Demographic Study for Consumer Product (Laptop) Evaluation Based on Add-On Features

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

Submitted by Group 4, IIFT, EPGDIB 2009-11

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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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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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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

http://www.journals.uchicago.edu/doi/abs/10.1086/596717

http://ideas.repec.org/a/ucp/jconrs/v36y2009i1p17-28.html



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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:

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

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



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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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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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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

What is your desirability of this feature on a scale of 1- 5?

Additional amount you as a consumer are willing to pay? (500- to 10000)

To what extent do you think that the enhanced /add-on features should be an integral component of the good on a scale of 1-5?

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.

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



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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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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

0

50

100

150

200

250

300

350

400

1 2 3 4 5

RATING SCALE

CO

NS

UM

ER

RA

TIN

GS

ALlIGNED FEATURES

UNALLIGNED FEATURES

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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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

Level

Age

Total Below 20 20 to 30 30 to 40 Above 40

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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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.

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

Level

Age

Total Below 20 20 to 30 30 to 40 above 40

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

Demographics AGE: Consumer Behavior for Aligned Add-ons

0

20

40

60

80

100

120

140

160

1 2 3 4 5 RATING SCALE

Age Group 20-30 Age Group 30-40 Age Group >40

CONSUMER RATING



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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.

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.

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

0

20

40

60

80

100

120

140

160

180

200

1 2 3 4 5 Rating Scale

Age 20-30 Age 30-40 Age >40

Consumer rating



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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.


Laptop Aligned Data Based on Income

Total Level

Income

25k 25-50 50-75 75-1 1l

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.

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.

Demographic Income: Consumer Behavior for Aligned Add-Ons

0

20

40

60

80

100

120

140

160


Income level < 25000 Income Level 25000-50000 Income level 50000-75000 Income level 75000-100000

Consumer rating



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DATA FOR NON ALIGNED FEATURES

Laptop unaligned Data Based on Income

Level

Income

Total 25k 25-50 50-75 75-1

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


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.

Demographic Income: Consumer Behavior for Non Aligned Add-Ons

0

20

40

60

80

100

120

140

160


Income level < 25000 Income level 25000-50000 Income level 50000-75000 Income level 75000-100000

Consumer Ratings



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5.1.3. Demographic Factor - Occupation


Laptop Aligned Data Based on Occupation

Level

Occupation

Total Business Man Professionals Student

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.

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.

Demographic Occupation: Consumer Behavior for Aligned Add-Ons

0

20

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120

140

160


Consumer Ratings

Profession :Business Profession :Services Profession :Students



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DATA FOR NON ALIGNED FEATURES

Laptop Non-Aligned Data Based on occupation

Level

Occupation

Total Business Professionals Student

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


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

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20

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60

80

100

120

140

160


Consumer Ratings

Profession: Business Profession: Service Profession: Student



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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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7. ANNEXURE Questionnaire:

Laptop (Product)_questionnaire.xls

Consolidated Detailed Responses:

BRM Project Data.xls

Demographic Study for Consumer Product (Laptop) Evaluation Based on Add-On Features

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