Reference groups:

A reference group refers to an actual or imaginary individual or group believed to have significant
importance upon an individual’s judgements, ambitions, or behavior while making buying decisions.
They are small groups who share a set of norms, values and beliefs and consist of family members, close
friends, work groups, neighbors or any other group of people you associate with, influence our purchase
decisions.

Marketers view reference groups as important because they influence how consumers
interpret information when making purchase decisions. They often serve as our role models
and inspiration. Opinions and recommendations made by people in reference groups have a
huge impact on approach and behavior of a potential consumer hence it influence what types
of products you will purchase and which brand of product you choose (example if we wear
Levi’s jeans versus Diesel jeans, or smoke Marlboro cigarettes rather than a national brand).
Group memberships, a form of reference groups, shape our preferences because we want
others to accept us or even because we copy the actions of famous people we have never met.
Marketers might influence consumer’s product preferences by using reference group appeals
such as celebrity endorsements in advertisements.

An example of reference groups on smoking illustrates how important they are. The study
found that smokers tend to quit in groups: when one person quits, this creates a ripple effect
that motivates others in his social network to give up cigarettes as well. The researchers
followed thousands of smokers and non-smokers for more than 30 years, and also tracked
their networks of relatives, coworkers, and friends. They found out that smokers tended to
cluster together. Some social connections were more powerful than others. Husband or wife
who quit had a bigger impact than did a friend, whereas friends had more influence than
siblings. Co-workers had an influence only in small firms where everyone knew each other.
Reference group influences don’t work the same way for all types of products and consumption
activities. Consumers don’t take others’ preferences into account when choosing products that
are inexpensive and have low perceived risk or that they can try before they buy.

Reference groups influence consumers in three ways which are informational, utilitarian, and value-
expressive. Informational influence can be powerful, and is perhaps the most easily affected by a
well planned marketing strategy. Marketers might direct certain information about various
brands directly to experts or professionals who serve as reference points for consumers and also
affect their choice of a brand. The individuals obtain brand-related knowledge and experience
from those friends, neighbours, relatives or work associates who have reliable information about
the brands. The brand the individual selects has already been approved by an independent testing
agency (such as Good Housekeeping).

Utilitarian influence refers to the influence of family members and acquaintances on an

individual’s decision to purchase a particular brand. REPHRASE: To satisfy the expectation of
co-workers, the individual’s decision to buy a certain brand is influenced by their preferences.
The desire to satisfy the expectations that others have of them has an impact on consumer’s
brand choice.

Value-expressive influence sometimes gives the feeling to an individual that the purchase of a particular
brand helps show others what he or she is or would like to be, for example a successful business person,
a perfect housewife, athlete etc. The individuals feel that the purchase or use of a particular brand will
upgrade the image others have of them. For example, many people who buy high end brands such as
Salvatore Ferragamo, Louis Vuitton etc are respected or held high in regard by others in the society.
They also feel that they will become like the person shown in advertisements by using a particular
brand. They think that those who purchase or use a particular brand possess the characteristics that
they would like to have.

The degree to which reference groups are important depends on whether the item is used publicly or
privately and whether it is a necessity or a luxury. There are four categories under which relative effects
of reference groups can be observed which are publically consumed necessity, publically consumed
luxury, privately consumed necessity, and privately consumed luxury. Public necessities have weak
reference group on product purchase such as grocery items including bread, butter and strong reference
group influence on brands. For example, car, wristwatch and property. Public luxuries have strong
reference group influence on both the product and brand. Examples are golf clubs, snow skis and yacht.
Privately consumed necessity have weak reference group influence on purchase of product and
selection of brand. Examples include mattress, floor lamp and refrigerator. Lastly, privately consumed
luxury has strong influence on product and weak influence for brand. For example; TV games, rubbish
compactor and icemaker.

Reference groups can be of four types; formal versus informal groups, membership versus aspirational,
identificational and positive versus negative reference group.

A formal reference group can take the form of a large, formal organization that has a highly defined
structure, specific roles and goals, regular meeting times and officers. Informal reference group consists
of small social groups such as a group of friends or students living in a university hall of residence.
Formal groups are more easily identified and reachable so that is why they are easily influenced by the
marketers. In general, informal groups tend to have greater influence on individuals as they are more
involved in our daily life and the opinion of the group members is more important to us. For example,
our parents may play a major role in forming our values towards many important issues, such as
attitudes about marriage and the family or which university to go to. Formal groups tend to be more
product or activity specific and thus are high in comparative influence.

A membership reference group consists of people we actually know, whereas aspirational

reference group are the groups you aspire to belong to and want to join at some future time. These
are athletes, performers, or some other elite group etc. Marketers link these individuals to
products or brands that they use or endorse also take on these aspirational qualities. For
example, David Beckham endorses a number of different products including Armani. For
example, Rihanna endorsed the footwear brand Puma after which its 2016 sales rose for sneakers.
Identificational reference groups means that we tend to compare ourselves with people we know or feel
that we are similiar to. We often have similar buying patterns. Many promotional strategies
include ‘ordinary’ people whose consumption activities provide informational social
influence.  Factors that help us to know which people will become part of our identificational
membership reference group are propinquity; relationships are more likely to when physical
distance between people decreases and opportunities for interaction increase, mere
exposure; frequent contact with people may help to determine one’s set of local referents
and group cohesiveness which refers to the extent to which group members are attracted to
each other and how much each values their group membership.

Positive vs negative reference groups refers to positive or negative influence that reference
groups may have on consumption behavior. In most cases, we shape our behavior with
what is expected of us by a certain group. However, we may do the opposite if we want to
avoid that group. For example an individual who is trying to succeed as a new
management trainee may attempt through her speech dress and mannerisms to
disassociate herself from her lower social class background in order to have a
greater chance of success in her job. Another example can be of college
students reported to have consumed less alcohol and less fattening food when
drinking alcohol and eating junk food linked to avoidance group members. Alot
more motivation is required to stay away from negative group than the desire to
please a positive group.

De-individualisation refers to larger groups or those situations in which

individual’s identities get submerged within a group due to which we focus less
attention on ourselves and. Here we tend to do tasks in groups which affects our
behavior and the effort that we put in. For example, people who shop with atleast
one person may make more unplanned purchases and cover more areas of a
store than shopping alone.

Conformity refers to a change in beliefs and actions based on real or perceived

group pressures. Norms, values and informal rules are developed that controls
behavior in a society. We choose a popular brand like our group but we
differentiate ourselves by choosing a unique attribute such as color. People
accept others who have non-conforming behavior within limits.
Reasons for conformity can be cultural pressures; different cultures support
conformity to a greater or lesser degree, fear of deviance; people who do not
conform to the norms can be punished, commitment; people who are members
of a group are more motivated to do what the group wants, group unanimity, size
and power; when groups come in power, obedience of group member increases
and finally environmental cues; people are more likely to conform and accept
each other’s opinion when they are provided with a good environment such as
warm room which causes participants to feel closer.

Normative and informational social influence are types of social influence.

Normative social influence occurs when a person conforms to meet the
expectations of a person or group and informational social influence refers to the
conformity that occurs when group’s behavior is copied.

Resistance to influence may bring about innovation, create change and demand
for new products and styles. Non-conformity may mean opposing the ideas of the
group and the freedom to choose and independence will allow people to act
differently to expectations of others.

In a nutshell, marketers make use of the group situation