Factors Affecting Consumer Choice of Mobile Phones: Two Studies from Finland

Heikki Karjaluoto Jari Karvonen Manne Kesti Timo Koivumki Marjukka Manninen Jukka Pakola Annu Ristola Jari Salo

ABSTRACT. 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 article deals with consumers choice criteria in mobile phone markets by studying factors that
Heikki Karjaluoto is Research Professor in Marketing; Jari Karvonen is Researcher in Marketing; Manne Kesti is Researcher in Marketing; Timo Koivumki is Professor in Marketing; Marjukka Manninen is Researcher in Economics; Jukka Pakola is Researcher in Economics; Annu Ristola is Researcher in Marketing; and Jari Salo is Researcher in Marketing, all at the University of Oulu, Faculty of Economics and Business Administration, Finland. Address correspondence to: Heikki Karjaluoto, Faculty of Economics and Business Administration, Department of Marketing, P.O. Box 4600, FIN-90014 University of Oulu, Finland (E-mail: heikki.karjaluoto@oulu.fi). The financial support of the National Technology Agency of Finland is gratefully acknowledged. The authors also wish to thank all the study participants. Journal of Euromarketing, Vol. 14(3) 2005 http://www.haworthpress.com/web/JEM 2005 by The Haworth Press, Inc. All rights reserved. Digital Object Identifier: 10.1300/J037v14n03_04

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influence intention to acquire new mobile phones on one hand and factors that influence on mobile phone change on the other. With the use of a series of focus group interviews (Study 1) with 79 graduate students followed by a survey (Study 2) of 196 respondents, it was found that although the choice of a mobile phone is a subjective choice situation, there are some general factors that seem to guide the choices. The two studies show that while technical problems are the basic reason to change mobile phone among students; price, brand, interface, and properties are the most influential factors affecting the actual choice between brands. [Article copies available for a fee from The Haworth Document Delivery Service: 1-800-HAWORTH. E-mail address: <docdelivery@haworthpress. com> Website: <http://www.HaworthPress.com> 2005 by The Haworth Press, Inc. All rights reserved.]

KEYWORDS. Buying decision process, consumer choice, mobile phones, mobile services, 3G, Finland

INTRODUCTION Although mobile phones have become a fundamental part of personal communication across the globe during the past ten years, consumer research has devoted little specific attention to motives and choice underlying the mobile phone buying decision process. There are numerous complex factors that need to be taken into account when exploring mobile phone buying decision process, including both macroand 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).

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The telecommunications sector has been struggling over the past years, not only due to high prices companies paid for UMTS licenses but also due to the global economic downturn. Although the mobile phone handset market is growing five to ten percent per year and operator subscriber bases are growing, average revenue per user (ARPU) is falling and price competition is heating up (Hansen, 2003). We are currently experiencing a shift from the second generation (2G) to the third generation (3G) mobile phones, which is expected to change the way people use their mobile phones. The rise of the 3G network and its consumer acceptance is said to be one of the toughest marketing challenges in recent history (Benady, 2002). In general terms, the success of 3G depends primary on how the real benefits of the technology are marketed to consumers on one hand and on pricing policy of the services on the other (e.g., Benady, 2002). If we look beyond the hype around 3G it is obvious that we are not experiencing a revolution in mobile phone markets, rather an evolution where consumers are able to do the same things they could with 2G and 2.5G (e.g., GPRS and EDGE technology), but only better and faster in terms of download times (cf. Drucker, 2004; Sehovic, 2004). The mobile phone industry is currently using many standards (e.g., Japanese PDC, European GSM, American CDMA), which has made it difficult for users traveling to utilize their phones extensively. The evolution of 3G is expected to simplify this as only two standards are competing, the WCDMA (Wide-Code Division Multiple Access) that will become the European UMTS (Universal Mobile Telecommunications System), CDMA2000 (Code Division Multiple Access), and the Chinese TD-SCDMA (Time Division-Synchronous Code Division Multiple Access). The WCDMA standard is said to dominate the global market for the next five years (Sehovic, 2003). Consumer shift from 2G to 3G means that in order to be able to use the services offered by the faster network consumers need to acquire new mobile handsets equipped with Internet access and new features such as possibility to receive and send multimedia messages. Although recent news indicates a strong demand for new mobile phones equipped with color displays and built-in camera, there still is plenty of skepticism in the media, as well as in the market itself, towards the technological development. The development of mobile phones is leading the market into a situation where the basic need, communication, is actually broadened to new means of interaction and personal digital assistance. In fact, mobile phone evolution will eventually lead to the convergence of mobile phones and digital personal assistants (PDAs). Thus, communication is

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not the only need mobile phones fulfill. Beyond voice, three main trends shaping the so-called mobile culture have been identified: (1) communication services such as voice, text and pictures, (2) wireless Internet services such as browsing, corporate access and e-mail, and (3) different media services such as motion pictures, games and music (Hansen, 2003). For example, telecommunications companies promote new services such as multimedia messaging service (MMS) as a new way of enhancing one-to-one and one-to-many communicating. According to a fresh study conducted in the UK, close to 40 percent of the youth market is using MMS (Enpocket, 2004). The research also found that MMS are used more and more in connection to television programs. However, the diffusion of MMS technology has been slow, mostly due to technical constraints and pricing policies. Mobile phone development has been rapid and new models are introduced to the markets almost on a weekly basis. Especially 3G networks and smart phones are expected to affect the evolution of the mobile phone market in the short future (e.g., Slawsby, Leibovitch and Giusto, 2003) as shown in Figure 1. However, at present the majority of new mobile phones purchased are low-cost handsets without the latest technological features. Whereas color displays have become common, with sales of over fifty percent in 2003 in some countries, e.g., in Finland (Poropudas, 2003), phones with a built-in camera reached globally below 15 percent of the total sales in the last quarter in 2003 (Gartner Dataquest, 2004; Strategy Analytics, 2003). However, more and more users are acquiring camera phones and learning how to take, send and print photos. The sales of built-in camera phones have contributed to an increase in mobile data usage and also enFIGURE 1. The Beginning of the Smart Phone Era
2000 2001 2002 Color bitmaps Simple animations EMS SMS Push/Pull WAP pull Smart phones, PDAs GPRS trials J2ME, MIDP Simple locationbased services 2003 2004 2005

Text, rings Simple bitmaps SMS Push/Pull Simple Web Clipping Legacy phones

MMS xHTML Real smart phones Real GPRS P2P M-Commerce 3G trials Micro movies

Mobile video/audio Location integration Voice recognition Real wireless PDAs Broadband access 3G networks Hybrid WLAN/3G PAN

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hanced device sales (OKeefe, 2004). Research institutes forecast that step by step properties like built-in cameras and calendar will become a standard inclusion within mobile phones (e.g., Slawsby and Chute, 2003). In terms of technology, the mobile multimedia market will remain in its infancy during 2004, but companies and analytics expect that the demand will continue to develop for mobile imaging, games, music and other media services as users become more aware and familiar with the services and their different purposes of use (see, e.g., Gartner Dataquest, 2004; Nokia, 2004; Strategy Analytics, 2003). But as the Internet finally finds its way to mobile phones the basic need to acquire a mobile phone might expand from communication to gaining Internet access. This in turn is expected to bring mobile phones one step closer to personal computers. The primary objective of this paper is to examine the importance of different factors affecting consumers motives related to mobile phone purchasing and to investigate the main reasons to change mobile phone. Although consumer motives underlying mobile phone acquisition are something one could call general knowledge, relatively little is known on the buying decision making process in relation to new mobile phone models packet with different properties (i.e., smart phones) allowing users to communicate in fresh ways. The next sections review previous research on motives and choice behavior in mobile phone markets. The results of the focus group interviews provide the basis for Study 2. The article concludes with a discussion of both theoretical and managerial implications for mobile phone choice. LITERATURE REVIEW: CONSUMER CHOICE BEHAVIOR From marketing perspective, consumer choice behavior can be studied through the classical five-step (needinformation searchevaluation of alternativespurchasepost-purchase evaluation) problem solving paradigm or through the progression of consumer choice from a product class to brand choice (Dorsch, Grove, and Darden, 2000). The five-step model is usually suitable for decision making that assumes rational problem solving behavior and, in most cases, complex decision making. The acquisition of a new mobile phone follows this traditional view of buying process, but is in many situations also affected by symbolic values related to brands.

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Consumer choice behavior has some important prevailing conditions that must be taken into account while studying choice. In the light of the classical problem solving buying behavior, consumers engage in information search before making the actual choice. Consumer decision making process is usually guided by already formed preferences for a particular alternative. This means that consumers are likely to make the choice between alternatives based on limited information search activity (Beatty and Smith, 1987; Moorthy, Ratchford and Talukdar, 1997) and without detailed evaluation of the other alternatives (Alba and Hutchinson, 2000; Chernev, 2003; Coupey, Irwin and Payne, 1998; Slovic, 1995). In close relation to information search, evaluation of alternatives has also gained a momentum in recent research (Laroche, Kim and Matsui, 2003). Their study on consumers use of five heuristics (conjunctive, disjunctive, lexicographic, linear additive, and geometric compensatory) in the consideration set formation found that conjunctive heuristics is the most often used decision model in the consideration set formation for two product classes in the study (beer brands and fast food outlets). Conjunctive heuristics means that a consumer selects a brand only if it meets acceptable standards, the so-called cutoff point on each key attribute consumer regards as important (Assael, 1995, p. 249; Solomon, 2001, p. 280). In this non-compensatory method of evaluation, a consumer would eliminate a brand that does not fulfill the standards on one or two of the most important attributes, even it is positive on all other attributes. We limit our analysis in this paper to consumer choice that can range from choice oriented referring to a decision on which alternative to purchase from a set of alternatives, whether or not to purchase, or whether to purchase now or later to value oriented choice (Shuv and Huber, 2000). The latter refers to an evaluation setting, in which each alternative is evaluated on different value criteria. Furthermore, consumer choice behavior can either be approached by utilizing different choice models (see, e.g., Chintagunta, 1999; Bockenholt and Dillon, 2000; Swait and Adamowicz, 2001) or neural networks to model selection decisions (e.g., Papatla, Zahedi and Zekic-Susac, 2002). Papatla et al. (2002) examined empirically brand choice and store choice in regard to margarine, detergent and tissue. The research found that while neural networks have higher probability of resulting in a better performance, hybrid models guaranteed equal or better results than stand-alone models. It has also been pointed that many decision strategies used by consumers can change due to person-, context-, and task-specific factors (Dhar, Nowlis and Sherman, 2000; Swait and

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Adamowicz, 2001). Therefore, mathematical modeling has its limitations in regard to the fact that consumers tend to utilize different approaches to make choices. Thereby, researchers should pay more attention to factors like task complexity and context in modeling choice behavior (cf. Swait and Adamowicz, 2001). Moreover, Coupey, Irwin and Payne (1998) found that the influence of task and context factors might be greater in situations in which consumer has little prior knowledge and experience. It is widely accepted that the traditional problem solving approach involving rational decision making to the study of consumer choice may not be suitable for all situations, or is at least incomplete to understand choice behavior. Limited information search and evaluation of alternatives led to a situation in which consumer choice is also driven by hedonic considerations (e.g., Dhar and Wertenbroch, 2000). In general, a common distinction to be made is that while the utilitarian goods usually are primary instrumental and functional, hedonic goods provide fun, pleasure and excitement. It has been noted that many choices have both utilitarian and hedonic features (Batra and Ahtola, 1990), and thus it can also be proposed that the choice between mobile phones has both utilitarian (e.g., communication, time planning) and hedonic (e.g., games, camera) features. The younger the consumer the more hedonistic features consumers tend to value in mobile phones (Wilska, 2003). Quite similarly, consumer choice can also be approached from the perspective of conscious and nonconscious choice (e.g., Fitzsimons et al., 2002). Quite many choice situations occur outside of conscious awareness and with limited information search (Kivetz and Simonson, 2000) and it can be stated that many choices have both conscious and nonconscious motives. Fitzsimons et al. (2002) found that in many cases nonconscious influences affect choice much more than is traditionally believed by researchers. MOBILE PHONE CHOICE Previous literature on mobile phone choice is sparse. Couple of academic articles have dealt with mobile phone usage and grasped the consumer decision making process. To begin with, Riquelme (2001) examined how much self knowledge consumers have when choosing between different mobile phone brands. The study was built upon six key attributes (telephone features, connection fee, access cost, mobile-to-mobile phone rates, call rates and free calls) related to mobile

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phone purchasing respondents had to importance rate. The research showed that consumers with prior experience about a product can predict their choices relatively well, although respondents tended to overestimate the importance of features, call rates and free calls and underestimate the importance of a monthly access fee, mobile-to-mobile phones rates and the connection fee. Mobile phone choice and use has 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, we hypothesize that background variables especially have an influence on mobile phone choice. H1: Demographic factors have an influence on the evaluations of different attributes related to mobile phone choice. Specifically, gender and social class will impact on the evaluations of the attributes as men belonging to higher social class seem to be more technology savvy. Consumers value in smart phones features that enhance their personal time planning (e.g., Jones, 2002). These high-rated features include calendar and e-mail services. It is interesting to note that according to Jones the so-called killer services such as gaming, gambling and music downloads are not seen that important in the diffusion of smart phones. However, there is little support to this argument. However, while synchronization of calendar and e-mail services to PCs has become easy and fast, the importance of time planning in mobile phones becomes more and more important. Thus, the following hypothesis is proposed: H2: Consumers value personal time planning properties in the choice of new mobile phones. Another important aspect that has risen from different studies is that consumers purchase new phones due to the fact that their existing ones

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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; OKeefe, 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: H3: New technical properties increase consumer willingness to acquire new phone models. In addition, it seems that size and brand play to some extent an important role in decision making. Liu (2002) for instance surveyed Asian mobile phone users and found that size of the phone had no impact on mobile phone choice, but this finding might be due to the fact that all competing brands have quite similar sized phones that are small enough. Liu continues that the trend will actually be not towards smaller phones but towards phones with better capability and larger screens. While companies are advertising new models and services that do not yet exist, it according to the paper signals to the market that the company is at the cutting edge of technology and shows what will be available in the very near future. The sales of new phones will then be driven by replacement rather than adoption. Thus, it is hypothesized that size and brand are related to mobile phone choice at some extent: H4a: When choosing between different mobile phone models, consumers value larger screen size but the whole phone should be small enough and light to carry in pocket. H4b:When choosing between different mobile phone models, consumers value familiar brands. Price of the phone has been identified as a critical factor in the choice of the mobile phone model, especially among younger people (Karjaluoto et al., 2003a; Karjaluoto et al., 2003b). By the use of a survey (n = 397), they found that besides new technological advances price was the most influential factor affecting the choice of a new mobile phone model. Price of the mobile phone is a very different issue in other EU countries compared to Finland where price is not linked to the operator contract. Therefore, while in other EU countries (except Italy and Benelux countries), the acquisition of a mobile phone is bun-

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dled with the operator contract, phones are, generally speaking, free of charge, whereas in Finland consumers pay relatively high prices for their phones. In Finland, that kind of linked transactions are regulated by law and currently illegal. In Finland, this kind of regulation has resulted in a situation where people change their operator quite often, and mostly on the basis of price (Alkio, 2004). On this basis, it should be noted that price of the phone plays an important role in Finland and thus, we hypothesize that: H5: When choosing between different mobile phone models, especially lower income consumers have a price limit that restricts the choice to fewer models. To summarize, consumer choice behavior can be studied through various frameworks such as the problem solving paradigm and through consumer choice from product class through brand choice. A summary of the literature review is presented in Table 1. METHODOLOGY Study 1 examines consumers preferences about mobile phone purchasing in a focus group setting. Focus group method was chosen because of the fresh nature of the phenomenon and to serve as a starting point to the survey (study 2). Focus groups produce data that are always biased by other respondents but also provide important data based on group interaction and give insights that are less accessible with other interviewing methods (Morgan, 1990; Threlfall, 1999). A total of four focus group interviews were conducted during autumn 2002 among graduate students. The number of participants in each group ranged from 15 to 19, and most of the students were aged 21-25. With these groups two important criteria considered as important in focus group interviewing (Malhorta, 2002; Morgan, 1996) were achieved: not only was each group homogenous in terms of demographic and socioeconomic characteristics but also shared a relatively common base of experience with the issue being discussed. Although the number of participants in each focus group was reasonably higher compared to the ideal number (8-12) suggested in marketing research literature (McDaniel and Gates, 2001; Morgan, 1996), the discussion among the participants and between the moderator was smooth.

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TABLE 1. Summary of Literature on Consumer Choice Behavior and Mobile Phone Choice
Contributor Dorsch, Grove and Garden (2000) Data Survey (n = 223) Contribution to our study Suggests that two distinct frameworks can be used to study consumer choice behavior: the classic problemsolving paradigm and the progression of consumer choice from product class through brand choice. Consumers make choices between alternatives based on limited information search and processing. Similar to Beatty and Scott (1997). Choice is made without detailed evaluation of alternatives. Similar to Alba and Hutchinson (2000). In addition, choices made from large assortments can lead to weaker preferences. Similar to Alba and Hutchinson (2000). Moreover, product familiarity influences preference construction. Preferences are often labile due to limited evaluation of alternatives. Suggesting that conjunctive heuristic is the most often used decision model in the consideration set formation. Consumer decision making strategies can change due to person-, context-, and task-specific factors. Consumer choice often occurs outside conscious awareness. Nonconscious influences affect choice much more than many researchers believe.

Beatty and Scott (1987) Moorthy, Ratchford and Talukdar (1997) Alba and Hutchinson (2000) Chernev (2003)

Survey (n = 351) Survey (n = 117) Literature review Four experiments (n = 88) Three studies (n = 48; n = 66; n = 28)

Coupey, Irwin and Payne (1998)

Laroche, Kim and Matsui (2003) Swait and Adamovicz (2001), see also Dhar, Nowlis and Sherman (2000) Fitzsimons et al. (2002)

Two surveys (n = 234; n = 235) Survey (n = 280)

Literature review

Mobile phone choice Wilska (2003) Survey (n = 637) Choices are often driven by hedonistic considerations (see also Dhar and Werterbroch, 2000; Batra and Ahtola, 1990). Specifically, the younger the consumer the more hedonistic features consumers tend to value in mobile phones. Mobile phone choice and usage is consistent to general consumption styles. Suggesting that prior experience of mobile phone choice affects future choice. Consumers value personal time planning features in mobile phones. Suggesting that new technology features are driving consumers to acquire new mobile phones. Similar to In-Stat/MDR (2002) and O'Keefe (2004). Additionally, size and brand of the phone are affecting choice. Price of the mobile phone affects choice in countries where mobile phones are not linked to the operator contract.

Riquelme (2001) Jones (2002) In-Stat/MDR (2002); O'Keefe (2004) Liu (2002)

Survey (n = 94) Survey (n = 500) Forecasts and surveys Survey (n = 800)

Karjaluoto et al. (2003a; 2003b)

Survey (n = 397)

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The four group interviews were led by an experienced researcher and special attention was given to provide a relaxed atmosphere and thereby making discussion nondirective and spontaneous. It has been stated that only by allowing spontaneous informal interaction focus groups are valuable qualitative technique in exploring unconscious needs and motives (e.g., Spier, 1996; Thomas, 1998) and moreover often perceived as more exciting and arousing by participants than surveys or one-on-one interviewing (Bristol and Edward, 1996). The focus group interviews lasted from 45 minutes to 90 minutes and were audio-recorded. The moderator had a list of keywords that were used in directing the discussion to motives affecting the purchasing process. This list of motives was based on previous studies and prior knowledge, but as one could have expected the interviewing revealed also new motives that were not previously discovered by the research group. Study 2 is built on the basis of the focus group interviews. Study 2 surveyed 196 voluntary respondents who filled in the questionnaire in September 2003. The questionnaire was developed on the basis of the focus group interview and tested with 50 students before distributed onwards. Questions inquiring mobile phone choice were implemented on seven-point Likert scales (1 = not at all important to 7 = extremely important) inquiring perceptions of various attributes related to mobile phone purchasing. Most of the survey respondents were aged 20-30 and were male (63.8 percent). The respondents educational backgrounds varied a lot as also their levels of employment. RESULTS Study 1 In total four focus group (labeled A, B, C, D) interviews were conducted. Table 2 illustrates the number of participants as well as sexes of the members of the four focus groups. In all groups, most of the mobile phones owned by the participants were Nokia phones. This share is quite similar to that in Finland in general, where over 80 percent of the phones are Nokia phones (Nyknen, 2002). Many of the participants who had owned more than four mobile phones always had the same brand but different model. Although in Finland the price of a new mobile phone is even higher than in other EU countries due to the fact that telephone operators cannot offer free or

Karjaluoto et al. TABLE 2. Focus Group Interviews

Focus group Male Female Total A 4 12 16 B 8 11 19 C 4 11 15 D 6 10 16

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heavily discounted mobile phones to customers, close to half of the respondents reported acquiring a new mobile phone every year and sometimes the changing cycle is even faster. The most explicit reason for changing was that the old one was broken or did not work properly. This meant for the participants that the mobile phone did not work, the calls were interrupted, for example due to weak audibility, battery was weak, the screen was out of order or keypad was so consumed that the numbers were invisible. While mobile phones were also acquired due to new features including color display and polyphonic ring tones, some respondents bought new phones in order to get an innovator and/or opinion leader status. Fundamentally, respondents agreed that price, brand, and size of the phone were the main factors affecting their choice of the new model. The importance of price might be related to the student sample. All groups reported having a maximum price they are willing to pay for a new mobile phone. The price range varied between 10 to 150 which indicates that students are buying low-priced phones. The groups regarded new technological features as too expensive to use, an in fact groups B and D felt new features as totally needless. On the other hand, groups A and C considered new features such as multimedia messaging service (MMS) handy but too expensive to use at present. Participants were also skeptical about the quality of the pictures and video clips. A general view seemed to be that mobile phones are still seen as talking devices, and new properties were not commonly used. Other services such as calendar, games or radio were not used by the participants. E-mailing was a service that might be used if it was very cheap or free. Although color display was after a little discussion regarded as a good improvement, students were not ready to pay the high price just for getting fancier color menus for their phones. Most felt that they never buy the newest model because mobile phone manufacturers are well-known for their pricing strategy in which new models while launched to the market cost much more than after a couple of months when the price begins to fall. Quite interestingly, relatively many were unaware of the

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properties new phones have. For instance, GPRS and WAP were unknown for many. This was quite a surprising finding because the interviewed can be considered as more aware of technical things than average Finnish people of their age. Only around one out of ten clearly knew what GPRS is and for what purposes it might be used. After the moderator told the groups about the new services (e.g., that GPRS can be used to get Internet access), students, after little consideration, seemed to form a more positive attitude towards the new features. The group D then summarized the discussion by saying that companies should educate consumers to use the new services. Besides price and new features, brand was also found important, not only among Finnish students but also among exchange students. It was interesting to find out that even though Nokias brand was appreciated by the Finns and by some of the foreign students as well, a couple of students reported that Nokias brand has suffered in Germany from quality problems, and thus the brand was not seen any better than competing brands. Nokias brand was valued above all because of easy-to-use interface, but also among Finnish students by its domestic origin. It was mentioned that students rarely change their mobile phone brand owing to the fact that it is much easier to stay with the same brand with familiar user-interface and menus regardless of the model. Size of the phone was found to have some importance. Although many had changed their phones in order to get a smaller model, some asserted that the phone should not be too small. Students felt that the phone should be small enough to match into a pocket but still allowing relatively convenient usage. In relation to size, fancy outlook was also discussed. The groups felt that outlook and colored covers are for small children and had very little influence on their choice of the model. Other peoples influence was found to have slight impact on intention to buy a new model. The groups highlighted the importance of parents by saying that in many Finnish families, parents get free phones from their employers and thus get used to one brand. Friends influence was two-handed. On one hand, through word-of-mouth it has an impact on the choice whereas on the other groups reported knowing people who want to have a different brand than their friends. During the discussion some other factors arose from the discussion such as salesmans recommendation. However, for the majority salesmans recommendation was found unimportant. This might relate to the fact that quite many stores only sell one brand and limited amount of models, thus allowing easier choice.

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In conclusion, the focus group interviews revealed that among students, mobile phones are mostly purchased and used for talking purposes, not as personal assistants helping, for instance, in time and information scheduling. On this basis we propose a preliminary model (Figure 2) of the factors and their relative weights, which affect mobile phone choice and reasons to change mobile phone among students. Study 2 On the basis of the findings obtained from study 1 and previous literature, a questionnaire was prepared. Of the 196 usable questionnaires, 71 were from female respondents and 125 from male respondents. The respondents had different had different educational backgrounds ranging from matriculation (21.0 percent) to university degree (26.2 percent) and also quite different levels of employment ranging from student status (42.6 percent) to white-collar workers (24.6 percent). Most of the respondents belonged to the age category 18-34 (77.4 percent). The respondents used their mobile phones mainly for calling, but other services were also popular. The most popular service was sending text messages (64 percent used daily), followed by downloading
FIGURE 2. Factors Affecting Mobile Phone Change and Choice Behavior

Technical*** problems

Price*** -Max. 150

Interface*** -Familiarity

New features**

Reason to CHANGE mobile phone

Factors affecting mobile phone CHOICE

Size** -Match into pocket

Innovators status*

Brand** -Global -Customer loyalty

Other factors* -Salesman

Properties* -New features

Note: *some influence, **medium influence, ***strong influence.

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logos and/or ring tones (49 percent used 1-2 times per month), phones own services such as radio, calculator, calendar and games (49 percent used daily), and value added SMS-services (39 percent used 1-2 times per month). Thus, although the respondents can be considered as lead users of mobile phones and mobile services, the sample represents relatively well the actual mobile phone usage in Finland among this age group. We used 24 questions in order to analyze consumer motives in mobile phone purchase. The correlation matrix and Bartletts test of spherity showed highly significant correlations between variables supporting the use of factor analysis. In factor analysis we used principal component analysis with varimax rotation. The number of factors was selected based on the scree-plot. The estimated seven factors (Innovative services, multimedia, design, brand and basic properties, outside influence, price, and reliability) explain about 70 percent of the total variance (Table 3). The correlation is considered to be significant if its absolute value is 0.4 or higher. The first factor, innovative services, exhibits heavy loadings for seven variables pertaining to the importance of new innovative services mobile phones nowadays have. Factor 2 accounts for 13.2 percent of the variability of the individual items and is defined by two items relating to multimedia properties with loadings higher than 0.7. The third factor is defined by three variables relating to design. This factor accounts for 7.7 percent of the total variance. Factor 4 appears to be a mix of items that reflect importance of brand and properties such as advanced SMS-options and better memory capacity. This factor accounts for 5.9 percent of the total variability of the items. The fifth factor can be called outside influence because the items loading at this factor refer to the importance of friends, salespersons and employers recommendation. Factor 6 is defined by two items referring to price. The seventh factor explains 4.2 percent of the total variance and is called reliability, as the items comprising the factor refer to reliability and usability of the phone. In sum, the factor analysis suggests that of the variables selected to the analysis, Factor 1 (innovative services) and 2 (multimedia) are seen as the most important innovative services as they explain together over 40 percent of the total variance of the items. In Study 2, we also examined how the importance of the variables varies between genders and different occupational groups. Only the variables with statistical differences are reported. The results in Table 4 show the means, standard deviations and the statistical significance of the mean differences. Based on the results, there are quite a few statisti-

Karjaluoto et al. TABLE 3. Factors Explaining the Choice of a Mobile Phone

Factors Variable (1) (2) Innovative Multimedia services (3) Design (4) (5) Brand and Outside basic influence properties (6) Price

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(7) Reliability

Browsing WWW E-mail UMTS Java WAP-services New features Color screen Multimedia Built-in camera Appearance Styling Small size Known brand Domestic product Advanced sms Larger memory capacity New product Salespersons recommendation Friends recommendation Employers recommendation Special offer Model at reduced price Reliability Usability % of variance explained

.843 .775 .743 .709 .682 .619 .503 .800 .737 .815 .811 .727 .676 .620 .594 .538 .410 .810 .728 .677 .880 .848 .712 .595 28.508 13.249 7.726 5.877 5.453 4.682 4.234

Note: Only the loadings above 0.4 are presented in the component matrix.

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Gender Mean 5.06 5.67 4.90 3.90 5.07 3.90 4.57 3.25 5.03 3.94 5.31 4.57 4.15 2.76 4.63 2.96 Std. Deviation 1.659 1.219 1.686 1.907 1.766 1.808 1.891 1.847 1.753 1.889 1.763 1.779 2.076 1.626 1.899 1.949 .000** .000** .009** .000** .000** .000** .000** t-test p-value .010**

Familiar brand

Male Female

New features, such as GPRS

Male Female

E-mail

Male Female

WWW-browser

Male Female

Color display

Male Female

Large memory

Male Female

UMTS

Male Female

Java enabled

Male Female

Note: *Significant at the 0.05 level. **Significant at the 0.01 level.

cally significant differences in the importance of the decision variables between men and women. When buying a mobile phone, women place more value on brand familiarity than men, whereas men seem to value more enhanced data processing, networking and navigational features. It thus seems that women use mainly voice services and therefore consider the brand of the phone as the main decision variable, and place very little value to data processing and networking features. Men, on the other hand, seem to utilize various enhanced features and network services such as e-mail, and therefore, these variables play an important role in their decision making. In the analysis of the importance of the decision variables between different occupations, we divided the respondents into three aggregate occupational groups: white-collar workers, blue-collar workers and students. White-collar group includes various professions in middle or top management of various companies. Blue-collar group includes employees that perform tasks that on the operational level in manufacturing or service industries. Students group includes undergraduate and graduate students. Again, only the variables with statistical differences are reported. The results are presented in Table 5.

Karjaluoto et al. TABLE 5. Results by Profession

Professional groups Design Students Blue-collar White-collar New features, such as GPRS Students Blue-collar White-collar E-mail Students Blue-collar White-collar WAP services Students Blue-collar White-collar UMTS Students Blue-collar White-collar
Note: *Significant at the 0.05 level. **Significant at the 0.01 level.

77

Mean 5.38 4.65 5.55 4.33 4.06 6.00 4.49 4.48 5.68 3.12 2.74 4.00 3.69 2.92 4.59

s.d. 1.471 1.664 1.092 1.729 1.825 1.078 1.939 1.877 1.166 1.958 1.612 1.932 2.137 1.754 1.955

p-value .031*

.000**

.010**

.029*

.013*

The statistics reported are the means, standard deviations and the statistical significance of the mean differences. The results show that white-collar workers value enhanced data and networking features significantly higher than students and blue-collar workers. The only exception is the design, which is considered equally important between white-collar workers and students. This result seems quite reasonable, as it can be expected that white-collar workers can utilize these features better in their work than blue-collar workers. The fact that the importance of networking features, such as e-mail or WAP services, is not more valued by student is somewhat surprising. CONCLUSION The objective of this article was to examine consumer buying behavior of mobile phones and to investigate the reasons underlying mobile phone change. The study found strong evidence that although mobile phones are developing at a rapid pace closer to personal digital assis-

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tants (PDAs), many consumers tend to be unaware of the properties and services the new models in the market contain. Most importantly, especially Study 1 showed that students are not familiar with new technical properties and their purposes of use. Study 1 furthermore showed that consumers are aware of the so-called curse of technology markets referring to the fact that new technologies reduce in price over time. This expected price reduction seems to be a factor slowing the diffusion of new models especially among lower income consumers. Study 2 showed that seven factors characterize mobile phone choice: innovative services, multimedia, design, brand and basic properties, outside influence, price, and reliability. The first factor, innovative services explained most of the variability of the variables indicating, together with other statistical analyses conducted, that especially men tend to value new services in choosing between mobile phones and intending to change their current mobile phone to newer model. The theoretical part of the study outlined in total five hypotheses that were supported by the empirical studies. Hypothesis 1 argued that demographic factors have an influence on the evaluations of different attributes related to mobile phone choice. This was verified in Study 2 in which we showed that specifically gender and occupation are significant variables affecting choice. Hypothesis 2 proposed that consumers value personal time planning properties in the choice of new mobile phone models. Although this hypothesis got some support among focus groups, more research is needed to confirm this. Hypothesis 3 stated that new technical properties increase consumer willingness to acquire new models. This got some support among focus groups but was actually verified in Study 2, where it was showed that innovative services were regarded as important. Hypothesis 4a claimed that size of the phone influences consumer choice of the mobile phone model. This hypothesis got strong support in both studies. Hypotheses 4b stated that when choosing between different mobile phone models, consumers value familiar brands. The hypothesis was verified. Finally, Hypothesis 5 argued that price of the mobile phone plays an important role in the choice especially among lower income consumers. This got strong support among focus groups as well as in the survey. From a theoretical viewpoint, this article contributed to the buying decision making process for mobile phones by looking at consumer motives and examining the importance of different attributes affecting the actual choice. In short, on the basis of Study 1 and 2, the following statements can be made. First, although mobile phone choice is affected by specific phone attributes, consumers evaluate and rank-order, choice is

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often made without detailed evaluation and understanding of the properties and features new models have. Second, decision making mainly follows a rational decision making process in which different attributes are evaluated, but also has some symbolic nature as brand was regarded as important among many study participants. The most remarkable implication for mobile phone manufacturers, resellers and other value chain members is that advertising of new mobile phone models should go beyond highlighting properties to highlighting what users can do with all the new technical features. Mobile phone advertising has long been based on eliciting properties and abbreviations (e.g., GPRS, EDGE, Bluetooth) that are fully understood only by technology savvy consumers. Therefore, more attention should be paid to educative advertising and marketing. The importance of the reseller becomes constantly more important as we are entering the smart phone erameaning that phones have so many properties and features that users need both hands-on instructions and better post purchase service than before. Furthermore, as Finland has high mobile phone penetration and active mobile phone users, the results obtained with Finnish consumers might guide other research conducted in other countries. However, we should bear in mind that many factors, such as legislation and international differences in culture for instance, definitely have an impact on results. Despite this piece of research provides some insights into the factors that influence the choice of a mobile phone model, the work is still at an early stage and certain limitations concerning the research setting should be noted in order to guide future research of this phenomenon. For example, general limitations are raised in regard to the use of focus groups (Study 1) and the interpretation of the results obtained. It should be noted that although four focus group interviews were conducted, the results cannot be generalized and might be biased by other subjects. Also, the fact that we used a student sample limits broader generalizations of the findings. Perhaps the most important limitation concerning Study 2 is the relatively small sample size, which makes it difficult to generalize the findings. More research is needed to leverage the findings and provide better and more in-depth implications for both theory and practice. To specify, the research presented measured its subjects perceptions of different factors affecting their choice of a mobile phone model at a given point in time. In the future with the use of a longitudinal study it might be possible to get a broader and deeper picture of the phenomenon under scrutiny.

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Submitted: May 2004 First Revision: June 2004 Second Revision: September 2004 Accepted: November 2004