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Chapter 9 Reference Groups and Word-of-Mouth LEARNING OBJECTIVES After reading, studying and analyzing this chapter, students should be able to understand: 9.1 The credibility of reference groups and their influence on consumer behavior. 9.2 The persuasive power and credibility of spokespersons, endorsers, celebrities, salespersons, vendors, and media. 9.3 The dynamics and measurement of opinion leadership and word-of-mouth. 9.4 The strategic applications, advantages, and potential perils of word-of-mouth. 9.5 The process for diffusion of innovations, and adopter categories as distinct market segments. CHAPTER SUMMARY Learning Objective 9.1: To understand the credibility of reference groups and their influence on consumer behavior. Within any setting, including consumer behavior, people are strongly influenced by how others think and behave. Reference groups are groups that serve as sources of comparison, influence, and norms for people's opinions, values, and behaviors. Word-of-mouth consists of communications where satisfied customers tell other people how much they like a business, product, service, or event, although word-of-mouth can also be negative. The perceived honesty, objectivity, expertise, and trustworthiness of reference groups make them highly credible sources. Consumers perceive people whom they know personally as more credible than paid-for promotional messages. People learn norms and values mostly from families and peers. They also imitate and adopt the values and habits of persons whom they respect or admire. The groups to which people belong, as well as groups that they aspire to join, influence their norms and behaviors. Consumption-related groups also influence consumers’ attitudes and behavior. Sociocultural groups that determine people’s behavior, norms, morals, and consumption patterns include family, social class, culture, subculture, and (for global consumers) cross-culture. Learning Objective 9.2: To understand the persuasive power and credibility of spokespersons, endorsers, celebrities, salespersons, vendors, and media. The perceived credibility of spokespersons, endorsers, and other sources that companies use in their advertising is the key to the ads’ effectiveness. The spokesperson can be an actual customer, a company employee, a celebrity, or a model. Companies also convey their credibility through solid past performance, good reputation, high product quality, and good service. Their perceived credibility is also a function of the image and reputation of the retailers that carry their offerings and the media where they advertise. Marketers employ celebrities for product testimonials and endorsements, as well as spokespersons and actors in commercials. Over time, consumers disassociate messages from their sources; they tend to remember only the message contents, but not the message sources. Therefore, marketers must regularly repeat messages that feature high-credibility spokespersons to maintain the messages’ persuasiveness. Learning Objective 9.3: To understand the dynamics and measurement of opinion leadership and word-of-mouth. Opinion leadership is the process by which one person—the opinion leader—informally influences others, who might be either opinion seekers or recipients. This influence occurs between two or more people, neither of whom represents a commercial seller nor would gain directly from providing advice or information. Opinion leaders who have expertise in a given product category provide advice and influence the consumption of others within the same category. They also follow any new products introduced closely, and are the first to buy new products. They tend to be self-confident, outgoing, and sociable. Several research methods are aimed at identifying opinion leaders. Learning Objective 9.4: To understand the strategic applications, advantages, and potential perils of word-of-mouth. Electronic word-of-mouth takes place online and occurs in social networks, brand communities, blogs, chat rooms, and tweets. Marketers hire buzz agents and initiate viral marketing to stimulate word-of-mouth in cyberspace. Buzz agents are consumers who promote products clandestinely and generally receive free product samples but not monetary payments. Viral marketing is a marketing technique that uses pre-existing social networks and other technologies to produce increases in brand awareness or to achieve other marketing objectives through encouraging individuals to pass along online email messages or other content. It is impossible to control word-of-mouth communications. Negative comments, frequently in the form of untrue rumors, can sweep through the marketplace and undermine a product. The Internet is a prolific ground for spreading negative rumors because disgruntled consumers can reach millions of people easily and exaggerate (or even lie about) their negative experiences with products and services. Learning Objective 9.5: To understand the process for diffusion of innovations, and adopter categories as distinct market segments. Over time, positive word-of-mouth leads to the widespread adoption of products. However, not all consumers adopt new products or new versions of existing products simultaneously. Sociologists who studied the how innovations are adopted within societies identified five categories of adopters: innovators, early adopters, early majority, late majority, and laggards. The concept of adopter categories is a classification scheme that depicts where consumers stand in relation to other consumers in terms of the first time they purchase an innovation (e.g., a new product). Each category represents a distinct market segment, so marketers must study each group to target it effectively. CHAPTER OUTLINE Introduction 1.Reference groups are groups that serve as sources of comparison, influence and norms for peoples’ opinion, values and behaviors. a.People are strongly influenced by what others think and how they behave. b.The most important reference group is the family because it provides children with the skills, knowledge, attitudes, and experiences necessary to function as consumers, a process called consumer socialization. *****Use Key Term reference group Here; Use Figures #9.1 and #9.2 Here ***** Source Credibility and Reference Groups 1.Reference groups, particularly informal ones, have a high degree of source credibility, defined as a source’s persuasive impact, stemming from its perceived expertise, trustworthiness, and believability. 2.When the source of communications about a product is well respected and highly thought of by the intended audience, the message is much more likely to be believed. a.A formal source is either a person or medium providing consumption-related information and hired and paid by an organization. b.An informal source is a person whom the message receiver knows personally, such as a parent or friend who gives product information or advice, or an individual met and respected online. 3.Source credibility: A source’s persuasive impact, stemming from its perceived expertise, trustworthiness, and believability. *****Use Key Terms source credibility, formal source, informal source Here; Use Review and Discussion Question #9.7 Here***** 4.Reference groups are groups that serve as frames of reference for individuals in their consumption decisions because they are perceived as credible sources a.Reference groups influencing broadly defined values or behavior are called normative reference groups. b.Reference groups serving as benchmarks for specific or narrowly defined attitudes or behavior are called comparative reference groups. c.A group to which a person either belongs or would qualify for membership is called a membership group. d.There are groups in which an individual is not likely to receive membership, despite acting like a member by adopting the group’s values, attitudes, and behavior. This is called a symbolic group. *****Use Key Learning terms reference groups, normative reference groups, comparative reference group, membership group, and symbolic group Here*; Use Review and Discussion Questions #9.2 and #9.3 Here **** 5.The consumption-related groups that influence consumers’ attitudes and behavior include friendship groups, shopping groups, virtual communities, and advocacy groups. a.Friends fulfill a wide range of needs: They provide companionship, security, and opportunities to discuss problems that an individual may be reluctant to discuss with family members. i.They may be a credible source of information about purchases. ii.People may shop together just to enjoy shopping or to reduce their perceived risk; that is, they may bring someone along whose expertise regarding a particular product category will reduce their chances of making incorrect purchases. iii.Referral programs are an important element of shopping groups. iv.Another example of a shopping group is the shared experience of waiting in line. Retail experts say that by standing in a crowd, shoppers see themselves as making the right buying decision—a concept known as “social proof.” v.Many websites encourage consumers to leave comments and have others respond to them. vi.Most young adults have extensive “buddy lists” and regularly communicate with people whom they have met online but never in person. vii.The fact that people can share their interests, hobbies, and opinions with thousands of peers online has benefited marketers. b.There are two types of advocacy groups: entities organized to correct a specific consumer abuse and then disband, and groups whose purpose is to address broader, more pervasive problem areas and operate over an extended period of time. c.The degree of influence that a reference group exerts on an individual’s behavior depends on the individual, product, and social factors. d.These factors include conformity, the group’s power and expertise, the individual’s experience and personality, and the conspicuousness of the product. e.To influence its members, a reference group must: i.Inform or make members aware that the brand or product exists. ii.Provide the individual with the opportunity to compare his or her own thinking with the attitudes and behavior of the group. iii.Influence the individual to adopt attitudes and behavior that are consistent with the group’s norms. iv.Legitimize the member’s decision to use the same products as other members. *****Use Table #9.2 Here ***** 6.Different reference groups may influence the beliefs, attitudes, and behaviors of individuals at different times or under different circumstances. 7.Consumers who are primarily concerned with approval from others usually adopt the same products and brands as those group members who have status. a.When consumers are preoccupied with the power that a person or group can exert over them, they often adopt products that conform to the norms of that person or group in order to be complimented on their choices. b.Unlike reference groups that are not power based, “power groups” may bring about behaviors, but not changes in attitudes. *****Use Table #9.3 Here ***** 8.People who are compliant, have a tendency to conform and a high need for affiliation, need to be liked by others, and are other-directed are more receptive to group influences. 9.Competitive people who desire to control other people and events and are inner-directed are less likely to look for guidance from reference groups. Credibility of Spokespersons, Endorsers and Other Formal Sources 1.Source credibility is the believability of the endorser, spokesperson, or individual in an advertisement. a.A spokesperson can be an actual customer, a company employee, a celebrity, or a model. b.Researchers have identified the following dimensions in measuring the credibility of a person or organization: expertise, trustworthiness, attractiveness, and likability. *****Use Key Term source credibility Here; Use Learning Objective #9.2 Here ***** 2.Consumers recognize that the intentions of commercial sources (e.g., manufacturers, service companies, financial institutions, retailers) are clearly profit and view them as less credible than informal reference groups. a.Companies can convey their credibility through solid past performance, good reputation, product quality, and good service. b.Their perceived credibility is also a function of the image and attractiveness of their spokespersons, the reputation of the retailers that carry their offerings, and the media where they advertise. c.Marketers also use institutional advertising, which consists of promoting a company’s image without referring to any of its specific offerings. *****Use Key Term institutional advertising Here ***** d.The greater the fit between the celebrity and the product endorsed, the higher the persuasiveness of the message. e.Endorsers whose demographic characteristics (e.g., age and ethnicity) are similar to those of the target audiences are viewed as more credible and persuasive than those whose characteristics are not. i.Although consumers may like an ad featuring a famous endorser, they will buy the product advertised only if they trust the marketer as well. ii.Marketers who use celebrities in testimonials or endorsements must ensure that the message contents are congruent with spokespersons’ qualifications. iii.Marketers must ensure that there is a synergy among the celebrity’s trustworthiness, expertise, physical attractiveness, and the product or brand endorsed. iv.They must also take into account the celebrity’s number of prior endorsements, because consumers perceive celebrities who appear in commercials too often as less credible than celebs with lesser commercial exposure. f.Celebrities, particularly movie stars, TV personalities, popular entertainers, and sports icons, are a symbolic reference group because they are liked, admired, and often have a high degree of perceived credibility. g.Credibility is the most important thing the celebrity offers – the audience’s perception of both the celebrity’s expertise (how much the celebrity knows about the product area) and trustworthiness (how honest the celebrity is about what he or she says about the product). h.Marketers employ celebrities in promotion in the following ways: i.Celebrity testimonial—Based on personal usage, the celebrity attests to the product’s quality. ii.Celebrity endorsement—Celebrities appear on behalf of products, with which they may or may not have direct experience or familiarity, for extended periods. iii.Celebrity actor—The celebrity plays a part in a commercial for the product. iv.Celebrity spokesperson—The celebrity represents the brand or company over an extended period. *****Use Key Term celebrity Here; Use Figure #9.6 Here; Use Review and Discussion Question #9.8 Here; Use Hands-on Assignment #9.11 Here***** 3.Salespeople who engender confidence and who give the impression of honesty and integrity are most persuasive. a.A salesperson who “looks you in the eye” often is perceived as more honest than one who evades direct eye contact. b.For many products, a sales representative who dresses well and drives an expensive, late-model car may have more credibility than one without such outward signs of success. c.For other products, a salesperson may achieve more credibility by dressing in the role of an expert. 4.The reputation of the retailer who sells the product has a major influence on message credibility. a.Products sold by well-known, quality stores carry the added endorsement (and implicit guarantee) of the store itself. b.The consumer’s previous experience with the product or vendor has a major impact on the credibility of the message. 5.Fulfilled product expectations increase the credibility accorded to future messages by the same advertiser; unfulfilled product claims or disappointing product experiences reduce the credibility of future messages. 6.The reputation of the medium that carries the advertisement also enhances the credibility of the message. a.Most consumers believe that a respectable medium would only advertise products that it “knows” to be of good quality. b.Because specialization in an area implies knowledge and expertise, consumers regard advertising they see in special-interest magazines and websites as more credible than ads in general-interest sources. 7.One’s disassociation of the message from its source over time, and remembering only the message content but not its source, is called the sleeper effect. 8.The theory of differential decay suggests that the memory of a negative cue (e.g., a low credibility source) simply decays faster than the message itself, leaving behind the primary message content. *****Use Key Terms sleeper effect, differential decay Here; Use Review and Discussion Question #9.9 Here ***** Word-of-Mouth and Opinion Leadership 1.Opinion leadership, defined as the process by which one person—the opinion leader—informally influences others, who might be either opinion seekers or recipients, occurs between two or more people, neither of whom is or represents a commercial seller or would gain directly from providing advice or information. a)The information that opinion leaders transmit includes advice on selecting the best brands, using the products correctly, where to buy the products, and other aspects. b)Opinion leaders are especially important in recommending service providers with whom they have had personal relationships, such as doctors, lawyers, hairdressers, garage mechanics, restaurants, or travel companies, because small service businesses have very limited advertising resources, and the main way they can get new customers is via recommendations by existing clients. c)Opinion leadership is category specific; that is, opinion leaders often specialize in certain product categories about which they offer information and advice. d)The motivations of opinion leaders and receivers are shown in Table 9.4 *****Use Key Term opinion leadership Here; Use Table 9.4; Use Review and Discussion Question #9.1 Here***** 2. Characteristics of opinion leaders include: a)Opinion leaders are highly knowledgeable regarding a particular product category, follow new products that come into the markets, and are often consumer innovators in their area of expertise. b)Opinion leaders are self-confident, outgoing, and sociable. c)Opinion leaders read special-interest publications and regularly visit websites devoted to the specific topic or product category in which they specialize. They have specialized knowledge that enables them to make effective recommendations to relatives, friends, and neighbors. d)Usually, opinion leaders and receivers belong to the same socioeconomic and age groups. 3. Consumer researchers can measure the degree of opinion leadership and its impact on consumption behavior by using one of the following methods: a)The self-designating method employs a self-administered questionnaire that requires respondents to evaluate the extent to which they have provided others with information about a product category or specific brand or have otherwise influenced the purchase decisions of others. b)The sociometric method measures the person-to-person communications about a product or brand among members of a community where most people know each other by name (e.g., a college dormitory or sorority). Respondents are asked to identify: i.The specific individuals (if any) to whom they provided advice or information about the product or brand under study. ii.The specific individuals (if any) who provided them with advice or information about the same product or brand. c.Researchers can also study opinion leadership by using a key informant, that is, a person who is keenly knowledgeable about the nature of social communications among members of a specific group. d.Klout scores measure people’s degree of influence online. *****Use Key Terms key informant, sociometric method, self-designating method, Klout scores Here; Use Table 9.6 Here; Use Review and Discussion Question #9.5 Here ***** Strategic Applications of Word-of-Mouth 1.In marketing, word-of-mouth consists of transmitting advice and other types of information about products, brands, and shopping experiences. 2.Word-of-mouth taking place online is called e-wom and occurs in social networks, brand communities, blogs, chat rooms, and tweets. *****Use Key Term e-wom Here; Use Learning Objective #9.4 Here ***** 3.Online, social networks are virtual communities where people share information about themselves with others, generally with similar interests, with whom they have established relationships that, for the most part, exist only in cyberspace. The major social networks are Facebook, YouTube, Twitter, and MySpace. 4.Three dimensions factor into consumers’ engagement in e-wom: a.Tie strength—the degree of intimacy and frequency of contacts between the information seeker and the source. b.Similarity among the group’s members in terms of demographics and lifestyles. c.Source credibility—the information seeker’s perceptions of the source’s expertise. 5.Negative reviews of hedonic (i.e., products used mainly for pleasure) products were considered less useful/attributed to the reviewer; negative reviews for utilitarian products were attributed to the product. 6.Involved consumers transfer and receive more rational product information than information appealing to emotions. 7.A brand community is a specialized, nongeographically bound community formed on the basis of attachment to a product or brand. 8.A blog is a discussion or informational site published on the Internet and consists of discrete entries (“posts”). 9.A microblog has less content than the traditional blog and allow users to exchange small elements of content, such as short sentences, individual images, and video links, mostly via Twitter. *****Use Key Term social networks, brand community, blog, Twitter Here; Use Learning Objective #9.4 Here; Use Review and Discussion Question #9.6 Here ***** 10.Marketers long ago realized the power of word-of-mouth communications between consumers, which is almost always more effective than promotional messages paid for by advertisers, and they often encourage it in ads. 11.Viral marketing (viral advertising) is a marketing technique that uses pre-existing social networks and other technologies to produce increases in brand awareness or to achieve other marketing objectives through encouraging individuals to pass along messages. a.Investigation of the motivations for passing along emails found that people were receptive only to emails from people they knew. The kind of emails they received included jokes, virus alerts, inspirational stories, requests to vote on certain issues, video clips, and links to other websites. b.The main reasons for not forwarding emails were outdated, dull, and inappropriate contents. About one-third of the forwarded emails included personalized notes from the forwarders, and most of the senders did not alter the emails’ original subject lines. c.The key reasons for forwarding emails were enjoyment (e.g., fun, entertaining, exciting) and helping others (i.e., let others know that the senders care about them). 12.Many firms enlist typical consumers to serve as their buzz agents—consumers who promote products clandestinely and generally receive free product samples but not monetary payments. 13.Consumers share negative experiences with others much more readily than positive ones. Consumers attend to negative information because it is less common than positive information and to protect themselves. 14.Online media made it easier for consumers to spread negative word-of-mouth. a.One study discovered that some consumers who posted unfavorable information wanted to vent negative feelings or warn others. b.Others sought exposure, self-enhancement, social benefits, and even economic rewards. Diffusion of Innovations: Segmenting by Adopter Categories 1.The concept of adopter categories is a classification that depicts where consumers stand in relation to other consumers in terms of the first time they purchase an innovation (e.g., a new product or model). 2.Sociologically, the model assumes that all members of a given society would, eventually, adopt the innovation. 3.The number of people belonging to each category was calculated in a manner resembling a statistical normal distribution: innovators— the first 2.5% to adopt; early adopters—the next 13.5%; early majority—the next 34%; late majority—the following 34%; and the laggards—the last 15%. ***** Use Learning Objective #9.5 Here; Use Review and Discussion Question #9.4 Here ***** 4.The innovators are the earliest consumers to buy new products. a.They are prepared to take the risk that the product will not work well, become unavailable, or be quickly replaced by an improved model (i.e., they are broad categorizers). b.They are often willing to pay somewhat higher prices for newly introduced products, because they enjoy being the first to own gadgets and show them off. 5.The early adopters are consumers who buy new products within a relatively short period following introduction, but not as early as the innovators. a.They are venturesome, likely to engage in word-of-mouth. b.They are likely to assist others who are considering adopting the new products. 6.The early majority consists of consumers who buy innovations after the early adopters have done so. a.This segment is larger than the preceding two groups combined. b.Risk aversion is defined as the reluctance to take risks and low tolerance of ambiguous situations. *****Use Key Terms innovators, early adopters, early majority Here; Use Table #9.8 Here ***** 7.Members of the late majority are risk averse and slow to adopt innovation. They wait until most other consumers have adopted the new product before buying it. 8.The laggards are the very last consumers to adopt innovations. 9.Marketers often “write off” non-adopters, but not all non-adopters are the same, and understanding nonusers is important. *****Use Key Terms late majority, laggards Here ***** Instructor Manual for Consumer Behaviour Leon G. Schiffman, Leslie Lozor Konuk, S. Ramesh Kumar 9789332555099, 9780134734828
