TO STUDY THE CONSUMER BEHAVIOUR WHILE BUYING MOBILE

PHONES

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR

Masters of Management Studies (M.M. S.)
(Two Years Full-time) Degree Course

ROLL NO.: M 36

Under the Guidance of

Dr. Arvind Ankalikar

University of Mumbai
Jamnalal Bajaj Institute of Management Studies (Autonomous)
STATEMENT OF PROBLEM

Mobile phone markets are one of the most turbulent market environments today due to
increased competition and change. Thus, it is of growing concern to look at consumer buying decision
process and cast light on the factors that finally determine consumer choices between different mobile
phone brands. Mobile phone manufacturers, distributors and retails need to know who buys their
product, how they buy, when and where they buy, why they buy and how they respond to marketing
stimuli. Consumer behavior is defined as the processes involved when individuals or groups select,
purchase, use, or dispose of products, services, ideas, or experiences to satisfy needs and desires. On
this basis, this article deals with consumers' choice criteria in mobile phone markets by studying factors
that influence intention to acquire new mobile phones. The study aims to determine whether key factors
such as handset price, design and technology impact on the buying behavior if mobile phone handsets.

INTRODUCTION

The increasing interest in smartphones among the people is the main reason that has amplified
the interest to research the topic. People’s obsession with smartphones has been increasing rapidly. The
aim of this research is, therefore, to find out consumer behavior of smartphone buyers in Indian Market.
The research aims to find out the reasons behind people purchasing smartphones, the factors
influencing the purchase decision and the motivations behind the purchase decision.

Different consumers have different characteristics in their life that also influences their buying
behavior. Social factors such as family, groups, roles, and status) and personal factors (such as age,
occupation, lifestyle, personality, and self-concept) are those characteristics that could influence the
buyer behavior in making the final decision.

Even when cheaper smartphones are available in the market, why do people buy expensive
smartphones? Price, quality, brand, country of origin, marketing, sales, word of mouth, etc. could be
several factors that a consumer may think before buying a smartphone. How much does the brand of a
smartphone affect the buying decision of a customer? As there are various types of smartphones
available in the market with a varying price; what is the difference between them? And how they impact
the customer buying decision?

This research also aims at the marketing strategy of the smartphone companies to influence the
buying behavior of the customer. These strategies include Promotional campaigns, Tie-Ups with the
network carrier, etc.
LITERATURE REVIEW

All marketing decisions are based on assumptions about consumer behavior (Hawkins, 2007).
In order to create value for consumers and profits for organizations, marketers need to understand why
consumers behave in certain ways to a variety of product and services offered. In order to determine
the factors that influence the preferences of the today’s consumers, an understanding of how consumers
generally think and behave in buying situations is vital.

Understanding consumer behavior and “knowing customers,” have and never will be simple.
Consumers may say one thing but do another. They may not be in touch with their deeper motivations.
They may respond to influences that change their mind at the last minute. These issues have led to
theories like that of the black box approach taken on by (Futrell, 2000). It refers to how marketers are
not able to tap into consumer minds, thus “keeping them in the dark.” In other words, marketers can
apply various stimuli and observe the conduct of consumers, but they cannot observe the consumers'
actual thought processes. This hidden information is considered to be the black box. In an attempt to
obtain some understanding, marketers study consumer behavior. Researchers (Hawkins, 2007)
describe consumer behavior as the study of individuals or groups and the mental, emotional and
physical processes they use to select, obtain, consume and dispose of products or services, to satisfy
needs and wants, and the impact that these processes have on the consumer and society.

This study focuses on independent variables which ensure that above recommendations and/or
conclusions are taken into consideration. Recommendations such as taking into account hedonic
considerations, conscious and non-conscious choices will be covered by varying demographic,
psychographic and behavioral factors and studying the effect on the choice.

Figure: Dependent and Independent Variables took into Consideration

❖ The Effect of Demographics on the Evaluations of Different Attributes Related to Mobile Phone
Handsets Choice.

Demography is the study of populations. Demography makes use of a wide range of data, including
the size of a given population and its birth rates. “Demographics are about everyone: who you are, where
you’ve been and where you are going. Demographics explain about two-thirds of everything: which
products will be in demand, where job opportunities will occur, what school enrolments will be when
house values will rise or drop, what kinds of food people will buy and what kinds of cars they will drive.
The further ahead in the future you are looking, the more relevant demographics will be to you.”

Demographics is one of the forces affecting acquisition of mobile phone handsets and but this
research will focus on three main demographically-related factors namely culture, age, and gender.

• Culture

The mobile device market has widened to a global scale and consequently, mobile devices are
distributed throughout the world (Kim and Lee 2005). As the use of mobile phones pervades the world,
the globalization of mobile device user interface design is becoming more crucial to business success
and building a loyal customer base. Communications technologies are entirely dependent on a social
network for adoption and use, and therefore the diffusion of these technologies within a culture should
be studied (Urbaczewski, Wells et al. 2002). The context of the mobile user includes user culture and
the influence of culture on mobile phone use (Urbaczewski, Wells et al. 2002; Teo and Pok 2003a;
Jones and Marsden 2005). This necessitates a review of culture as an essential part of understanding
users and the factors that influence mobile phone usage.

In the context of mobile phone design and usage existing research into the effects of culture has
been aimed at the culture-based preferences for specific design attributes (Choi, Lee et al. 2005; Kim
and Lee 2005) and the distinction between universal and to-be-localized components (Lee, Ryu et al.
2005b). The following studies represent the general trends, all using Hofstede’s premises: Choi et al.
(2005a) looked at cultural influences on the functional design of mobile data services by comparing 24
Korean, Japanese and Finnish users. They found 52 attributes considered important by mobile data
service users and identified 11 critical attributes related to the user interfaces of mobile data services
devices. The critical attributes such as minimal keystrokes, iconic menu style, logical ordering of menu
items, variety of fonts and font colours, etc., all showed a clear correlation with characteristics of the
culture of the user’s country (as identified by Hofstede); Kim & Lee (2005) investigated cultural
influence and mobile interface design to clarify the relationship between cultural traits and mobile
phone interfaces.
 Based on the findings of these studies it can be argued that culture and mobile phones have been
researched to some extent, but what it is found lacking is a model to integrate the findings on culture
with the other factors that influence mobile phone adoption and usage. So generally, culture has no
impact while buying new phones.

❖ Age in the Context of Mobile Phones

Sabnavis (2002) identified three different consumer types of three generations in India.
Traditional consumers of pre-liberalization phase (1960-70s) were, stable, inward-looking and had
limited choices. They kept their family needs on the top and their own personal needs were subordinate
to their family needs. They avoided risk. In the transient phase (1980-90s), the consumers were more
risk-taking than their predecessors. They had experienced multi-choices and had a tendency to be
better off than their parents. Economically, they had no fears or concerns. The new millennium
consumer tends to enjoy life. He has greater self-control and looks for personal style and pleasure.
Exposures to a variety of products and enhancement of economic status have changed the attitudes of
the upper middle – class consumers towards brands. Indian society being hierarchical in nature is,
therefore, status-conscious (Sahay and Walsham, 1997).

Indians give very high value to brands. In India, a brand is a cue to quality because the quality
of the unbranded products varies widely (Johansson, 1997). According to a study conducted by Maxwell
(2001) on testing of homogeneity versus heterogeneity of global consumption in a cross-cultural
price/brand effect model; Indian consumers in comparison to Americans are tougher for the marketers
to sell their products. However, he found Indian consumers more price and less brand conscious.

It is normally perceived that young buyers try new products, seek greater information and are
more self-confident in decision-making. Elderly consumers are selectively innovative and they accept
only those innovations that provide exclusive benefits (Nam et al, 2007). Therefore, age and life cycle
can be the delicate variables (Kotler and Keller, 2006) in the consumer behavior process.

According to one study it is found that while age group between 23 to 30 is very reluctant to buy
new mobile phones than that of the other age groups.

❖ Gender in the Context of Mobile Phones

Mobile phone choice and use have also been found to be related to prior consumption styles.
According to a fresh survey of Finnish young people aged 16-20, it was found that mobile phone choice
and especially usage is consistent with respondents‟ general consumption styles (Wilska, 2003). The
research showed that addictive use was common among females and was related to trendy and
impulsive consumption styles. Instead, males were found to have more technology enthusiasm and
trend-consciousness. These attributes were then linked to impulsive consumption. The study concluded
that genders are becoming more alike in mobile phone choice. Because individual differences in
consumption patterns are obviously identifiable, it is assumed that background variables especially
have an influence on mobile phone choice. Female are concern about mobile camera clarity and the
handset colors than that of other features but in case of male the storage, operating system, technology
are the important factors.

❖ The Effect of Behavior on the Evaluations of Different Attributes Related to Mobile Phone Handsets
Choice.

The purchase decision of products such as mobile phone, which is used publicly, is strongly
influenced by the consumer’s reference groups (Bearden and Etzel, 1982; Bourne, 1957). Studying the
customer preference groups give a good indicator of the behavior of the consumer.

• Influence of Social Reference Groups

The purchase decision of products such as mobile phone, which has been used publicly, were
found to strongly influenced by the consumer’s reference groups (Bearden and Etzel, 1982; Bourne,
1957). Mobile phone manufacturers have been applying such interpersonal influence in their
advertising and marketing practice. For example, an advertisement focused on personalization through
color faceplates was used when Siemens launched its series of GSM phones in the USA during 2002,
while a mobile phone looking like a compact case complete with a mirror inside was promoted by
Samsung (Luna, 2002).

One study found that consumers used both reflective and comparative appraisal to choose their
products (Morchis, 1976). Another revealed that consumers would not only apply direct and verbal
interaction to obtain the evaluations from the reference group but also observe reference group
members behavior to make a decision and suggested that the individual’s choice of different brands
might also be influenced by one’s reference groups (Bearden and Etzel, 1982).

Comparing young students with generally more conservative housewives, Park and Lessig (1977)
concluded that American students were more likely to be influenced by reference groups than general
American housewives were when making their purchasing decisions and that the advertisements and
promotions utilizing reference group had more direct and significant influence over consumers‟ final
purchases. In their research, Park and Lessig (1977) developed the first set of scales for measuring
reference group influence functions, concluding that reference group influence varied across products.
Bearden et al. (1989) believed that consumer susceptibility to interpersonal influence is a general trait
that varies across individuals and developed a scale to measure it. Becker (1991) found that demand by
a typical consumer is positively related to quantities demanded by other consumers by exploring
restaurant pricing. Wooten and Reed (2004) suggested that consumers with high susceptibility to
normative influence tend to use protective self-presentation to avoid undesirable disapproval.

In summary, the existing literature has demonstrated that reference groups have a significant
influence on consumer’s purchasing behaviors. While a consumer may consider whether to follow the
group consciously, in most cases, one will agree with the group subconsciously. An individual who is
more susceptible to interpersonal influence will try to satisfy reference groups‟ expectation by
complying with groups‟ norms – here refer to those compliance expectations for every group member
within a particular social background or acting in an expected role displayed by the group. Previous
research has identified three major types of reference group influences: informational influence,
utilitarian influence and value-expressive influence (Park and Lessig, 1977; Bearden and Etzel, 1982),
which are briefly described below.

• Informational Influence

The informational influence is based on the desire to make informed decisions and optimize the
choice. Kelman (1961) suggested that an individual would accept an influence that improves one’s
knowledge and ability to cope with the environment.

The informational influence only functions when the individual regards the behavior and value
of reference group members as potentially useful information and takes them into consideration.
Especially when a consumer lacks the knowledge of a certain product and the experience of purchasing
this item, one may perceive the information and recommendation from his/her reference group as
credible and thus accept them with certain confidence. Marketing practical applications can be seen
from the use of expert power and internalization in advertising with the ads that feature doctors
impersonating as spokespersons for over-the-counter medicines.

• Utilitarian Influence

This influence can be explained by the so-called “compliance process” in which an individual is
willing to satisfy a certain group’s expectation in order to obtain the praise or to avoid the punishment
from the group (Kelman, 1961). A best demonstration for the utilitarian influence may be the famous
Asch Experiment in which participants were found to willingly conform to the group answers, even
changing their original right answers (Rock, 1990). From a marketing research view of point, that is, by
suggesting in the advertisements that one could obtain social approval and acceptance by just using a
certain commodity, or in an opposite direction, by suggesting that one might be reject by a certain group
by not using a specific product, will have an influence on certain groups of consumers. A good example
is an advertisement for personal care products in which consumers are punished by co-workers or
friends for not using anti-dandruff shampoo, deodorant or mouthwash in fact take advantage of the
reference group’s utilitarian influence.

• Value-Expressive Influence

This influence may be best explained by the “identification process” in which people are willing
to better express themselves to the society by making themselves similar to the group that they want to
belong to (Kelman, 1961). Under this influence, one may actively follow the groups‟ beliefs and rules
while neglecting the praises or punishments and decide to completely accept and internalize the value
of that reference group. One good example of using this influence in marketing practice was used by
soft drink giant Pepsi, the company has aired its Young Generation brand image extensively so that its
targeted consumers had accepted the value of this specific group. Electronic products giant Sony has a
famous celebrity playing a successful manager’s role in its Sony mobile phone advertisement and
implying that people who use the same mobile phone will have the same characteristics with that
expected group

❖ The Effect of Psychographics on the Evaluations of Different Attributes Related to Mobile Phone
Handsets Choice.

Psychographics and demographics are similar in that they both refer to the characteristics of
groups and individuals. Where they differ is in what types of characteristics they describe.
Demographics uses traits of people such as age, gender, occupation, home size, income, number of
children, etc. Psychographics instead focuses on people’s actions, including preferences and lifestyle
choices (Holladay, 2004). This study addresses performance, image/impression and technological
dimensions that relate to people’s actions.

• Performance and Image/Impression Dimensions

Mobile phones are becoming increasingly popular. Due to the competition in this new market,
many companies are gearing towards a “consumer-orientated” approach in their product design. In
specifying design elements of mobile phones as well as other consumer products, conjoint analysis
technique has been used to collect consumer preference data. Conjoint analysis in product design is
usually conducted based on the assumption that consumers evaluate the value/utility of a
product/service by combining separate aspects of utility provided by each product attribute (Hair et al.
1995).

The design of mobile phones is slightly different from general consumer electronic products such
as audio/video, home appliances, and computers. Consumers seem to perceive the
hardware/software/service of a mobile phone as a single entity while the design and planning of each
element are typically managed by different companies.

Mobile phones in South Korea differ from each other in almost all design features, including
shape, color, size, and material. Due to the integration of functions such as address books, calendars,
and multi-media contents, a significant number of software usability issues are introduced in menu
design, icon interface, message management, animation, and so forth. A possible way to approach this
design problem would be a model-based evaluation; that is, identifying the functional relationships
between user satisfaction and the specific design features of a product.

❖ Technology Adoption

Another important aspect that has risen from different studies is that consumers purchase new
phones due to the fact that their existing one’s capacity is not appropriate referring to the idea that new
technology features such as built-in cameras, better memory, radio, more developed messaging
services, and color displays are influencing consumer decisions to acquire new models (In-Stat/MDR,
2002; Liu, 2002; O’Keefe, 2004). Thus, it can be expected that new features will influence the intention
to acquire new mobile phones, and therefore the following hypothesis was developed.

Since cell phones are vulnerable to security and privacy violations. Another specific factor for
cellular devices is payment and cost (Kleijnen, M. and K. de Ruyter, 2003) and we likewise include it.
Since studies of mobile adoption (Van Akkeren, J. and D. Harker, 2003) point to present applications
dominated by voice communications and the simple Internet, but a future of the complex web, Internet,
and e-commerce enhanced uses, we have added web connectivity as a factor.

This study will emphasize concern for the reliability of mobile devices, the importance of
technology product suitability, digital standards, and web-connectivity. In sum, the two major models
and recent studies seek to explain user adoption and acceptance of the technology. The theoretical
framework combines the Rogers and Davis models, and the present study adds the factors of cost,
security, reliability, digital standards, technology product suitability, and future web-connectivity

INDIAN MOBILE INDUSTRY

❖ Introduction

India is currently the world’s second-largest telecommunications market with a subscriber base
of 1.19 billion and has registered strong growth in the past decade and a half. The Indian mobile
economy is growing rapidly and will contribute substantially to India’s Gross Domestic Product (GDP),
according to report prepared by GSM Association (GSMA) in collaboration with the Boston Consulting
Group (BCG). The country is the fourth largest app economy in the world.

The liberal and reformist policies of the Government of India have been instrumental along with
strong consumer demand in the rapid growth in the Indian telecom sector. The government has enabled
easy market access to telecom equipment and a fair and proactive regulatory framework that has
ensured availability of telecom services to the consumer at affordable prices. The deregulation of
Foreign Direct Investment (FDI) norms has made the sector one of the fastest growing and a top five
employment opportunity generator in the country.

The Indian telecom sector is expected to generate four million direct and indirect jobs over the
next five years according to estimates by Randstad India. The employment opportunities are expected
to be created due to a combination of government’s efforts to increase penetration in rural areas and
the rapid increase in smartphone sales and rising internet usage.

❖ Market Size

The mobile industry is expected to create a total economic value of Rs 14 trillion (US$ 217.37
billion) by the year 2020. It would generate around 3 million direct job opportunities and 2 million
indirect jobs during this period. India’s smartphone market grew 14 percent year-on-year to a total of
124 million shipments in 2017.

The rise in mobile-phone penetration and decline in data costs will add 500 million new internet
users in India over the next five years, creating opportunities for new businesses. The monthly data
usage per smartphone in India is expected to increase from 3.9 GB in 2017 to 18 GB by 2023.

Data usage on Indian telecom operators' networks (excluding Reliance Jio), doubled in six
months to 359 petabytes or 3.7 million gigabytes per month as 4G data usage share increased to 34
percent by the end of June 2017$. According to a report by leading research firm Market Research
Store, the Indian telecommunication services market will likely grow by 10.3 percent year-on-year to
reach US$ 103.9 billion by 2020.

Samsung Electronics has lost its crown as the top smartphone seller in India for the first time in
six years, as it was outsold by China's Xiaomi in the final quarter of 2017, data from two tech research
firms shows.

Xiaomi's aggressively priced suite of high-spec handsets and market expansion strategy enabled
it to take the top spot in the world's biggest smartphone market after China.
 Counterpoint pegged Xiaomi's smartphone market share in India at 25 percent in the fourth
quarter based on shipments, ahead of Samsung's 23 percent. Lenovo, Oppo, and Vivo came in behind
them, each with about 6 percent market share.

India Smartphone Shipment Market Share - Q4

2017

25%
34%

6% 23%
6%
6%

Xiaomi Samsung Lenevo Vivo Oppo Others

IDC mobile phone market report says One Plus captured 48% of the Indian Premium Market
share and Apple netted about 38% followed by Samsung at 4%.

Premium Mobile Market Share

10%
4%

38%

48%

Apple One Plus Samsung Other

❖ Road Ahead

India will emerge as a leading player in the virtual world by having 700 million internet users of
the 4.7 billion global users by 2025, as per a Microsoft report. Internet economy expected to touch Rs
10 trillion (US$ 155 billion) by 2018, contributing around 5 percent to the country’s GDP. With the
government’s favorable regulation policies and 4G services hitting the market, the Indian
telecommunication sector is expected to witness fast growth in the next few years.
 The Government of India also plans to auction the 5G spectrum in bands like 3,300 MHz and
3,400 MHz to promote initiatives like the Internet of Things (IoT), machine-to-machine
communications, instant high definition video transfer as well as its Smart Cities initiative. The Indian
mobile phone industry expects that the Government of India's boost to production of battery chargers
will result in setting up of 365 factories, thereby generating 800,000 jobs by 2025.

METHODOLOGY

With the purpose of answering the research questions in this dissertation, the Primary data
collection is used. Using primary data collection had allowed addressing specific issues to consumers
about their use of their Smartphone and factors that influenced them in the purchase decision-making
process for a smartphone. The data collection was a critical part of the research as this was the core of
the findings. Additionally, using primary data allowed greater control of the collection of information.

RESEARCH OBJECTIVE

❖ To identify to what extent evaluation of outcomes and beliefs affect consumers’ attitudes and
intention to purchase in the smartphone market in India.
❖ To develop a framework for the effects of external influence and internal influence which affect
self- concept, and lifestyle of the consumer which result in purchasing decision-making process.
❖ To analyze what are the factors which influence and eventually motivate the customer to buy a
smartphone in Indian market.
❖ To analyze the theoretical implication of brand of smartphone in the Indian market and what is
the effect on the purchase decision-making process.
QUESTIONNAIRE

1) Do you own a smartphone?

2) If yes, are you satisfied with your smartphone?
3) Would you like to switch to another brand with additional features?
4) Frequency / Level of switching smartphones?
5) How much are you willing to pay for a smartphone?
6) Does the country of manufacture or size of manufacturer matter?
7) What is the level of influence of family and friends/word of mouth?
8) How much is your status in society a factor in making a purchase decision for a smartphone?
9) What is the level of influence of festival offers and promotional offers?
10) What is the level of influence of advertisement?
11) What is the level of influence of after-sales services provided by manufacturers?
12) What is a level of influence on finance before buying a smartphone?
13) Do you get influenced by the company brand name?
14) How much the quality of smartphone influences you?
15) What is the level of influence of previous experiences from using the product of a certain brand?
16) Do you get influenced by the technical specifications of a smartphone?
17) Which brand of the smartphone did you purchase last?