CONSUMPTION PATTERNS: NEEDS, WANTS, AND DESIRES - PART 2

Having taught marketing courses, especially Consumer Behavior, and being an Applied Anthropologist, I find that there is a simple paradigm you can use when considering your product and your customer.[1] Business is a transactional human activity that takes place in a “transactional environment.” The act of consumption is transactional taking place on the individual and the social level. To understand how and why business takes place the way it does, one must understand how the transactional system works. That is, one must look at the very nature and structure of the consumption patterns and their motivational roots.

The transactional environment may be divided into basic observational or transactions units.  A transaction is a dyad, a simple two-party behavioral structure of a “buyer” and a “seller.” It represents an exchange between the two parties that is “mutually” satisfactory in the moment. The key word here is ”satisfactory” which signifies that the exchange has taken place. “Mutually” implies that each party agrees that “what was exchanged” met their individual standard of “fairness”. “In the moment” implies that the transaction is bound by the time and place of the transaction, i.e. is an event resulting in behavior under specific circumstances. Every event is unique, yet every event pattern falls into one of three motivational patterns. These patterns together represent the Consumption Pattern.

A transaction event or situation arises when two or more parties[2], each decides that it wishes to exchange a quantity of A for a quantity of B. The transaction begins with individual party’s decision and ends when a “deal” or agreed decision is made to make the exchange and the exchange takes place.

The Consumption pattern consist of a buyer or consumer and a seller or producer of a physical good or behavioral service. The pattern is structural, that is an outside observer can witness the exchange and identify and label the part or role each party plays in the transactional event.

In a smaller or more traditional economy (transactional space), exchange may take place in a context of “barter” where the status/roles of the parties are complementary. In a barter economy, the individuals in the transaction occupy both the buyer and seller statuses and must play both seller and buyer roles in order to “make a deal”. Thus, every Buyer is also a Seller and every Seller is a Buyer. The exchange takes place when there is a mutual agreement on the relative value of the good/service A = the value of good/service B. Value varies based on the availability of A and B in the transactional space and is highly situational.

In modern and global society, we identify the “buyer” as the party that receives the product (a good and/service) from the producer in exchange for money (“an object of generalized value”) received by the “seller.”[3] The value of the exchange is defined as the “price” the buyer pays to the seller or the value demanded by the seller. Money is an agreed upon unit of measure that transforms the good or service provided by seller into a generalized “value” that the buyer can access at a time and place of his/her choosing.

Every “deal” has a purpose. That purpose is to support Life, that is the life of the parties to the deal, in some way.

Life has two basic requirements. First, a living body must survive its environment. That is, it must have the capacity to perform the basic function of life – self regulate itself within an external environment. To do this the individual must survive as a separate entity in its environment. Survival in itself does not constitute “life”. Life requires that the entity also contributes to the dynamic stability of its environment. When the entity can no longer contribute to its environment it dies, or ceases to exist.

What distinguishes life from non-life, is that its survival is dependent upon and requires that it contributes to environmental stability. Otherwise, if the entity fails to contribute to stability, the system must change or adapt in order to survive. Thus, the entity must be capable of replicating itself. 

Every transaction constitutes as “deal” and , as such, it has both an individual and a social psychological dimension. These dimensions begin with the customer as an animal with basic physical needs that can be satisfied by the physical environment. The individual acts as the “buyer” and Nature acts as the “seller”. These are the inherited biological requirements for survival  as a human animal with individualized needs.

As a human, however, we have a specific set of needs that can be satisfied by Nature by a certain set of products. There are other products in Nature that threaten the individual's survival. Humans must learn the differences. This means the individual must Choose between the products that Nature offers. 

Choice creates “wants” which are preferences among the products offered by Nature. Finally, as the individual grows and ages, her/his needs and wants change to accommodate his/her position or a status in its environment. These changes are part of the lifecycle.

An individual’s lifecycle is defined in terms of one’s biological age, physical characteristics and needs, and the social meanings and values attached those characteristics. These meanings and values create social status. The social meanings and values influence one’s choices in their social environment and their status in that environment. 

One's choices influence how others interpret one’s status. Status, in group terms, is based on the group’s shared values. To conform to the group, individuals must select among its available choices, those that conform to the group. Thus, they distinguish between those choices that satisfy a physical need and those that satisfy a social status need.

Choices that satisfy a social need become desirable choices because they identify one’s social standing in the wider socio-cultural system. We can define these choices as desires. As we proceed through the lifecycle and become identified with social groups, we find that the power relationship between BUYER and SELLER changes.

We find that the paradigm, NEEDS, WANTS, and DESIRES, repeats itself on each level[4]. But what and how it will satisfy the individual’s need in the buyer’s and seller’s roles changes with their status.

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[1] See my earlier essay, “Consumption Patterns: Needs, Wants, and Desires” https://www.researchgate.net/publication/259495871_Consumption_Patterns_-_Needs_Wants_and_Desires

[2] “two or more” implies that there may a “supply chain’ through which the “end buyer” and “primary producers or seller” are connect through a “chain” of deals, e.g, buyer of bike + retail store + wholesaler+ shipper+ bike manufacturer. 

[3] “Money or generalized value” means that the object received by the seller fulfills the three basic functions of money – a medium of exchange, a store of value, and a unit of account.

[4] The study of Consumption patterns depends on the researcher’s focus e.g. the individual, family, community, social class, etc. They also express the power relation between buyer and seller.  

The Superorganic World of Transfer Pricing

Business anthropology is an emerging sub-discipline in anthropology. As an academic discipline, business anthropologists study business practices and organizations from a cultural and cross cultural perspective. As an applied discipline, the Business anthropologist works with business owners and corporations to solve cultural and cross cultural problems that arise in the course of international business and/or working with a socially and culturally diverse workforce, market place and business environment.

One problem unique to the international business corporation is the impact of "transfer pricing" on the corporation's organizational structure and operational processes. This is a concept that the business anthropologist should become familiar with when working with international\global corporation.

Transfer Pricing is an accounting tool used in international business to account for sales between a parent company and its subsidiaries located in a different tax jurisdiction. Transfer pricing deals with the problem companies face when they have operations in several different taxing jurisdictions and engage in intra-company sales of goods and services. It can also be a tool that can be used to maximize corporate income taxes savings.

A recent NPR interview on Fresh Air with reporter Jesse Drucker, from Bloomberg News, describes how this tool is being used by such global corporations as Google,Forest Laboratories and other companies to save billions of dollars of taxes.

What every applied anthropologist should learn about money!

In a recent question posed in the Systems Thinking World interest group on LinkedIn, I was struck by what I consider to be an area missing in the standard training of an applied anthropologist. This training gap applies specifically to a problem such quoted below.

On the surface this might be taken to a simple cross-cultural problem in a business context.The question is:

What should you do if you meet this situation when you are in a foreign-owned enterprise: A foreign home company set up a new brand company in China five years ago! However, till now, the Chinese brand company size was still same as before. Compared with the other similar company, this Chinese brand company never grew up. The profit that they earned has to submmit to the foreign home company by a kind of form call technical support cost.

My first questions to the reader are:
How would you attempt to address this question?
Is this a matter of cross cultural mis-communication?
Is it an example of foreign exploitation or even racism?
and, What theory or tools would you be using to assess the problem?

As I first read it. I thought about these questions and how I might have attempted to address one or the other. Maybe both. But then I paused and remembered my MBA training, especially accounting. In the world of business, accounting is the lingua franc. If you go to the site you can read my answer. Here is where the answer lay - it is a linguistic problem.

In this particular case, we have a common situation found in international business where a profit can be quickly transformed into an expense and even a loss for tax purposes. The situation is called, "transfer pricing" and is a little magical trick of removing a profit on the balance sheet and transferring it to a liability on the Income statement.

What I want to stress here is that every applied anthropologist should take a basic course in financial accounting, not to become an accountant, but to learn the language of money. Especially, the grammar of money and when to bring in an interpreter.

I am not attempting to justify exploitation such as described in the original question. What I am criticizing is that so much of the ideological criticism by anthropologists directed toward corporations and international businesses, attacking capitalism vs labor, etc. is based on the critic's linguistic ignorance of the language spoken by those they criticize. Traditional ethnography would require that the ethnographer have a basic understanding of the native language before attempting to interpret the alien culture.

What I am proposing is that any applied anthropologist who expects to influence a client who works in the real world should be familiar enough with the language of money to know when it is time to call in an accountant.