AM2012 0189 Paper PDF
AM2012 0189 Paper PDF
AM2012 0189 Paper PDF
Introduction
Mobile phones have become a necessity item, similar to a wristwatch or a pair of glasses
(Renaud and Van Biljon, 2010), a factual ‘extension of man’. Market penetration of mobile
phone for UK adults is nearly 100% (Carphone Warehouse, 2008), with 17% of adults
owning more than one handset (ibid.). Given the prominence of this product in the UK
market, comparatively little research has been conducted into purchasing behaviour
concerning mobile phones. This may be the result of the complexity of the decision making
processes involved when customers decide for or against a particular phone. The buying
decision for mobile phones concerns not just buying one product, but more often than not of
purchasing a contract/phone bundle – in a context of ever changing technologies and
increasing choice.
The purpose of this paper is to explore how a range of key antecedents of this decision
making process impacts on the loyalty of mobile phone users. These factors include the brand
of a phone, its features, price consciousness, usage, type of contract, status consumption,
technology acceptance, satisfaction and behavioural intentions. In an increasingly
competitive market achieving customer loyalty is critical – it is much less expensive to retain
customers than to gain new ones (Reichheld & Sasser, 1990). Furthermore, loyal customers
provide firms with a consistent source of revenue (repeat and increased purchases) and of
cost reductions (fewer promotional expenses) (Li & Green) that lead to increased profits. Key
questions for this paper are which key factors influence a customer’s decision to stay with
his/her current brand of phone, which factors may have a negative impact on customer
loyalty, and to identify managerial and academic implications. In the following sections, core
concepts have been italicised.
Dick and Basu (1997) identified three drivers of loyalty in their seminal work. These three
areas are personal aspects such as risk assessment and variety seeking behaviour, brand
drivers and social drivers such as recommendations and word of mouth. Previous experience
reduces perceived risk, therefore the previous usage of a mobile phone by the potential buyer
will be utilised as a helpful criterion for their decision over which mobile phone to choose
(Sorce et al., 2005, Mazzoni et al., 2007). This is especially pertinent if the prior purchasing
experience was satisfactory, many studies have shown that a customer’s intention to
repurchase is heavily linked to previous satisfaction, satisfaction being the confirmation or
disconfirmation of prior expectations (Churchill & Suprenant, 1982). Whilst satisfaction does
not necessarily lead to loyalty, many authors (e.g. Jines & Sasser, 1995, Torres-Moraga et
al., 2008) have found that there is an important relationship between customer satisfaction,
loyalty and intention to buy.
For many mobile phone users, especially young consumers, the mobile phone has become a
representation of Belk’s (1985) notion “we are what we have”. The phone is a symbol of their
lifestyle and fashion object (Grant & O’Donohoe, 2007; Economides & Grousopulou, 2009).
Dittmar (2008) maintains that in today’s consumer culture consumer goods are valued and
bought as means of regulating emotions and gaining status, and as ways of acquiring or
expressing identity and aspiring to an ‘ideal self’ (Dittmar, 2008, p.2). Consumer goods
acquire symbolic meanings – but only when these meanings are a shared reality among
people. A trendy designer briefcase (or mobile phone) is only fashionable when others (the
peer group) share the belief that the briefcase is indeed fashionable. (Dittmar, 2008).
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Branding is often perceived as the main attribute which distinguishes one phone from others
that are available on the market at the same time (Petruzzellis, 2008). A strong brand creates
a high awareness in the market, a positive ambiance around the brand, customer loyalty and,
for the company, more power in their relevant market (Muniz & O’Guinn, 2001; Holt, 2004,
Kay, 2006).
In the context of mobile phones, the issue of technology acceptance arises, which was first
introduced by Davis (1989) and built on by later research. Technology acceptance revolves
around the question of what causes people to accept or reject a (new) technology (Davis,
1989). This has been linked to the perceived usefulness and ease of use (ibid.). For mobile
phones, Biljon et al. (2008) identified four core usage aspects of mobile phones, namely
organising and synchronising, feeling safe and secure, keeping hold of personal information,
building relationships and finally for relationship needs. Marcus and Chen (2002) added six
additional uses, the storing of non personal information, entertainment such as music games,
the exchange of information, the creation of a personal history, expansion and exploring new
alternative environments, and finally building the image of the user. More specifically,
Lomas (2011) identified social networking, browsing the internet and sending and receiving
emails as important aspects of a smart phone.
When choosing a new mobile phone, the user must first decide whether or not they are
paying for a pay-as-you-go handset, or for a contract of so many months. Increasingly,
customers now commit to longer contracts of 24 months, as opposed to 12 or 18 months
(Ofcom, 2011). This has resulted in reduced contract prices as the mobile phone providers are
able to return the price of the handsets over a longer period of time. Price conscious
consumers find comparisons in this sector particularly difficult because diverse contracts
which may cover different length of time, different handsets and offer different features have
to be evaluated. An important aspect here is that the user of the mobile phone may not always
be the bill payer, especially younger people, whose bills are paid by the parents (Ling &
Helmerson, 2000). Someone else paying the bill may also have an impact on the decision for
and loyalty to a brand.
There is a considerable amount of research that suggests that demographics are an important
factor influencing mobile phone use and choice. Several studies (e.g. Wilska, 2003; Wei &
Lo, 2006) highlight differences in the use of mobile phones between males and females; and
other other research (e.g. Coates, 2001; Kurniawan, 2008, Lomas, 2011) suggests differences
in usage between age groups, with older consumer using their phones less frequently and
mainly for texting and calling.
Research Design
Based on the review of the literature, the researchers hypothesised that the dimensions of
brand, phone features, price, usage, contract, status consumption, technology acceptance and
behavioural intentions influence loyalty in this sector (Appendix A). We also expected
gender, age, owning a smart phone and paying for your own bill to have an impact. We
assumed that being female and/or being older would have a positive impact on loyalty, as the
literature suggest that older and female consumer are more risk adverse and therefore more
likely to stay with their current brand.
Based on the key concepts identified above, a questionnaire was constructed. To measure
these concepts, established and validated measurement scales were used, except for the
construct contract as no previously validated scales were available (Appendix B). The survey
was conducted online, and a snowballing approach was used to recruit respondents.
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Permission had been obtained to contact the employees of a major employer with a diverse
workforce, who were encouraged to fill in the questionnaire. Furthermore, the survey was
promoted via the social and professional contacts of the authors. Finally, a total of 146
responses to the online survey were received. 10 questionnaires with missing values were
removed.
The main constructs were checked for reliability. All constructs had acceptable to excellent
Cronbach Alpha values and were factored into single variables for further analysis. These
variables were used for a regression model which explained nearly 50% of the variance in the
output variable. The R2 value was 0.53, the adjusted R2 was 0.47. Three variables impacted
significantly on loyalty: Brand (t= 7.22, sig = 000, β = 0.65); Usage (t= 2.58, sig = 0.01, β =
0.29); and Status (t= -2.21, sig = 0.09, β = -0.21). The full model can be found in the
Appendix C. Appendix D provides the Pearson correlation coefficients for the key constructs.
The features of the phone, price consciousness, the type of contract, the acceptance of
technology and satisfaction did not impact significantly on loyalty. Neither did owning a
smart phone or paying your own bill. However, it appears that brand is not only a
differentiator between phones as the literature suggests, but also a decisive aspect
determining loyalty. Furthermore high usability (usage) of a phone is an important
determinant of brand loyalty for all consumers, but more advanced features of the phone and
the price of the phone are not important when customers consider staying with a brand or
switching to another one. However, status consumption impacted significantly and negatively
on loyalty, implying that to be seen with a phone with high status such as the Apple iPhone is
important to respondents and may lead to brand switching. Owning a smart phone and
paying for you own bills did not impact on brand loyalty significantly. Gender and age as
dummy variables did not impact on loyalty, suggesting that perhaps with increasing customer
sophistication differences in the acceptance of technological products like mobile phones are
less evident than in the past. In order to explore this further, t-tests were conducted. There
was only one construct with significant gender differences, namely price (sig = 0.008, df =
135, t = -2.703, mean males = -0.19, mean females 0.26). This means that women are more
price conscious than men and more willing to shop around for a good deal. Although age did
not significantly impact on the output variable loyalty, it did impact on the brand, features,
usage, status, contract and technology acceptance variables.
T-tests reveal (Table 1) that for younger consumers (below 29 years of age), the brand and
status of a mobile phone are much more important than for older consumers. This links in
with the extensive literature of status consumption and peer influence amongst younger
people. The brand and status of a product become expressions of the self. For older people,
this becomes less important. Younger consumers are also more concerned with the new
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features of mobile phones, which confirms existing literature. A recent study by Pew Internet
Research (2010) found that teenagers use their mobile phones heavily for accessibility,
entertainment and social purposes – texting, taking and sharing pictures, listening to and
sharing of music, and accessing social network sites. In contrast, older people use the more
basic features of their phones such as texting and making calls (Coates, 2001). Whilst the
acceptance of technology did not impact on loyalty, there were significant differences
between groups. As expected, younger consumers more readily accepted their mobile phones
and were more comfortable with them. The details of the contract were also more important
for younger consumers, this is very much related to the fact that the features of the phone
were also more important for younger people.
Interestingly, there were no significant differences between age groups for price
consciousness, satisfaction, behavioural intentions and loyalty. All of these variables are core
marketing concepts. The implication here is that mobile phone customers of all ages do not
differ much in the way they derive satisfaction, deal with price, and their behavioural
intentions and loyalty. However, price consciousness is significantly influenced by gender –
women are more likely to be influenced by a low price than men.
Implications and Conclusions
This research has shown that branding and the status of a mobile phone are of overriding
importance to achieve customer loyalty in this market. Furthermore, appropriate usage
features that allow users to do what they want to do are a significant determinant of customer
loyalty. These findings have some important implications for all companies in the sector. If
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branding and the status of a phone are of such importance, it will be very difficult for smaller,
lesser known brands to break into the market and achieve substantial growth rates. If
customers, especially younger ones, perceive their phone as a status symbol, a brand has to be
able to present such an image before market share will grow. This is borne out by the fact that
the vast majority of mobile phones owned by respondents in this research were limited to
four brands, Apple, Blackberry, Samsung, and Nokia, reflecting the market leaders in smart
phones (Apple and Blackberry), and Nokia for feature phones (Perez, 2011). This means that
a few companies have become very powerful in this market, and other competitors do not
have the advantage of a strong brand name and the resulting loyalty. It takes time and
resources to build a brand – but it can be done. Globally, the smart phone market constitutes
27% of the overall phone market, and within this market segment, relative newcomer HTC is
now a genuine competitor for Apple (ibid.).
Perhaps some of the most interesting results of this research concern the impact of the
demographic variables. In contrast to most existing literature, gender had little impact in this
context. The only variable influenced by gender was price, which means that advertising on
price could be more specifically targeted at women – as they are more price conscious than
male customers. As far as age is concerned, loyalty per se was not influenced by this variable
but some of the variables relating to the use of a mobile phone, namely features, usage, and
contract were. In conjunction with lower technology acceptance and the lower importance of
brand and status of a phone different marketing strategies seem to be appropriate for older
consumers. Whilst mobile phone companies have developed targeted phone models for
customers with sight and flexibility issues, (phones with larger buttons and a very limited
number of features), these adaptations impact on the usage and functionality of the phones –
large number buttons with small, multiple letters make phone calls easier but texting difficult.
Also, there appears to be very little segmentation of the ‘older’ consumer amongst mobile
phone companies. In this research, ‘older’ consumers included everyone 29 years and above.
The majority of these people is not ‘old’ in the traditional sense but ranges from relatively
young, to middle aged and older. Despite these rather dissimilar respondents having been
grouped together, age significantly impacted on a number of variables, implying that that
there is a rather diverse middle group of customers for whom sophisticated phone features,
brand and status are not as important as for younger consumers, but who are capable of using
newer technology and who still care to some extent about brand and status. This is reflected
in the prominence of these two constructs in the regression analysis conducted for this
project. Currently the needs of this group of customers are not served well by the phone
market, clearly targeted segments are younger consumers for whom their phone is an
extension of their life style, and much older consumers who need adapted phones with
limited functionality. This research shows that for all consumers high usability (usage) of
core functions is important, regardless of age. Therefore mobile phone providers could focus
much more on providing branded stylish phones with a good range of core functions, e.g.
calls, texting, email, Internet access without customers having to pay for large numbers of
unneeded and unwanted features. Such phones could be targeted at and directly marketed to
the ‘middle’ age group.
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Hypothesis 1: The brand of a mobile phone will have a positive impact on loyalty.
Hypothesis 4: Status consumption is likely to increase brand switching and therefore will
have a negative impact on brand loyalty.
Hypothesis 5: The usage of a phone (frequency of texts etc) will impact positively on brand
loyalty
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Appendix B
Adapted from Odin, Y. et al. (2001) Conceptual and Operational Aspects of Brand Loyalty: An
Empirical Investigation. Journal of Business Research, 53/2, pp. 75-84.
Appendix C
Adjusted R
R R Square Square F
.73 .53 .47 9.31
Construct Standardized β t Sig. Tol. VIF
(Constant) .11 .91
Brand .65 7.16 .000 .50 2.00
Features -.16 -1.51 .13 .37 2.71
Price consciousness -.08 -1.06 .29 .78 1.28
Usage .29 2.58 .01 .32 3.14
Contract .099 1.07 .29 .47 2.30
Status -.21 -2.21 .03 .44 2.30
Technology .39 2.58
.086 .84 .40
acceptance
Behavioural Intention -.006 -.09 .93 .85 1.18
Satisfaction -.082 -.99 .32 .60 1.67
Gender dummy -.016 -.23 .82 .82 1.21
Age dummy .086 1.08 .28 .64 1.56
Smart phone .52 1.92
-.041 -.47 .64
ownership dummy
Pay for own bill .81 1.23
-.074 -.89 .37
dummy
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Adjusted R
R R Square Square F
.73 .53 .47 9.31
Contract type dummy .078 1.10 .27 .60 1.67
Appendix D
Pearson Correlations
Techno
Price Logy Satis Behav.
Brand Features Con. Usage Contract Status acc. Loyalty faction Intention
Brand 1.00
Features .42** 1.00
Price
-.20* -.07 1.00
con.
Usage .48** .65** -.06 1.00
Contract .29** .62** .12 .59** 1.00
Status .47** .43** -.19* .62** .41** 1.00
Techno
.57** .54** -.16 .64** .47** .62** 1.00
Logy acc.
Loyalty .64** .36** -.21* .46** .34** .33** .48** 1.00
Satis
.51** .43** -.11 .32** .31** .25** .47** .35** 1.00
faction
Behav.
.11 .13 -.08 -.06 .07 .02 .09 .03 .26** 1.00
Intention
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
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