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Consumer preferences in American capitalistic society

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CONSUMER PREFERENCES
IN AMERICAN CAPITALISTIC SOCIETY
A Dissertation
Presented to
the Faculty of the Department of Economics
University of Southern California
In Partial Fulfillment
of the Requirements for the Degree
Doctor of Philosophy
Department of'Economics
by
Paul V. Sheehan
December 194-1
UMI Number: DP23226
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T h is d is s e rta tio n , w r it t e n by
............... PAUL..V.....SM3HAN.............
u n d e r the g u id a n c e o f h i s . . F a c u lt y C o m m it te e
on S tu d ie s, a n d a p p r o v e d by a l l its m em b ers, has
been p re se n te d to a n d a ccep ted by the C o u n c i l
on G ra d u a te S t u d y a n d R esearch, in p a r t i a l f u l ­
f i l l m e n t o f re q u ire m e n ts f o r the degree o f
D O C T O R ^O F ~ P H Z L OSO P H Y
Secretary
D a te
De_c ember.
C om m ittee on Studies
C hairm an
S3
TABLE OP CONTENTS
CHAPTER.
.'I.
.
.PAGE
INTRODUCTION.......... . . . . . . . . . . . .
*
1
The problem
3
The procedure •
7
Who Is the consumer?.
...........
8
Other definitions . . . . . . . . . . . . .
12
Basic ass^^mptions . . . . . . . . . . . . . .
16
II. CLASSIFICATION OP PRODUCTS
ACCORDING TO MEANINGS. .
..............
18
What Is choice? • • • • • • • . . . . * . .
19
What, is a product?*
.
21
Necessities, comforts, decencies,
and luxuries . . . . . . . . . . . . . .
Goods classified according to resistance.
Modes of living
24
.
27
..........
36
Effect of income on mode .of living. . . . .
40
Influence of education and environment. . •
47
C o n c l u s i o n s ................................
52
III, CONSUMER DEMAND.AS AFFECTED BY RESISTANCE.
.-
54
Indifference curve analysis . . . . . . . .
56
Consumer preferences in the short run . . .
59
Consumer preferences in the. long run. . . .
61
Principle of diminishing utility. . . . . .
63
CHAPTER
PAGE
Substitutability and complementariness
of products.
..............
66
Elasticity of demand.
...................
71
■Conclusions . .........
. . . . . . . . . .
77
IV. THE RESISTANCE FACTOR IN PRODUCT'
;DIFFERENTIATION.
.
...................
79
Product differentiation ...................
80
General and specific competition.
. . . . .
83
Competition in the short run. • • » . . . .
85
Competition in the long run. . . . . . . .
89
Sales policies of sellers
. -...............
Conclusions
V.
CONSTJMER TIME
91
.
PREFERENCE. . . . . . . . . . .
The propensity to save.
97
..........
105
..........
C o n c l u s i o n s ................................
VI. CONSUMER PLACE PREFERENCE .
..
95
.............
The factor of durability.
Consumer credit
93
108
Ill
...........
114
Convenience, shopping andspecialty goods .
116
Relation of price and inconvenience
. 119
Non-resistance attitudes towards'
inconvenience.
C o n c l u s i o n s ..........
.....................
122
124
Iv
CHAPTER
VII.
■PAGE
.............
125
. . . . . . . . . . .
127
CGNSUMER BUYING MOTIVATION.
Primary motivation.
The psychological theory of adjustment. •
132,
Social influences •
135
Will...................
Habit
. .
...........
139
...................
142
Consciousness of motives. . . . . . . . .
145
Conclusions
148
........................
VIII. .DEMAND STIMULATION.............. . . . . . .
150
The subjective approach . . . . . . . . .
151
The objective approach..............
155
Quantitative emphasis . . . . . . . . . .
156
Criticism of sales theories .............
157
Ethical significance.
160
. . . . . . . . . .
The resistance factor in demand
stimulation. . . . . . . . . . . . . .
165
Quality and price . . . . . . . . . . . .
170
Complementary goods . . . . . . . . . . .
171
Resistance to selling methods ...........
173
Enhancing the meanings of g o o d s ...
174
Classification of appeals according to
media. . . . . . . .
Conclusions . . . .
........
. . . .
176
. . . . .
179
IX.
GENERAL CONCLUSIONS ’...................
X.
BIBLIOGRAPHY.
........................
181
193-203
CHAPTER I
INTRODUCTION
The subject of consumption has been treated from
many angles by a host of writers.
Many of them have
merely tried to explain how the consumer acts, others have
set up standards to show how he should act,•and yet others
have attempted to explain how he can be influenced to act.
Those whose work may be considered as standard in
the first category are Nystrom,1 Waite,^ and Wyand,3 though
these three are only a few of the many who have dealt with
the subject.
Hazel Kyrk might be considered a fair represen
tative of those who have set up standards to show the
consumer how he should act.^
Varied and numerous are the
points of view expressed by those who may be considered as
belonging in the third classification.
Kitson,3
1 Paul H. Nystrom, Economic Principles of Consumption
(New York* The Ronald Press Company^ cl929)•
^ Warren C. Waite,
McGraw-Hill Book Company,
Cassady, The Consumer and
McGraw-Hill Book Company,
York:
Economics of Consumption (New York
1926).
See also Waite and Ralph
the Economic Order (New York:
193917
• 3 Charles S. Wyand, The Economics of Consumption (New
The Macmillan Company, 1937).
4 A Theory of Consumption (Boston: Houghton Mifflin
Company, 1923) .and Economic Problems of the Family (New.York
Harper & Brothers, 1633)'.
3 Harry D. Kitson, The Mind of the Buyer (New York:
The Macmillan Company, 1921)•
-- 2
Scott,® and Strong*'* deserve special recognition because they
were pioneers in the third field.
It is interesting to note, by a comparison of publi­
cation records, quantitatively speaking, the increased
attention given to methods of influencing demand.
The
Library of Congress listed a single volume on the subject
of salesmanship for the year 1869.
another was recorded.®
Between 1870 and 1880 .
Between 1920 and 1930, however, 294
books were registered.®
This does not take periodical
literature into account.
The more strenuous efforts devoted to demand stimu­
lation In the last few decades have not been without
reaction.
The repercussion has taken form in the mass of
literature^published in indictment of m o d e m methods of
influencing demand.-*-®
Kallet and S c h l l n k H and Stuart
® Walter Dill Scott, The Psychology of Advertising
(Boston:
Small, Maynard & Compahy, c1902; and Influencing
Men in Business, Third Edition, (New York: The Ronald
Press Company, cl928).
7 Edward K. Strong, .Jr., The Psychology of Selling
and Advertising (New'York: McGraw-Hill Book Company, 1925)
and Psychological Aspects of Business (New York:
McGrawHill Book C ompany, 1938').
. ® The Psychology of Selling and Advertising, p. 8,
Fn. 7.
9 H. K. Nixon, Principles of Selling (New York:
McGraw-Hill Book Company, 1931), p. 14.
1® Cf. -Ruth O ’Brien, "An Argument for Consumer Goods
Standards.-"”- Printers’ Ink Weekly, CLXVIII:13 (Sept. 27,
1934), pp. 63-65.
Arthur Kallet and F. J. Schlink, 100,000,000 Guinea _
Pigs (New York: The Vanguard Press, 1933).
Chasel^ are leaders In an acrimonious denunciation of what
they have taken to he practices of mulcting the public.
These men have advocated the setting up of consumer goods
standards to replace brands and trade names.
I.
THE PROBLEM
When economists assume the existence of pure com­
petition, they postulate conditions under which individual
producers profit by their abilities to satisfy human
de3lr.es, which, presumably, they are tanable to influence. 13
Assuming a large number of sellers and homogeneity of
products, even a very large advertising expenditure by one
firm would have at best a small, virtually negligible effect
on total demand.
Demand Is taken to be in existence and the
costs of the entrepreneur are incurred to meet it but not to
alter It. ■ Changes In demand are consequently met but not
consciously Influenced by producers.
As a result of their
long preoccupation with pure competition, economists have
generally left the subject of demand stimulation to students
I*16 Tragedy of Waste (Hew York:
Company, 1926)*
The Macmillan
(
13 Cf. Edward Chamberlin, The Theory of Monopolistic
Competition, Third Edition, Harvard Economic Studies, No. 38
(Cambridge: Harvard University Press, 1939), pp. 117-129.
Also A. R. B u m s , The Decline of Competition (New York:
McGraw-Hill Book Company, 1936T7 PP» 372-417, and C. A.
Stocking, ’’Modern Advertising and Economic Theory,” The
American Economic.Review, X X I :1 (March, 1931) 43-55.
and practitioners In the field of business.
Though sales­
manship and advertising have been introduced into college
of business curricula, many teachers have insulated them­
selves' against economic principles and confined their
explorations to the field of motivation or to pressure
techniques.
More recent theory has taken cognizance of the
element of monopoly created by product differentiation and
has recognized the significance not only of price and nature
of product, but also of selling outlays.3-4
With the
recognition of the importance of nonprice competition,
economists are beginning to- provide a place in economic
theory for the subject of demand stimulation, but a gap
still separates the two.
It is the purpose of this study to
bridge this gap.
In doing this we shall consider the first and the
third sxibjects mentioned on page one of this section:
namely, an investigation of how the consumer acts and an
analysis of how he can be influenced to act.
logically a prerequisite to the latter.
The former is
We shall do this
by setting up a basis for the determination of consumer
behavior according to the factor of resistance, an ever­
14 Edward Chamberlin, op. cit., p. 117 and Horace G.
White, Jr., "A Review of Monopolistic and Imperfect Com­
petition Theories," The American Economic Review. XXVI:4
(Dec., 1936) 644.
present element of deliberation and judgment in choice.
Our
thesis is that attitudes of insistence and resistance are
developed by consumers, and that these give us our best
basis for 'understanding buyer selection.
The need in under-,
taking such a task is not that of exploring new land so much
as it is that of harrowing ground already tilled.
Selection,
evaluation, restatement, and synthesis are probably more
prevalent here than originality.
The science of economics has been predicated upon one
very important premise, the assumption that human wants in
the aggregate exceed human capacity to satisfy those wants.
If there are more wants than there can be gratifications,
some wants must remain unsatisfied and, since this is true,
there must be some selection of the particular satisfactions
to be enjoyed.
This selection is known as choice.
In a
primitive society, man would devote his endeavors to par­
ticular tasks in order to attain certain gratifications.
He
could spend more or less time hunting and fishing, more or
less time improving the hut in which he lived, or more or
less time making clothes and decorations for his body, but
the more time he devoted to any one of these, the less time
he would have to give to the others.
The total of wants
satisfied would depend partly upon the opportunities offered
by the locality in which the man lived and partly upon the
expenditure of effort which he was both able and willing
to make.
6
In a more civilized society, man participates in the
kind of production in which he is most efficient and,
through m o d e m mechanisms of exchange, he secures the pro­
duction of others.
is made is money.
The medium through which the exchange
If .the man of today wants a commodity
of any kind he does not ordinarily set out to make it himself
but usually goes to someone who already possesses such an
object and offers to purchase it with money.
Every exchange transaction involves a seller, an
object, and a buyer.
The terms "seller" and "buyer" refer
to the actions of persons based on subjective choice.
The
"object," being the pawn in the game, is of importance only
in so far as it has certain meanings to the seller and to
the buyer.
Since this study is confined to an analysis of con­
sumer preferences, the seller-object-buyer relationship will
be approached from the point of view of the consumer.
The
problem is that of establishing some basis for determining
consumer preferences by a consideration of certain general
characteristics of human nature in its relationship to •
environment.
It will be assumed that sellers, objects, and
buyers do exist and that these objects, which we shall refer
to as products, commodities, or goods, have certain capaci­
ties or powers to satisfy human desires.
They are popularly
said to have "utility" because there are persons whose
desires they may satisfy.
It must be recognized that these
capacities or powers are the result of a relationship with
a subject, for a commodity has no intrinsic value.of itself
other -than in so far as it has meanings to a human being.
Articles lying at the bottom of the sea have no value if
they cannot be reclaimed by men, and, if all the people on
an island were to die of a contagious disease, the goods
they left would have no utility unless they could be
acquired by other people.
It Is the relative Importance of
commodities to human beings that will be considered in this
study.
II.
.THE PROCEDURE
In the chapters that follow, we shall consider goods
In their relationships with human beings according to con­
sumer attitudes of resistance or non-resistance.
The
importance of habits, as human cultivations resulting from
both individual experiences and environmental influences,
will be analyzed.
Though we cannot observe the subjective
resistance of the consumer at work, we can take account of
the influence of this internal factor in his inertia to
change, his hesitance to spend money, his disdain for
inconvenience, and his opposition to sales pressure.
It
would be Impossible to treat the many and minute differences
among individual consumers; hence we must limit our
observations to groups.
It must be remembered that, in
referring to individuals, we are always thinking of those
only who are representative or characteristio of groups.
Demand will be analyzed under- both static and dynamic
conditions; thus the time factor will be elevated to a
place of prominence in our study.
The resistance factor
will be dealt with under different competitive conditions
and will be considered in relation to marginal utility
analysis, time preference, and place preference.
After a general analysis of types of products in
their relationship to human beings according to consumer
attitudes of resistance or non resistance, some attention
will be given to buyer motivation under present-day economic
and social conditions.
then be presented.
An evaluation of sales theories will
The older individualistic theory of
"attention, interest, desire, action” will be compared to
the later "situation-response" and ”want-solution” theories.
Comparison of the objective methods of influencing demand
with the more subjective theories will also be made.
And,
finally, a synthesis will be presented.
III.
WHO IS THE CONSUMER?
Hot the least of the problems involved in a study of
consumer preferences is a careful definition of the term
"consumer.”
Economists have-long set up a hypothetical
person called the ’’economic man"; psychologist's have used
a fictitious being that might be called a "psychological
man"; salesmen have commonly referred to an assumed in­
dividual known as a "prospect"; and students of the
economics of consumption have Inferred a person called a
"consumer."
Ordinarily, a ’consumer is defined as a human being
who destroys or at least partly deteriorates goods.
Nystrom
points out, however, that in'a few cases the value of goods
"consumed" does not shrink and that now and then it even
increases.15
He had in mind certain kinds of art work.
R. B. Perry’s definition of consumption as "use" and not
"metamorphosis" or "annihilation" is much more helpful.-*-®
But because we must distinguish between those who buy goods
for use directly in the gratification of desires, such as
those who purchase food to satisfy hunger, and those who buy
foods for use indirectly in the satisfaction of a desire,
such as purchasers of producers’ goods, it is better to de­
fine consumption as direct use of a commodity in the
satisfaction of a desire.
A consumer, then, is an ultimate
or retail buyer or one who buys products for his own direct
use.
cit., pp. 34-35.
"Economic Value and Moral Value," The Quarterly
Journal of Economics. XXX;3, (May, 1916) 451-452.
10
The term 11consumer" or "ultimate buyer" often con­
notes a collective significance.
When a person says that
the-American buyer bought fewer -durable goods during the
years 1929-1933 than he did in the years directly preceding,
he does not necessarily mean that any one individual bought
fewer durable commodities, but that American buyers as a
whole decreased their purchases.
A few might have increased
them but buyers, collectively speaking, did not.
The use of
■singular number does not imply an average buyer so much as
it does a characteristic one— one whose actions in certain
respects conform to those of a group.
The more inclusive the term the more general the
implications.
Yet even the general expression, the American
buyer, must connote certain meanings to those who hear the
word used.
To apply more specific meanings, "buyer" may be
broken down into more limited classifications;
we use such
phrases as "the American housewife," "the American business
man," "the American laborer," etc.
Consumers may best be
classified according to age, sex, family, habits, customs,
standard of living, geographic area, occupation, purchasing
power, and education, though much more general classifi­
cations may be used.
p. 8.
It is realized that these may overlap,
11
and that a group could be defined according to several of
these classifications.
Although the consumer is spoken of as an individual
throughout these pages the implication is that he is a
characteristic person who conforms in certain respects to a
group.
In our analysis of motivation, for instance, we are
searching for what is common or uniform and not for the un­
usual i n .the reaction of the American buyer to certain
stimuli.
Since it has long been recognized that there is
some behavior common to most human beings in any society, it
is possible to use the term "consumer'1 in a very broad sense
to signify the buyers of a country as a whole.
This usage
will be made in dealing with consumer motivation, but
usually the term will be used in reference to a much smaller
group.
The consumer, then, may be said to be an ultimate or
retail buyer, characteristic of a large or small group, who
as a result of motivation and purchasing power, displays
certain preferences in his purchases of goods or services.
The preferences we shall study are those common to many
persons who live ■under similar economic and social con­
ditions.
Preferences which are peculiar to separate
individuals present problems in personal differences which
are'beyond the scope of a work as limited as this.
12
IV.
OTHER DEFINITIONS
Other words besides that of "constonier11 which need
definition are "habit," "custom," "fashion," "mores," and
"Institution."
Expressions not included in this classifi­
cation will be defined as they are used.
A habit, which is a conditioned reflex, is, simply
speaking, a learned method of responding to a particular
stimulus.^®
Dickinson speaks of it as "a matter of per­
forming a certain chain of acts in serial fashion."
Import­
ant principles governing the process are contiguity,
frequency, recency, and similarity.
One constituent reflex
"serves as stimulus to the next one, and so on to the end
of the series."!®
An interesting economic consideration of
the term is that of considering a habit as a "rational
defense" for the consumer, who would rather rely on past
judgment than sacrifice leisure in the painful task of
making decisions.2®' Though habit does relieve the consumer
of making endless decisions, we shall consider it a learned
method of responding to particular stimuli as a result of
experience rather than a course of action determined by
18 Cf. L. F. Shaffer, The Psychology of Adjustment
(Boston; Houghton Mifflin Gompany, cl936 j, pp. 106-107.
!® Z.- C. Dickinson, Economic Motives, Harvard Economic
Studies, No. 24 (Cambridge; The Harvard University Press,
1922), p. 145.
Cf. Henry Smith, "A Note on Time Elasticity of
Demand," Economica, IV(New Series);15 (August, 1937) 315.
13
rationalization upon the utility to be derived, from leisure.
It is true that the individual often takes stock of
his habits and evaluates them with consequent resolutions
to break some that have been developed and to acquire others.
The complex of habits may even be spoken of as the character
of the individual, for in their totality these tendencies of
response account for much of the behavior of the human being.
Yet many habits result from action that was originally no
more than experimentation and hence cannot be spoken of as
springing from rationalization.
Most habits are prompted
partly or wholly by environmental conditions.
The principal difference between a habit and.an in­
stinct is that a habit is an acquired tendency to act or
think in a certain way as a result of a particular stimulus,
whereas an instinct is a natural or innate tendency to act
in a certain way as the result of a particular stimulus.
The phrase "a custom," like the phrases "a conven­
tion," "a prestige," or "a fashion," is a term used to
indicate the power which the group exerts over the individual
member.^
Habits which are common to many members of a
group are likely to be accepted and imitated by others.
Imitation, education, or inculcation may be responsible for
the passing of some customs from one generation to another.
21 Cf. z. C. Dickinson,
0 £.
cit.'. p. 216.
14
Keller offers an interesting explanation of customs
by stating that they can be classified in a broad way ac­
cording to the "large and comprehensive interests of life."
By constant attempts to satisfy hunger-interests, loveinterests, and vanity-interests and to allay fear-interests,
men have unconsciously built customs around these interests.
In extracting a living out of the physical environment,
. to meet hunger, they fell into common ways of adjust­
ment to nature, so- that whole peoples are describable
on the basis of the methods by which they meet their'
hunger-interests; hunters, herders, tillers. These
ways are the germ of all economic institutions, for
trade, transportation, and the mechanism of exchange are
really no more than instruments for handling the
products of the extractive industries...22
Summarizing an analysis previously made by Sumner,23
Keller distinguishes mores from folkways by tabbing the
latter as "popular usages and traditions," such as the
tipping of the hat to women.
Mores are more definitely
fixed because they are "regarded as positively essential to
the welfare of society."
Honesty is an example.2^
Prom "clusters" of customs that arise to satisfy
human interests society has "carved, like statues from rough
blocks of stone," all its institutions.2^
crescive or enacted.
These may be
Grescive institutions start with
22 a. G-. Keller, M a n 1s Rough Road (New York:
Frederick A. Stokes Company, 19327," P« 27.
25 W. GY Sumner, Folkways (Boston:
1907).
24 Qp, cit., p. 28.
25 Loc. cit.
Ginn and Company,
15
folkways, become customs, "take shape" in mores, become
fixed by rules— and the struct\;ire is complete.
marriage, and religion are primary forms.
Property,
Enacted insti­
tutions are "products of rational invention and intention."
Current usages are considered in the light of experience
and systematization and regulation are provided.
Banks are
an example.26
Summarizing the distinctions between habit, custom,
fashion, mores, and institution, we think of a habit as an
individual tendency resulting partly from repetition in
thought or action.
Whereas the term "habit" applies to the
individual, the term "custom" applies to the group.
A cus­
tom is a tendency for a group to act in a particular manner.
A fashion is a kind of custom, resulting from the
tendency of a group to imitate certain members.
It is
many times a style or mode forced upon the group by com­
mercial interests.
Often of short duration, fashion is
exemplified in current styles of dress.
Mores have an
ethical implication and are usually the result of a belief
that has become virtually an unwritten law.
Institutions
are procedures that have become crystallized and structuralized over generations and centuries.
Habits, customs, fashions, mores, and institutions
26 W. G. Sumner,
o jd .
cit., pp. 55-54.
16
are often said to limit the choice of action of the consumer,
hut such-a statement needs'qualification.
The subject will
be dealt with in the following chapter.
V.
BASIC ASSUMPTIONS
Certain basic assumptions are necessary in carrying
to its conclusion a study of this kind.
As has already been
implied, sellers, products, and consumers will be assumed to
exist.
Then, as the title implies, this study will be
limited to American capitalistic society.
Private property,
individual initiative and enterprise* and opportunity for
profits are thus implied.
Relative freedom from governmental price-fixing and
governmental interference with consumer selection of
products is also assumed, although these may exist in
limited degree.
Consumer preferences would exist under
conditions of wide-scale price-fixing but, to a certain
extent, both choice and methods of influencing demand would
be affected.
exists,
This study assumes that some price competition
it also supposes relative freedom of the buyer i n -
his selection of product, though it is recognized that
external or' social influences often limit the choice of the
consumer.
Methods of influencing demand such as are in operation
in the United States will be taken for granted* therefore
conditions of monopolistic competition will be assumed.
Product differentiation will, as a result, be considered
condition of fact.
CHAPTER'II
CLASSIFICATION .OF PRODUCTS ACCORDING- TO MEANINGS
Although no distinction is commonly made between a
want and a desire, it is wise to distinguish between the
two terms in the pages that follow.
Haney’s discriminating
definitions of these words are helpful.
A want he defines
as a "sustained tendency of the subject toward the object,"
which has served as an exterior stimulus.
He says;
The individual, without being conscious of motive, or
knowing the means of satisfying It, tends to a ct in a
non-purposive way with reference to the stimulus that
comes from the object. He may come to "feel" a sort of
vague general appreciation of the object, which may be
described as an Imputation of utility.1
A desire, on the other hand,
"is_ a tendency in which
the difference between subject and object is consciously
recognized by the subject, whose reaction to the object is
affected by a consciousness of dependency upon it which is
not present in a mere want.
The action tendency resulting
from desire implies a greater degree of consciousness of
purpose and consequently a will to attain, satisfaction.
1 Lewis H. Haney, Value and Distribution (He?/ York;
D. Appleton-Century Company, cl939), p. 164.
2 Ibid.. p. 170.
19
I.
WHAT IS CHOICE?
Choice is "the determination of the relative impor­
tance of two or more objects to one s u b j e c t . "3
Implying, as
the term does, selection and alternative action, choice is
often circumscribed by external forces, some of which are
custom, fashion, mores, and institutions.
Usually these
forces do no more than set up boundaries within which the
consumer is given some range of selection.
True, a man in
civilized society must wear clothing or go to jail.
True,
also, he must pay some attention to styles or bear the
scoffs of other men.
Nevertheless, he is given a range of
selection in kind, qxiality, -and quantity of wearing apparel
he buys.
Customs do not prove the nonexistence of choice.
They narrow it and often set up boundaries beyond which, the
selection of the consumer is not likely to go.
There is
admittedly a high degree of correlation between custom and
purchase.
This means only that custom.is one of the factors
present: with."many purchases.
Other factors are also present.
Therefore it is accurate to say that custom as an external
influence may, along with subjective factors, be of causal
importance in the choices of consumers.
For example, a
man may, because he feels that it is expected of him to
5 Ibid.. P* 171
20
appear on certain occasions in formal attire, purchase a
full-dress suit regardless of misgivings concerning the
personal pleasure he will derive from wearing it.
Custom is
a factor in the purchase, but so is a peculiar intermingling
of the motives of self-gain and fear.
Surely the seller
should examine customs when trying to predict consumer
actions, but he should not stop here.
Customs vary with social groups and with localities.4
Tastes vary in so far as food, clothing, furniture, archi­
tecture, etc., are concerned.
Nystrom sa3rs:
There are widespread, national customs as well as local
customs.
Styles of dress, special foods and tjp es of
domestic architecture are peculia.r to many countries and
communities, hew England pie, southern corn bread,
Mexican tortillas, Irish bacon, Scotch porridge-, German
sauerkraut, and Chinese rice are distinctive foods,
fixed in consumption by long custom.®
The distinction between the influence of custom and
that of habit on selection should be clear.
Custom is an
external influence; habit is not, though It may be
influenced by external factors, such as customs.®
confusing to say that habit limits choice.
It Is
Since habit is
an acquired tendency to react to a certain stimulus In a
particular way, it is better to say that present choice Is
4 Charles S. Wyand, op. clt., p. 202.
.® Paul H. Nystrom,
6 Supra. p. 13.
o jd .
cit., pp. 61-62.
21
often based upon past choice.
guides present action.
In other words, past judgment
Since learning is based upon
experience, all of man's present actions are based partly
upon previous ones.
II.
WHAT'IS A PRODUCT?
A product may be simply defined as an object that
has the capacity for satisfying a human desire.
Care must
be taken, however, that this definition does not lead to the
Idea that utility is intrinsic In a commodity, for this
quality is the result of a relationship between objects and
a human being who has desires that they may satisfy.^
Nearly all consumption involves choice or selection in
purchase, which means that utility Is relative.
In the
words of Haney, ’’most Individuals, In their producing and
consuming activities, voluntarily choose among a range of
alternatives which Is limited only by their own capacities
and knowledges, and by their material environment."®
In a
system of positive economics, all products are looked upon
*7 in this study, we shall use the definition of
utility suggested by L. H. Haney, o j d . cit.. p. 15. Haney
speaks of utility as "a mere potential relation between an
individual and objects in his environment-~one which may
develop into an.'urge' or ’drive' in the individxial toward
the object." A good, then, is a means through which a
human can obtain the satisfaction of a desire.
® L. H. Haney, o£. cit., p. 130.
- 22
by buyers according to prospects of substitution, using this
term broadly.0
In a- system of normative economics, utility tends to
become an absolute quality, for. the aspect of individual
self-interest is sacrificed for that of social welfare, and
the opportunity for freedom of individual choice is lessened
if not eliminated.
The. question arises, who should make the
choice under a system of normative economics? ' If we assume
that there are consumer preferences, we thereby acknowledge
that there is some choice.
Since our assumption is that in
most groups individuals have more desires than they can
satisfy, the selection of one good must be made at the
sacrifice of another.
Since the concept of leisure, eo
ipso, as a means of satisfying a human desire conforms to
our definition of a good,10 we may say that it competes with
other products which are used in gratifying d e s i r e s . H
One
may prefer leisure to other goods, or one may sacrifice it
for other commodities.
Since utility would not exist without human desire,
it is- to the latter that we must turn in any attempt to
0 Of.
R. B. Perry, op. cit., pp. 454-455.
10 Supra, Fn. 7, p. 21.
11 Gf. P. h. Rosenstein-Rodan, "The ROle of Time in
Economic Theory," Economica, I(New Series):1 (Feb., 1934)
86
.
23
analyze goods.
What are the desires of men?
classification must begin with the trichotomy:
psychological, and social desires.
Any very broad
-physical,
In the first category
are those for bodily gratification, in the second for mental
or spiritual satisfaction, and in the third for prestige
and recognition by one’s fellows.
Physical and psychological desires usually result
from two important factors, experience and association*-*-^.
It is through experience that desires multiply and intensify.
Persons 'living in comparative isolation are likely to have
relatively few of them.
Speaking comparatively, those with
broadened experience- are likely to have many of them.
Experience results in association.
We learn to
associate the satisfaction of desires with the means which
we have used to gratify them In the past.
Until our
experience.is broadened, we sometimes use older but less
efficient means Instead of available but untried newer and
more efficient means of satisfaction, much depending upon
the extent of our knowledge.Is
12 Some psychological or spiritual desires are the
consequence of innate capacities, but experience is even
then an important factor in the development of a desire.
See distinction-between want and desire on p. 14.
13 Cf.
Henry Smith, op. cit.. p. 316.
24
Social desires arise from m a n ’s gregarious qualities,
his fear of isolation.
Many of them are rooted in folkways,
customs, fashions, and mores.
Most men are followers,
imitators, rather than leaders.
They are content to do as
a few leaders or the masses do rather than to set up in­
dependent standards of their
own.
3-4
Thus folkways, customs,
fashions, and mores arise and prescribe certain rules of
conduct.
Boundaries are set beyond which m a n ’s choice is
not allowed to go without loss of social reputation or
prestige.
It would be very difficult to make any exacting dis­
tinction among desires on the basis of physiology,
psychology, or sociology, for usually the three are inter­
dependent.
Any fashion good may illustrate the interaction
of all three— protection from the elements, personal pride,
and social distinction.
III.
NECESSITIES, COMPORTS,'
.DECENCIES, AND LUXURIES
Economists frequently classify goods as "necessities"
and "luxuries," sometimes adding the categories, "comforts"
and
" d e c e n c i e s . -"3-5
3.4 cf.
a
Adam Smith, one of the first to use 3uch
. G. Keller, op. cit. . pp. 39-40.
15 Gf. T. N. Carver, Principles of National Economy
(Boston;
Ginn and Company, cl921), pp. 584-597.
25
a classification, included decencies as "necessaries.
The difficulty In such, a disposition rests in the ambiguity
of terms.
The word "necessity" obviously implies something
essential to the gratification of a want that -must be
satisfied.
But, in the words of Marshall, "When we say that
a want must be satisfied, what are the consequences which
we have in view if it is not satisfied?"
Are these con­
sequences death, loss of efficiency, or discontentment?
Marshall, himself, considers a "necessary" as a good which
adds to the productive efficiency of a p e r s o n . ^
Carver defines "necessaries" as "goods which are
required for the maintenance of physical health and
strength, not only of the mature man but also of his family
and even of his young children."
He confesses the diffi­
culty of defining comforts, which are "not absolutely
necessary for the maintenance of health, and strength," but
which "can hardly be dispensed with in any society where
life is really worth living."
Decencies are "those articles
of .consumption which the habits or customs of o n e ’s neigh­
borhood or one's class prescribe and without which the
individual or the family would feel that it could scarcely
Adam Smith, The Wealth of Nations (London* G. Bell
and Sons, 1921), Vol. 2, pp. 402-403.
I*7 Alfred Marshall, Principles of Economics. Eighth
-Edition (London: Macmillan and Company, 193077 PP» 67-70.
26
maintain its position of -respectability."
Luxuries are
"articles of consumption which, are not demanded either by
the physical health and strength of the people or by the
rules of society, but are wholly matters, of individual
indulgence ."18
Carver believes with Marshall that from the point of
view of the employer or the lawmaker, "all those things which
the customs of the time and country give to the laborer must
be considered as necessaries," for a decrease in wages paid
would not always mean an abatement in the use of luxuries
but "would be quite as likely to cut down his consumption of
physical necessaries as of those things which, from an
absolute point of view, could be called decencies or
luxuries.n1^
There is a tendency in popular usage to include
conventional goods--those for which habits of usage have
been acquired.— in the classification of necessities.
Though
these goods of themselves are essential neither to physical
well-being nor to efficiency, they are often bought at the
sacrifice of commodities considered as such.
That a classification of goods according to.
necessities, comforts, decencies, and luxuries is likely to
hoc, cit.
££* £!£•» P* 587.
27
cause confusion is easily seen.
Pew commodities are pur— -,
chased without opportunity of choice and hence the idea of
absolute utility is discarded for one of relative utility.
Consequently, thei usage of such a term as "necessities” is
ambiguous.
An expensive automobile provides comfort but is
usually considered a luxury by those with small incomes.
Shoes are a necessity in winter, but a comfort and, in most
parts of the country, a decency at all times.
Juicy steaks
provide energy, physical well-being, and efficiency, and yet
they are luxuries to many people.
For our purposes the classification -under discussion
is unsatisfactory.
We shall use instead of it one based-on
the resistance attitudes of individuals.
IV.
GOODS CLASSIFIED ACCORDING T O ’RESISTANCE
Since we are going on the assumption that all the
desires a consumer experiences cannot be satisfied under
ordinary circumstances, we must, generally speaking, dis­
tinguish between those that are and those that- are not
gratified.
The very fact that some desires are not satis­
fied is proof of obstacles or hindrances.
A better under­
standing of these obstacles or hindrances, which will
henceforth be referred to as resistance, means a better
comprehension of desire.
As any desire is intensified, the will of the
28
consumer to overcome the resistance to it is equally streng­
thened.
The will to overcome resistance may be measured by
the readiness of the consumer to make sacrifices to earn
money and by the lack of hesitancy with which he parts with
his' dollars to obtain particular commodities.
There must be
more than a willingness to sacrifice leisure to earn money,
however, for the individual must not only have the capacity
but in most cases he must also withstand a certain amount
of irksomeness.
Clearly, irksomeness, which is a negative
factor, is something more than the mere sacrifice of a
positive factor, leisure.^®
The tendency to deal with choice as a matter of
selection only in the satisfaction of positive desires
ignores the dual concept of motives.
A clearer conception
of choice as affected by subjective resistance is that of
taking cognizance of both a conflict between positive
desires and between opposing motives.
Since restraint is ,
sometimes stronger than alternative positive desires, allow­
ance is made' in this study for negative motivation.
The
positing of an alternative desire in the case of the indi­
vidual who desires a product and who has the purchasing
power with which to buy it, but who hesitates because of a
feeling that his action would be extravagant, seems more
20 p. N. Rosenstein-Rodan, loc. cit.t gives three
concepts of time expenditure: e.g., leisure, disutility,
and irksomeness.
29
questionable than the recognition of a negative•motive.
It
is true that even though the individual does not intend to
spend the money for any other immediate gratification, and
that though he has no definite thought of anything concrete
on which he wishes to spend the money in the future, he has
a remote feeling of some eventual need, and hence he has an
alternative positive-desire in mind.
Yet the immediate
restraint is often far stronger and more definite than the
alternative positive desire; consequently we are being
realistic in taking cognizance of negative motivation.
Impediments to consumer action may be either sub­
jective or o b j e c t i v e . 21
Subjective resistance results from
a conflict of either opposing or positive motives and leads
to a lack of decision on the part of the consumer.
In the
case of opposing motives, a negative and a positive motive
conflict and cause indecision.
In the case of conflicting
positive motives, more desires are present than can be
gratified and indecision arises over which ones are to be
satisfied.
The first type of internal resistance is thus
explained by Woodworth:
Conflict between the enterprising tendency to ex­
plore, manipulate or somehow launch forth into the new,
and the negative tendencies of fear, inertia, shyness,
etc., is something that recurs again and again in human
experience, as illustrated by making up your mind to get'.
21 Cf. R. S. Woodworth, Psychology (New York:
Holt and Company, cl921), pp. 528-539.
Henry
30
up In the morning, or to plunge Into the cold water, or
to speak up and have your say in a general conversation.
There is a hesitancy in such cases, due to a positive
and a negative tendency.
The conflict may be resolved
in favor of the negative tendency by. simple prolongation
of the hesitation till the occasion for action has
passed, or it may be resolved in favor of the positive
tendency v/hen this is strong enough for an Instant to
enable the individual to commit himself to the enter­
prise, after which he usually stays committed.
The
positive motive must for an .instant be stronger than the
negative, in order to get action .^2
Certain deductions may be made concerning these
opposing motives.
If we assume that an action is repeated
at Intervals of time sufficiently great enough to prevent
the application of the lav/ of diminishing utility, we can
say that repetition'of that action, if It brings any degree
of satisfaction, will form habit tendencies which are in­
clined to break down indecision by causing the consumer to
base present selection on past choice of action.
If we were
to assume that the act brings dissatisfaction, we can say,
conversely, that greater resistance will meet each repe­
tition.
If the action were to bring neither satisfaction
nor dissatisfaction, the resistance to each repetition
would remain the same.
As actions that bring satisfactions to consumers are
repeated the resistance decreases until it becomes virtually
negligible.
for granted.
Actions of this kind may be said to be taken
Substituting the word commodities for the word
22 Ibid., pp. 529-530
31
actions, we may say that commodities of this kind, after
resistance has been broken down, are ones to which the
consumer has an attitude of non-i’esistance.
The second type of subjective resistance is described
as vacillation.
Woodworth says;
Vacillation is certainly a very unpleasant state of mind. We want action, or else we want peace, but
vacillation gives us neither.
In spite of its irksome­
ness, v/e seem sometimes almost powerless to end it,
because as soon as we have about decided on the one
alternative, what we shall miss by not choosing the
other comes vividly to mind, and swings the pendulum
Its way.^2>
After a decision is reached, the siibject "rationalizes,”
"justifies,” and ."fortifies” It.
either forgotten or deferred.
Rejected motives may be
A negative decision once made
is not likely to be changed because the resolve not to sat­
isfy certain desires immediately is likely to result in an
Increased resistance to the gratification of them.^4
While decision is the response to subjective
resistance, effort is the response to objective resistance.
Frequently the latter type is physical, such as distance,
though it -Is ordinarily combined with subjective resistance,
f.or the will to act must precede the effort to overcome
23 hoc, cit.
£4 Conflicting positive motives are dealt with more
fully in Section VII of this chapter.
environmental obstacles.
Though Impediments to consumer
purchase are classed as subjective and objective, it must
be recognized that the two are closely linked.
A man may
desire a. new home but feel that it would be extravagant for
him to purchase one.
is a negative motive,
Although the feeling'of extravagance
it is caused partly by limited fi ­
nancial resources, an objective condition.
Likewise, a
consumer may have a desire for a new automobile and yet
realize that the purchase of the car would result in the
sacrifice of other gratifications.
If the desire for the
other.satisfactions is stronger than that for the auto­
mobile, the machine will not be bought.
The obstacles to
purchase are both subjective and objective:
the conflicting
desires are subjective, but the limitation of purchasing
power is objective.
One of the most accurate gauges we have for measuring
resistance is that of consumer distribution of expenditures.
Commodities which any class of consumers purchases regularly
without hesitation may be thought of as non-resistance goods
to them.
This does not mean that the buyer felt no re­
sistance at the time of the original purchase, but it does
mean that the hesitancy felt the first time is lost as
frequent purchases of the same kind of product are made.
T3qe original commitment or decision becomes the basis for
judgment as successive purchases are made.
33
Original purchases are likely to be made because of
desire intensity or objective pressure.
Intensity of desire
for a good Implies a recognition of dependence of the con­
sumer upon the product for a particular satisfaction.
Objective pressure, on the other hand, connotes the influ­
ence of customs.
Repeated purchases are likely to result in
habits and the removal of resistance.
Certain attitudes are
formed, and the consumer takes on a' mode of living from
which he is not likely to vary in any period of time too
short to permit of a change in habits.
Habits .of consumption are likely to vary with groups
according to age, sex, purchasing power, etc.^b
While the
seller should study the consumer according to all class­
ifications, one of the most important is that of purchasing
power, which in most cases is indicated by income.
We arrive at the conclusion then that goods toward
which the consumer adopts an attitude of non-resistance are
those to which a consumer or class of consumers, through
habitual purchase and usage, becomes so accustomed that this
person or class expects repeated consumption at somewhat
regular Intervals.
The familiarity with the commodities in
the gratification of particular desires brings a close
association of the satisfaction of these desires with the*
25 Supra p. 8 .
34
specified, products.
The commitment of the consumer to the
satisfaction of these particular desires results in an
inertia to change and the attitude of the individual becomes
one of assumption that particular desires will be gratified
in usual ways.
Since an attitude of non-resistance is actually an
8.ttitude of insistence upon, the gratification of a certain
desire, we may say that certain resistances to change are
developed by the consumer.
These resistances may be general
or specific. ■ The latter type may be divided into two class­
ifications, specific-inclusive and specific-exclusive.
General resistance is the inertia of the consumer to give up
the satisfaction of one certain desire for the gratification
of any other desire.
In other words, the consumer will not
discontinue to purchase the means of gratifying a certain
desire so that he may purchase the means of satisfying any
other desire.
The term "desire” is subject to more than one
meaning, however.
It may be looked upon in a general sense
according to its nature, or it may be looked upon in a
specific sense according to taste.
A variety of kinds of
products will satisfy the desire for hunger, for instance,
but only one will satisfy the taste for tea.
.Inertia which
prevents any consumer from substituting one type of product
for another that would in a general sense perform a similar
35
function, we shall speak of as. "specific-inclusive
resistance,” but inertia which prevents any consumer from
substituting one brand of a particular type of product for
another, we shall speak of as "specific-exclusive re­
sistance."
A refusal to substitute cocoa for coffee would
be specific-inclusive resistance, but a refusal to substi­
tute X for Y brand of coffee would be specific-exclusive
resistance.
Goods to which the consumer has an attitude of
resistance are those to the use of which he has -not become
sufficiently accustomed to take regularity of purchase for
granted.
These are goods which, although they may be often
purchased, are bought only after some hesitancy or vacil­
lation on the part of the buyer.
There has not been a
sufficiently-repeated usage of this kind of article for the
consumer to take an attitude- of assumption of regularity
of consumption.
There is still some reluctance on the part
of the consumer which causes him to hesitate to part with
his dollars in making a purchase.
Some consumers may develop an attitude of non-re­
sistance to a particular kind of product to which other
buyers have an attitude of resistance.
It is necessary to
turn to various classifications of consumers to consider the
26 Infra, pp. 80-83.
36
resistance factor.
Those with incomes of more than a hun­
dred thousand dollars annually may form through habitual
usage of a town car an attitude of non-resistance to the
product whereas those with incomes of under five thousand
dollars a year may have very much resistance to the purchase
of such a commodity.
It does not- mean that the man with'the
lower income does not desire the product--!t merely signifies that his resistance to the purchase of it is very
strong.
Attitudes of non-resistance are not controlled by
considerations of well-being' in any strict sense.
Econo­
mists have long recognized that articles they have
considered as. luxuries become so habitually used by certain
classes of buyers that they are purchased at the sacrifice
of commodities which others consider physical necessities.27
V.
MODES- OP L I V p G
A mode of living is an acquired v m j of living.
It Is
comprised of the many habits which tend to give the life of
a person a routine element.
These habits result either from
the repeated behavior of the individual following originally
motivated responses or from external pressures.
Carver,
27 Cf. Alfred Marshall, 0£. cit.« p. 70.
o jd .
cit., p. 587.
Also- T. M .
37
There has been a wide difference in the many defi­
nitions given for standard of living.. Earlier economists
defined the term as the number of desires a person required
satisfied before he would marry and have children.28
Sociologists sometimes imply a moral significance.
One view
presents a standard of living as "a scientifically deter­
mined schedule of expenditures" designed to attain an end
that is socially approved .29
Mo differentiation is made
between standard and plane of living by some writers.30
Eliot, in the Introduction to American Standards and
Planes of Living, draws a distinction between standards and
planes of living by referring to the former as "a set of
habitual valuations" or "attitudes of insistence" and by
considering the latter as "the actual distribution of real
income in goods, services, and advantages r e c e i v e d ." 3 1
Although the plane of living frequently is "our best
practical objective measure of standards of living," there
28 See R, T. Ely, Outlines of Economics. Third
Edition (New York:
The Macmillan Company, 1919), p. 438 and
T. N. Carver, The Distribution of Wealth (New York:
The
Macmillan Company, 1928), pT 170.
29 L. L. Bernard, Standards of Living and Planes'of
Living in American Standards and Planes of Living, Thomas D.
Eliot, editor, (Boston; Ginn and Company, c 19311, pp. 5.7-58.
30 N. H. Cornish, The Standard of Living (New York;
The Macmillan Company, 1923), p. 62.
31 0£. cit., pp. 1- 6 .
38
are times when a gap exists between the two, such as when
income is lowered or when poorer persons would like to
emulate richer ones.
He points out that costs of living, amount of income,
and changes in the standard of living may cause variations
in the plane of living.
Often we are not fully mindful of
the goods we use habitually until these articles are taken
away from us and then Yire make every effort to secure the
satisfactions they give us once more.
Standards are naturally much broader in import than
are planes of living.
Eliot emphasizes this.
As Alison
Cornish observes, standards include "not only present con­
sumption wants but also needs of the future."32
This writer
points' out that such things as "size and composition of the
family, place of residence, type of occupation, custom,
fashion, emulation, advertising, experience, and education"
influence the standards of living.33E l i o t ’s distinction is helpful in that it differ­
entiates between the subjective and objective, but it is
unilateral.
Not only do standards affect planes, but planes
affect standards.
This point is observed by Cornish:
32 ’’Capacity to Consume," The American Economic'
Review, XXVI:2 (June, 1936) 293.
■
.
33 hoc. cit.
59
It will toe seen that the factors of wants and of
goods and services available are Interdependent. When
wants are made effective, they are a determining
influence on what goods and services will toe produced.
Goods and services available, conversely, may determine
wants, especially.through advertising.34
Careful attention to the actions of consumers shows us that
the object or stimulus often brings a response which, after
repeated action at intervals of time,-forms a habit.
Habitual ways of responding to the stimuli of certain
goods we shall consider as a mode of living.
Attitudes
toward commodities which spring from changes in a person's
status in society, such as those resulting from education or
from variations in environment or customs, we shall treat
as the standard of living.
The former has a more economic
and quantitative, and the latter a more characteristic and
qualitative significance.
The importance of discriminating between attitudes
may toe seen In the human being's tendency of thinking that
what is should be.
The longer what is taking place has
taken place the more likely a person is to think that it is
what should take place.
The longer he follows certain
habits of buying the greater becomes the inertia to change.
It is important to recognize that modes of living may vary .
because of standards.
34 Ibid.. p. 294
Attitudes created by changes in the
40
c harac ter^ 0f the individual may "bring new experiments with
goods and, as a consequence, a new set of habits.
VI. -EFFECT OF INCOME. CN MODS OF LIVING
It must be clear, of course, that for some indi­
viduals income and purchasing power are not the same.
Savings accumulated from Income in the past, as well as
gifts and inheritances, may cause purchasing power to exceed
Income at any one time.
However, it is true that for most
persons•Income .constitutes the major part, if not all, of
purchasing power.
It is because of the available data on
Incomes as compared to those for total purchasing power that
the former instead of the latter is dealt with here.
The National Resources Committee made a study of
consumer incomes in the United States for 1935-1936.36
This
survey includes the incomes both of individuals and of
families.
It defines the former as individual householders,
listed as one-person families by the census; single persons
35 pt should be remembered that the word "character ’1
has a social significance, but not an ethical one.
*
Consumer Incomes in the United States; Their
Distribution in 1955-56 (Washington: United States Govern­
ment Printing Office, 1938). An interesting account of the
concentration of individual incomes is given in the Tempo­
rary National Economic Committee report, Investigation of
Concentration of Economic Power, monograph No. 4, Concen­
tration and Composition of Individual Incomes, 1918-1957
(Washington: United States Government Printing Office, 1940).
41
residing in lodging houses or hotels* servants or lodgers
living in private homes, and sons and daughters residing
with parents but paying for board and room instead of
pooling earnings with family Income.
The definition did not
include those living i n 'institutions but took in single
Individuals on relief .37
Family incomes were based on a
sampling of families and a tabulation of material according -.
to homogeneous groups.
to tax data .38
The results were adjusted according
Incomes varied considerably with geographic
area.
As shown in Tables I and II, more than 9 per cent of
Individuals in the United States had Incomes of less than
$>250 a year and almost 4 per cent of the families received
less than this amount.
Of Individuals, more than 80 per
■cent, and of families, almost 65 per cent received less than
$1,500 a year.
Less than 1 per cent of either single
individuals or families had incomes of more than $ 10,000
annually.
The highest percentage of individuals in any one
income bracket was 19.62 in the $500 to $750 level, whereas
the highest of families in one level was 14.55 in the $750
to $ 1,000 bracket.
37 Ibid.. p. 30
38 Ibid.. p. 14
I
TAbJab
Distribution of single Individuals and of aggregate income received,
_______ by income level, 1955-365§ ____ ■
Single Individuals
Income level
Under $250
$250-<po^
<?!:
$500-$750
*750-Sl,000
f
il j000-lpl, 250
|l,250-|l,500
$1,500-f1,750
$1,750-82,000
$2,00042,250
S2,250-$2,500
$2,500-|5,000
$3,000-$3,500 '
$3,500-14,000
§4,000-$4,500
$4,500-$5,000
$5,000-87,500'
$7,500-$10,000
$10,000-$15,000
$15,000-$20,000
$20,000-125,000
$25,000-$30,000.
-30,000-|40,000
$ 40,000-$50,000.
S50,000-|100,000
T100,000-1250,000
5250,000-$500, 000
$500,000-$l,000,000
$ 1,000,000 and over
All levels
Aggregate income
Per cent Cumu'Amount
lurnber at each lative
(in thoulevel per cent sands)
960,644
1,571,983
1,972,745
1,599,030
1,108,551
877i956
546,54-6
398,985
283,652
210,099
161,275
108,360
63,731
36,105
25,491
57,316
88,582
20,861
9,436
5; 617
3,350
2,398
1,737,
» 2,470
808
217
• 4-3
12
9.55
15.63
19.62
15.91
11.02
8.73
5.43
3.97
2.82
2.09
1.60
1.08
.63
.36
.25
.57
.28
.21
.09
.06
.03
9.55
25.18
44.80
60.71
71.73
80.46
85; 89
89.86
92.68
94.77
96.37
97.45
98.08
98.44
98.69
99.26
99.54
99.75
99.84
99.90
99.93
99.95
99.97
99.99
.02
.02
.02
.01 100.00
<*)
<#>
(*)
----- -
$158,302
1.37 ■
600,854
5.19
1,231,636
10.63
12.01
1,391,492
1,240,682
10.71
1,201,347
10.37
883,223
7.63
745,400
6.44
600,779
5.19
497,260
4.29
436,150
3.77
349,494
3.02
237,497
2.05
154,458 ■ 1.33
1.06
122,319
344,315
2.97
242,188
1.09
250,325
-2.16
160,910
1.39
126,874
1.10
92,701
.80
80,882
.70
75,622
.65
153,468
1.33
98:,452
.85
64,324
.56
23,849
.21
14 ,-587
.13
$11,579,390
' 10,058,000 100.00 .....
Less than 0.005 per’ cent".
■
Per cent
at each
level
Cumulative
per cent
• 1-.37
' 6.56
17.19
‘ 29.20
39.91
50.28
57.91
64.35
69.54
73.83
77.60
80.62
.82.67
; 84.00
' 85.06
88.03
90.12
‘92.28
93.67
• 94.77
95.57
96.27
96.92
98.25
99.10
99; 66
99.87
100.00
100.00
~
39 Consumer Incomes in the United States; Their Distribution in 1935-56
(Washington; United States G-0v erhmeht “Printing Office, j.y38), p .50.
■
Distribution of families and of aggregate income received., by. income level. 1955-56^°
Families
Income level
Number
Under $&5(7
$250-$500
<1500-*
l750-|l,000
$1,000-$1,25Q
$1,250-^1,500
81,500-11,750
&1;750-^2,000
$2,000-|2,250
82,250-^2,500.
$2,500-^3,000
$3,000-83,500
§3;500-84,000
X/ * -I14, 000—f,;4,500
$4j500-$5,000
$5,000-$7,500
$7,500-$10,000
$10,000-115,000
1-15,000-820,000'
$20,000-825,000
125.000-130,000
$30,000-140,000
$40,000-850,000
850.000-1100,000
$100,000-8250,000
$250,000-$500,000
|500,000-$1,000,000
f>l,000,000~and over
All levels
ss
Aggregate income
Per cent uumuAmount
at each
lative (in thou­
level
per cent sands )
1,162,890
3,015,394
3,799,215
4,277,048
3,882,444
2,865,472
2,343,358
1,897,037
1,420,883
1,043,977
1,314,199
743,559
438,428
249,94-8
152,647
322,950
187,060
131,821
58,487
34,208
22,233
15,561
■6,603
10,571
3,336
699
197
75
3.95
10.26
12.92
14.55
13.20
9.75
7.97
6.4o
4.83
3.55
4.47
2.53
1.49
.85
;52
39,400,300
100.00
1.10
.64
.45
.20
.12
.08
.05
.02
.04
.01
(*)
(*)
(*)
3.95
14.21
27.13
41.68
54.88
64.63
72.60
79.05
83.88
87; 45
91.90
94.43
95.92
96.77
97.29
98.39
99.03
99.48
99.68
99.80
99.88
99; 93
99.95
99.99
100.00
Per cent
at each
level
0.28
2.45
f 135,836
1,166,509
2,384,017
3,738,014
4,348,429
3,907,765
3,777,570
3,468,803
3,002,082
2,471,672
3,568,624
2,385,993
1,625,887
1,048,368
719,447
1,900,091
1,605,632
1,496,600
1,013,664762,240
627,567
560,390
314-, 689
755,017
440,554
200,174
110,954
142,650
7.48
5.00
3.41
3.20
1.51
3.99
3.37
3.14
2.13
1.60
1.32
1.18
.66
1.58
.92
.42
.23
.30
|47,679,238
100.00
5 ;00
7.84
9.12
8.20
7.92
7.27
6.30
s;i8
Cumulative
per cent
0.28
2.73
7.73
15.57
24.69
32.89
40.81
48.08
54.38
59.56
67.04
72.04
75.45
77.65
79.16
83.15
86.52
89.66
91.79
93.39
94.71
95.89
96.55
98.13
99.05
99.47
99.70
100.00
0* 005 per "cent'.
40 Consumer Incomes in the United States: Their Distribution in 1955-56
(Washington: United States Government Printing Office, 1938} p. 18.
44
Man j studies have, been made-of the distribution of
family expenditures' according to size of income .44
Waite
and Cassady estimate that more than 450 of these have been
made in the United States .42
^ more recent one is that of
the Bureau of Labor Statistics cited in a report of the
Temporary National Economic Committee.43
in this report it
is shown that for the period 1935-1936 the income residuals
remaining after food, home maintenance, clothing, and
personal care have been provided for varied somewhat inver­
sely according to the size of the community but directly
with the amount of income received.
The variations accord­
ing to incomes are portrayed by the following figures;
Income
$750-|l,000
Residual percentage
-8 to 20
$1,000-$1,250
7 to 21
$1,250-$1,500
10 to 28
$5,000-$7,500
32 to 51
$10,000 and over 44
51 to 68
44 National Resources Committee, Consumer Expenditures
in the United States; Estimates for 1955i~36 (Washington;
United States Government Printing Office, 1939),
42 Ojd• cit., pp. 184-185.
’ ^ Investigation of Coneentration of Economic Powe r ,
Monograph No. 1, Price Behavior and Business Policy, TWashington;
United States Government Printing Office, 1940),
pp. 132-133, 265.
44 Report on this group covers only a few areas
A general tendency for percentages of residual to
decrease with increase in size of city was shown, though
this was' not true of the Rocky Mountain District,
Likewise, '
according to area, larger percentages of residual were found
in the west, and particularly in the northwestern states.
This might have teen caused, partly, at least, .by higher
prices in the eastern states.
These' figures show that for.those in the lower income
brackets very little remains after expenditures are made to
provide satisfaction of the more fundamental desires of lifef^
hot only is the range of goods to which the consumer has
developed attitudes of non-resistance through habitual usage
limited,
but experiments with commodities are restricted
because of the lack of residual income.
Consequently, novel
expenditures for goods not habitually used are likely to
be indulged in only for cheap commodities because of the
high degree of resistance to the purchase of expensive
commodities.46
This is-shown in the figures representing the re­
lationship of purchases of electric refrigerators, power
45 a fundamental desire is one which is not re­
stricted to any group of consumers, but which instead is
likely to be common to all human beings.
46 c f . Yv'alter B. Pitkin, The Consumer; His Hature
and His Changing Habits (Hew York; McGraw-Hill Book Com­
pany, 1952), pp. 222-225.
washing machines, and vacuum cleaners to the incomes of
families .417
The report, based on figures compiled by the
Bureau of Labor Statistics for 1934-1936, covered three in­
come levels;
#1,000, $1,600, and $2,100 a y e a r . 4 ^
With the
exception of washing machines, the point of saturation rises
directly with increases in income.
For example, purchases
of electric refrigerators in any one year in the $ 1,000
level were made by bnly 1.1 per cent of the families, but in
the $2,100 bracket by 12.1 per cent.
It is interesting to
note that the percentage.of families purchasing washing
machines in the $2,100 level is slightly less than that In
the $1,600 bracket.
This fact Is explained by the tendency
of families to patronize laundries after higher income
brackets are reached.
It is also interesting to note the
high percentage of homes in all but the very lowest income
brackets owning radios.4^
This can be explained 'igr the fact
that most families have developed attitudes of non-re­
sistance to the purchase of this commodity.
4>7 Temporary National Economic Committee, op. cit.,
pp. 120-130.
48 Ibid., p. 130.
49 Ibid.. pp. 128-129.
47
VII.
INFLUENCE OF EDUCATION AND ENVIRONMENT
The hesitancy to part with dollars cannot be
measured by size of income in relation to prices alone, for
It must depend partly upon the number of desires competing
for satisfaction.-
The point of view taken here is that
desires spring largely but not absolutely from experiences
with commodities.
environment.
Desires may arise from education arid
Knowledge, advertising, and observation are
important factors In changing the attitudes of consumers.
Resistance depends, then, not only upon income or
lack of it, but also upon the number and Intensity of
desires competing for the consumerfs income.
If we consider
the intensities of desires of two consumers equal for the
moment, we can make a comparison of their problems of choice
by assuming that their incomes are the same but that their
desire capacities are different.
This Is illustrated in
Forms I and II, showing the relation between Income and
number of desires.
We are supposing for the sake of analysis an unlikely
condition in which the consumer represented by Form I has no
greater number of desires than he has the Income with which
to provide gratifications.
The consumer illustrated by
Form ll has just twice as many desires as he has the income
with which to provide gratifications.
Since the first
consumer has h o greater desire capacity than he has
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FORM :
Income in
number of
dollars.
9
8
7
»i
n
11
ij
14
5
4
3
5
4
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. —.J.......
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1
INCOME IN RELATION TO NUMBER OF DESIRES
Desires in
terras of dollars
.required for
gratification.
FORM II.
Income)in. Desires in
number of •terms of doldoliars,
lars requir­
ed for gratif­
ication.
49
purchasing power, he Is likely to have little relative
resistance to the purchase of means of satisfaction for all
his desires.
The consumer represented by Form II has a much
greater relative resistance to the expenditure of his dollars,
for, because his desire capacity in terms of the money re­
quired for complete gratification is twice as great as his
Income, he has a problem of selection.
If the consumer represented by Form II were .to ex­
perience a change the results of which were to cause both
Income and desire capacity to be increased proportionately
to twice their present magnitude, his problem of selection
would become more complex even though the ratio between
income and desire capacity remains the same.
If the ratio
were to change from t*vo to one to four to one through a
further expansion of desires, the problem of selection
would become far more complicated, for a still greater
proportion of desires to income would have to go unsat­
isfied.
The difficulty of attempting to measure accurately
the desire capacities of consumers is recognized; never­
theless we can, by assuming that some conditions are known,
use comparisons which help us in drawing certain general
conclusions.
We know.that an indication of. desire capacity
is found in the experiences, education, and environment of
individuals.
Since desires are based partly on experience,
50
capacities increase with broadened experience, and since
experience with products broadens with. Increased purchasing
power, we may say that desire capacities Increase with high­
er Incomes.
They do not necessarily Increase proportion­
ately, however, for some consumers in lower Income brackets
may have proportionately larger desire capacities than those
in much higher levels. •
One of the most important tasks of the seller is that
of educating the consumer in the use of newer and more
efficient products.
In doing this the difficult part of
the task is that of overcoming the Inertia of the mode of
living.
In this respect the seller must take into consid­
eration the factors that make up the standard of living.
The attitude of many is that, since d_esires are
considered to be limitless and purchasing power limited, the
only way to turn desires to purchases is by Increasing the
Income of the individual.
true.
This argument is only partly
Comish refers to the savings of the rich as a con­
tradiction of this argument.50
Economists have long
observed that some consumers, because of the lack of inten­
sity of their desires, devote less effort to increasing
50 Q£. cit., pp. 291-292.
The point of view ex­
pressed in ouir study is that desires of thems.elves may be ' •
unlimited but, becauise of the lack of Intensity and the
strength of the resistance, the consumer may anticipate the
satisfaction of very few of them.
Because of this some may
be so remote as to border on Indifference.
51
their incomes than they would if they were stimulated "by
stronger motivation. ' On this point Carver says:
It is a well-known fact that in certain low states of
civilization the laborer or the peon is content with so
few articles of consumption that he will not work
efficiently or steadily.
If by working three days In a
week he can earn wages enough to support him, in the
style to which he is accustomed, for seven days, he will
■work only three-days in the week.
It has been generally
recognized that the only cure for this difficulty is to
raise his standard of living .and Increase his wants, so
that he will, have a motive for ’regular and steady work.§!
Ho one 7/111 deny that an increase in purchasing power
usually causes an increase in demand in situations other than
those of large incomes, for such an increase is tantamount
to a decrease In objective resistance.
It Is also true,
however, that a heightened desire capacity as the conse­
quence of a change In attitude also increases demand,
neither of these causal factors should be overlooked.
•When we speak of limited desire capacities, we not
only refer to number but also to intensity of desires*
A
consumer may have many desires, but, if the intensity is not
great enough to overcome the resistance to satisfaction, he
may be said to have a limited capacity.
If desires can be
intensified to the place where resistance is broken down, or
to the extent that income is increased to make purchases
easier or more possible, consumption increases.
■5-*- T. IT. Carver, Principles of national Economy,
p. 589.
52
Our analysis, as yet is very incomplete, for we have
not given attention to quantity as a variable which under
conditions of diminishing utility has an important effect
on resistance in general.
And while we have given some
consideration to income as a variable, we have not treated
resistance under conditions of price changes of specific
commodities, during times when general price levels remain
the same.
These considerations will be given attention in
the following chapter.
Any rise or fall in the general.price level without
a proportionate change in income has an effect on the
consumer similar to that of a decrease or increase in
income; consequently changes in the general level of prices
need be given no further consideration.
Resistance may
increase or diminish and habits change with any fluctuation
in real income.
VIII.
CONCLUSIONS
Thus far our efforts have been devoted to placing
emphasis on a factor i n .demand that has been given too
little attention:
-i..e., the element of resistance.
Our
contention has been mainly that resistance, both subjective
and objective, can .be measured to a certain extent at any
one time by'the readiness or the reluctance'of the consumer
to part with his dollars,^though the possibility of
53
Increased sacrifice to earn more money has been recognised.
In classifying goods according to consumer attitudes
of resistance or non-resistance, we are not basing our
disposition upon any Inherent qualities in commodities, but
instead upon a relationship between a human being and-his
environment.
This relationship is not restricted to the
consumer and a single product, but to a selection of some
goods from many.
Choice is not the outgrowth of an attitude
of a subject for a product in isolation, but of an attitude
of an individual to'a product or number of products that
exist in interdependence with many others In the environment.
CHAPTER III
CONSUMER DEMAND AS AFFECTED BY RESISTANCE
In this chapter we shall consider demand -under con­
ditions in which it is unaffected by any kind of sales
stimulation.
Consumption under conditions of this kind is
purely a matter of the consumer's attempting to gratify
certain desires by exercising freedom of choice.
The seller
does no more than provide the means of satisfaction-without
any effort to change or alter the selections of buyers.
Demand is often defined as consumer willingness to
buy linked with purchasing power.
A better definition
characterizes It as the series of quantities of a good which
would be purchased by consumers in a given market,
at a
given time, at different prices per unit.-1- The laws of
supply and demand are often explained:
(1) when supply at
a prevailing price is exceeded by demand, the price has a
tendency to rise, and, conversely, when demand is exceeded
by supply, the price has a tendency to fall*
(2) demand has
a'tendency to fall and supply to increase with a rise in
price, and, conversely, supply has a tendency to decrease
CJT* W. F. Ferger, "The Static and the Dynamic in
Statistical Demand Curves," The Quarterly Journal of Eco­
nomics, XLVIIsl (November, 1952 ) ~ W .
55
and demand to increase with a fall in the price of any good;
and (5) price tends to settle in the penumbra of the point
of equilibrium at which the opposing forces of supply and
demand are balanced.^
More specifically, the law of demand is that the
quantity of any good that would be demanded at a series of
prices varies inversely with price.
This is explained for
individual consumers by the law of diminishing utility, for
individual producers by the law of diminishing productivity,
and for groups of buyers by the differences in desires and
in purchasing power.
In Marshall’s Principles of Economics, the book upon
which orthodox economic theory has been based in this
country, the supply side is treated according to time
periods, and consideration is given to periods which are so
short that the quantity of any good offered must be taken
as fixed and to longer periods in which production fa­
cilities may be changed.
The demand side has been treated
mainly under conditions of market time, however, with no
provisions made for changes in habits, income, or personal
^ Of. H. D. Henderson, Supply and Demand. Cambridge
Economic Handbooks, Ho. 1 (Hew York* Harcourt, Brace and
Company, cl922), pp. 18-19; and Alfred Marshall, op. clt..
p*. 345.
The latter says;
’’When demand and supply- are -in
equilibrium, the amount of the commodity which is being pro­
duced in a unit of time may be called the equllibriumamount. and the price at which it Is being sold may be
called the equilibrium-price.”
56
conditions.S
There lias been a recent tendency for theorists
to give attention to the time element in demand.4
This
chapter will deal with (1) time that is too short to permit
of change and (2) time that is long enough to allow changes
to occur.
I.
INDIFFERENCE-CURVE ANALYSIS
What are now called indifference curves were used by
Marshall in presenting.the benefits to be attained in
foreign
t r a d e . 5
These curves were based on the principle of
diminishing utility.
Later Edgeworth, Pantaleoni, and
Pareto used them, the last named in his consideration of
economic equilibrium.®
Marshall’s explanation of the ad­
vantages of foreign trade through indifference curves was
that as increased total quantities of any good desired by a
country are received in exchange for a commodity possessed,
® Ruby T. Norris, "The Analysis of Demand," The
Quarterly Journal of Economics, LIV:1 (November, 1959 7
13l'-T4'2;
4 Of. Ruby T. Norris, loc. cit.; P. N. RosensteinRodan, b £ . cit., pp. 7 7 - 9 7 j and Henry Smith, 0£. cit.,
pp. 309-322.
® Edmund Whittaker, A History of Economic Ideas
(Longmans, Green and Company, New York:
1940), pp. 4-48-449.
The use of indifference curves in analyzing foreign trade
Is also treated in a somewhat recent article by W. ¥.
Leontief, "The Use of Indifference Curves in the Analysis of
Foreign Trade," The Quarterly Journal of Economics, XLVII:3
(May, 1933) 493-503.
® Edmund Whittaker, loc. cit.
57
the desire to exchange loses intensity.^
John Hicks has made an interesting elatoration upon
the work of Pareto, in which he translates diminishing
marginal utility in terms of indifference curves and the
diminishing marginal rate of substitution.®
Hicks points'
out that a "given want" to Marshall must .mean an assumption
of a given "utility function" or desire intensity for a
particular collection of goods, whereas he explains that a
given -want to. Pareto need only be a given "scale of prefer­
ences."
The marginal rate of substitution between two com­
modities is defined as the quantity of one good which just
compensates the consumer for the loss of a marginal unit of
another.
The price of a commodity "equals the marginal rate
of substitution of that commodity for money."®
The di­
minishing marginal rate of substitution is explained by the
fact that the amount of one good which has to be subtracted
to set off an additional unit of another "will be less than
that which has to be subtracted in order to set off the
first unit."-*-®. The difference between the diminishing
^ ho°« cit.
® John Hicks, Value ana Capital: An Inquiry into
Some Fundamental Principles of Economic Theory (Oxford; The
Clarendon Press, 1959), pp. 11-41.
9 Ibid.. p. 20..
10 Ibid.. pp. 20-21.
58
marginal rate of substitution and diminishing marginal
utility is explained by reference to Marshall’s treatment
of the marginal utility of money as constant.
The con­
sideration of money as ’h aving a constant marginal utility,
Hicks points out, leads to neglect of income differences in
the treatment.of demand.
As a consequence, Hicks makes use
of what he calls an income-consumption curve.
A valuable contribution made by Hicks is his sug­
gestion of the importance of particular price changes under
conditions in which the general level of prices and income
remain the same, which results in a positive or negative
income effect.-*--*-
Conditions of price change in this respect
will be treated later.
Though H i c k s ’ presentation is more literary .than are
the so-called "pure” theories of consumption, which are
expressed in terms of mathematics,12 very largely the same
criticism applies.
consideration.15
The time element is not taken into
In addition to this, the principle
Ibid., pp. 42-52.
' : •^
Georgescu-Roegen, "The Pure Theory of Con­
sumer ’s Behavior," The Quarterly Journal of Economics, L:4
(August, 1956) 545-593; Umberto Ricci, ""The Psychological
Foundation of the Lav/ of- Demand," The -Journal of Political
Economy, XL;2 (April, 1932) 145-185; and P.A. Samuelson,
’
T F Note on the Pure Theory of Consumer’s Behaviour,
Economica, V (New Series);17 (February, 1938) 61-71.
15 Oskar Morgenstern, "Professor Hicks on Value and
Capital," The Journal of Political Economy, XLIX:3 (June,
1941) 361-393. Also Gf. Emil LedereF, "Developments in
Economic Theory," The American Economic Review, Supplement,
XXVI *1 (March, 1936T-lF£h
59
advanced In Indifference-curve analysis can only be extended
to more than two goods by changing the graphic portrayal
to an "algebraic version."14
II.
CONSUMER PREFERENCES IN THE SHORT RUN
Choice Is always a matter of decision, but It Is not
always a matter of current verdict.
Many selections are
based upon past decisions as In the case of purchases made
as the.result of habits.
Instead of choice being flexible
in the making of selections, it becomes rigid in so far as
many purchases are concerned.
Contractual commitments and
home and family responsibilities tend to prescribe conduct
for periods of time.3-5
A person may bind himself to pay
premiums on a life insurance policy for twenty years, he
may obligate himself by Incurring debts for durable goods,
or he may feel the responsibility of.providing certain means
of education for his children till- they are grown.
Our present problem Is a consideration of demand in
the short run, or In time which is so short that no changes
in income, prices, or attitudes of resistance or nonresistance occur.
Income can be increased or decreased,'
however, by drawing upon or by making savings.
During the
14 John Hicks, o£. cit., p. 45.
15 Cf. Ruby T. Norris, o£. cit., pp. 132-155.
60
short rim we assume that attitudes of non-resistance to
purchases or to expenditures, which are determinants of
current choice on the basis of past decision, are suf­
ficiently rigid that'they do not vary.
Considering savings
as expenditure for future preferences, and recognizing that
habits of saving may be just as fixed as those of purchasing
certain goods,1® we can divide income in the short run into
two classifications: • (1) that spent on goods to which the
consumer has developed an attitude of non-resistance or that
expended as a result, of previous commitments, and (2) that
which is residual.
The expenditures in the first category
are made as the result of fixed attitudes and do not change
in the short run.
The expenditures in the second category
are made up of those which are purely experimental and those
which, though they are not experimental, are made only after
some degree of hesitation or vacillation.^
The residual income for those in the lower income
brackets is likely to be smaller.than it is for those in the
higher income levels.-*-®
The_ situation is altered consider­
ably by conditions prevailing at any given time.
As the end
•16 Infra Ch. V.
II Cf. Ruby T. Norris, o£. cit.. p. 134.
The margin
referred to below which the consumer does not think it worth
while weighing expenditure could more effectively be ex­
plained according to the resistance factor.
I® Supra pp. 40-46.
61
of an income period is reached, individuals are more likely
to have a greater resistance to spending any part of re­
sidual income, because of its diminished amount, than they
are during an earlier part of the period.19
Since the
resistance to the expenditure
of any
part of residual income
is proportional to the amount
of the residual income at that
given time, resistance varies according to the time under
consideration.
The rigidities in income expenditure can be best
studied according to groups.
The age^O of the individual
and the sise of his income are important.
single or married, the number of his
social circles in which he moves
Whether he is
dependents, and the
are all determining
factors.
III.
CONSUMER PREFERENCES
IN
THE LONG RIM
By consumer preferences in the long run we mean in
time sufficiently long to permit changes in income, prices,
and attitudes of resistance or non-resistance to particular
19
Ruby T. Norris, o j d . cit., p. 135.
The im­
portance of considering time in the income period is exempli­
fied in the test referred to by H. A. Burd and C. J. Miller,
Business Letters: Their-Preparation and Use (New York;
McGraw-Hill Book Company, 1930), p. 288, in the collection
of accounts.
Collection efforts were found to be much more
effective toward the first than toward the end of the month.
Ruby T. Norris, op. cit., p. 139, observes that
fixed policies of expenditure develop with age.
62
expenditures.
The importance of income in consumer prefer­
ences has already been noted.21
The effect of a change in
price of any commodity regularly used at a time when income
and the general price level remain the same will he treated
’ ■
«*
in later sections of this chapter dealing with the principle
of substitution and elasticity of demand.
In this section,
we shall consider mainly changes In attitudes of resistance '
or non-resistance.
In the long run, consumers are able to evaluate their
habits of expenditures and to change their mode of living.
Judgments can be made more effectively after experiments
involving risk and speculation have already been made and
the consumer can evaluate the satisfaction or disappointment
In each case.
The buyer can amend his habits and com­
mitments and bring them more into line with his standard of
living or his Ideal conception of life to which he aspires.
The element of speculation and risk arising from the
consumer's attitude of resistance to the exchange of leisure
for knowledge in making d e c i s i o n s ^ is counterbalanced by
experiences of satisfaction or dissatisfaction resulting
from novel purchases.
The risk present at the time of the
first purchase is no longer present when repeated purchases
Supra pp. 40-46.
22 gf. Henry Smith, 0£. cit.. pp. 316-317.
63
are made.
The experience received serves to guide the
consumer’s later action.
Thus the tendency for a.person as
he grows older to base his judgment in making purchases more
and more upon experience and to rely less upon speculation
is a sign 01 greater rationality of choice but at the same
time of greater rigidity of expenditures.
It must be clear, h o w e v e r ,
that all purchases,
regardless of the risk or speculation involved, are made
because the consumer has desires which he believes the goods
he buys will satisfy.
His purchases are based purely upon
expectations of satisfactions.^
jp
purchase is a novel
one, there is some degree of speculation and risk since the
satisfaction anticipated may not be realized.
If the
purchase is merely a repetition of a previous one, the
element of speculation is lessened, if not eliminated.
Thus
consumer preferences In the short as well as the long run
can' be explained in terms of marginal utility though better
so in the long run because of the buyer’s possession of
greater knowledge.
IV.
PRINCIPLE.OP DIMINISHING UTILITY
Since the degree to which a consumer overcomes
Oskar Morgens tern, o£. cit., p. 385 Fn., s¥iggests
the word "anticipation” as Including foresight, planning,
and expectation.
Though he had producers in mind, It can
be assumed that consumers have some degree of foresight and
do some planning.
64
resistance depends partly upon the relative intensity of the
desire, and since the relative desire intensity for any good
diminishes with the consumption of each additional unit of
the product at a given time, resistance may he said to in­
crease proportionately to desire satisfaction with each
quantitative addition,of a unit of product.
The consumer
tends, therefore, in the short run to expend his residual
income and in the long run to emend his commitments in such
a way that, relative to resistance, the anticipated marginal
utilities of all goods he purchases are proportional to the
prices thereof.
The anticipated utility of the last unit purchased
must offset the reluctance of the buyer to part with the
number of dollars required to pay for it.
If the antici­
pated utility is greater, relatively, the buyer feels he is
making a good purchase.
If, however, the resistance to
parting with the sum required to pay for a unit is much
greater, relatively speaking,, than the anticipated satis­
faction to .be received In the consumption of that additional
quantity, the consumer is likely to forego the gratification
offered by that unit of produot.24
24 jevons worked out pleasure and pain curves.
The
pain or disutility was representative'of the labor performed'
that the consumption might be enjoyed. "Cf. Edmund Whittaker,
op. cit., pp. 449-450.
In our analysis, we are assuming
that a consumer has a-reluctance to part with money whether
he has earned it or not.
Those on relief have some hesi- '
tancy In spending their Incomes for some products as against
others.
65
When we speak of goods to which the consumer has
adopted an attitude of non-resistance, we must make quantity
as well as commodity distinctions.
Buyers form habits'with
regard to amounts the same as they form habits with regard
to kinds of articles, and they take for granted only par­
ticular quantities of consumption of certain goods.
These
amounts are purchased without hesitation or vacillation.
■Additional units are bought only after hesitation and vacil­
lation. ‘
When a consumer decides to make an unusual expendi­
ture that is relatively large, he does not ordinarily
discontinue the consumption of any one product in its
entirety but cuts down on the quantity of many other arti­
cles used in order to make up for the additional expendi­
ture.
If it is not large, the expenditure is usually made
from the residual income.
If this unusual expenditure
becomes a usual one, the consumer makes an adjustment in his
mode of living and accustoms himself to the changes.
The modes of living of progressive people are
constantly in the process of adjustment.
Changes are very
gradual and hardly discernible at any one time but are
easily noticeable over a period of years.
Because of their
many desires, advanced people are likely to spread the
satisfaction of desires rather thin to make limited Incomes
cover wide demand surfaces.
66
V.
SUBSTITUTABILITY AND COMPLEMENTARINESS
OF PRODUCTS-
We have considered the effect of a change in real
income, as a consequence of fluctuations one way or- another
in income without corresponding shifts in the general-price
level.
Shifts in the general price level without corre­
sponding changes in income have a similar effect.
If the
result of the shift is a lowering of real Income, there may
be a temporary gap between' the standard and the plane of
living of any group, and new modes of living are likely to
result.
Adjustments are made by the consumer to the new
situation.
What happens, however, with price variations of par­
ticular products when the general level of prices and income
remain the'same?
Suppose, for instance, that the price of
bread rises while the prices of other commodities remain the
same.
Will the consumer simply reduce the quantity of bread
he consumes without increasing his consumption of any other
good, will he decrease his consumption of the commodity In
question and increase his consumption of some other com­
modity, or will he continue to use bread In the same
quantity and diminish his use of other products accordingly?
In searching for the answer, we must examine the
interdependence■of bread and other goods.
Economists
usually regard given pairs of commodities as substitutable,
67
complementary, or Independent, respectively, according to
whether a change in the price of one will have a similar,
inverse, or negligible effect on the demand for the other . ^
If an Increase in the price of bread causes a rise in the .
demand for another good, the two may be considered substi­
tutes, If it results in a decrease in the demand for the
other, the two are complementary, and if it causes no change
in the demand for the other, they are independent.
Thus, if it may be assumed that consumers use more
potatoes and less bread when the price of the latter rises,
the two are substitu-tes.
Since less butter Is used when the
consumption of bread is reduced, butter and bread are com­
plementary.
This assumes that the reduction in the use of
butter through a decreased consumption of bread would not be
offset by the use of the former on potatoes.26
jf a de­
creased consumption of bread, after a price rise, has no
effect on the consumption of gasoline, the two are inde­
pendent.
If potatoes are a substitute for bread,, then bread
is a substitute for potatoes; and, if butter is complementary
25 e . E. Lev/Is, "The Relation of-Commodities in De­
mand," The American Economic Review, XXVIII:3 (September,
1938) 488-496.
Also C f . Robert Triffin, Monopolistic
Competition'and General Equilibrium Theory, Harvard Economic
Studies, No. 47 (Cambridge: Harvard University Press,'
1940), pp. 91-93; and John Hicks, 0£. cit., pp. 42-52.
26 Because butter might be a complementary product to
both bread and potatoes, the situation could be altered.
68
to bread, bread is complementary to butter.27
Lewis points out that a change in the price of a good
affects substitutes in two ways:
"through the change in
their relative prices, and through the change in the con­
sumer’s
r e s o u r c e s .
"28
Commodities spoken of as independent
are still affected by any variation in the resources of the
c o n s u m e r .
29
as Hicks points out, a drop in the price of a
commodity regularly used has two .effects on the demand.'for
that commodity:
(1) it has a positive income effect because
"it makes the consumer better off";
(2) it brings about a.
change in relative prices between the commodity in question
and all other
c o m m o d i t i e s .
80
positive income effect
depends largely upon the "proportions in which the consumer
was dividing his expenditure" as between the good in
question and all other products.
If the expenditure on the
commodity is relatively great, the positive income effect is
important.
If it is relatively small, the income effect
"is likely to be swamped by the Substitution Effect" re­
sulting from the change in relative
p r i c e s .
27 John Hicks, op. cit., p. 42 .
28 Q£. cit.. p. 496 .
l°c » eft.
8° John Hicks, oj>. cit. p p .
^
loe« cit..
31-32 .
81
jf the
69
commodity in question is an inferior good, however, and the
proportion of income spent on It Is large, any surplus
resulting from a fall in price may be spent upon more
"interesting” goods, for, the demand for "inferior" goods
tends to fall with a rise In
i n c o m e .
32
He sums the situation in the following
w a y .
33
pn the
case of.,a decrease in the price of a commodity, the sub­
stitution and the income effects may both increase the
demand for the good.
The substitution effect tends to
decrease demand proportionately for all other products, but
the positive income effect tends usually to increase it.
Because of the "comparable magnitude" of the effects, the
result may be a total increase or decrease in demand for
other goods.
In the case of two substitutable goods, the substi­
tution of X for Y upon a decrease in the price of the former
at a time when that of the latter remains stationary depends
on how highly substitutable the goods are.
If they are
perfect substitutes, the demand for the latter will fall to
zero.
The two goods would have to be indistinguishable,
however, a situation which Hicks admits is not likely to
exist.
If the goods are highly substitutable, nevertheless,
a substitution effect will predominate.
32 0£. cit.. pp. 28, 35-.
33 Ojd. cit., pp. 48-50.
70
If X and Y, on the other hand, are highly comple­
mentary, the substitution effect in the event of a price
drop for X may "drown" the income effect, and the demand for
Y is increased.
If only mild complementarity exists, the
income effect is likely to go In the direction of the
substitution effect, and hence there will be somewhat of an
increase in the demand for Y.
How does a functional interdependence among products
affect our classification of commodities into non-resistance
and resistance goods?
It is likely that an increase in the
price of a good habitually used may cause resistance to
spring up very suddenly.
Some consumers may decrease their
expenditures on that good proportionately.
If there are
other goods of functional similarity, those who are not in
the habit of using certain substitutes may begin using them
and, in consequence, build new habits of consumption.
A
later cut in the price of the article originally used does
not necessarily, because of these new habits, bring the
return of patronage.
If an upward swing in the price of any good merely
brings a directly proportionate decrease in consumption, It
is likely that in the future some consumers will not,
immediately at least, increase their consumption of this
good to its former level even though the price drops to what,
it previously was.
Many consumers will find that they can
71
get along with a smaller quantity of the product and use the
positive income effect in the gratification of other
desires.^4
Though substitution is likely to involve products of
functional similarity, those that will satisfy the same
desire, it is not necessarily limited in this respect.
If
the price of- furniture increases, a man may discontinue
buying It and use his money for a product of•functional
dissimilarity,
such as a trip or new clothing.35
Substi­
tution of products of functional similarity will be referred
to as specific substitution, and that of products of
functional dissimilarity as general substitution.
These
terms'will be used In our development of the subject of
monopolistic competition in the next chapter.
VI.
ELASTICITY OF DEMAND
The extent to which consumer attitudes of nonresistance may become attitudes of resistance with a change
in the price relationship of a good to other commodities is
explicable in terms of elasticity of demand.
Most econo­
mists agree that goods which are low in price, goods which
. 34 This constitutes, in a broad sense, a type of
substitution.
35 Cf. Robert Trlffin, op. cit., pp. 90-93.
72
have few close substitutes, relatively speaking, and. goods
which have very few uses are likely to have inelastic de­
mand.
On the other hand,' the demand for goods which are
high in price, goods which have many close substitutes, and
goods which have many uses tends to be elastic.33
This explanation is inadequate, "however, for what a
person is accustomed to plays an important part in the
elasticity of his demand in two respects:
(1) the fixity
of his habits in regularly gratifying particular desires,
and (2) the extent of the association of the means of
satisfaction, the product, with a certain price.
If we could assume that the consumer's anticipation
of satisfaction with respect to two substitutable goods of
functional similarity were the same, a case of perfect
substitutability, the consumer would not hesitate substi­
tuting the one for the other in the event of a price differ­
entiation.
But consumers rarely anticipate equal satis­
faction from substitutable goods of functional similarity.
The extent to which substitution is likely to take place
depends upon the degree of resistance resulting from the
price increase and the proportion to which anticipated
satisfaction will- be diminished by the substitution.
36 Gf. F. B. Garver and A. H. Hansen, Principles of
Economics, Revised Edition (Boston: Ginn and Company,
cl957), p. 104.
73
Any price rise of a particular good must mean an
adjustment in the'amount of the commodity consumed, a
substitution, or a change in other expenditures, or a com-,
bination of' those.
If the attitude of insistence to any
desire satisfaction is strong enough that an individual
prefers to continue to enjoy a particular gratification at,
a proportionate increase in price and to adjust his other
expenditures accordingly rather than to decrease his con­
sumption of the good, the demand for the means of satis­
faction is inelastic.
.A gratification commonly enjoyed is usually associ­
ated with a means of satisfaction, which in turn is associ­
ated with a price.
The first time the gratification is
enjoyed the price forms an element of resistance, relatively
speaking.
As the satisfaction is enjoyed at intervals, the
price becomes closely associated with the gratification, and
the resistance to paying it becomes almost negligible.
Any
increase in that price breaks the association and makes room
for new resistance.
Sherman observes:
Prior to the World War, over large sections of the
United States the customary price of bread had become
five cents per loaf.
The customary loaf was one pound.
Bakers1 competition appeared in variations of quality,
in advertising, and in slightly overweight loaves, sold
as pound loaves. When the price of wheat sharply in­
creased at the beginning of the war, the baking industry
in those sections found it difficult to adjust. Attempts
to increase the customary, price resulted In heavy loss
74
of volume. Housewives who bought in routine fashion at
5 cents, took the matter out of routine at 6 cents, and
displayed an unexpected degree of independence.37
Henry Smith suggests that, because of his lack of
knowledge, the most rational type of habit for the consumer
would be that of adhering to a price rather than to a
brand.38
The risk that an inferior product will be received
if substitution is resorted to acts as a deterrent, however.
In cases in which knowledge is limited and the price of a
commodity regularly used is increased, it is a matter of
the consumer's paying a higher price and cutting consumption
of the product or of other products, or of both; or it Is a
matter of his accepting risk of inferiority of product
through substitution.
The consumer may minimize this risk
by sacrificing leisure to obtain knowledge.
Observation
shows that consumers are reluctant to do so, however.
The general tendency Is for the demand for products
to which the consumer has become accustomed to paying
certain fairly well standardized prices and to which he has
become accustomed to the consumption of particular quanti­
ties to be inelastic.
Vaile and Slagvold observe;
In general, it may be said that necessities, staple
commodities, things which are in constant customary use,
37 John H. Sherman, "Observations on Custom in-Price
Phenomena," The American Economic Review, XVIII;4 (December,
1928) 668.
The author criticizes certain common assumptions
of custom in the fixing of prices by retail sellers but at
least acknowledges In these lines the influence of customary
prices in so far as the attitudes of consumers are concerned.
38 0£. oit., p. 316
75
have inelastic demand schedules.
Many of the staple
food products, medium-priced articles of clothing,
items sold most' commonly by hardware stores, all Delong
in this class.
For such articles, price concessions
may change patronage from one store to another, or from
one week to an earlier one, hut they are not likely to
increase the total seasonal sales.39
An interesting suggestion is that made by Broadus
Mitchell, linking the elasticity of demand.to the standard­
ization or lack of standardization of products.
In cases In
which standardization of goods has been more nearly at­
tained, there is likely to be more elasticity of demand.
He
compares men's suits to women's dinner gowns and thinks that
a man Is more likely to know the price of the former than a
woman is that of the latter.40
Probably just as Important as present prices in an .
analysis of consumer preferences are expectations of future
prices.
If the consumer expects the price of a commodity
he is accustomed'to using to go up, he Increases his pur­
chases, but, If he expects the price to go down, he post­
pones them.41
Hicks defines an individual's elasticity of
39 R.-S. Valle and P. L. Slagvold, Market Organi­
zation (Hew York:
The Ronald Press Company, cl929),
pp7"lU9-110.
^ General Economics, Revised Edition (New York:
Henry HoIt and ''C'ompany, c1937), pp. 149-150.
41 M. A. Copeland, ’'Economic Theory and the Natural
Science Point of View,” The American Economic Review, XXI;1
(March, 1931) 71-72.
76
expectations of the price of a commodity X "as the ratio of
the proportional rise In expected future prices of X to the
proportional rise in Its current
p r i c e .
"42
Tf expectations
are inelastic and present Increases in price are considered
as -only temporary, there will be a tendency on ‘the part of
the consumer to make substitutions or to postpone purchases
until the price drops to its former
l e v e l .
43
Tf the elas­
ticities of expectations of prices are greater than unity or
In other words if the present increases In prices are taken
to be a trend which will continue Into the future, buying Is'
likely to Increase.
If, on the other hand, present price
Increases are considered as only temporary,
substitution and
postponement of expenditure are likely to take
p l a c e .
44
The three influences on price expectations are given
as (1) non-economic:
"psychology";
weather, political news, health, and
(2) economic but not closely allied with
actual price-movements:
(3) experience with
market superstitions, market news;
p r i c e s .
45
42 0£. cit., p. 205.
43 ,0£. cit., pp. 250-251.
44 op. cit., pp. 251-255. Hicks, op. eft., p. 205,
says that Hilae elasticity of expectations oi price is unit y
when "a change in current prices-will change expected prices
in the same direction and in the same proportion"; elasticity
of expectations•of prices is greater than unity when people
believe that present increases In price are a trend and that
they will continue rising and less than unity when people
believe that present increases in price are only temporary.
45 op. cit., p. 204.
77
VII.
CONCLUSIONS
In this chapter the significance of habits under
certain varjring conditions was analyzed, and-the resistance
•factor was related to such variables as quantity of con­
sumption and specific price .changes.
In making-our
analysis, we have used the term "consumer" in the broader
sense included in our definition.46
The impossibility of making any classification of
commodities, per se, according to resistance should be
clear.
The terms "resistance" and "non-resistance" are
representative of consumer attitudes and, in so far as these
attitudes are constantly changing, we can only draw an
Inference of the relationship between subject and object at
any one-time under a given set of circumstances.
Re­
sistance, which Is relative, varies with, the relationships
between Individuals and different commodities according to
conditions of time, place, and circumstances of environment.
V/e are endeavoring not so much to describe the par­
ticular 'preferences of any group of consumers as v/e are to
set up a basis for determining these preferences under
different situations.
In doing this, we are placing em­
phasis upon the negative factor of relative resistance
because it is more easily measured than the positive element
46 Supra, p. 11
78
of relative intensity of desires.
Since the willingness of
the consumer to overcome the one is an indication of his
intensity-feeling for,the other, our analysis of the neg­
ative element gives us a better understanding of the '
positive one.
It must be remembered that a given attitude of the
individual to all goods Is met by relative degrees of
resistance.
The use of some means the -sacrifice of others.
His position with regard to many of these goods changes with
the development of particular habits concerning them.
Toward some commodities, under certain conditions, he de­
velops attitudes of non-resistance.
Any change in a
situation may cause new resistance to arise and the relation­
ship between subject and objects to become altered.
adjustments are made, new habits become fixed.
of living are constantly changing.
After
Thus modes
CHAPTER IV
THE RESISTANCE FACTOR IN PRODUCT DIFFERENTIATION.
Legal and institutional elements of monopoly as well
as restriction of entry Have long been taken cognizance of
by economic theorists.
As Machlup points out, the essential
elements of monopoly were ’’scarcity and indivisibility of
certain means of production, legal, institutional or other
restrictions of entry into the trade, and various con­
sequences of these facts such as the existence of specific
rents, and especially the fewness of s e l l e r s . A more
recent school of economists has made an important con­
tribution by placing emphasis upon product differentiation
under conditions of monopolistic competition.
In so far as
our study goes, we are not concerned with the problem of
whether monopolistic competition causes higher prices than
would exist under conditions of pure competition.^
The
solution to such a problem must be sought In an analysis of
production and selling costs under circumstances defined as
monopolistic competition.
The only reason that such a
problem has some relevance in an analysis of consumer
1 Fritz Machlup, "Evaluation of the Practical Sig­
nificance of the-Theory of Monopolistic Competition," The
American Economic Review, XXIX:2 (June, 1939) 230-231.
2 Cf. Edward Chamberlin, op. cit., pp. 130-176; A. R.
B u m s , op. cit.« pp. 372-417; Fritz Machlup, op. cit., pp.
231<r232; and Sumner H. Slichter, M o d e m Economic Society
(New York: Henry Holt and Company, 1931), "p." 567.
80
preferences is that some consumers believe that advertising
raises prices and are influenced in their choices of
products as a result.
Product differentiation and imperfect knowledge make
the substitution of functionally similar products more
difficult for the consumer and consequently cause the demand
of buyers, generally speaking, to be somewhat less elastic
than it otherwise would be.3
One of the purposes of sales­
manship is to create greater elasticity of substitution by
the imparting of knowledge, and another is to influence
preferences by altering desires.4
In this chapter we shall
deal with the resistance factor in its relationship to
general and specific substitution.
Our treatment of the
subject will lead us to analyze competition according to
distinctions we shall make concerning consumer attitudes of
resistance and non-resistance.
I.
PRODUCT DIFFERENTIATION
Two commonly used bases for differentiating among
commodities in economic theory are substitutability and
technology,3 though these two would seem in most instances
3 Cf. Edward Chamberlin, op. cit.» p. 118.
4 Cf. Edward Chamberlin, op. cit., p. 119.
3 For an interesting discussion, see Robert Triffin,
op. cit., pp. 75-96.
81
to be interdependent.
For our purpose in dealing with con­
sumer preferences, function seems to be more important than
technology since it is consumption and not production with
which we are concerned.
,
Returning to our earlier definitions of general and
specific
s u b s t i t u t i o n , S
we may say that goods which are
generally substitutable are those which are commonly substi­
tuted by consumers to satisfy different desires or to
satisfy one desire instead of another, and 'that goods which
are specifically substitutable are those which are commonly
substituted by consumers in satisfying the same desire.
Accordingly, we have a differentiation of commodities based
on both substitutability and function.
Our definition is
broad enough to take -account of difficulties that must be
encountered in trying to base a definition on function only,
for’though products have capacities for consumer satis­
faction which make them functionally similar, area and price
range must be taken into consideration.7
Regardless of how
functionally similar two articles are, they can hardly be
said to compete with each other if the one is sold in a
store in New York City and the other in Los Angeles.
And
regardless of the fact that they are functionally similar,
6 Supra, p. 71.
^ Cf.'" Robert Triffin, o£. cit., pp. 87-89.
a $25 overcoat hardly competes with a $200 one.
On the
other hand, a differentiation of commodities based ex­
clusively on substitutability fails to account for two
distinctly different kinds of .substitution.
The man who
deliberates upon vdiether he should buy a new automobile or
more furniture represents a different problem from the one
who questions whether he should substitute brand nY" for
brand "X" of butter.
Our differentiation is not complete, however, for
distinction must be made among substitutable goods that are
functionally similar and those that are functionally quasi­
similar.
A man may deliberate upon whether to buy a theater
ticket or gasoline for a pleasure trip.
Either product would
furnish amusement, but the forms are different.
In the same
sense, a housewife may hesitate between the purchase of meat
or fish.
Both would satisfy the general desire for food.
To make our differentiation more accurate, we must dis­
tinguish between general desires and specific tastes.
Substitutable goods which are functionally dissimilar are
those which are used only in the satisfaction of desires
which are different In nature, such as food, clothing,
furniture, automobiles,
etc.
Substitutable goods which are
functionally quasi-similar are those which are capable of
satisfying any one general desire, such as food items, which
have capacities for satisfying hunger, and fashion items,
83
which have capacities for satisfying self-esteem.
Substi­
tutable goods which are functionally similar are those which
have capacities for satisfying specific tastes, such as ,fX"
brand of coffee has the capacity for satisfying the con­
sumer’s taste for coffee.
Attitudes of resistance vary with regard to product
differentiation.
The resistance to substituting one
•functionally dissimilar good for another is general re­
sistance, that to substituting one functionally quasi­
similar good for another is specific-inclusive resistance,
and that to substituting one functionally similar good for
another is specific-exclusive resistance.®
These terms will
be helpful to us in our analysis of competition.
II.
GENERAL AND SPECIFIC COMPETITION
Most sellers compete on the basis of both quality and
price and usually what Is spoken of as ’’nonprice" compe­
tition is no more than the placing of emphasis on quality.at
a price in sales competition.
Rarely is either quality or
price ignored entirely in sales efforts though sometimes the
stress is laid upon one or the other.
The reasons that non­
price factors are often emphasized instead of price factors
® Supra» p. 35.
84
lie partly with sellers and partly with buyers.® .Business
men have come to fear the consequences resulting from price
emphasis, which sometimes leads to price cutting and price
wars.
Buyers are usually unable to make effective compari­
sons on the basis of price and are sometimes prone to judge
•quality by p r i c e . A n d
finally, consumers have a tendency
to form habits with regard to prices, which tend to make
demand inelastic.H
For our purposes, competition can be more effectively
classified on the basis of product differentiation than it
can on the basis of quality and price.
We shall consider as
general that competition which exists among sellers of
substitutable goods which are functionally dissimilar, as
quasi-specifIc that competition which exists among sellers
of substitutable goods which are functionally quasi-similar,
and as specific that competition which exists among sellers
of substitutable goods which are functionally similar.10
® Temporary National Economic Committee, op. cit.,
pp. 60-63.
10 Cf. M. A. Copeland, op. cit., pp. 309-314.
11 Cf. Henry Smith, op. cit., pp. 309-314.
This
author observes that If demand is elastic the demand for a
product may decrease with a drop in price If inferiority is
suspected.
'10 Paul D. Converse, In The Elements of Marketing,
Revised Edition (New York;
Prentice-HalT, 1^35), pp. 20-21,
refers to general competition as inter-industry and specific
competition as intra-industry competition.
85
Sellers of any one group not only compete among them­
selves, but they also compete with other groups.
A grocer,
for instance, not only competes specifically with other
grocers, but he competes quasi-specifically with bakers,
butchers, and delicatessens, and generally with furniture
stores, automobile agencies, theaters, and hardware stores.
To increase his business, he might try to draw customers
only from other grocers in his area, or he might attempt to
increase his sales at the expense of other competing groups
as well*
The three kinds of resistance he would meet in
winning the trade of consumers from competitors in the three
groups respectively we shall refer to as specific, quasispecific, and general resistance.
III. COMPETITION IN THE SHORT RUN
The sales problems of sellers are of both an inform­
ative and manipulative nature;
they must, first, -provide
means of letting buyers know about the existence and nature
of the products offered for sale and, second, provide means
of stimulating the desires of consumers.14
As Chamberlin,
points out, "new products and new varieties of old products
would have virtually no market at all" if sellers did not
l^ Supra, p. 83.
14 Edward Chamberlin, op. cit., p. 119.
86
provide consumers with information about them,
But the
informative function Is only one of the purposes of selling.
and advertising.
As Sumner H. Slichter observes;
But we should overlook much of the significance of
modern marketing methods if we regarded them solely as
ways of informing consumers about opportunities to spend
money.
Marketing is an attempt to mold the consumer's
valuations, to influence the importance which he
attaches to things— in other words, to do the very thing
that religion and- education endeavor to do.
By their
influence upon the valuations of millions of men,
marketing experts help mold the very philosophy of the
age.
Indeed, they are doing more than this, for since
men are largely what their desires make them, marketing
experts are engaged in nothing less momentous than the
molding of human character on a gigantic scale ...!6
Our present task is that of examining these two
functions of selling according to the time factor.
The
purchase of goods to which the consumer has an attitude of
non-resistance is fixed during short time.
In so far as
expenditures for these goods are concerned, the attitudes
of buyers are conditioned by habit, and sometimes, as in
the case of durable goods, by contractual commitments, and
changes do not occur in short tlme.
There may be, however,
some switching from store to store or from brand to brand.
For particular groups, this depends entirely upon the kind,
of resistance developed.
If the resistance to change of
patronage is general, buyers may switch from one store to
0£* cit., p. 119.
i-6 6p. cit. , p. 564.
87
another, provided both sell substitutable goods which are
functionally similar or quasi-similar.
If the resistance is
quasi-specific, a more restricted change from store to
store may take place, for both stores must be selling
substitutable goods that are functionally similar.
If the
resistance is specific, habits of consumer patronage are
definite enough to prevent customers from switching their
trade during short t i m e . 17
On the other hand, if the re­
sistance to substitution of goods is general, buyers may
substitute freely among functionally similar and quasisimilar goods.
If it is specific-inclusive, their substi­
tutions are limited to functionally similar goods.
But if
it is specific-exclusive, no substitution takes place in
short time.
Since the market of any retail institution or for any
one product is likely to be made up of intermingling groups,
the resistance factor may be said to vary in most markets.
Consequently, there is likely to be some elasticity of de­
mand in the market of any store or for any single commodity
at any-given.time.
In addition, a commodity to which some
consumers have developed attitudes of non-resistance is
usually a good to which others have attitudes of resistance,
Supra, p. 85
1® Supra, p. 83
a fact which assures some elasticity of total demand for
most products at any one time.
In a similar sense, while
some consumers have established fixed habits of patronage
with respect to particular retail institutions, others have
not, a fact which assures some elasticity of total demand
for the services of any single store at any one time.
a result, salesmanship and advertising may increase the
total demand for a good or service at any one time though it
may not affect the expenditures of s o m e .consumers.
By
Imparting knowledge of substitutable goods which are
functionally similar or functionally quasi-similar,
sellers
can influence consumers who have developed attitudes of
general resistance or specific-inclusive resistance to
change to make substitutions in short time.
They cannot
influence those who have developed attitudes of specificexclusive resistance against change with respect to certain
commodities to substitute other goods for these commodities
in short time, however.
Expenditures made by.buyers from residual income may
be manipulated by sellers, notwithstanding, for these ex­
penditures are often speculative and represent purchases for
goods to which consumers have attitudes of resistance.
For
consumers in the lower income brackets, these residuals are
small and resistance is relative to the number of desires
competing for satisfaction and the price charged for the
means of gratifying each of them.
Usually the expenditures
are necessarily small as a result.
IV.
COMPETITION IN THE LONG RUN
The overcoming of general resistance usually requires
the application of long-time sales efforts In accordance
with definite selling policies.
Not only do sellers give
general knov/ledge of product and sales conditions, but they
also create in buyers a consciousness of certain ends or
results to be attained from the goods they sell, which is
tantamount to the stimulation of desires.
In this respect,
selling is both informative and manipulative.
Time is
allowed for a change in habits and an adjustment In con­
tractual commitments, and the substitution of products of
functional dissimilarity may be brought about through the
seller*s Influencing buyers to make adjustments in certain
choices which are fixed in the short run.
Time is also
permitted for overcoming quasi-specific and specific
attitudes of resistance with regard to patronage, and for
overcoming specific-inclusive and specific-exclusive
attitudes of resistance with regard to particular commodities.
Long-run sales policies as they apply to consumer
expenditures of residual income are ordinarily concerned
with, the changing of attitudes of resistance to those of
non-resistance. .Markets are in a constant state of flux as
a result of births, deaths, marriages, changes in location,
changes in income status, etc.2^
any length of time.
ifo market is static for
Sellers must not only compete in
retaining customers whose patronage is sought by competi­
tors, but they must find new patrons to replace those lost
as a consequence of natural changes in the market.
Expendi­
tures made in experimentation by buyers today may be fixed
by habit tomorrow.
Thus the long-time policy of most retail
sellers must provide for efforts which will not only bring
immediate purchases from the residual incomes of consumers,
but-which will also tend to develop habits which will
rigidify future purchases in their favor.
Since widespread efforts at overcoming the general
resistance of consumers may work to the advantage of all the
sellers of goods which are functionally similar in any area,
sellers sometimes use cooperative advertising to build the
market for their products .21
For example, theater owners
r
might engage in a cooperative campaign to urge consumers to
spend more money for theatrical entertainment, which would
involve, of course, smaller expenditures on functionally
20 ££• laul D. Converse, op. cit., pp. 30-51.
21 Cf. A. R. B u m s , o£. cit., p. 380.
91
dissimilar or quasi-similar goods.
In the same sense,
sellers might cooperate to overcome hoth general and spe­
cific-inclusive resistance.
The overcoming of specific-
exclusive resistance offers no' opportunity for cooperation. .
V.
SALES POLICIES OP SELLERS
The sales policies of sellers are rarely limited to
providing means for meeting one kind of competition only,
for unless a seller has a monopoly in his particular area
he usually faces general, quasi-specific, and specific
competition.
An automobile dealer, for Instance, attempts
In the long run to get persons who have never owned auto­
mobiles to develop habits of buying them and tries to pre­
vent persons who already have developed attitudes on nonresistance to the purchase of cars from changing their
attitudes to those of resistance.
He also attempts, if he
sells X brand of cars, to get persons to develop habits of
buying this make of automobile.
In addition,, he encourages
the use of automobile transportation over other kinds of
transportation.
In this sense, he competes with street
cars, railroads, and in many cases with steamship agencies.
The seller should take cognizance of the kinds of
resistance he must overcome to increase sales.
He searches
for the most effective combination of selling media in
relation to their cost in the light of his particular
92
m
a
r
k
e
t
^
any particular price, advertising may bring,
as additional selling costs are incurred, comparatively
speaking, increasing or decreasing results.23
Increasing results tend to come from the cumulative
effect of advertising which accrues from repetition in the
overcoming of resistance.
Small expenditures to overcome
either general or specific resistance may easily be wasted.
The greatest benefits to be derived from small outlays
would seem to be those which accrue as the result of urging
consumers to spend their residual income in particular ways
since this kind of selling may be effective in the short
run.
Increasing results also result from improvements that
can be attained In organization of expenditure with enlarge­
ment of outlay.
Diminishing results usually result from attempts to
expand the area of the market or from attempts at In­
tensifying the exploitation of a given market.
Since what
is a non-resistance good to some is a resistance good to
others, and since habits vary with groups of consumers, some
can be more easily persuaded to purchase than can others.
It must be remembered that the relative resistance to the
purchase of any good increases with each additional unit
bought.
22 cf. Edward Chamberlin, op. cit.t pp. 130-140.
23 of. Edward Chamberlin, op. cit., pp. 134-137.
93
¥1.
CONCLUSIONS
Product differentiation is necessary in an analysis
of the resistance factor.
For our purposes, products are
most conveniently differentiated according to substi­
tutability and functional similarity.
The. resistance factor is also closely related to the
time element.
In the short run It is fixed with regard to
many expenditures; in the long run It is subject to adjust­
ment with respect to all expenditures.. General desires do
not change In the short run but some substitutions of
functionally similar products may take place In the satis­
fying of those desires which are regularly gratified by
consumers.
The extent to which this substitution occurs
depends upon the particular attitude of resistance of any
buyer.
To bring about adjustments in consumer purchasing
habitSj long-time sales efforts must be carried out in
accordance with definite selling policies.
Expenditures ■
from residual income may be influenced, however, by sporadic
and unrelated sales efforts.
Nevertheless,
since expendi­
tures which are made on the basis of experiment in the
present often lead to attitudes of non-resistance with
respect to the purchases of particular goods in the future,
most selling efforts are related to a long-time sales
policy.
Selling m a y toe either informative or manipulative,
or it may toe tooth.
Informative selling in the short run ■
may bring atoout some switching of consumers from store .to
store or from brand to brand.
Manipulative selling in the
short run can affect only those expenditures, which are made
from residual income.
Both informative and manipulative
selling are used In the long run.
CHAPTER V
C OH SUMER TIME PREFEREN CE
In analyzing consumer preferences, we Have not as
yet discriminated between present desires for immediate
satisfaction and those for future gratification.
The
purpose of this chapter is that of comparing these two,
which we shall speak of as Immediate and* future preferences.
A future preference Is only one kind of present
preference, for It Is the current attitude of a consumer to
gratifications which he hopes in the present to enjoy in the
future.
A man may forego some satisfactions in the present
so that he can save money with which to buy a home, enjoy
leisure, or travel in the future.
one for a future satisfaction.
The desire is a present
The attitude may change as
time goes b y , ■but it is characteristic of the human being
to think of satisfactions he may enjoy In future time in
terms of present evaluations.1
The relative nature of
resistance is more readily seen when it is realized that not
only does the consumer have competing desires for current
satisfaction, but he also has a present attitude with re­
spect to consumption in the future.
Consequently,
there is
1 Much of the thought expressed in this chapter Is
based upon Robert B. Pettengillfs Distribution Theory
(Los Angeles;
University of Southern California, 1941).
96
not only a competition among all present desires, but this
competition Is heightened by current desires for future
gratification.
For instance, a man may not' only feel the
sacrifice of other current .satisfactions when he uses his
money to go on a vacation trip, but he may also feel that
he Is spending money which he would like to save for his
children’s education.
He may resort to a less expensive
trip than he had planned or he may abandon the trip entirely
according to the relative intensity of his desires.
The
future preference is a direct competitor with present
preferences in this case.
When a consumer has a positive time preference,
immediate or direct uses are given a higher relative valu­
ation than future or indirect consumption, but when he has
a negative time preference, the opposite is true .2
As a
result, the relative resistance to the purchase of goods for
immediate gratification is greater, ceteris paribus, when
there is a negative time preference than it is when there is
a positive time preference. ■
In this chapter, we shall deal with three important
elements in time preference:
credit.
viz., saving, durability, and
These three we shall consider according to their
relative importance in consumer preferences.
2 Cf. James G-. Smith, "The Measurement of Time Valu­
ation,” The American Economic Review," XVIII:2 (June, 1928)
251.
97
I.
THE PROPENSITY TO SAVE
Persons put off immediate consumption for many
reasons:
there‘is uncertainty with regard to the future,
there is a reward- in-the way'-of interest, 3 there are future'
preferences competing with immediate preferences, and there
is a tendency for some persons to save because of the
development of habits of thrift.4Not the least of the influences -on saving is the
working of the principle of diminishing utility.
A man. gets
a- greater return in utility from the first dollar he spends
at any one time than he does from the second, and a greater
utility from the second than he does from the third, and so
on.
If he were to spend all his income at one time, the
last unit of expenditure would bring a far smaller return in
utility than the first one would.
Before a man spends his money., he has estimates of
the relative utility each unit of expenditure will bring
him.
He also has present estimates of the future utilities
he would receive if he were to keep some of his money and
3 Some persons have a negative time preference to the
extent that they would save if they had to pay to have their
money taken care of.
^ Habits of this kind often develop from negative
motives'.
Supra, pp. 27-28.
T. N. Carver, "Thrift and the
Standard of Living," The Journal of Political Economy,
XXVIII:9 (November, 1920) 764-786, declares that thrift and
a high standard of living are not antagonistic.
See his
definition of standard of living, supra, p. 37n.
98
spend it for future preferences.
Since the most intense
desires for immediate gratification are.usually estimated
more highly then the most intense desires for future satis­
faction, some 'immediate preferences are virtually always
taken care of first.
The question is, how many immediate
preferences will be taken care of before money is saved for
future preferences?
As expenditures are increased for the satisfaction of
immediate desires, a point is reached at which the estimate
of an additional unit of spending for an immediate grati­
fication brings no greater utility than the saving of that
unit for the satisfaction of a future preference.
At this
point it is a matter of indifference whether the man spends
or saves the dollar.
But the expenditure of the next
additional unit of income for an immediate gratification
would bring less utility, according, to estimate, than the
saving of that unit for a future satisfaction.
Conse­
quently, at about this juncture the consumer begins to
devote his dollars to the most alluring of his future
preferences.5
«4
The principle of diminishing utility applies to
saving as 'well as spending.
Each additional unit of saving
brings present estimates of smaller utility.
As a result,
5 An excellent discussion of the working, of this
principle is given in T. h. Carver's The Distribution of
Wealth, pp. 232-236.
See his chart on p. 233.
99 .
.the consumer spends and saves to the extent, roughly
speaking, that the marginal utility of a unit of the one is
proportional to that of. a unit of the other.
The possibility
of interest alters the situation, however, for a reward ms,j
be offered.to the one who saves.
Instead of saying that the
point at which saving begins is reached about when the
estimate of the utility of another-immediate preference good
equals the estimate of the utility to be derived from the
satisfaction of the most desirable future preference, we
should say that the point at which saving begins is reached
about when the estimate of the utility of another immediate
preference good equals the estimate of the utility to be
derived from the satisfaction of the most desirable future
preference plus the utility to be derived from the goods
that can be purchased with the interest.
This analysis, which Is conventional, is very in­
adequate notwithstanding, for two important considerations
have not been given attention.
In the first place, future
preferences often become very vague and remote as the con­
sumer looks further and further into the future .6
the individual may mistrust the economic future:
Then, too,
fear of
inflation or suspicion of deflation' might influence or
prevent present spending.
The.idea that the consumer may do
6 Cf. P. N. Rosenstein-Rodan, op. cit., p. 82.
100
"better or worse "by spending immediately or deferring ex­
penditure may be responsible for bis actions.*^
In the
second place, future preferences should be considered in
their relation to consumer preferences in short and longrun time.- •
Future preferences may be divided into two classifi­
cations;
(1 ) the more concrete present desires for future
satisfactions and (2 ) the more vague idea of remote and
indeterminate satisfactions that may be desirable in the
uncertain future.®
The first category Includes future
preferences that seem very real in the present and thatoffer a definite opportunity for comparison.
The second
category comprises those indefinite future preferences which
are not clearly visualized In the present but which, because
of an uncertain or somewhat pessimistic point of view of
future resources in relation to desire capacity, have an
efficacious Importance with regard to the present view of
the future.
As James G. Smith says, ’’Every present desire has as
a-competitor other present desires and also other desires
for future goods, and thus every valuation must be effected
7 Supra, pp. 75-76.
® P. N. Rosenstein-Rodan, op. cit., pp. 81-82, classi­
fies these as the future preferences which can be "foreseen
concretely" and those which cannot and therefore must be
considered as sundry.
.101
Toy time valuation.1'®
But the. opportunities of comparison of
immediate preferences with each other are usually always
direct whereas the opportunities for comparison of immediate
preferences with future preferences may be either direct or
indirect.
If the future preference is concretely visu­
alized, a fairly direct comparison is possible.
If It is
in posse, t h e •comparison is usually indirect, such as the
consideration of a commodity that would satisfy a current
desire in relation to the general means of satisfying
practicable desires of the future as they appear in a rather
vague way in the present.
Referring to our classification of consumer expendi­
tures on the basis of those that are fixed by habit and
contractual commitment and those that are made from residxial
income,
v/e may say that in the short run any saving which
is not done as a result of habit or previous commitment
must be made from residual income.
In this sense, immediate
preferences are compared w/ith future preferences and time
valuation is important.
If fixed expenditures are large
proportionately to Income, saving Is likely to be small.
If
fixed expenditures are small proportionately .to income,
saving may be large, relatively speaking.
® Loc. cit.
10 Supra, pp. 59-63.
Much depends upon
102
the time -preference of consumers*
Persons who originally weigh immediate preferences
against future preferences, and who, as rational consumers,
start saving when their estimates of future utility are
higher than those of immediate utility, often develop habits
of saving in the long run.
Money put aside as the result of
habits of saving is very similar in effect on residual
income to that of money used for fixed expenditures.H
In
the short run, habits of saving decrease residual income'the
same as any fixed expenditure does.
In the long run, habits
of saving may be adjusted the same as habits of expenditure.
The. time is sufficiently long to permit a more careful
consideration of the relative utility to be received from .
additional units of expenditxire in comparison with ad­
ditional units of saving. 12
Habit is often influenced by environmental factors,
such as custom..
Persons reared in an atmosphere of thrift
and taught to save when they are .young may develop habits
that tend to fix their behavior patterns as they grow
o l d e r . jn some communities, even, reputations have been
Cf. Ruby T. Norris, o£. cit., p. 134.
12 Of. Ruby T. Norris, op. cit.t pp. 138-139.
13 £f. Paul H. Nystrom,
op. cit., p. 487.
103
judged by amount of
s a v i n g s .
14
jt is customary among many
of the families of foreign extraction to save and some do so
at the sacrifice of goods to which most Americans have
developed attitudes of non-resistance.
More important than any other consideration in an ex­
amination of the proportionate savings of consumers is size
of income.
A study made by the National Resources Committee
showed that during the period 1935 to 1936 families with
smaller incomes than $>1,250 annually consumed more than
their incomes provided for.
Debts, withdrawals from
previous savings, and gifts made up the difference.
In the
$>1,750 to $2,000 level, an average of 5 per cent of income
was saved.
In the $4,000 to $5,000 bracket, 21 per cent of
Income was saved.
The estimation for families above $20,000
ran as high as 51 per cent.15
Even though we grant that individuals with larger
incomes are apt to have greater desire capacities than those
with lower incomes, these greater desire capacities are not
likely to increase proportionately with income as the latter
14 Cf. Simon N. Patten, "The Standardization of Fami­
ly Life," Annals of the American Academy of Political and
Social Science, XXXXVII i l J u l y , ~ 19l3) Bl-90'.
15 Citing Consumer Expenditures in the United States,
1935-36, (Washington": United States Government Printing
Office, 1939), by Temporary National Economic Committee,
Investigation of Concentration of Economic Power, Monograph
No. 57, Saving, Investment, and National Income (Washington;
United States Government Printing Office, 1943),, pp. 16-17.
104
peaches the higher brackets.
The principle of diminishing
utility is more clearly manifested in the cases of persons
with larger than with smaller incomes as in the case of a
man with an income of $50,000 a year compared to one with
under $5,000 annually.
Another element in income besides amount that affects
saving is regularity.
Persons engaged in seasonal occu- '
pations must save to provide regularity of consumption.
G-. P. Watkins says:
It Is obvious that the continuous regularity of its
flow increases the satisfaction realized from a given
size of income.
If the income fluctuates considerably
and is consumed during periods of abundance as com­
pletely as of shortage, then the principle of di­
minishing utility means that the satisfaction realized
in the former situation is considerably less than that
realized from like units spent during shortage.
The
most important ground for saving is that income is
thereby better distributed in time and thus has greater
utility...I®
In general we may conclude, then, that savings have a
tendency to increase directly with size of income but in­
versely to number and intensity of desires for Immediate
gratification and to fixed expenditures which are the result
of habit.
Although the desire capacity for’ immediate satis­
factions is apt to grow with earning capacity, it does not
increase proportionately; consequently diminishing utility
usually affects more those with larger than with smaller
"Economics of Saving," The American Economic Review,
XXIII:! (March, 1935) 70.
105
incomes.
The tendency for immediate preferences to be more
intense than future preferences is offset partly by the
reward that may be received for saving and partly by atti­
tudes of non-resistance toward saving by consumers.
II.
THE FACTOR OF DURABILITY
The satisfaction derived from some consumer goods is
short lived, and the gratification can be renewed only by
the consumption of more of the same kind of commodities*
These products are spoken of as single-use goods.
The
satisfaction received from other commodities extends over a
considerable period of time and the gratification is usually
derived at periodic Intervals.
as durable.
These products are spoken of
'Food and picture shows are single-use commodi­
ties, but pianos and automobiles are durable products.I5?
Clothing is semi-durable. •
Since the consumption of durable goods begins in the
present but extends Into the future, these goods satisfy
both immediate and future preferences.
The degree to. which
they are consumed In present or future depends upon the
extent to which they are durable.
If a person's time
^
James G. Smith, 033. cit., p. 227, explains, "Every
more or less durable good Tincluding land) may be looked
upon as a series or ’bundle' of separable uses, extending
over a period of time.
There exists a market in which the
durable goods themselves are bought and sold for prices
where the whole ’bundle' of separable uses are exchanged at
once."
.106
valuation Is negative, he either saves or buys commodities.
Persons form habits with regard to the time of re­
placement of durable goods just as they form habits with
r \
regard to the choice of products.
change in the short run.
*
These habits do not
They may, nevertheless, be ad­
justed in the long run just the same as other habits.
Observation shows us that decreases in real income
are more likely to affect the demand for durable goods than
that for single-use commodities.
During times of falling
real Incomes, consumers are likely to feel the pinch of
emergency, and in periods such as this their thoughts run
more to immediate than they do to future preferences.
latter can wait.
postponed.^®
The
Hence the replacement of durable goods is
This is Illustrated by the following quotation
from Paul D. Converse:
As a general statement we may say that when the
country becomes more prosperous, people spend more
on durable goods such as houses, automobiles, furn­
iture, and rugs, and on such services as travel,
education, and domestic service.
When the national
income decreases, the purchase of such goods and ser­
vices is curtailed.
It appears that there is relative­
ly little variation in the purchase of perishable
consumption goods such, as food, clothing, gasoline,
and tobacco.
In the Tebbutt study it was shown that
there was no falling off in the consumption of food
from 1928 to 1932, although there were some shifts'
!® James G. Smith, o p . 'cit., pp. 231-232, offers an
explanation of the effect of war upon time preference.
In
times of uncertainty, consumers have a positive time prefer­
ence; v/hen the war is over, the future becomes more certain
and they have a more negative time preference.
107
in the consumption of individual items.
The con­
sumption of w o m e n ’s clothing did not decrease in the
aggregate in 1952 as compared with 1928j the'con­
sumption of m e n ’s clothing may have declined slightly.
The consumption of gasoline was 11 per cent higher
in 1932 than in 1928, while, the consumption of cigar- /
ettes was 2 per cent lower. After allowing for the
increase in population, we may s a j that there was a
very slight decline in the per capita consumption of
perishable consumption goods.
The big decline occurred
in durable goods such as buildings., industrial machin­
ery, automobiles, and furniture.
The ups and downs
in business activity appear to be caused very largely
by variations in the activities of the industries
producing durable goods.
An opposing force to durability is that of style.
Rapid changes in this element tend to give durable goods
a more positive time preference.
The importance of being
in fashion in the present is greater than the desire for
gratification in the future.
This may be cited as a reason
for the difference in consumption changes between m e n ’s and
w o m e n ’s clothing during 1928 and 1932.20
Our deduction is, then, that during, times when a con­
sumer must make adjustments in expenditures because of a
drop in real income, he tends to use the durable goods he
already owns longer and to make fewer replacements.
This
Op. cit., pp. 34-55.
Cf. also J. P. Pyle, Market­
ing Principles, Revised Edition T W e w York:
McGraw-Hill Book
Company^ 1936)', PP» 422-436 and A. R. Tebbutt, The Behavior
of Consumption in Business Depression, Harvard University
Business Research Studies, Ho. 3, August, 1933.
^9 Leon Kelley, in "Outmoded Durability,” Printers’
Ink Weekly, CLXXIV:2 (January 9, 1936) 59-61, takes the
attitude that durability is a detriment to good business.
108
tendency is generally noticeable among buyers during periods
of national or local emergency.
The reason is that a con­
sumer naturally tends during a time such as this to concen­
trate his attention on the immediate.
III.
C ON SUMER C REDIT
Other than during times of emergency or economic
depression, persons with positive time preference; not only
spend more freely, comparatively speaking, on immediate
preferences than do those with negative time preference,
but they also borrow or use their credit to enjoy Immediate
satisfactions rather than wait to get the use of goods after
they have saved the money to buy them.
This does not mean
that credit is not used during times of emergency or eco­
nomic depression, but it does mean that it is used more
guardedly during these times.
The reason Is not only that
credit is not so liberally offered during these times, but
also that consumers have a more pessimistic vlevi with regard
to their ability to pay.
Factors causing the consumer to discount the future
for the present are optimism and indifference.
A person
will borrow or use his credit If his desire Intensity for
immediate gratification is greater than his desire intensity
for future satisfactions by sufficient margin to pay the
Interest costs.
109
The kind of consumer credit we are particularly
Interested in is that of the contractual type granted in the
sales of semi-durable and durable goods.
The situation is-
different from that in which a person uses,-credit in buying
single-use goods, for, instead of balancing present prefer­
ences and interest costs against future preferences, the
consumer usually weighs part present and part future prefer­
ences against the present sacrifice entailed in the down
payment and the future sacrifices represented by the pay­
ments.
The interest cost is included in these payments.
If
we assume that X, a durable commodity, costs $100 but may
be purchased for $10 down and $10 a month for twelve months,
the consumer is likely to balance what he could purchase
immediately with $ 10 ,and what he could purchase in the
future for each of twelve months for $10 against the immedi­
ate and future utilities to be derived from X.
It must be
clear that In this situation durable goods may satisfy in
part immediate preferences.
Thus there is general compe­
tition between the sellers of single-use goods and those of
durable commodities .21
Persons with a negative time preference may weigh the
Immediate utility to be derived from a durable commodity and
interest costs against the postponement of utility less
C f . E. R. A. Seligman, The Economics of Installment
Selling (New York;
Harper & Brothers" 1927), Vol. 1, p. 260.
110
Interest costs.
Pew consumers, however, have a sufficiently
negative time preference to wait until they have the money
saved for cash purchase of comparatively high-priced durable
products.
Many would not even postpone consumption until
they had the money saved for cash purchase of semi-durable
commodities.22
Were
installment payment, plans discontinued,
many would spend money previously used for durable goods for
low-priced immediate preference goods.
Time-payment plans
have removed some of the resistance of the consumer to the
purchase of relatively high-priced durable and semi-durable
goods.
As a result, many products that would,■because of
price, be looked upon by consumers with attitudes of re­
sistance have through time-payment plans which necessitate
only small down payments become habitually purchased and
consequently looked upon by buyers with attitudes of nonresistance.
N. R. Danielson presents a reasonable argument that
the consumer "discounts the future costs more than he does
the future utilities of the durable commodity" because
"under high-pressure salesmanship and in the absence of the
necessity of making immediate payment in full, the present
utility yielding power of the commodity is paramount in the
22 c f . Avard L. Bishop, "Social and Economic Aspects
of Instalment Buying," The Journal of Business of the Uni­
versity of Chicago, 11:1 ("January, 19291 20; and Paul H.
Uystrom, op. cit., p. 546.
purchaser's mind when he makes the decision to sign the
contract."
It happens that "future costs are underestimated
because the consumer cannot forsee the possibilities of more
desirable alternative ways of spending in the future."23
One of the most important influences of installment
selling on consumer preferences is found In the effect it
has on the distribution of the buyer's expenditures In the
short run.
The contractual obligations can only be adjusted
In the long run and hence at any one time the amount of
residual income Is definitely lessened by the payments to
which the consumer has committed himself.24
pf these pay­
ments -.are large proportionately to income, the freedom of
selection of the buyer is restricted In the short run.
If
this hampered choice in short time becomes oppressive to
some consumers, a resistance to time-payment plans arises
which may result in the adjustment of expenditures in the
long run.
IV.
CONCLUSIONS
■ The conflict between both opposing motives and com­
peting positive desires is heightened considerably by future
preferences.
One of the important negative motives causing
23 "The Theory of Consumers' Credit," The American
Economic Heview, XIX;3 (September, 1929) 397-39*8.
112
hesitation by the consumer in the spending of his money is
the feeling of uncertainty with regard to future needs.
This retardation may take the form of a habit which, unless
adjusted in the long run, reduces spending.
Just as important is- the conflict between present and
future preferences.
A provident person not only weighs
prevailing estimates of immediate gratifications against one
another, but he compares them with future preferences.
This
comparison may be made with respect to expenditures from re­
sidual income in the short run or with respect to adjustments
of habits of. expenditure in the long run.
The competition
of desires for satisfaction is thus intensified.
The consumer may develop, attitudes of non-resistance
with regard to future preferences just the same as with
regard to present preferences.
Habits of saving and of
purchasing durable goods may cause the consumer to devote
a smaller proportion of his income to the satisfaction of
immediate preferences.
During times of emergency, however,
the .buyer has a tendency to devote his attention to immedi­
ate preferences, and particularly to postpone replacements
of durable and even semi-durable goods.
Since saving has usually been a prerequisite to
purchase of relatively high-priced durable commodities in
the past by consumers in the lower income brackets, the
comparison of relatively low-priced single-use goods with
113
durable commodities has been that of immediate preference
with future -preference.
Time-payment plans have removed
the necessity for prior saving and have made available the
immediate utility that can be derived from durable goods
purchased with small down payments.
Consequently,
install­
ment selling has intensified the general competition between
sellers of comparatively low-priced single-use goods and
those of durable commodities by making the basis of com­
parison for buyers that of immediate preference with that
of part immediate and part future preference.
Since the
immediate utility to be derived from durable goods is often
paramount in the minds of consumers,
choices are frequently
made on the basis of comparisons among immediate preferences
only.
CHAPTER VI
CONSUMER PLACE PREFERENCE
We have already said that, when the'relative desire
intensity of a consumer for a good is. greater than his
relative'resistance to purchasing it, he is likely to buy
the product if he has the mone 3r.l
To the extent that this
relative desire intensity is much greater than the relative
resistance', the consumer feels he is making a good buy.
This means that of the many uses to which the consumer could
put the dollars required in the purchase of a particular
commodity, the purchase of a specific good gives the
greatest estimate of relative utility in comparison to
relative resistance.
The assumption here seems to be that
the variotis uses to which the consumer might put his money
are equally available and that the relative resistance can
be measured by the comparative reluctance and vacillation on
the part of the buyer in parting with dollars for any one
use.
But goods and services are not equally accessible, and
any-analysis of consumer preferences must take some account
of the relative.inconvenience to which the consumer must go
in making different purchases.
1 Supra, p. 64.
115
If a man is willing on a warm afternoon to pay the
customary price, five cents, for an ice cream cone, he may
he unwilling to walk six blocks to get one.
He might even,
be willing to pay tv/ice the customary price if he could get
the product with little effort.
If the nearest store that
handles ice cream is located six blocks away, no sale is
made.2
But if a vendor passes the home of this man and
proffers the commodity, a sale is made.
If a sale is to
take place, then, the estimated utility to be derived from
any product must not only be great enough to offset the
consumer's disinclination to part with the money required to
pay for it, but it must also, in addition, be great enough
to overcome any inconvenience that must be suffered in
making the purchase.
It often happens that a person makes a decision to
buy a product but postpones the actual purchase until It is
convenient for him to make it.
But If the desire is a
transient one, postponement may defeat purchase.
If there
is merely a postponement, the estimate of utility is great
enough to balance the resistance *to part’with money suf­
ficient to constitute the price, but it is not high enough
in addition to overcome the obstacle of inconvenience.
When
the estimate of utility is Just equal to that of the
resistance to part with the price, relatively speaking, a
2 Many consumers would not walk this distance If the
product-were offered gratis.
116
sale will not result unless the product is made more
accessible or sales effort is used.
Students of retailing have long recognized the
importance of location in catering to the desires of con­
sumers.
A classification of .goods frequently used.is that
which divides retail products into convenience,
and specialty a r t i c l e s , ^
shopping,
Since this classification has as
its basis the distance factor, we shall examine it in the
following pages.
I.
CONVENIENCE, SHOPPING, AND SPECIALTY GOODS
A convenience good is one which the consumer refuses
to go any distance, relatively speaking, to buy.
It is the
type of commodity he expects to be able to purchase without
any great deal of effort beyond that represented by payment.
Norris A. Brisco, who reclassifies this type of
product, divides it into impulse, utility, and emergency
goods..
Impulse goods are those bought "on the spur of the
moment," such as candy.
Utility goods are those "generally •
used by the average- customer" but ptirchased at a time of
convenience, as when a consumer is shopping for other
merchandise.
Tooth paste is an example.
Emergency articles
3 In so far as this writer knows, M. T. Copeland in
"Relations of Consumers' Buying Habits to Marketing Methods,"
Harvard Business Review (April, 1923) 282-286, yms the first
to use this classification.
117
are those bought because of the urgency of the moment.
Shopping bags are an example,.4
Shopping goods are those "in the purchase of which
one wants to compare values, prices, and styles."
Usually
"the customer will make a .special trip to several stores to'
Inspect them before purchasing."
Commodities of this type
appeal to the "comparison habit" of the consumer, and the
tendency of stores selling this kind of goods is "to group
themselves in what is knoxwi as the shopping district. "5Specialty goods may be defined as "those which are
sufficiently different from other goods in the same class to
possess reputation enough to cause the consumer to go to
considerable inconvenience— usually to' a particular firm--to
purchase them."®
Substitutions can only be made for these
articles at the. sacrifice of gratification.
One of the weaknesses found in classifications
of
this kind is that writers, without remembering that their
definitions are largely adapted to the meanings of products
to consumers, frequently tend to consider goods of them­
selves as fitting into these divisions.
- Retailing
(New York;
A commodity has no
Prentice-Eall, 1935), op. 86-
87.
® C. Vh Barker and I. C. Anderson, Principles of
Retailing (New York;
McGraw-Hill Book Company, 1935),
pp. 4314-"4".
® Warren C. Waite and Ralph Cassady, op. cit., p. 231.
118
economic significance other than that it has meaning to a
..human'being.
Since the import of products varies with
persons, the utility estimates of these persons may be said
to vary;
For instance, one consumer might shop for certain
articles of clothing, another might go out of his way to buy
these at a particular store, and still another, might buy
these articles at the most convenient place.
Consequently,
we cannot classify goods per se but.must divide them
according to their meanings to consumers.
Consequently, we
must reject such a classification.
Consumers form attitudes of resistance or nonresistance to different inconveniences just as they develop
these attitudes toward goods.
A man who is in the habit of
traveling a particular distance to purchase a commodity may
feel no resistance to the inconvenience involved at any one
time.
In the short run this attitude does not change.
But
habits are taken stock of. and evaluated in the long run, and
consumers may adjust them writh regard to the convenience
factor.
In the expenditure of residual income, buyers are
constantly estimating the relative factors-.of resistance
represented in both price and inconvenience in making
purchases.
Many of the decisions made may serve to guide
future behavior; therefore,, in the next few pages we shall
consider the relationship between the two factors of re­
sistance, price and inconvenience, in the expenditure of
119
'residual income during short time.
II.
RELATION OP PRICE AND -INCONVENIENCE
If we consider that in the case of a particular con­
sumer the estimate of the utility of a specific product-to
which this consumer has an attitude of resistance Is fixed,
we may make some interesting speculations with regard to the
relationship between price and Inconvenience of purchase.
If the utility estimate is low and a purchase is to take
place, the price must be low and the convenience high,
relatively speaking.
The lower the price in relation to
other goods, the greater the comrjarative resistance may be,
but the total resistance, relatively, cannot exceed the
estimate of utility.
The Inconvenience factor Is altered by the number of
goods the consumer is desirous of buying at one place.-
If
It Is only one, total relative resistance must not exceed
total relative utility expectations.
If it is five, total
relative resistance likewise must not exceed total relative
utility expectations,
but the factor of inconvenience does
not,always increase proportionately with utility expec­
tations and with price resistance when the number of g oods
to be purchased at a particular place and time Increases.
For example, a buyer might be unwilling to travel a mile to
buy commodity X at a price of ten cents.
He might be willing,
120
however, to travel a mile to buy commodities A, B, C, D, and
X, each at a price of ten cents.
The narrow d.ifference
between relative utility estimate and relative price
resistance in the case of commodity X may not be great
enough to induce the consumer to suffer the inconvenience of
traveling a mile, but, if we add this narrow estimate of
utility surplus of each of the five products, the total may
be sufficient to induce the consumer to travel the distance.
There is considerable distinction between the
purchase of only one and that of several goods for which the
consumer has low-utility estimates.
A woman who would not
go an additional half mile to a shopping center to save two
cents on a pound of sugar might travel this distance if, in
addition to saving the two cents on the sugar, she could
also save two cents on the purchase of each of another halfdozen products.
Some allowance must be made, of course,
for the added inconvenience of carrying the five products,
but if the goods are not bulky our assumptions are generally
true.
The importance of price advertising by shopping
centers is thus seen.
If for the sake of illustration we may speak of the
relative utility estimates of a particular consumer for
three specific products as low, medium, and high, re­
spectively, we can generalize upon the differences in in­
convenience that may be suffered In the making of purchases.
121
If purchase of the first commodity is to he made, con­
venience must he high,- regardless -of price.
If it is not,
inconvenience would be greater than utility even though the
article were offered free.
The inconvenience suffered in
buying the second commodity may be much greater and purchase
still be made.
The higher the utility estimate -the more
likely it Is that there will be a comparative difference
between .utility expectations and price resistance.
Con­
sequently the inconvenience to be suffered in buying the
third commodity might be relatively high and purchase still
be made by the consumer.
'Whereas a consumer may refuse to
go six blocks for an ice cream- cone even if he could get it
for nothing, he may be willing to travel four times this
distance for a fishing rod that costs four dollars.
The
higher degree of utility estimate offers a greater chance
that there will be a wider margin of utility surplus over
price resistance.
It sometimes happens that even in situations of highutility estimates, the degree of desire intensity and re­
sistance to pay the price balance each other to the extent
that indifference results and the consumer puts off purchase
because of inconvenience.
The higher the utility estimate,
however, the less likely situations of this kind are to
arise other than when the inconvenience is relatively very
great.
Only a wide difference between utility estimate and
122
price resistance for instance causes some, persons to go from
Los Angeles to Flint to purchase their automobiles.
- The situation may .be altered by the durability or
lack of durability of the product.
The desires for single­
use goods are sometimes transient.
The consumer who post­
pones purchase of an' ice cream cone today because o f ■the
inconv.enience that must be suffered in purchasing it-may not
care for one tomorrow when he passes a store that sells ice
cream.
Desires for durable goods are oftentimes more stable
because of the chain of utilities that may be derived from
the use of the product.
Whereas-postponement of the satis­
faction that may be derived from a single-use article may be
permanent, postponement of the satisfaction derived from a
durable good is often temporary.
III.
¥, ON-RESISTANCE ATTITUDES TOWARDS INCONVEN1EUGE
Persons learn not only to associate gratifications
with the means of satisfaction, but they also come to
associate the means of satisfaction with price and with
methods of acquirement.-. Consequently, the thought of'a
certain product brings particular'expectations concerning
not only the price which must be paid for it but also the
inconvenience which must be suffered in getting it.
If a consumer is in the habit of purchasing a com­
modity through a method that requires.
.little inconvenience,
123
it is-likely that his resistance to any increased discom­
modity will be great.
If, on the other hand, he is used to
going to considerable effort in purchasing an article, he
may not notice the Inconvenience as he repeatedly makes the
purchase.
Attitudes of non-resistance with regard to incon­
venience are often closely related to consumer habits of.
patronage.
Individuals acquire habits of trading with '
particular retail Institutions and quasi-specific or
specific attitudes of resistance to change are developed.®
A change in patronage, even though it would offer greater
convenience, may involve risk of Inferiority of product or
of poorer service, and hence the buyer continues to trade
■«ith particular stores.
These attitudes may be overcome in
the long run through informative advertising.
The group to which one belongs may Influence the
buying methods u.sed.
A w o m a n hearing her neighbors tell
about bargains received in shopping may feel that she is
extravagant In having her groceries delivered from a
neighborhood store instead of going to a large shopping
center for them..
On the other hand, some persons might feel
7 Cf* H . H . Maynard, W. C. Weidler, and T. 1. Beckman,
Principles of Marketing, Revised Edition (lew York;
The
Ronald Press Company, c!932), p. 83.
® Supra, p. 84.
•124
that they would lose social distinction if they were seen
carrying shopping baskets.
In this respect, habits may
develop as a result of social influences.
IV.
CONCLUSIONS
Price resistance and Inconvenience are both impedi­
ments to purchase.
The latter is easily observed In the
aversion of consumers to go to any great inconvenience to
buy goods which they look upon with low-utility estimates.Unless a person's attitude toward the inconvenience that
must be suffered in purchasing any good is fixed by habit or
what this person is used to, the basis for judging this
factor of resistance is one of comparison with the incon­
venience which must be suffered in purchasing other goods.
Hence, Inconvenience as a factor of resistance Is relative
in the same sense that, price resistance is.
A buyer may
make general, quasi-specific, or specific substitutions on
the basis of relative inconvenience just the same as he may
on the basis of relative price resistance.
•In introducing Inconvenience as a factor of resistance
along with price, we are broadening our concept of total
resistance and giving the term a significance ydiich more
closely approximates what economists speak of as disutility
costs as distinguished from expenditures or expenses.
CHAPTER VII
C ON SUMER BUYING. MOTIVATION
The Interpretations'of human, conduct made by econo­
mists who have used deductive methods have been the target
for much criticism.. If the psychic element knoiwi as the
human desire is unpredictable and changeable, how can it be
made the basis of a science?
In the words of a critic, J. M.
Clark, marginal utility "is in appearance a theory of
equilibrium and something to gratify the treacherous yearn­
ing for a psychic entity which price can be said to measure.”!
The charge that orthodox economists are still trying
to measure the abstract by the objective, the cravings of
the soul by the price the body pays for gratification, Is
not uncommon.
As C. E. Ayres puts it, "Either wants are
stable and known to be stable and reliable guides to human
destiny, or no significance whatever attaches to them or to
utility or to maximization or to price equilibrium.
The attitude that motives should not be stixdied
because they are unknowable, however, is untenable in so far
as the point of view of this study is concerned.
Instead,
1- "Economics and Modern Psychology," The Journal of
Political Economy, XXXVI:1 (January, 1918) 5.
2 "Fifty Y e a r s ’ Developments in Ideas of Human Nature
and Motivation," The American Economic .Review, SuoDlement,
XXVI :1 (March, 19337
126
we shall follow the reasoning set 'forth in a recent paper by
Robert■M . MacIver:
.We cannot accept the intellectual asceticism of those
who would rule out of the realm of science the study
of motivation, since by that decree we would be
denying to the scientist a vast area of human interests.
Those who assert, as an objective against the language
of "motives and goals," that the scientist is concerned
only with the how of things are not really facing the
issue...Now, among the conditions of human behavior
are the subjective attitudes and impulses without which
It would certainly not be human.
To the agent himself
these subjective urges are important as conditions and
explanations of his a c t . . . 3
The.purpose of this chapter Is to examine one kind of
economic motivation, that which controls the buying action
of the consumer.
In this analysis we shall attempt to
establish no specific schedule of motives.
Instead, we
shall examine certain common operations in the motivation of
human beings that guide their actions.
It is not our intention to compose any specific
classification of motives.
Instead, the study tries to
establish a basis for such classifications according to
uniformities of desires among groups.'
A "motive," as the
term is used in this analysis, is not limited to the narrow
meaning usually Implied in the word "instinct."
As we are
■using the word, It is synonymous with "desire."
The latter
term has been differentiated from the word "want," which is
considered to have a negative connotation.
In using the
term "desire," we are making allowances for both innate
3 "The Imputation of Motives," The American Journal
of Sociology, X L V I :1 ■(July, 1940) 3.
127
tendencies and acquired characteristics.
To segregate the
inherent or the unlearned tendencies from the learned ones
would seem to be a difficult if not impossible task because
of the interdependence of the two.
I.
PRIMARY MOTIVATION
Studies of motivation are fogged by much controversy
over how much of a m a n ’s conduct is controlled by Innate
forces as against acquired disposition.
The influence of
those who believe that the human being is the slave of
Inherent tendencies to react to particular situations in
certain ways has prompted many college teachers to advance
theories of salesmanship which proclaim that all one has to
do to get a particular response from a consumer is to set
certain stimuli in force.
William McDougall, often called the father of
instinctivism, has been the inspiration for much misguided
thought.
He says;
The department of psychology that is of primary
importance for the social sciences is that which
deals with the springs of human action, the impulses
and motives that sustain merital and bodily activity
and regulate conduct; and this, of all the departments
of psychology, is the one that has remained In the
most backward state, In which the greatest obscurity,
vagueness, and confusion still reign...-
4 An Introduction to Social Psychology, Fifteenth
Edition (Boston;
John W. Luce & Company, 1923), pp. 2-3.
128
Critics have not been slow to take advantage of what
they have considered to be a variation of opinion with
regard to human propensities to act.
Ellsworth Paris
queries;
How does it happen that- gifted-men are so 'unable
to agree on what they consider the basic.facts of
human nature?
Some slight differences m i g h t ■be
umderstood, but surely the range is distressingly
wide.
One, or two, or four, or eleven, or sixteen,
or thirty, or forty— this looks s u s p i c i o u s . . . 5
The perplexities entertained in ascribing man's
actions to inherent causes is easily seen in the reasoning
of Paris that "habit and social interaction enter in so
early that it is difficult to disentangle the original from
the acquired."®
It is interesting, however, to observe the
so-called primary motives listed by authorities in the field
of merchandising and selling.
First of all, we must ascertain what is meant by
primary.
Customarily the term Is used to signify innate,
unlearned tendencies.^
But not all writers limit their
classification'of primary motives to tendencies appearing at
birth.
Burtt uses the word "instinct" in what he speaks of
as a loose.usage and admits that in his list are motives
5 "Are Instincts Data or Hypotheses?"
The American
Journal of Sociology, XXVII;2 (September, 19211 188.
6 L o c . cit.
V G f . D. B. Lucas and C. E. Benson, Psychology for
Advertisers (He?/ York;
Harper & Brothers, T93(31, p. 51.
.129
which some might hesitate to call innate.®
Tipper, Hotch­
kiss, Hollingworth, and Parsons use the term "fundamental”
instead of "primary" and include acquired tendencies which
they consider to be common to human beings.®
.-
Drives which-are learned or derived are often referred
to as secondary,I® though many prefer to classify motives as
primary and selective rather than as primary and seconda r y . H
Considerable difference of opinion exists among writers.
For example, there is some question of whether cleanliness
is innate o r .acquired.12
Strong leans upon Tolman in
classifying wants according to the physiological state of
the individual.
needs.13
Those wants which are primary are organic
This distinction is similar to the one made by
Young.14
8 Harold E. Burtt, Psychology of Advertising, (Boston:
Houghton Mifflin Company, c 19381” p p . 76-787”
® Harry Tipper, et al, The Principles of Advertising,
Second Edition (New Yorkl* T h e Ronald Press Comnahy, cl925T,
pp. 67-77.
1° Edward K. Strong, Psychological Aspects of Business,
pp. 75-76, refers to wants as primary, secondary, and
tertiary.
11 Cf. Harold H. Maynard, Walter C. Weidler, and
Theodore N. Beckman, op. cit., pp. 58-60.
18 Cf. Harold E. Burtt, ojp. cit., p. 77, and H. P.
Adams, Advertising and Its Mental Lav/s (New York:
The
Macmillan Company, 192677 P* 117.
13 Edward K. Strong, Loc. cit.
14 P. T. Young, Motivation of Behavior (New York;
John Wiley & Sons, 19367*, pp. 154-155.
150
The. most commonly listed primary motives are food- getting, parental and maternal,
sex, fear, curiosity,
acquisition, self assertion, the desire for comfort, play,
and gain.
Frequently mentioned are avoidance, pride,
emulation, constructiveness, affection, worship, and rival­
ry.
Occasionally listed are mastery, fighting, health
preservation,
sociability, shyness, cleanliness, sympathy,
and gregariousness.
Many others are mentioned now and then,
such as manipulation, exploration, dependability, economy,
distinctiveness, admiration, fair play, cunning, gratitude,
etc.
Inadequacy of definition may be the cause of much
lack of agreement among merchandising and sales authorities.
For instance, to what extent does the term "emulation”
signify "rivalry," or "manipulation" signify "construction,"
or "gain" signify "economy."
It is very probable that some
of the differences resu.lt from peculiarities of terminology.
In our study, we avoid the difficulties that arise
with the attempt to draw distinctions between primary and
secondary motives.allowances for both.
Our use of the term "desires" makes
In this sense, we are using the term
similarly to that in which R. B. Perry uses the word
"interest":
First, we can avoid the special questions arising
from the interrelations of feeling, desire, will,
Instinct and disposition, by using the term "interest,"
and leaving it ambiguous.
This term calls attention
to the essential fact that it is characteristic of
mind as we know it to be for some things and against
others• or to view some things with favor and others
with disfavor.
This duality of attitude appears in
liking and disliking, in desire and aversion, in will
and refusal, and in seeking and a v o i d i n g . . .lb
We do know that human beings have desires and that
many of these are the result of learning.
these desires vary with groups.
We also know that
It is to the extent that
many of them are common to the members of groups that a
study of motivation is important in an analysis of consumer
preferences.
The investigator’s opportunities are clearljr
pointed out in the words of Maclver;
If, as social psychoanalyst, he is concerned with
problems of group behavior, he can achieve the very
considerable reinforcement of probability that comes
from the study of the like behaving of many individuals.
On this basis he can learn to predict with expertness
hov/ people will, respond to similar situations as they
occur - how, for example, a group of people of a particu­
lar culture will feel and act if they are treated thus
and'thus by another group.
If this art is still rudi­
mentary it Is not because the evidences of motivation
are lacking but because the scientific study of these
evidences has gone so short a way...The lapse from
science appears when he claims unwarranted certainty
and treats his inferences as though they were es­
tablished facts'. ..16
In the pages that -follow, we shall make no attempt to
establish a list of motives to which advertisers may suc­
cessfully direct their appeals.
Instead, we shall merely
132
attempt to establish a basis for the determination of
desires.
II.
THE PSYCHOLOGICAL THEORY OF ADJUSTMENT
L. F. Shaffer makes the striking statement that the
"practical problems of the psychological practitioner have
been greatly clarified by the concept that all behavior>
no matter how strange, has its motives.”
The import ”is
recognized in many fields, as in industry, in law, in sport
and in education.
As' a preliminary definition, he speaks of a motive as
"that which arouses, sustains and directs activity."
The
stimulus is the "trigger which sets off the activity of the
response."
Appetitive tensions are the result of the "Inner
physiological state."
For example, "visceral tension" might
arouse activity the same as a stimulus in the way Of food.
Stimuli cause tensions within the Individual which result In
general activity or -"drives."
..
Behavior Is adjusted to reduce these drives and these
"adjustive habits" are mechanisms.
This behavior, which is
learned, Is directed, in the red.uction of the tension or the
removal of the stimulus.
But not all action of the indi­
vidual is toward removal of the stimulus.
Some drives,
^
Psychology of Adjustment (Boston:
Mifflin Company, cl93'6), p. S’ST.
Houghton
133
referred to as adient, attempt to perpetuate the stimulus,
such as a sweet taste or a flowery odor.
Motives, then, are drives "which have been modified
by ordinary processes of learning,"
The direction of this
learning may be "to extend the range of' stimuli that will
arouse the drive and to modify the activity that results."
Drives natively aroused by internal stimuli caused by
nutritional deficiency may be aroused, for example, by
savory odors, and the response can be a _preparation in the
way of bathing and dressing for dinner rather than an
immediate removal of the stimulus by eating.
Motives are
derived chiefly from emotional tensions, which come not only
from overstimulation but by conditioning.
For instance,
mastery or self-assertion motives may develop from fear, and
social approval motives from love.18
Leaning on Shaffer's work, Haney gives an economic
interpretation of motivation.!®
He begins with the as­
sumption that the individual "has potentialities for certain
physiological and related emotional disequilibria or
tensions within himself, which, together with habits and
sentiments, control both his responses to stimuli and his
18 Ibid., pp. 83-112.
19
cit., pp. 163-167.
134
motivated
b e h a v i o r .
”20
These ’'tendencies to activity with
reference to objects” are "desire tendencies, or desires."
Valuation -begins with the "stimulus which causes some
reaction in the subject."
internal:
Stimuli may be external or
they may arise from objects in the environment or
from "some inner physiological state of tension," stich as
contraction of the muscles of the. s.tomach.
It happens that
"the mature subject senses the existence of the ’object’...
and consciously or unconsciously assumes its reality.”
There follows ’’generation of a more or less sustained
tendency of the subject toward the object, which tendency
may be described as a want,” and a feeling of "vague general
appreciation of the object," which may be described as "an
imputation of utility.”
Undirected activity in the form of effort follows and
results in "various reactions being tried.”
learning process, habits or mechanisms,
tendencies, are acquired.
Through the
learned behavior
These tendencies modify drives.
Hindrances, either in environment.or in the way of con­
flicting desires arise and adjustments are made for relief.
As a consequence of "hindrances and adjustments, and habits,
• 20 According to Shaffer, habits are "learned modes of
responding to drives," ( o t d . cit., pp. 106-107) whereas
sentiments are "systems of emotional response and of moti­
vation in relation to familiar objects and events and
persons," such as love and hate (o£. cit. , pp. 108-109).
135
the subject’s motives become purposive.”
wants to desires.
They pass from
Motives which are "directive and se­
lective” tend "toward specific activity.”
The intensity of
motivation or desire, when purposive, can be "measured by
the obstacles which an individual overcomes to fulfil the
motive, or gratify the desire.
Briefly, then, we may say that motives are desires,
and that desires imply learning, selection, and purpose.
To be economic, they must, in addition, be met by obstacles;
consequently the matter of determination or will arises.
the objective worth striving for?
Is
How intense is the desire?
We must understand that both intensity of desire and
degree of resistance vary with stiuations and that both are
conditioned not only by the circumstances prevailing at the
time at which the subject and object are .brought into
relationship, but also by the many factors, Internal and
external, which complicate the attitude of the individual.
III.
SOCIAL INFLUENCES
Any observation of human conduct must show that
social influences play an important part in the motivation
of the individual.
A tendency by some to neglect environ­
mental factors has brought much criticism.
.21
l
. H. Haney,
loc. cit.
As J. K. Clark
136
points out, "The twentieth century is an age which,."beyond
other ages, is aware how much man is molded by his environ­
ment, and is deliberately undertaking to control this
molding process."22
The emphasis upon the social aspects of environment
has given rise to a newer branch of psychology which has
been kept separate from the conventional' field, social
psychology.23
Generally speaking, modern socialistic psy­
chology shows a modified socialistic trend.
The principle
of conditioning is basic in the understanding of social
responses and the implicit habit mechanisms.
Fundamental in
the thinking of this school is biology and statistical
t e c h n i q u e s . E m p h a s i s is placed upon the prompting of
individual action by social or group stimuli.25
In this study we are interested in an economic
interpretation of human conduct, but in making this interpre­
tation we must be fully cognizant of the importance of
social influences on the reaction of the individual to
stimuli, known as goods.
The point of view given by
22 Ojo. cit. , p. 6.
■23 q # 2 . Ayres, op. cit., p. 231.
24 c f . "The Status of Social Psychology," The American
Journal of Sociology, XLVTj3 (November, 1940) 300.
25 cf. Ellsworth Paris, o£. cit., p. 195.
137
A. J. Snow Is an excellent expression of this exegesis:
Because previous reactions and many other factors
change the internal state of an organism, therefore,
the response of an animal to any given stimuli is
not to he inferred from the external environment
alone or from the inherited traits, or even hoth,
but from the total situation at any given'T i m e --the
internal organic state and the external environ­
mental condition at the time in question.26
It is not our thesis that the individual is an
aperture through which mysteries of the universe appear
unveiled, but he is, in that he is human, characteristic of
other men in certain respects and particularly Is he likely
to have certain traits typical of the group to which he
belongs.
Haney expresses it thus:
While organic wants unquestionably tend toward
uniformity of individual action, and some "Instincts”
work In the same direction, it may be granted that
some tendencies, such as the so-called Instinct of
self-display, may be acquired at a very early age,
and lead to divergencies of action.
In the scientific
sense, however, such tendencies toward dissimilar
action may be classified and understood, and thus in
reality become the basi3 of social uniformities.27
Individual differences there are, but In the main they are
subject to distribution according to a normal curve.
Those
that are not are problems for the psychoanalyst and not the
economist.
26 "psychology in Economic Theory," The Journal of
Political Economy, XXXII:4 (August, 1924) 487-49'6.” Snow's
views on marginal utility are unreal. A person does-not
just eat until he is no longer .hungry.and stop.
There are
degrees of hunger. Even though a person is still not satis­
fied after he has had a portion of food, he is not hungry to
the same extent he was before he had that portion.
27 2R* oik*» PP* 58-59.
Italics are -this writer's.
158
The more ■general desires of man are classifiable in a
broad way according to age, sex, purchasing power, etc.
Youth may not feel the need for insurance to the same extent,
that adults do.
Men are more likely than women to feel that
the old furniture is good enough.
Most women do not have
the same desire intensity for sporting equipment that men
have, and the more senile in both sexes are less likely to
have any desire for it.
The heads of large families,
particularly if the children are young, are likely to
believe that French furniture is not sturdy enough.
'When
most men are wearing silk or rayon ties, any one man,
particularly a young one, is not likely to wish to buy a
knitted tie.
Persons living in California are not apt to
demand coal when natural gas is cheaper.
incomes do not buy elaborate houses.
Men with small
Truck drivers do not
usually collect.rare books, and persons with little edu­
cation do not on the whole purchase literary classics.
The value of a study of consumer buying motives.rests
on the uniform, the classifiable actions of buyers.
The
truth of this statement is found in the success of modern
advertising.
Though there are slight differences in
specific motivation, an appeal to a general desire brings
mass response.
It is not the slight differences we are
interested in but the general fact.
139
IV.
WILL
■Our loasic assumption, thus far, has been that the
relationship between any human being and the objects in his
environment results In certain meanings to the individual.
These meanings include appraisals of both utility from the
use of and disutility in the acquiring of these objects.
- Both appraisals are relative in that the human- being does
not consider any one object In Isolation but instead con­
siders the utility and disutility Involved In the use of one,
product as compared to that of another.
The appraisals made
by the individual are not only learned from experiments with
goods biit also through education.
If a good means a specific satisfaction to an Indivi­
dual and, If the good can only be obtained through the
overcoming of certain resistance, we say that the article
has economic significance.
The balancing of the obstacle,
which may be the sacrifice of other gratifications, against
the satisfaction to be derived, brings decision or Inde­
cision.
Indecision must change to positive decision before
a satisfaction can be enjoyed.
Decision may be either positive or negative.
If it
is positive, desire is stronger than subjective resistance,
and the individual determines to overcome objective re­
sistance.
This kind of determination we shall speak of as
140
will.28
Will is shown either in the overcoming of the re­
sistance represented Toy the consumer’s reluctance to part
with dollars or in the overcoming of aversion to incon­
venience.
It is, then, the- degree of positive determination
necessary to overcome the negative attitude of a person whose
desires meet with resistance, and it is the subjective force
which impels the individual to use the required effort to
overpower any objective impediments.
Money is not necessarily a part of a transaction in­
volving the exchange of economic goods, though this medium
usually does figure in most exchanges of commodities in
civilized countries,
free goods of nature,
such as air,
are not considered economic since there is no resistance to
attaining them.
Though water is often treated as belonging
in this category, this good is usually economic.
Most
persons living in urban communities pay for the commodity.
True, they could in many instances go to rivers or streams
and get the product free, but the inconvenience is great
enough to prompt them to pay for it.
Farmers usually go to
effort in digging and expense In -paying for the piping of
wells.
The factor of will is exemplified in the hypothetical
case of the traveler who hears water running in a canyon
28 of.
r
.
s.
Woodworth,
op. cit., 523-550.
beneath, his path.
If thirst is great enough, he will
descend the ravine to get a drink.
against the impediment.
He weighs the desire
If thirst is great and the canyon
small, a decision is quickly forthcoming.
If the desire is
less intense and the inconvenience great, he will pass on
without gratification.
If a boy is in readiness to offer
his services in fetching water for-travelers, the resistance
instead of inconvenience, is a reluctance to part with money
If a positive decision is made, will is-the resolution of
attitude to attain the desired end.
Woodworth explains that
the Individual is moving towards a certain goal, but
encounters obstruction* and his response is effort, or
increased energy put into his movements towards the
goal.
So long as the tendency towards a goal finds
smooth going, there is not the same determination that
appears as soon as an obstruction is encountered...29
By. balancing desire against resistance, the individ­
ual formulates his Ideas of subjective worth.30
The extent
to which he decides that resistance should be overcome to
bring satisfaction is the degree of worth he attributes to
the means.
If the traveler decides that his thirst is great
enough to make It worth his while to enter the ravine, he
believes the product is worth the effort.
If he gives a boy
ten cents to bring the \7ater to him, on the other hand, he
29 Ibid., p. 536
142
decides the water to be worth the sacrifice of money.
He
might feel that the product is worth much more, but he pays
the minimum requirement for satisfaction.
The law of di­
minishing utility applies to the situation, of course.
If
the boy charges according to the quantity fetched, the
traveler will buy only the amount he feels to be worth the
charge.
Will is, in a sense, a measure of effective desire.
Because it is impossible to know the extent of ineffective
desire, we can only roughly approximate it by observing
variations in effective desire with changes in price, con­
venience, etc.
V.
HABIT
Since, habits are conditioning, based partly on
experience,, we may say that a habit is a learned method of
responding to a particular stimulus.
Like all forms of
learning, habit formation involves time.
Persons do not
change their habits so much as they grow out of them.
Naturally as the individual acquires new or additional ex­
periences, he learns new methods of responding to stimuli.
Not only this, but his environment is usually subject to
gradual change.
At any one time a large part of a person’s
conduct is controlled by habit, but certainly not all of it
is so controlled.
Hew stimuli are forever presenting
143
themselves and new decisions are constantly being made.
We
need have no objection, then, to J. M. Clark’s statement
that:
it is'only by the aid of habit that the marginal
' utility principle is approximated in real life, for
only so is it possible to have choosing which is
both effortless ’and intelligent, embodying the
results of deliberation or of experience without
the accompanying cost of decision which, as we have
seen, must prevent the most rational hedonist from
attaining hedonistic perfection.
For'habit is'
n a t u r e ’s machinery for handing over to the lower
brain and nerve centers the carrying on o f ‘work done
first by the higher apparatus of conscious
deliberation.31
This must not be taken, notwithstanding,
to mean that
the marginal utility principle does not apply in the short
run.32
Clark’s words admit that conscious deliberation
often precedes habit.
While habits are .acquirements of
experience, original decisions are based on expectations.
If a man makes a decision today and finds that the results
bring greater satisfaction than sacrifice, he may follow the
same resolution when confronted by a similar problem.
If
the problem changes, the previous decision does not apply.
If, however, there Is some degree of similarity, the ex­
perience attained in solving the first problem may be of
help in reaching a later conclusion.
31 Og-. cit. , pp. 26-2,7
32 Supra, p. 64.
This does not imply
144
psychological principles of adiency through pleasure and
pain motives.
Especially it does not imply that material­
istic doctrine known as hedonism.
person involve direct habit.
Many of the actions of a
This is merely another way of
saying that much of an individual's current choice is based
upon past decision or judgment.
Habit patterns control much
of the action of the consumer in the short run. • In the long
run, however, these patterns are evaluated according to a
standard which functions in the mind of the individual.
This standard is the individual's value structure.
"Life is
not fundamentally a striving for ends, for satisfactions,
but rather for bases for further striving," as Knight
expresses it.33
A cluster of grapes may leave an impression
of color that is of a different complexion from any one of
the grapes clinging to it.
Similarly, the choice of an
individual is affected by a total value structure and not
elemental experiences which give rise to special habits.
The habits are the accompaniment, but not the driving force.
We study the fragments merely to get a picture of the whole.
Materialistic philosophy denies or Ignores these
Gestalten, and yet, as Knight points out, the individual
sometimes ends life rather than to live it in a way which
33 P. II. Knight, "Ethics and the Economic Interpre­
tation, ".The Quarterly Journal of Economics, XXXVI;3 (May,
1922) 459.
denies value structures.34
a
materialistic conception of
economic value takes account of -the mode of living, hut it
refuses to recognize the higher concept of a standard of
living predicated upon a total value structure.35
V I.
CONSCIOUSNESS OP MOTIVES
Economists have commonly used the terms "want" and
"desire" interchangeably.
For a careful analysis of con-
sumer preferences a distinction seems desirable.
The former
signifies a negative quality, whereas the latter connotes
something positive as well as negative.36
jf an indi­
vidual wants something, we say that he senses something
missing or lacking.
If he desires something,
he. is conscious
of his dependence upon an object for .gratification.37
The
one is a manifestation of the other in terms of the
purposive behavior of the individual in attempting to
acquire a specific object for satisfaction of a desire.
If
we consider a need as a tissue requirement, a negative
factor, the term "desire" Is not limited to the acquirement
of objects for the satiation of needs, for many desires are
34
Loc* cit»
35 Supra, 'pp. 36-40.
36 2JL* p *
Young, op. cit., pp. 80-81, 251-253.
14 6
founded In environmental conditions,
social surroundings.38
Some needs may never evolve into desires,, for many physical
requirements are not recognized by human beings.39
"Desire," as the term is used in this study, implies
not only a consciousness of a dependence for gratification
upon an object but also- a realization of obstacles which
must be overcome in attainment of"satisfaction.
Usually
these obstacles involve the sacrifice of the means of
gratifying other desires.
always conscious.
Thus we say that desires are
Throuigh habit formulation, the action
performed in satisfying a desire may be mechanically per­
formed, but the individual is always conscious of the end
or goal to be attained.
A person is usually conscious of a
general endeavor to carry out a purpose though much of the
specific action performed is done as a matter of routine.
As Woodworth expresses it:
The typist may write the letters mechanically, and
if expert may write even words in this way, but all
the time he is consciously aiming to copjr the passage.
His attention and impulse have deserted the fully
mastered details and attach themselves to the larger
units.
In the same way, in signing your name you
have no conscious intention or impulse to write each
successive letter; but ;fou fully intend to sign your
name.40'
Of. P. T. Young, op. cit., p. 252.
39 Ibid., p. 81.
49 0]D. cit., pp. 525-526.
14 7
Other than the simple reflexes, ideomotor action
offers the best example of involuntary action.
This kind of
action is closely linked, through association, with par­
ticular ideas or stimuli.
immediate response.
The thought or stimulus brings
For example, a man approaching the
ticket window of a theater may, upon sight of the tickets,
automatically reach into hi-s pocket for money.
The idea
suggested .by the stimulus brings 'an immediate response.
The
goal and the general striving' to attain the e n d •in view are
conscious, nevertheless.
A better understanding of involuntary action gives us
a clearer insight to consumer attitudes of non-resistance.
When a'person becomes accustomed to the regular gratifi­
cation of a particular desire through the means of a
specific product, much of the action required in attaining
the commodity becomes mechanical as a result of habit and
association.
The more complex the chain of acts prerequi­
site, the longer the time required for development of an
attitude of non-resistance.
The sacrifice of the means of gratifying other
desires may be consciously recognized with the original
purchase of a commodity by a consumer.
As frequent purchases
are made, the consumer becomes more conscious of his
dependence upon the particular commodity toward which he
develops an attitude of non-resistance and less aware of. the
148
sacrifices of other utilities. ' In the short run the element
of sacrifice loses importance relative to the utility re­
ceived from a good to which the buyer has an attitude of
non-resistance.
ated.
Only in the long run is the habit evalu­
Thus the principle of marginal utility applies only
to expenditures from residual income in the short run.
In
the long run it applies to all expenditures.4^
VII.
CONCLUSIONS
Causation of human conduct is an interplay of many
forces, some of which are subjective and some objective.
The total effect of these interplaying forces is summed up
in the totality of desires of the individual.
The more
common desires of man, vdiether they be elaborations on
organic -wants, acquirements from experience and learning,
acquisitions from geographical or social surroundings, or
combinations of all these, may be classified according to
well-defined groups.
The economic significance of consumer goods rests on
the meanings of these objects to human beings.
These
meanings are important in that they define commodities in
terms of their capacities to gratify desires.
Supra, p. 64
To find the
149
significance in tiie relationship of subject and object, we
must associate meanings with desires.
To the extent that both meanings and desires are
common in the relationships of individuals of particular
groups to specific commodities, we have a body of classi­
fiable data.
In this sense, certainly, a study of consumer
motivation is scientific.
CHAPTER VIII
DEMAND STIMULATION
Methods of influencing demand have probably been
used by men of most ages, but the development of any methods
that even approach the scientific has taken place only .with­
in the last century.
It is not the purpose of this chapter
to give a history of salesmanship, showing the development
of methods of influencing demand since the days of the
peddler; neither is it the purpose to give any handbook
rules of technique.
Instead, this chapter will present a
general classification of the.theories developed by various
students of the .subject, a criticism of these theories, and
a restatement of demand stimulation in the light of the
analysis of consvtmer preferences made In previous chapters.
For purposes of terminology, v/e shall classify
approaches to the 'subject'Into subjective and objective
categories.
The former embraces the theories of those who
believe that the approach to demand stimulation shovild begin
with the consumer.
V/e dismiss, of course,
the works of
those who have enveloped themselves in metaphysical specu­
lations.
The objective approach, often followed by business
men who have become discouraged-with abstract treatises.on
motivation,
seller.
is concerned chiefly with the conduct of the
College textbooks on salesmanship are full of the '
advocated procedLires drawn from the subjective approach,
151
'whereas business publications brim over with the objective
pressure techniques.
I.
THE SUBJECTIVE APPROACH
E. K. Strong, Jr., who composed one of the most
comprehensive statements of salesmanship in his book,
Psychological Aspects of Business,1 says that only three
general theories of selling are "definitely
f o r m u l a t e d .
"2
The first is the attention, interest, desire, action, satis­
faction formula, which grew out of an advertising slogan
composed in 1898.
Though the statement o f ■the prescription
has been frequently modified, the idea is found in the works
of many later writers.
Kitson uses it in describing and
elaborating 'upon- the mental stages through which the mind of
the consumer passes.3
A perusal of the chapters on sales letters in m o d e m
business correspondence texts shows an amazing Inclination
on the part of authors to follow this theory of selling.
The very neatness of the formula itself may be responsible.
A part of each sales letter can be addressed, supposedly, to
a mental stage of the reader.
1 0|5. cit.
2
. PP« 206-211
3 Op. cit.
152
The second, theory, that of situation-response, or as
it Is sometimes called, the appeal-response theory, is based
on the belief that, if the proper situation or appeal is
made'by the seller, a desired response will be received.
This theory is thus described by one of Its proponents ;■
Managing the Interview is, In reality, planning
the presentation of your appeal In such a way that
the prospect's mind responds throughout the interview
In a manner which will lead him eventually to-signing
the application.
A sale, after all, is nothing more
than a series of situations created by the salesman
with corresponding responses made by the prospect,
and in managing the interview, you are planning your
questions and your remarks so that they will present
certain situations to the prospect which will produce
certain responses.
You are the engineer who guides the
train of the prospect's t h o u g h t . 4
Daniel Starch places considerable emphasis on the classifi­
cation and selection of appeals.
His interest is that of
determining the'appeal the seller should use to get the
proper response from the consumer.5
Strong uses what he terms a want-solution formula.
The four elements in the analysis of.a purchase are w a n t ,
solution, purchase, and satisfaction.6
He classifies wants
as primary, secondary, and tertiary, and considers the first
4 J. A. Stevenson, Selling Life Insurance (Hew York;
Harper and Brothers, 1922), p. 129.
5 Principles of Advertising (Chicago:
Company, 1923)•
6 Op. eft., p. 16.
A. W. Shaw
153
as innate or the result of ’’natural maturation,” the second
as acquired very early in life to satisfy the primary wants,
and the third as want habits "peculiar to individuals."7
With regard to what wants the seller should appeal to, he
is vague.
He states,
"Undoubtedly one of the best ways to
discover what appeals to use is to put yourself in the
place of the prospect and figure out what would make you
yourself act as desired.”®
In a rather interesting fashion, Lucas and Benson
attempt- to break down the difference between the first and
third formulae to show that they are not as -different as
they may seem to be.
Attention, interest, and desire
become the same as want, whereas conviction, an addition
often made to the first formula, becomes the same as
solution.
Both formulae aim at purchase and s a t i s f a c t i o n . 9
W. D. Scott’s contribution to sales theory should not
be overlooked.
suggestion.
He distinguishes between deliberation and
His explanation of the latter is helpful;
"Every idea of an action will result in that action unless
hindered by an impeding'idea or physical impediment."IQ
But
7 OR- clt-» PP- 75-76.
® 0£. cit., p. 233.'
9 D. B. Lucas and C. E. Benson, op. .cit., pp. 130-132.
York;
Influencing Men in Business, Third Edition (Hew
The Ronald Press Bompanyj cl928), p. 36.
154
Ills "types of decisions" are suggestive of types of indivi­
duals and subject to question accordingly.H
Charles Bennett, who criticizes the three theories
referred to by Strong on the ground that they are "formulated
upon the premises that human behavior can be accounted for
adequately by reference to the original nature of. man and
instincts," suggests what he calls the "expansion of
meaning"
t h e o r y .
12
■ g e
critical of the vagueness of the
term wants in the third t h e o ^ ,
suggests needs as a more
appropriate expression, and speaks of the latter word as
including both the psychological and the physiological.
He
is not clear concerning just what a need is, however.15
jje
divides the sale into four stages:
The first stage of selling procedure in the use of
this theory is for the salesman to make an.effort to
understand the prospect’s value complexes.
The second
stage is to present the proposition and explain its
selling features.
The third stage is to explain the
proposition in relation to the needs of the prospect as
determined in stage one and in accordance with the
11 rbld.« PP- 61-72.
12 Scientific Salesmanship (St. Louis; American
Efficiency Bureau, 1933), pp.’"'72-85. Bennett’s book was
written before Psychological Aspects ~of Business was pub­
lished and hence the criticism was based mainly on The
Psychology•of Selling and Advertising, published in 1925 and
The Psychology of Selling Life Insurance (New York: Harper
& Brothers, 192’ST.
I 3 In one place Bennett gives an ethical -significance
1° neecis. Ibid., p. 72.
155
utility of the product.
The fourth stage is to meet the
specific objections of the prospect... 14
This formula is somewhat similar to the want-solution
theory.
II.
THE OBJECTIVE APPROACH
A formula often used, by advocates of the objective
approach is that of preapproach, gaining the interview, the
approach, the demonstration, meeting objections, and the
close.3-5
i>he experimental factor is important--what acts of
sellers have proved most successful In selling practice?
H. W. Hepner gives the reasons for the use of this approach
by business men;
Some sales managers who have trained salesmen claim
that it is very difficult and decidedly confusing for
a salesman to focus attention upon what the prospect
is thinking.
An easier and more effective method Is
to train the salesman to think of what he himself does
rather than what may be happening in the mind of his
prospect.
The mental states of the prospect cannot
be ignored, but t h e 'emphasis should be upon what the
salesman does and the objective 'fac"tors of the selling
act.’..1£
An excellent example of the objective approach in the
field of advertising is found in.Richard Surrey’s book,
Layout Technique in Advertising.17
This author devotes his
14 Op. cit., p. 81.
15 Qf. p. a . Russell, Textbook of Salesmanship, Second
Edition (McGraw-Hill Book Company, 19537.
Psychology in Modern Business (New York;
Hall, 1931), p . "3537
17 (New York;
Prentice-
McGraw-Hill Book Company, 1929).
156
attention to formulating principles for the layout man to
follow in his work.
It must be understood, of course, that objective
factors are included in many books on selling or advertising
that place emphasis on the consumer.
The space devoted to
such techniques as the use of calling cards or the focus of
gaze during the interview or the mechanics of layout vary,
however, and assume a place of first importance or of
supplementary nature accordingly.
For example, P. W. Ivey
treats memory as a factor in the development'of a-sales
personality!^ whereas Strong treats the subject in relation
to the buyer.!®
The difference is obvious.
III.
QUANTITIVE EMPHASIS
H. C. Link, a behaviorist, is one of the most ardent
advocates of empirical methods in the study of consumer
p r e f e r e n c e s
.20
The problem as he states it is not one of
influencing the preferences of consumers but instead one of
finding out what these preferences are in the present and
using this knowledge in determining t r e n d s . 21
16 Successful Salesmanship (Hew York:
1937), pp. 104-107 *
19
Making the
Prentice-Hall,
clt»* PP* 551-375.
20 The Hew Psychology of Selling and Advertising (Hew
York: - The Macmillan Company, 1932)7
21 Ibid., p. 1.
157
charge that the ''dominating theme" of sales liters.ture has
been that of explaining how the seller can make the consumer
buy what he did not previously want, Link stresses the
Importance of finding out through quantitative studies what
the buyer at any one time actually does wish as signified by
his purchases.
No denial of the value of quantitative methods should
be made.
These, however, should supplement introspective
methods rather than replace them.
The mere proof of the
value of one method is no evidence of the lack of importance
of other methods.
Empirical observation, as a matter of
fact, should show Link that consumer preferences are in­
fluenced by salesmanship and advertising and that many of
the desires made manifest by the purchases of consumers
today are the result of the sales efforts used by merchants
yesterday.
The significance of determining what the actions
of buyers are does not refute the importance of ascertaining
how these actions can be modified.
A more justifiable
accusation would be that sales theorists have exaggerated
the relative importance of getting buyer response in re­
lation to other causal factors in consumer preferences.
IV.
CRITICISM OF SALES-THEORJ.e s
Helpful though a few sales theories have been in
diagnosing causal factors in consumer conduct, they are in
158
the main barren in philosophy, biased in point of view,
superficial in analysis, and limited' in perspective.
They
are little more than cramped doctrines offering, in handbook
fashion, rules whereby the conduct of the consumer can be
modified, distorted, and controlled to the benefit of the
seller with little analysis which penetrates into the
causal factors of human behavior.
Very few of them are diagnostic In character, com­
prehensive in range, or economic in treatment.
If attention,
interest, desire, action, satisfaction is the formula that
will make the consumer a slave to an appeal, what is to
happen after all sellers are using exaggerated methods of
getting attention, screaming their wares in large type,
and blandishing the buyer with selling stimuli?
If the consumer is no more than a bundle of motives
controlled by a keyboard, what is to happen if all sellers
press the same key?
Might not a slight change in service,
price, or quality have more effect than the pressing of a
dozen keys?
Are not negative motives as important as
positive ones In controlling human actions?
Can the study
of consumer buying motivation be divorced from an analysis
of the economic situation of the buyer?
Most subjective theorists have, as a matter of fact,
leaned heavily on instincts..
Their conclusions suggest that
all that is necessary to make sales is the application of
159
the proper stimuli--man’s inherent tendencies will accomp­
lish
the feat.
is shallow, to
An explanation of human conduct this simple*
say the least.22
jt is difficult to explain
why sales theorists have evaded the fertile ground so long
held
in fee-simple by economists
other than that they have
been
searching for an elementary explanation of buyer
behavior.
The want-solution theory seems to be the soundest ofthe subjective theories, but even it examines only a small
range of human conduct.
The point of view taken in this
approach rests too heavily on instinctivism.
Although
Strong recognizes that interests may be acquired, a reading
of his work gives the impression that innate wants deserve
*
much of the attention of the seller.
Obviously, the objective approach cannot constitute a
theory by itself.
It may provide a valuable basis for
vocational training by putting into practice a subjective
theory, but it cannot stand alone.
It Is only logical that
what the salesman does must be guided, by the reaction he
wishes to get from the buyer.
Too much emphasis on the
salesman’s acts can easily lead to high-pressure methods of
22 cf. Z. C. Dickinson, ojc. cit., p. 226.
selling to which the consumer may quickly huild r e s i s t a n c e . ^3
Quantitative studies can be made very valuable In the
field of consumer preferences, b u t 'they should be, after allj
only a part of a broader study.
They should supplement
subjective theories but not replace them.
In so far as they
ascertain the how rather t h a n •the why or the cause, they
are imcomplete.
Sales theories should not be limited to methods of
influencing demand alone but should be related to the
broader field, economics, through the door of consumer
preferences.
We are not only interested in these prefer­
ences to be able to control them, but we are interested in
why they are, what causes them to change, and how they
function in relation to the economic system as a whole.
After all, the principle of diminishing utility,, time
preference, and place preference should be only a little,
if any at all, less significant to the sales theorist than
to the economist.
V.
ETHICAL SIGHIFICANCE
Controversy has waged over whether salesmanship and
161
advertising create desires or whether they merely stimulate
those already existlng.24
influence of instinctivism
has influenced some theorists,' no doubt, to maintain that
desires cannot be created but are merely stimulated and
directed.
Then, too, the ethical significance of selling is
one which most authors on demand stimulation wish to evade.
If it is admitted that desires can be created, is It
appropriate to ask what desires should be created and what
ones should not be?
The mere denial of "desire creation" does not remove
the question of ethics, however, for It is just as logical
to ask what desires should be stimulated’as it is to ask
what ones should be created.
What difference does it make
whether we are creating unsocial desires or are appealing *
to the baser Instincts?
Is one more wrong than the other?
For the sake of precision, it might be better to say
that desires are cultivated than to say that they are
created, though the point of view taken here coincides with
that presented in' an article by G. A. Stocking in The
American Economic Review, in which that writer maintained
"that the fundamental aims of advertising are;
the crea.tion
of wants, the shaping of tastes, the determination of
values, "25 •
■; •
24 Gf. C. A., Stocking,
25 Loc. cit.
o jd .
cit. p .
50.
162
The erroneous idea that desires can he created by the
advertiser in some supernatural way as by the waving of a
magic wand must be guarded against, hoxvever.
Likewise,, one
must guard against the idea that desires lie dormant -until
they are awakened by the seller.
Such a belief does not
conform to sound theory on motivation.
The consumer, in
such an event, would be unconscious of desire.
Our distinction between want and desire is that the
latter implies a consciousness of both end and means and a
purposiveness of.action when the consumer wills to satisfy a
desire.^7
Some desires obviously grow out of organic wants,
but in their cultivation they often become so elaborate as
to be hardly comparable to the raw material from which they
sprang.
J. M. Clark’s statement is interesting in this
respect:
The primitive instincts appear to be few in number,
general in character, and attached to no one particular
object. Economic wants for particular objects are
manufactured out, of this simple and elemental raw
material just as truly as rubber heels, tennis balls,
fountain pens, -and automobile tires are manufactured
out of the same crude r u b b e r . . . 28
The difference between what would be necessary to
satisfy an organic want and what is.demanded in American
26 Supra, pp. 145-148.
27 Supra, pp. 146.-'
28 0£. cit., p. 8.
V
163
society in the gratification of- desires is clearly presented
in t h e .following passage from P. H. Knight:
If we begin with food, the most material and necessary
of our requirements, it is obvious that but a fraction
of a modest expenditure for board in an American town
would come under this head.
And proceeding in order to our other "material” needs, clothing, shelter,
furniture, etc., it is apparent that the farther v/e go
the smaller the fraction becomes...29
That advertising, the same as any form of propagating
knowledge, may cultivate desires is true, but that desires
can be created overnight is untrue.
Much advertising is no
more than an appeal to desires of long culture, and, in this
sense,is but a selling stimulant designed to bring a desired
response from the consumer.
It might be said that man is a "bundle” of desires
and that these desires, clustered as they are about a general
stem or base, make up the life of the individual.
It Is
this cluster of desires, some of which are being satisfied
in the present and others for which the hope is that they
will be satisfied In the future, that comprises what v/e call
the standard of living.
Among these desires are those which
are gratified regularly by means or products to which the
individual has developed ‘attitudes of non-resistance.
Many
desires are ‘not satisfied because they do not come up to
the standard Implicit in the individual’s total value
29 Q£. cit., p. 462
164
structure.so
This basis of evaluation, known as the standard
of living, is influenced by many social factors as v/e1-1 as
by education.
As the causes change, the standard changes
also.
Over a long period of time, alterations which are
gradually made in the cluster'may considerably vary the
complexion of the whole, but the change at any one time is
hardly noticeable.
Thus we say that during short time many
of the actions of the human being are fixed by habit.
Consequently, to understand the preferences of any group
we must turn to the common habits of that group.
means that we must study modes of living*
This
But for a
knowledge of trends we must examine the factors that In­
fluence the standards of living of groups.
Social and
educational tendencies are important.
It. is not our problem to set up standards for evalu­
ating consumer preferences.
Instead we are interested in
setting up a basis for determining what the preferences of
consumers are, why they are, and how they may be influenced
by sellers.
Our concern with social attributes is founded
on neither a moral nor an ethical interest regarding the
control society should exercise over the desires of indivi­
duals, but instead it is based on an interest in the extent
30 cf_. P. H. Knight, op. cit. , pp. 465-466.
165
to-which social relations do influence the desires of
consumers.
VI.
THE RESISTANCE FACTOR IN DEMAND STIMULATION
We have already'.said .that there are two kinds of
competition, general, which exists among sellers of substi­
tutable products which are functionally dissimilar and
specific, which exists among sellers of substitutable goods
which are functionally similar.31
kinds of competition.
Many sellers meet both
In other \vords, if a seller, attempts
to sell an automobile to a man who has never driven one, he
is competing generally with the clothier, the realtor, the
jeweler, etc.
He is, on the other hand, competing specifi­
cally with sellers of other makes of cars In a similar price
class.
Sellers in s.ny one of these competition groups may
attempt to increase sales through advertising, but their
problems differ.
The man who meets only general competition
tries to stimulate desire that requires for satisfaction a
general type of product,
such as an automobile.32
jje mus-t;
have a monopoly on the general type of product he sells- in
the area In which he does business or he would also meet
31 Supra, pp. 84-85.
32 This, of the three situations, is least likely to
exist.
166
specific competition.
If the desire of consumers for
gratification is intense enough, they will buy the product
from him.
If the demand for a general type of product, such as
an automobile in a particular price range, is already well
established in an area, a seller may not try so much to
increase this demand as to get his share of the sales of
that product.
In this case the problem is not that of
stimulating,' hut that of directing desire.
However, the man
who not .only wishes to increase the demand for automobiles
in a price range but also to get his share of the sales of
this kind of product, must both stimulate and direct desire.
In the second situation, that in which the demand for
a general type of product is well established, we speak of
the attitude of a group of buyers to the good as that of
non-resistance, though we recognize that specific-exclusive
resistance to the changing of brands of the commodity may be
in existence.33
mjxe demand for the general type of product,
at least, is Well established in this case.
Even when this situation exists, general competition
arises as soon as any of the sellers attempt to get consumers
to use more of the commodity than they are accustomed to
doing.
For example, if sellers tried to get consumers to
23 Supra, p. 84
167
trade In their automobiles more often than they are ac­
customed to doing, general competition arises.
If we define an appeal as an action designed by a
seller to bring a desired response from a consumer, the
appeals used in the three situations described would differ.
Let us borrow" the word conviction from sales theorists and
define it as knowledge.-
Let us also differentiate between
kinds of knowledge, with general conviction meaning' all
information that convinces a consumer that a general type of
product will satisfy a desire, and with specific conviction
meaning all information that convinces a consumer that a
particular make or brand of the commodity will most com­
pletely gratify a specific desire or a taste.
Then the
seller in the first situation provides general conviction
and the one in the second situation provides specific con­
viction.
The seller in the third situation provides both
kinds.
But, we may ask, -how does general conviction cultivate
or create desire?
If we assume- that a seller of soap wishes
to increase the demand for his product in a certain locality,
he may advertise the use of the commodity for cleanliness.
If the people of the community are not conscious of un­
cleanliness, advertising may stimulate this
c o n s c i o u s n e s s .
^4
34 C. A. Stocking, op. cit., p. 52, uses as an example
Listerine advertising and halitosis.
168
The situation is different in the case of the second
seller.
The ass-umption is, in this situation, that consumers
are conscious of uncleanliness and have the desire to be
clean.
All the seller often does is to try to convince
buyers that the brand of soap he sells will give them more
cleanliness for their -money than will that of any competitor.
The third seller meets the problems of both the
others and gives general and specific knowledge.' Obviously
his appeal must be more extended than that used by sellers
who meet only one of the two kinds of competition.
One of
the failures of many sellers is that they do not recognize
that general conviction may sell the goods of competitors
rather than their own if precautionary measures are not
taken.
Salesmanship and advertising are certainly educational
forces if one of their main purposes is the imparting of
knowledge to the cons^^mer.
Nevertheless, this information
is usually presented from a biased point of view and some
consumers learn to evaluate sales stimulants just as they
learn to appraise goods.
If they feel that they have been
tricked by -grossly exaggerated or -untruthful statements,
they become critical of selling methods and build a certain
amount of resistance to them.
educated in the art of buying.
Thus they become further
169
Some advertising is informative, only in that it gives
the names of products.
simple suppestions.
Other advertising is limited to
The extent to which resistance,
either
general or specific, is great or small is often a determin­
ing factor in the extent to which knowledge is given in
selling.' A very rich man may, though even he is unlikely
to, huy a house for his wife just because she thinks it is
beautiful.
A man in any of the lower income brackets
certainly does not, even though both he and his wife think
it beautiful, buy anything that costs as much as a house
without receiving some information about it.
Any realtor
would be expected to give considerable data about property
he is selling if he expects a buyer to purchase it.
never­
theless, even a poor man is often willing to spend ten cents
or a quarter at a side show of a circus or carnival.
Many low-priced commodities are bought on impulse.
This is because the resistance factor is not great enough
to overcome impulse and force deliberation.35
There should
be no confusion between goods bought on impulse and goods to
which the consumer has an attitude of non-resistance.
In
the case of the latter, choice -is made on the basis of
previous decision and,' though the-customer originally
.35
classification of consumers according to de- ■
iiberative or emotional natures is purposely avoided.
Supra, pp. 153-154.
170
deliberated before purchasing the product, he does not
continue to do so after purchase is taken for granted.
VII'.
QUALITY MID PRICE
Stress on quality and price or quality at a price is
of-prime importance in selling substitutable goods which are'
functionally similar after demand for a general type of
product is well established.
To the extent that many goods
are easily substitutable in' the satisfaction of a particu­
lar desire, consumers are likely to make purchases on the
basis of a quality-priee. differential so that they can
maximize satisfaction.36
Since price resistance diminishes inversely as pur­
chasing power increases, quality. Is likely to be of greater
Importance to persons with large incomes.
Conversely,
since price resistance increases as purchasing power de­
creases, price is likely to be of greater Importance to
persons with smaller Incomes.
But inconvenience resistance is likely to be rela­
tively more important in comparison to price resistance In
the case of persons with high incomes and relatively less
important in comparison to price resistance in the case of
persons with low incomes.
-
36 By maximizing satisfaction, we mean getting the
greatest total gratification of all desires in proportion to
total resistance that must be overcome.
171
Putting; this another way, we may say that persons
with greater purchasing power are likely to be willing to
pay more if the purchase of goods is made convenient for
them and that persons with smaller.purchasing power are
likely to be willing to go to greater Inconvenience to buy
for less money.
Service Is discounted for price reduction
and price reduction for service accordingly.
Time .preference influences quality-price estimate's,.
Persons with positive time preference but low incomes are
likely to demand less quality In durable goods so that they
can. purchase more of them in the present.
It Is not so much
a matter of receiving future .utility as It is of satisfying
an Immediate preference.
VIII.
COMPLEMENTARY GOODS
The demand for some goods is derived from that for
others.
If a consumer buys an. automobile, he must, to
derive utility from the product, purchase gasoline.
By
virtue of the purchase of one good, then, the buyer assumes
an attitude of non-resistance to another.
Similarly,'the
sale of electrical equipment gives rise to an Increased
demand for electricity.
But the increased demand for complementary products
varies with the consumption habits of buyers.
If a person
purchases an automobile, he also buys gasoline in some
172
quantity, depending upon the use he makes of the car.
In
the event that he uses it for business purposes only, more
gasoline can be sold to him If he Is influenced to use’the
machine for pleasure as w e l l . ' But while he has little
resistance to the purchase of fuel for the automobile for
business he does have resistance to the purchase of it for
pleasure.
Consumption habits are formulated not only with
regard to type of product but also with regard to quantity.
In the situation referred to, gasoline is taken for granted
and purchased regularly for business purposes, but increased
purchases for other uses are made only after some hesi­
tation or vacillation.
The demand for one good does increase with an increase
in demand for another good v/hich is complementary.
This
Increase, however, must not be considered directly pro­
portionate unless there is a condition of perfect comple-.
mentarity, which seldom exists.
Sales effort might be used
successfully in increasing the proportionate sales of the
one product to the other.
For example, advertising might be
used by tire manufacturers to increase the sales of their
products proportionately to the sales of automobiles or by
public utilities to increase their sales of electricity in
proportion to the sales of electrical equipment.
173
IX.
RES IS T M CE TO SELLING METHODS
Since the consumer cannot satisfy all his desires,
some are given preference over others.
Sellers meeting
general competition contend among one another to stimulate
those desires the gratification of which mean increased
sales of their products.
The very nature of this compe­
tition, sponsored hy the profit motive, has forced the
consumer to build a resistance to sales methods.
Because
of this the seller often seeks to conceal the nature of his
efforts until he has aroused the interest of the buyer.
Consequently, he concentrates his first efforts on the •
stimulation of a desire which requires for gratification the
general type of product offered for sale.
For instance, the seller of life insurance stresses
first in the advertisement the importance of independence
after an individual has reached the age of sixty-five, or
the seller of correspondence school education places
emphasis on larger income or business success.
Not until
this is done is the consumer given any clue to the product.
The second step is that of associating the gratification of
the desire with the means, the article offered for sale.
This is brought about through the use of general conviction.
Although .this method is somewhat similar to the
Yi/ant-solution formula, it differs in that advocates of the
latter prescription lead one to believe that the want is
174
already In existence, whereas modern selling makes no such
assumption.
A person who had given no thought to what he
would do after he became too old tohvork might be made
conscious of the advantages of providing for his later years
through a frequent repetition in advertising of the desira­
bility of being independent financially during senescence.
What is desired and what is desirable differ only in respect
to. 'consciousness of feeling.
It is the latter rather than
the former that is recognized as being of importance in
salesmanship today.
It rs erroneous to suppose that any one formula Is
sufficiently expansible to apply to all selling situations.
The seller of non-resistance goods need not concentrate on
the stimulation or cultivation of desire before introducing
the product, for, plainly enough, desire has already been
adequately intense to induce regular or habitual use of the
commodity, and special attempts to get Interest are un­
necessary.
X.
ENHANCING THE MEANINGS OF GOODS
Products have meanings of utility and. disutility to
consumers, and purchases are made only when there are
estimated increments of the former over the latter or
decrements of the latter under the former.
Anything which a
seller does to enhance the estimate of relative utility over
175
that of relative disutility is salesmanship.
If shoes will
pay for themselves in style and durability alone, the
.addition of comfort is an increment of utility over re­
sistance, or if a worker ordinarily pays five dollars for a
pair of shoes that last nine months, he is given an additional utility over resistance if he is sold shoes that last
twelve months for the same price.
And if coffee has only
the meaning of a hot drink to a consumer, the idea of
utility is projected with the suggestion of the product as
an iced beverage.
Coca Cola was commonly thought of as' a
refreshing drink for warm .weather until the producers
brought out the slogan, "Thirst knows no season."
Auto­
mobiles may mean no more then speedy transportation until
producers place emphasis upon comfort and safety.
The
limitation of meaning of any article to consumers restricts
its sale, for buyers commonly turn to sellers for information
about the commodities they
s e l l .
37
When a sequence of acts is preliminary to -any single
purchase, consumers are prone to weigh relative resistance
In terms, of its totality in. 30 far as the particular
purchase Is concerned.
Sellers, realizing this, often
direct their advertising.at overcoming only the resistance
37 h . D. KItson, "Economic Implications In Interest,"
The Journal of Political Economy, XXVIII:4 (April, 1920)
332- 3’5S“, says that interest in anything is developed by
giving information about it.
.176
to the first of the chain of actions.
This may result in •
the paying of a visit to the showrooms of an automobile
agency, or the mailing of a coupon for more.information
about a life insurance policy."
After the consumer visits
the display rooms or mails the coupon, the seller places
emphasis upon the second act of the series.
The resistance
to any one of the sequence of acts is small when that act. is
singled out from the others and subjected to special sales
effort.
Installment selling has been another important factor
in breaking down the resistance to certain relatively high
priced semi-durable or durable goods.
The seller places
emphasis uxpon the smallness of payments rather than the
total price and takes advantage of the consumer’s tendency
to discount future sacrifices against immediate- and future
g r a t i f i c a t i o n s . W i t h little .if any down payment required,
the present gratification is likely to exceed any immediate
sacrifice.
XI.
CLASSIFICATION OF APPEALS ACCORDING TO MEDIA
We have defined an appeal as any action of a seller
designed to bring about a desired response from a consumer.3®
3® Supra, pp. 110-111
Supra, p. 167.
177
Tli© desired response does not have to be a purchase, for,
as we have a l r e a d y explained, the purpose of an advertise­
ment may be no more than that of inducing the buyer to visit
the display rooms of the seller.
An appeal may be limited or extended, according to
the purpose of the seller, the resistance that must be over­
come in getting the desired response, and the medium of
selling used.
It may be no more than a simple suggestion,
or it may begin by stimulating or cultivating a desire,
follow with general and specific conviction, and end with
persuasion designed to overcome resistance.
The purpose of the seller may be that of making a
sale, that of getting the consumer to perform one of a
sequence of acts preliminary to a sale, or that of supple­
menting other sales or advertising efforts.
If the re­
sistance is great, the appeal is likely to be extended, but
If It is small the appeal is likely to be limited.
The
medium of selling -may be suited to particular kinds of
appeal only and thus place limitations upon the efforts of
the seller.
It is difficult to use more than a very limited
appeal:' in:-billboard advertising; consequently the seller
uses this medium when resistance is minor or when the
purpose is to supplement other sales efforts.
A mere
suggestion may sell candy or cigarettes, but it will not
178
sell a radio or an automobile— it may help sell either a
radio
or an automobile If
other efforts are used as well.
Both newspapers and magazines may Toe used for either
limited or extended appeals, and, if the resistance to the
purchase of the commodity is great, the seller is likely to
appeal often and use supplementary media.
Sales letters,
likewise, may be used to present complete appeals or they
may be used for supplementary purposes.
The radio comes in
other
between the billboard and the
media in that it is not used very effectively for the
presentation of extended appeals but can be used to achieve
a small amount of conviction and persuasion.
If the
relative resistance to the purchase of an article is rather
small, the radio can be used effectively, but, for any task
beyond this, the medium is used mainly' in a supplementary
way.
Personal selling is used to perform part or all of
the transactions prerequisite to a sale, but because of the
high expense involved, relatively speaking, mass methods are
usually used to break the ground and salesmen used to com­
plete the task. ■ Some personal selling amounts to little
more than order taking after resistance is broken through
advertising.
179
XII,
CONCLUSIONS
Sales theory has been limited principally to the
narrow confines of methods in demand stimulation.
The
search for quick and easy ways of controlling and regu­
lating human conduct that would satisfy business men is
responsible for neglect of the broader field of consumer
preferences.
If the disdain with which economists glance at the
subject of salesmanship is to be replaced by deserved
recognition, a broader vision on the part of sales theorists
is necessary.
Demand stimulation is only one phase of the
broader field of economic motivation, and, in this respect,
it cannot rest upon a handful of assumedly all-important
instincts.
Neither can it rest upon a few rules of person­
ality contrived for the Improvement of salesmen.
No one handy formula can account for both the action
of-the -individual in making a five-cent purchase of a candy
bar and that in making a five-thousand-dollar purchase of a
house.
But some idea of the difference in attitude involved
In both situations can be determined by analysis of the
resistance factor under conditions of both purchases.
Since one of the most accurate bases for measuring
desire intensity is found in the quantum of the resistance
element overcome in obtaining gratification, we have
largely based our analysis of demand stimulation
180
upon the negative factor.
A third element of resistance,
that to sales efforts, is thus added to the two impediments
to action treated in previous chapters:
inconvenience.
price and
CHAPTER IX
..GENERAL CONCLUSIONS,
T h e 'contribution o'f this study Tests In Its analysis
of the relationship between economic theory and theories of
demand stimulation.
The material In itself has In the main
been drawn from the many studies made in both fields.
the presentation can be termed o r i g i n a l . 1
Only
The -suggestion
for a study of this kind came from an article by C. A.
Stocking in The American Economic Review of March, 1931.
In
this paper the author took economists to task for ignoring
the fact that desires are created by sales' efforts.
Stocking1s- article was published after the writings of the
newer school of economists who devoted their efforts to
treatment of the subject of monopolistic competition had
already begun to appear.
Piero Sraffa's article entitled,
"The Laws of Returns under Competitive Conditions," was
published in the Economic Journal. December, 1926, while
Harold Hotelling's paper, "Stability in Competition,"
appeared in the same publication in December, 1929.
article by Edward Chamberlin,
An
"Duopoly and Oligopoly,"
appeared in The Quarterly Journal of Economics, November,
1929, preceding the appearance of the same author's book,
1 The orderly presentation of the entire subject mat­
ter, however, Is believed to be original.
182
The Theory of Monopolistic Competition, in 1933.
Stocking’s
article can hardly be said to have presaged the writings.of
the newer school, since some of them had already appeared
before his paper was published.
The influence of- monopolistic competition in value
theory has been given considerable attention by a host of
economists.
As yet, however, the relationship between
demand and sales theory has largely been neglected.
If the
diagnosis presented in this study does 110 more than to
encourage further speculation, it will have been worth while.
In our analysis of the subject of consumer preferences, we
have:
(1) Defined the consumer according to a group concept.
Our attention ha,s been devoted to the uniformities rather
than the individual differences of buyers.
The consumer in
this sense is a characteristic person.
(2) Distinguished between instincts and habits,
classifying under the former,
"unlearned tendenciesj” and
under the latter, "learned tendencies."
(3) Distinguished between wants and desires.
The
former signify something missing or lacking with only a very
general arid vague idea of the means of satisfaction.
The
latter connote consciousness of both something missing or
lacking and the means of gratification.
An economic desire
is one to the gratification of which there is relative
183
resistance.
Desires may spring from innate .and acquired
tendencies, or from environmental conditions,' or from an
assimilation of these.
(4) Classified products according to consumer atti­
tudes of resistance or non~resistanc8.
Buyers have atti­
tudes of resistance to the purchase of all goods other than
those to the use of which they have become accustomed by
habit .or committed by previous decision.
.purchase of goods is relative.
Resistance to the
Since most groups .of'
consumers cannot satisfy all desires,
some are gratified at ■
the sacrifice of other satisfactions.
(5) Distinguished between modes and standards of
living.
The former is comprised of the many purchasing
habits of consumers, whereas the latter involves the desires
of consumers.
The consumer tends to establish a basis for
evaluating his desires.
This basis is the foundation of his
value structure■and we call it his standard of living.
(6) Shown the importance of the time factor in an
analysis of consumer preferences.
and commitments' do not change.
fixed.
In the short run, habits
Hence, many purchases are
The marginal utility principle does not apply to
purchases of goods to which the consumer has an attitude of
non-resIstan.ce In the short run.
This principle does apply
to expenditures from residual income, nevertheless.
Habits
and commitments may change in the long run and consequently-
184
the principle of marginal utility applies more perfectly to
expenditures in 'the long run.
Sellers study modes of living
to determine the preferences of consumers in the short run,
but standards of living to determine the trends of consumer
preferences in the long run.
(7) Considered the interrelations of commodities
according to substitutability and complementarity.
A price
increase of a commodity, regularly-used by a consumer at a
time when other conditions remain the same usually involves
substitution and always results in a negative income effect.
Wide changes in consumption habits may result with changes
in price.
(8) Considered the effects of customary prices,
expectations of prices, and anticipations of .quality on
elasticity of demand.
Consumers tend to form habits with
regard to prices they pay for commodities just the same as
they do with regard to the kinds of products they purchase.
Increases in the prices of these goods give rise to consumer
resistance to purchase.
The demand for any commodity in­
creases with expectations of higher prices and decreases
■with, expectation of lower prices in the' future.
The substi­
tution .of one commodity for another with an increa.se in the
price of the latter depends partly upon anticipation of
quality differences.
If the price of a commodity regularly
Used by a group of consumers is reduced, demand may
185
temporarily decrease rather than increase because of sus­
picions of inferiority of prodtict.
(9) Treated competition under conditions of product
.differentiation.
.Competition was classified as general or
specific according to whether it exists among sellers of
substitutable goods which are. functionally similar or
functionally dissimilar.
All goods in a price range in a
specific market compete with each other and are in a broad
sense substitutable.
But if the demand for a particular
commodity Is well established, substitution is usually
narrowed to substitutable goods which are functionally
similar.
Demand is established only for particular quanti­
ties of goods, however, and any attempt to increase the
quantities customarily used by groups of consumers must
meet with resistance.
(10) Drawn distinctions between competition in the
short run and competition in the long run.
In the short
run> general substitution of products to which the consumer
has developed an attitude of non-resistance does not take
place.
Specific substitution may, however, be. Influenced by
advertising.
In the long run, both kinds of substitution of
products to which the consumer has developed an attitude of
non-resistance may be enhanced by advertising*
(11) Dealt with consumer time preference with respect
to the propensity to save, to buy durable or single-use
186
goods, and to make use of credit.
Individuals have desires
for immediate and for future gratifications and, although
the most urgent of the former are given preference over the
most intense of the latter, the degree to which immediate
satisfactions are postponed for future gratifications
depends upon how much of a negative or a positive time
preference the consumer has.
A person will satisfy immediate
preferences to the point at which the estimated relative
utility of a future satisfaction plus the satisfactions that
can he attained from the interest reward are as great as
that of another immediate gratification.
'For persons with
negative time preference, this point is reached more quickly
than It is for those W i t h positive time preference.
Consumers form attitudes of non~resistance with respect to
the replacement of durable'goods just as they form them with
regard to choice of commodities.
The regular replacement of
articles Is carried-out without hesitation, but any attempt
on the part of the seller to Increase sales by speeding the
replacements of buyers meets with resistance.
In times of
emergency, consumers are inclined to concentrate on the
immediate, and consequently they devote much of their Incomes
to single-use goods and put off the replacement of durable
commodities.
Tinder conditions of sales stimulation and
small down payment's, consumers with positive time preference
are likely to give exaggerated appraisal to the immediate
18 7
gratification to be received from durable goods sold on the
Installment plan and to discount the sacrifices represented
by payments because of their postponement.
(12) Stressed the Importance of inconvenience as a
type of resistance.
Consumers in the higher income brackets
are inclined to discount price reduction for service, whereas
those in the lower income brackets tend to discount service
for price reduction.- The importance -of' advertising price
concessions is exemplified in an analysis of inconvenience
resistance. ,Although a consumer might be unwilling to
travel any distance for a concession of a few cents in the
price of any one commodity, he might be willing to go to
considerable inconvenience if this concession were to be
extended to a number of articles.
(13) Treated consumer buying motives as desires which
are caused by a number of interacting factors some of which
are subjective and some objective.
elaborations upon organic wants,
Some motives are
some acquirements from
experience and learning, some acquisitions from geographical
and social surroundings, and many are combinations of all
these.
Many of the desires of human beings are classifi­
able according to well-defined groups on the basis of age,
sex, etc.
If the more common meanings of a product to a
consumer are understood and if the unexceptional desires of
any group are definable, the subjective valuation of an
188
object to any consumer is likely to originate in the
rapprochement.
(14). Classified methods of demand stimulation as
subjective and objective.
They are concerned with the.
behavior of the consumer or the technique of the seller.
Obviously, if the desire of the buyer is a prerequisite to
a .sale, any theory of demand stimulation must be predicated
•upon a study of consumer preferences.
Objective methods
may supplement subjective theories but not replace them.
Although theorists have found it convenient to deny that
sales methods can create desires because of their wish to
evade ethical probing concerning what desires should be
given birth, the refutation hardly seems worth while.
It is
as logical to task what desires should be stimulated as it is
to ask what ones should be created.
A sales appeal must
depend upon the resistance factor and the media available
for expressing that appeal.
Appeals vary according to
consumer attitudes of general resistance, specific-inclusive
resistance,
and specific-exclusive resistance with respect
to goods; consumer attitudes of general resistance, quasispecific resistance, and specific resistance with respect to
patronage; and opportunities for extended or limited appeals
with respect to media.
Naturally no one sales formula can
be used in selling all kinds of products.
The extent of the
appeal must depend upon the resistance factor.
For
189
relatively high-priced commodities or those which are sold
in inconvenient locations, extended and supplementary appeals
are used.
For relatively low-priced products sold in
convenient locations, limited appeals are used.
quality and price are important in selling.
Both
The former more
particularly in appealing to those in the higher income
levels and the latter in appealing to those in the lower
income brackets.
The thesis of this study does not rest on material­
istic foundations nor does it imply the materialistic '
doctrine known as hedonism.
Psychologists recognize that
objects can and do stimulate human.beings and are in a sense
causal factors in human conduct.
The current misunderstanding
arises from a confusion of terms, that of causal factor and
cause.
An object has value significance only when considered
in relationship with a subject.
Hence, a good is not of
itself a cause but only one of the many interplaying factors
that in their totality are the cause.
These interplaying
factors are both subjective and objective in that they may
be both organic and environmental, but there is no clear
line of demarcation between the two unless we consider the
infant .at birth, for from this period on the individual's
capacity to-adjust himself to others and. to his surroundings
results in a conditioning which we speak of as learning.
190
Habit, which is a conditioned method of responding to
particular stimuli, is one kind of -learning that has par­
ticular significance, for it measures in a sense the extent
to which the individual has overpowered resistance to
certain actions.
Habits, which are the static element in
the lives of people, are transitory because any change in
either the subjective or the objective conditions results
in resistance arising in a new form.' .Either the new re­
sistance is overcome in turn or the habits change and with
them the mode of living.
But the standard of living, which is the basis of all
evaluation, is the gauge by vdiich the individual appraises
his mode of living, his present resting place, in terms of
the level to which he aspires.
In so far as he accepts
what Is as the measure of what should be, his standard and
his mode of living are the same, but in so far as he con­
siders what is as only a temporary state of affairs that must
in time give way to a "better” life for which he Is striving,
his mode and standard differ.
Although the standard is influenced by a person's
experience with objects, the mode is only a causal factor,
and not the entire cause of the standard.
Attitudes are
retempered by idealistic beliefs, by education, by society1-,
and by ethical criteria.
Out of these grows a broad and .
basic attitude toward life to which the Individual strives
191
to make the way of living conform.
It. is like a hug'e
mirror which reflects a fascicle of lights only one of
which is the m o d e .of living.
At any one time the seller
turns to the mode of living to determine the resistance to
his product.
Nevertheless, a study of trends must take
cognisance of the standard of living.
The thesis of this study is that economists and
theorists 'on the- subject of demand stimulation can profit by
exploring common ground In the ascertainment of causal
factors in consumer preferences.
This can most accurately
be accomplished through a careful Investigation of the
relative resistance to purchase.
Impediments to consumer
action/ which are both subjective and objective, have as
their fundamental base the attitude of the individual.
The
Individual makes a positive decision after overcoming con­
flicts both of contradictory motives and of numerous
positive desires, all of which cannot be gratified.
Posi­
tive decision Inspires will to attain, and will to attain Is
manifested in purchases.
Demand stimulation bids fair- to receive a greater
recognition in demand theory in the future..
But the narrow
concepts upon which sales theory has been constructed in the
past must give way to a broader prospectus of the field In
the future.
No longer can the scope of demand creation be
confined to the small area of methods in advertising and
salesmanship.
If this study has done no more than erect
rope 'bridge over the chasm between the fields of demand
theory and sales stimulation, it has made a contribution.
Massive concrete may replace the fiber in years to come.
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5H2 pp.
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198
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351 pp.
Maynard, H. PI., ?/. C. Weidler, and T. N. Beckman, Principles
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790 pp.
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Ch787
Naether, Carl A . , The Business Letter; Principles and
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Pyle, J. P., Marketing Principles. Revised edition; lie\y
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Russell, F. A., Texthook of Salesmanship. Second edition;
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Ohs. 8 and 9.
Scott, Walter Dill, Influencing Men in Business.. Third
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________ , The Psychology of Advertising.
Maynard & Company, clFoFT
437" "pp.
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Small
Shaaber, M. A., The Art of Writing Business Letters.
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Ch. 11..
Sheehan, Paul V., .Better Business
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Letters. Boston;
Ch. lF.
Benj.
Smart, W. K . , and L. M. McKelvey,
Business Letters. New
"York; Harper & Brothers, 193F7
Ch. 8.
Starch,' Daniel, Principles of Advertising.
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A. W.
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Strong, Edward K . , Jr., Psychological Aspects of Business.
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_____
, The Psychology of Selling and Advertising*
"
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IV.
New
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VI.
TABLES CITED
Distribution of Single individuals and of aggregate income
received,-by income' level, 1935-56. National Resources
Committee, Consumer Incomes in the United States; Their
Distribution in 1955-56. Washington;
United States
Government Printing OlTice, 1938, p. 30.
Distribution of families and of aggregate income received,
by income level, 1935-36.. National Resources Committee,
Consumer Incomes in the United States; Their Distri­
bution in 1955-56. Washington;
United States Govern­
ment PrintIngf"'OlTIce, 1938, p. 18.
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