Consumer Behaviour - Reference Groups PDF

Introduction In consumer behavior terms, reference groups serve as sources of comparison, influence, and norms for consumers' opinions, values, and behaviors. Where do reference groups get their power and influence? From each of us, because consumers within any setting are strongly influenced by wha...

Introduction In consumer behavior terms, reference groups serve as sources of comparison, influence, and norms for consumers' opinions, values, and behaviors. Where do reference groups get their power and influence? From each of us, because consumers within any setting are strongly influenced by what people think and how they behave. FigureB.1.1 The most important reference group is the family because it provides children with the skills, knowledge, attitudes, and experiences necessary to function in society and as consumers, a process ca lled consumer socialization. This KFC ad shows how families act as reference groups to create a strong impact on consumer choice. Reference groups achieve their power through word of mouth (WOM). Marketers strive to prompt the spread of positive WOM whereby satisfied customers share their stories about how much they like a business, product, service, or event. Because true WOM (different from influencer marketing which is paid) comes from sources who have nothing to gain by promoting brands' products and services, it is seen as the "best advertising." It is viewed this way because reference groups spreading WOM have a high degree of credibility stemming from their perceived expertise, trustworthiness, and believability. When the source of communications about a product is well respected by the intended audience, their messages are likely to be well received. Figure 8.1.2 WOM and reference groups (e.g., friends, neighbors) strongly influence consumer behavior. In this chapter, we'll discuss the different types of reference groups and how marketers can use those reference groups and word of mouth to drive consumer behavior. Section 1: Reference Groups There are three types of reference groups that we'l l study as part of this chapter: Membership groups Aspirational groups Dissociative groups Membership Groups A membership group is a group that you belong to, like a school club. There are both primary and secondary membership groups. Figure 8. 1.1 Not surprisingly, members are close to other members of their primary reference: they have frequent interactions, they often share their thoughts and feelings, and the opinions of other members within the primary reference group truly matter to their members. Examples of primary reference groups include families, sports teams, and roommates. As discussed, members of primary reference groups have rea l influence over each other, especially on how members think about consumer products, Marketers often appeal to the strength of primary reference groups in advertising. Take a look at this Miller Light advertisement. The ad shows the strength and influence close friends can have on each others' purchase decisions. In contrast to primary reference groups, secondary reference groups are those with which consumers have less frequent interactions. As a result, secondary reference groups have less impact on members' purchase decisions than do primary reference groups. For many consumers, professional organizations, church congregations, large social clubs, and alumni associations are examples of secondary reference groups, It's important to note that while secondary reference groups have less power to influence their members. often they are made up of a collection of primary reference groups. Consider the following scenario: you decide to attend your five-year high school reunion. Although your class as a whole is likely now considered a secondary reference group, you attend the reunion with your close friends and former roommates who are still, in fact, your primary reference group. Those close friends and roommates still maintain a significant degree of influence over you. Aspirational Groups An aspirational group is a group t hat a consumer would like to be part of but to which she or he does not currently or may never belong. A prime example of an aspirati onal group is the professional football team you, as a high school football player, dreamed of being a part of. Often, individuals are highly influenced by aspirational membership groups, emulating their members by dressing, acting, and even t hinking t he way they believe members of the aspirational group dress, act, and think. There are two types of aspirational reference groups: Anti cipatory aspiration groups Symbolic aspiration groups Section 2: Factors Impacting Reference Group Influence The degree of influence that a reference group exerts on an individual's behavior depends on a number of factors, including the individual, the product choice at hand, and social factors. This means that the infl uence reference groups have are more profound for some consumers than others and for certai n product types. There are five factors that affect a reference group's influence over consumer purchase decisions: The group's Relwant Product Personality Conformity power and information conspicuousness chefacterlstics t xpertise and expertise l CONSUMER'S PURCHASE DECISION Figure 8.2. 1 Conformity In consumer behavior terms, conformity can be defined as one acting in a way that is similar to those around him or her in order to gain acceptance. For many marketers - especially those who work at market-leading companies - the marketer's role is to instill a desire for conformity into their customers. Why? Because brands that are market leaders tend to be widely used. Marketers wish to conti nue to drive purchase by reinforcing that consumers should conti nue to make the same purchase decisions as their reference groups, which likely use the market leaders' products and services. Just how do marketers use reference groups to drive conformity among consumers? First, they have to make members aware that the brand or product exists, if members are unaware. Members may be unaware of a brand's products and services, especially if that brand is not the market leader. Next, the marketer's goal is to incentivize thought leaders within a reference group to choose the company's product (s) or service(s). Then, others in the group will compare their own products to that of the thought leader, often feeling pressure or "influence" by the thought leader to adopt product(s), attitudes, and behaviors that are consistent with those of the thought leader. The thought leader then will take action to legitimize the members' decisions to use the same products as other members, often offering praise or recogn ition in group settings. Consumer conformity is a very real phenomenon that has been studied extensively. In fact, Harvard Business Review (HBR) conducted a st udy in collaborati on with a lar ge European automaker whose customers had the opportunity to "build their own car" by choosing among fourt een different categories of car features ranging from lighting to interior decor to seating. HBR studied 149 consumers who designed their optimal car and then asked a friend on social media for feedback before finalizing the order. HBR also studied 684 customers who designed their optimal car but did not pursue any feedback. The customers who got feedback tended to modify their config urati ons in order to conform to the feedback they received, leading to less distinctive designs by the consumers who solicited and received feedback. Many consumers have a natural instinct to conform; marketers need to recognize i-f their consumers have that instinct and determine how best to market their products and services to them accordingly. Group's Power and Experti se Different reference groups may influence the beli efs, attitudes, and behaviors of individuals at different tim es or under different circumstances. For example, the dress habits of a young staff member working for a conservative law firm may vary, depending on her place and role. She conforms to the dress code of her office by wearing conservative clot hing from Ann TaY.lor, but may wear more trendy, revea ling clothing from Alice and Olivia in her free time. Compare the two brands through the two advertisements below: While some reference groups require their members to adopt their attitudes and beliefs in additi on to changing behavior, others do not. Consider you're a more traditional religious group - typically, more traditional religious groups require their members to adopt their attitudes and beliefs and to change their behavior to comply with group norms. Relevant Information and Expertise Individuals who have firsthand experience with a product or service, or who can easily obtain detailed information about it, are less likely to be infl uenced by the advice or example of others. In contrast, people who have little experience with an item are more likely to seek out the advice of reference groups. For instance, when a young corporate sales rep wants to impress his client, he may take her to a restaurant that he has visited before and liked or one that has been highly recommended by a restaurant guide. If he has neither personal experience nor informati on, he may seek the advice of a friend or imitate the behavior of a more senior sales rep, a m ember of his reference group, by taking the cl ient to a restaurant that is frequented by executives whom he views as role models. Using the power of online review engines and consumer testimonials, marketers have the power to harness the expertise and opinions of experienced consumers. These experienced consumers also become part of a consumer's reference group. By encouraging consumers to write reviews and clearly posting t hose reviews in channels consumers are using during the information search phase, marketers can leverage the power of reference groups to drive favor among consumers and, ult imately, drive purchase. Figure 8. 2.2 Product Conspicuousness The degree of influence that a reference group has on a purchase decision varies based on product conspicuousness. A conspicuous product is one that is consumed or used in public, so it is noticed by others. It's the new sneakers your friends make a point of showing off or the latest gadget you see your friends using. The more conspicuous the product, the more likely that a reference group will influence the purchase of the product. Products that are privately consumed are, by nature, less conspicuous and therefore, reference groups have limited infl uence into this type of decisions. For example, a person's reference group will have strong influence on whether or not he or she gets a tattoo or piercing, as well as on the type of piercing or the design of a tattoo, because both are very conspicuous. But, a reference group will have limited influence on the brand of toothpaste you decide to use because toothpaste is unlikely to be used in public. Personality Characteristics Personality is also one of the most critica l drivers of the degree of a reference group's influence on its members. People who are compliant have a high need for affiliation, and those who are dogmatic tend to be highly receptive to reference group infl uences. Those who are inner-directed or those who are innovators tend to be far less receptive to reference group influences, and, often times, t hey themselves are the reference group leaders. Section 3: Word of Mouth and Opinion Leadership Formally, the communications pertaining to consumer behavior between peers are part of a process called "opinion leadership." Opinion leadership is defined as the process by which an influencer, or an opinion leader, infl uences his or her peers, who are often referred to as opinion receivers. Traditionally, this process happened between two or more people who were not compensated by brands or products being discussed. From the opinion receiver's perspective, opinion leaders were t ru ly unbiased, thus making their opinions on products and services extremely valuable. In addition, because opinion leaders often base their product comments on firsthand experience, their advice reduces the opinion receivers' perceived risk and anxiety in the course of buying new products. While opinion leadership has evolved over time to include influencers and infl uencer marketing (where the infl uencer is often connected to the brand or product being discussed), opinion leaders remain one of the most trusted and valued sources of product information by consumers. Generally speaking, opinion leaders tend to be infl uencers in specific product categories where they have the knowledge and experience to provide cred ible advice through word of mouth, or WOM. Opinion leadership and infl uencer marketing is rapidly becoming a critica l tactic for marketers across a variety of industries. An X {formerly known as Twitter) post or an lnstagram post from an influencer can generate significantly more buzz than messaging from a company's owned social media channels. With 130 million TikTok followers, Charli D'Amelio became the most followed person on TikTok. The 17-year-old built her following through her videos of dance choreography, but since that time, she has become a key influencer for a number of brands - notably teen banking service Stefl. In 2020, Step raised its $SOM Series B with Charli herself also acti ng as an investor who also promoted the product and spoke about financia l literacy on her TikTok and lnstagram accounts. It's important to note that opinion leaders can also be opinion seekers. When other product categories are discussed, however, opinion leaders often take on the role of opinion seekers. For example, one of your fellow students may be an opinion leader on the topic of great resta urants, so you might approach him to figure out where to take your friend out for his birthday; when it comes to any other topic (e.g., shopping for sneakers), though, he may be an opinion seeker, taking advice from others on the next pair of sneakers he should purchase. Why does opinion leadership and influencer marketing work? Because of the concept of social proof. Social proof is the concept that we, as humans, are naturally inclined to take the same actions as others. According to Robert Cialdini, support for an idea begets support, therefore turning the perception of a small group into reality for the masses. Social proof is particularly impactful when considering ideas where we don't consider ourselves the expert and where we feel unfamiliar with a situati on. Cialdini proved his theory in a study focused on charitable donations. His findings indicated that showing people a list of their neighbors who had donated to a charity led to a substantial increase in funds raised. This is because, the more names people saw on the list, the more they perceived donating to be the right and safe choice, so the more they did so. Social proof may not always drive the intended outcome, however. Cialdini also points to drug and alcohol consumption campaigns which are intended to reduce consumpti on that often have the opposite effect simply because they cite high rates of usage of the substances. The audience sees the high usage statistics cited as social proof that "everyone is doing it" so even though the campaign's intention is to reduce engagement with these substances, they can have the opposite effect. As marketers, we should consider if we should be marketing our products as "better, cheaper, faster" or simply highlighti ng social proof to convince consumers to try. Characteristics of Opinion Leaders Just who are opinion leaders or influencers? Can marketers isolate their distinctive characteristics in a scientific and replicable way? Marketers were asking these questions long before opinion leadership morphed into influencer marketing because if they cou ld identify a systematic way to find effective influencers for their products, they would have hit the holy grail of marketing. Though there's no systematic way to identify influencers who are guaranteed to drive awareness and considerati on for your products, studies indicate that opinion leaders do share the fol lowing characteristics: They have large follower-bases consisting of a particu lar target customer whose purchase decisions they tend to influence. They are highly knowledgeable about a particular product category, actively follow product innovation in that category, and are early adopters in their areas of expertise or interest. They are self-confident, outgoing, and sociable, ready to discuss products and consumption behaviors with others. They are avid readers of special-interest publications, and they regularly peruse websites devoted to the specific topic or product categories in their areas of expertise or interest. Section 4: Leveraging Word of Mouth and Opinion Leadership An opinion leader or influencer review of a movie, book, product, university, professor, employer (or really almost anything) can be the driving force behind the perception of th at "product" since reviews about almost any topic can be quickly and easily posted on line and viewed by thousands of people. In addition, there are always new forums that allow people to compile, post, and sort through online r eviews where opinion leaders are shari ng vivid consumption experiences in visual and verbal ways. Savvy marketers should ta ke advantage of these forums to ensure they are working with infl uencers to post across these channels, leveraging opinion leadership and WOM to drive positive brand awareness, consideration, and purchase. Three of these tactics that we will focus on are: Social networks User-generated content Consumer testimonials So cial Networks (Note: For historical accuracy, the social media company Xis called Twitter below as that is what the company was called when the following events occurred. X posts are a/so called tweets or retweets for historical accuracy.) For many of us, it's likely that social networks are our primary communication vehicles with friends and family - the main communication channel t hat you use to share information about yourself and connect with the world, including brands. Social networks enable brands to leverage word of mouth and opinion leadersh ip for two primary reasons: Consumers prefer how quick and easy it is to consume content via the visual structure of social networks. Think about it: on social media, we have a tendency to quickly scroll through content without having to click through or read anything, but we feel like we are connecti ng wit h friends, family, and companies nonetheless. The real power of social media for marketers is that the visual nature pushes us to share recommendations even when we don't intend to. For example, even if I am just taking a photo of my new sneakers, my post is actually a brand and product endorsement that I am sharing across my social network. Social networks' expansive reach truly drives global word of mout h due to the massive network of users across social media. According to eMarketer, in 2021 there were 1.074 billion active monthly users on lnstagram who spent an average of 30 minutes a day on the platform. Just by being active on lnstagram, brands can engage with consumers who might like or repost their images, achieving more cost-efficient scale than is available through any other medium. Below are a few examples of companies that have successfully used social networks to drive word of mouth and opinion leadersh ip. Oreo's #oreoscoJ!e on Twitter With a clever play on the 2021 horoscope craze, Oreo analyzed fan's tweets and shared a personalized "Oreoscope": observati ons about the fans' personalities and how they rel ate to Oreo products. This personalized content gave fans a unique opportunity to repost the content Oreo delivered, relishing in the opportunity to share something unique about themselves. Get!Y. Museum Challeng!l on Twitter, lnstagram, and Facebook During the pandemic. the Getty Museum asked users to rep licate their favorite artwork with items around their house. Starbucks Starbucks didn't grow to its current size through traditional advertising; it favored word of mouth. To this day, Starbucks has invested significant resources into growing its social media presence and encouraging customer comments and suggestions to drive word of mouth. Take a look at a simple unpaid post of Starbucks' Dragon Drink: it received 1 K+ likes within 1 day of being posted. That's the simplicity of word-of-mouth marketing on social media. Chipotle In 2013, Chipotle released The Scarecrow. a film t hat features a mournful scarecrow with a burlap face touring a dull, listless city built on "unnatural" foods like a "100% Beef-ish" product and chickens injected with fluid that makes them bloated. What was Chipotle's intenti on with the video and the game that followed? To share its message that fresh, locally sourced food, the point of differentiation that Chipotle has built its brand on, can help to build a better world. The Scarecrow has been praised as innovative marketing because it was a word-of-mouth masterpiece driving millions of views and an endless strea m of comments. User-Generated Content Encourag ing the creation and sharing of user-generated content (UGC) is another strong way to encourage word of mouth and opinion leadership. UGC is content that customers create about the brands or products that they use. UGC appears trustworthy and honest simply because it is created by customers t hemselves. In fact, 86% of millennials indicate that UGC is a good indicator of a brand's quality and service. Through the use of hashtags that aggregate and help consumers identify UGC, incentives that compel consumers to create and share on social media. and a sense of community that highlights UGC, brands can work with consumers to drive word of mouth through authentic user-generated content. Similar to t he Getty campaign described above. Sephora's Beauty Insider Community website is a great example of how the brand leverages UGC to drive engagement and positive word of mouth. It combines a Reddit-li ke forum and a review system to create a holistic community where users can even chat with each other about beauty and Sephora products. Consumer Testimonials Consumers overwhelmingly trust testimonials over company-generated marketing because testimonials, though sometimes sponsored by the company itself, are still a form of word of mouth. Testimonials help to reassure consumers of a brand's value proposition. and that ultimate ly makes your target customer more comfortable with purchasing your product or service. Written or video testimonials can be hosted on a company's webs ite. shared across any number of aggregator websites like Yelp, TripAdvisor or Expedia, or featured in marketing materials like paid search ads. Here are a few great examples of companies who are using testimonials across these channels: Codeacademy Codecademy Stories shares the inspiring testimonials of program alumni who have changed their lives through the programs and services offered by Codeacademy. The Codeacademy Stories website is beautifully and simply designed, and when users click into any story they can watch a video or read the story as a Q&A. Slack Slack takes a different approach. nesting their customer testimonials on their Rroduct r;iages. The company uses these testimonials to highlight how customers are using specific product features, enabling happy customers to share their enthusiasm for the brand's unique features. Visitors can even c lick on each testimonial to learn more about the specifics of that customer's experience through a case study. ~~slack Figure 8.4.2 Source: Slack HubSpot HubSpot's testimonials not only feature testimonials from a variety of happy customers, they highlight one critical detail: the software the customer used previously. Just why do they do this? Because switching software is a huge, often grueling undertaking and it takes time, energy, and effort- as potential consumers engage with these testimonials. they'll see that ot hers have successfully made the switch and that it resulted in a positive experience with HubSpot. Conclusion Across the globe, businesses of all sizes rely on word of mouth, opinion leadership, and reference groups to drive awareness, considerati on, and ultimately sales of their products. A great product is simply table stakes - enabling consumers to share their positive opinions about your products is likely the most cost-efficient and effective form of marketing you'll fi nd, simply because consumers find it trustworthy. In his book, "Word of Mouth Marketing;' WOM expert Andy Sernovitz explains how marketers use word of mouth, opinion leadership, and reference groups. Sernovitz says, "Happy customers are your best advertisers. If people like you and like what you do, they will tell their friends." He provides real insight behind why consumers may spread word of mouth that students and marketers alike can learn from. The three reasons Sernovitz cites are: Consumers feel a connection to your brand or company, respect your mission, and truly want to support you by sharing the brand with their friends. They feel inspired to share the great products with their friends and family. What does this mean for marketers? Simply that we have a responsibil ity to build great products and features that inspire customers. Socially conscious brands like TOMS Shoes do this well. People thrive on the feeling that they, themselves, are tru ly influencers - it makes them feel important. It also makes them feel good when they can help friends and family solve problems. As marketers, we then have an obligation to create programs and platforms where we can appeal to a customer's desire to share their opinions. Talking about a company and helping that company build their brand makes customers feel like they are part of a team, family, or community. Think about avid sports fans whose knowledge and engagement in the sport makes them part of the team. That sense of community can be created through swag, events, and discussion groups. If we, as marketers, combine the knowledge of why consrumers may become opinion leaders with the how - how we can leverage word of mouth, reference groups, and opinion leadership - we can create effective, consumer- driven marketing tactics to drive brand awareness, consideration, and purchase.