Agent Based Simulation of Consumers Purchases Decision Making of Mobile Telecommunication Products

Putro, Utomo Sarjono Bandung Institute of Technology Permadi, Krisna Bandung Institute of Technology Siallagan, Manahan Bandung Institute of Technology Novani, Santi Bandung Institute of Technology Utomo Sarjono Putro, School of Business and Management, Bandung Institute of Technology, Jl. Ganesha No 10, Bandung, West Java, Indonesia 40132, Tel. 62222531923 Abstract About a decade ago, the mobile phone system began reaching the market in Indonesia. After the mobile phone GSM Indonesia successfully penetrated the market, many service providers in the telecommunications service provider made mobile telecommunications market as a competitive market and continue to change. To face the complex changes, statistical analysis and modeling based variable has weaknesses in explaining aspects of the changes caused by the behavior of consumers / individuals. This research is trying to make a prototype model to challenge the market dynamics of mobile telecommunications services and to analyze how provider can attract consumers interest to buy their product with respect to consumers value and life style using agent-based modeling and simulation. We focused on the process of change of consumer preferences mobile communication and decisionmaking consumer purchases of mobile telecommunication products, and how marketing strategies and knowledge gained from the social environment can affect the individual preferences and consumer purchasing decisions. Based on result of simulation, effort or marketing strategies from provider to attract the customer should be design with respect to values and life style of customer. Introduction It has been one decades cellular telephone system starts in Indonesia market. Consumer cellular telephone in Indonesia is growing rapidly. Based on data, it shows number of cellular telephone consumers in Indonesia increase more than 25 million in the year 2004, 60 million in 2007 or around 26 % of Indonesia population, and it is expected that the number of consumer will reach 100 million in the year 2008. This situation makes the service feeders more creative in determining marketing strategy which will be done, because determination of marketing strategy will determine success from a product or service in market. Simulation is a way to analyze social interaction. Dynamics happened at social interaction process and phenomenon resulted by it can be observed in experimental simulation without generating risk at system in reality [3]. Purpose of this research is to analyze change of telecommunications product preference as result of existence of interaction and transfer of information between consumers (word of mouth), and alteration of respected product attribute. We also analyze how provider can attract consumers interest to buy their product with respect to consumers value and life style. In next session we will explain about simulation model, simulation result, and conclusion of this research. Simulation Model In this paper, simulation model will use the five-steps of purchasing decision process of consumer. We assume consumer will purchase a telecommunication product from several providers (there are seven providers in this model). Every provider has four attribute, i.e. price, coverage, used by many people, and customer service. Price is an attribute of product which indicates an amount that customer will pay for the product. Coverage is an attribute of product which indicates availability area (transmission area) that covered by a provider. Used by many people is an attribute of product which indicates how well the product was known by consumer. Customer service is an attribute which indicates availability of after sale service of a brand. We also assume consumer have weight and utility value for each attribute and for each provider. We assume consumer and provider as an agent for this model. Each consumer has a type of consumer based on VALS segmentation. Simulation model for purchase decision making of consumer will use flowchart which describe in Figure 1. For each iteration time, each consumer will interact with his/her neighbor to exchange information that he/she has about attribute for some providers. Depends on his/her level of arousal, consumer may do or not to do an

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activity to consume. Detail explanation of this simulation model can be described as follows:

utility value and weight for each attribute, i , i = 1,2,3,4 and i , i = 1,2,3,4 respectively.

3. Evaluation Consumer decides to use service from a provider 1. Problem Recognition based on his/her utility function. The utility function Decision making of consumer agent is started with existence for each consumer in this model is given by following of desire to consume (arousal) from consumer. We defined equation level of arousal according to type of consumer.

= number of attribute

4. Purchasing Decision After knowing the utility function for each provider, every consumer has a set of probability vector [ Pi ( a1 ), Pi ( a 2 ),..., Pi ( a m )] , where
C = {a1 , a 2 ,..., a m } is the set of provider available in the marketplace. Consumers decision probability vector is calculated by Pij (C ) = 1, if U ij = max(U ), else 0 . Pij (C )

is the probability for consumer i to choose provider j among a set of provider C . U ij is the utility of Figure 1. Flowchart of Purchase Decision Making of Consumer 2. Information Search Population of consumer will stays at one particular population grid. Each consumer agent will interact with his/her four nearest neighbors. Consumer consumer i assigned to provider j . 5. Post Purchase Evaluation The process does not end with purchase decision; consumer will evaluate their experience with the provider and change their level of satisfaction. In this simulation, level of satisfaction is described by utility function and weight. If consumer is satisfied by certain attribute of provider, his/her utility value will increase. The provider has ability to change their attributes parameter = [g1, g 2 , g 3 , g 4 ] in order to attract consumers. Simulation Result In this simulation, we set 400 of consumers and 7 of providers namely (SP, XO, IM, TH, AX, MT, KA), we set 300 of iteration. We use two scenarios in order to analyze effect of provider effort ( parameters) to maintain their consumer, especially in attribute price. We emphasize on price to describe price war situation in telecommunication market. Type of consumer is also a part of these scenarios. In this simulation, weight and utility of consumer will initialized randomly. Scenario 1: We set all providers have parameter 0.1 except provider 6 ( P6 ) has parameter on The exchanged information can be positive or negative perception toward a providers attribute. Every consumer has a utility value and weight for each attribute of a provider. A provider j has four attributes, g i , i = 1,2,3,4 , a consumer will give his/her attribute price 1. This means that provider 6 ( P6 ) make hard effort on price (e.g. lower price and discount). Proportion of survivor consumer is large (65%).

Ai , j will interact with consumer

{ Ai , j 1, Ai , j +1 , Ai +1, j , Ai 1, j } described by Figure 2. Each

consumer will have ten strings of information representing attributes of provider.

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PA: [5, 5, 5, 5, 5, 5, 5, 65]; IMS:[12.75, 12.00, 16.75, 15.00, 13.75, 16.00, 13.75]; FMS:[12.25, 9.25, 11.75, 12.25, 10.50, 33.75, 10.25]

Scenario 2: We set all providers have parameter 0.1 except provider 6 ( P6 ) has parameter on attribute price 1. This means that provider 6 ( P6 ) make hard effort on price (e.g. lower price and discount). Proportion of survivor consumer relatively not too big. PA: [15, 15, 10, 5, 5, 10, 15, 25]; IMS:[ 12.25, 15.75, 15.25, 13.50, 15.25, 15.25, 12.75]; FMS:[ 14.75, 12.00, 12.25, 15.25, 12.50, 20.50, 12.75] Conclusion Effort or marketing strategies from provider to attract the customer should be design with respect to values and life style of customer. In the situation where population of customer is dominated by certain type of values and life style, we can make an effort according to this type. So, we must do an investigation to find what type of our population customer and make effort according to what we have found. Future Research Implementation of this model is to describe churn phenomena in Indonesias telecommunication market. References Csik, B. (2003). Simulation of competitive market situations using intelligent agents. Periodica polytechnica , 11 (1), 83-93. Engel, J., R.D.Blackwell, & Miniard, P. (1995). Consumer behavior. Philadelphia: The Dryden Press. Gilbert, N., & Terna, P. (2000). How to build and use agent-based models in social science. Mind and society , 1, 57-72.

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