Cross-Cultural Consumer Behaviour - A comparison between Germany and the U.S.

  CROSS-CULTURAL CONSUMER BEHAVIOR  I

Table of Contents

  Page  

  Introduction  1

1  The Concept of Culture  2

1.1  Definition of Culture  2

1.2  The Cultural Iceberg  2

2  Value Systems  3

2.1  Hofstede and his Concept of Distinguishing National Cultures  3

2.2  The Rokeach List of Values (LOV)  4

3  Applications of Values to Consumer Behavior  5

3.1  German Core Values  5

3.2  American Core Values  6

3.3  The Dynamics of Culture  8

4  Lifestyle Segmentation Across Cultures  8

4.1  Models of Market Segmentation  8

4.2  The Sinus Milieus  9

4.2.1  Social milieus  11

4.2.2  Hedonistic milieus  12

4.2.3  Mainstream milieus  13

4.2.4  Traditional milieus  13

5  Trends Mistakes  14

5.1  Trends  15

5.1.1  Hot Segments  15

5.1.2  Between Luxury and No-Marketing  15

5.1.3  Entertainment and the Place of Purchase  17

5.2  Marketing Mistakes a Failure to Understand Differences  17

  Closure  18

  List of Figures  II

  References  20

Appendix A   

CROSS-CULTURAL CONSUMER BEHAVIOR

Introduction

The study of consumer behavior is about much more than just people buying things. It is about the study of ‘why’ people buy things, about their needs and desires. Possessions influence the way people feel about themselves and on the other hand, people’s culture, lifestyle and social settings influence their purchasing decisions. “Culture is the lens through which people view products” (Solomon, 1999, p.495). Today, almost all major companies are marketing their products beyond their original homeland borders. The question is generally not whether to market a brand in other countries but rather how to do it (Schiffmann, 2003). The field of consumer behavior is young and dynamic. In order to understand why people buy certain products or services, marketers must understand the differences between the consumers of different cultures – „cross-cultural“ differences. Especially in times of globalization and internationalization it is very important to develop effective marketing strategies for foreign markets, to define consumption motives, goals and desires. Communication and advertising messages should then be adapted accordingly to the specific values of particular cultures. Sensitivity towards these cultural differences can provide sales- and profit opportunities (Schiffmann, 2003). However this sensitivity can only come from understanding the underlying dimensions of culture. The key for success and the challenges to face for companies in any business will be to constantly watch and adapt to the changing cultural values, changing consumption patterns and lifestyles.

To write about the ”American” or “European” consumer might be challenging in some way, because the general theories about sociological or psychological influences on consumer behavior are common to all Western countries. On the other hand, the ways in which people live their consumption life can already vary greatly within one country only. Thus, one could assume that numerous larger differences exist between the citizens of different nations. “The United States is, without a doubt, the most important country to understand, yet it is the most misunderstood country in the world” (“Release of the Special Issue of the USA 2002”, 2002). Because of this, the risk of missing the American target is high. Vice versa, many Americans miss the target in operating effectively in foreign countries (Ting-Toomey, 1999).

The goal of this paper is to explain cultural diversity between the United States of America and Germany and its influence on consumer behavior. Therefore it is important to understand where cultural values are settled, how they change and finally how market segmentation helps to identify them. The first two chapters of this paper will deal with the conception of culture and refer to the empirical value researches of Geert Hofstede and Milton

^{CROSS-CULTURAL CONSUMER BEHAVIOR} Rokeach. Chapter 3 will present a broad-based concept of the German and American set of values and show how they drive consumer behavior. Because each of these values vary in importance, each provides an effective basis for segmenting consumer markets which will be the focus in Chapter 4. Here, the lifestyle studies of the research institute Sociovision will form the main part of this paper. Different lifestyle milieus will be compared and visualized. Today, many companies try to reach their target groups upon these results. The so-called sinus-milieus are a very important tool to forcast trends and identify value changes in different societies. The last chapter will focus on marketing opportunities such as ‘hot’ market segments and trends as well as on marketing mistakes as a failure of understanding differences. The market segment will mainly refer to the consumer goods industry of both countries.

1 The Concept of Culture

1.1 Definition of Culture

From a broader perspective the study of culture is the examination of the character of a total society. It includes factors such as knowledge, language, religion, food customs, art, music, technology, work patterns, products and other facts that give a society its distinct flavor (Schiffmann, 2003). Culture is learned and is shared amongst members of a certain group. It is also transferred from one generation to the next (Ting-Toomey, 1999). Culture is not stable in itself. It changes and develops and is therefore very dynamic. Because the objective of this paper is to understand the influence of culture on consumer behavior, Schiffmann’s (2003, p.408) definition of culture as “the sum total of learned beliefs, values and customs that serve to direct the consumer behavior of members of a particular society” comes closest to an effective description.

1.2 The Cultural Iceberg

Ting-Toomey (1999) explaines culture as an iceberg: Traditions, beliefs and values form the deeper layers of the iceberg which are hidden for the viewer. Only the upper layers of verbal and nonverbal symbols and cultural artifacts like fashion, trends and pop music can be recognized. To attain a deeper understanding of culture, it is important to understand the underlying set of belief and values that form peoples’ behavior and thinking.

^{CROSS-CULTURAL CONSUMER BEHAVIOR} Beliefs and values are guides for consumer behavior. They refer to the accumulated feelings and priorities that individuals have about things and possessions. There are five criteria that distinguish values from beliefs: they are (1) few in numbers, (2) serve as a guide for

Figure 1: The Cultural Iceberg (Ting-Toomey,1999, p.5)

2 Value Systems

2.1 Hofstede and his Concept of Distinguishing National Cultures

Geert Hofstede has empirically derived four value patterns that can be transferred to a diverse range of cultures. These value dimension were the first systematic empirical attempt to compare cultures on an aggregate, group level. The first and most important dimension is individualismcollectivism. The other three are power distance, uncertainty avoidance, and masculinity-feminity.

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Individualism emphasizes the importance of cultural identity. Open confrontation and active exchange of different opinions characterize individually oriented countries. Personal autonomy and individual responsibilities are promoted (Hofstede, 2001). The US and Germany can both be regarded as individualistic – as “I” countries. However the “I” – index of the United States is much higher than of Germany, meaning that the US are more individualistic than Germany.

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Power Distance distinguishes cultures to the extend of accepting unequal power distribution. Nations differ in this dimension, for example, in the way how much value the assign to a high social status, to a renowned profession, or to a high level of education (Hofstede, 2001). The US and Germany can both be regarded as small power distance cultures. They both highly emphasize equality, democracy, individual credibility and

^{CROSS-CULTURAL CONSUMER BEHAVIOR} informality. Germany however has a slightly smaller power distance index than the US. The smaller the power distance the more a country emphasizes these values.

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Uncertainty avoidance reflects the avoidance of situations where the outcome is uncertain. According to Hofstede (2001) weaker uncertainty stands for greater tolerance of innovative ideas and behavior. The US is a typical example for a weak uncertainty avoidance culture. Conflicts are regarded as natural part of productivity and career change is important. Germans in contrast tend to avoid new situations and has a much higher uncertainty avoidance index. Career stability is more important, conflicts are seen as a negative impact, clear procedures are expected and uncertainty is treated as a threat.

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Masculinity pertains to societies in which social gender roles are clearly distinct (Hofstede, 2001). Masculine cultures emphasize achievements, economic growth, business performance and life in order to work. Both Germany and the US are masculine cultures. However Germany has a slightly higher masculinity index.

Figure 2: Hofstede’s Dimesions of Culture. (Sigma Two Group)

2.2 The Rokeach List of Values (LOV)

The psychologist Milton Rokeach identified two types of values – terminal and instrumental values. Terminal Values apply to many different cultures whereas the instrumental values are the actions needed to achieve these terminal values (Solomon, 2002). The study of LOV stresses the relative importance, or ranking, of these terminal and instrumental values and thus makes clear what distinguishes cultures. A comparison between Germany and the US shows that the value of sense of belonging is very important to Germans, but less important to Americans which underlines the American individualistic character. Also Germans seem to value fun and enjoyment in life more than Americans. The value of security is very important to both Germany and the US, whereas the values sense of accomplishment and self-respect vary greatly between the two countries. However, such values must be understood in the local context. The meaning of values can change over time and also when the cultural context shifts. As these values

^{CROSS-CULTURAL CONSUMER BEHAVIOR} are not very consumption-specific or product-specific values, the following Chapter will explain some of the core values related to consumer behavior.

Figure 3: Distribution of LOV values in different countries (% rating as most important value).

(Solomon, 2002, p.110 )

3 Applications of Values to Consumer Behavior

Every culture has its own set of values. In many cases values are universal. Who does not desire health, wisdom or world peace? But on the other hand values do change over time or they cross over from one country to another. The following section will present a broad-based concept of the German and American set of values and show how they drive consumer behavior:

3.1 German Core Values

Traditional German values in the pre-industrial age were thriftiness, modesty, and restraint. Individually varying consumption was a characteristic for people of high social classes. During the industrialization age the social structure and thus the role of the German society changed. In the mid 19 ^th century, the American society was taken as a raw model. Core American values like materialism crossed over to Germany and a “demonstrative consumption” (Hansen, 1999, p.27) started. In the mid twenties, German marketing theories developed in dependence on the USA. The attitude grew that consumption leads to more satisfaction. But Marketing and Advertising never developed as aggressive as in the US. German advertising still does not allow an ad to compare one brand to another, nor do they permit to offer a “lifetime guarantee” (Schiffmann, 2003). In 1996, the Allensbach Institute (1993-1997) found out that 66% of the Germans hold the US as a bad example for consumption and waste. According to the researches of Allensbach, Germans emphasize most their health, individual development, employment and quality of work life, standard of living, time and leisure, security and family. The high importance of the value health can be explained by a negative “spill-over effect” caused by pollution, noises, garbage, the loss of old habits and new technologies. According to a study of