9
Ethnic Networks and the Adoption of Relational Strategies
This chapter elaborates on the importance of the promotion of suppliers to a minority ethnic group to a perceived “preferred supplier” status, as a factor in the generation of affiliated ethnic minority consumers’ loyalty to the supplier and to the group.
Contrasting with an implied restriction in the identification of “preferred suppliers” to routinely purchased products in business-to-business relationships (Ulaga and Eggert, 2006), preferred supplier status can be conferred to suppliers of all types of service-products in minority ethnic markets. The distinctive factor is that the de facto consumer is the minority ethnic group rather than any one individual consumer. In this way, while individuals’ consumption of a service-product may be episodic, routine purchase occurs when all consumers in the group are considered.
Becoming a preferred supplier to a minority ethnic group with sufficient substantiality may be a source of advantage for suppliers over their competitors (Pires, Stanton and Stanton, 2011), which can be made more meaningful when advantage is complemented by strong, long-term loyalty of the group, even if not necessarily by all group members. As a rule, preferred suppliers to a minority ethnic group can be expected to be co-ethnic minority businesses, and to deploy reciprocal and mutually beneficial relational marketing strategies. The loyalty anchored competitive advantage is likely to be as sustainable as the group’s resilience and stability.
Provided preferred suppliers are able to sustain performance effectiveness by reliably meeting the group’s needs and preferences over time, the necessary conditions are created for performance to be rewarded by complementing ethnic loyalty with consumer loyalty (Sirdeshmukh, Singh and Sabol, 2002). This makes it difficult for other (non-preferred or backup) suppliers to gain even a testing of the service-product they have to offer, let alone arriving at terms of exchange.
Preferred Suppliers, Ethnic Networks and Minority Ethnic Markets
A minority ethnic market can assume many shapes depending on the analytical perspective that is taken. Here it is understood as the set of stakeholders and interactions that take place in the context of a given minority ethnic group.
Chapters 7 and 8 in this text sought to understand what causes ethnic minority businesses to emerge, and the forces, such as networks, that subsequently shape their development (Fadahunsi, Smallbone and Supri, 2000). Borrowing from that understanding, this chapter provides a networked perspective of ethnic minority markets, whereby focus is on the social and business networks operating in the realm of a given minority ethnic group, with the inherent relationships within those ethnic networks explaining how and why stakeholders’ behave the way they do.
Bowles and Gintis (2004) define ethnic networks as
sets of agents unified by similarity of one or more ascriptive characteristics (such as race, ethnic identification and religion) engaged in non-anonymous interactions, structured by high entry and exit costs, but lacking a centralized authority.
(p. 2)
Conforming to the definition, a minority ethnic group may be described as an ethnic network comprising group institutions (such as social clubs, cultural centres, religious and academic associations), social structures of individuals (consumers) affiliated to the group, including its consumer network, similarly affiliated businesses and their business networks. It is also the minority ethnic market.
Ethnic networks are expected to exhibit a parochial cultural affinity characterized by cooperation, interpersonal commitment and collective action among its co-ethnic members, in contrast with exclusionary practices and interactional avoidance towards dissimilar others (Serino, Giovagnoli and Làdavas, 2009; Kim, 2007; Bowles and Gintis, 2004; Stephan et al, 1991). Focusing on relationships among social entities within ethnic networks and driven by the shared activities and affiliations of their members (Kossinets and Watts, 2006), social networks are deemed to involve interactions of a social nature between group affiliates that generate social ties (Chung and Whalen, 2006) and influence entrepreneurial activity (Batjargal, 2010; Zhao, Frese and Giardini, 2010). In contrast, business networks involve business interactions between suppliers and consumers (B2C) and between businesses (B2B) affiliated with the minority ethnic group.1 Together with group institutions, the group’s social networks and business networks make up the ethnic network.
Focused on the relational interdependence of social structures created by repeated interactions of the parties to an exchange over time (Cook et al., 2013; Dwyer, Schurr and Oh, 1987; Hallen, Johanson and Seyed-Mohamed, 1991; Portes and Sensenbrenner, 1993), the boundaries of ethnic networks determine the access to the resources that they enable, ranging from open access to impermeable to outsiders (Wimmer, 2008; Mummendey et al., 1999).
The idea that interpersonal interaction is guided by calculations of costs and rewards is central to social exchange theory (Stafford, 2008; Cropanzano and Mitchell, 2005; Emerson, 1976), helping to understand why socialization benefits and economic advantages may convert into preference for interactions within the social network over the long term (Ram, Jones and Villares-Varela, 2017). These may be complemented by a reluctance to go outside the network and bear the costs of interacting with dissimilar others.
Given the resilience of minority ethnic groups within host countries, ethnic networks have potential as a source of economic advantages for suppliers that accrue over time. It can therefore be argued that these advantages work against suppliers’ concerns about restricted gains from trade and foregone economies of scale when targeting a small minority ethnic group (Pires and Stanton, 1999).
From a perspective of ethnic minority consumers affiliated with a minority ethnic group, rather than simply expressing ethnic loyalty encompassing altruistic feelings towards co-ethnic members (Bowles and Gintis, 2004), emphasis may also be on their identification with ethnic networks in terms of economic advantage and avoidance of eventual exposure to exclusionary practices in other markets. Some of these consumers may also be self-employed ethnic entrepreneurs managing ethnic minority businesses seeking to serve the co-ethnic group.
Bringing together the social embeddedness theory (Granovetter, 1985, 1992), Waldinger, Aldrich and Ward (1990) interactive model, and the mixed embeddedness theory (Kloosterman, van der Leun and Rath, 1999), the next section establishes the compelling rationale for examining minority ethnic groups by reference to their inner networks and related relational drivers.
Ethnic Networks as Relational Drivers
The presumption by suppliers that ethnic minority consumers are in a relationship with their minority ethnic group, thus favouring in-group behaviour reciprocity (Yamagishi, 2003), and that these consumers value a relationship with the suppliers preferred by their co-ethnic group, provides two starting premises for examining relational ethnic marketing drivers in the perspective of ethnic networks, namely:
- The focus of ethnic minority business is on the minority ethnic group, operationalized by serving one consumer at a time;
- Ethnic minority consumers reward ethnic minority businesses with loyalty, possibly complementing ethnic loyalty with consumer loyalty.
In-group behaviour reciprocity is likely to apply more strongly to ethnic minority consumers with a strong group identity, with the added premise that there may be compelling reasons why switching preferred suppliers may be undesirable for these consumers.
Amidst significant disadvantages such as language skills, education, lack of mobility and discrimination, ethnic minority consumers newly arrived in a host country may be challenged by a lack of market knowledge in satisfying their consumption requirements, which places them at an economic disadvantage and steers their behaviour (Volery, 2007; Fregetto, 2004). They may overcome the challenge by joining co-ethnic consumers (making up the consumer network) and taking advantage of the minority ethnic group of affiliation’s ethnic network. In this process they may develop interdependencies with like consumers, with the minority ethnic group itself and with the set of preferred suppliers to that group, effectively adding up to the ethnic network depicted in Figure 9.1.
Figure 9.1
The Ethnic Network for a Minority Ethnic Group in a Host Country
The minority ethnic group and its relevant consumer network are central to the informal elevation of specific suppliers to a “preferred” status, perceived as well positioned to satisfy the new arrivals’ consumption needs and preferences, based on similar others’ previous consumption experiences. While any business may achieve the preferred status, this may be more at the reach of ethnic minority businesses. A positive (or negative) interaction between the newly arrived consumer and the preferred supplier recommended by experienced similar-others in the consumer network results in terms of exchange seen by the supplier as contributing to its retention (or discontinuation) of ethnic-sensitive tactics towards the group affiliates. Retention can be seen as a strengthening the supplier’s commitment to its relationship with the consumer network and partaking in the ethnic network. Figure 9.2 depicts ethnic network operations, including the set of decisions and interdependence between the different stakeholders in the ethnic network.
Figure 9.2 Ethnic Network Operations
Ethnic network operations involve processes that contribute to inexperienced ethnic minority consumers’ perceptions of the ethnic network as an economic asset in their consumption socialization, adding to group strength. In the case of preferred suppliers, the loyalty of the minority ethnic group is fundamental but insufficient in their targeting decision. Sufficiency requires a positive payoff from the cost-benefit analysis of the targeting opportunity offered by the minority ethnic group. Subsequently, the targeting decision also needs to account for opportunity cost (Buchanan, 1991). Positive outcomes pave the way to engage in mutually beneficial relationships between preferred suppliers, minority ethnic groups and their affiliates.
Networks Imply Relational Imperatives
Over time, repeated successful exchanges build up trust in the ethnic network recommendations and contribute to increasing commitment to the minority ethnic group by both consumers and suppliers. Ethnic network members engage, and develop a relationship with other stakeholders within the network. Through their engagement they come to know many of the group’s preferred suppliers directly through recommendation by specific network peers or through the group’s institutions and resources, such as lists of “suppliers to the community” available from consulates, from social clubs, or by other means (Pires and Stanton, 2005).
Self-ascription to an ethnic network is based on peer similarity with membership benefits justifying voluntary dependence on the minority ethnic group. One such benefit is the possible adoption of the group’s expectations and evaluation criteria to assess supplier’s performance, but continued group membership may require consumer behaviour to conform to the group’s values and attitudes. Notwithstanding, conspicuous self-ascription to a minority ethnic group may be required, that is, being seen by similar-others as belonging to the group. Hence, in addition to economic costs, switching costs also need to account for social or psychological costs, leading to a relationship that is constrained by a member’s conformance to the group (Johnson, 1982).
Overall, consumers may stay in a relationship with a preferred supplier because of the constraints imposed by the desire to conform to the co-ethnic group, or as a result of consumer satisfaction with the supplier, which may be due to the adoption by the supplier of group oriented, ethnic-sensitive strategies and tactics (Bendapudi and Berry, 1997) when justified (Bartikowski, Taieb and Chandon, 2016).
Initial consumer satisfaction by itself is rarely sufficient to justify the development and maintenance of a long-term relationship. Continued support for, and referral to a specific supplier by a minority ethnic group implies consistently positive experiences together with switching constraints. Hence, the combination of a minority ethnic group’s uniqueness and evaluation difficulties may result in personal loyalty, as advocated by Bowles and Gintis (2004).
While achieving sustainable competitive advantage is a desired objective for most suppliers, including those active in ethnic marketing, the process will require the use of effective segmentation, targeting and positioning analysis, combined with specific supplier skills (including cultural awareness, sensitivity and responsiveness) that can be used to build consumer loyalty. Ultimately, ethnic marketing success depends on maintaining a minority ethnic group’s loyalty, justifying the adoption of relational approaches by business.
Decision to Adopt a Relational Marketing Approach
Many businesses engage in transactional approaches in their targeting of consumers or consumer groups, and this may be the logical approach to adopt in situations where a business has power over the market, as in the case of monopolist businesses—the supply of utilities is a common example—or in cases of powerlessness over market demand, characteristic of perfect competition or hypercompetition situations (Gummesson, 1997). An alternative is for businesses to differentiate themselves from competitors by adopting relational strategies (Ravald and Grönroos, 1996).
From a marketing perspective, any business can consider adopting relational strategies to identify, grow, maintain and enhance profitable exchanges with a network of individual consumers, such as a minority ethnic group, effectively partaking in the group’s ethnic network as a supplier, even when network membership is not a deliberate objective.
While all businesses may gain from accessing a loyal network of repeat consumers, relationship related investments are usually necessary, and likely to be recovered/compensated only ex post and over time. For example, targeting a minority ethnic group with ethnic-sensitive strategies may require a variety of competencies, from an ability to communicate in the group’s language to the ability to behave in a way reflective of cultural awareness. Depending on their level of preparedness for intercultural exchanges, some businesses may face higher investment costs than others, both in time and in financial resources.
Given the relationship related investment involved in developing capabilities and competencies for deploying sensitive positioning strategy and tactics, the business decision of whether to target ethnic minority consumers with a loyalty-generation oriented, relational marketing approach involves discerning clearly what the benefits are that accrue to consumers and to the business, given the costs they face. In other words, the relational approach depends on the net value it generates vis-a-vis a transactional approach.
In addition, given that minority ethnic groups are intrinsically heterogeneous (Lindridge, 2015; Berry and Sam, 1997), businesses must decide who should be targeted. This is a difficult decision to make, with clear implications for the assessment of the net value that can be generated.
Because relational marketing strategies involve mutually dependent investments by all parties in the relationship (Holm, Eriksson and Johanson, 1999), the relational strategy and associated tactics must derive mutual benefit to the business, to the minority ethnic group (Shrivastava and Kale, 2003) and to the individual consumers affiliated with the group. This also has an impact on the targeting decision.
The targeting decision using a relational approach refers to consumer segments (minority ethnic groups or part thereof) identified based on ethnicity-related characteristics that influence behaviour (such as language and ethics). Hence, in addition to assessing segment substantiality, businesses need to access/develop accurate segment profiles for substantial segments and to ensure, subsequently, they possess the capabilities and competencies required to deliver to the segment the value proposition attributes revealed by the profiles through an appropriate ethnic-sensitive positioning strategy. This is a demanding process with at least six main steps, outlined in Table 9.1.
Table 9.1 Targeting Decision Process for Consumer Segments Based on Ethnicity
| The Targeting Decision Process for Consumer Segments Based on Ethnicity |
|
|
| Step 1 Recognize the opportunity offered by the minority ethnic group and define desired objectives. |
| Step 2 Apply a screening framework to assess substantiality (primary research). See Pires and Stanton (2015, Chapter 6) for a guide to this step based on external signs of substantiality. |
| Step 3 Develop a segment profile that reveals valued proposition attributes (primary research might be needed to distinguish the important and determinant attributes that characterize the group’s consumption preferences). |
| Step 4 Verify that the business is able to perform in delivering the identified attributes by analyzing own resources, capabilities and competencies to ensure alignment in the provision of the identified attributes. |
| Step 5 Develop a suitable ethnic–sensitive positioning strategy. |
| Step 6 Evaluate vis objectives identified in step 1 and correct as required. |
A mainstream supplier considering a minority ethnic group for targeting purposes must first establish the need for a differentiated ethnic marketing strategy towards that group. Only when the supplier discovers significant consumer behaviour differences between the mainstream, or other consumer groups, and the minority ethnic group (inter-group heterogeneity), is it justifiable to examine the minority ethnic group as a separate potential value opportunity, following effective marketing segmentation procedures (Dibb and Simkin, 2010) for achieving competitive advantage.
Determinant attributes, likely intertwined with ethnicity aspects, are crucial for competitive advantage. For example, issues of language, meaning and demeanour may be determinant aspects to consider. Since it is taken for granted in this analysis that the minority and mainstream groups behave differently in consumption, the likelihood is that some adjustment will be required to the mainstream suppliers’ capabilities and competencies before ethnic-sensitive, effective and efficient value propositions/terms of exchange can be offered to the consumers affiliated with the minority ethnic group.
Given the umbilical connection between ethnic entrepreneurs, their ethnic minority businesses and the minority ethnic group of affiliation, ethnic minority businesses may be naturally better positioned for engaging with co-ethnic groups. Suppliers engaging in relationships with individual ethnic minority consumers requiring customization and who are not affiliated with a minority ethnic group are likely to be uncommon. Suppliers aim at the group’s substantiality, stability and munificence, all of which are lacking in outlying consumers. Conspicuous affiliation with the minority ethnic group is the key indicator for suppliers, and the relationship with the group occurs via its affiliated consumers, one at a time.
For their part in the exchange, consumers assess their perception of the supplier’s performance drawing on assessment criteria received from the minority ethnic group. After the exchange takes place, feedback is provided to the group about whether borrowed expectations were confirmed or disconfirmed. Positive feedback is consistent with consumer satisfaction and supports future recommendation of the supplier to other group affiliates, as well as building a positive attitude of the consumer towards the group.
Relationship Between Consumers and Preferred Suppliers
To the extent that supplier involvement and reliance on a minority ethnic group brings about an effective reduction in culture shock through gains in consumer socialization (Oberg, 1960), ethnic minority consumers are able to adapt better to the host country’s environment. Beyond feeling more confident in their adaptation to a new life, the desire to maintain these benefits over time explains their continued reliance on, and affiliation to the minority ethnic group, generating feelings of ethnic loyalty and possible gratitude towards the group (Bridger and Wood, 2017; Palmatier et al., 2009; Soscia, 2007), to the group’s network and to its recommended suppliers. Repeated positive feedback to the group about recommended suppliers after an exchange may generate stronger group preference for the supplier.
It is the consumer’s acceptance of the suppliers recommended by the minority ethnic group that operationalizes the “preferred” qualifier conferred on the suppliers, eventually establishing new direct relationships (between these consumers and the suppliers) and indirectly strengthening the existing one between the consumer, the minority ethnic group and the supplier. That is, satisfaction with the interaction with preferred suppliers in the ethnic network leads to further interactions, resulting in relationship building that may lead to the justification and consolidation of the advantageous terms of exchange offered by the supplier to consumers affiliated with the minority ethnic group, strengthening the ethnic network overall.
The consumer’s decision to partake in a relationship with a preferred supplier may be justified because their alternative is to search independently for suitable suppliers in a space to which they are foreign, investing time and effort while risking making the wrong selection, given their lack of market knowledge and language-related communication challenges. As noted by Bendapudi and Berry (1997), informational investments range “from informing a hairdresser about one’s personal style and preferences … to gathering financial records and participating in a series of in-depth discussions to educate a personal financial planner” (p. 24). Additional to informational investments, consumers also incur sacrifices related to time, effort and money, from an economic perspective, all of which are taken into account by consumers when considering switching providers (Shaw and Pirog III, 1997).
Once a relationship is established, situational ethnicity—which accounts for the contexts in which consumption choices are made (Stayman and Deshpandé, 1989)—can contribute to the development and enhancement of the relationship. If ethnic minority consumers are only fluent in their ethnic language, consumption needs can easily convert into communication discomfort and in a reduced ability to pass on and to retrieve information during interactions outside the co-ethnic network environment. This condition is clearly demonstrated by widely used tactics in the healthcare and banking industries involving the purposeful employment of individuals from within the minority communities they wish to serve (Subeliani and Tsogas, 2005; Shanmuganthaan, Stone and Foss, 2004). More generally, this is the case, for example, of consumer-supplier interactions where the service-products being exchanged are high in interpersonal contact and in credence qualities, such that customization, responsiveness and personalization have the potential to further differentiate the preferred supplier and enhance the related terms of exchange. In situations such as these, changing suppliers can be expected to increase perceived switching costs for consumers, hence reinforcing their dependence on their preferred supplier. It is well known that higher switching costs and greater dependency fosters relationship maintenance (Ganesan, 1994).
Notwithstanding, even communication difficulties may be overcome depending on the consumption situation. In cases where service-product quality is easy to assess (as in the case of highly tangible search products such as groceries and hardware, or even in the case of some experience service-products such as fast-food) ethnic minority consumers may prefer standard offerings to ethnically adapted ones. Ultimately, these are cases with high complexity, as consumption experience may not be assessed simply in terms of service-product quality or fluency in communications. Sharing the consumption space with co-ethnic consumers and with similar-others may be the determinant attribute in the choice of a supplier.
This highlights both the need for businesses to understand consumers’ needs and wants in all their facets, as well as the opportunity for non-ethnic minority businesses to successfully target minority ethnic groups. For example, for product categories such as electronics, a Tunisian minority in France was found to react negatively to ethnically adapted websites (Bartikowski, Taieb and Chandon, 2016).
The link between ethnic minority consumers and their co-ethnic group’s ethnic network can be strong or weak. Arguably, it is weak in the case of groups with low rates of self-employment such as the Koreans and Mexicans in the Chicago area (Raijman and Tienda, 2003). In any case, the link is likely to support a long-term relationship with preferred suppliers to the network, provided interactional experiences are not negative; that is, suppliers’ performance should continuously meet with consumers’ expectations, remaining reliable and credible. Beyond situational circumstances, inexperienced ethnic minority consumers may associate with a minority ethnic group for perceived strategic utility reasons (Espiritu, 1993), and to benefit from the support of that group through lower perceived risk and faster market socialization. It is also through their identification with that group that they become important for suppliers, justifying their deployment of loyalty generating relational strategies and tactics.
Loyalty to Preferred Suppliers
As time goes by, exposure to everyday consumption situations enables consumers’ to overcome their inexperience, becoming less challenged by socialization needs. It cannot be questioned, for example, that it is not uncommon for newly arrived immigrants to settle in areas without an ethnic community of significant mass. With more or less difficulty these settlers deal with their consumption difficulties (possibly in kind and in communication) and often acculturate to the dominant local population.
More common, however, is settlement into areas with more or less mature ethnic communities. Provided there is a continued allegiance to a minority co-ethnic group, when combined with ethnic loyalty satisfaction with preferred suppliers rationally excludes any incentive to search for new information, for new information sources or for new suppliers; indeed, at least theoretically, less than full satisfaction may be tolerated, since changing suppliers may be perceived as re-establishing risk, although strong dissatisfaction may incentivize negative feedback to the minority ethnic group.
The scenario just described is somewhat aligned to an economic ceteris paribus, consumption-as-usual view of the world (Girod, de Haan and Scholz, 2011). It should not preclude the reality that we live in a dynamic and turbulent world characterized by intense competitive activity. Hence, although ethnic minority consumers may form close relationships with preferred suppliers recommended by their co-ethnic group, and these may develop into a strong form of ethnic group—ethnic consumer—preferred supplier loyalty as per the depiction of an ethnic network in Figure 9.1, competition for these consumers may result in switching, even if not targeted as a group. Therefore, close attention is required to ethnic minority consumers’ switching behaviour.
Switching Preferred Suppliers
Ethnic minority consumers may consider switching preferred suppliers for situational reasons, including:
- Suppliers closing down or relocation, or changing ownership;
- Consumers relocating themselves, such that current supplier retention may become inconvenient. Inconvenience is a recurring switching motivation in the literature (Keaveney, 1995). The effect of inconvenience is likely to vary with service-product type, with higher switching rates in search service-products than in the other classes of credence and experience;
- ‘Pricing’ is also a possible switching motivation, likely to be more important for service-products in the search class. “Core service failure” and “service encounter failure” were respectively the largest and second largest switching motivations in the Keaveney (1995) study.
- For newly arrived ethnic consumers, improved market knowledge is likely to be an important switching reason for service-products in the experience and credence classes. Consumer socialization gains encompass a growing awareness of alternative suppliers, possibly indicative that the preferred supplier recommended by the minority ethnic group has failed to develop a strong relational strategy. It may also reflect acculturation away from the group over time.
- Consumers may become disappointed with a preferred supplier if performance is below expectations such that service quality failure and dissatisfaction contribute to switching suppliers (Grace and O’Cass, 2001; Mihelis et al., 2001). In this case, the perceived net value of retaining the supplier will be reduced. Whether the consumer will switch requires comparing the new perceived value relative to the net values of available alternatives. Endorsement by the minority ethnic group, for example, may suffice to deter switching due to in-group behaviour reciprocity. But the switching decision may also inform the group’s perception about the particular supplier. While one consumer’s switching may not be enough to jeopardize the group’s preference/recommendation for a supplier, similar feedback by other members may result in the supplier losing its status.
Dissatisfaction with the preferred provider’s service is likely to be a major reason for the minority ethnic group to seek alternative providers. For the business, because of group dynamics, rather than facing a slow attrition from consumers’ switching, loss of ethnic loyalty may cause a large and rapid loss of the target group altogether. Hence, having targeted and attracted the patronage of a minority ethnic group, there is also an economic imperative for the business to continually address and monitor the relationship.
This switching scenario might possibly be averted if the preferred supplier emphasizes relationship benefits. Service support and high quality personal interactions may be major retention factors, even more important than product quality or price (Ulaga and Eggert, 2006), leading to a preferred supplier’s competitive advantage.
Relationships, Networks and Competitive Advantage
Competitive advantage at a point in time requires that suppliers offer their consumers value propositions/terms of exchange that are perceived by those consumers as superior to those offered by competitors. If superiority is based on attributes that competitors cannot offer, the conditions for continued competitive advantage are met. If the delivered attributes match those required by consumers, competitive advantage can be sustainable.
More formally, sustainable competitive advantage requires a business taking a distinctive position in the market that is more attractive to the target market than competitors’ offers and difficult for competitors to emulate (Porter, 1996). Emulation difficulties may arise from many possible bases for distinctiveness that a business may seek to develop, including quality, innovation and special features of their service-products. Price or lowest cost are not included because it generally means offering the same as competitors, only cheaper, and this is rarely sustainable for a long period.
Minority ethnic groups are groups of consumers with distinct needs and preferences relative to other groups. To win and hold a minority ethnic group requires that a business find the differences in determinant and important service-product attributes that matter to the group’s affiliates, positioning itself to attend to those differences in their value proposition. Even if ethnic minority consumers share mainstream consumers’ needs, their ethnic preferences, situational ethnicity and consumer socialization deficits are likely to be distinct, perhaps unique, providing an opportunity for ethnic-sensitive suppliers to tailor their offerings focusing on that uniqueness. Since core service-products are becoming standardized (Sundbo, 2002), it may be the targeting of ethnic minority consumers’ situational uniqueness that makes value propositions (or terms of exchange) superior.
The implication here is that suppliers wishing to target ethnic minority consumers must discover what attributes they should draw upon to offer distinctive value propositions. Importantly, the source of this knowledge is the relevant minority ethnic group. Group profiling may provide the necessary information about what makes the group distinctive. Using this information to develop value propositions may or may not guarantee superiority and, even in cases of superiority, the competitive advantage that ensues may not be sustainable. In principle, any supplier can develop minority ethnic group profiles and use this information to target ethnic minority consumers with ethnic-sensitive strategies, so there must be something else that prevents competitors from accessing the same opportunities available to preferred suppliers.
It is mutual benefit that helps to promote suppliers to a preferred status, for these suppliers to be recommended to affiliated ethnic consumers, and for consumer loyalty to the business to develop over time. By itself, satisfaction is not sufficient to engender loyalty. Loyalty is best considered as dynamic and varying in its possible strength. In terms of the earlier discussed four stages/phases of loyalty development proposed by Oliver (1999), beyond action loyalty, ultimate loyalty requires a socio-emotional involvement to which the minority ethnic group contributes as a social network. Successful relationship marketing requires the consumer to derive benefit from the relationship. In the case of ethnic minority consumers, the growth of village envelopment generates this benefit in many ways, ranging from the reduction of perceived risk for individual members to the social ties that are formed.
A targeting strategy that will lead to a high retention of ethnic minority consumers may also include the creation of perceived procedural and financial switching costs. However, these are elements that may well engender group dissatisfaction that undermines a loyalty strategy.
Clearly, competitive advantage is linked to the building of a strong relationship, but this requires special competencies and capabilities, especially implementing cross-cultural awareness and ethnic-sensitive practices. The networked, relational interdependence between the minority ethnic group, the individual ethnic consumer and the preferred co-ethnic supplier makes this relationship difficult to penetrate by others.
Given the central role played by ethnic identity in network operations, the findings may not apply equally to consumers not bound by ethnicity, discussed in the next section.
Implications for Consumer Groups Not Bound by Ethnicity
The findings from two contrasting studies help to identify the group conditions for a relationship to develop. The first, an American study (Berkowitz, Bao and Allaway, 2005) investigated whether there was any relationship between ethnicity and store loyalty. Hispanics were defined as the ethnic group and the particular question of interest was whether Hispanic consumers were different from non-Hispanic consumers in store loyalty. The authors conclude that the finding of no loyalty differences is not “too surprising” with the claim that their results support the contention that cultural differences between Hispanics and Anglo-Americans are “prone to possible exaggerations” (p. 20). Yet the study’s findings are to be expected given its parameters: the broad coverage of Hispanics as an “ethnic group”, the criterion of being Hispanic based on family name, while strength of identification was not taken into account. Further, store loyalty pertained to grocery shopping, generally a low involvement exercise, with no evidence that the single store took measures to build loyalty specifically with this group.
Separated by nearly a decade in time, Huang, Oppewal and Mavondo (2013) used a stronger conceptual and research framework to identify members of a Chinese minority ethnic group. Using self-identification by Chinese living in Australia, whether they considered themselves Chinese, and whether they had previously travelled overseas, the study examined attraction to the travel agent used and the agent they would have used if their first agent had not been available. Institutional theory was used to distinguish the role of a consumer, as an individual seeking the best outcomes in terms of competitive price, consumer service, atmosphere and accessibility; and as a member of an ethnic community, valuing actions bringing benefits to their community. In the latter context, the theory of intercultural accommodation was applied to draw attention to service providers using ethnic attributes to establish both pragmatic and social legitimacy with the minority ethnic group. Four accommodation behaviours were examined for their importance: ability to speak the ethnic language, employing ethnic staff (Murphy, 2011), being located near the ethnic community and support for the ethnic community.
While consumer service had the largest effect on attraction to the agent, it was noted that this “partly acts as an ethnic related attribute” (p. 891). Despite a smaller effect than service and price, ethnic-related attributes contributed positively to perceived attractiveness of a service outlet, supporting the conclusion that businesses should take care to properly communicate their position as an ethnic retailer or service provider. Mainstream providers seeking to become preferred providers were also recommended to consider focusing on such attributes if they wanted to make a positive impression and establish a service relationship with ethnic minority consumers.
Performance attributes in seeking a minority ethnic group’s support include strong relationship elements. Perceived pragmatic legitimacy can be achieved through performance attributes that include atmosphere and consumer service. These help to establish social legitimacy through perceived sensitivity to ethnic culture. The contrasting outcomes from the two studies demonstrate the need to carefully identify a minority ethnic group and to recognize the long-term benefit of interactive relationship building. A stronger, ethnicity-based rationale beyond language alone is likely to be required, to justify a business investing in meeting the group’s preferences while consumer groups that are not bound by ethnicity, tradition and difference to other groups will not be amenable to ethnic marketing.
Conclusion
From a supplier’s perspective, the decision of whether to invest in a relationship with ethnic minority consumers will depend on whether the lifetime value promised by their co-ethnic group (not the individual group affiliates per se), as per the supplier’s estimates, converts into a substantial value opportunity for the supplier that justifies the investment in developing and delivering ethnic-sensitive terms of exchange. Provided all conditions are met, effective supplier performance can lead to its promotion to a preferred status within the ethnic network.
Preferred suppliers may compromise their status if they become condescending about their performance and cease to meet the minority ethnic group’s expectations. Their status is aligned to the perception by the group that those distinguished are the best suppliers of net value. Responsiveness and personalization, for example, may be attributes that clinch the “preferred supplier” status through consumer-oriented ethnic-sensitive strategies. But, as in most market situations, the good performance of the agreed terms of exchange in a competitive fashion cannot be compromised. Continued support and referral by the co-ethnic group is essential for sustainable competitive advantage and implies consistently positive service experiences, together with switching constraints. Hence, the combination of the uniqueness of group and the nature of the terms of exchange may result in greater loyalty by ethnic minority consumers.
The selection of new suppliers is the culmination of the switching process, unless the particular service activities are no longer required. Three points to keep in mind are:
- There is no reason to expect that motivations for switching be in the selection criteria for new suppliers. Once ethnic minority consumers become more knowledgeable about the market, they may use different criteria for selecting new suppliers;
- Switching does not question ethnic loyalty;
- Economic and switching costs need to account for social or psychological costs, leading to a relationship that is constrained by a member’s conformance to the minority ethnic group.
(Johnson, 1982)
This chapter relied on relevant literature to offer an explanation of how and why minority ethnic groups are important for ethnic minority consumers and for suppliers seeking to target minority ethnic groups.
If a business can become a preferred supplier to a minority ethnic group, it is likely to have a source of advantage over competitors that can be as sustainable as the resilience and stability of the group. Provided the business is able to sustain its performance as a preferred supplier, consumer loyalty may join with ethnic loyalty to make it difficult for competing businesses to gain even a testing of the service-product they have to offer. Because minority ethnic groups have certain characteristics that underpin their resilience and stability, there is a need to find an ethnicity-based rationale that justifies a business investing in meeting the group’s preferences.
Chapter 10 delves into issues of marketing strategy and tactics. One aspect that is discussed is that reciprocity between ethnic minority businesses and consumers may entail the promotion of the minority ethnic group to a “preferred customer status” and group affiliated consumers to become members of the preferred customer program.
Note
1. A social network is an expression with multiple interpretations in the literature, today most commonly used in the context of computer-mediated communication (Ellison, 2007). This not the interpretation adopted in this chapter.
References
Bartikowski, B., Taieb, B. and Chandon, J. (2016). Targeting without alienating on the Internet: Ethnic minority and majority consumers. Journal of Business Research, 69(3), 1082–1089.
Batjargal, B. (2010). The effects of network’s structural holes: Polycentric institutions, product portfolio, and new venture growth in China and Russia. Strategic Entrepreneurship Journal, 4(2), 146–163.
Bendapudi, N. and Berry, L. (1997). Consumers’ motivations for maintaining relationships with service providers. Journal of Retailing, 73(1), 15–37.
Berkowitz, D., Bao, Y. and Allaway, A. (2005). Hispanic consumers, store loyalty and brand preference. Journal of Targeting, Measurement and Analysis for Marketing, December, 14(1), 9–24.
Berry, J. and Sam, D. (1997). Acculturation and adaptation. In J. Berry, Y. Poortinga and J. Pandey (eds.), Handbook of Cross-Cultural Psychology, Vol. 3, 2nd ed. Boston: Allyn & Bacon, pp. 291–326.
Bowles, S. and Gintis, H. (2004). Persistent parochialism: Trust and exclusion in ethnic networks. Journal of Economic Behavior & Organization, 55, 1–23.
Bridger, E. and Wood, A. (2017). Gratitude mediates consumer responses to marketing communications. European Journal of Marketing, 51(1), 44–64.
Buchanan, J. (1991). Opportunity cost. In The World of Economics. London, UK: Palgrave Macmillan, pp. 520–525.
Chung, E. and Whalen, K. (2006). The embedded entrepreneur: Recognizing the strength of ethnic social ties. New England Journal of Entrepreneurship, 9(1), 51–61.
Cook, K., Cheshire, C., Rice, E. and Nakagawa, S. (2013). Social exchange theory. In Handbook of Social Psychology. Dordrecht: Springer.
Cropanzano, R. and Mitchell, M. (2005). Social exchange theory: An interdisciplinary review. Journal of Management, 31(6), 874–900.
Dibb, S. and Simkin, L. (2010). Judging the quality of customer segments: Segmentation effectiveness. Journal of Strategic Marketing, 18(2), 113–131.
Dwyer, F., Schurr, P. and Oh, S. (1987). Developing buyer-seller relationships. Journal of Marketing, 51(April), 11–27.
Ellison, N. (2007). Social network sites: Definition, history, and scholarship. Journal of Computer-Mediated Communication, 13(1), 210–230.
Emerson, R. (1976). Social exchange theory. Annual Review of Sociology, 2(1), 335–362.
Espiritu, Y. (1993). Asian American Panethnicity: Bridging Institutions and Identities. Temple University Press.
Fadahunsi, A., Smallbone, D. and Supri, S. (2000). Networking and ethnic minority enterprise development: Insights from a North London study. Journal of Small Business and Enterprise Development, 7(3), 228–240.
Fregetto, E. (2004). Immigrant and ethnic entrepreneurship: A U.S. perspective. In H. P. Welsch (ed.), Entrepreneurship: The Way Ahead. New York: Rout-ledge, pp. 253–268.
Ganesan, S. (1994). Determinants of long-term orientation in buyer-seller relationships. Journal of Marketing, 58(April), 1–19.
Girod, B., de Haan, P. and Scholz, R. (2011). Consumption-as-usual instead of ceteris paribus assumption for demand. The International Journal of Life Cycle Assessment, 16(1), 3–11.
Grace, D. and O’Cass, A. (2001). Attributions of service switching: A study of consumers’ and providers’ perceptions of child-care service delivery. Journal of Services Marketing, 15(4), 300–321.
Granovetter, M. (1992). Economic institutions as social constructions: A framework for analysis. Acta sociologica, 35(1), 3–11.
Granovetter, M. (1985). Economic action and social structure: The problem of embeddedness. American Journal of Sociology, 91(3), 481–510.
Gummesson, E. (1997). In search of marketing equilibrium: Relationship marketing versus hypercompetition. Journal of Marketing Management, 13(5), 421–430.
Hallen, L., Johanson, J. and Seyed-Mohamed, N. (1991). Interfirm adaptation in business relationships. Journal of Marketing, 55(April), 29–37.
Holm, D., Eriksson, K. and Johanson, J. (1999). Creating value through mutual commitment to business network relationships. Strategic Management Journal, 467–486.
Huang, Y., Oppewal, H. and Mavondo, F. (2013). The influence of ethnic attributes on ethnic consumer choice of service outlet. European Journal of Marketing, 47(5/6), 877–898.
Johnson, M. (1982). The social and cognitive features of the dissolution of commitment relationships. In S. Duck (ed.), Personal Relationships: Dissolving Personal Relationships. New York: Academic Press, pp. 51–73.
Keaveney, S. (1995). Consumer switching behavior in service industries: An exploratory study. Journal of Marketing, 59(April), 71–92.
Kim, Y. (2007). Ideology, identity, and intercultural communication: An analysis of differing academic conceptions of cultural identity. Journal of Intercultural Communication Research, 36(3), 237–253.
Kloosterman, R., Van Der Leun, J. and Rath, J. (1999). Mixed embeddedness: (In) formal economic activities and immigrant businesses in the Netherlands. International Journal of Urban and Regional Research, 23(2), 252–266.
Kossinets, G. and Watts, D. (2006). Empirical analysis of an evolving social network. Science, 311(5757), 88–90.
Lindridge, A. (2015). Market segmentation by ethnicity: Is it really feasible? The Routledge Companion to Ethnic Marketing, 235–253.
Mihelis, G., Grigoroudis, E., Siskos, Y., Politis, Y. and Malandrakis, Y. (2001). Consumer satisfaction measurement in the private bank sector. European Journal of Operational Research, 130, 347–360.
Mummendey, A., Kessler, T., Klink, A. and Mielke, R. (1999). Strategies to cope with negative social identity: Predictions by social identity theory and relative deprivation theory. Journal of Personality and Social Psychology, 76(2), 229.
Murphy, C. (2011). Latino influence emphasized at chamber breakfast. Mclatchy—Tribune Business News, Washington, March 3.
Oberg, K. (1960). Cultural shock: Adjustment to new cultural environments. Practical Anthropology, 7, 177–182.
Oliver, R. (1999). Whence consumer loyalty. Journal of Marketing, 63, 33–44.
Palmatier, R., Jarvis, C., Bechkoff, J. and Kardes, F. (2009). The role of customer gratitude in relationship marketing. Journal of Marketing, 73(5), 1–18.
Pires, G. and Stanton, J. (2015). Ethnic Marketing: Culturally Sensitive Theory and Practice. Abingdon, UK: Routledge.
Pires, G. and Stanton, J. (2005). Ethnic Marketing, Accepting the Challenge of Cultural Diversity. London: Thomson Learning.
Pires, G. and Stanton, J. (1999). The substantiality test: Meaning and application in market segmentation. Journal of Segmentation in Marketing, 3(2), 105–115.
Pires, G., Stanton, J. and Stanton, P. (2011). Revisiting the substantiality criterion: From ethnic marketing to market segmentation. Journal of Business Research, 64(9), 988–996.
Porter, M. (1996). What is strategy? Harvard Business Review, November–December.
Portes, A. and Sensenbrenner, J. (1993). Embeddedness and immigration: Notes on the social determinants of economic action. American Journal of Sociology, 98(6), 1320–1350.
Raijman, R. and Tienda, M. (2003). Ethnic foundations of economic transactions: Mexican and Korean immigrant entrepreneurs in Chicago. Ethnic & Racial Studies, 26(5), 783–801.
Ram, M., Jones, T. and Villares-Varela, M. (2017). Migrant entrepreneurship: Reflections on research and practice. International Small Business Journal, 35(1), 3–18.
Ravald, A. and Grönroos, C. (1996). The value concept and relationship marketing. European Journal of Marketing, 30(2), 19–30.
Serino, A., Giovagnoli, G. and Làdavas, E. (2009). I feel what you feel if you are similar to me. PLoS One, 4(3), e4930.
Shanmuganthaan, P., Stone, M. and Foss, B. (2004). Ethnic banking in the USA. Journal of Financial Services Marketing, 8(4), 388–400.
Shaw, E. and Pirog III, S. (1997). A systems model of household behavior. Journal of Marketing Theory and Practice, Summer, 17–29.
Shrivastava, S. and Kale, S. (2003). Philosophizing on the elusiveness of relationship marketing theory in consumer markets: A case for reassessing ontological and epistemological assumptions. Australasian Marketing Journal, 11(3), 61–71.
Sirdeshmukh, D., Singh, J. and Sabol, B. (2002). Consumer trust, value, and loyalty in relational exchanges. Journal of Marketing, 66(1), 15–37.
Soscia, I. (2007). Gratitude, delight, or guilt: The role of consumers’ emotions in predicting postconsumption behaviors. Psychology & Marketing, 24(10), 871–894.
Stafford, L. (2008). Social exchange theories. Engaging Theories in Interpersonal Communication: Multiple Perspectives, 377–389.
Stayman, D. and Deshpandé, R. (1989). Situational ethnicity and consumer behavior. Journal of Consumer Research, 16(3), 361–371.
Stephan, W., Stephan, C., Wenzel, B. and Cornelius, J. (1991). Intergroup interaction and self-disclosure. Journal of Applied Social Psychology, 21(16), 1370–1378.
Subeliani, D. and Tsogas, G. (2005). Managing diversity in the Netherlands: A case study of Rabobank. The International Journal of Human Resource Management, 16(5), 831–851.
Sundbo, J. (2002). The service economy: Standardisation or customisation? Service Industries Journal, 22(4), 93–116.
Ulaga, W. and Eggert, A. (2006). Value-based differentiation in business relationships: Gaining and sustaining key supplier status. Journal of Marketing, 70(1), 119–136.
Volery, T. (2007). Ethnic entrepreneurship: A theoretical framework. In Handbook of Research on Ethnic Minority Entrepreneurship: A Co-Evolutionary View on Resource Management. Cheltenham: Edward Elgar, pp. 30–41.
Waldinger, R., Aldrich, H. and Ward, R. (1990). Ethnic Entrepreneurs: Immigrant Business in Industrial Societies, Vol. 1. Sage Publications, Inc.
Widmer, A. (2008). The making and unmaking of ethnic boundaries: A multilevel process theory1. American Journal of Sociology, 113(4), 970–1022.
Yamagishi, T. (2003). The group heuristic: A psychological mechanism that creates a self-sustaining system of generalized exchanges. Proceedings of the Santa Fe Institute Workshop on the Coevolution of Institutions and Behavior.
Zhao, X., Frese, M. and Giardini, A. (2010). Business owners’ network size and business growth in China: The role of comprehensive social competency. Entrepreneurship and Regional Development, 22(7–8), 675–705.