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Hans Ruediger Kaufmann PhD

Associate Professor Intercollege Cyprus

Zorica Zagorac

Hochschule Liechtenstein


The influence of identity on international consumer behavior in transitional settings:
a case study of the Bosnian- Herzegovinian banking market


In a time, in which borders between countries are becoming increasingly open for foreign direct and portfolio investment, enterprises are confronted with new national as well corporate cultures in the host country.

So far identity, a concept from the discipline of social psychology, did not receive much academic attention to explain the success or failure of market entry strategies of international, multinational or global companies into transition countries. Research on the influence of identity on entrepreneurial behaviour in transitional settings (i.e. Kaufmann, 1994, 1995, 1996, 1997, 1998, 2000), the increasing higher level of coherence between brand and clients’ identity and its implications (German, Morgan and Hunt, 2003; Pracht, 2006) point to the high relevance of the identity concept in the field of international consumer behaviour.

The Identity concept. In 1934, Mead (quoted by Cudic, 2001) introduced the concept of identity into social psychology and his book ‘Spirit, Identity and Society’ was very influential for further research to come. According to Mead, “identity is a dynamic phenomenon, which can develop only in social interaction, however, is simultaneously the precondition for its functioning” (Cudic, 2001, p. 35, translated by the authors). Based on this definition the concept experienced differentiations as to social, personal or self-identity, ethnic, national, cultural, political as well as group identity. In 1966, group identity has been described by Erikson (in Cudic, 2001) as the interaction between the self-identity and the belongingness to the group. There is a reciprocal action between the continuous strive for being him-or herself and a continuous participation in specific group features.

Coining the term of the social identity was Goffman in 1969, who understood social identity as a set of social categories, groups and organizations, to those an individual can belong or can be seen as such (Cudic, 2001). Tajfel, in his theory of social identity (SIT), in 1978, and later Turner, in 1986, further developed the concept of social identity (Skrobanek, 2005). According to these authors, an individual’s behaviour cannot be described as an isolated object, but in that processes within a relationship structure are explained from the viewpoint of the individual. Concordantly, social identity “refers to that part of the self-concept being deducted from the knowledge about his/her membership in social groups and from the value of its emotional importance attributed to this membership” (Wagner, 2006). The other part of the self-concept is the personal identity. The core message of the SIT is that each individual strives for a positive social identity. It is a precondition, that the individual identifies with the in-group and that a group is salient in a specific situation. In order to achieve, respectively, maintain a positive social identity members of the in-group are comparing each other with members of out-groups and, consecutively, evaluate the outcome of this comparison. Is the result conducive for the in-group, the positive social identity is maintained. In the opposite case, the member would try to change the features of the in-group in order to achieve a positive social identity. Otherwise, the member would try to leave the group. An individual can be a member of several groups. Categorisations and stereotypes in relation to in- and outgroups play a major role in this context. SIT has been criticized by social psychologists. Skrobanek (2006, p. 5) holds that “instrumental components of a group membership in relation to the strategic self-interest of group members are not considered by SIT”. Also Schiffman and Wicklund (1988, p. 159) question the SIT in several respects: “this conceptualisation is criticized in the following way: 1. Inter- group behaviour is reduced to conflicts between groups; 2. The conceptualisation of social identity is sociological; 3. the theory consists of a co-existence of sociological and psychological variables; 4. The central finding that the discrimination of the out-group leads to the increase of self-assessment can be alternatively explained.” Other social psychologists, on the other hand, criticize the critique of the SIT: “Schiffman and Wicklund (1988) have presented a critique of the social identity theory of Taifel and Turner. It is shown that this critique is based on unjustified assumptions about the theory and its level of confirmation and that the suggested reduction is not appropriate for the subject” (Zick, Wiesmann, Wagner, 1989, p. 172).

Ethnic, cultural and national identity. The borders between social, cultural, ethnic and national identity are fluent and lack a unanimous definition. Based on the definitions of social identity according to Goffmann or Taifel and Turner, ethnic, cultural and national identity would be subcategories of social identity as those reflect a sense of belongingness to a certain group. In this respect, ethnic is synonymous with belonging to a people or testifying a common culture or community (Zwahr, 2003). “Heckmann (1992) describes ethnicity as a general sociological concept, the fact being significant in meaning for individual and collective action that a relatively large group of people are related by the belief in a common origin, by commonalities of culture, history, and current experiences and has awareness of identity and solidarity” (Heckmann, 1992, quoted by Cudic, 2001, p. 40).

The differentiation between ethnic and national identity is difficult due to its reciprocal relationship. Contrarily to ethnicity, the concept of nation is seen to have more complex connotations. Whereas nation is always associated with a political-state and territorial context, ethnicity lacks this political component (Zwahr, 2003, p. 4076). Cultural identity comprises a, by far, larger spectrum than national and ethnic identity. Cultural attributes can not just be formed ethnically or nationally but also in a multi- ethnical and multinational way, like religion, language, and traditions etc. which belong to a cultural identity. The ethnical identity results from identification with a group of the same origin.

The influence of salient identity on consumer behaviour. In 1980, Burke (quoted in Reed, 2000) referred to the individual’s self-concept to constitute of interrelated multiple role identities. This is supported by Stryker holding that the individual possesses several identities, which are outstanding in hierarchical order (salient): „Identity theory incorporates a concept of the person as having self comprised of multiple identities organized in a salience hierarchy” (Stryker, 1981, p. 15). Stryker and Serpe established in 1966 the theory of the identity salience suggesting that all relationships of an individual are based on his/her identities. Hence, besides being dependent on the respective situation the degree of salience of an identity role is influenced by the engagement of an individual for a specific relationship. A distinction to Tajfel’s theory becomes apparent who explains identity constituted group belongingness to become salient by the perception of social inequalities which are interpreted as illegitimate and changeable (Nunner-Winkler, 1998).

In 1995, as one of the first scientists Laverie considered the effects of group activities such as tennis and aerobics on purchasing behaviour and the identity salience interrelating social identity with purchasing behaviour. „Over time, people form and maintain consumption patterns associated with particular activities (Laverie, 1995, p.2). According to Laverie, the affiliation to the group affects the purchasing behaviour not directly, but indirectly by the personal estimations of group members to the product. Latter, again, affects the emotions of the individual to the product. Consequently, the feelings to the product, which one consumes in the context of the group activity lead to the salient identity: „the personal and social appraisals lead to positive feelings which make participation into the activity more important to the self. As the activity becomes more important to the individual, he or she participates in the activity more often” (Laverie, 1995, p. III). Also Laverie (1995, p.2) points out that the realization that products are not only consumed due to bare needs and personal experiences, was already the subject of earlier theses. „ The idea that other people impact the products that we use, and that they evaluate us when we use products, has been suggested for some time (McCracken 1987). In spite of intuitive appeal and everyday instances of this notion, consumer researches have virtually ignored the social consequences of product use (Ward 1974). This void exists because consumers are often viewed as individuals who use products in isolation”. Reed (2002) suggests a repertoire of different external social categories is at the disposal of the individual, which represent a basis for forming the own social identity of the individual. Social roles the individual identifies with can be permanently, like, for example, the role as a mother or a friend, or temporarily, like, for example, the role as a citizen or sportsman. „The term ‚social identity’ refers to the actuated perspective or frame of reference that a consumer processes as part of the repertoire of who they are or want to appear to be” (Reed, 2000, p.40). From this vantage point, the consumer makes judgements and decisions. Beyond that, the consumer makes judgements and decisions which form his/her attitude not in favour of any arbitrary social category but in favour of his/her salient identity. „If a social identity is salient, then there is an increased likelihood that the evaluated content linked to that social identity will impact the formation of a consumer attitude” (Reed, 2000, p.17). Which identity is salient, depends on the situation and the environment of the consumer. As an example, the identity salience of an afro-American consumer in a store is provided. If it concerns a store, in which, except the Afro-Americans only Caucasian consumers buy, the ethnical identity might be salient. On the other hand, the more the social identity becomes self-important or salient the more this will influence consumer attitude. As a precondition, there has to be a relevant functional relationship between the respective social identity and the product/service to be evaluated. Further researching this subject, Underwood, Bond and Bear (2001) related social identity to the process of developing brand equity, particularly of high involvement sports related service brands. Fans identify themselves often to a very large extent with certain sportsmen, particularly with crews reflected by the numerously existing sports associations. As a result of this identification, a victory or a defeat of this crew is often equated with personal victory or defeat.

More recently, Arnett, German and Hunt (2003) refer in the context of Relationship Marketing in the Non profit business to the identity salience theory. According to the authors, the salient identity plays a substantial role in Relationship Marketing, if two criteria are fulfilled: „We argue that in contexts in which one partner is an individual, for example, business-to-consumer marketing, identity salience may be an important construct that mediates relationship-inducing factors, such as reciprocity and satisfaction and relationship marketing success“ (Arnett, German and Hunt, 2003, p.90). Furthermore, beyond a mere economic benefit, the consumer has to gain a social benefit through the business relation. “We argue that identity salience may play a crucial role in contexts in which one of the partners to the exchange receives substantial social benefits. For example, in the clothing industry many consumers use strong brand names as social symbols, which can affect the formation and maintenance of identities (Laverie, Kleine, and Kleine 2002; Solomon 1983)” (Arnett, German and Hunt, 2003, p. 90). Based on these hypotheses, Arnett, German and Hunt developed the ‘Identity Salience Model of Relationship Marketing Success’ for the Non-profit sector. In line with Arnett et al. implying that social identity can not only be addressed but, even more, externally stimulated Reed (2004, p.1) summarizes : „… identity salience – a temporary state during which the consumer’s identity is activated …– can bring to mind attitudes and behaviors consistent with the social identity. This is important because there are a number of potentially controllable environmental and situational stimuli that may evoke or instantiate a particular social identity, thereby making it an important factor in a resulting judgement (see Reed and Forehand, 2003)”.

Consumer identity in Bosnia-Herzegovina. Compared to the 1980s the question of the national and ethnical identity currently gains momentum in the Southeast-European area. Personal networks have increasingly ethno-national character (Brunnbauer, 2002). Ethnical identity is defined, on the one hand, by religion, on the other hand, by an original ethnical one. After the Yugoslavian civil war and after the transition to a new, democratic and free market oriented governmental and state system, the structure and character of all economic units changed. Market entrance activities international companies into the Bosnian and Hercegovinian market are increasing (Eger, Fritz and Wagener, 2006). This situation influenced the attitude and behaviour of humans, also regarding consumption patterns.

The Central Bank of Bosnia Herzegovina responsible for the distribution of the new currency ‘Konvertibilna Marka’, exists since 1997. The control function, which, in general, corresponds with international standard, is exerted by the two entities, the Republic of Serbia and the Federation of Bosnia Herzegovina. The private banks in both partial republics are mainly new establishments or developed from the Yugoslavian state banks. After a wave of new bank establishments a number of relatively small private financial institutions exist albeit with a limited service portfolio and a weak financial basis. Although no private banks existed in the previous Yugoslavia the banking system was quite autonomous from governmental influence (Neuhauss, 2001). In the context of implementing a high performance financial system in Central and Eastern Europe (CEE) transformation processes are an important challenge and, therefore, from a long term perspective, foreign investors play a crucial role (Tkaczynski, 2001).

Research Methodology. The research objective was to investigate the effect of the identity of the customers of Bosnian- Herzegovinian banks on their customer behaviour and the implications on Marketing policies of international banks. Due to the EU-South-East Expansion and the assumed very important role of identity this region was selected. In this exploratory stage of this qualitative case study approach it was perceived that marketing managers of the most influential international banks might be better able to comment on more theoretical, holistic and strategic aspects than local consumers. A preliminary documentary analysis via an internet research provided background information about the banks. The qualitative case study approach is recommendable if relatively few cases shall be researched in-depth (Lamnek, 2005). As a research technique, problem-centred, semi-structured in-depth interviews were chosen. The fact that the interviews were conducted in the mother tongue (Serbian in the Republic of Serbia and Bosnian in the Federation of Bosnia Herzegovina) of the respective marketing managers relates to an ethnographic research approach and increases the reliability and validity of the findings. All the interviews were recorded and later transcribed. Following an interpretation of the statements of the interviewees a comparing systematization took place “with the objective to identify collective action patterns” (Witzel, 1985, quoted by Lamnek, 2005, p. 368). In total, 7 marketing managers of 3 Austrian, one Austrian-Italian and one German bank in Sarajevo and Banja Luka have been interviewed.

Based on the literature review the following hypotheses were generated.

Although, the national and ethnical identity of the citizens of Bosnia Herzegovina are currently pre-dominant due to ethnic conflicts, this should not be seen as a static phenomenon. It is assumed that this situation analogously refers to the customers.

H 1: The customer identity in Bosnia-Herzegovina is in transition.
In international business, particularly, cultural values have a substantial bearing on consumer behaviour. As the salient identity affects the purchasing decision of the consumer it is, therefore, assumed that also in Bosnia-Herzegovina the identity of the customers affects their customer beviour (see: Arnett/German/Hunt,2003; Baer, Bond, Underwood, 2001; Bouchet, 1995; Reed, 2000; Stryker, 1981).

H 2: The identity of bank customers in Bosnia-Herzegovina affects their customer behaviour.

In Bosnia-Herzegovina particularly international banks entered the market arena, mainly by acquiring domestic banks or by establishing subsidiaries. Due to missing conceptional marketing models related to the identity theory, it is not referred to a specific concept but, in a more general way, it is assumed that the international banks adapt their marketing concept to the local customer identity in Bosnia-Herzegovina, whether in a structured or in an intuitive way.

H 3: International banks adapt their marketing strategies to the customer identity in Bosnia-Herzegovina.

Although social changes have strongly affected the identity, no clear road map exist as to in which direction this development in the next years will drive. These transformations are reflected in customer behaviour. Due to this fact it is assumed that international banks on the Bosnian-Herzegovinian market can contribute to forming a new customer identity in Bosnia-Herzegovina (see Brunnbauer, 2002; and Cudic, 2000).

H 4: International banks form the customer identity in Bosnia-Herzegovina.
Following Arnett et al (2003) the question as to corporate responsibility arises when using the identity concept. The customer should be provided with a social benefit in addition to an economic exchange. If international banks, have the possibility of contributing to form or addressing the local customer identity, i.e. by marketing strategies, then this thought should be taken into account.

H 5: International banks take on responsibility for the identity development in Bosnia-Herzegovina.

Results of the research. Hypothesis 1and Hypothesis 2 are supported in that the different interview statements repeatedly refer to a change of the existing social structures and, consequently, to a change of customer behaviour. The fact that the country is in a transitional phase, entails the comprehensible consequence that human and customer attitudes change, and develop in new directions. The following statements of the interviewees confirm the hypothesis. Interviewee 1 states in this context: „… what is interesting in this region, in these three countries of former Yugoslavia, Croatia, Serbia and Montenegro and Bosnia-Herzegovina, that this region had already a common, own identity, which was already developed in the last decades”. Interviewee 2 adds: „Drastic changes, which we have experienced in Bosnia, logically affect the identity of the individuals and the total population”. Implications for the banking industry are highlighted by interviewee 3: „after the war in Bosnia-Herzegovina a large distrust against all financial service institutions has dominated, because a majority of citizens, if not even all, lost their savings in the domestic banks, which represented the market at that time.“ The changing customer’s social identity is reflected in a conscious behaviour to the banks, which shows the influence on customer behaviour. „The customers became more responsible. The customers are aware that the banks are not state run anymore and that their credits and all other debts must be acquitted” (Interviewee 2). The social and collective identity develops according to the opinion of some interviewees towards a Western European identity, which is reflected in a changed behaviour, thus, also customer behaviour. „This region gets gradually a more a Western European character. Humans develop their knowledge, humans travel to other countries, are customers of foreign banks…“(Interviewee 1). This statement in a group interview is, however, complemented by stressing that customers stick to their national and ethnical identity as interviewee 2 points out: “our advantage is that we have two headquarters, both in the Republic of Serbia and in the Federation of Bosnia-Herzegovina, as customers identify themselves with the region. This is confirmed by Interviewee 4: „the local identity is pronounced. (…) Due to the economic situation, due to the unemployment and due to a generally bad situation, customers increasingly went to foreign banks. These banks could provide the customers with credits, of which we were not able to. I am sure that the majority of the banking customers would decide in favour of domestic banks, if there would not be this difficult situation. This is natural and normal”. The interview results from all banks having been interviewed supported hypothesis 3. In particular, marketing-mix activities are delegated to local subsidiaries, which allow for a better adaptation to the local customer identity. „We can act independently and locally, and adapt to our customers “, said Interviewee 5 supported by Interviewee 2 holding: “….we have a very respectful approach to our customers, we agree with the identity of our customers, we understand the differences in this region, hence, all our materials e.g. are written in all three languages, if we speak of this kind of identity, the national identity“.

Also in advertisement, the adaptation to customer identity is reflected as mentioned by Interviewee 3: „they know that we know the market and the mentality of our customer better. Something which is e.g. successful in Hungary or Albania, would perhaps be hurting here. The local community is respected, as well as the mentality of here living citizens”. One bank prioritized sponsoring and event marketing as marketing mix elemments when appealing to the customer identity. „We are very engaged for social causes, e.g. for the community in which we live, by means of sponsoring and donations…“, said Interviewee 1.

Hypothesis 4 is supported to that extent, that most respondents believe that they are able to affect and form the customer identity by certain conditions and activities. „It concerns the individual, independently of national or religious affiliation. It concerns the citizen, who is self-responsible, but also for his bank and for the state. This is the task of the bank, in order to compensate for the national identity, which is overestimated nowadays in this region” (Interviewee 2). This is supported by Interviewee 5: „the bank tries to positively affect the identity. This also affects the long-term connection with the bank… we affect this development surely indirectly. I would say that we develop the customer identity in this way, by further education”.

Hypothesis 5, however, is regarded to be only partially supported by the interview results. The answers were vague and generally formulated implying that the aspect of taking on responsibility for the identity development of the customer is not considered on a conceptual basis. Partially, the interviewees could not even answer this question. On the other hand, the will and, especially, some actions of the banks to develop the region, i.e. by donating for marginalized groups or projects, as hospitals, medical equipment and cultural events, show a responsible attitude. „Our philosophy pursues the direction that we give that, what we also take” (Interviewee 1). The following statements underline this view. „We do not only want to entice the customer, but also to keep him on a long-term basis. We would like to be a partner, which accompanies him/her in life, thus to be a part of his/her identity” (Interviewee 6). „We donate, make various sponsorships, most important is that our customers are satisfied” (Interviewee 5.

In can be summarised on the basis of this research with international banks in Bosnia-Herzegovina that banks which enter an international market deal with the customer identity, but not in a structured and conceptual way. The local banks are usually aware of this issue due to personal knowledge and experience and use this for implementing marketing activities. These activities, however, do not seem to be based on marketing strategies related to a holistic identity concept but are rather expressions of individual fragmented marketing activities. Based on the literature review and the research findings the following initial conceptualisation is suggested.

Consumer Behaviour/Purchasing Decision

Corporation/

Corporate

Corporate Identity

Consumer

Identities
Economical Exchange

Social Exchange

Commitment Social Benefits

Product/Service

-Marketing Mix/Branding

Consumer Behaviour/Purchasing Decision. A goal of the research work was to show that the socio-psychological theory of identity, which affects the consumer behaviour, could be applied as an interdisciplinary complement to marketing concepts, especially in transition countries. However, a holistic model for transitional settings inter-relating the variables of corporate identity, customer behaviour, identity and other relevant marketing concepts do not seem to exist yet. Such a holistic and interdisciplinary view might herald a new era in Marketing adressing, in addition to the economical exchange, the responsibility of companies to care for social benefits of customers as well. In this respect, social marketing, corporate social responsibility or cause related marketing might gain momentum in the near future. Further, more explanatory, research is suggested to test the initial conceptualisation with both, bank customers and strategic decision makers in banks, politics and education. Since, international agreements and institutions like the WTO and EU support global market liberalization and free trade the implications of these policies for national or regional identity are suggested to be considered to a larger extent in the future. Based on the European visions of ‘unity in diversity’ or ‘richness by diversity’ it might be interesting to discuss if macro policies should contribute to maintain local identities or, even, support international companies in their efforts to address or contributions to develop identities.