Seminar in Economic Policy

Seminar Thesis

“Purchase involves Reference group influence”

Submitted by:
Qasim Rishi
2002-1-10-5136
Submitted to:
Mr. Ashraf Janjua
Dean, Institute Of Business Management

Submitted on:
May 15th 2007

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 Letter of Transmittal

Mr. Ashraf Janjua

Dean
Institute of business Management
Korangi
Karachi

Dear Sir:
As authorized, I have prepared the Thesis on “Purchase of a Mobile Phone
involves reference-group influence” for the course Seminar in economics policy.
Kindly accept my efforts.

I have tried to fulfill all the requirements laid by you and hope that you find it up
to the mark.

Sincerely,

Qasim Rishi
MBA(R)
2005-1-16-5136

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 Table of Content
Research objective___________________________________________________4
Literature survey____________________________________________________5
What is a reference-group influence?__________________________________5
Variability among products:___________________________________________6
(1) Publicly consumed luxury:_____________________________________6
(2) Privately consumed luxury:____________________________________7
(3) Publicly consumed necessity:___________________________________7
(4) Privately consumed necessity:__________________________________7
Significance and restraints of the study__________________________________10
Research methodology_______________________________________________11
Research design:________________________________________________11
Data collection methods/tools_________________________________________12
Sampling method_________________________________________________12
Population:____________________________________________________12
Sample size:___________________________________________________12
Extent:_______________________________________________________13
Time: ________________________________________________________13
Sample product category:_________________________________________13
Brand__________________________________________________________13
Data collection method____________________________________________13
Data collection tool_______________________________________________13
Respondents:____________________________________________________13
Literature survey/secondary data:____________________________________14
Questionnaire design________________________________________________15
Questionnaire______________________________________________________16
Research tabulation, analysis & interpretation____________________________19
Summary of findings, conclusion & recommendations_____________________22
Recommendations:________________________________________________22
Appendix_________________________________________________________22

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 RESEARCH OBJECTIVE
I have chosen “Mobile Phones” which belongs to the category of “Publicly consumed
Necessity” to test the influence of reference-group.

Null- HYPOTHESIS (H0)

“Purchase of a Mobile Phone involves reference-group influence”

Alternative-HYPOTHESIS (H1)

“Purchase of a Mobile Phone does not involve reference-group

influence”

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 “LITERATURE SURVEY”
(From: Marketing Management by Philips Kotler
&
Consumer Behavior by David L. Loudon)

What Is a Reference-Group Influence?

A group is a set of people who have a sense of relatedness as a result of interaction with
each other. Reference group is a group, which people generally prefer referring to. A
person’s reference group consists of all the groups that have a direct (face-to-face) or
indirect influence on the person’s attitude or behavior. Groups having a direct influence
are called membership groups.
Some membership groups are primary groups such as family, friends, neighbors and co-
workers, wit whom the person interacts fairly continuously and informally. People also
belong to secondary group such as religious, professional and trade union groups, which
tend to be more formal and require less continuous interaction. . People are significantly
influenced by their reference groups in at least three ways:
 Reference groups expose an individual to new behavior and lifestyles.
 They influence attitude and self-concept.
 They create pressures for conformity that affect actual product and brand
choice.
People are also influenced by groups to which they do not belong. Aspirational groups
are those person hopes to join; dissociative groups are those whose values or behavior an
individual rejects.
Marketers try to identify target customer’s reference groups. However, the level of
reference-group influence varies among products and brands. Reference groups appear to
influence both product and brand choice. Manufacturers of products and brands must
identify ways to reach opinion leaders. An opinion leader is a person in informal
product-related communications who offers advice or information about a specific
product or product category.

Variability Among Products:

When the influence of reference groups on the purchase of a number of consumer goods
was studied, it was found that the “conspicuousness” of a product is a strong determinant
of its susceptibility to reference-group influence. David L. Loudon has identified two
forms of conspicuousness on the basis of:
 Consumption: Public-Private
 Items: Necessity-Luxury
The item must be exclusive in some way. If virtually everyone owns it, it is not
conspicuousness in the first sense, even though it may be highly visible. Operationally,
we may think of this as the distinction between luxuries (having a degree of exclusivity)
and necessities (possessed by virtually everyone). Secondly, the item must be seen or

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identified by others. Thus, where an item is consumed has great relevance. In this
situation a distinction may be made between “publicly consumed products” (which are
seen by others) and “privately consumed items” (that are not seen by others). Reference
groups may influence either the purchase of the product or the choice of a particular
brand, or both.
David L. Loudon has identified the concepts of public-private consumption and luxury-
necessity items. Such combination has further identified eight reference-group influence
relationships.

(1) Publicly consumed Luxury:

A product consumed in public view and not commonly owned or used such as
golf clubs etc. in this case, whether or not the product is owned and also what
brand is purchased is likely to be influenced by others.
Relationships with reference-group influence:
a) Because it is a luxury, influence for product should be strong.
b) Because it will be seen by others, influence for the brand of the
product should be strong.

(2) Privately consumed Luxury:

A product consumed out of public view and not commonly owned or used such as
a trash compactor. In many cases, the brand is not conspicuous or socially
important and is a matter of individual choice, but ownership of the product does
convey a message about the owner.
Relationships with reference-group influence:
a) Because it is a luxury, influence for product should be strong.
b) Because it will not be seen by others, influence for the brand of the
product should be weak.

(3) Publicly consumed Necessity:

A product consumed in public view that virtually everyone owns such as

wristwatch. This group is made up of products that essentially all people or a
large population of people use, although they differ as to what type of brand they
use.
Relationships with reference-group influence:
a.Because it is a necessity, influence for product should be weak.
b. Because it will be seen by others, influence for the brand of the product
should be strong.

(4) Privately consumed Necessity:

A product consumed out of public view that virtually everyone owns such as
mattress. Purchasing behavior is largely governed by product attributes rather

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than by the influence of others. In this group neither products nor brands tend to
be socially conspicuous, and the products are nearly owned by all the consumers.
Relationships with reference-group influence:
a) Because it is a necessity, influence for product should be weak.
b) Because it will not be seen by others, influence for the brand of the
product should be weak.

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 “REFERENCE-GROUP INFLUENCE
RELATIONSHIPS”

Product Weak reference group Strong reference group

Brand influence (- ) influence (+)
Public necessities Public luxuries
influences: Weak influences: Strong
Strong reference group product and strong product and brand.
influence (+) brand. Examples: Examples: Golf clubs,
Wrist watch, Mobile sailboat etc.
Phones, automobile
etc.
Private necessities Public luxuries
influences: Weak influences: Strong
Strong reference group product and brand. product and weak
influence (- ) Examples: Mattress, brand. Examples: TV
undergarments etc. game, ice maker etc.

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“SIGNIFICANCE AND RESTRAINTS OF THE STUDY”

The following are the significance and restraints of the study conducted:

1. The responses collected for the Research are from Saddar therefore the views and
behavior of the respondents should not be considered as a response and behavior
of the customer of the whole city of Karachi and also not that of the country as a
whole.

2. This study will reveal the influence of reference-group on the purchase of

“Mobile Phones”.

3. Since the consumers themselves will fill the questionnaire therefore it can truly
reveal the picture of reference-group influence in the purchase.

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 “RESEARCH METHODOLOGY”
Research is descriptive and conclusive because we would like to find out the existence of
reference-group influence in the purchase of “Mobile Phone”.

Research Design:

1. Research design followed is “Conclusive Research Design” because I would like

to find out the reasons why does a publicly consumed necessity have a strong
reference-group influence.

2. Within conclusive our research falls in the category of “Descriptive Process”

since we want to evaluate customer’s preference, perception, awareness, norms
etc.

3. I will use Omni-Bus Style from Longitudinal Style of Sample. We will use one
sample and will evaluate all the variables of awareness, preference, knowledge,
benefits etc. from that sample.

4. I will design a questioner as a tool to study the problem.

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 “Data collection Methods/Tools”

We will collect the data directly from respondents through “QUESTIONNAIRE” as a

tool for data collection since it fits our research i.e. Conclusive and secondly its time and
cost effective.

“SAMPLING METHOD”

Population:

Element:
Demographics:
Age: 18 years - 50 years
Geography: Saddar
Psychographics:
Activity: Entertainment (Concert etc), Work /Student, Sports, Shopping, Community,
Club Membership
Interest: Family, Job, friends, Community, Fashion, Food, Media.
Lifestyle: Strivers
Personality: Gregarious, Ambitious
Sampling Unit:
Sample Size:
There are approximately 200 outlets of Mobile Phones in Saddar. I have chosen 10% of
the retailers i.e. 20 retailers. I will then interview 2 buyers per retail shop who would be
leaving after purchasing the phone. Thus I will end up in interviewing 40
consumers/purchasers.

Extent: Saddar, Karachi

Time: April 10th, 2007- May 10th , 2007.

 Since Element is equal to Sampling Unit therefore it is a “Single Stage Sampling

Process”.

 Since all the consumers are hard to question therefore it falls under “Non-
Probability Sampling Process”.

 Under this we will investigate as our “Convenience”. Means any consumer who is
available.

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Sample Product Category:
From the theory I have selected Mobile Phone category to test my hypothesis.
Brand: Mobile Phone.
Data Collection Method: Survey
Data Collection Tool: Questionnaire

Respondents:
Respondents from the following retailers:

Mobile zone LG electronics

Gaba Electronics Global Communications
Signals Waqar electronics
City town Nadias electronics
Mohsin Communication Minhaz mobile shop
Kashan electronics Al-Jadeed mobile shop
Bawani Electronics New Sony electronics
Samsung Electronics Nokia mobile
Mega Communications Sony outlet
Wireless service providers Imtiaz mobile collection

Literature Survey/Secondary data:

Two sources were used to collect the theoretical material one was the book

 Marketing Management
By Philips Kotler
Millenium Edition

 Consumer Bahavior
By David L. Loudon.

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 Questionnaire Design
In order to collect accurate responses and to increase validity and consistency of the
analysis all the responses are collected through Closed Ended Responses using checklist
answers.

The Content of the questionnaire covers the following areas

 Mobile Phone as a Necessity Item:

Question 1 check the presence of mobile phones in the product category of publicly
consumed necessity.

 Strong Brand:
Question 2 is targeted towards revealing the condition of containing a strong brand
since it is publicly consumed.

 Reference-Group Influence:
Question 3-6 is targeted to find out the influence of reference group while purchasing
mobile phones.

 Respondent being a reference group:

Question 7 is targeted to find out the whether the respondent himself/herself is an
influencer or not.

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 “QUESTIONNAIRE”
1. Where will you place the Mobile phones:
 Luxury items.
 Necessity items.

2. Which Brand did you purchase?

 Nokia
 Samsung
 Motorola
 Sony Ericsson
 LG

3. Why did you purchase this mobile phone?

(Tick all that apply)
 Brand Image
 Price
 Features
 Color
 Warranty
 Ad of the Product
 Old user of this brand
 Reference Group

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4. Who is involved in your reference group?
(Tick all that apply)
 Peer Group
 Family
 Celebrity
 Retailer influence
 Friends
 Brand itself

5. Did you have any reference group pressure for the purchase of this Mobile phone?
 Yes
 No

6. The Purchase was based on: -

 Purely your own decision.
 A mutual decision of your and your reference group.
 Purely reference group.

7. Where will you rank yourself: -

 Decision Maker
 Influencer
 Information Gatherer
 Follower

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 Personal Information:

Age:

Household Income:

Activities: (Tick all that apply)

 Social group hang out
 Community
 Sports
 Shopping
 Club membership

“THANK YOU”

Name of the Shop: ______________________ Respondent Number: _______

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 “Research Tabulation, Analysis & Interpretation”
For the purpose of analysis, I have calculated the frequencies and percentages of the
responses to each question and part. I will discuss in detail the results of each and every
question by comparing the percentages of each part and question and give adequate
reasoning for the results derived through the survey.

Question 1:

1. Where will you place the Mobile phones:

 Luxury items.
 Necessity items.

Q1 Frequency %
Luxury 12 30
Necessity 28 70
Total 40 100

Analysis and Interpretation:

70% purchasers of mobile phone admit that this is included in a necessity item.

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Question 2:

2. Which Brand did you purchase?

 Nokia
 Samsung
 Sony Ericsson
 Motorola
 LG
Q2 Frequency %
Nokia 24 60
Sony Ericsson 11 27.5
Samsung 3 7.5
Motorola 2 5.0
LG 0 0
Total 40 100

Analysis and Interpretation:

60% purchasers purchased Nokia; 27.5% purchased Sony Ericsson; 7.5% purchased
Samsung; whereas 5% purchased Motorola.

BRAND PURCHASED

Nokia
Sony Ericsson
Samsung
Motorola

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Question 3:
3. Why did you purchase this mobile phone?
(Tick all that apply)
 Brand Image
 Price
 Features
 Color
 Warranty
 Ad of the Product
 Old user of this brand
 Reference Group

Q3 Frequency %
Brand Image 13 13.3
Price 13 13.3
Features 27 27.6
Color 0 0
Warranty 13 13.3
Ad 0 0
Old user 14 14.3
Reference Group 18 18.4
Total 98 100.0

Analysis and Interpretation:

27.6% respondents look for product features while purchasing a mobile phone. 18.4%
respondents purchased was due to their reference group. Other responses were rated at an
equal rate.

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Question 4:
4. Who is involved in your reference group?
(Tick all that apply)
 Peer Group
 Family
 Celebrity
 Retailer influence
 Friends
 Brand itself

Q4 Frequency %
Peer Group 14 16.9
Family 15 18.1
Celebrity 14 16.9
Retailer 4 4.8
Friends 18 21.7
Brand Itself 18 21.7
Total 83 100.0
Analysis and Interpretation:
21.7% respondents revealed that friends and the brand itself are included in their
reference group, which is the highest ratio in the study.

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Question 5:
5. Did you have any reference group pressure for the purchase of this Mobile phone?
 Yes
 No

Q5 Frequency %
Yes 29 72.5
No 11 27.5
Total 40 100.0

Analysis and Interpretation:

72.5% respondents revealed that reference group influence was involved in the purchase
of the mobile phone.

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Question 6:

6. The Purchase was based on: -

 Purely your own decision.
 A mutual decision your and your reference group.
 Purely reference group.

Q6 Frequency %
Own 27 67.5
Own + Reference-Group 13 32.5
Reference Group 0 0
Total 40 100.0

Analysis and Interpretation:

67.5% purchasers purchased their mobile phones purely on their decision however 32.5%
accepted the involvement of the reference group in the purchase along with their own
decision.

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Question 7:

7. Where will you rank yourself: -

 Decision Maker
 Influencer
 Information Gatherer
 Follower

Q7 Frequency %
Decision Maker 29 72.5
Influencer 11 27.5
Information Gatherer 0 0.0
Follower 0 0.0
Total 40 0.0

Analysis and Interpretation:

Majority of the respondents questioned fell in the category of decision maker (72.5%).
However 27.5% respondents interrogated ranked themselves as influencers.

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 “SUMMARY OF FINDINGS, CONCLUSION &
RECOMMENDATIONS”
SUMMARY:
70% purchasers of mobile phone admit that this is included in a necessity item. 60%
purchasers purchased Nokia, 27.5% purchased Sony Ericsson, 7.5% purchased Samsung, whereas
5% purchased Motorola. 27.6% respondents look for product features while purchasing a
mobile phone. 18.4% respondents purchased was due to their reference group. Other
responses were rated at an equal rate. 21.7% respondents revealed that friends and the
brand itself are included in their reference group, which is the highest ratio in the study.
72.5% respondents revealed that reference group influence was involved in the purchase
of the mobile phone. 67.5% purchasers purchased their mobile phones purely on their
decision however 32.5% accepted the involvement of the reference group in the purchase
along with their own decision. Majority of the respondents questioned fell in the category
of decision maker (72.5%). However 27.5% respondents interrogated ranked themselves
as influencers.

CONCLUSION:
I may conclude that there are many factors involved in the purchase of a mobile phone
but the involvement of the reference group cannot be terminated altogether. Hence the H o
stands true:

“Purchase of a Mobile Phone involves reference-group

influence”

RECOMMENDATIONS:

Following recommendations can be suggested after the findings:

1. Since mobile phone has been identified as a necessity item and its features are the
most important factor for its consumers therefore marketers must look to remain
focused on the features.

2. Marketer must also try to find out the reference-group of their target market since
they influence the purchase.

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25
 “Tally Sheet”
Q1 Q2 Q3 Q4 Q5 Q6 Q7
S.No.
a b a b c d e a b c de f G h a b c de f a b a b c a b c d
1  1 1        1 1 1      1 1 1  1  1 1 1  1    1     
2  1 1            1  1      1 1        1  1    1     
3  1 1          1    1          1    1 1  1    1     
4  1 1        1  1      1 1 1    1    1  1    1     
5  1 1          1    1        1    1    1 1      1   
6 1  1            1  1      1  1      1  1    1     
7 1  1        1      1  1 1        1 1  1 1      1   
8 1    1        1    1      1  1      1    1  1     
9  1 1            1  1        1      1  1 1      1   
10  1 1        1      1    1 1      1    1  1    1   
11  1 1          1    1  1      1      1    1  1     
12  1 1            1  1    1      1  1 1  1    1     
13  1 1        1  1          1 1    1    1  1    1   
14 1    1        1 1  1  1 1    1    1 1    1  1     
15 1  1            1  1    1        1  1  1    1     
16  1 1        1 1        1  1        1 1    1  1     
17  1  1        1    1    1  1 1  1    1  1    1   
18  1  1        1 1          1        1 1  1    1     
19  1  1      1                  1  1  1  1    1     
20  1  1        1        1 1  1  1  1 1    1  1     
21 1    1          1          1      1  1  1    1     
22 1  1          1 1        1    1    1  1 1      1   
23  1 1        1  1      1          1  1    1  1     
24  1 1            1        1 1 1        1  1    1     
25  1 1          1 1        1    1        1 1      1   
26  1 1                    1  1 1    1 1 1    1  1     
27  1 1            1              1    1  1 1      1   
28  1 1        1 1          1 1 1    1 1 1  1    1     
29  1 1                    1      1      1    1  1     
30 1  1            1      1    1    1    1 1      1   
31 1  1            1      1      1    1 1  1    1     
32  1 1        1  1        1  1    1    1  1    1   
33  1    1        1        1    1    1 1  1    1     
34  1    1        1      1    1    1  1  1    1     
35 1      1    1  1        1  1        1  1    1     
36 1  1        1  1          1      1 1 1  1    1     
37 1  1        1  1        1      1    1    1  1     
38  1 1            1      1 1  1      1 1  1    1     
39  1 1            1            1    1  1  1    1     
40  1 1            1                  1 1 1  1    1     
Total 12 28 30 7 3 0 0 13 13 27 0 13 0 14 18 14 15 14 4 18 18 29 11 27 13 0 29 11 0 0

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