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Mobile handset purchase: Do consumers use EPS & LPS

A report submitted to Amity University as a part fulfillment of Full time MBA Telecom.

Submitted To: Prof. Marshal Sahni HOD MBA Telecom, AITTM

Submitted By: Lavi Sangal A1603708069

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CERTIFICATE

This is to certify that the project work done on Mobile handset purchase: Do consumers use EPS & LPS submitted to Amity Institute of Telecom Technology & Management by Lavi Sangal in the partial fulfillment of the requirement for the award of degree of MBA telecom, is a bonafide work carried out by her under my supervision and guidance. This work has not been submitted anywhere else for any other degree / diploma. The original work was carried during 21 st December 2009 to 5th March 2010.

Date:

Prof. Marshal Sahni MBA Telecom, AITTM Amity University

ACKNOWLEDGEMENT

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I, LAVI SANGAL, express my deepest gratitude to Prof. Marshal Sahni - Head of Department MBA Telecom, AITTM, Amity University for his kind support in this dissertation as well as round the clock generous encouragement throughout the dissertation. I express my heartfelt gratitude to Prof. Marshal Sahni for extending his unconditional support and providing valuable inputs. I also convey my sincere thanks to all faculty members of AITTM for their kind support and knowledge.

DECLARATION

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This Dissertation Report is submitted in partial fulfillment of the requirement for the award of degree of MBA Telecom at Amity University. I declare that this Dissertation Report is my own work and it does not contravene any academic offence as specified in the Universitys regulations. I confirm that this Dissertation Report does not contain information of a commercial or confidential nature or include personal information other than that which would normally be in the public domain unless the relevant permissions have been obtained.

Sign: Name: Lavi Sangal Date: Program: MBA (Telecom) Marketing

TABLE OF CONTENTS
EXECUTIVE SUMMARY .. 07 1.0 INTRODUCTION .. 08 1.1 Consumer Behavior ........................ 08
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1.2 Models of Consumer Behavior. 09 1.3 Key Terms 11 1.4 Engel-Blackwell-Miniard Model... 14 1.5 Mobile phone buying decision process 17 2.0 STATEMENT OF RESEARCH/HYPOTHESIS .. 19 2.1 Research Question/Objective 19 2.2 Research Design 20 2.3 Sampling Method.................. 20 2.4 Data Collection 20
2.5 Design of instruments ..................
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3.0 PROCEDURE 21 4.0 DISUSSION/ANALYSIS.....................22 5.0 CONCLUSION 28 6.0 LIMITATIONS. 29 7.0 REFRENCES..
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8.0 TIME SCALE..31 9.0 ANNEXURE32

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Executive Summary
The project titled Mobile handset purchase: Do consumers use EPS & LPS has been undertaken with an objective to research whether consumers go through EPS & LPS stages (of EBM model) in their purchase of mobile handsets. One of the objectives of this research was to find out the problems which respondents had faced with their earlier mobile handsets and what reasons forced them to shift to their current handsets. Another research objective was also to find the impact of various external factors which influence the buying decisions when the respondents decide to choose particular mobile handsets over the other. The sample size taken was
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about 50 within NCR. The data given by these respondents forms the basis of my research and findings. After collecting the data, the analysis gave a fair idea about the problems which respondents had faced with their earlier handsets and the reasons for shifting to the other handsets they were carrying. I came to know that there are so many factors which generate the need of mobile handset in the memory of the respondent and what are the factors which he/she had considered while purchase a another one which the respondent is presently carrying. This research revealed that the consumer undergoes an extensive problem solving and limiting problem solving stage of the EBM model while purchasing a mobile handset.

1.0 INTRODUCTION
1.1 CONSUMER BEHAVIOR Consumer Behavior is the process and activities people engage in when searching for, selecting, purchasing, using, evaluating, and disposing of products and services so as to satisfy their needs and desires. Research in economics, business, marketing, psychology and sociology domains, studys, consumer behavior from different theoretical premises: for economists, consumption is used to produce utility; for sociologists, it is a means of stratification; for anthropologists a matter of ritual and symbol; for psychologists the means to
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satisfy or express physiological and emotional needs; and for business, it is a way of making money (Fine 1997). Today consumer behavior is increasingly dynamic as the choice of alternatives increases with the growth of global markets. The complexity of the decision-making process and a large number of influencing factors suggest that changing consumer behavior towards more sustainable consumption is a challenging process, which requires coordination at individual and societal level. Consumer has been elated with the kind of reception; they are getting from various companies these days. The reason behind a drastic change in consumer behavior is because the consumer is no more treated as a hire purchaser but, he is treated as the decider of the companys fortune. Companies or marketers cannot hire any fortuneteller to guess the consumers attitude. Guessing or measuring the consumers attitude is not a cake walk but this is because predicting consumers attitude is as tough as predicting consumers mind (Bheri,2004). Consumers will drive the market in the 21st century. They exert their spending power within a marketplace, thereby influencing the success of all stakeholders in that marketplace. It is therefore crucial that manufacturers, retailers and marketers understand consumers in order to survive and be profitable in the highly competitive and rapidly changing 21st century. 1.2 MODELS OF CONSUMER BEHAVIOR A model presents phenomena in such a way that it can be easily communicated. Models operate on the assumption that all human behavior is rational. A model is a simplified version of reality, it has never been reality, it isnt reality and it will never be reality... therefore all models are subject to criticism. A model is also a set of internally consistent propositions that map out the components of a system or process. Relationships among the components are indicated and are usually presented visually. Models serve as maps of what makes up a specific phenomenon, whereas theories explain why and how the parts of a system
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or process interact and function in the manner they do (Damhorst, 1991; Engel & Blackwell, 1982; Loudon &Della Bitta, 1993). Various consumer decision-making models (Engel, Blackwell & Miniard, 1995; Schiffman & Kanuk, 2000), have been documented in the past, Damhorst (1991) is of the opinion that models and theories are equally important to scientific progress. Theory development becomes haphazard and inefficient without models of the process or system under investigation. Theory is a set of related or internally consistent propositions that explain, interpret, describe and/or predict a phenomenon in a highly simplified manner in order to be applied to a large number of phenomena (Damhorst, 1991; Winakor, 1988). (Assael (1992) and Engel et al. (1995) emphasized the importance of using a consumer behavior model that describes the sequence of factors that leads to purchase behavior. Models encourage a total and integrative view of consumer behavior. It would be irresponsible for stakeholders to attempt to understand the purchasing behavior of their clientele without having a holistic framework of variables that could influence consumer behavior. The quantification of the variables and their relationships is encouraged in a statistically reliable manner. Models also provide a basis for the development and evaluation of marketing strategies, as well as for market segmentation. The application of models identifies/ascertains/exposes gaps in knowledge and facilitates the identification of research priorities. Model components may not be equally important or relevant to all product categories. All the components of a general model of consumer behavior may not be equally important for all usage situations. No two individuals are the same, as they differ with regard to the variables of the model. This results in model components having different values, weights and importance for individuals in the same market. All purchase decisions are not equally complex. The complexity of the decision-making process will, for example, impact on consumers degree of information search, as well as evaluation of alternatives and choice of products from the evoked set. These limitations should not restrict the use of decision-making models. Models may differ,
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for example, with regard to complexity and consumer involvement. The degree of involvement in the decision-making process depends more on the individuals attitude towards the product than on the product characteristics itself (Du Plessis & Rousseau, 1999).

1.3 KEY TERMS Culture: Culture is the Set of Values, Perceptions, Wants & Behavior Learned by a Member of Society. It is the sum total of learned beliefs, values and customs that serve to direct the consumer behavior of members of a particular society. Cultural Factors: It is the fundamental determinant of a persons want and behavior. A person acquires a set of values perception, preferences and behavior through his or her family and other key institutions. Moreover values and beliefs are mental images that affect a wide range of specific attitudes that in turn influence the way a person is likely to respond in a specific situation. Both these components refer to the accumulated feelings and priorities that individual have about things and possessions.
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Social Class: It is the division of members of a society into hierarchy of distinct status classes, so that members of each class have relatively the same status and members of all other classes have either more or less status. It is a societys relatively permanent & ordered divisions whose members share similar values, interests, and behaviors. Social Class is measured by Occupation, Income, Education, Wealth and Other Variables. Social status: Social class is measured in terms of social status. Social status defines each social class by the amount of status the members of that class have in comparison with members of other social classes. Social Factors: Reference Groups: These are the groups that serve as frames of reference for individuals in their purchase or consumption decisions , group may be defined as two or more people who interact to accomplish either individual or mutual goals. These have direct or indirect influence on the persons attitude and behavior, Membership groups: These are the groups which have the direct influence on the persons behavior. Aspirational Group: These are the groups are those a person hopes to join. Dissociative Group: These groups are those whose values or behavior an individual rejects. Family: It constitutes the most influential primary reference group. Roles and Statuses: Role consists of the activities a person is expected to perform, each role carries a status. Personal Factors: Age and stage in the life cycle: Consumption pattern differs at different stages in the life cycle, thus the age and a life stage matters a lot.

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Life Style: It is a persons pattern of living in the world as expressed in activities interests and opinions. Personality and self concept: Personality is a set of distinguishing human physiological traits that lead to relatively consistent and enduring responses to environmental stimuli. Traits can be self confidence, dominance, autonomy, deference, social ability defensiveness and adaptability. Self concept is how person views himself and it is also one of the factors which influence the consumer behavior. Psychological Factors: Motivation: It is a need that is sufficiently pressing to drive the person to act. Learning: It involves changes in an individuals behavior arising from experience. It is produced through the interplay of drives, stimuli, cues responses and reinforcement. Perception: Perception is the Process, by which an individual selects, organizes and interprets information, inputs to create a meaningful picture of the world. Beliefs and attitudes: Belief is the descriptive thought which a person holds about something and attitude is persons enduring favorable or unfavorable evaluations, emotional feelings and action tendency towards Stimuli. An attitude may be defined as a learned predisposition to respond in a consistently favorable or unfavorable manner with respect to a given object.

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1.4 ENGEL- BLACKWELL-MINIARD MODEL


This model was created to describe the increasing, fast-growing body of knowledge concerning consumer behavior. This model, like in other models, has gone through many revisions to improve its descriptive ability of the basic relationships between components and sub-components; this model consists also of four stages;

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DECISION STAGES Research has demonstrated that there are five phases in the decision making process (Assael, 1998). Depending on the type of decision, there are major differences between the various decision stages (Engel, Warshaw & Kinnear, 1994).

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Extended Problem solving (EPS) Limited Problem Solving (LPS) Problem Recognition Stage : Recall of brand will not trigger interest. Recognition of brand may trigger interest. Information Search Stage : Low motivation to search. Passive exposure to ads. Internal search from memory. Strong motivation to search. Active exposure to ads. Some internal search from memory.

Exposure at point of sales triggers Buying action influenced by brand recall brand recognition. (brand name and product attributes) Alternative Evaluation Stage : Rigorous Evaluation of brands before Non rigorous Evaluation of brand after purchase. purchase. Limited evaluative criteria. Processing by Attribute. Purchase stage : Shop few outlets. Purchase Shop many outlets. Location of outlets not as important. Location of outlets most important. Personal selling more important. Display and point of sale are important. Outcome stage : Large potential cognitive dissonance. Little potential cognitive dissonance. Satisfaction crucial to routine purchases Satisfaction leads to routine based on based on brand loyalty. inertia, not on brand loyalty. Multiple evaluative criteria. Processing by Attribute to cut down on number of alternatives and then Processing by Brands

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First stage: decision-process stages The central focus of the model is on five basic decision-process stages: Problem recognition, search for alternatives, alternate evaluation (during which beliefs may lead to the formation of attitudes, which in turn may result in a purchase intention) purchase, and outcomes. But it is not necessary for every consumer to go through all these stages; it depends on whether it is an extended or a routine problem-solving behavior. Second stage: Information input At this stage the consumer gets information from marketing and non-marketing sources, which also influence the problem recognition stage of the decision-making process. If the consumer still does not arrive to a specific decision, the search for external information will be activated in order to arrive to a choice or in some cases if the consumer experience dissonance because the selected alternative is less satisfactory than expected.

Third stage: information processing This stage consists of the consumers exposure, attention, perception, acceptance, and retention of incoming information. The consumer must first be exposed to the message, allocate space for this information, interpret the stimuli, and retain the message by transferring the input to long-term memory. Fourth stage: variables influencing the decision process This stage consists of individual and environmental influences that affect all five stages of the decision process. Individual characteristics include motives, values, lifestyle, and personality; the social influences are culture, reference groups, and

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family. Situational influences, such as a consumers financial condition, also influence the decision process.

1.5 MOBILE PHONE BUYING DECISION PROCESS


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. On this basis, this research deals with consumers choice criteria in mobile phone markets by studying factors that influence intention to acquire new mobile phones on one hand and factors that influence on mobile phone change on the other. There are numerous complex factors that need to be taken into account when exploring mobile phone buying decision process, including both macro and microeconomic conditions that affect the evolution of mobile phone market in general and individual consumers motives and decision making in particular. Moreover, it is important to distinguish between buying behavior referring to the choice between different mobile phone models and brands and change aspects referring to reasons that affect change. As the mobile phone market is a typical technology push driven market where products are created ahead of the recognition of existing recognized consumer needs (e.g., Gerstheimer and Lupp, 2004), mobile phone development is based on consumers possible future needs and thus companies that best hunch the technologies and services of future will be the leaders in the discipline (for discussion of technology push see, e.g., Brown, 1991; Hamel and Prahalad, 1991; Kumar, 1997; Nagel, 2003). As it is still argued that the same basic Engel-Blackwell Miniard model can be used to characterize both the EPS and LPS behavior, and also because of high involvement EPS is usually activated by exciting those motives that are closely related to the consumers self concept, thus with the help of this research it is to be characterized that whether consumer passes both these stages while buying the mobile handset.

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2.0 STATEMENT OF RESEARCH / HYPOTHESES

Research refers to the systematic method consisting of enunciating the problem,


formulating a hypothesis, collecting

facts or data, analyzing the facts and reaching certain conclusion either in the form of solutions towards the concerned problem or in certain generalization for some theoretical formulation.

2.1 The research question/objective is: Do consumers go through EPS & LPS stages? To answer this question, purchase behavior for mobile handsets was studied.

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2.2 RESEARCH DESIGN

The research can be viewed from the following parameters The research is descriptive in nature. This refers to a study that is concerned with describing the characteristics of certain individuals or a group. The study involves finding out the data from the respondents by taking in-depth personal interview 2.3 SAMPLING METHOD The sampling method used in this project is Convenience Sampling. The number of elements of the population to be sampled is chosen is 50. Due to limitation of time, logistics and respondents willingness, the sample size is 50, which confirms to statistics requirement. 2.4 DATA COLLECTION Secondary data This data was used for literature review and to identify the relevant issues. Primary data was collected through in-depth personal interviews, using a structured questionnaire (attached in annexure-)- at respondents office or home. 2.5 DESIGN OF INSTRUMENTS Questionnaire Design
The method used for primary data collection is through in depth personal interview using a questionnaire designed specifically for this research. [19]

3.0 PROCEDURE
The first step was literature review. On the basis of secondary research and Engel-Blackwell-Miniard model, the questionnaire was designed. The survey was conducted in the NCR region.

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4.0 ANALYSIS/DISCUSSION
For analysis and to draw conclusion/s, the responses are presented in the following pie charts.

Q 1 &2 Many of us shifted from a basic telephone to the current handsets. What problems you faced and what reasons forced you to shift.

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Q3. It is a very good handset (the one the respondent is carrying). How did you identify this handset as the one you would like to buy?

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Q4&5 Imagine you want to buy another handset. Please indicate the priority (1, 2, 3) you will accord to the following Advertisement Friends Co Website None Retailer Magazines/Newspaper articles Any Other (specify)

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5.0 CONCLUSION:[26]

As far as EPS of EBM model is concerned, EPS involves high level of involvement of the consumer and high levels of the perceived risk, in this stage consumer do rigorous evaluation of brands before purchase, have multiple evaluative criteria and do processing by attributes to cut down on number of alternatives. According to the data given by the respondents, depicts that there are multiple factors which generates a need or a drive into a consumers mind and also there are multiple factors which are considered before making a purchase. As far as LPS is concerned, the consumer involvement is low and low levels of the perceived risk. Thus according to this, consumer has low motivation to search for brand information and also satisfaction with the purchase will encourage repurchase because of inertia, not real loyalty with the product.

With this research, it is seen that for some consumers its just a status issue, or they got bored with their handset, which creates an urge to buy a newer one even without a strong need, they dont think too rigorously before making a purchase.

Friends among the reference groups are considered to be the most influential factors in these decision making stages.

Hence it is proved that consumers actually go through these EPS and LPS stages while making a decision for purchasing a mobile handset.

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6.0 LIMITATIONS

Due to limitation of time, logistics and respondents willingness, and a small sample size was taken into consideration. Thus it is not possible to generalize this study, although future studies may like to take this further. There are some aberrations found in this research such as some consumers make a purchase decision just by getting bored with the older mobile handset, and sometimes status issue, social class , reference groups impacts a consumer in such a manner that with their influence he/she actually buys rather than even generating a need in the memory.

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7.0 REFERENCES:
Books: 1) Harper W. Boyd, Jr. Marketing Research, 7th edition. (Dated 15.01.2010) 2) Leon G Schiffman /Leslie Lazar Kanuk, Consumer Behavior: 8th edition. 3) David L. Loudon and Albert J. Della Bitta: Consumer Behavior: 4th Edition. Articles and Journals:1) European Advances in Consumer Research Volume 1, 1993,Pages 1-4,The future of the association for consumer research: backward to the past, by Alan R. Andreasen , University of Connecticut, Storrs, U.S.A.. 2) ECIS 2009 -0515.R1:17th European Conference on information Systems; The impact of culture on mobile phone purchasing. 3) Volume 15 Number 1: Customer satisfaction: cognitive dissonance vs. Brand preference: by Rader, Charles and Comish, Ray, from state McNeese University. 4) CEFAGE-UE working paper 2009/06;A conceptual framework of consumer food behavior. 5) Vol.5, No.3, 2007: Social Reference Group influence on mobile phones purchasing behavior: Int. J. Mobile Communications. 6) Vol. 14(3) 2005: Factors affecting Consumer choice of mobile phones: Two studies from Finland: Journal of Euro marketing.

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8.0 TIMESCALE
GANTT chart: A Gantt chart is a type of bar chart that illustrates a project schedule. Gantt charts illustrate the start and finish dates of the terminal elements and summary elements of a project.

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9.0 ANNEXURE
Questionnaire Q Many of us shifted from a basic telephone to the current handsets. What problems you faced and what reasons forced you to shift. What about you sir/madam. Q Would you be able to recall, what type of problems you had faced with your old telephone/handset. Q It is a very good handset (the one the respondent is carrying). How did you identify this handset as the one you would like to buy?
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Q Did you consult any friends/relatives/retailers/websites before finally buying this handset. Q Imagine you want to buy another handset. Please indicate the priority (1,2, 3) you will accord to the following Advertisement Friends Co Website None Your Name Your current handset THANK YOU SO MUCH FOR YOUR VALUABLE TIME Retailer Magazines/Newspaper articles Any Other (specify)

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