Understanding Consumer Behaviour in Information and Communication Technologies

(ICTs)

Alastair W RobertsonA.W.Robertson@lancaster.ac.ukDepartment of Management ScienceLancaster University Management SchoolLancasterLA1 4YXUnited Kingdom

What are ICTs?

• ICTs are ‘gadgets’ that people can use to connect to information and to communicate with one another.– e.g. Computers and PDA’s. – Focus here is limited to internet adoption.

• But why has research into ICT adoption become so important?

Milit

ary

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Sim

plifi

ed w

eb

use

Expl

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e in

tern

et

grow

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Broa

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ener

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5.5M!

Digi

tal

Divi

de?

60’s 90’s 95 00 0?04

9kbs 56 to 128kbs

512Mbs 2Mbs

Discussion highlights a fast changing market

• What do market stakeholders need to know to be able to forecast the market better?

• Why and Which consumers adopt technologies!

Knowledge of consumer behaviour

How to apply this information

to produce forecastsDevelop

ment of new

methodologies, or existing

techniques re-

applied

The stakeholder positions

• Digital divide highlights missed revenue or missed development opportunities and cost saving.

– Marketers and Business Planners;• Missed revenue: Untapped market

– Government and Regulators;• Missed development opportunities: Countries

with less ICT may grow less. • Missed cost saving: Those on ‘wrong’ side of

divide use government services more frequently.

Focus of the Research

• Human characteristics and ICT

Combine to produce consumer groups with unique ICT characteristics

Technology acceptance (perceptions)

2 Levels of HC

Segment using perceptions,

confirm segment validity using

socio-economicSocio-Economic

(e.g. income, age)

Application of Human Characteristics

• Segmentation; – measure of the digital divide?

• Model estimation; – Application of choice modelling.– confirmation of what drives the digital divide.

• Experimentally, applied to the diffusion modelling process; – Introduces idea that that segmental diffusion curves can be

estimated.– Estimate of how digital divide may evolve over time.

Social Psychological Factors• Massive literature on TAM;

– Google ‘technology acceptance model’– A large number of test applications.

Fred Davis (1989);

External Variables

Perceived Ease of Use

Perceived Usefulness

Attitude, Use of Tech

Behavioural Intention

Actual Usage

• Adams (1992): Usefulness and Ease of Use perceptions

– Applicable to diagnosis of user acceptance in technologies in general

– Especially applicable when adoption is voluntary

• Igbaria et al (1996): TAM research justified due to extensive expansion into ICTs by businesses, but low final use

– Similar to residential ICT adoption?

Enjoyment and ICT adoption

• An obvious point,

– If computers become more enjoyable to use, their adoption and usage will increase, Igbaria (1996)

– Perceived enjoyment distinct from U and EoU

– Three perceptions are measurable at the consumer level

• EoU, U and E

First internet test of TAM, Teo (1999)

• Where next?

– New application of the TAM perceptions…

Ease of Use

Enjoyment

Usefulness

Internet Usage

All perceptions important, but usefulness more so….

An application of TAM, Survey of UK Households

– Extensive data collected from 1286 HHs.– Data was weighted to minimise non-response bias.

Expected ICT Utility

Enjoy, Comp

Easy, Comp

Useful, Comp

Enjoy, Net

Useful, Net

Easy, Net

Simple Application of Expected ICT Utility

Divide up the measure into arbitrary segments.

Measure known characteristics for each segment.

Merge ‘similar’ segments i.e. if demographically similar.

For each segment, measure their proportion in the data;

This is an estimate of the proportion of consumers in the UK of this utility level.

Computer Adoption by Utility Level

0%

20%

40%

60%

80%

100%

Seg1 Seg2 Seg3 Seg4

Utility level

Perc

enta

ge w

ithin

se

gmen

tNB: No difference in gender…

Age by Utility Level

0%20%40%60%80%

Seg1 Seg2 Seg3 Seg4

Perc

enta

ge w

ithin

Se

gmen

t

18 to 29 30 to 39 40 to 49 50 and above

Educational Attainment by Utility Level

0%20%40%60%80%

100%

Seg1 Seg2 Seg3 Seg4

Perc

enta

ge w

ithin

se

gmen

t

Level 4 Level 3 Level 2 Other No Qualifications

Individual Disposable Income by Utility Level

0%20%40%60%80%

100%

Seg1 Seg2 Seg3 Seg4

Per

cent

age

with

in

Seg

men

t

£7,500-£11,249 £11,250-£18,749£18,750-£26,249 £26,250-£33,749£33,750 and above

• Complex approach– Incorporate expected ICT Utility with other strategies

• Estimate consumer choice model– e.g. logit

• Use the model to define segments via expected ICT utility– Estimate segmental price sensitivities

ICT Choice

No internet Narrowband BroadbandFactors drive the choices…

→Stage 1, fairly common procedure

How is logit output interpreted?

Logit estimates ICT adoption probabilities given a set of inputs, much like regression;

∑=

+++

+++

= n

j

xxx

iikxkixix

ikkii

j

1

)...(

)...2211(

2211

exp

exp)(Prβββ

βββWhere = Probability individual i purchases product j given xs

)(Pr ji

Factor effects facing

consumer β

Factor effects facing

consumer xi

Technology Levels in the Home

01020304050

Tech 2 HH Tech 3 HH Hi-tech HHTechnology Level

Odds

Rat

io

Narrowband Broadband

Household Educational Attainment

00.10.20.30.40.50.6

Level 3 Level 2 Other No Qual.

Odd

s R

atio

Narrowband Broadband

Compare to missing category

Presence of Children

00.5

11.5

22.5

3

Narrowband Broadband

Odd

s R

atio

Point: Overall effects stronger for broadband than for narrowband

Insight: Demographic effects dissipate over time…

Internet Choice Elasticity: +0.2

Segmentation Results

Table 2: ICT utility segments

83%-1.28High income and educ., 25% with kids, love technology.

High(62.1%)

65%-1.42Good income and educ., white collar, possibly kids.

Mid to High(22.7%)

21%-1.51Moderately better income, slightly better educ. Blue collar.

Low to Mid (13%)

8%-1.77Low income and educ., retired, unemployed.

Low (2.2%)

Computer Adoption

Broadband Price

Elasticity

Household Description

ICT Utility Level

• Apply price forecast to the model for each segment

→Stage 2, new and experimental procedure

£0£10£20£30£40£50

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Pric

e

Broadband Price Forecast

Broadband Price Forecast

)22.004.4(exp ttP

−=

+

−=

+−

+−

).tq(p

s

s

).tq(p

tsss

ss

epq1

e1Pr)|MProb(s(t)N

Work resulting segmental adoption probabilities to the diffusion process.

Segmental Adoption Probability

Segmental Innovation and Imitation Parameters

‘Moving’ Social System Size N

Segmental Diffusion Rate

00.5

11.5

22.5

33.5

4

2001

2003

2005

2007

2009

2011

2013

2015N

umbe

r of N

ew A

dopt

ers

in Y

ear

Low to Medium Utility Medium to High UtilityHigh Utility Aggregated Segments

High Utility Adopt First: Innovators

Low Utility are the Laggards

Segmental Diffusion

05

1015202530

2000

2002

2004

2006

2008

2010

2012

2014

Num

ber o

f H

ouse

hold

s, M

illio

ns

Low to Medium Utility Medium to High UtilityHigh Utility Aggregated SegmentsBroadband Actual

Model Comparison

05

10152025

2000

2002

2004

2006

2008

2010

2012

2014

Num

ber o

f H

ouse

hold

s, M

illio

ns

Bass Aggregate AEUDSegmental AEUD Broadband Actual

Bass tends to under perform in presence of limited data

Segmentation approaches: Simple versus Econometric

0%

20%

40%

60%

80%

Simple Econometric

Perc

enta

ge

Seg1 Seg2 Seg3 Seg4

2.2%

13.0% 22.7%

62.1%

47.6%42.1%

6.9%3.4%

Which to choose?

Recap.

• The presentation has introduced expected ICT utility as a segmentation variable for residential ICTs;

– Created from a sound theoretical foundation.

– Applications go some way to confirm validity of the measure.

Issues• More testing needed to confirm validity;

– New survey is proposed for next year.– Same HHs, two year interval.– Track segmental shifts.

• Wider tests required;– Different applications (e.g. wireless apps.).– Different countries.

Future Possibilities

– Other applications may exist for this variable also, especially if captured regularly in time;

• Comparable measures across countries.

( )itframework regulatory factors, economic-Sociof Utility ICT Expected it =

Where i could be individual or country…