Presentation on theme: "Coordinate implementation of customer service strategies Lecture 5 Payman Shafiee."— Presentation transcript:
Coordinate implementation of customer service strategies Lecture 5 Payman Shafiee
Disadvantaged consumers The disadvantaged are those who are unequal in the marketplace because of characteristics that are not of their own choosing, including their age, race, ethnic minority status, and (sometimes) gender. The Age of Greed: Referred to the 1980s in the U.S.It resulted in: renewed interest in government regulation of the marketplace Increased protection of low-income consumers. a swing of the pendulum back from the laissez-faire 1 1 regulatory environment of the Reagan-Bush years 1. The doctrine stating that the government should stay out of business and economic affairs Slides by Payman Shafiee
The 80s and where we are today 1. Poverty has changed. 2. The definition of disadvantaged consumers has broadened. 3. The dimensions of consumer behavior have broadened. 4. Services are increasing in importance. 5. Receptivity to enforcement that is skewed to benefit the disadvantaged appears to be increasing. Andreasen, Alan R. Journal of Public Policy & Marketing. Chicago: Fall Vol. 12, Iss. 2; pg. 270, 6 pgs
Support for extra government regulation One major argument for reregulation put forth by Thayer 1988], Trebing , and Brobeck  is that "decontrol reallocated costs from individuals and that these costs often fell disproportionately on low- and moderate-income households" [Brobeck 1991, p. 170].
Example of Disadvantaged consumer A 1992 study carried out by New York City's Consumer Affairs Office showed that automobile drivers in low-income neighborhoods in Brooklyn and the Bronx must take out policies that cost significantly more than other New York City residential policies [Fulman 1992]. In the southern half of the Bronx, 81.6 of drivers were placed in the high-risk (and high-cost) insurance pool compared with only 16.6% in more affluent neighborhoods in Staten Island, yet 58% of the former have not had an accident or moving violation in three or more years
Example of Disadvantaged consumer The New York City Consumer Affairs Office has also found that "more than 32,000 minority homeowners in neighborhoods in Brooklyn, Queens and the Bronx have been victimized in the last seven years by home-improvement sales representatives who are essentially agents for finance companies and banks, who then charge interest rates as high as 21 percent" [Hicks 1993, p. B2]. The department alleges that the firms target these areas because the residents cannot get financing directly from banks.
60s and 70s all over again Some of the most important conclusions of the research and writing in the 1960s and 1970s: 1. The causes of the consumer problems of the disadvantaged are multiple and interacting. A review of the research to 1975 indicates that the problems that disadvantaged consumers face could be attributable to three sources, each of which had its own implications for needed interventions. The underlying causal structure appears to have changed little in the 1990s. The three main sources of their marketplace disadvantage are as follows: 1. The characteristics of the consumers themselves-The disadvantaged are often poor, undereducated, and unemployed. This makes it difficult for them to afford lower-priced, large-sized products; restricts their access to credit and free bank checking; and restricts their mobility to shop outside poor neighborhoods. The latter is an even greater problem for ethnic minorities who often feel unwelcome in shops outside their own neighborhoods. 2. The characteristics of the marketplaces in which they shop-As Bell and Burlin and the New York City studies cited previously make clear, a major cause of the higher food prices paid by disadvantaged consumers is the market structure they face.
60s and 70s all over again 3. The rapacious behaviors of the sellers they encounter-Research makes clear that there are always merchants who will take advantage of the lack of mobility of disadvantaged consumers and the absence of competition in disadvantaged marketplaces to charge exorbitant prices for products and unconscionable interest rates on consumer loans. These same merchants are the ones who will trick the elderly into buying hearing aids by playing on their fears of aging and senility or who will sell expensive encyclopedias to the poor or blacks by playing on fears that their children will not rise above their present circumstances. Marketing researchers in the 1960s and 1970s were unwilling to delve deeper than the most superficial revelations. For instante Consider poverty-being poor is not just a matter of having less money. As a wide range of studies has shown, being poor means that one is also much more likely to be young, uneducated, a member of a minority group, in a single-parent household, and living in isolated pools of urban poverty. As Wilson , Peterson , and others have pointed out, the United States has a distinctive underclass that has proved remarkably resistant to change over the last 20 years despite significant increases in social welfare spending. It may well be that we do not understand the underclass at a level of insight that yields effective solutions
60s and 70s all over again 2. The disadvantaged are qualitatively, not just quantitatively, different from the middle class. Marketing researchers in the 1960s and 1970s were unwilling to delve deeper than the most superficial revelations. For instant: Consider poverty-being poor is not just a matter of having less money. As a wide range of studies has shown, being poor means that one is also much more likely to be young, uneducated, a member of a minority group, in a single-parent household, and living in isolated pools of urban poverty. As Wilson , Peterson , and others have pointed out, the United States has a distinctive underclass that has proved remarkably resistant to change over the last 20 years despite significant increases in social welfare spending. It may well be that we do not understand the underclass at a level of insight that yields effective solutions
60s and 70s all over again 3. The complexity of disadvantaged cultures requires careful disentangling of cause and effect relationships. Because many markers of disadvantage (age, race, income) are associated with other traits that we know are associated with consumer behavior, it is extremely important that we understand what really is driving specific problems. For example, in the 1970s there was a good deal of interest in the consumer problems of blacks. Several authors expressed concern over what they labeled "compensatory consumption," the purchase of upscale products and brands by minorities as a way of compensating for the fact that society denied them access to good jobs, good housing, nice country clubs, and so on [Caplovitz 1967]. As supporting evidence, speakers would point to the well-documented finding that blacks spent proportionately more on clothing than whites of equal incomes. However, as Andreasen and Hodges  noted at the time, virtually all of the differences between blacks and whites in clothing expenditures could be explained by other characteristics associated with race, including larger family sizes, (then) higher rates of multiple earners, earlier stapes in the family life cycle, residence in urban areas, and so on.
60s and 70s all over again 5. Solutions should not be limited to regulatory intervention. Perhaps as few as 1 of all complaints find their way into the hands of Better Business Bureaus or to local, state, and federal regulatory agencies. If we are to combat problems of rapacious sellers preying on the disadvantaged, the logical place to start is with consumer self-help This means that we need to understand much more about the extent to which disadvantaged consumers act in their own interest to protect themselves from shoddy treatment in the marketplace. The results to date are problematic. It appears that many disadvantaged groups (e.g., the poor and elderly) do not perceive as many problems with their purchases as others do and are less likely to speak up about them when they do perceive problems. What we do not know is, for example, whether this is because they purchase fewer goods and services-so less can go wrong; they purchase simpler goods and services-so less can go wrong; they shop more carefully because they have fewer resources; they have lower standards or aspirations, perhaps because of their present circumstances (in the case of the poor), their past circumstances (in the case of immigrants), or the era in which they grew up (in the case of the elderly); they fear they will compromise their limited access to goods and services; they believe they will have less success in making the complaint system work; and they are less sophisticated about detecting problems and where to go to cope with them.
NEW PROBLEMS 1. Poverty has changed The poor in the United States today are much more often single parents and their children concentrated in the city Poverty among the elderly has declined significantly Long-term joblessness is a much more serious cause of poverty, especially among blacks and those without higher education There are more unwed mothers in poverty. The high school drop out rate among both white and black poor has decreased and reading and mathematical skills for these groups have improved Teenage motherhood and violence appear to have declined somewhat drug use appears to be a more serious correlate of poverty in the 1990s and drug sale is a more frequent contributor to the cycle of poverty in poor neighborhoods [cf. Jencks 1991] Therefore models used to explain the problems of disadvantaged consumers must be adjusted to accommodate this new environment
NEW PROBLEMS 2. The definition of disadvantaged consumers has broadened. In 1975, the major groups of interest were the poor and the racial minorities and, to a lesser extent, children and the e elderly. Today, the group would be broadened to include the physically handicapped. ethnic minorities, including recent immigrants [cf. Andreasen 1982], and, in some special cases such as automobile shopping, women. This broadened definition should spawn a range of new concerns and populations to investigate 3. Services are increasing in importance. As is well known, the U.S. economy has become dominated by services. However, much of past interest in the problems of the disadvantaged has focused on products (e.g., supermarket or prescription drug prices). Today, as the research of Brobeck  and the New York City Consumer Affairs Commissioner has made clear, we need to pay more attention to the effect of practices in service industries such as insurance, banking, and telephone service on the disadvantaged.
NEW PROBLEMS 4. Receptively to enforcement that is skewed to benefit the disadvantaged appears to be increasing 5. The recession has increased the intensity of consumer problems while reducing the ability of local agencies to respond to these problems. Recessions often bring out the worst behavior of ordinarily respectable merchants who, faced with declining profits, are less likely to "do the right thing" ["Dark Days for Consumer Agencies" 1993].