responsible.

While much of the discussion in this article has noted the many similarities four stages of the paradigm, it might also be worthwhile to note some essential differences between these two groups of countries. First, the eastern bloc countries have, until the present time, shared the same form of socialistic political and economic system. From this perspective they are a more homogeneous group than the Third World countries. Marketers might therefore be able to use similar marketing strategies in many, if not all, of the east European countries. This is not likely to be the case with the Third World countries. However, is must be noted that it is possible to capitalize on the similarities among the Third World countries also. Several researchers have suggested the possibility of clustering countries which would allow the standardization of marketing strategies across groups of countries ( Jain, 1989; Sood, 1993).

One big market A second major difference is the close geographic proximity of the eastern bloc countries in relation to one another as well as to western Europe. The western countries therefore have a vested interest in facilitating the conversion of eastern Europe from a socialist to a capitalistic economy, which would have major ramifications for the future economic development of eastern Europe. While the Third World countries may not have this type of economic support from the West, most of them also will not have to invest the time and resources that the eastern European nations have had to expend to convert their economic systems. On the other hand, the problems of population and poverty are not as acute in eastern Europe as in the Third World. The geographic proximity of the eastern bloc countries to one another also enables marketers to consider them as one big market, which is not feasible with the Third World

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countries. The third and most important difference between eastern Europe and the Third World is in the degree of sophistication of the consumers. Eastern European consumers are generally familiar with Western products and share many Western attitudes and values related to purchase and consumption. As a result, these consumers are, by and large, positively predisposed toward buying Western products and services. The conversion to a capitalistic system and economic growth in eastern Europe will also further ensure a good demand for Western goods in the future. On the other hand, Western companies may have to work much harder to sell their goods in Third World countries because of the diversity of values and attitudes present in these countries. While this article has suggested many generalizations in regard to consumer behavior in developing countries, in the final analysis every country is unique. Generalizations about consumer behavior across countries should be made with caution based on the significant features of each country ( Olshavsky et al., 1988). Hopefully, the A-B-C-D paradigm has provided a simple framework not only to analyzing consumer behavior within a particular country, but also to examining the similarities and differences in consumer behavior across countries.

Article Type: Research paper Keyword(s): Consumer behaviour; Developing countries; Eastern Europe; Marketing; Third World. Content Indicators: Research Implication - * Practice Implication - * Originality - * Readability -*
Journal of Consumer Marketing Volume 12 Number 5 1995 pp. 37-56

Figure 1 . The A-B-C-D paradigm

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