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05/09/2012

Case Study - Consumer Behavior


Case Question 1: What will be the effect of industry trends on the demand for mobile commerce applications among cellular service providers in the next decade? What killer applications will be most successful?

Answer

            The increase in usage of mobile devices, such as cellular phones, has also increased the opportunities for cellular service providers to pursue mobile commerce. The basic idea of M-Commerce is to distribute information and thus generate business in a mobile way. M-Commerce gives traditional media (newspapers, magazines, TV) the opportunity to supply different pieces of information to millions of users, and – in the end of the day – to earn money from re-using their content. Many predict that M-Commerce will develop into a big industry in the next decade. This prediction is based on the increasing number of cell phone users around the world. For example, it was estimated by Wireless Week that there were 94.9 million of M-Commerce users in the world in 2003. This number was expected to grow to 1.67 billon by 2008. Moreover, worldwide revenues from M-Commerce were $6.86 billion in 2003 and were expected to reach $554.37 billion by 2008. One of the most important industry trend that is expected to catapult this growth is the increase of mobile phone (and other devices) users around the world. Technological and demographical developments will have a tremendous impact on the development of M-Commerce. Socio-cultural changes have changed the behavior of people in today’s world. The continued impressive growth of mobile services is also expected to result in the healthy growth of M-Commerce. New technologies and innovations will help M-Commerce service providers to offer better services and attract more users. The development of the mobile internet channel will open up new possibilities. Because of the development of technology and innovations in the mobile computing and communication industries, M-Commerce applications continue to develop:

·         Mobile banking – this application makes it possible to complete bank-related transactions such as checking account status, transferring money and selling stocks, via mobile devices, independent of the current location

·         Mobile entertainment – on the one hand, this application contains services that provide the user digital data with entertainment value on mobile devices such as ring tones, music and videos. On the other hand it opens an array of interactive services such as betting, gaming, dating and chatting

·         Mobile information services – this term refers to mobile services that provide subscribers with content of informational character. Examples of such services are news updates of any nature, travel information, access to search engines and Mobile Office.

·         Mobile marketing – this term refers to services based on mobile communication technologies that provide firms with new, innovative instruments, such as to increase sale, win and retain customers, improve after-sales services, build and sustain a positive and modern image/brand and carry market research. Mobile devices serve thereby as simple and relatively inexpensive channels of interaction

·         Mobile shopping – this application bundles services that allow for mobile processing of transactions involving purchase of goods of daily use. The user can purchase products by choosing them from a catalog accessible from a mobile device. The products need not be of a digital nature.

·         Mobile Ticketing – all services must be paid for, before a lawful utilization can take place, are suitable for Mobile Ticketing such as traveling in public transport, entry to a cultural event of cinema. This application ensures that the user can purchase a right to utilization/entry via mobile device, replacing conventional paper ticket. The ticket is sent in digital form to the mobile device.

·         Telematics services – telematics is an artificial term referring to innovative technologies that link telecommunication technologies with informatics. The transport segment has been the primary area of this application, which is also known as Intelligent Transport System (ITS).

Case Question 2: Will the provision of M-Commerce applications by T-Mobile help the company build a strong brand and maintain its competitiveness in the marketplace?

Answer

            By providing M-Commerce applications, T-Mobile is able to provide the services that are needed by the consumers. By providing the needs of its users, T-Mobile will be able to build a strong brand and be able to create brand loyalty among its consumers. Since, M-Commerce applications can benefit the company’s consumers, providing M-Commerce applications will help the company build a stronger relationship with the customers which will be a switching barrier. In his book, Blackwell identified three switching barriers: These are:

·         Social benefits – customers build interpersonal relationships with service personnel. These bonds between the customers and the firm result in the former receiving social benefits. The same interactions can lead consumers to develop strong personal relationships with the company and bind customers.

·         Perceived switching cost – in many instances customers are loyal to a provider, because of the difficulty of changing to a different firm. Switching is likely to involve various behavioral and psychological aspects, given that switching costs include the time, money and effort the customer perceives, when changing from one provider to another, more specifically, they entail search and learning costs.

·         Attractiveness of alternatives – depending on the quality of competing alternatives, the customer perceives a benefit in changing the provider. The more attractive the alternatives are, the higher the perceived benefits when switching. Therefore, consumers are likely to switch once they perceive alternative offerings being superior with respect to the cost-benefit ratio.

            By providing M-Commerce applications the company will decrease the likelihood of its customers from switching to other cellular phone services providers since the company also offers the services that other providers offer. Because of this, the company will maintain its competitiveness. Additionally, by providing the services that other providers offer, T-Mobile has a bigger chance of attracting current users of its competitors’ services to switch to T-Mobile because the company offers more services, more minutes, and more features.  

            By anticipating the needs of the consumers, T-Mobile will have a good brand image among its consumers creating brand loyalty. By providing better and innovative services and applications, T-Mobile will be able to develop brand loyalty among its consumers. According to Blackwell, product (or service) quality is a key to brand loyalty. Consumers may also become brand loyal to high quality brands that are perceived to be priced fairly.

Case Question 3: Will M-Commerce applications contribute to T-Mobile present business strategy, “Get more from life”?

Answer

            Providing M-Commerce applications will contribute to T-Mobile’s present business strategy which is “get more from life”, since this slogan promises subscribers that they will get more services, more minutes, and more features, so they can enjoy the benefits of cellular communication services. Providing additional applications and services that will benefit the consumers is a fulfillment of the company’s brand promise. Let us consider Ansoff’s (1995) matrix. Ansoff’s strategy is composed of four components. These are product/market scope, growth vector, competitive advantage, and synergy. Ansoff identified four generic growth strategies:

  • Market Penetration

  • Market Development

  • Product Development

  • Diversification

Market Penetration – The market penetration strategy amounts to increasing sales of existing products while at the same time trying to maintain current margins of profitability on sales. When the market is expanding this may be accomplished through active marketing in order to get more first-time users to buy the product or to increase product usage of existing buyers or to increase product usage of existing buyers or to increase the frequency of use (Proctor 2000).

Product Development – A new product can be defined in several different ways. A product can refer to a physical entity or a cluster of expected customer benefits. From the point of view of a business, a product innovation may represent a change in, or addition to, the physical entities that make up its product line. From a market perspective, the term refers to a new or revised set of customer perceptions about a particular cluster of benefits (Proctor 2000).

Market Development – Finding new markets may not guarantee success for the firm. A firm can also achieve growth in developing market. Market development strategy involves developing new markets by duplicating the business operation, with minor adaptive changes. The firm can undertake a market expansion strategy. In market expansion, the same expertise and technology and sometimes even the same plant and operations facility can be used. There is therefore potential synergy and resulting reductions in investments and operating costs. Geographic expansion may involve changing from regional operation to a national operation, moving into another region, or expanding to another country (Proctor 2000).

Diversification – Diversification involves moving simultaneously into new products and new markets. It is a risky strategy but with careful selection of the right kind of businesses, considerable improvements in profitability can be experienced. Diversification can take place into related or unrelated products. A related diversification is one in which the new business has meaningful commonalities with the core business. These provide potential to generate economies of scale or synergies based on exchange of skills and resources. A diversification strategy can be implemented by an acquisition (or merger), new business venture or strategic alliance (Proctor 2000).

            Providing M-Commerce applications and services is considered as a form of diversification, wherein T-Mobile introduces new services and applications to improve their customers’ experience. This strategy is aligned with the company’s business slogan since added M-Commerce applications and services are expected to provide benefits for the customers.

Case Question 4: How will M-Commerce applications increase customer satisfaction among T-Mobile subscribers?

Answer

            There are several factors that affect customer satisfaction as applied to M-Commerce. These include:

1. Information factor – similar to the online environment, users in m-commerce environment are able to easily find information and communicate easily and conveniently, 24 hours a day, 7 days a week. As a source of information and communication, the mobile phone significantly affects user behavior. Therefore, the quality of information content provided by the mobile phone often reduces user search efforts and stimulates behavioral intention to use. Mobile phone users often log on the Web to check email, get news, obtain map or driving directories and restaurant guides, etc. It is expected that overall perception and aroused satisfaction will positively affect an individual user’s perceived usefulness and ease of use.

2. Price factor – price plays a large role in the choice and quantity of decisions. Price is considered as a major factor for measuring consumer sensitivity. Price affects the perception of online users positively and negatively. Similar to online users, pay additional fees in order for value added services (VAS), such as downloading TV programs, books, accessing the Internet, etc.

3. Service factor – services that are provided via mobile phone have been developed rapidly. Penetration rates of Internet-enabled phones have been drastically increased, whereas adoption rates still varied by regions. Existing and potential services are varied based on the development of mobile technology. Services such as SMS, voice messages, changing or downloading ringtones, accessing the Internet, and other basic functions are available for most of the mobile phone users in the world, whereas value added services (VAS) such as downloading or listening to music, receiving receipts for credit card transactions, downloading coupons, watching TV, reading books, paying for vending machines or transit, and receiving advertising or promotions are available for some mobile phone users and also in some countries that provide those services. M-businesses extend models and services by working with banks, credit card companies, and retailers to develop the right micro-payment solutions and business models.

4. Convenience factor – various researchers have found that a major factor to increase consumer satisfaction from e-commerce is convenience. As with the Internet, a media-inherent characteristic of the m-commerce is its accessibility: 24 hours/7days a week. Mobile users can save time when they manage businesses, enjoy services, and place orders. Mobile phone users easily get access to the Internet, download music, check email, enjoy m-books, and obtain coupons.

5. Technology factor – mobile phone usage cannot only adopt new technologies but also consider usability factors to meet the ultimate needs and wants to customers. Prior studies discussed how perceived usefulness and ease of use are influenced by various factors, including the system’s technical design characteristics. Technology factors include website effectiveness – speed and customer interaction design factors such as content, context, and customization.

6. Promotional factor – M-businesses have been used as promotional tools in some countries. The mobile phone has been used as an important marketing tool for price, product, promotion and place.

7. Entertainment factor – prior studies note that computer-mediated communication is strikingly playful. Various studies have recognized the inherently playful nature of the computer as a medium. It has been mentioned that millions of people are playing with their mobile devices in various ways. Previous studies state that playfulness is an important factor to acquaint users with the computer, by shifting attitudes from fearful and awesome aspects to positive factors.

Case Question 5: How will location-based M-Commerce applications affect consumer behavior?

Answer

            It should be noted that the introduction of new technologies such as mobile devices and the Internet and the development of E-Commerce and M-Commerce are have resulted in changes in consumers’ behavior and expectations with regard to brand loyalty. Mobile phones and the web are now allowing people to be more connected than ever. Consumers are also responding to businesses that take the time to understand their needs and offer excellent customer service. Mobile technology allows businesses to become more service-oriented in what they do and to tailor what they provide to better meet the needs of individual consumers. Mobile phones are enabling these changes to happen on a global scale. There are re over 3 billion mobile phones worldwide. This means that over 40 percent of the world’s population carries a mobile phone, far more than use a computer or have access to the internet. In many developed countries, mobile phone penetration is above 90 percent and developing countries are catching up fast.

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