BB Chapter Thirteen : Household Structure And Consumption Behavior

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Chapter Thirteen

Household structure andconsumption behaviour

Chapter 13Household structure andconsumption behaviour

1. Nature of Australian households2. Stages in the household life cycle3. Households also undertake purchase-

related decision making

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related decision making4. The link between household and consumer

socialisation5. Trends relating to household consumption

Household types

• Household designates a variety of distinct social groups

• Family household

– Two or more related persons, who live and eat in private residential accommodation

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in private residential accommodation• Non-family household

– Householders who either live alone or with others to whom they are not related

Changes in household structure(the average size of household and family units)

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The Household Life CycleThe Household Life Cycle

�Most households follow much more complex and varied cycles today. Therefore, researchers have developed several models of the household lifecycle (HLC)household lifecycle (HLC) .

�Each HLC stage presents unique needs and wants as

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�Each HLC stage presents unique needs and wants as well as financial conditions and experiences.

��HLCHLC provides marketers with relatively homogeneous household segments that share similar needs with respect to household-related problems and purchases.

Household lifecycle

• Young (under 35)– Single I– Young married– Full nest I– Single parent I

• Older (over 64)– Single III– Empty nest II

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• Middle-aged (35–64)– Single II– Delayed full nest II– Full nest II– Single parent II– Empty nest I

Stages in the household lifecycle(shows stages with children at home)

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Young single stage

• Two subgroups– Living at home– Independent

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Household Life CycleHousehold Life Cycle

Young (18-34) unmarried individuals. In 2003, there were roughly 66.5 million people in this age group, with 69% of men and

Single I

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age group, with 69% of men and 60% of women being single.

Single ISingle I is basically the unmarried members of the younger Gen X and older Gen Y.

Great market for activities such as going to to bars, movies, and concerts.

Young married: no children stage

• High level of disposable income• Often DINKs

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Decision to marry or live together brings about a new HLC stage.

Most in this group have dual incomes and are relatively affluent.

Young Couples: No Children

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and are relatively affluent.

Spend heavily on theater tickets, expensive clothes, luxury vacations, restaurant meals, and alcoholic beverages.

Can afford nice cars, stylish apartments, and high-quality home appliances.

Full nest I: young married with children stage

• One partner stops working

• About 61% keep dual income

• Discretionary funds

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• Discretionary funds are redirected to baby needs


Full Nest I: Young Married with Children

The addition of the first child creates many changes in lifestyle and consumption.

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This stage yields new purchases of baby clothes, furniture, food, and health care products.


Income and expenditure change from childless to young child.Full Nest I: Young Married with Children (cont.)

10

20

30

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-50

-40

-30

-20

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0

Income Food atHome

Meals Out AlcoholicBeaverages

AdultApparel

Health Care Pets & Toys Education PersonalCare

Products

Percent Change

Single parent I: young solo parent stage

• One in three marriages end in divorce

• A higher proportion of divorced males remarry

• Quite often a defacto relationship

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• Quite often a defacto relationship prior to remarriage

• Latest statistics


Birth or adoption by singles is increasingly common. Roughly 1/3 of children are born to unmarried mothers.*

Single Parent I: Young Single Parents

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mothers.*

Divorce also continues to be a significant part of American society.

This type of family situation creates many unique needs in the areas of child care, easy-to-prepare foods, and recreation.

*As many as 40% may actually be born to cohabiting unmarried parents.

Middle-aged single II stage

• Small group of the population• High disposable income• Short on time• Travel often

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The middlemiddle--aged singleaged single category (age 35 to 64) include never married and divorced with no child-rearing responsibilities.

!

Middle-Aged Single

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The middlemiddle--aged singlesaged singles have higher incomes than young young singlessingles.

Often live in nice condos, frequent expensive restaurants, own luxury cars, travel often, and are a major market for gifts.

Delayed full nest I: older married with young children stage

• Many have delayed having children until their thirties

• They have a high income and have acquired more capital and possessions

• They outspend all groups on childcare, mortgage

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• They outspend all groups on childcare, mortgage repayments, home and garden maintenance, and household furnishings

• High non-child spending e.g. food, alcohol, entertainment and savings


Many baby boomersbaby boomers delayed having children until their mid-30s, resulting in a large number in this stage.

Major difference between this segment and the younger new parents is incomeincome.

Delayed Full Nest I: Older Married with Young Children

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parents is incomeincome.

Spend heavily on child care, mortgage payments, home maintenance, lawn care, and household furnishings.

Want only the best for their child and willingwilling and ableable to pay for it.

Full nest II: middle-aged married, with children at home stage

• Older children• Heavy consumer of

lessons and clothing• Need larger homes• Some advertisers try to

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• Some advertisers try to attract the attention of teenagers of these households


A major difference between this group and delayed Full Nest IFull Nest I is the age of the children.

Full Nest II: Middle-Aged Married with Children at Home

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the children.

Children are generally over age 6 and are becoming more independent, creating new consumption needs.

Families with children age six + are the primary consumers of lessons of all types, dental care, soft drinks, presweetened cereals, and a wide variety of snacks.

Single parent II: middle-aged single with children at home stage

• Financially burdened group

• Older children take on significant household responsibilities

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responsibilities• Typically female

(5 times male number)


This group often faces serious financial pressures. The single parent often lacks some or all of the financial, emotional, and time support that the presence of a spouse generally provides.

Single Parent II: Middle-Aged Single with Children at Home

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This group is inclined to use time-saving alternatives such as ready-to-eat food, and eat at fast-food restaurants.

Empty nest I: middle-aged married with no children at home stage

• Typically dual income

• Time poor, cash rich• Spend on dining out,

holidays, services

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holidays, services


Typically dual income and busy.

Empty Nest I:Middle-Aged Married with No Children

Includes married couples whose children have left home, couples who chose to not have children, and second marriage households in which children are not living with the parent.

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Typically dual income and busy.

Spend on dining out, expensive vacations, second homes, luxury cards, time-saving services.

Prime market for financial services and upscale children’s products

About $35 billion/yr. spent on grandchildren by baby boomers!.

Older single III stage

• Typically female• Growing segment as

baby boomers age• Requirements for

services, assistance

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services, assistance with financial decision making, and seek security


There are more than 15 million older singlesolder singles in the U.S., and this group is growing rapidly.

Older Single

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Roughly 3/4 of all older singlesolder singlesare female and roughly 2/3 of all older singlesolder singles live alone.

Being older, single, and generally retired, this group has unique needs for housing, socialization, travel and recreation.

Empty nest II: older married couple stage

• Either still working or fully retired

• Financial situation in decline

• Unique needs for

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• Unique needs for health care, housing, food and recreation


There are about 10 million households in this segment, and it is expected to grow rapidly over the next 10 years as the Baby Boomers age.

Empty Nest II: Older Married Couples

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Boomers age.

Most couples in the over-64 age group are either fully or partially retired.

The younger members are healthy, active, and often financially well-off.

They have ample time and are a big market for RVs, cruises, and second homes. They also spend a lot of money on grandchildren.

Household life cycle and social class

• A useful segmentation is household lifecycle and social class

• People from different social classes have similar problems but seek

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have similar problems but seek varying solutions

Marketing Strategy Based on the Marketing Strategy Based on the Household Life CycleHousehold Life Cycle

��HLCHLC can be an important segmentationsegmentation variable .

�The purchase and consumption of many products are driven by the HLC, with each stage posing unique

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driven by the HLC, with each stage posing unique problems and opportunities.

�The stage in the HLC causes many of the problems or opportunities individuals confront as they mature, but it does not provide solutions.

Marketing Strategy Based on the Marketing Strategy Based on the Household Life CycleHousehold Life Cycle

�Factors such as income, occupation, and education heavily influence how an individual meets his/her needs.

�So, it makes sense to combine stage in the HLC with one of these variables to aid in market segmentation and

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one of these variables to aid in market segmentation and strategy formulation.

Household life cycle/social stratification matrix

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Household Decision MakingHousehold Decision Making

�Family Purchase Roles

�Determinants of Family Purchase Roles

�Conflict Resolution

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�Conflict Resolution

�Marketing Strategy and Family Decision Making

�Consumer Socialization and Marketing to Children

Family Decision MakingFamily Decision Making

Family decision makingFamily decision making is the process by which decisions that directly or indirectly involve two or more family members are made.

Family purchases are often compared to organizational buyingorganizational buying

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Family purchases are often compared to organizational buyingorganizational buyingdecisions. However, with family purchasing, there is usually less explicit criteria, and most family purchases directly affect the other members of the family.

Most important, many family purchases are inherently emotional and affect the relationships between the family members.

Household decision making

Five distinct roles:1. Information gatherer2. Influencer

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3. Decision maker4. Purchaser5. User

Targeting communications at ‘influencers’ and ‘information gatherers’

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The Nature of Family Purchase Roles

�Marketers must determine who in the family plays which role before they can affect the family decision process.

�Family decision making has been categorized as

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�Family decision making has been categorized as

��husbandhusband--dominantdominant

��wifewife--dominantdominant

��jointjoint , or

��individualizedindividualized


The Nature of Family Purchase Roles (cont.)

�Studies of family decisions have focused on direct influence and ignored indirect influence

�Different family members often become involved at

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�Different family members often become involved at different stages of the decision process.

�In addition, family decisions also allow different members to make specific subdecisions of the overall decision.


Determinants of Family Purchase Roles

�How families interact in a purchase decision is largely dependent on the

��cultureculture and subculturesubculture in which the family exists

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��cultureculture and subculturesubculture in which the family exists

�the role specializationrole specialization of different family members

�the degree of involvementinvolvement each has in the product area of concern, and

�their personal characteristicspersonal characteristics of the family members

Determinants of household purchases

• Different members at different stages• Different attributes are considered by each

member• Involvement is often removed

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– E.g. clothes for children, BBQ for dad• Who is doing the ‘purchasing’

– Product category– Likely conflicts– Resolution etc.

Family-member influence at various stages of the decision-making

process

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Conflict resolution

Approaches used to resolve purchase conflicts:

1. Bargaining2. Impression management3. Use of authority

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3. Use of authority4. Reasoning5. Playing on emotions6. Additional information


Conflict Resolution (cont.)One study revealed six basic approaches that individuals use to resolve purchase conflicts1.

Approach Description

Bargaining Trying to reach a compromise.

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Bargaining Trying to reach a compromise.

Impressions Management

Misrepresenting the facts in order to win.

Use of Authority Claiming superior expertise or role appropriateness (the husband/wife should make such decisions).

Reasoning Using logical argument to win.

Playing on Emotion

Using the silent treatment or withdrawing from the discussion.

Additional Information

Getting additional data or a third-party opinion.

1C. Kim and H. Lee, “A taxonomy of Couples Based on Influence Strategies,” Journal of Business Research, June 1996, pp. 157-68.


Conclusions on Family Decision Making

1. Different family members are often involved at different stages of the decision process.

2. Different family members often evaluate different

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2. Different family members often evaluate different attributes of a product or brand.

3. The direct involvement of family members in each stage of the decision process represents only a small part of the picture.


Conclusions on Family Decision Making (cont.)

4. Participants at each stage of the decision process and the method by which conflicts are resolved are primarily a function of the product category and

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primarily a function of the product category and secondarily a function of the characteristics of the individual family members and the family as a whole.

5. Overt conflicts in decision making are less common than agreement.

Marketing Strategy and Family Decision MakingMarketing Strategy and Family Decision Making

Effective marketing strategy requires a thorough understanding of the family decision-making process.

Marketers can use a family decision making grid to detail each members influence at each stage of the process.

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each members influence at each stage of the process.

Managerial framework for evaluating the household decision-making process

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Targeting parents in an ad

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Consumer socialisation

• Young people acquiring skills, knowledge and attitudes relevant to their functioning as consumers in the marketplace

• Consumer socialisation and advertising

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• Consumer socialisation and advertising– Advertising standards

• Role of the household in socialisation

Consumer SocializationConsumer Socialization

�The family provides the basic framework in which consumer socialization occurs.

��Consumer socializationConsumer socialization is the process by which young people acquire skills, knowledge, and attitudes relevant to their functioning as consumers in the marketplace.

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to their functioning as consumers in the marketplace.

�Must understand both the content and the process of consumer socializationconsumer socialization.

��Consumer socializationConsumer socialization content refers to what children learn with respect to consumption.

��Consumer socializationConsumer socialization process refers to how they learn it.


Piaget’s Stages of Cognitive Development

Stage Description

Stage 1 The period of sensorimotor intelligence (0-2 yrs.)- behavior is primarily motor- the child does not yet “think” conceptually, though

cognitive development is seen

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Stage 2 The period of preoperational thoughts (3-7 yrs.)- Characterized by the development of language and

rapid conceptual development

Stage 3 The period of concrete operations (8-11 yrs.)- the child develops the ability to apply logical

thought to concrete problems

Stage 4 The period of formed operations (12-15 yrs.)- the child’s cognitive structures reach their greatest

level of development, and the child becomes ableto apply logic to all classes of problems.


Consist of three categories:

1.1. ConsumerConsumer skillsskills —are those capabilities necessary for purchases to occur such as understanding money, budgeting, product evaluation, etc.

The Content of Consumer Socialization

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budgeting, product evaluation, etc.

2.2. ConsumptionConsumption--related preferencesrelated preferences —are the knowledge, attitudes, and values that cause people to attach differential evaluations to products, brands, and retail outlets.

3.3. ConsumptionConsumption--relatedrelated attitudesattitudes —are cognitive and affective orientations toward marketplace stimuli such as advertisements, salespeople, warranties, etc.


Consumer socializationConsumer socialization occurs primarily through family, as well as through a number of avenues including advertising and friends.

Parents socialize their children through the following:

The Process of Consumer Socialization

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1.1. Instrumental trainingInstrumental training —occurs when a parent or sibling specifically and directly attempts to bring about certain responses through reasoning or reinforcement.

2.2. ModelingModeling —occurs when a child learns appropriate, or inappropriate, consumption behaviors by observing others.

3.3. MediationMediation —occurs when a parent alters a child’s initial interpretation of, or response to, a marketing or other stimulus.


Stage I: Stage I: ObservingObserving

Stage II: Stage II: Making RequestsMaking Requests

The Supermarket as a Classroom

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Stage II: Stage II: Making RequestsMaking Requests

Stage III: Stage III: Making SelectionsMaking Selections

Stage IV: Stage IV: Making Assisted PurchasesMaking Assisted Purchases

Stage V: Stage V: Making Independent PurchasesMaking Independent Purchases

Marketing to ChildrenMarketing to Children

�Children are a very large market. Spending by children aged 5 – 14 is estimated at $35 billion, and they influence about $220 billion of their parents’ purchases!

�However, marketing to children is fraught with ethical concerns, including:

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concerns, including:

�The limited ability of younger children to process information and to make informed purchase decisions.

�Marketing activities, particularly advertising, can produce undesirable values in children, resulting in inappropriate diets, and cause unhealthy levels of family conflict.

Household trends over the next 25 years

• Single households to double • Average household size down*

– 2.6 (1996)– 2.2 (2021)

• Families without children more than ‘with children’ by 2016*

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by 2016*• One-parent families up by 30% to 66%*

* Reference ABS: 3236.0 - Household and Family Projections, Australia, 2001 to 2026

The importance of the family pet: ownership in 1998

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Pets are regarded as family members

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Computers and Internet use in households

• Large number of household have Internet access

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• Opinion of being ‘online’ and video games is now more favourably accepted by experts

Households and the purchase of services

• High use of services • Food

– Eating-out more frequent

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– Fast food frequently purchased

Implications

• As marketers you will need to consider: – Will these trends continue?

– What will be the ramifications for the product/service market under your

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product/service market under your management?

– When is the ‘household’ the decision-maker … as opposed to ‘individuals’

Summary

• Household is the basic consuming unit• Family households pass on cultural and social class values

and behaviour patterns• Family household - 2 or more related persons living together• Non-family households - 2 or more unrelated persons

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• HLC is classified into stages - relatively predictable• HLC variables - age, marital status (household head)

presence of children• Household decision making - who buys,who decides, and

who uses products purchased and used by and for the household

Summary (cont.)• Marketing managers must take into account each

household decision process for each product category

• Role specialisation• Trends—services, role of pets, etc.• Consumer socialisation—how children become

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• Consumer socialisation—how children become socialised, learn how to be consumers– Purchasing skills, e.g. shopping, budgeting– Indirect skills, e.g. symbols of quality, prestige– Families assist by teaching, providing role

models, etc.

BB Chapter Thirteen : Household Structure And Consumption Behavior

Business

Transcript of BB Chapter Thirteen : Household Structure And Consumption Behavior