A Marketing Model for Mobile Wireless Services1


1 Invaluable feedback from HIICS referees is gratefully acknowledged. Mobile data services integrate handheld and Internet technologies to create new value propositions (Keen and Mackenzie 2001), in a social context, over time (Rogers 1995). Yet, this value can only be realised through new behaviours, including acquiring the enabling technology, learning to use it, applying it to solve problems or add value in everyday life, and communicating what one has learned about it to other prospective users. This article explores the recent emergence of the mobile data services phenomenon in Malaysia and Singapore, and analyses survey data from over four hundred cell phone subscribers to identify a marketing model that targets the needs of early adopters, identifies the information channels that reach various types of innovators, then examines the linkages among early adopters and other segments over time and across markets. Introduction Mobile data services (MDS) applications deliver content and enable transactions, but unlike the Internet, can serve users while they are on the move. The Internet plays an important enabling role in the MDS phenomenon: for WAP and i-Mode as an enabling technology and source of content. Both use mark-up languages derived from the Web, with features to accommodate the limitations of cell phones. The messaging capabilities built into GSM were not originally intended for subscriber use, and Internet chat serves as an inspiration and role model for the extension of the SMS standard to EMS and beyond. As communications devices that accompany owners, cell phones have characteristics in use that differ sharply from personal computers: they are truly portable, seldom used by others, and increasingly, constantly connected to an ”always-on” network (Raisinghani 2001). The rapid diffusion of digital mobile networks, first to Europe, then throughout Asia, and now North America, enables data delivery to various types of “anywhere, anytime” personal terminals. However, while SMS adoption is growing exponentially, the technically more sophisticated WAP services have generally failed to attract a critical mass of users. MDS are a current example of technologyenabled discontinuous innovation, similar from the economic and behavioural perspectives to the Internet. Such innovations will succeed only if adopted by a critical mass. To attract this critical mass, MDS must create new value, and generate new behaviours, in specific social contexts, over time. Such behaviours include acquiring the enabling technology, learning to use it, applying it to solve problems or adding value in everyday life, and communicating what one has learned about it to others. The Context of the Study Adjacent Southeast Asian nations Singapore and Malaysia share a colonial heritage, and were briefly a single nation. Despite similarities in culture, they vary greatly in terms of geographic, demographic, political, and economic structure. Home to about four million residents, Singapore is a compact and entirely urban city-state. Malaysia, with its far more widely dispersed population of about 20 million, has a strong agricultural sector. Both developed modern urban infrastructure, to support a wide range of industries including electronics manufacturing. To enhance its main economic role as an entrepôt trading centre, Singapore deployed analogue mobile technology in the 1970s, followed by digital wireless voice services in the 1980s, with Malaysia not far behind. Malaysia opened fixedline and mobile markets several years before Singapore’s “big bang” liberalisation in early 2000. In Malaysia, mobile subscribers double every 18 months, and SMS traffic accelerated following operator agreements to interconnect SMS services so subscribers to one operator can send messages to those subscribing to another. In the relatively saturated Singapore mobile voice market, operators use SMS as a source of HIICS 2003 mobile data services 2 differentiation. Local operators have the second highest (after the Philippines, where SMS is a substitute for expensive intra-city voice traffic) percentage of revenues from SMS, and SMSbased information services such as information services, taxi orders, and logo and ringtone downloads are gaining market acceptance. The MDS phenomenon has roots in the storeand-forward short messaging service (SMS) model. This soon evolved to the broadcast ”push” mode, followed by interactive or “pull” SMS. MDS infrastructure is evolving rapidly. In Europe and much of Asia, GSM (Global Systems for Mobile communication) is the current de facto wireless network standard. Designed for voice, GSM carries data over a relatively slow, circuit-switched signalling channel. Today, data rates are being upgraded through General Packet Radio Services (GPRS) and Enhanced Data for Global Evolution (EDGE) technologies. In perhaps five years “Third-generation” (3G) infrastructure will be deployed throughout the region, offering far higher mobile data rates. The resulting increase in spectrum capacity, combined with new functionality, will drive the diffusion of mobile data communications (Gruber and Verboven 2001). Merrill Lynch views the Asia Pacific (outside Japan) as a promising region for MDS growth, riding on continuing growth in adoption, and operator upgrades to support Enhanced Messaging Services (EMS). Even today, premium SMS services could easily double current revenues from mobile data services, according to Strand Consultancy (2002). In responding to this opportunity, mobile service operators face several uncertainties. First, the specific types of MDS products that will meet marketplace desires are not well understood (Evans 2001). Until the value propositions are established, it is impossible to source and price content. Next, the underlying structure of this market, which is the basis for its segmentation, is not likely to resemble current markets. In any case, operators are not effectively segmenting mobile markets, as evidenced by high churn rates. Finally, several years and billions of dollars will be needed to deploy 3G. Given that these factors are the basis of a viable business model (Afuah and Tucci 2001), and that fixed costs are likely to dominate the MDS cost structure, MDS investment risk will remain high until these knowledge gaps are filled. Approach This work integrates two perspectives on market segmentation. Diffusion research, by categorising adopters according to their intended and actual adoption behaviour, creates segments derived from factors such as perceived value, time, and access to information (Rogers 1995). Needs-based segmentation emerges in information intensive contexts, where competing demands for attention (Simon 1971, Goldhaber 1997) shift marketing and communication activity from the traditional mass media orientation toward a personalised approach, enabled by information technology (Hoffman and Novak 1996). To successfully introduce new products to emerging markets, it is necessary to acquire an understanding of the underlying phenomena: consumer behaviour, market segmentation, product life cycles and positioning, and competitive behaviour (Urban and Star 1991). This work explores the first two of these phenomena. Needs-based Market Segmentation Originating in diffusion research, different adopter groups perceive innovations and thus behave differently. Miller (1993) finds that prior knowledge of potential adopters can focus the use of resources to prevent an innovation from failing. The three dimensions for segmentation analysis are based on Weinstein (1994): Table 1: Segmentation Dimensions Demographic Psychographic Behavioural Age, occupation , gender, income, religion, nationality, education, marital status, ethnicity Values, lifestyle, interests, opinions, activities Product use patterns and perceived benefits Innovation theory can be applied to identify the attitudes and behaviour of early adopters, as a dynamic basis for a market segmentation model. A Research Framework for MDS Deployment The figure below models interactions among supply factors, demand factors, and the contextual forces that mediate supply and demand, from the dual perspectives of the MDS operator and its subscribers. Contextual forces – the flow of wealth, new tools, public policy, and culture shape both the supply of new technology-based services and the demand for them (Urban and Star 1991). The marketplace is mediated by these macro forces. Supply factors for operators include both internal and external HIICS 2003 mobile data services 3 resources, marketing activities, and operational activities such as customer care. An operator’s current subscribers represent both opportunities and constraints, in that perceived subscriber needs and expectations tend to influence both the value proposition and pricing structure for new offerings. On the demand side, adoption and use of MDS are driven by various types of personal needs and by institutional forces such as employer or client expectations. Adoption of new MDS may be constrained by commitments brand loyalty, a lack of number portability to a new operator, or the expiry date of a service contract to their current mobile operators, or simply by a lack of awareness regarding the availability and features of new services. Figure 1: A Research Framework for Mobile Data Services This framework is multidisciplinary and atheoretical, in the sense that it is possible to map it to any one of several theories. From a strategy perspective, it is compatible with the Porter diamond (Porter, 1990), while from a behavioural perspective, the Rogers (1986, 1995) model of innovation adoption is a good fit. The framework is also dynamic: changes in any cell are likely to influence others. For example, when MDS technology enables a new value proposition on the supply side, its emergence in the marketplace may alter market structure, tap latent user needs, or reveal new governance issues, and its use is likely to impact the operator’s current resource base, marketing activities, and operations. Due to the failure of WAP-based services to attract users, nearly all consumer-oriented MDS offerings in Singapore and Malaysia are SMS based. While this will change, as a critical mass of local users acquire cell phones that take advantage of the superior performance offered by GPRS and EDGE, current links between context and supply are relatively static. Thus, the current work focuses on interactions among contextual factors, demand factors, and market structure. The research seeks an understanding of how to segment the MDS market so that it is possible for operators to match specific MDS with target users, over time. Four primary sets of variables make up the model: 1. The independent variables are reported behaviours and demographic data. These include age, income, education, residence, technology ownership, and uses of respondents. These data constitute the general structure of demand for MDS. 2. The dependent variables are product preference and channels for information. If these can be related to the attributes of subscribers, market segments emerge. 3. Time of adoption alters market structure over time. 4. The Social System is a contextual variable (in this work either Singapore or Malaysia), that mediates among MDS market factors. Figure 2: Research Model Figure 2 maps these variables to the research framework, which reveals that the current work explores only a small subset of the total set of relationships captured by the framework. Contextual Factors Economics Technology Governance Culture Supply Factors Resources Marketing Operations Current Subscriber Base Demand Factors Personal Needs Institutional Forces Commitments to Operators Product Awareness MDS Market Structure and Dynamics Contextual Factors Singapore vs. Malaysia Supply Factors Beyond scope of current work Demand Factors Reported needs of subscribers Product Awareness Information Channels MDS Market Structure and Dynamics HIICS 2003 mobile data services 4 Fieldwork and Analysis This exploratory work is intended to surface emergent behaviour patterns rather than confirm well-established cause-effect relationships. The research objective is to seek an understanding of how to segment the MDS market so that it is possible for operators to match specific MDS products or services with target users, over time. It is unclear whether this will be based on demographic or behavioural traits, or both. The researchers selected innovation theory as the primary lens through which to view the MDS phenomenon, in two study rounds. The initial study examined WAP services as the most widely available interactive platform in use at the time (Gilbert and Sungawan 2002). The second study round extended the research scope beyond the Singapore market and took a more general look at mobile data services. The idea is not so much to develop a predictive model of MDS diffusion (e.g. Rai, et al 1998) but more to understand underlying segments. All field research followed the general protocols below: 5. Review recent industry research and mass media to surface current market trends. 6. Organise focus groups to explore emerging issues, refine research questions, and gather impressionistic data. 7. Design survey instruments to capture data about the most interesting research questions, from the perspective of the relevant theory. 8. Field-test survey questions with members of the target groups, and refine research instruments. 9. Collect survey data, avoiding systematic bias whenever possible. Empirical Evidence: Round One The first round, completed in early 2001, explored the early stages of mobile data services deployment on the SMS and WAP platforms (Gilbert 2001; Chia, et al 2001). The first stage began with a focus group composed of 20 GSM subscribers who were non-users of WAP. The focus groups helped clarify research issues and refine the survey, later distributed to 300 undergraduate and postgraduate students. The unit of analysis was the individual decision to adopt WAP services, rather than the device. Of the 300 forms distributed, 198 were returned, for a 65% return rate. The survey population was evenly distributed along age, gender, and occupational lines. More than 85% owned and used cell phones. WAP subscribers in the survey panel were likely to be male, and perceived themselves as technologically savvy persons to whom others turn for guidance. They were also more likely to use SMS and personal organiser functions on their cell phones. Subscribers were also more likely to use cable and wireless modems to connect their personal computers to the Internet. For access to information about technology and technology-based services, WAP subscribers were significantly more dependent on mass media channels, and less dependent on advice from family, friends, and colleagues, compared to non-subscribers. These findings confirm the need to match the communications channel to the intended target (Rogers 1995), over time. Table 2: Factor Loadings for Exploring Needs-based Segments Subsequent exploratory R-type factor analysis was used to investigate relationships among key survey interval-scaled questions regarding the intention to use WAP services. The subset of participants indicating such use totalled 149. Principal axis factoring was carried out, followed by varimax rotation with Kaiser Normalisation. Rotations converged in 6 iterations. The KMO measure of sampling adequacy and Bartlette’s tests of sphericity provided support for the validity of running factor analysis on the data set. Varimax rotation facilitated interpretability. Initial runs showed, on the basis of a scree plot and eigenvalues, support for five factors, which explained 48% of the total variation. Rotated Factor Matrixa

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Cite this paper

@inproceedings{Gilbert2002AMM, title={A Marketing Model for Mobile Wireless Services1}, author={A. Lee Gilbert and Jon D. Kendall}, year={2002} }