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LITERATURE REVIEW
institutions for their personal needs. The research will investigate the social influence
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
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
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
outcomes are not mutually exclusive functioning in the same situations with various
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
Coercive power, on the other hand, uses negative structure instead of constructive,
and uses punishment instead of rewards. French and Raven (1959) contented that,
P can avoid the punishment by conformity, i.e., the probability of punishment for
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
The social influence theory, according to French and Raven (1959), includes
crucial changes in a group produced directly with social influence. The influence process
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
Our theory of social influence and power is limited to influence on the person, P,
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
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
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
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
classrooms, salespeople and customers, political figures, as well as doctors and their
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
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
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
phenomena as a direct response to overt social forces had been a major goal of the
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:
the second period researchers began to be more deeply interested with more subtle,
Social influence can take different forms under different contexts and situations.
possible behavior (frame of reference) and this mere tendency is sufficient for the
through the induction of norms guarantee social control, where in people follow norms,
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,
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:
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
oneself with others in the frame of reference (Festinger, 1954; Forsyth, 2010; Moscovici,
1980).
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
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
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
groups.
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
of business management.
process whereby the young individual acquires consumer-related skills, knowledge, and
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
information sources such as media, peers, and parents, which can improve
development of environmental stimuli that help young people function effectively in the
marketplace and to present new directions and opportunities for studying and
However, the problem is that in all of the social influence research, a gap in the
and consumers selections of banking institutions for their personal banking needs.
attitudes, or behaviors, which stems from interaction with another individual or a group
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
Social influence is broadly defined as the ways people are influenced by the
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)
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
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,
2007).
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)
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
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
1996).
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
setting, therefore, someone they personally identify with, a person they respect
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
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,
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
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
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
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
The dynamics of social influence were extensively theorized and researched in the
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).
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
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
more correct solutions to the task. This result indicated a strong effect of minority
viewpoints.
information received from others. Persuasion focuses on written or spoken messages sent
messages carefully whenever they are motivated. Persuasion research includes two types
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).
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
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,
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,
within communication networks (Rashotte, 2007). This process can lead attitudes and
beliefs to become clustered or correlated, such that less popular beliefs become combined
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 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
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).
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).
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
However, more substantive work has been executed using expectation states
jury rooms. Status characteristics, including sex, race, sexual orientation, and physical
Moreover, research in this context has developed into an emergent area within
sociological social psychology. Scholars continue to expand the theory both theoretically
ideas about status interventions, and work on status creation (Rashotte, 2007).
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
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
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
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
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.
Moore and Moschis (1983) used the consumer socialization approach to explore
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
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
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
consumer finances, (d) attitudes toward prices, (e) materialistic attitudes, and (f) the
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
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
1997). Members of different cultures tended to show different behaviors, values, and
norms, thus the subject matter of the learning outcomes was varied across
also affected the learning outcomes based on the cultural setting (Moschis & Moore,
1982).
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
There have been numerous researches that investigated the relationship of various
differences of consumers demographics. While there has been consensus that different
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
the authors Moschis, Moore, and Churchill have been on adolescent consumer learning,
the authors offered a comprehensive understanding of the social structural constraints and
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
products.
areas, age, gender, income, and different levels of education (Power & Mont, 2010).
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
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
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
Rights, Resources and Voice, 2001). Gender differences also influence consumption
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,
2010).
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
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
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
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
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
peer influence. Using 246 adolescents, Flouri found that the influence of the mothers
religious service attendance and economic socialization were negatively correlated to the
environment such as the level of mothers materialism predicts the childrens level of
materialism.
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
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
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
retailers.
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
retailers.
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
consumers.
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
personalities, online purchasing experience, and guidance of online purchasing are factors
consumers online purchasing. Consistent to earlier online marketing studies, security and
purchases.
Other robust studies have been conducted to examine the online consumers
purchasing behavior using a target population of college students. Wang (2004) used the
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.
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
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
from a long-term competitive advantage is associated with its capacity for the
construction, distribution, and utilization of knowledge (Tsokas & Saren, 2004). The
(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
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
strategy that focuses on classifying and meeting the unknown needs and wants of
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
Single market strategy is described as a company or industry that would serve the
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
standardized products and services through identical strategies, although with lower cost
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
centered on allowing customers needs to shape the companys strategic decisions, and
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,
market strategy for the long term, and indeed may require a complete change in an
and employees at every level of the entire organization. The guidelines and action plans
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
(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
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
found that market orientation had an efficient and effective superior value for customers.
behavioral characteristics: (a) customer orientation, (b) competitor orientation and (c)
the other hand, involves determining the strengths, weaknesses, capabilities, and
the use of the firms resources for creating high benefit to target customers (Narver &
Slater, 1990).
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
orientation (Narver & Slater, 1990). The influence of a market orientation on business
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
orientation.
Atuahene-Gima (1996), on the other hand, studied 158 manufacturing and 117
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
(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
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
performance, as well as other consequences and requirements. Horng and Chen (1998)
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
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.
performance. Horng and Chen (1998) further affirmed that organizational responsiveness
was strongly related to employees' organizational commitment and esprit de corps. They
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,
relationship between market orientation and performance in their study of 441 retail
In another study, Chen et al. (2002) used 162 hospitals in Taiwan as research
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,
2002).
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
to gross domestic product (GDP) per capita, Human Development Index (HDI), and
Hofstede's individualism cultural dimension. The authors suggested that the relationship
worldwide. Their research showed stronger associations between market orientation and
Sin, Tse, Yau, Chow, and Lee (2005) investigated the relationship of market
Hong Kong, Sin et al (2005) found a positive and significant relationship between
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
customers.
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
2004).
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
decisions. Thus, there is plausible evidences that supports the use of social influence
banking institutions.
that a deeper understanding of the behavior of the consumer determines the success of the
the efficacy of information sources such as media, peers, and parents, who can improve
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-
required to implement market strategy for the long term, and indeed may require a
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
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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