Advice Networks And Consumption Decisions Essay

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Economic consumption can be defined broadly  as the utilization of economic  goods to satisfy needs or  desires.  It is the  branch  of social  science that deals with the production, distribution, and consumption of goods and their management. Consumers  have   used   advice   networks  in  all stages of their individual  and household economic consumption, and  advice  networks have  sought to enable, encourage, engage, or exemplify consumption  decisions.   Advice   networks  can range  from  formal,  such as financial  planners,  to informal, such as community and family networks. Policy  makers   and   marketers  are   increasingly aware  of  the  influence  of  advice  networks, the networks’  capacity  to  advocate  behavior  change, and the relationship with personal  utility/ satisfaction.

Almost all consumption involves both a personal and a social aspect. Even if people think of consumption mainly,  or  even solely, in individual terms, consumers  can seek advice on consumption matters  or can even be inadvertently influenced by advice  networks on  their  consumption decisions. Reliance  on  advice  networks can  depend  on  the urgency of the need being served. For example, if a person is starving  and receives food, the value and satisfaction involved  are primarily  individual  and not   related   to   hunger   in  the   rest   of  society. Similarly, the value of shelter as protection against the   wind   or   cold  is  largely   independent  of  a person’s  neighbor’s  situation; that  is,  a  person’s exposure  to  cold  is not  affected  by  whether  the neighbor  is freezing  to  a greater  or  lesser extent. Fundamental needs  are  of  this  nature, and  they involve an independent, or absolute,  degree of satisfaction. Economists  refer to these as nonpositional goods. However,  consumption with a strong or relative  social orientation or consumption that is beyond  the basic survival needs can be different and  can  be referred  to as the  need  for positional goods.  Consumption of  positional goods  can  be highly    influenced    by    advice    networks.   An ever-increasing   proportion of  growth  in  wealthy societies  is devoted  to  goods  and  services with  a strong  positional aspect.  Status,  social differentiation,  and  conspicuous   consumption have  been  a part  of the discourse  on economic growth.

The majority of interventions available to advice networks include information, education, and incentives, aimed  at affecting  individual  or household consumer  choices.  However,  networks can still feature  arms-length approaches to behavior change, such as leading by example and community action, which affects the social contexts in which individuals make choices. Dominant political,  social,  and  economic  forces  and  structures  influence the context  of decision  making,  as do  technology  and  innovation. The  development of the  Internet  saw  widespread growth  of online networks   and   social   networks   that    changed the paradigm of consumption decision  making  to be more instant,  less tangible, and ubiquitous. The Internet, also known  as the World  Wide Web, is a global  computer network providing  a  variety  of information and communication facilities, consisting of interconnected networks using standardized communication protocols. The  Internet  facilitates networking between individuals  around the world, allowing virtually instant access to exponential consumer   issues.  One  of  the  paradoxes of  consumer choice, however, is that the more choice consumers  have, the more decision-making paralysis grows,  and  consequently, consumers  may seek more advice on their consumption decisions.

Practitioners  and   academics   have   speculated that   as  consumer   decisions   move   to   different modus  operandi, such as online, the cognitive and social  context  of decision  making  will change  in ways  that  will then  need  to  be  investigated. For example, at the individual  cognitive level, the increasing     availability     of    extensive,    easily retrievable,  and easily stored  databases relevant  to product/service purchases  may  lower  the  cost  of information search for the typical online consumer, perhaps  decreasing  the  proportion of  consumers who  engage  in what  some  researchers  consider  a suboptimal degree of search. However, the sociocultural, not the cognitive, aspects of Internet participation have  prompted the  most  discussion and interest in the media and have significant implications for consumer behavior online. For example,  if Internet  peers or connections are more influential   in  major   and   minor   decisions   than friends, coworkers, or even family, then consumers need to be more cognizant  of the risks of trusting advice from a virtual  community. Online  communities do not have an ongoing commitment to computer-mediated social  relations  and  may  feel no sense of responsibility for the consequences  or accuracy  of their advice. Participants in discussion groups  are usually anonymous, physically  distant, and not involved in the ongoing exchanges that characterize many social relations in the face-to-face world.

Marketers have long known  the critical  role of interpersonal  ties   in   a   variety   of  phenomena studied,  such  as word-of-mouth, reference  group influence, group decision making, and opinion leadership/diffusion of innovations. If interactive, computer-mediated discussion  groups  represent  a new  technical   and  perhaps   cultural   context   for social   relations,   the   study   of   community  on the Internet, and its influence on the content,  patterns, and structure of interchange, is vitally important for consumer-researchers to understand. Face-to-face  communities include,  minimally, social   actors,   social   ties,  and   communications among   the  actors,   channeled   by  the  pattern of ties     among     them.     Each     of     these,     and their  interrelations, can  be viewed in the  context of consumption-related communications in computer-mediated groups. The nature  of communication is one aspect  of consumer  behavior   in  discussion   groups,   but   it  is  created   by individuals  and channeled  by their social ties.

Most  models of behavior  change  that  focus on individual  cognitive processes and decisions vastly underestimate the impact  of social contexts.  There is  a  tendency  to  treat  society  as  an  externality, which may bring individuals  to a decision-making process  but  is not  as  such  a  part  of  the  mental accounting that  constitutes  that  process. However, social context  and social pressures  inevitably  play a role in consumer  behavior, having an impact  on the agency or power  of individuals.  Interventions by advice networks need to take into account  both the individual  as a decision  maker  and  the wider social context  in which that  individual  lives.

One   of  the   strongest   and   most   established ideas about  the transmission of marketplace information is the importance of interpersonal communication, whether  face-to-face or online. Traditionally, many consumers  seeking expert, unbiased  advice about  a purchase  have turned  to their circle of social ties, family members, coworkers, neighbors, and friends. The family can be a particularly dominant network for consumer advice. The family is both a primary  group (characterized by intimate, face-to-face interaction) and  a reference group  (with  members  referring  to certain family values, norms, and standards in their behavior).  These two factors,  however,  are not the sole reasons accounting for the strength of the family’s influence.  Rather,  it is, first, the fact that  the bonds within the family are likely to be much more powerful  than those in other small groups. Second, contrary to most  other  groups  to which  the  consumer belongs, the family functions  directly in the role  of ultimate  consumption. That  is, the  family operates  as an economic  unit, earning  and  spending money. In doing this, family members must establish individual and collective consumption priorities, decide on the products and brands  that fulfill  their  needs,  and  also  decide  where  these items are to be bought  and how they are to be used in furthering family members’ goals. Also, consumers attitudes toward spending and saving, and even the  brands   and  products  purchased, have  been molded, often quite indelibly, by the family’s influence on  its members  and  the  way  in which  purchase decisions are made by members  so that  they may effectively program their marketing mix.

However,   the   circle  of  close  ties  has   been extended  to online communities as well as to neighborhood  communities, particularly  if  consumers’ circle of ties may be limited and include no one with  expertise  on their  interests.  The makeup of  peer  networks also  affects  consumption decisions  differently.  People  at  the  center  of the  peer network influence  more  peers than  people  on the periphery.  Marketers have  utilized  various  forms of  network marketing, that  is, relying  on  a  network  to influence greater  consumption of a product.  In  the  area  of  new  product  marketing, the rationale of many such efforts rests on the assumption that  some customers’  adoptions and opinions have a disproportionate influence on others’ behaviors  and  that  firms are able to identify  and target  those influential  or opinion  leaders.

Seeking information from an advice network or hiring  an  expert  is an  acknowledgment that  the expected benefit of informed choice exceeds that of uninformed choice or of increasing one’s own knowledge  through time  and  effort.  Factors  that influence  either  the costs or the expected  benefits of  advice  will  affect  the  decision  to  seek  advice from   an   advice   network  or   hire   an   expert. Purchasing the services of a skilled expert also involves potential agency costs. Agents seeking to maximize their own utility may provide recommendations  that   are  not  perfectly  aligned  with those   of  their   client.  Higher   agency  costs  will reduce the expected increase in informed consumption. In terms of economic  consumption, management  of money  requires  an  increasingly  complex understanding of financial  concepts.  Rather  than investing  scarce resources  to acquire  the financial knowledge  needed  to  plan  effectively, consumers have  utilized  advice  networks to  help  make  efficient and appropriate financial decisions, including the use of paid financial advice. In this context,  the failure  to  understand the  financial  planning  process (e.g.,  determining financial  goals,  managing and  protecting resources)  may  lead  to  significant loss of welfare. However, increasing choice and complexity  also can potentially  benefit those  with sufficient information and ability by providing additional options   that  may  be  better  suited  to unique  household preferences  and  objectives. The likelihood  of seeking help outside  one’s social network tends to increase as the degree of complexity or the need for specialized knowledge  increases.

The  likelihood   of  seeking  information  from advice  networks or  experts  is also  influenced  by cultural  influences. Race and gender tend to affect help-seeking  behavior. Some historically  disadvantaged  groups  may  be  less  trusting   of  an  expert external  to their social networks. They may also be less willing  to  trust  the  advice  of an  expert  and incur higher agency costs. Many academics and practitioners working  in economics  and sociology have highlighted  the importance of good advice for consumers. Some researchers have commented that excessive consumption can have negative social effects and detrimental environmental impacts. For example,  excessive consumption can be associated with  health  problems,   and  our  unwillingness   to disrupt  routines  of both consumption and production  has  led  to  massive  injections  of  greenhouse gases into the atmosphere over time. Growing awareness  of sustainable development may lead to more  sustainable consumption.  Sustainable   consumption can  be  broadly   defined  as  the  use  of goods and services that respond  to basic needs and bring  a better  quality  of life while minimizing  the use of natural resources, toxic materials,  and emissions of waste and pollutants over the life cycle, so as  not  to  jeopardize  the  needs  of  future  generations. More  broadly, sustainability is generally conceived   as  comprising   three   dimensions:   (1) social (including  cultural  preservation and equity), (2) environmental (including  clean  air  and  water and biodiversity), and (3) economic (including household needs and industrial growth).

There  is a  growing  level of  awareness  of  the environmental costs of consumption and some broadly  adopted responses to this awareness, even in  the  context   of  a  strong   marketing  industry. Advice   networks   are   one   means   of   raising awareness   of  key  consumer   issues.  Increasing global   connectedness   may   also   be  assisting   in giving  new  meaning   to  longer-range  consumer issues such as environmental management.

Advice networks may assist consumers  to make better  informed  consumption decisions,  including abstaining from consumption. For example, reducing  consumption and voluntary simplicity are methods  for ending the destructive  cycle of sacrificing more leisure time for higher wages to consume more. Commonality of values is important for such an advice network to function  effectively. Furthermore, the idea that relationships have greater agency than  individual  actors  also finds resonance in work  on transformative politics,  transformative activism, and social movement  scholarship.

One  challenge  faced  by  advice  networks and many  other  agencies  is in  assessing  the  need  of consumers  for  consumer  information and  advice services. A needs  assessment  is required  as a key element in the effective planning  and development of services in each network to encourage  networks to consider  suitable  solutions  to meet the needs of people in their communities. Advice networks may form organically, that is, as an iterative response to a common  issue. Or networks may be established as part  of a reference group  for consumers,  whose presumed   perspectives   or  values  are  used  as  a guide for behavior  in a specific situation. There are different  types  of reference  groups  depending  on the  strength   of  the  social  tie.  Primary  reference groups   typically  involve  lots  of  interaction  and strong  ties  wielding  considerable influence,  with secondary  reference groups  having less interaction and influence. In spite of the commodifying  effects of modern  market  systems,  there  are  indications that  some consumers  are showing  greater  concern for the provenance of the products they consume. Some  of  the   informational  benefits   recognized from consulting advice networks include providing solutions, metaknowledge, problem  reformulation, validation, and legitimation.

Bibliography:

  1. De Botton, Alain. Status Anxiety. New York: Penguin Books, 2004.
  2. Diani, Mario. “The Concept  of Social Movements.” Sociological Review,  40/1 (1992).
  3. DiMaggio, Paul and Hugh “Socially Embedded Consumer Transactions: For What  Kinds of Purchases Do People Most  Often  Use Networks?” American Sociological Review,  v.63/5 (1998).
  4. Little, Jo, Brian Ilbery, and David Watts. “Gender, Consumption and the Relocalisation of Food: A Research Agenda.” Sociologia Ruralis, v.49/3 (2009).
  5. McCracken, Grant. “Culture and Consumption: A Theoretical Account of the Structure  and Movement of the Cultural Meaning  of Consumer Goods.” Journal of Consumer Research, v.13/1 (1986).

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