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The purpose of this quantitative study is to contribute to the body of social

influence research, particularly its relationship to individuals selections of banking

institutions for their personal needs. The research will investigate the social influence

theory to determine whether the theory can be generalized to banking institution

selections. The research will examine the relationships between social influence and

individuals selections of banking institutions. The research will analyze how variables

like family, friends/peers, and mass media are related when considered for wealthy versus

non-wealthy individuals and their selections of banking institutions. Finally, the research

will analyze the relationships between social influence and banking institution selections

for individuals in different demographic categories.

Historical Perspective of Social Influence

Early research of social influence comes from the scholarly understanding

originated by Deutsch and Gerard in 1955. The theory of Deutsch and Gerard involved

two types of social influence: normative and informational. Deutsch and Gerard (1955)

defined normative social influence as those influences that conform to the norms of the

society and is limited only by the positive norm of an individual. Normative social

influence ensues from a process of social exchange, in which the individuals behavior

conforms to group norms and role expectations through the acceptance of the group

members. Normative social influence excludes influences that are taboos.

On the other hand, informational social influence is an influence that focuses on

the acceptance of information from an individual that is use to illustrate reality. However,

researchers condemned the notion that informational social influence includes uncertainty
determined through reliance on mutual judgment and perceptions of significant others

(O'Reilly III, Caldwell, & Barnett, 1989; Pfeffer, 1981). Informational social influence

considers a process of informational influence with uncertainty reduction, in which the

outcomes are not mutually exclusive functioning in the same situations with various

mechanisms (O'Reilly III et al., 1989; Pfeffer, 1981).

In 1959, French and Raven conceptualized social influence on the bases of social

power. The authors posited that within the social influence, the agents of change consist

of individuals and groups as well as norms and roles. According to French and Raven

(1959), social influence is the result of the application of social power from one of these

bases: (a) reward power, (b) coercive power, (c) legitimate power, (d) expert power, or

(e) referent power. Reward power augments with the extent of the reward, in which the

bigger the power the better the award. Reward power is dependent on the givers ability

to control positive responses and eliminate negative results and feedback.

Coercive power, on the other hand, uses negative structure instead of constructive,

and uses punishment instead of rewards. French and Raven (1959) contented that,

the strength of coercive power depends on the magnitude of the negative

valence of the threatened punishment multiplied by the perceived probability that

P can avoid the punishment by conformity, i.e., the probability of punishment for

nonconformity minus the probability of punishment for conformity (p. 157).

Legitimacy materializes from internalized values, which show that an individual

has a legitimate right to influence the other who is compelled to accept this influence.

Referent power is the desire to want this identity. It is the feeling of oneness of one with

another (French & Raven, 1959). Legitimate power is the valence in a region induced by
some internalized norm or value (French & Raven, 1959), which stems from the cultural

values of the individual above the other (French & Raven, 1959).

Expert power is the knowledge and perception of one person attributed to another

within a given area. For instance, if an individual is attracted to someone about something

else, that person will desire to be associated with the other person. Expert power results

in primary social influence on ones cognitive structure and probably not on other types

of systems (French & Raven, 1959).

The social influence theory, according to French and Raven (1959), includes

crucial changes in a group produced directly with social influence. The influence process

occurs as the receiver experiences a psychological change resulting from sender

characteristics. French and Raven (1959) described the relationship between the message

sender and the message receiver. This means that all groups are interdependent on its

members to function. According to French and Raven (1959), a change in one may bring

about a change in others. French and Raven stated,

Our theory of social influence and power is limited to influence on the person, P,

produced by a social agent, 0, where O can be either another person, a role, a

norm, a group, or a part of a group (p. 151)By the basis of power we mean the

relationship between O and P which is the source of that power. ...we shall here

define five which seem especially common and important. These five bases of O's

power are: 1) reward power, based on P's perception that O has the ability to

mediate rewards for him; 2) coercive power, based on P's perception that O has

the ability to mediate punishments for him; 3) legitimate power, based on the

perception by P that O has a legitimate right to prescribe behavior for him; 4)

referent power, based on P's identification with O; 5) expert power, based on the

perception that O has some special knowledge of expertness (pp. 155-156).

Influence occurs when the sender uses his power to bring about a psychological

change in the receiver. French and Raven (1959) described, "influence is kinetic power,

just as power is potential influence" (p. 152). A sender may not bring all his "potential

influence" to bear on a receiver in order to cause a psychological change in the receiver.

French and Raven understood this phenomenon, commenting that a receiver could be

influenced by a sender's power without "conscious behavior" from the sender (p. 152). In

addition, the influence process can be a complex one. French and Raven admitted that

receivers are normally influenced by several of the sender's power characteristics at once

(p. 155). Thus, only the receiver can accurately describe what sender characteristics have

brought about the psychological change, which consummates the influence process. The

French and Raven theory of social influence succinctly defined the influence process as it

relates to group interaction.

Work settings also continue to be an important issue for social influence studies

(French & Raven, 1959). French and Ravens (1959) theory focuses on situations, in

which a superior influences a worker in the workplace. Their theory of social influence

examined a wide range of social interactions, such as families, dating couples,

classrooms, salespeople and customers, political figures, as well as doctors and their

patients (French & Raven, 1959).

In search for robust evidence to relate the concept of social influence to the shift

of beliefs, attitudes, and behaviors of an individual, recent empirical studies from the

field of psychology implicated social influence as a psychological state that compels

individual to act as a result of open social pressure (Cialdini & Goldstein, 2004). Social

pressure, in this context, has been defined as people's tendency to adhere to social norms

(Cialdini & Goldstein, 2004). Social influence is broadly defined as the ways people are

affected by the real and imagined pressures of others and social influence processes refer

to processes wherein an individuals attitudes, cognitions and behaviors are changed

through the doings of another individual (Cialdini & Goldstein, 2004). Many recent book

chapters and reviews on social influence have begun to consider the scientific study of

social influence in two periods with a consideration of a major paradigm shift in 1970s

with the introduction of social-cognitive view of human behavior, thought, and

motivation (Forgas & Williams, 2001).

In terms of the first period, the explication of devastating psychological

phenomena as a direct response to overt social forces had been a major goal of the

scientific study of social influence. Milgrams (1969) work on obedience to authority,

Aschs (1951) experiments on line-judgment conformity and Sherifs (1936) studies of

autokinetic effect offered the major advances in the scientific study of social influence

since the results of their studies pointed to a common understanding on social behavior:

People may be susceptible to others explicit influences in different situations. However,

the second period researchers began to be more deeply interested with more subtle,

indirect, and non-conscious forms of social influence processes, such as persuasive

communication and information processing strategies during persuasion (Cialdini, 1993).

Social influence can take different forms under different contexts and situations.

Major work on social influence is generally summarized based on three comprehensive

subtopics: Obedience, compliance and conformity (Cialdini & Goldstein, 2004).

According to Sherif (1936), people use the behavior of others to establish the range of

possible behavior (frame of reference) and this mere tendency is sufficient for the

formation of norms and consensus in groups of people. Social influence processes

through the induction of norms guarantee social control, where in people follow norms,

while surveillance is not required. Conformity is not explicitly based on power

relationships, but rather on subjective validity of social norms; thus, people have a

tendency to believe that thoughts and actions described by a salient norm are correct,

valid and socially appropriate (Festinger, 1950).

Deutsch and Gerards (1955) seminal review on past conformity research in terms

of two fundamental processes revealed that people conform to others for two basic needs:

need to be liked (normative influence) and need to be right (informational influence).

People change their cognitions, attitudes or behaviors in order to make use of information

provided to them for the sake of shortcuts (heuristic processing) and to gain society

groups or salient others approval. Informational influence is generally associated with

social comparison processes: interchanging thoughts, observing others behaviors, or

gathering information involving either conscious or subconscious forms of comparing

oneself with others in the frame of reference (Festinger, 1954; Forsyth, 2010; Moscovici,


According to Deutsch and Gerard (1955), an individual could differentiate

normative influence from informational social influence. Normative social influence

focuses on the sanctions used by members to conform in regards to attitude and behavior.

Conformity indicates a change in beliefs and behavior toward a group because of group

pressure. Normative social influence constitutes a strong communication and similar

orientation within the group members, which distinguishes the group from other social

actors in its environment (Pfeffer, 1981).

Studies on the impact of normative social influence on individual attitudes and

behavior ranged from the studies of Festinger, Gerard and Hymonitch (1952), Kaplan and

Miller (1987), Postmes et al. (2001), as well as Lee and Nass, (2002). These studies

indicated that as people conform to group norms, they achieve membership and social

support, particularly goal attainment through group membership. Group membership can

be strengthened by cohesion, as it attracts group members.

According to Pfeffer (1981), normative social influence individual beliefs about

the nature of work, appropriate attitude towards work, and an individuals behavior

towards work (Pfeffer, 1981). In workgroups, an agreement may emerge about the

essential features of the work environment regarding media choice, which is constrained

by each individuals socially created guidelines for interaction with other group members.

As such, group members may work to certain aspects of media choice (O'Reilly III et al.,

1989), which may lead to media being preferred similarly within groups. Thus,

conformity to group norms may result to group homogeneity in media preferences within


In Moschis and Churchills (1978) theory of consumer socialization, the

researchers highlighted the social learning approach and the influence agents that act as

the sources of influence. In Moschis and Churchills theory, the agents or sources of

influence are identified as family, peers/friends, and the mass media (p. 599). Within the

framework of Moschis and Churchill, consumer socialization was conceptualized for

business marketing. As such, consumer socialization has become widely used in the field

of business management.

Moschis and Churchill (1978) described consumer socialization as a development

process whereby the young individual acquires consumer-related skills, knowledge, and

attitudes. Consumer socialization focuses on the influence of marketing activities on the

development of consumer behavior, values, and attitudes among youth. Interest in this

area has been growing recently, mainly because of contemporary issues related to public

and corporate policy formulation (Moschis & Churchill, 1978).

Another interest in consumer socialization is the evaluating the efficacy of

information sources such as media, peers, and parents, which can improve

communication campaigns. Consumer socialization researchers aim to understand the

development of environmental stimuli that help young people function effectively in the

marketplace and to present new directions and opportunities for studying and

understanding consumer behavior (Moschis & Churchill, 1978).

However, the problem is that in all of the social influence research, a gap in the

literature exists as it relates to studies identifying relationships between social influence

and consumers selections of banking institutions for their personal banking needs.

Social Influence Theory

Social influence is described as the change in a persons thoughts, feelings,

attitudes, or behaviors, which stems from interaction with another individual or a group

(Rashotte, 2007). According to French and Raven (1959),

social influence and power is limited to influence on the person, P, produced by a

social agent, O, where O can be either another person, a role, a norm, a group of a

part of a group. We do not consider social influence exerted on a group (p. 151).

Social influence theory, according to French and Raven (1959), implies that all

groups are interdependent, in which the group members are dependent on its members to

function. This theory focuses on the primary changes in a group that are produced

directly with social influence. As such, a change in an individual may produce a change

to another (French & Raven, 1959).

Social influence is broadly defined as the ways people are influenced by the

pressures of others, and social influence processes refer to processes wherein an

individuals attitudes, cognitions and behaviors are changed through the doings of

another individual (Cialdini & Goldstein, 2004). The social influence theory examines

influence from the viewpoint of the target, which relied heavily on sender characteristics.

This emphasizes the relationship between the sender and receiver, the crux of the

influence process (Tedeschi & Bonoma, 1972). Influence occurs when the sender uses his

power to bring about a psychological change in the receiver. French and Raven (1959)

described this relationship, "influence is kinetic power, just as power is potential

influence" (1959, p. 152).

A sender may not bring all his "potential influence" to bear on a receiver in order

to cause a psychological change in the receiver. French and Raven understood this

phenomenon, commenting that a receiver could be influenced by a sender's power

without "conscious behavior" from the sender (French & Raven, 1959, p. 152).
In addition, the influence process can be a complex one. French and Raven (1959)

explained that several of the sender's power characteristics normally influenced receivers.

Thus, only the receiver can accurately describe what sender characteristics have brought

about the psychological change, which consummates the influence process (Rashotte,


The French and Raven (1959) theory of social influence succinctly defined the

influence process as it relates to group interaction. The five sources of social influence,

according to French and Raven (1959) include (a) expertise, (b) legitimate authority, (c)

referent power, (d) rewards, and (e) coercion.

Expertise is defined as the extent to which the receiver perceives and self reports

the sender as someone having knowledge in a "given area," which typically comes from

experience (French and Raven, 1959, p. 63). Griffin (1996) stated that expertise is

"derived from information" (p. 508). In a group setting, therefore, influence caused by

this variable is the perceived knowledge, information, or experience receivers attribute to

other group members.

Legitimate authority is the degree to which the receiver reports that he/she has

accepted the sender's right to influence him and that he/she is obligated to obey the

sender (French & Raven, 1959). Legitimate authority is typically granted through an

organizational hierarchy, but must be accepted by the receiver to be of influence (Griffin,


Referent influence is the amount to which the receiver reports identifying with the

sender. This is also described as a "feeling of oneness," a "high attraction," and a "close

association" between receiver and sender (French & Raven, 1959, p. 161). It is clear that
this influence occurs because of a personal, internal attraction of the receiver toward the

sendernot a relationship that occurred from external (organizational) means. In a group

setting, therefore, someone they personally identify with, a person they respect

personally, or someone they consider to be a mentor or a friend may influence receivers.

Reward influence is the sender's ability to extend positive valences or remove

negative valences for the receiver (French & Raven, 1959). The receiver must recognize

and report the sender's power to administer rewards, and must consider the likelihood of

receiving rewards offered by the sender. While managers can use rewards such as salary

increases, bonuses, and promotions to influence subordinates in a general organizational

setting, individuals may experience more short-term incentives or enticements in a group

settingsuch as promises of help with a task.

Coercive influence is defined as a receiver's expectation that the sender will

punish him if he refused to "conform to the influence attempt" (French & Raven, 1959, p.

157). In a group environment, coercion can take the form of a psychological, emotional,

or physical threat" (Griffin, 1996, p. 507).

Work settings also continue to be an important issue for social influence studies

(French & Raven, 1959). French and Ravens (1959) theory focuses on situations, in

which a superior influences a worker in the workplace. The authors theory of social

influence examined a wide range of social interactions, such as families, dating couples,

classrooms, salespeople and customers, political figures, as well as doctors and their

patients (French & Raven, 1959).

The majority influences individuals when a large portion of an individuals

referent social group holds a particular attitude. Rashotte (2007) further explained that
individuals would make significant changes to their feelings and behaviors because of

interaction with others who are perceived to be similar, desirable, or expert (Rashotte,

2007). With social influence, people adjust their beliefs about others to whom they feel

similar with their psychological principles (such as, balance) (Rashotte, 2007). As such,

an individual may alter his or her opinion because of the influence of another who is

considered an expert in a particular the issue (Rashotte, 2007).

Furthermore, Kelman's (1958) theory of social influence provides insights into

consumer cooperation. Kelman's three influence processes can be explicated in terms of

social identity theory (Stryker & Serpe, 1982). Identity theory focuses on the relationship

between the individual self, roles, and social behavior. Identity theory studies concepts of

commitment to roles and salience of social identities and uses these concepts to explain

social behavior (Goodwin, 1987).

Many role-theoretic constructs applied to service encounters derive from the

symbolic interaction framework, which does not translate well into testable hypotheses of

empirical issues. Identity theorists attempt to derive testable hypotheses and develop

measurement tools for relevant constructs, such as identities derived from roles.

Therefore, since identity theory offers a potential direction for researchers of service

encounters, it is useful in the perspective on social influence processes (Goodwin, 1987).

The dynamics of social influence were extensively theorized and researched in the

framework of group dynamics, as revealed by the influence of in-group versus out-group

members and the influence of the minority and majority parties within groups (Martin,

Gardikiotis, & Hewstone, 2002; Wood, Lundgren, Ouellette, Busceme, & Blackstone,

1994). Social influence and conformity processes in groups had been first explained as
uniform effects of the majority, but later work by Moscovici and Faucheux (1972)

showed that the influence processes are not uniform and that the majority itself could be

influenced from the consistent decisions of a minority group through a private change

(Moscovici, 1985).

Social influence is determined from changes based on reward or coercive power

and from forced public acceptance. Social researchers categorized social influence into:

(a) minority influence in group settings, (b) research on persuasion, (c) dynamic social

impact theory, (d) a structural approach to social influence, and (e) social influence in

expectation states theory (Rashotte, 2007).

Minority influence. Although it is perceived that social influence occurs when a

minority subgroup attempts to change the majority, it is also believed that every member

of a group can influence others to some extent. This occurs when a minority group is

consistent of what it presents to the majority (Rashotte, 2007). The presence of minority

groups within a larger group would result to a more creative thinking and better overall

solutions on group tasks. In the study of Nemeth and Kwan (1987) of four-person groups

working on a creativity task, individuals in the minority condition actually produced

more correct solutions to the task. This result indicated a strong effect of minority


Persuasion. Persuasion is defined as change in attitudes or beliefs based on

information received from others. Persuasion focuses on written or spoken messages sent

from source to recipient. Research on persuasion assumes that individuals process

messages carefully whenever they are motivated. Persuasion research includes two types

of theories: elaboration likelihood model and heuristic-systemic models (Rashotte, 2007).

The elaboration likelihood model (Cacioppo, Petty, & Stoltenberg, 1985) has

been frequently used in therapeutic and counseling settings. The elaboration likelihood

model focuses on the influence of persuasion that the message produces to the amount

and nature of thinking that a person does. Persuasion includes important aspects for this

situation: (a) source, (b) message, (c) recipient, (d) affect, (e) channel, and (f) context.

This model has demonstrated its utility in persuading various people to make various

types of healthier choices. For instance, these include teenagers at risk from tobacco,

those people at risk from HIV/AIDS, and cancer patients (Cacioppo et al., 1985).

In heuristic-systemic models, argument strength is most effective in persuasion,

especially if the person is motivated and able to attend to the message (systemic route).

When the target individual is not motivated, persuasion will occur using a more indirect

means, such as nonverbal cues or source credibility (heuristic route). Persuasion that

occurs through the systemic route will be comparatively stable, whereas persuasion

through the heuristic route is more likely to be momentary (Rashotte, 2007).

Dynamic social impact theory. Dynamic social impact theory (Latane, 1996)

used the ideas about social impact to describe and predict the diffusion of beliefs through

social systems. Social impact is defined as any number of changes, such as physiological,

cognitive, emotional, or behavioral changes that might occur in an individual because of

the presence or action of others, who are real, imagined, or implied (Rashotte, 2007).

Social impact theory proposed that the influence of any information source is a

function of the following factors: number of other individuals who create that source,

their closeness, and their salience or power (Rashotte, 2007). In dynamic social impact

theory, social structure is the result of individuals influencing each other in a dynamic
and iterative way. Dynamic social impact theory views society as a self-organizing

complex system in which individuals interact and influence each others beliefs. As such,

the likelihood of being influenced by someone produces localized cultures of beliefs

within communication networks (Rashotte, 2007). This process can lead attitudes and

beliefs to become clustered or correlated, such that less popular beliefs become combined

into minority subcultures (Rashotte, 2007).

Structural Approach to Social Influence. The structural approach to social

influence examines interpersonal influence that happens within a larger network of

influences. In this larger network, attitudes and opinions of people are manifestations of

the attitudes and opinions of their referent others (Rashotte, 2007). Interpersonal

influence is considered as a basis of individuals socialization and identity. Social

influence is viewed as the process by which a group of individuals will reflect on and

integrate their opinions with their significant others within the context of social structural

constraints. The structure establishes the primary positions of group members and the

network and weight of interpersonal influences within the group (Rashotte, 2007).

The structural approach to social influence includes the social influence network

theory (Friedkin, 1998). This theory uses mathematical models and quantifications to

measure the process of social influence. The social influence network theory involves a

two-stage weighted averaging of influential opinions. In this theory, individuals started

with their own initial opinions on some matter. During each stage, a person forms a

norm opinion, which is a weighted average of the other opinions in the group. The

individuals will then change their own opinion in response to this norm, forming a new
opinion, which is a weighted average of their initial opinion, and the network norm

(Rashotte, 2007).

Expectation States Theory. Expectation states theory is rooted in the work of

Bales (1950), who found certain differences of members over one another. Bales (1950)

discovered that among group members who were on the same status prior to the group

session, some group members would be more influential compared to other members. A

hierarchy based on the behavior of the group members would be developed. However, as

group members were originally unequal in status, inequities would be imported to the

larger group. For instance, age, sex, or race would structure a hierarchy of influence

(Rashotte, 2007).

However, Berger et al. (1980) stated that expectation states theory is an

explanation of Bales finding that groups of status would develop inequalities in regards

to influence. Berger et al. (1980) stated that group members would develop expectations

about the future task performance of all group members, including themselves (Rashotte,

2007). These expectations, once developed, would guide the group interaction.

Expectations would both guide and be maintained through the group interaction.

According to the theory, the group members with the highest expectations will be the

most influential in the groups interactions (Rashotte, 2007).

However, more substantive work has been executed using expectation states

approaches to social influence in various settings, such as classrooms, workplaces, and

jury rooms. Status characteristics, including sex, race, sexual orientation, and physical

attractiveness have been identified and extensively studied to produce influence.

Moreover, research in this context has developed into an emergent area within
sociological social psychology. Scholars continue to expand the theory both theoretically

and substantively. Theoretically, developments include the status characteristics branch,

ideas about status interventions, and work on status creation (Rashotte, 2007).

Social Learning Theories

Social learning models were focused on external socialization agents, which had

been organized around the concept that a persons socialization was the result of various

influential external environmental forces, rather than internal biological and

psychological processes (Bandura, 1977). The theories of social learning were

subcategorized further into connectionist theories and interaction theories.

Connectionist Learning Theories

According to Bandura (1977), connectionist learning theories were theories about

the process of socialization that was controlled by certain external factors (irrespective of

a person's active or passive state). The most famous connectionist learning theory is the

classical conditioning theory (Pavlovs famous stimulus-response theory) that showed

learning as a process in which the outcomes were conditioned by certain, externally

imposed rewards, thus allowing an external agent to have superior control over the entire

process (Bandura, 1977). The instrumental conditioning theory showed the process of

learning that occurred through an externally imposed system of punishment and reward,

provided by an external agent ,depending on the state of the learners active behavior

(Bandura, 1977).

Interaction Theories

Unlike the connectionist learning theory proponents, the interaction theorists were

focused on the active role of an individual within the socialization process. Individuals
were seen as active participants within the entire learning process, in which the growth of

personal beliefs, values, and behavioral attitudes all resulted from the participants direct

interactions with surrounding people. Various innuendoes from interactions could also

influence a participants learning, as a means of feedback regarding the participants

beliefs and behavioral attitudes.

Moschis and Churchill (1978) suggested a consumer socialization model that

included both the theories of social learning and cognitive development. The model

included concepts of the age or life cycle (cognitive development theory) of an individual

and included the variables of social structures such as social class, gender, and ethnicity

as precursors to the process of socialization. Socialization agents were comprised of

various people and institutional leaders who tended to affect a young individual and were

credited as active agents in the entire process of socialization. At the core of the

socialization model were the various learning processes that socialization agents used as

tools to influence the learner. Bandura (1977) identified three types of learning: (a)

modeling, (b) learning through reinforcement, and (c) learning through social interaction.

All contributed to the process of socialization.

Moore and Moschis (1983) used the consumer socialization approach to explore

primary factors in determining adolescent consumer learning. Various learning traits

were studied, including: (a) brand specification, (b) attitudes towards advertising, (c) the

capacity to recall slogans, and (d) accuracy of prices. Moore and Moschis used

socialization agents of media and family members. Moore and Moschis explored

variables of social structure including socioeconomic position, age, and level of

intelligence. In the experiment with two sample groups of adolescents (middle school
and high school), Moore and Moschis found that although levels of intelligence and

media exposure were important variables in the middle school age range, these became

less important variables for high school students. The finding was reflective of the

assumption that the influence of distinct socialization variables changed with age, which

was consistent with socialization theory principles.

In addition to the age variable, Moore and Moschis (1983) explored social

variables like class and gender along with the influences of mass media, parents, peers,

and school as the socialization agents. Outcomes of interest were listed as: (a) consumer

activism, (b) knowledge of consumer affairs, (c) competency in the management of

consumer finances, (d) attitudes toward prices, (e) materialistic attitudes, and (f) the

socioeconomic motivations for consumerism. An individuals level of interaction with

the various socialization agents was shown as a determining factor in the levels of

variation within the consumer learning outcomes (Moore & Moschis, 1983).

Moore and Moschis (1983) indicated that (a) the family unit formed the most

important agent in teaching adolescent children the financial motives for consumption

(the rationality factor); (b) peers and mass media were involved in teaching social

motivations (the materialistic factor); and (c) as an institution, the school did not have

any perceivably significant role in the process of consumer socialization. Social structure

variables of age and gender were significant; generally, older male adolescents tended to

possess more consumer knowledge than other participants did. Higher social classes

showed higher economic motivation and showed an increased competency in financial

management (Moore & Moschis, 1983).

Social Systems Theories

The social system theorists added a perspective that influenced factors that

originated from within the group or organization in which the learner belonged. The

assumption in social systems theory was that the learner or individual would acquire the

various rules and norms followed by that particular society according to its unique culture

or subculture (Kgler, 1997). Socialization was understood as the process by which one

internalized one's own culture, a learning process referred to as enculturation (Kgler,

1997). Members of different cultures tended to show different behaviors, values, and

norms, thus the subject matter of the learning outcomes was varied across

cultural/subcultural groups. Along with varying norms, varied socialization processes

also affected the learning outcomes based on the cultural setting (Moschis & Moore,


Using the consumer socialization models, socialization variables and influential

social agents can be identified for their effects on an individuals pattern of consumerism.

Any business leaders conducting a market survey to create a new strategy for increasing

sales outputs and profits, or trying to introduce a new product in the market, would need

to focus on these variables and shaping agents for the consumption patterns and habits of

the primary emerging consumer segment, adolescents. With the background of consumer

socialization models, influences from demographics, peer pressure, media, and family are

reviewed and discussed.

Empirical Studies on the Influence of Demographics to Consumers Decision

There have been numerous researches that investigated the relationship of various

demographics to consumers behavior. As early as 1950s, social scientists have been

interested in differentiating the cognition and behaviors of consumers in terms of

differences of consumers demographics. While there has been consensus that different

demographics had differences in consumption pattern and behavior, researchers are

unable to determine the cause of such differences (Moschis & Moore, 1984). Continuous

research of Moschis, Moore, and Churchill, however, had provided a structured model of

analyzing consumers behavior as it relates to various demographics. While the focus of

the authors Moschis, Moore, and Churchill have been on adolescent consumer learning,

the authors offered a comprehensive understanding of the social structural constraints and

socialization agents to economic and social motivations for consumption. Social

structural constraints consist of variables including social class, sex, and birth order that

are influential in the learning process. Socialization agents consist of media, family, and

peers are also highlighted to influence the consumers through cognitive orientation of the


Consumption patterns vary with demographic differences, including geographical

areas, age, gender, income, and different levels of education (Power & Mont, 2010).

Geographical differences could be distinguished among continents. In Europe, a middle

class dominates consumer spending. The middle class spending is based on aspirations

and emulation, rather than spending on basic needs. For instance, the middle class in

Eastern Europe is inclined to replicate lifestyles, as the home, technology, wellness, and

leisure, in the US and Western Europe (Hedley, 2007).

People of different ages have different lifestyle patterns as they go through the

different stages of life (Toivonen, 1992). Children play an important role in consumption

and decision-making regarding purchasing, despite their lack of direct income. Children
are brand conscious and sometimes possess knowledge about purchasing and

consumption that their parents lack (Tufte & Ekstrom, 2007). Several factors have been

found that influence the level of materialism in children and adolescents. These factors

include family environment, parenting style, peer interaction, and media exposure. One

study suggested that all these factors affect materialism through childrens self-esteem

(Nguyen & Roedder, 2007).

Different age groups also show conflicting understanding to sustainable

consumption practices. Young people between the ages of 18 and 25 are conscious about

the need to reduce environmental influence, even though they may not always link it to

their purchasing behavior (Engendering Development: Through Gender Equality in

Rights, Resources and Voice, 2001). Gender differences also influence consumption

patterns and levels. In Organization for Economic Co-operation and Development

(OECD) countries, women typically make 80% of consumption-related decisions, while

men may spend more than 80% of household funds. This reflects the inequality between

men and women in families in terms of access to power and resources (Power & Mont,


A study by the World Bank has demonstrated that gender differences are greatest

among the poorest families (McConnel & Deljavan 1983). Women purchase cheaper

products, such as everyday and frequent consumer needs (food, clothing, and household

articles) for the family. However, mens purchases include expensive capital goods and

luxuries, such as homes, cars, IT and stereo equipment (Power & Mont, 2010). A United

Kingdom (U.K.) study found that women are more concerned about climate change

compared to men. Women advocate changes in lifestyles and consumption behavior,

whereas men prefer technological solutions for mitigating climate changes (Womens

Manifesto on Climate Change, 2007).

These findings have implications for the effectiveness of potential strategies for

the establishment of sustainable consumption (Power & Mont, 2010). Women are found

to be sustainable consumers, as they are likely to purchase organic food, have a higher

tendency to recycle, and place more value on efficient energy use, waste separation, and

recycling than men do (Promoting Sustainable Consumption, 2008). Women are more

likely to consider social issues, such as child labor and have higher awareness about fair

trade labels (Johnsson-Latham, 2007).

Income is one of the most essential factors that influence sustainable

consumption. Wealthy households are likely to purchase sustainable products

(Promoting Sustainable Consumption, 2008). However, wealthy households are the

least likely to change their lifestyles with reduced consumption (Power & Mont, 2010).

On the other hand, low-income households could be reached by life cycle cost

information (Power & Mont, 2010). It is therefore important to consider the distributional

influences of actions to prevent unfair allocation of costs among different classes and

income levels. As such, strategies for greening the markets might be more efficient when

targeted towards wealthy households (Power & Mont, 2010).

Income and level of education also influence consumption patterns and levels.

Bihagen (1999) studied how income is used by different classes in Sweden. The study

showed that the higher classes spend significantly more on household services,

association or membership fees, cinema, travels, sport activities, photo services, eating

out, and personal cosmetic care. The higher classes not only travel more often, but also
pay more when they travel. In addition, it was found that skilled workers spend vaguely

more than non-skilled workers. These two classes have much higher spending on tobacco

and lotteries, compared to other classes (Bihagen, 1999).

Moreover, retired households use a small portion of income on necessities and

more portions on gifts compared with the non-retired families (McConnel & Deljavan

1983). The aging population in Europe, for instance, has effects for consumption, which

include growing demand for services, retirement homes, health-care, and different types

of entertainment targeted at older people. Europeans who are over 60 are less wealthy

compared to younger people and have lower household costs. However, young adults

during the 1950s and 1960s were able to establish generous final salary pensions, have

the opportunity to travel, and could afford different types of entertainment (Power &

Mont, 2010).

Peer influence has been numerously cited to effect the behavior of consumers

particularly adolescents. In the study of Flouri (1999), the author found that adolescents

have a probable tendency of adopting materialism, which is positively enforced through

peer influence. Using 246 adolescents, Flouri found that the influence of the mothers

religious service attendance and economic socialization were negatively correlated to the

satisfaction of adolescent consumers behavior. Moreover, the study of Flouri suggested

that adolescent materialism is not related to family structure. However, family

environment such as the level of mothers materialism predicts the childrens level of


Other researchers characterize consumers based on their attitudes and relate the

attitudes to the consumers consumption pattern and behavior (Bellenger & Korgaonkar,
1980; Gehrt & Carter, 1992; Hiu et al., 2001). For instance, in the study of Sproles

(1985), the decision-making styles of mall consumers were profiled using a 50-item

instrument. Using the factor analysis technique to analyze 111 undergraduate women

from the University of Arizona, Sproles classified the styles of mall consumers as (a)

Perfectionism, (b) Value Conscious, (c) Brand Consciousness, (d) Novelty fad Fashion

Consciousness, (e) Shopping Avoider-Time Saver-Satisfier, and (f) Confused Support

Seeking Behavior. In the later study of Sproles and Kendall (1986), however, these

characteristics have been deduced and added with other consumer decision making styles

to include (a) Recreational and shopping conscious, (b) Price conscious, (c)

impulsiveness/careless, (d) confused by over choice, and (e) habitual/brand loyal. The

1986 study was a result of the introduction of the Consumer Style Inventory (CSI), which

have been tested using 482 high school students in 29 home economics classes from five

schools in Tucson, Arizona.

In the advent of science and technology, media through internet have further

added the actual contribution of media in influencing consumers behavior. In the study

of Guo (2011), the author investigated the influencing factors of the purchases made

using the internet. Using the Analytic Hierarchy Process in data analysis, Guo found that

security, prices, and credits are the primordial factors, while secondary factors include

gender, education, and the design of the stores. Guo recommended that communication

with consumers must be strengthened though use of reliable security software that

ensures privacy and security of the customers information. Guo stressed that while

security and privacy issues are pressing problems in online marketing, the retailers must
not condone the service quality. The study improves the value-added feature of online


Using the TAM model, the authors Chuan-chuan, Lin, and Lu (2000) examined

the quality of website that affects consumers attention on online purchases. The authors

used 139 online consumers to determine the effects of the model to PEOU and PU on the

attitudes and intentions of the consumers. The study found that the variables are

positively related to the website quality, which implicates that online behavior of the

consumer is affected by the quality of websites created and designed by the online


Similarly, Koufaris (2002) conducted an empirical investigation that tested the

theory of flow based from the main theoretical model of TAM. Using 300 online

consumers from an identified online purchasing website, the author found that pleasure

and utility of online purchasing are significantly related to the purchasing intention of


Another similar study was conducted using the TAM model. Aioa, Cass, Tino,

and Feneeh (2005) examined the perceptions of 392 online consumers to relate specific

characteristics of consumers to their online purchases. Aioa et al (2005) found that

personalities, online purchasing experience, and guidance of online purchasing are factors

influencing online consumers behavior.

In 2004, Ying Zhao conducted an empirical understanding of factors influencing

consumers online purchasing. Consistent to earlier online marketing studies, security and

reliability of network, infrastructure support of the network, products characterization,

and the quality of images in online stores are factors that motivate online consumers


Other robust studies have been conducted to examine the online consumers

purchasing behavior using a target population of college students. Wang (2004) used the

consumer-purchasing model and the theory of innovation diffusion in building a new

pattern of factors. The author found that innovation, network, time pressure, online time,

and disposable income are positively related to online purchasing behavior of consumers.

A recent addition to models that understand the factors influencing online

purchases was the task technology (TTF) introduced by Dong et al (2007) and the

perceived risk (PR) under the frame of TAM model. Dong and Yang (2007) conducted an

empirical test in China, making use of their TAM/TTF/PR model for consumers online

purchasing. The authors found that intention of online purchase predicts at a great degree

the actual behaviors of the consumers.

Business Management and Market Orientation

Business organizations are aiming to achieve long-term competitive advantage

against market competitors. Like any other business organizations, financial service

sectors such as banks offer relational and interaction approaches as means to provide

efficient service and trust to their clientele (Olotu, 2011). Depending on the customers

needs and expectations, the relational and interaction approaches of financing institutions

may be changed. For instance, Law, Lau, and Wong (2003) observed that banks adopted

unique business strategies with the aim of maintaining the relationship with their client.

Law et al., in their study of banking institutions, opined that providing easy access to

loans, for instance, attracts high value customers. Although provision of easy loan access
may be risky, it does however provide competitive advantage over other financing

institutions. Within this context, the section highlights the value of market orientation in

the management of financing organizations.

According to Tsokas and Saren (2004), the ability of an organization to benefit

from a long-term competitive advantage is associated with its capacity for the

construction, distribution, and utilization of knowledge (Tsokas & Saren, 2004). The

ability therefore to create new knowledge is crucial in building competitive advantage

(Leisen, Lilly, & Winsor, 2002). In the case of financing institutions, banks offer

products and services that are beneficial for the client and the institution. The quality of

products and services depends largely on the information used to develop strategies that

sustain competitive advantage (Marchand, 2000).

The concept of market orientation was developed in the late 1960s to 1970s at

Harvard University to reinstate previous sale and production orientations that were

prevalent in the 1950s (Jain, 1989). Market orientation is considered as a business

strategy that focuses on classifying and meeting the unknown needs and wants of

customers. As a component of market strategy, market orientation must focus on how an

enterprises leaders can effectively define its market scope and products entry into the

market, including promotion, distribution, and pricing strategies (Jain, 1989). Producers

can also identify whether they would use a single market, multi-market, or total market

strategy for introducing products to clients or customer (Jain, 1989).

Single market strategy is described as a company or industry that would serve the

market notwithstanding difficulties, but avoid competition with established firms.

However, in a multi-market strategy, the company may serve many distinct markets but
require careful selection of its captive market to avoid confrontation with those serving

the entire market (Jain, 1989). The total market strategy, on the other hand, means that

company will serve the entire market with differentiated products for different segments

of the market. As such, the different mixture of price, product promotion, and

distribution strategies employed are assessed with the top managers commitment to

embrace the entire market, based on the companys strong financial position (Jain, 1989).

Thus, the worldwide marketplace has been homogenized with the present influx of

globalization, which further implies that multinational corporations can promote

standardized products and services through identical strategies, although with lower cost

and higher profit margins than in the past.

Evaluating the application of the model, it can be argued that market orientation

is related to product orientation and sales orientation. Market orientation involves a well-

defined marketing strategy that defines how the marketing mix will be utilized to attract

and satisfy the target market(s), as well as accomplish organizational objectives with the

following strategies: (a) market (b) product (c) promotion and (d) pricing. However,

although these domains within the model of market orientation are applied, this notion

translates an issue for applied academic research in business, particularly the

identification of an applicable metrics that defines success of these domains.

A market-oriented firm, otherwise known as consumer-focused, would be

centered on allowing customers needs to shape the companys strategic decisions, and

systematically building a corporate culture devoted to customer value (Corry, 2010).

Often, the company would conduct market research to determine which customer wants

or needs to supply that would position the company for sustainable competitive
advantage (Corry, 2010). A market-oriented firm can be described by its (a) extensive

use of marketing research, (b) broad product lines, (c) emphasis on product benefits to

customer, (d) emphasis on product benefits rather than attributes, (e) use of innovative

product , and (f) offering of ancillary services like credit availability, delivery,

installation, and warranty (Corry, 2010).

Market orientation requires the application of the marketing concept, which

focuses on customer-orientation. Full organizational support is required to implement

market strategy for the long term, and indeed may require a complete change in an

organizations culture. Market orientation involves strategic commitment from managers

and employees at every level of the entire organization. The guidelines and action plans

for implementing market orientation can then be explored.

In a later research study, Narver and Slater (1990) retested a broad sample of

product and service businesses operating in a variety of industries, and found market

orientation to be positively associated with business profitability. Narver and Slater

(1990) used a sample of 140 business units, consisting of commodity and non-commodity

businesses. In their study, the chief marketing officer assessed the level of market

orientation, whereas the general manager assessed the firms profitability to avoid

common respondent bias. They found a positive effect of a market orientation on the

profitability of both types of businesses.

Narver and Slater (1990) argued that business performance is influenced by

market orientation; however, the authors believed that in their time, no valid measure of a

market orientation had been developed for systematic analysis of its effect on a business's

performance. The authors reported the development of a valid measure of market

orientation and analyzed its effect on a business's profitability (Narver & Slater), and

found that market orientation had an efficient and effective superior value for customers.

Narver and Slater (1990) viewed market orientation as comprising of three

behavioral characteristics: (a) customer orientation, (b) competitor orientation and (c)

inter-functional coordination. Customer orientation focuses on understanding customer

needs to create a benefit for customers on a continuous basis. Competitor orientation, on

the other hand, involves determining the strengths, weaknesses, capabilities, and

strategies of key competitors. Inter-functional coordination is the process of organizing

the use of the firms resources for creating high benefit to target customers (Narver &

Slater, 1990).

The components of market orientation (customer orientation, competitor focus,

and cross-functional coordination) are long-term in vision and profit-driven. Kohli and

Jaworski (1990) concluded that market orientation could be utilized to combine focus for

the activities of the individuals, which leads to superior performance. Empirical research

has found a strong relationship between market orientation and several measures of

business performance including profitability, customer retention, sales growth, and new

product success (Narver & Slater, 1990).

Cultural influence on business performance includes a measure of entrepreneurial

orientation (Narver & Slater, 1990). The influence of a market orientation on business

profitability was compared with the influence of an entrepreneurial orientation. The

findings showed that the regression coefficient for market orientation (.662) was higher

in the replication compared to the original study (.501), and the correlation coefficient for

the relationship between market orientation (.362) and profitability (.345) were very
similar in both studies. The researchers found no relationship between entrepreneurial

orientation and business profitability. Narver and Slaters conclusions from this balanced

replication increased confidence for the importance and generalizability of the market


Atuahene-Gima (1996), on the other hand, studied 158 manufacturing and 117

services firms in Australia and examined the influence of market orientation on

innovation characteristics and performance on product newness. Atuahene-Gima showed

that market orientation had a significant relationship with innovation characteristics such

as (a) innovation-marketing fit, (b) product advantage, and (c) interfunctional teamwork,

but not with product newness and innovation-technology fit. After controlling for the

effect of these innovation characteristics, it was found that market orientation has a

significant contribution to the innovation project's impact performance as measured by its

intermediate benefits for the firm (Atuahene-Gima, 1996). However, Atuahene-Gima

(1996) indicated that little effect from market orientation is shown on the companys

market success, as measured by sales and profit performance. The hypothesis of the

study failed to confirm that market orientation would have a stronger impact on service

innovation performance than on product innovation performance.

Marketing scholars have advocated that a marketing philosophy is intrinsic to

long-term organizational performance and have been required to clearly align the

philosophy of marketing with the practice of marketing (Kohli & Jaworski, 1990; Kotler,

1994; Narver & Slater, 1990). The roles of information acquisition and utilization are

highlighted in a market orientation.

Previous studies have examined the relationship between market orientation and

performance, as well as other consequences and requirements. Horng and Chen (1998)

found a significant positive relationship between market orientation and performance in

their study of 76 small businesses that are members at the national union for small

medium enterprise in Taiwan. Their research findings showed that market orientation is

a critical determinant of (a) business performance, (b) employees' organizational

commitment, and (c) esprit de corps in small and medium-sized enterprises. They further

affirmed that their findings were consistent with research findings for large U.S. firms.

Intelligence generation appeared to be the key requirement to achieve higher overall

performance. Horng and Chen (1998) further affirmed that organizational responsiveness

was strongly related to employees' organizational commitment and esprit de corps. They

also indicated that management training was an important determinant of market

orientation (Horng & Chen, 1998).

Pelham (2000) found significant positive relationships between market orientation

and sales efficiency, and growth to market share ratio and profitability in a study

conducted on 235 small businesses from eight different U.S. industries. Similarly,

Homburg, Hoyer and Fassnachts (2002) findings showed a significant positive

relationship between market orientation and performance in their study of 441 retail

stores at two disparate geographic zonesthe United States and Germany.

In another study, Chen et al. (2002) used 162 hospitals in Taiwan as research

objects to empirically test the construct validity of an integrated market orientation

against two mainstream models: Kohli and Jaworski (1990), and Narver and Slater

(1990) models, with four components: (a) customer-oriented intelligence generation, (b)
competitor-oriented intelligence generation, (c) inter-functional dissemination, and (d)

responsiveness. Their research findings showed that the integrated model had better

construct validity compared to the two other mainstream models about the measurement

model fit using confirmatory factor analysis. Using the different analytical methods to

test the relationship between market orientation and performance, the integrated model

not only outperformed the other two models in the structural equation modeling test, but

also showed a more comprehensive explanation in the stepwise regression model (Chen,


Moreover, Canoa, Carrillat, and Jaramillo (2004) conducted a meta-analysis study

and gathered information from 23 countries spanning five continents to examine the

moderating effects of (a) business objective, in terms of profit, not-for-profit; (b) industry

type in terms of manufacturing, service; and (c) socioeconomic development pertaining

to gross domestic product (GDP) per capita, Human Development Index (HDI), and

Hofstede's individualism cultural dimension. The authors suggested that the relationship

between market orientation and business performance is positive and consistent

worldwide. Their research showed stronger associations between market orientation and

business performance of not-for-profit companies compared to for-profit firms, and for

service compared to manufacturing firms.

Sin, Tse, Yau, Chow, and Lee (2005) investigated the relationship of market

orientation (marketing performance) and marketing orientation as strategic orientations

contributing business venture performance (financial performance). Using 63 hotels in

Hong Kong, Sin et al (2005) found a positive and significant relationship between

variables marketing performance and financial performance within the hospitality

industry when leaders adopt relational marketing orientation as a strategy, in addition to

the typical market orientation approach to business management.

In a recent study of Olotu, Maclayton, and Opara (2010), the authors validated the

earlier studies of Sin, Tse, Yau et al (2005) and Sin, Tse, and Chan (2006), who

introduced the relational market orientation tool as a valid measure relating market

orientation to business performance. Using the samples from 123 bank branches in Port

Harcourt, Nigeria, six multi-item scales of relational market orientation (trust, bonding,

communication, empathy, shared values, and reciprocity) were tested using confirmatory

factor analysis. The results of the study revealed that the six scales are positively related

to business performance. Olotu et al. recommended that other than providing customers

with strategic bank policies, banking sectors might need to strengthen relational strategies

as part of the marketing orientation framework to achieve the acquisition and retention of


To achieve superior performance, business managers must develop and sustain

competitive advantage. Competitive advantage was previously based on structural

characteristics such as market power, economies of scale, or a broad product line.

Current emphasis has shifted the meaning of competitive advantage to capabilities that

enable a business to consistently deliver superior value to its customers (Canoa et al.,

2004) to include relations market orientation (Olotu et al., 2010; Sin et al., 2005). A

business shows a market orientation if its culture is systematically organized toward the

continuous creation of superior customer value. A market-oriented culture offers a solid

foundation for these value-creating capabilities. As such, competitive advantage includes

collecting and coordinating information on customers, competitors, and other significant

market influencers, including regulators and suppliers to use that value (Canoa et al.,


Conclusions and Summary

Many researchers as well as economists provide various means to analyze the

factors that can determine effective strategies to achieve business advantage. However,

among the models reviewed for the purpose of this review, are conducted in business

market in general. There is scarcity of studies that investigates social influence theory as

factor for individuals selections of banking institutions. The studies reviewed however

demonstrated the relationship of various influences to consumers to their market

decisions. Thus, there is plausible evidences that supports the use of social influence

theory to the investigation of the relationship of influence to individuals selection of

banking institutions.

The review discussed the components of consumer socialization and articulated

that a deeper understanding of the behavior of the consumer determines the success of the

business. Consumer socialization understands the impact of marketing activities on the

development of consumer behavior, values, and attitudes among consumers. Evaluating

the efficacy of information sources such as media, peers, and parents, who can improve

communication campaigns, are among the components of the consumer socialization

model. Consumer socialization tackles learning and cognitive development theory,

which is crucial in developing effective marketing strategies for establishing a reputation

among competitors, as well as reaching the consumers. However, using the consumer

socialization model alone is limited particularly when the business aim at gaining long-

term competitive advantage.

In the light of the limitations of the consumer socialization model, market

orientation is a significant and an evolving concept within the broad framework of

business management. Market orientation requires full implementation of the marketing

concept, and is more than being customer-focused. Full organizational support is

required to implement market strategy for the long term, and indeed may require a

complete change in an organizations culture. Market orientation involves strategic

commitment from managers and employees at every level of the entire organization.

Researchers and business analysts found evidence to support the relevance of the

market orientation model to business success. Chapter 2 articulates the relationship of the

application of market orientation in the organization with sales efficiency, market share

growth, and profitability. However, in the light of a changing business environment,

organizations, which implement marketing orientation, may need to ensure the relevance

of the identified strategies. Understanding the relevance of the model, including the

activities, would mean that management may require research and development activities

which cover the dimension of all factors that limits the business to succeed.

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