Customer Behaviour and Customer Decision Making Processes - Research Proposal Example

Full-Time Masters in Management Programme 2006-2007 Research Methods Proposal Form Proposed Topic Area Behaviour andCustomer Decision Making Processes Proposed Working Title The influence of customer behaviour and decision making processes on profitability in the personal computer market in the United Kingdom: A case study on Dell Proposed Aims of the Research The aim of this research is to determine the factors that influence the customer decision making process in the home computer industry in the UK. The secondary aim of this research is to examine how these decision making processes affect consumer behaviour for this industry in the UK. Research Context Personal computers have become the norm in homes in the UK, so much so that prices have been driven down in the industry. The personal computer changed from being one associated with high profit margins, to one where computers are purchased on the basis of cost (Blackburn et al 1998, Brown 1998). This has resulted in an influx of small and medium sized computer businesses entering the market which has further reduced the profit margins (Blackburn et al 1998, Brown 1998). This has resulted in a decline in growth for the big computer companies as personal computers become more of a commodity, which has meant that customers can easily replace the unit, after a short period of time. These factors contribute to the lack of technological differentiation between suppliers leading to a market where cost is a deciding factor in buying decisions and a market that is reaching saturation with little opportunity for growth (Blackburn et al 1998, Brown 1998). Customer decision making in the personal computer industry has recently become an issue and this can be demonstrated by the low prices for and the high ownership of laptops in the UK. One example of the importance of customer decision making can be demonstrated by the losses experienced by Dell. Dell used to be regarded as producing high quality laptops and computers (BBC 2007, Schofield 2007), and consumers certainly approved of the price tag which came with it. In 2003 consumers could purchase a Dell laptop for approximately £2000, but in 2007, the equivalent laptop is being sold for approximately £400 (BBC 2007, Schofield 2007). In 2006 Dell sold 38 million personal computers, which was equal to that of HP, however, by the beginning of 2007, HP was selling 24% more personal computers whilst Dell’s sales fell by more than 8% (BBC 2007, Schofield 2007). Part of the reason for Dell’s apparent demise may lie in its focus on selling mainly to businesses as opposed to consumers, and its focus on being profitable as opposed to maintaining a sizeable market share (BBC 2007, Schofield 2007). This is different to its main competitors who focus on selling to consumers through retailers such as PC World, Comet and Currys; however the main issue to be addressed by Dell is finding out what factors are influencing consumers to purchase other rival computers, despite its personalised and unique approach to manufacturing personal computers. Customers can only purchase Dell personal computers via their website, where they can customise the hardware specifications and not have a computer that is standardised (Dell 2007). There is no doubt that the reduction in the price of laptops and personal computers is a direct result of major changes in customer behaviour, and by understanding the current market characteristics, Dell will be able to steer its strategy so that it maintains its focus on profitability. Customers in the personal computer industry tend to base their decision to purchase on factors such as product attributes, salient benefits, stock availability, and delivery reliability (Christopher 1987). For example, Dell’s rivals would probably sell more units than Dell through retailers, especially if it can be proved that customers value stock availability over delivery availability. For instance one can walk into PC World and purchase a personal computer with the same specifications as Dell, but the decision to purchase would have been made on stock availability and not the product attributes or the brand. To purchase a Dell personal computer, one has to order online and wait for the unit to be delivered. Some customers may value this factor; however, current figures demonstrate otherwise (Schofield 2007). Therefore by gaining an insight into customer behaviour and the decision making process, Dell will be in possession of knowledge on the factors that are regarded as important by customers in this industry. This can be achieved by researching areas such as advertising, price, customer service, and product quality, to name a few. Research into this area is more likely to focus on obtaining customer perceptions of Dell’s personal computers in comparison to its rivals as this will highlight any gaps and shortcomings in the Dell supply chain and strategy. Customer perceptions are also useful as they these contribute to the decision making process, for example, if a customer perceives that Dell is representative of superior quality, this perception will be used to judge competitor personal computers on that same factor. Data collection for this research would therefore have to be targeted towards the retailers of personal computers as they clearly represent a significant distribution channel, and it is likely that customers visiting these outlets will probably have considered purchasing a personal computer online, which is Dell’s distribution source. Outline Literature Review In order to make this research and dissertation valid, a literature review will be conducted which will focus on selected themes and theories governing customer decision making and customer behaviour. The first part of the literature review will provide an overview of customer behaviour. Customer behaviour is important as it forms part of the value chain for an organisation (Vigneron and Johnson 1999, Lim and O’Cass 2001). Customers place a value on the product and this limits what everyone else can get from this value chain (Vigneron and Johnson 1999, Lim and O’Cass 2001). However, customer behaviour is also reliant on customer lifestyles and culture (Vigneron and Johnson 1999, Lim and O’Cass 2001). The second part of the literature review will provide an overview of customer decision making. Customers tend to purchase products to satisfy a problem (Vigneron and Johnson 1999, Lim and O’Cass 2001) and in this case, customers purchase personal computers for a variety of reasons, but some include space, and others simply to keep up with the times. One model that will be discussed is Engel’s four step model as it allows for information to be searched in a variety of ways, and the outcomes will depend on the degree to which performance meets expectations (Engel et al 1968, Knox and Walker 1996), which is line with the research methods proposed for this research. This part will also look at the types of decision making of which there are two main ones – involvement and habit formation (Engel et al 1968). Involvement refers to the subjective importance of the purchase and is a function of financial and functional importance, perceived risk, emotional value and sign value (Engel et al 1968, Howard and Sheth 1969, Knox and Walker 1996). This means that the customer will make a decision on how affordable the computer is, and whether the price reflects the functionality and qualities they are looking for. For example, customers that purchase personal computers manufactured by Apple may make a decision based on the capabilities of the computer in terms of graphics and video performance, as these computers are supposed to excel in this area. Whereas habit formation decisions tend to rely on brand loyalty (Engel et al 1968, Howard and Sheth 1969, Knox and Walker 1996). So for instance, some customers may purchase an Acer personal computer as they prefer the brand to any others regardless of any shortcomings. Despite this, four main buying decisions have emerged which include complex decisions, brand loyalty, limited decisions and inertia (Engel et al 1968, Howard and Sheth 1969, Knox and Walker 1996). There are two main theories of customer behaviour – one from Engel et al (1968) and Howard and Sheth (1969). Both models are similar in terms of high involvement decision making but differ for low involvement as Engel’s model is distinctive and assumes trial prior to attitude formation. Engel’s model developed the notion that involvement affects the style of decision processing when consumers select brands. However, Ehrenberg (1988) and East (1990) noted that these two main theories do not lend themselves to being easily interpreted. For instance, there are difficulties in verifying attitude-behaviour models, and there are problems regarding consistency and the validity of results. These problems have led to the use of other theories and models for decision making and measurements of involvement, which include using the level of information search and attention to advertising (Mittal and Lee 1989, Knox and Walker 1996), and attitude behaviour consistency by Beatty and Kahle (1988) to understand the decision process. These are all based on the following theories: The theory of reasoned action states that a weighted combination of attitudes towards acts and subjective norms lead to intention which, in turn precedes behaviour (Sheppard et al 1988, Knox and Walker 1996). The theory of planned behaviour takes perceived control into account but Aizen (1986) claims that it is not appropriate for products that are readily available and relatively inexpensive (Knox and Walker 1996, Thompson et al 1996). However, the most influential model is one developed by Martin Fishbein (1983) which measures three components of attitude – Salient beliefs, Object-Attribute linkages and Evaluation. This model was soon extended to recognise the power of other people in influencing behaviour through the following variables (Azjen and Fishbein 1977, Knox and Walker 1996) – normative belief, the motivation to comply, social influence, and cognitive dissonance. Research Questions (s) This dissertation aims to answer the following research questions: How do customers place a value on personal computers? Why do customers purchase personal computers? Is involvement more important than brand loyalty when it comes to purchasing personal computers? Is the decision to purchase a personal computer easily influenced by social pressure? By asking these questions, the researcher intends to find out why customers have altered the value to Dell personal computers, why they are not purchasing as many Dell computers, as well as whether recommendations or word-of-mouth has had a part to play in their decision making process. In addition to this, the researcher also intends to find out whether customers value brands when it comes to personal computers or whether the decision to buy is simply based on the functionality and price. Research Strategy/Methods The aims and questions of this research lend themselves to the use of market research techniques, as the objectives will only be met by understanding the market and its perception towards Dell computers. Market research techniques will also enable the researcher to identify the relative sources of influence that are affecting customer purchase decisions, by highlighting factors such as relationships with companies, stock availability of retail outlets and customer service levels (Knox and Walker 1996). The research will therefore be primarily quantitative as the data collected will primarily be used to propose relationships between specified variables (Cooper and Schindler 2003, Creswell 2003, Hair et al 2003, Saunders et al 2003). Some elements of the research will be qualitative due to the need to gain an understanding of the meanings humans attach to events. The research approach will be deductive as this research intends to explain causal relationships between variables, it involves the collection of quantitative data, the questionnaire method will involve the application of controls to ensure data validity and there is a necessity to generalise the conclusions (Saunders et al 2003). A deductive approach will involve deducing a hypothesis from the theory, expressing this hypothesis in operational terms which propose a relationship between two specific variables, testing this operation hypothesis which will involve some form of empirical inquiry, examining the specific outcome of the inquiry to confirm or disprove the theory and modify the theory if necessary in light of the findings (Saunders et al 2003). The research strategy will involve the use of both case studies and primary research. A case study of Dell will be used to gain a richer understanding of the context of the research (Cooper and Schindler 2003) and this will be enabled by the use of questionnaires and/or interviews with customers and representatives of Dell. A single case study will be appropriate for this dissertation as it aims to carry out an in-depth investigation into Dell. Secondary research will also be included; however its inclusion will mainly be in the discussion chapter of the dissertation. It is important to add secondary data as it will help to add more depth to the discussion by raising issues that may not have been addressed or covered in the primary research. The sampling strategy to be used is likely to be judgement sampling as this method is appropriate for research that involves a specific purpose (Cooper and Schindler 2003). Judgement sampling is also appropriate in this instance it is low cost and will be convenient for the researcher (Cooper and Schindler 2003). The data collection is likely to focus on collecting data supplied by the customers on their perceptions of Dell in comparison to other computer suppliers, as well as data that will enable the researcher to answer the research questions. In terms of ensuring the research maintains its validity, the researcher will ensure that questionnaires for customers are distributed only in outlets and organisations that sell personal computers to the public, and a sufficient sample size will be calculated to ensure a high response rate is achieved. The reliability of the study will come from the use of a standard questionnaire that is based on the theories and models of customer decision making and customer behaviour. The results will also be able to be generalised in relation to Dell and personal computer sales. The main research limitations will include the lack of sufficient qualitative research methods, as customer perceptions are difficult to assess by solely using quantitative research, and would have probably benefited from research methods that involve the use of focus groups and one-to-one interviews, however this would place an unacceptable time and resource constraint on the researcher and raise the probability of introducing bias into the dissertation. To negate this, customers will be asked for information to be used qualitatively. The research could have also benefited from multiple case studies as these tend to produce more powerful analytical conclusions (Cooper and Schindler 2003) and they would also allow for better understanding of the findings in terms of detecting any differences and similarities (Cooper and Schindler 2003). However, this would demand enormous time constraints for the researcher, and would require a more in-depth dissertation to make this worthwhile. To counteract this, the questionnaire for customers will provide the scope for detecting similarities and differences through the use of a SERVQUAL design which relies on a Likert (7-point scale) to achieve a similar effect. Finally, the researcher intends to restrict the distribution of questionnaire to outlets that sell personal computers, so as to capture information that can be used to answer the research questions, however, this means excluding individuals that may purchase their personal computers from individuals and classifieds, and whose views and perceptions may equally be important to the selected sample. Schedule The first stage is getting the proposal approved by the faculty by 15 May 2007. The main stage is that of securing permission to distribute the questionnaires in retail outlets, as this will be where the main sample size will come from. This should be achieved by 30 June 2007. The next stage will be to obtain an interview or permission to send a questionnaire to a representative from Dell. This should also be achieved by 30 June 2007. When these three have been achieved, then the rest of the dissertation will proceed and a literature search and review will be conducted. At the same time, the questionnaires will be distributed to allow sufficient time for customers to return the forms so as to allow analysis. The deadline for the return of questionnaires is 31 August 2007. References Ajzen, I. (1985), “From Intentions to Actions: A Theory of Planned Behaviour”. In: Action-Control; From Commitme?rt to Behaviour. (Eds) Kuhl, J. and Beckman, J. (Heidelberg), Springer. Ajzen, 1. and Fishbein, M. (1980) “Understanding Attitudes and Predicting Social Behaviour”, New Jersey, Prentice Hall. Blackburn A,Halprin M, Veloria R. (1998) “The case of the profitless PC.” Harvard Business Review, 1998; November–December Brown, BAT. 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(1975) “Beliefs, Attitudes, Intentions and Behaviour: An Introduction to Theory and Research”, Addison-Wesley Publishing. Hair, J F and Babin, B and Money, A H and Samoeul, P. (2003) “Essentials of Business Research Methods”, John Wiley and Sons Inc, Sussex Howard, J., and Sheth, J. (1969) “The Theory of Buyer Behaviour”, New York: Wiley. Kahle, LR. (1995), "Role-Relaxed Consumers: Empirical Evidence," Journal of Advertising Research, 35 (2), 59-62. Knox, S and Walker, D. (1996) “SWP 2196 UNDERSTANDING CONSUMER DECISION MAKING IN GROCERY MARKETS: NEW EVIDENCE FROM THE FISHBEIN MODEL” Cranfield School of Management, Cranfield University, Cranfield, Bedford MK43 OAL Lim, K. and O’Cass, A. (2001) ‘Consumer brand classifications: An assessment of culture-of-origin versus country-of-origin’, Journal of Product and Brand Management, 10 (2), 120–136. Mittal, B. And Lee, M. S. (1989) “A Causal Model of Consumer Involvement”, Journal of Economic Psychology, Vol. 10, pp. 363-3 89. Saunders, M., Lewis, P., Thornhill, A., (2003) “Research Methods for Business Students Second Edition” UK Financial Times, Prentice Hall. Schofield, J. (2007) “How HP has overtaken the bigger boys of computing” Thursday January 25, 2007; The Guardian Sheppard, B. H., Hartwick, J.and Warshaw, P. R (1988) “The Theory of Reasoned Action: A Meta-Analysis of Past Research with Recommendations for Modifications and Future Research”, Journal of Consumer Research, December 1988 Vol 15, pp. 325-343. Vigneron, F., and Johnson, LW. (1999) “A Review and a Conceptual Framework of Prestige-Seeking Consumer Behavior” Academy of Marketing Science Review Volume 1999 No. 1 Name: …………………………… Date:…………… …………… Signed (Hard copy only): …………………………… Read More