CONSUMPTION PATTERNS --- NEEDS, WANTS, DESIRES – PART 3

As one proceeds up the SUPPLY CHAIN, and from the human animal thru the human social animal and sociocultural system, we find that the paradigm, NEEDS, WANTS, and DESIRES, repeats itself on each level[1]. This paradigm reflects changes in the power relationship between Buyers and Sellers in the transaction space. The power relationship can be divided into two parts – survival and replication.

Survival and replication takes place in all living systems. 

Humans have evolved two basic exchange systems that take place between individuals and/or social systems. These are a barter system and a monetary system, Exchange systems have a cultural significance that derives from the meaning and value of the products exchanged to the Buyer (recipient) of the product and the Seller (offeror) of the product. These exchange systems are barter and monetary, discussed below. In either system, the buyer seeks to acquire a good or service that meets a personal or social NEED. The seller offers to exchange a good or service in order to acquire a product that fills his/her NEED.

A barter system is a social system of exchange that creates the status/role set of a “buyer and seller” that both parties to the exchange occupy In a barter situation each party acts as both a Buyer/Seller. The value of the items exchanged is relative. The value is determined by the ratio of supply and demand at the given moment in the given place where the exchange takes place. Each party engages in a search process to find an interested BUYER for their good/service. And they act as a SELLER of the product they seek to exchange.
   

A modern exchange system involves a unique commodity, Money. Money serves as an intermediary in an exchange system and separates the roles in the system, by separating the Status of Buyer from Seller. Money is the physical and ideational manifestation of a cultural expression of value for a good and/or service. The value of a commodity is determined by the buyer and seller acting as members of a sociocultural exchange system.

Value is expressed as a ratio between the supply of the product and the consumer demand for it.  Money, in this instance, is just another commodity. In and of itself, Money has no intrinsic value. It only derives its value based on what individuals and cultures give to it. It is symbol and may be represented in physical form or an entry in a journal.

Money, as a cultural commodity, becomes a store of value for expressing this ratio. When a willing Buyer offers and the willing Seller accept a quantity of money in place of a good or service, money becomes the medium of exchange that captures this relationship. Money, by serving as an intermediary commodity, gives cultural meaning to the value (ratio) of the exchange by serving as a “neutral” unit of account shared by and equating the Buyer’s willingness to pay and the Seller’s willingness to accept a transaction.

The monetary situation separates the Buyer and Seller roles. The Buyer has specific needs, wants, and desires while the Seller has a specific product, (a good or service) to offer that may satisfy a particular need. The Buyer is thus engaged in a search for the “best deal” or an exchange rate that gives him/her the best or greatest future return or benefit (utility) for his/her investment in a Seller’s offer.

The Seller is focused on the “best deal” from selling the product of his/her investment in time and effort to produce and sell the product. This “best deal” is defined in terms of finding the Buyer or situation where she can find the greatest Need (demand) for the product and gain the "best price."

Finding and creating the “best deal” is an uncertain event. The difference between the best deal and a good deal is risk each actors assume by accepting a deal. Here is where a monetary system captures the uncertainty (or risk) of a “best deal”. Money, in exchange for a current good or service, enables the Seller the opportunity to concentrate on production and sell it when it is ready.

Money allows the Buyer to acquire the product in the amount and at the rate she/he wishes to consume it, rather than depending a single producer or single opportunity. The differences in the risk of holding or using the product is transferred by the monetary  system. The risk value of holding (storing) or using (consuming) a good can be measured in terms of the discount rate, or interest paid for holding the money between transactions.

The Agricultural example

The good example here is agricultural production. Here the farmer requires seed at the beginning of the growing season to begin production of a crop. In a barter system, he would have to reserve some of last year’s crop production for seed to use in the next season. This exposes him to the risk that not having enough for food or trade between harvests. In a monetary system, the farmer can borrow Money from a “bank”today, at a known interest rate or risk premium, to use to buy the seed needed today. Assuming that the farmer has a good season both he and the bank prosper when the farmer pays the loan owed plus interest, from the proceeds from the sale of the future harvest.

If it is a bad year, some of the risk has been transferred to the Bank and might be postponed for another season via another loan and interest rate. The Bank becomes an intermediary between the planting and the harvest, i.e. the capital investment  and the investment's return. The Bank shares the risk and would lose its investment should it  chose to foreclose on the loan.

By transferring risk, the farmer is taking out “insurance” today against the potential failure in the future. Here failure is a metaphor for the risk to “survival” and the “insurance” a metaphor of the potential for “replication.” These are cultural tools that humans have developed to spread risk and to bind social groups through an exchange system.

The questions facing every Buyer and Seller are: “How do I manage my consumption to maximize my chances of survival?” and “What steps do I take to insurer that I can replicate and/or improve my survival?” These are the two different questions we will address next.

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[1] See my earlier essay Consumption Patterns: Needs, Wants, and Desires

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.