Mobile Phone Buying Behaviour in the UK - Research Paper Example

Study of Mobile Phone Buying Behaviour in the UK Contents Contents ii iii Aims of the Study Hypothesis Research Methodology and Literature Review 2 Data and Analysis 4 CMA Study 4 Data from ciao.co.uk 5 Conclusions and Recommendations 7 Appendices 9 Figure 1: Web diagram of Customer Influences (2004 vs. 2005) 9 Figure 2: Value for Money (2004 vs. 2005) 10 Table 1: CMA Study Scores for Buying Behaviour Factors 11 Table 2: Ciao Consumer Review Data 12 Table 3: Summary of Results 13 Bibliography 14 Abstract This study looks at the buying behaviour of mobile phone customers in the U.K. using analysis of secondary research data to test the hypothesis that such behaviour is rational. Based on findings from the latest annual industry survey conducted by the Communications Management Association of the U.K., feedback on a consumer website (www.ciao.co.uk), and a review of relevant literature on mobile phone buying behaviour, the study concludes that U.K. consumers exhibit predominantly rational characteristics. Buying decisions, however, are affected by hedonic factors that are emotional in nature, and also by other considerations such as age group, financial capability, and the capabilities and image of the mobile phone model being offered. Consumer decision-making therefore combines the rational assessment of the phone plan, the perceived service quality, and the phone's technology. Aims of the Study This study looks at the buying behaviour of mobile phone users in the U.K. based on secondary research data and has the following aims: 1. To analyse the decision process affecting the mobile phone buying behaviour of customers. 2. To determine which of the following features have greater influence on the customer's decision to buy a mobile phone: the plan (tariffs, free minutes, network coverage, etc.), the phone itself (capabilities, image, or advertising), customer service, or a combination of any or all three factors. Hypothesis Conventional marketing theory predicts that buying behaviour of mobile phones follows a rational process because a mobile phone is a high-technology product, it is useful, and it is a personal item that a consumer has close at hand for many hours during the day. The study aims to test the hypothesis that the mobile phone buying behaviour is rational. Proving our hypothesis would mean that customers who buy mobile phones follow a rational decision-making process that marketing theorists summarise as a five-stage process of Awareness Interest Evaluation Trial Adoption. In order to determine whether the buying behaviour is rational, this study looks at each stage of the buying process according to a set of basic rational and emotional factors as shown in Tables 1 and 2. Using secondary research based on U.K. consumer data and their decision to buy a mobile phone service, it would be possible to compare responses with the rational and emotional factors and test our hypothesis based on the results. The hypothesis can be confirmed if the results show that rational factors consistently score higher than emotional factors. Otherwise, the hypothesis is false. Research Methodology and Literature Review The research study used three secondary data sources. The first data source is the latest annual survey of the Communications Management Association (CMA, 2006), a U.K.-based professional organisation of companies in the telecommunications sector, which includes mobile phone suppliers such as Nokia, Sony Ericsson, and Motorola; and mobile service providers such as Vodafone, Orange, O2, T-Mobile, and Virgin. The CMA has been conducting an annual survey since 2003 and publishing the results on its website (www.thecma.com). The CMA conducted its last annual surveys in 2006, and part of the data gathered from the survey are the factors that make up consumer decision-making and satisfaction, consumer concerns, and image perceptions towards mobile phone suppliers and mobile service providers. The second source of data is ciao.co.uk, a shopping intelligence website (www.ciao.co.uk) where thousands of registered members rate products, services, and companies. The site provides a good data source directly from personal consumer feedback as they rate products and services based on personal experience. Using a simple but intuitive 1- to 5-star rating system, ciao.co.uk members provide reviews for other users of the site and are paid for doing so if their comments are proven to be helpful. Each data source enumerates mobile phone buying decision factors and provides an empirical basis for hypothesis testing. The third set of data consists of literature representing landmark studies on mobile phone customer buying and usage behaviour. Palen et al. (2000), who showed that mobile phone users quickly modify their perceptions of social appropriateness around mobile phone use, that actual usage differs from what consumers initially predict, and that comprehension of service-oriented technologies can be problematic because mobile phones simultaneously occupy multiple social spaces and lead to conflicts between the physical space of the user and the virtual space of the conversation. Gerstheimer and Lupp (2004) argued that the mobile phone market is characterised as a technology push-driven market where products are created ahead existing consumer needs, so development of products is based on possible future needs, and the companies that correctly predicts what those needs are would have a competitive advantage over others. Karjaluoto et al. (2005) concluded using empirical data that although the choice of a mobile phone is a subjective choice situation, there are some general factors that seem to guide the choices. Studies showed that while technical problems are the basic reason to change mobile phone amongst students; price, brand, interface, and properties are the most influential factors affecting the actual choice between brands. These experiments built on the findings of Hamel and Prahalad (1991) and Kumar (1997), who described in detail the competitive nature of technology-driven markets and the pressure for companies to be ahead of the innovation curve to exploit market potential and gain leadership positions. The study of rational or emotional decision-making in consumer buying behaviour is complex because information search limitations and the evaluation of a high number of alternatives lead to a clash between hedonic (fun and excitement) and utilitarian (functionality and usefulness) considerations (Dhar and Wertenbroch, 2000; Batra and Ahtola, 1990). The same applies to mobile phones, which is further made complicated by different choice parameters amongst age groups with younger consumers choosing hedonic (ring tones, camera and video, games, etc.) over utilitarian (text messaging, phone calls, information storage, etc.) factors (Wilska, 2003). Lastly, Fitzsimons et al. (2002) showed that non-conscious factors have greater influence over buying behaviour than conscious influences. Oliver (1993); and Sheppard et al. (1993) show that buying behaviour is a combination of both rational and emotional factors, and the degree to which the buying decision is one or the other depends on the product and the price. It also depends on whether the purchasing decision is personal or not. At the centre of the emotional context of the buying decision is the brand: what it signifies, the images that it projects, and the status that it gives to the customer (Schultz and Timothy, 1998; Kotler, 1999, p. 117-118). Data and Analysis CMA Study The CMA study is comprehensive and detailed. It identified thirty-four (34) factors that influence mobile phone customer decision-making. These are divided into three sets: image (14 factors), value for money (8 factors), and customer experience (12 factors). Customers ranked each factor on a scale of 1 (extremely unsatisfied) to 4 (extremely satisfied). This allowed for the computation of an average score for each set. The 14 image factors are: high quality products, longevity and stability, focus on the customer, innovativeness, reputation in the industry, corporate values/ethics, has the best prices, used by companies or people I respect, partnerships and alliances, strong brand/wide recognition, market leadership, good employer, quality of marketing communication, and advertising. The 8 value for money factors are service performance and resilience, pricing relevant to the solution or need, quality of service, service and supplier adaptability, quality of service, billing and management information, quality of supplier staff, and tailored solution. The 12 customer experience factors are access to technical knowledge, billing accuracy, implementation of plans, fault reporting and repair, complaint handling, fraud prevention or security, appropriate supplier staff contact, account management, billing enquiry handling, communication and information sharing, pre-sales, and ordering. Figure 1 show these three sets of factors using a web diagram that also indicates the scores for each factor. Table 1 shows how these 34 factors can be classified with their corresponding scores from the CMA study. Data from ciao.co.uk Ciao contains a total of 1,782 reviews of 16 mobile service providers as of 31 March 2007. Each of these reviews gave comments on one provider and corresponding explanations on the factors that influence customer behaviour. Each reviewer submitted a rating on the provider, which Ciao also summarises on the mobile service provider portal. For this study, some 30% of reviews were randomly selected to gather data for analysis. The findings from Ciao members are summarised in Table 2. The positive or negative observations (e.g., poor billing service, excellent phones as part of the plan, or good prices for plans, etc.) were indicative of which factors were identified by reviewers as significant in the buying decision. Observations were summarised into eight factors, which were then grouped into two sets: rational and emotional. The rational factors were: tariffs (costs and benefits), network coverage, customer service, and billing experience. The emotional factors are the business reputation of the mobile provider, the brand and capabilities of the phone, ethical image of company, advertisements, and coolness of the telephone gadgets. The literature review findings were considered in the classification: rational factors consist of characteristics that are more utilitarian, whilst emotional factors consist of hedonic characteristics which impact on the buying decision. Several reviews contained personal anecdotes, mostly emotional in nature and are related to these factors, and were included in our data set. Table 1 compares the ranking of the 34 factors based on the CMA Survey and the eight factors from the Ciao survey. Included also is a breakdown of reviewer preferences on the types of plans (pre-paid or post-paid) cited as important buying decision factors and whether the review mentioned the amount of "Free Minutes" as significant. According to the CMA data, customers rate rational factors as having greater importance over emotional factors. Rational factors garnered higher scores (average scores of 3.4) include the data sets for Value for Money and Customer Experience. These two sets of factors contain predominantly rational and utilitarian criteria. The highest-rated factor is implementation of plans (3.9), which is caused by past experiences of mobile service providers promising too much but delivering little. The score shows that improvements have been made in the past year (from 3.7 in 2004), with positive impact on customer satisfaction. Despite improvements in technology and plan implementation, however, customers continue to give low ratings to other important components of the customer experience such as billing procedures and account management issues. Figure 2 shows improvements in the Value for Money based on customer perception of T-Mobile, Orange, and Vodafone, but a decline in the score of O2. These are the Top Four mobile service providers in the U.K. The same could be said of the set of Image factors, which declined in over-all scores from 2004 to 2005. This set of factors combine both utilitarian and hedonic criteria perceived by consumers: corporate image, ethical reputation, brand image, and trust in the mobile service provider from its use by someone customers know. The study highlighted a paradox that had been evident since 2004 where dismal customer satisfaction results (according to customers who actually took service) were not being matched by their image according to the perceptions of a wider set of customers. CMA (2006) explained that "if suppliers do not connect their brand position and strength to provide good customer satisfaction, the strong image ratings would decline as customers weary of below par performance" (p. 5). The lower half of Table 2 shows the feedback from Ciao website data, which highlights the predominance of rational over emotional factors by a small margin. Tariffs (diversity of payment plans, call costs, and free benefits such as SMS or calling time), network coverage, and customer service account for the biggest proportion of customer behaviour amongst rational factors, whilst phone technology (video, camera, and audio) and a cool image were cited as dominant emotional factors. The finding that pre-paid plans are favoured by young customers and post-paid plans are favoured by older customers is consistent with the research literature. Conclusions and Recommendations Analysis proves the hypothesis that buying behaviour for mobile phones in the U.K. is a rational process as summarised in Table 3. Despite a decline in perceived Value for Money from the mismatch between what is promised and what is delivered, and improvements in capability and brand image, U.K. mobile phone consumers exhibit rational behaviour by considering several factors that are important to them, such as the plan's costs and benefits, tariffs schedules, network coverage, and the technical capability and perceived service quality of the provider. The technological capability of the phone is a secondary consideration that is hedonic in nature and that customers would consider only if their rational needs are satisfied. We can conclude that a typical U.K. consumer would buy an affordable plan offered by a reliable service provider that offers the highest possible and acceptable level of perceived service quality. The mobile phone itself can catch attention, but it is not the main consideration. Aside from these, marketers must also learn to address and capitalise on age preferences, income classifications, user habits, technology image, and other socio-cultural factors that influence buying behaviour. Findings are consistent with literature on rational behaviour of consumers who purchase personal and branded high-technology products. Appendices Figure 1: Web diagram of Customer Influences (2004 vs. 2005) [Source: CMA, 2006, p. 4] Figure 2: Value for Money (2004 vs. 2005) [Source: CMA, 2006, p. 4] Table 1: CMA Study Scores for Buying Behaviour Factors Image 3.1 Scores Rational Emotional Scores Quality products 3.6 1 3.6 Longevity and stability 3.5 1 3.5 Customer focus 3.5 3.5 1 Industry reputation 3.3 3.3 1 Best prices 3.1 3.1 1 Innovativeness 3.0 1 3 Corporate values/ethics 3.0 3.0 1 Used by companies/people I respect 2.8 1 2.8 Partnership and alliances 2.8 2.8 1 Strong brand/wide recognition 2.8 1 2.8 Market leadership 2.6 2.6 1 Good employer 2.6 2.6 1 Marketing communication 2.4 2.4 1 Advertising 2.0 2.0 1 Value for money 3.4 Service performance and resilience 3.8 3.8 1 Pricing relevant to solution or need 3.6 3.6 1 Quality of service 3.6 3.6 1 Billing and management information 3.4 3.4 1 Quality of supplier staff 3.4 3.4 1 Technical excellence and innovation 3.3 3.3 1 Service and supplier adaptability 3.3 3.3 1 Tailored solutions 3.1 3.1 1 Customer experience 3.4 Implementation of plans 3.9 3.9 1 Technical knowledge 3.7 3.7 1 Fault reporting and repair 3.7 3.7 1 Billing accuracy 3.5 3.5 1 Complaint handling 3.4 3.4 1 Fraud prevention or security 3.3 3.3 1 Supplier staff contact 3.3 3.3 1 Account management 3.3 3.3 1 Billing enquiries 3.3 3.3 1 Communication and information sharing 3.2 3.2 1 Pre-sales 3.1 3.1 1 Ordering 3.1 3.1 1 3.23 29 5 3.14 [Source: CMA, 2006] Table 2: Ciao Consumer Review Data Factors Percentages n=534 Rational Plan Tariffs 29% 58% 155 Network coverage 13% 70 Service 10% 56 Billing 5% 29 Emotional Phone Phone technology 26% 42% 140 Ethics 5% 28 Ads 3% 14 Cool image 8% 42 Other Factors Cited Age Group Pre-Paid Post-Paid Free Mins 24 and below 35% 2% 69% 25-34 16% 10% 7% 35 and over 4% 33% 1% Totals: 55% 45% 77% [Source: Author, 2007 from ciao.co.uk website] Table 3: Summary of Results CMA Survey Rational Emotional Customer Experience 3.4 0 Value for Money 3.4 0 Image 2.8 3.1 Ciao Review Analysis Rational Emotional Plan 0.58 Phone 0.42 Bibliography Batra, R. and Ahtola, O.T. 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