Chapter 2 Literature review:
The previous chapter introduced the research problem and objectives of this research regarding the boom of telecom sector in Pakistan and the analysis of mobile consumer's behavior. The aim of this chapter to offer a review of the literature concerning Telecommunication sector and consumer behavior, to provide foundation for testing a theoretical framework developed from existing marketing and consumer behavior knowledge. The background theories of consumer behavior, consumer decision making process and also influencing factor on consumer behavior will be discuss in literature review.
However, prior to the discussion of academic theories, literature regarding telecommunication industry and its background will be reviewed to provide insight knowledge regarding the telecom industry in order to generate appropriate research hypothesis as well as guiding for survey design.
Telecommunication in simple word is a transmission of signals from one place to another for the purpose of communication. A modern Telecommunication system are capable of transmitting telephone, Fax, Data, radio or television signals- can also transmit large volume of information at longest distance calls. In many ways it's been described as the transmission of data (digital and Analog) from one place to another. Due to technological development it has been evolved and now a lot of things come under the head of telecommunication and many other applications rely on this communication technology i.e. Internet Data processing, Fax voice mail box, video conferencing etc.
Telecommunication is one of the fastest growing industry around the world with a exponential growth rate in Pakistan. Wajcman (2008) explain that information and communication technologies are speeding up the daily lives. Telecom is considered to be one of the world's most dynamic economic sectors and it faces relentless technological and market forces (Wellenius & Stern 1996). Prior to the development into the telecom sector, this sector associated with engineers but now many large and small businesses, banking industry, user groups, policy makers, legislators, economist, politicial scienctists, development organizations, lawyers and many others are actively engaged in this sector.
Bautsch et al. (2001) reported that cell phones have a several influence on over society. This could include convenience to communicate, increased connectivity and affordability of mobiles etc. however many other communication facilities comes under the head of telecommunication like, fixed land line, internet broadband, calling cards and cellular service. The main focus of the study will be cellular (mobile) sector.
Cell phones are becoming a basic necessity of life according to international telecommunication union estimates, world wide mobile cellular subscription will reach approximately 4.1 billion by end of 2008. Mobile has effectively gained importance in communication technology and significantly adding value into economic development of many countries.
Bautsch et. al. (2001) stated that cell phones have a multiple influances on our society. This includes the daily interaction/ communication of people, access to anyone anywhere, convenience of usage and improved connectivity and affordability of technology. According to Aoki and Downes (2003), cell phones were originally desgined for business perspective and adult users but now situation is opposite. Srivastava (2005) argued that growth of cell phone technology is very impressive about the fact that in year 2002 the total number of cell phone users all over the world exceeded the total number of fixed landline users. Similarly Koopmaa (2000), Katz (2003) and Cooper et al. (2004) suggested that the growing usage of cell phones may influence our social and geographical aspects of people, especially young ones. Growth of cell phone will also provide many solutions and facilities to libraries and education systems.
In a press release of Garntner (2005) reported that if the current penetration rate of cellular mobile technology which is about 779 million cell phones every year, will continue then by the end of year 2009 the total mobile phones sales per year would reach up to 1 billion cell phones. Moreover, Motorola (2006) reported that in the year 2006 round about 31 percent of people were using mobile technologies. This growth of cellular phones and technology is quite impressive and is a clear evidence of stated literature. Geser (2006) also believed that the diffusion rate of mobile cell phones is much greater then any other technical gadget; this also includes internet and computer.
Masooud and Gupta (2004) explained the importance of mobile commerce as an important stream of revenues for many telecom organizations and further more they are enjoying much stable position as compare to other industries. However a Rapid technological advancement in an industry brings a lot of challenges for organizations. Therefore, it requires continues customer patronage which can be achieved through understanding or analyzing consumer behavior of the industry.
Recent Researches in Telecom industry
In recent era of telecom many researches taken place in this sector. Gaynor et al. (2005) used a structural model to analyze the demand and learning behavior of cell phone consumers market. They divided mobile phone consumption in to high- value part and low value part and considered that consumers were uncertain about their needs regarding low value and high value part. They argue that consumer knowledge improves over a time frame and consumers can make better decisions regarding products and services. They researched on learning behavior of consumers how consumers behave with the passage of time.
Similarly Ridenour and Fuch (1997) done the empirical research associated with risks of cellular phone usage still unaddressed. Burgass (2004) also has done researched on cellular phones, public fears and cultural precautions in American journal of sociology. Lorente (2002) analyzed the diffusion velocity of mobile phone usage and he realized that south East Asia and Europe had a larger share in this process as compare to US. The role of mobile phone in family communication is researched by the Devitte and Roker (2006). In which they have thrown light on many social aspects of mobile usage in relation to family consumption of cell phone and their views regarding mobile communication.
Kwon and Chidambaram (2000) suggested that social norms and culture of people influences on consumption pattern of cell phone usage among adults. Richard Ling a senior researcher at Telenor (R&D) Norway, done a lot of research on understanding the sociology of cellular phone usage. He argued that diffusion rate of cell phone usage among Norwegian teens, girls and boys in early years were almost equal yet it increased in boys as they grew older. Ling (2001) further includes that about 90% of young male has cell phone ownership where it is about 70% in case of young women. He also reported the positive correlation in male age and trend of making phone calls. In another research Eldridge and Grinter (2001) reported that the average number of text messages sent by boys average 2.3% whereas girls sent 3.3% on average. Text messages are very famous among young teen agers because of its low cost, convenience and prompt replies. Mostly these messages used to adjust meetings and short replies for long conversations which already took place between these peoples. Countries like United state and United Kingdom and many developing nation's people prefer text messages as compare to costly calls. In Pakistan many cellular service providers are giving special packages for texts and calls according to the special needs of local people.
State of Telecom Industry in Pakistan:
Pakistan is one of the fastest and largest growing cellular market of the world with current market position of fourth (Pakistan Telecommunication Authority 2008). The present growth is influenced by the many effecting forces and de-regulation of govt. policies. This growth is also due to various favorable influences including maximum coverage, cheap tariff plans, deregulated environment. PTA (2008) reported that the percentage of Teledensity has been improved and reached up to 55.6% out of 52.4% is only for cellular subscription. The current growth trends of the industry envisaged that industry will attract two to three million cell phone services subscribers each month. These growth indicators have forced cellular service providers to improve services and increase network coverage in remote areas of Pakistan to cover 90% of population. Complete description of Pakistan telecom industry is available in section "Boom of Pakistan Telecommunication"
Welcome to the fascinating field of consumer behavior (Loudon & Bitta 1979). Behavioral studies have vital importance in marketing managers and others who are professionally concerned with buying activities. Not all behavioral science concepts relate with marketing management but considerable interest has been expressed in behavioral science studies, especially psychology and sociology to understand consumers. Consumer psychological backgrounds have been studied to find out what factors effect buying behavior like, attitude, motives and personality, status and family and culture. Foxall (1980) stated that knowledge about the consumer in competitive economic system is very important for the survival and growth of company. Firms should aware of consumers in a sense: how they buy, why they buy and where they buy as well as just what they buy.
According to Kotler et al. (2002, p. 189):
'Consumer buying behavior refers to the buying behavior of final consumers- individuals and households that buy goods and services for personal consumption', and 'all of these consumers combined make up consumer market'.
Loudon et al. (1979) define consumer behavior as
"The decision process and physical activity individuals engage in when evaluating, acquiring, and using economic goods and services"
Another author Moutinho (2007) refers consumer behavior as
"The process of acquiring and organizing information in the direction of a purchase decision and using and evaluating products and services".
This process includes the various stages of searching, purchasing, using, evaluating and disposing of products and services. One author defined consumer behavior are "the way people act in the exchange process"
Williams (1982) explained in his book that consumer behavior are the behavior that consumer display in searching for, purchasing, using and evaluating products, services and ideas which they expect will satisfy their needs. Essentially all these definitions say that consumer behavior involves a complete process by which people acquire and use various products and services which they think satisfies their need.
Consumer behavior is dynamically changing and evolving, many statements about consumer behavior become irrelevant due to changes in thoughts and social conditions (Blythe, 1997). Researchers want to explore more in depth of behaviors like what consumer think (cognition), what they feel (affect), what they do (behavior) and what things and places that influence and also these things influenced by others. Now a day the understanding of all these topics is essential in making good business strategy.
In a general sense consumer behavior plays a significance role in our routine life. Much of the time directly spent into market place shopping or engaging in other activities. Mostly a large amount of time spent on thinking about the product features, talking to friends about them, seeing advertisements, news, and billboards about all interested products. In the end the goods we purchase and the way in which we use them significantly influence on our daily life style.
As mentioned by Blythe (1997) we should know what things influence on behavior. However understanding of consumer behavior and customer orientation is vital for every firm but it's not an easy task because of its vastness. The main problems are every one is different from one another and consumers often act emotionally rather then rationally and they all act differently at different times and often respond differently. So the understanding of the consumer decision process and all other influencing factors including social and individual factors in consumer choice is vital.
Consumer Buying Process:
The consumer buying decision process, also known as consumer decision theory was actually based upon the integrated models of consumer decision making introduced by Nicosia (1966), Engel et al. (1968) and Howard and Sheth (1969). Consumer decision making models are still the basis of marketing text despite its increasing complexity. Foxall (1980) states consumer buying process into four distinct stages figure: 2.1
Figure 2.1 Buying Process A Basic Representation
Source: FOXALL, GORDON R. 1980. Consumer Behavior a Practical Guide. London: Routledge.
He explains, consumption is a process which starts before the actual product purchased and it extends well beyond it. Many writers argue that first stage in this buying process is that of growing consciousness of a need, potential customer realized about his wants and this could be fulfilled by marketing system by providing required and innovative products to satisfy customer needs. This process included a lot of other options some time consumer may aware of its need and he may directly purchase product or in some case lack of money, or conflicts of interest may lead to another activity.
Kotler (1972) and Kotler, et al. (2002) represented another simplest consumer decision model: the "Black Box". This model is essentially a stimulus response model based on early communication research an exogenous variables, black box model avoided any supposition related with finding processes and variable in the mind of consumer (Lye, Shao, Sharyn and Fausnaugh 2005). However Schramm (1971) argued that the content in the communication process of black box (figure: 2.2) are vaguely understood without a empirical support because behavior is a subjective term.
Figure 2.2: Model of Buying Behavior
Source: Kotler, P., Armstrong, G., Saunders, J., and Wong, V. (2002), Principles of marketing. 3rd edition., Harlow: Prentice Hall. P. 191.
As we know consumer decision process contain five simple steps (figure: 2.1) which suggested as a response to problem faced by consumer (Solomon, 1991), and in most cases consumer has more than one choices in a market place which requires evaluation (Schiffman, and Kanuk, 1978). During this evaluation process, information will be collected from various sources to make purchase decision and consumer take also further actions according to his level of satisfaction of post purchase decision evaluation. During this process a lot of influencing factor plays role in buying process.
Sprolls and Kendall (1986) identified some characteristics of eight decision making styles which are stated in a Table: 2.1 below.
Table 2.1: characteristics of eight decision making style
Source: Sproles, G.B., and Kendall, E.L. (1986). 'A methodology for profiling consumers' decision making styles', Journal of Consumer Affairs, 20 (2), pp. 267-279
However it is worthwhile to figure out consumer decision process stages, in low involvement purchases, consumer may skip or reserve some stages (Kotler, 1994). For example in low involvement purchase conditions, consumer decision stages can be learn according to environment such as store promotions or extrinsic factor such as style of cell phones, mobile features or exotic outlook of cell phone.
It clearly means that the main decision process happen at the point of purchase, at that point consumer recognize his need and evaluate the product and then make final purchase decision, Still at the time of purchase point many influencing factor plays role in consumers buying decision.
Factor influencing consumer buying behavior:
The buying behavior of customer is very complex and it's influenced by the many factors, and some time these factors conflicts with so called rational behavior of customers. There are so many influencing factors both at macro and micro level influences on the consumer buying behaviors. Chisnall (1995) states the influencing factor on consumer behavior are the interactions of groups and personal behavior, challenges of authority and status, subtle effects of culture on consumption etc. Many authors identified social and individual factors affecting on consumer choice or decision making. Foxall (1980) also provided influencing factors on consumer behavior and decision makings, two major influencers are Social Structure and individual influencers which influence on consumer decision making (see figure:2.3). Some author categorize these aspects into two, External Environment (Social structure) and Individual Determinants (Individual Influencers)
- Internal Influences:
- External Influences
Researchers argue that consumer's buying choices are mostly influenced by four major psychological factors: Motivation, perception, learning and attitude/beliefs (Armstrong & Kotler, 2000). Well and Prensky (1996) consider these factors as a tool to recognize their feelings, gather and analyze information, formulate thoughts and take actions. Goodwin (1999) believes these factors are the success of any marketing strategy. All factors comes under internal influencing are important but attitude of consumer is the bridge between consumer background characteristics and consumption that satisfies its needs and influence on his decision making process. Attitude of consumer does not directly help or tells certain behavior of consumer instead it gives an idea that what buyers are likely to do in certain situations. According to Fishbein and Ajzen (1975), cited by Hawkins, Best and Coney (1998):
"Attitude is an enduring organization of motivation, emotional perceptual, and cognitive process with respect to some aspects of our environment"
Attitude describes person's persistent evaluation, feeling and tendencies towards particular objects or idea. It puts people constantly in to various favorable and unfavorable manner with respect to a given object/product. It is how consumer thinks, feels and acts towards some aspects of environment such as retail stores or products. Attitude of people are very difficult to change so the understanding of mobile consumer attitude will help organization in many perspectives like, the adoption rate of cellular products, mobile brands, services and evaluate future growth of mobile phones and also subscription rate.
The consumer behavior of several products and services can not realistically isolate from their societal roles as family, friends, workers, social class and so on. The consumption of goods takes place in a social and cultural environment; social and cultural norms and inhibit personal consumption (Chisnall 1995).
For clear understanding consumption influenced by people's social environment, most importantly Culture and norms of society. The differences in sociologist and social psychologist opinions made this area of study blurred but still all of them at the same consensus that societal aspects and individual aspects of consumer are important to understand for marketers, however all individual factors of consumer are also influenced by societal & cultural aspects/factors. This point gives more importance to social and cultural factors.
The study of environmental elements/factors impinging upon consumer is a lot but the most important and basic enduring factor is culture which has pervasive influence on consumer behavior. Many researches argued upon various influencing factors on grouped consumer behaviors and individual consumer behavior. Duesenberry (1949) argued cited in Loudon et. Al (1979) that all the activities in which people engage are culturally determined, and all the purchases made by consumer make up the life of a culture. Thus the understanding of the culture enables marketers and management people to interpret the response to their marketing strategies.
Assael, (1987) cited in Slowikowski & Jarrat (1997) defines Culture as
"A norms, beliefs and customs that are learned from society and lead to common pattern of behavior"
In the center of every culture there is a common set of values which determines what is a socially acceptable behavior. These values formed by social organizations such as families, friends, education and social class.
Many authors have tried to explained this concept in their own ways like Hofstede (2001, p.9) described culture as the
'Collective programming of the mind that distinguishes the members of one group or category of people from another'
Similarly Tayeb (2003, p.10) also explained culture as
'historically evolved values, attitudes and meaning that are learned and shared by the members of the community and which influence their material and non-material way of life'
Wild et al (2008, p.50) given a very simple definition of culture stated, culture as a set of values, beliefs, rules, and institutions held by a specific group of people but on the other hand Trompenaars and Hampden- Turner (1997) arguing that culture is not based on the agreed ways of living but also the ways in which society or group attributes meaning to their world. Since the importance of culture raised in multinational organizations now every company looking for those people with cultural sensitivity that can put their selves into another's shoes. Latest management studies and reports cleared that lack of cultural sensitivity can be much costly to TNC's in the sense of money and opportunities (Wild et al 2008, p. 91).
The rise in international business practices resulted in increased importance of understanding of local and international cultural. The previous research in understanding of consumer behavior and marketing practices emphasized the growing importance of understanding of culture (Aaker and Lee, 2001, Deshpande and Parasuraman, 1986, Hofstede, 1991). Similarly, research done by Mattila (2004) showed that culture influences the service expectations of a consumer and consumer perceive products according to their attitudes and behaviors. In simple words better understanding and cultural literacy is the key to success (wild et al, 2008), on the other hand lack of understanding and knowledge about culture and consumer behavior could create barriers for success. All researchers believe in importance of cultural & consumer understanding for making effective marketing strategies.
Hofstede Cultural Dimensions:
The nature of management skills is not a universal they are cultural specific. However management skills and philosophies that are appropriate in one culture cannot be similar to another. So management should have local knowledge about customs and traditions and attitude of local people. Professor Hofstede presented its research on cultural dimensions which helps management people to examine different cultures and also help in making effective strategies. This model is based upon the following dimensions
- Individualism versus Collectivism
- Power Distance
- Masculinity verses Femininity:
- Uncertainty Avoidance:
This dimension identifies the cultural emphasis on the individualism and collectivism. Individualism can be seen as a degree to which individual decision making actions supported and encouraged and individualism is a loosely knit social frame work in which individuals are supposed to take care of themselves and immediate fellows (Hofstede 2005). Whereas collectivism is the degree to which group efforts and actions are encouraged and this is the very closely knitted social framework in which individuals can expect their relatives and friends for help in exchange of unquestioned loyalty. Some culture in this world follow individualist culture characteristics and some believe in collectivism so based upon Hofstede model these are some factors which segregates from individualistic culture to collectivist. In individualistic culture mostly identity based upon on individuals and their mostly tasks preferred over relationship with low responsibility and very low context of communication, however in collectivism people share responsibilities and very strong context of communication with one another (Hofstede 2005). As we know Hofstede (2005) had done this research in 40 different countries and identified different values for each country. According to him Pakistan comes under the collectivism as compare to USA and UK.
This dimension conveys the degree to which culture accepts the social inequalities among people. It also connected with the willingness of the society to accept hierarchal power system. Some countries in this dimension believe that high power distance and established power hierarchies are necessary for smooth operations in society but it also tends to be inequality between superior and subordinates that's why management in high power distance societies got much more advantages and perks. However in low power distance countries displays a greater degree of equality, with prestige and rewards more equally shared between superior and subordinates. The basic fundamental issues addressed by this dimension is that its gives the direction of culture in way of solving inequality in society.
Hofstede (2005) identified these factors for differentiating low power difference and high power difference. In low power distance people hate status symbols, privieleges and inequalities in society or either family, whereas in High power distance people give importance to privileges, status and higher liked to be treated different way than lower. According to Hofstede (2005) dimensional model Pakistan scored 55 on power distance and Malaysia scored 104.
This dimension attached to the importance of male values such as the competitiveness, performance and assertiveness as compare to feminine values such as quality of relationship and care takers (Hofstede 2005). Basically this dimension gives an idea regarding the culture of country that what kind of status female and male hold and what kind of jobs are specific to gender. The distribution of gender roles in some societies is a critical issue. In Masculine culture males are supposed to be aggressive, tough and focused on material success, whereas in feminist culture females are supposed to be modest, nurturing, concerns for others and quality of life. Apart from this, the role of female in some societies overlaps which means that both men and women are supposed to be tender, modest, concerns for others and assertive, aggressive. Some of the feminine cultures are Sweden, Norway and Denmark whereas Pakistan has masculine culture according to Hofstede (2005).
'The uncertainty avoidance is the degree to which people in society feels uncomfortable with uncertainty and ambiguity' (Hofstede, 2005). This dimension deals with the society's tolerance for unstructured and uncertain situations. The culture with a large uncertainty avoidance values security and places, their faith is on strong system of rules and regulations in society. The people with large uncertainty avoidance normally have less employee turnover, more formal rules for regulating employees. Whereas cultures with low uncertainty avoidance tends to be more open to change or new ideas that's why people in this category more entrepreneurial and organizations welcome new ideas and practices in businesses. These are some factors which distinguish from high level to low in uncertainty avoidance. People in high uncertainty avoidance are emotional and aggressive abide by many rules and regulation with low level of tolerance. Mostly they are resistant to change. However in Low Uncertainty avoidance people got high tolerance level, open to change, and very less rules and regulations to abide. According to this dimension given by Hofstede (2005) many western European nations, Australia, Canada are in Low uncertainty avoidance and Pakistan comes under High Uncertainty avoidance.
This chapter presented the review of the literature regarding telecommunication and its impressive growth in all over the world especially in developing nations like Pakistan. This chapter also discussed the penetration of mobile phone in the world and its influences on social lives of people. Then it described the foundation underlying the theoretical framework related to research objectives which is consumer behavior. A complete buying process and influencing factors are discussed to understand mobile consumer in Pakistani context. A brief explanation about the Hofstede cultural dimensions to exactly know how cultural can influence on the consumer buying behavior. Overall, in this chapter research related literature reviewed and a possible research framework developed to achieve the main objective of the research. These are the proposed hypothesis developed as a guide line for data collection and analysis.
- To Investigate the boom of telecommunication industry of Pakistan particularly cellular sector & its various impacts
- How do psychographic factor effects buying behavior of mobile phone
- Perception of mobile phone is positively related with mobile brand name
- Attitude of mobile consumers are negatively related with the usage of mobile phone
- There is a relationship between the mobile usage and fashion statement
- There is a negative relationship between collectivism and individualism in mobile buying behavior
- There is a relationship between the masculinity and famine mobile usage and buying behavior
- There is a relationship between education and buying behavior
- There is a relationship between personal income and buying behavior