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A demographic study for consumer product (laptop) evaluation based on add-on features

Submitted by Group 4, IIFT, EPGDIB 2009-11

A DEMOGRAPHIC STUDY
FOR
CONSUMER PRODUCT
(LAPTOP)
EVALUATION BASED ON ADD-
ON FEATURES

PREPARED BY GROUP 4:

PRAVEEN AHUJA (ROLL NO. 45)


CHAYAN KUMAR GHOSH (ROLL NO.20)
MOIEN-UR-RAHMAN QURESHI (ROLL NO.35)
SHIRAZ MOIN (ROLL NO. 62)

EPGDIB 2009-11
IIFT, NEW DELHI

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

TABLE OF CONTENTS
1. Introduction __________________________________________________________ 3
2. Objective ____________________________________________________________ 4
2.1. Steps Undertaken for project execution: ______________________________ 4
3. Hypothesis ___________________________________________________________ 5
3.1. Consumer Perception for Add-On in Goods Sector: ______________________ 5
3.2. Demographics _______________________________________________ 5
3.2.1. Income ____________________________________________________________ 6
3.2.2. Occupation _________________________________________________________ 6
3.2.3. Age ______________________________________________________________ 6
4. Methodology _________________________________________________________ 7
5. Data Used and the Analysis _____________________________________________ 8
5.1. Demographic Data & Analysis ___________________________________ 10
5.1.1. Demographic Factor - Age: _____________________________________________ 10
5.1.2. Demographic Factor - Income____________________________________________ 13
5.1.3. Demographic Factor - Occupation _________________________________________ 15
6. Conclusion & Implications for firms _____________________________________ 17
7. ANNEXURE _________________________________________________________ 18

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

1. Introduction
Consumer behavior (in consumer business context) referred to as the study of when, why,
how, where and what people do or do not buy products. Consumer involvement is a source
to explain the differences in the degree of both mental and physical effort of a consumer and
his decision making. During the past five decades, consumer involvement received
noteworthy attention among academicians as it is considered to have paradigmatic
implications on the consumers’ decision.

Consumer buying behavior is focused on whether people respond to stimuli, like


advertisements or mail shots or Additional Add-On being provided by the companies, by
making a purchase.

Present study has its focus on understanding how consumers ' perceive and consider the
“Add-On Features” in products that help consumers draw inferences which changes the
perceived utility of the base good itself.

The goods such as Laptops come with a cluster of features. The features can be classified
as
Aligned Features: that enhance an existing feature
Non-Aligned Features: that provides a new capability

Consumer reactions depend on the type of add-ons being offered.

As the commercial appeal of add-ons continues to grow, it becomes increasingly important


to understand their role in the marketplace.

Literature references:

http://www.journals.uchicago.edu/doi/abs/10.1086/596717
http://ideas.repec.org/a/ucp/jconrs/v36y2009i1p17-28.html

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

2. Objective
Considering the above mentioned reasons the study on “How the consumer perceives the
Add-On features was conducted”.

The Objectives for the study are to analyze the role of “Add-On Features” in pre purchase
evaluations of goods and to understand how these impact the consumer behavior.

The questions that the study attempted to address are:


1. How the consumer’s perception changes with the availability of the Add-On
Features?
2. How the Consumers perception differs with various Demographic Characteristics?

2.1. Steps Undertaken for project execution:


The following steps were undertaken during the project execution:

Selecting the Product- Laptop

Gather preliminary information about the Product

Determining Key Research Areas

Formulating the Research Design

Preparation of Questionnaire on Laptop Features (Aligned & Non-Aligned)

Pilot Testing of Questionnaire

Alteration of Questionnaire

Preparation of Final Questionnaire

Collecting questionnaire responses

Data Tabulation & Analysis

Report Writing & Presentation

We used primary data collection mechanism targeting:


1. Customer Preference across different demographic characteristics (Age,
Occupation, Income)
2. Relative Appeal of Different Aligned Features
3. Relative Appeal of Different Non-Aligned Features

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

3. Hypothesis

3.1. Consumer Perception for Add-On in Goods Sector:


The theoretical argument we outline in this section reflects the accepted notion that the
consumers often use the peripheral cues as indicators of product utility. Consistent with this
view, we propose that under certain conditions consumer draw conclusions about the value
of base good from a firm’s decision to provide one or more add-on features.

To develop the formal hypothesis for the goods Sector, we draw primarily on the fact that
people perceive differences in the goods as either alignable or non-alignable. An alignable
difference relates to some common characteristics of objects, such as when two or more
options vary on the level of a shared attribute. In contrast, a non alignable difference is a
property of one object that has no direct correspondents in other objects, such as when one
option offers a benefit that competing alternatives do not.

The firm provides alignable add-on when it enhances features that base good already has,
and provides non-alignable add-ons when add on introduces new capabilities.

HYP-1
Consumers certain about the value of the product will judge it to be more appealing when a
firm offers alignable add-ons which enhance the product attributes.

HYP-2
Consumers certain about the value of the product will judge it to be less appealing when a
firm offers non alignable add-ons when no such option exists.

3.2. Demographics
Within a person related antecedents, demographics have considerable influence on the
add-ons.

The below figure depicts the relationship between demographics and consumer
involvement.

The following demographics have been considered for the analysis:

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

3.2.1. Income

Income of the individual combined with his accumulated wealth determines the purchasing
power. Though income enables purchases, however, it does not generally cause or explain
them.
It is likely that the occupation and education directly influence the preferences for products,
media and activities; income provides the means to acquire them.

Hence the third hypothesis is:

HYP-3
The consumer from different income groups values the add-on features differently.

3.2.2. Occupation

Various studies have found differences in preferences of products with differences in the
occupations. Occupation is one of the widely applied cues to evaluate an individual
(Hawkins in 2003). It is strongly related to education and income.
However, it may be speculated that the differences in the perception levels of consumer
would be influenced by different occupations. Hence, the fourth hypothesis is stated as

HYP-4
The consumer perception for the add-on differs because of the differences in the
occupation.

3.2.3. Age

Age carries with it culturally defined behavioural and attitudinal norms.


Age affects consumers self concept and life styles
The age factor determines the consumption of various products, media, and shopping
centers and has been used by marketers frequently to segment the markets.
The consumers’ needs and tastes vary according to the age group they belong to. Age also
influences the level of consumer involvement.
Hence, the fifth hypothesis is stated as

HYP-5
The consumer perception for the add-on differs because of the differences in the Age.

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

4. Methodology
The analysis was captured through a set of questionnaire targeted at the segment of
different Income/Age/ Occupation Groups. The main groups for the same have been the
Corporate where we all have been working.

The study was conducted on one product from the Goods industry. The Laptop was taken
as the product from Good Industry.

The set of surveys conducted explored the utility of the product to the consumer based on
the “Add-On Features” that were provided to the user.
The surveys also explored the effects of the Demographic such as Income, Occupation &
Age that influences consumer’s perception.

The set of questions used for the Survey are as below:

Below are the features in the base model laptop.


Color Black Warranty 1 yr ltd hardware warranty
Processor 1.66GHz,800fsb Display 15.6'' 1366x768
OS Vista Home Premium SP1 32 bit Memory 2GB
MS office office basic 2007 Hard Drive 250GB
Batteries 6cell Optical Drive DVD-RW
Keyboard Normal Video card 256MB

To what extent do you think


Additional amount you as a that the enhanced /add-on
What is your desirability of this
consumer are willing to pay? features should be an integral
feature on a scale of 1- 5?
(500- to 10000) component of the good on a
scale of 1-5?

Please rate the below features, if the features are enhanced from their current specs ex. RAM size increased to 8GB,based on the
impact that feature has on overall utility of the laptop if you are in purchase of the laptop. Similarly the features marked in green
above have been improved to new specs. Please rate them accordingly

Processor 2.1 GHz,1066 FSB


Memory -RAM 8GB
Hard Drive 500GB
Video card 512MB
Below is set of ADD-ON features available with the Laptop, please rate the features based on the impact of
the add-on on the overall utility of the LAPTOP
HP 3in1 Printer
256MB Datacard
Optical Drive :Blu-ray +DVD-RW
Bluetooth Wireless headset
Carrycase
NOTE: The definition of integral component would be that, for the base goods, the enhanced capability should be an integral component,
example RAM size increased from 2GB to 8GB. 8GB RAM should be there in the laptop or you will buy it separate. Similarly for the ADD-
ON features, these peripheral features are available with the laptop at some additional discounted prices, so will you accept these as an
integral component or buy it separately.

The questionnaire file along with the consolidated responses is attached as part of the
annexure.

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

5. Data Used and the Analysis

MANUFACTURED (LAPTOP) GOODS DATA


Data for the Alignable and Non Alignable Features

The consolidated set of data for the alignable/ non-alignable Features of the Laptop is listed
below:

Laptop Ratings
Alignable Features 1 2 3 4 5
Processor 2.1 GHz,1066 FSB 15 13 72 22 58
Memory -RAM 8GB 15 13 68 74 10
Hard Drive 500GB 12 18 68 76 8
Video card 512MB 6 68 78 16 12
TOTAL 48 112 286 188 88

NON ALLIGNABLE FEATURES


HP 3in1 Printer 11 68 78 14 9
256MB Datacard 12 32 91 28 17
Optical Drive :Blu-ray +DVD-RW 22 128 13 9 8
Bluetooth Wireless headset 17 118 17 13 15
Carrycase 6 7 12 14 141
TOTAL 68 353 211 78 190

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

ANALYSIS
Alignable Feature Analysis
As can be seen from the graph below, higher ratings are given to the features which are
aligned with the product.
This effectively implies that our Hypothesis HYP-1 stands true.

Non Alignable Feature Analysis

As can be seen from the graph, the lower ratings are given to the features which are not
aligned with the product. This effectively implies the utility of these add-ons to the users is
low. A noteworthy fact is that the segment of the consumers we have targeted, have good
knowledge about the product and its usage.
This effectively implies that our Hypothesis HYP-2 stands true.

LAPTOP GOOD ANALYSIS

400

350

300
CONSUMER RATINGS

250

ALlIGNED FEATURES
200
UNALLIGNED FEATURES

150

100

50

0
1 2 3 4 5
RATING SCALE

The above graph typically proves that the consumers certain about the value of the product
will judge the alignable add-on to be more valuable than the non-aligned add on.
Hence the Hypothesis-1 and 2 are believed to be true.

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

5.1. Demographic Data & Analysis

The following demographic factors have been considered for analysis

5.1.1. Demographic Factor - Age:


The consumer survey conducted by us segregated the data collected based on different age
groups. First, we would be taking data based on the Laptop Product Study for Alignable and
non-alignable Features

DATA FOR ALIGNED FEATURES

Laptop Aligned Data Based on AGE


Age
Level Below 20 20 to 30 30 to 40 Above 40 Total
1 0 8 15 25 48
2 0 46 52 14 112
3 0 102 152 30 284
4 0 52 120 16 188
5 0 32 45 11 88
Total 0 240 384 96

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

ANALYSIS FOR ALIGNED FEATURES:

The graph below provides an insight into the perception differences that exists for add-on
features across the consumers belonging to different age.

Demographics AGE: Consumer Behavior for Aligned Add-ons

160

140

120

100
CONSUMER RATING
Age Group 20-30
80 Age Group 30-40
Age Group >40

60

40

20

0
1 2 3 4 5
RATING SCALE

As can be seen from the above graph, the consumers of different age groups have given
higher ratings for the aligned features. This helps us to conclude that the aligned features of
a good are valued across at a higher scale by the group of people across the different age
groups.

DATA FOR NON ALIGNED FEATURES:

Laptop Non Aligned Data Based on AGE


Age
Level Below 20 20 to 30 30 to 40 above 40 Total
1 0 70 178 52 300
2 0 105 110 20 235
3 0 49 70 20 139
4 0 42 62 8 112
5 0 34 60 20 114
300 480 120

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

ANALYSIS OF NON ALIGNED DATA:

The graph below provides a insight into the perception differences that exists for non
aligned add-on features across the consumers belonging to different age.

Demographic Age: Consumer Behavior for Non-Aligned Add-Ons

200

180

160

140

120
Consumer rating Age 20-30
100 Age 30-40
Age >40

80

60

40

20

0
1 2 3 4 5
Rating Scale

As can be seen from the above graph, the consumers from different age groups have given
lower ratings for the non aligned features. This helps us to conclude that the non-aligned
features of a good are valued across at a lower scale by the group of people across the
different age groups.
This effectively implies that our Hypothesis HYP-5 stands true.

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

5.1.2. Demographic Factor - Income

The consumer survey done has been segregated, and the data collected based on different
income groups is listed below.

DATA FOR ALIGNED FEATURES

Laptop Aligned Data Based on Income


Income
Level 25k 25-50 50-75 75-1 1l Total
1 9 7 24 8 0 48
2 40 42 24 6 0 112
3 129 40 106 9 0 284
4 146 21 16 5 0 188
5 36 34 10 8 0 88
Total 360 144 180 36 0

ANALYSIS OF ALIGNED DATA:

The graph below provides an insight into the perception differences that exist for aligned
add-on features across the consumers belonging to different income groups.
Demographic Income: Consumer Behavior for Aligned Add-Ons

160

140

120

100

Income level < 25000


Income Level 25000-50000
80
Consumer rating Income level 50000-75000
Income level 75000-100000

60

40

20

0
1 2 3 4 5
Rating Scale

As can be seen from the above graph, even though the consumers are from different
income groups they have provided substantially higher ratings for the aligned features of the
product.

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

DATA FOR NON ALIGNED FEATURES

Laptop unaligned Data Based on Income


Income
Level 25k 25-50 50-75 75-1 Total
1 150 54 75 21 300
2 123 35 67 10 235
3 45 34 52 8 139
4 72 23 13 4 112
5 60 34 18 2 114
Total 450 180 225 45

ANALYSIS OF NON ALIGNED DATA:

Demographic Income: Consumer Behavior for Non Aligned Add-Ons

160

140

120

100
Consumer Ratings
Income level < 25000
Income level 25000-50000
80
Income level 50000-75000
Income level 75000-100000

60

40

20

0
1 2 3 4 5
Rating Scale

As can be seen from the above graph, the consumers from the income group of less than
25000 have provided substantially lower ratings for the non-aligned features of the product.
The same is reflected across for all the income groups.
This effectively implies that our Hypothesis HYP-3 stands true.

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

5.1.3. Demographic Factor - Occupation

DATA FOR ALIGNED FEATURES

Laptop Aligned Data Based on Occupation


Occupation
Level Business Man Professionals Student Total
1 7 20 21 48
2 12 53 47 112
3 16 131 137 284
4 13 50 125 188
5 12 46 30 88
Total 60 300 360

ANALYSIS OF ALIGNED DATA:

The graph below provides an insight into the perception differences that exist for aligned
add-on features across the consumers belonging to different occupations.

Demographic Occupation: Consumer Behavior for Aligned Add-Ons

160

140

120

Consumer Ratings
100

Profession :Business
80 Profession :Services
Profession :Students

60

40

20

0
1 2 3 4 5
Rating Scale

As can be seen from the above graph, the consumers of different occupations have given
different ratings to the aligned features. The students and working professionals such as
Engineers, Doctors have given higher ratings to the aligned features as compared to the
consumers from business domains.

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

DATA FOR NON ALIGNED FEATURES

Laptop Non-Aligned Data Based on occupation


Occupation
Level Business Professionals Student Total
1 35 137 128 300
2 9 121 105 235
3 8 35 96 139
4 11 34 67 112
5 12 48 54 114
Total 75 375 450

ANALYSIS OF NON ALIGNED DATA:

As can be seen in the below graph, the consumers from nearly all professions have rated
the non-aligned features to be lower. Thus, it further adds on to our hypothesis that the non-
aligned features do not capture much of the consumer’s decision making process as
compared to the aligned features.
This effectively implies that our Hypothesis HYP-4 stands true.

Demographic Profession: Consumer Behavior for Non-Aligned Add-Ons

160

140

120

Consumer Ratings
100

Profession: Business
80 Profession: Service
Profession: Student

60

40

20

0
1 2 3 4 5
Rating Scale

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

6. Conclusion & Implications for firms


The objective of the study was to understand the way consumer’s perception change with
the availability of the Add-On Features and also study the impact of various Demographic
Characteristics in shaping consumers decision for buying a product.

After doing an elaborate survey across a section of the 180 consumers (who were primarily
well educated about the products), we identified that the consumer perception is
comparatively more driven by the value of the money a base product offers, and then
subsequently for the additional goodies that the firm offers with the goods.

The comparisons again were done across consumers with different demographics.
Later, we found out that that most of the demographic variables have significant influence
on the perception level of the consumers for the product. The data collected and segregated
for the demographic variables like age, income, occupation helped us conclude the
significant influence of these factors on the consumer decision making process.

These findings are interesting and useful for marketers. Marketers of products can use age
income and occupation, as the key variables for planning their marketing strategies.
The relevant differences as had been captured in the study for the Add-on for Product can
help marketer to adopt different marketing programs for each of the product.

An even bigger challenge for marketer is to bring the low perceived add-on features such as
printers in case of laptops to a highly perceived item or all together capture the attention of
educated consumers with some different aligned add-on.

The findings of the study are constrained by three major factors; only one product for the
study, moderate sample size with majority of the samples being from a section of the
consumer who are well educated about the product. Though some of the findings are similar
to the results of past studies; there are also contrasting results that our study has found.

In that sense, this study would be useful as an addition to the existing literature. Further, the
scale is moderately consistent internally and we have not validated the instrument to our
context which remains another constraint.

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A demographic study for consumer product (laptop) evaluation based on add-on features
Submitted by Group 4, IIFT, EPGDIB 2009-11

7. ANNEXURE
Questionnaire:

Laptop
(Product)_questionnaire.xls

Consolidated Detailed Responses:

BRM Project Data.xls

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