A group consists of two or more individuals who share a set of norms, values or beliefs and have a defined relationship such that their behaviour is interdependent.

Reference Groups are basically small in size and differ from one individual to another. Family members, Relative, Friends, Colleagues and other close acquaintance are usually termed as Reference Group. Common organizations like Colleges, Schools, Police Academies and membership firms also fall under Reference Group.

Characteristics of Reference Groups

• Reference Group consists of people who share interests in common
• People in reference groups are sought for before any real purchase decision is made
• Opinions or recommendations made by people in Reference Groups have a huge impact on the approach and behaviour of a potential consumer
• Reference Groups many a times acts as the factor responsible for creating aspirations in other members of the group
• Reference Group tends to provide ideas pertaining to products that can be purchased with reference to specific lifestyles
• Reference Groups play an important role in setting standards pertaining to purchase decisions made from time to time
• Reference Groups become successful when homogeneity is found in the same
• Some Reference Group that are common to public exert pressures related to conformity to set rules
• All members associated with the group are expected to certain rules and regulations set through mutual understanding

Nature of Reference Group

• Norms – These are unwritten codes or standards of conduct that are assigned to an individual within a group.
• Roles – These are functions that an individual assumes or that the group assigns to an individual to attain group objectives. E.g. The influencer, the gatekeeper, decision maker, purchaser, consumer
• Status – It is the position of authority that is designated within a group. High status implies greater power and influence.
• Socialisation – It is the process by which an individual learns the group norms and role expectations.

Types of reference group

(1) Aspirational Groups – These are groups in which people are not members but desires to become one on a future date. The aspiration may become true once they are ready to join the group at the future point of time. The influences exerted by such group members on consumers make them join many groups every now and then.

(2) Primary and Secondary Groups – Primary Groups are basically ones whose members are closely knit. Family and relatives fall in this group Secondary Groups are not as closely knit as Primary Groups. They may be memberships in clubs where the meeting may happen only once a while. The influence exerted by both the Primary and Secondary Group members play a crucial role in the decision making process pertaining to purchase of goods and services

(3) Non-Membership and Membership Groups – As the very name suggests, Membership Groups are the ones which insist on people to become members to avail benefits offered by the same. Non-Membership group are general groups in which one associate them for keeping self updated about certain aspects of their interest. Such groups do not insist on any type of memberships. The influence exerted by Membership groups on consumers and their purchase decisions are many a times higher than that of the same from non-membership groups. This is mainly because of the adherence levels exhibited in Membership groups

(4) Formal and Informal Groups – While formal groups are bound by set rules and regulations Informal groups lack the same. The unstructured nature of Informal groups tends to exert lesser influence over consumer preferences than the Formal Groups which are highly structured. Due to the structure nature of Formal groups, the influence on the group members with respect to various aspects is generally high.

Influence of reference groups on consumer behaviour

The influence of reference groups depends upon –

• An individuals information and experience
• Credibility of the group
• Attitude towards the group
• The nature of the product

The involvement of members in a group can range anywhere between a simple one or one with high dedication levels. It can be divided into:

• Compliant
• Identity
• Internalization

Compliant – This type of group members remain in a group paying the set membership fees, participating in the meetings and other get together in the instructed manner and adhere to things like dress code etc. during all occasions. They do not undergo any change as far as their attitude and personality is concerned just because they are the members of the group. In a typical consumer scenario, being one of the members of the group, people tend to go in for the brands and products when the same is suggested by another group member.

Identity – People of this type tend to mend their attitudes and ideas to suit the objectives of the organization they associate themselves with. They will be more inclined towards attaching themselves with the group through services and other such activities. They express their pride in being one of the group members and show this as their key identity. In a real life purchase decision making scenario, any consumer who identifies himself with the group he is associated with, respects the opinion of the group members more than any other thing

Internalization – The involvement levels of people who fall in this category are very high. Not only they act highly dedicated to the group but they pull in others into the group. They motivate other members of the group to get involved in a deeper manner. They become one with the group. Anyone with such high levels of involvement in groups will go in for recommendations from other in the group with respect to their purchase decisions. They try to influence the purchase decision of others also basing the same on the recommendations of other group members.

Many factors pertaining to Reference Groups tend to influence consumers and their purchase related decisions. Three factors concerned with Reference Groups are Norms, Status and Roles.

(1) Norms are rules set by Reference Groups in writing. People who belong to the Group are expected to adhere to the same at all points of time. Norms force consumers to go in for certain options as a part of their adherence process.

(2) Status of members in the reference Groups matter the most when it comes to decision making pertaining to purchase. Member who are highly positioned within a group have the power to take the final decision of purchase. For instance, in the case of a family, the Father holds an upper hand in decision making pertaining to purchases.

(3) Roles here refer to the part played by every member of the reference group. In a typical family environment, each family member plays a different role like gatekeeper, initiator, decision maker, influencer and many more.

Categories of Reference Groups

The four categories are Normative Groups, Comparative Reference Groups, Status Reference Groups and Dissociative Groups.

(1) Normative Groups Park and Lessig – A consumer is motivated to conform to the norms and behaviour of the group if :

• The group provides significant rewards for the compliance     
• The individual’s behaviour in conforming is visible to the member

These are the groups that care for set norms and ensure that the same are held up at all points of time. Influence exerted on the consumer by such Normative Groups is many a time subjective. This type of influence is also termed as Utilitarian Influence. Any group expectation getting fulfilled by one of the individuals in the group is referred to as Utilitarian Influence. For instance, when you purchase a refrigerator brand suggested by your family member without choosing the one of your choice, the influence is called as Utilitarian. Young students who avoid wearing certain style of clothes for the fear of getting mocked by his friends experiences the type influence common to Normative groups.

(2) Comparative Reference Groups –These are groups with whom the individual compares himself and his attitudes. They provide a basis for validating beliefs, values and attitudes.  Value expressive influence.

Getting influenced by a likeminded neighbor is a typical happening that can be witnessed in Comparative Reference Groups. The main characteristics of such groups is the validation of practices and belief systems that happen between people who belong to the group. The influence exerted in such type of groups is termed as Value Expressive Influence. The reason for the term ‘Value expressive’ is the uniformity in thoughts and belief systems that prevails between the members of the group. For instance such a group members may be of the same opinion when it comes to smoking or drinking habit.

(3) Status Reference Groups –A group in which one refers to the position or status of the people in a group before making a purchase decision.

This group is also called as Aspiration Group since anyone who wants to exert influence being a member of this group may do so based on his status. The higher the status in the group, the more intense the influence exerted on other group members.

(4) Dissociative Groups – Some individuals do not want to be linked to, or identified by a group of individuals and try to dissociate themselves from the group.

Many a times, people wish to and dissociate themselves from a group which they consider as a ‘not suitable one’ for themselves. For instance, in a typical office scenario, a person may not want himself to be identified with a group of people who are considered as dishonest. He tends to dissociate himself from them. As a consumer, he keeps away from buying the products and brands any of the other group members buys.

Application of Reference groups in Marketing of a product –

Product purchases can be influenced by using the following to promote products:

• Celebrities
• Experts and Professionals in the relevant field
• Good spokesperson
• Opinion leaders

Characteristics of groups influencing Consumer Behaviour

• People who associate themselves with a group adhere to norms that are common to all in the group
• Their beliefs and value system complement each others’ thoughts
• They share a relationship that is either direct or indirect by nature
• Their approach towards each other in taking decisions is mutual and interdependent
• Every member of the group learn many crucial things from others present in the group

The above characteristics enable organizations to device their marketing mix based on the approach and behaviour of each individual group. Stratification is thus leveraged to the marketing advantage of organizations which focuses on tapping the right set of customers for selling their products and services.

Reference Group and Social Power

The influence of reference groups on Consumer Behaviour is felt through the influence of Social power. The following powers are used to influence individuals in a group:

(1) Reward Power – It is the power to restrict or allocate material resources and rewards to a person. 

Consumers are offered rewards in the form of cash and kind whenever they yield to the influences of the group they are associated with.

(2) Coercive Power – It is the power based on application of fear, pain, restrictions etc. on a person.

Many a times, consumers are threatened to go in for certain brands or to avoid a particular brand. Here coerciveness acts as the main power and so is termed as Coercive Power

(3) Legitimate Power – This power is based on  the position of a person in an organization or social unit.

As the terminology implies, when someone gets what is legitimately due to them as a consumer, it is termed as Legitimate Power

(4) Referent Power –  A person tries to copy the behaviour of another person whom he takes as an idol and wants to be identified as him. The referent power lies with the person whose personality characteristics others try to copy and are attracted towards him.

(5) Expert Power – It is one`s power to withhold information from others. It is based upon one`s experience, special skill, or knowledge.

The behaviour of consumers tend to get modified when a person who is an expert in the product or area of interest vouches otherwise. The expertise power rules over purchase decision made by the consumers to a great extent.

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