The analysis of factors affecting purchase decision of ...



THE ANALYSIS OF FACTORS AFFECTING PURCHASE DECISION OF CHINESE CONSUMERS ON TV HOME SHOPPING

Sangyub Shin, MBA

China Europe International Business School

699 Hongfeng Road, Pudong

Shanghai 201206 P.R.C. China

Tel.: +86 13 6419 73754

E-mail: chinafriend68@

Yoonkyo Cho, MS

Assistant Consultant

GNBRD Consulting

241-4, Oksu-dong, Seongdong-gu

Seoul, 133-839, Korea

Tel.: +82 11 9525 0912

E-mail: astroroad@

THE ANALYSIS OF FACTORS AFFECTING PURCHASE DECISION OF CHINESE CONSUMERS ON TV HOME SHOPPING

ABSTRACT

Owing to Chinese consumers’ increasing demand for consumption of convenience and innovative products, many cable TV home shopping companies enter Chinese market. Accordingly, this study attempts to provide an empirical analysis of the factors affecting purchase decision of Chinese consumers on TV home shopping.

Independent variables are product’s price and quality, show host, broadcast organization, delivery and payment, and communication. A dependant variable is purchase decision and product category (utilitarian goods, hedonic goods) is used as a dummy variable.

The result shows that firstly, product factor positively affects purchase decision of consumers. Secondly, show host factor has no effect on purchase decision in overall. Broadcast organization factor has positive effects on the overall purchase decision. Fourthly, factor of delivery and payment has positive effects on purchase decisions of Chinese consumers. Communication factor was found to significantly affect consumers’ purchase decision, which is the most influential effect. Lastly, product category factor differently affects purchase decision of consumers.

The implication of this study is that TV home shopping firms have to focus on service factors such as communication and fast and correct delivery and safe payment system to succeed in Chinese market.

Key Words: CATV home shopping, Chinese consumers, purchase decision, price and quality, broadcast, service, utilitarian goods, hedonic goods

INTRODUCTION

Over the last 8 years since 2002, due to the rapid economic growth of over 10%, the increasing spending power, and the retail market opening following the entry of WTO, various types of multinational firms, including Cable TV home shopping companies, have entered Chinese market. The expansion of many cable TV home shopping companies into Chinese market is primarily owing to Chinese consumers’ increasing demand for consumption of convenient and innovative products.

Based on the newly expanded and the potential purchasing power, companies hope to make an entrance to the Chinese market, while the ones already entered Chinese market plan on further expansion. Today, major TV home shopping firms in Shanghai are Korean Dong Fang CJ, American TVS, Japanese ACORN International, and Austrian TVSN. However, these firms have not achieved major success yet and we cannot help but asking why.

The principal cause lies in the fact that there has not been any analysis based on the actual customer trends within the Chinese market. Previous studies related to TV home shopping have only offered a general outline on the entry to the Chinese market and the business strategies in the country, and have failed in drawing a demand research among the Chinese consumers. So far, firms have relied on population statistics or on secondary data from other countries or regions; but such documents do not properly reflect the tendencies of the Chinese consumers. They ignore the rapidly changing environment of the Chinese market and the specific characteristics of the Chinese consumers and have only provided strategies they used in their own countries, hence the failure. Eventually, the major strategy of TV home shopping companies has been concentrated on analyzing the tendencies of Chinese customers, the strategy that has especially become important in foreign companies. This study therefore analyzes the factors that influence upon the purchase decision of Chinese consumers on TV Home shopping and aims at contributing in this area.

CONCEPTUAL FRAMWORK AND HYPOTHESES

The Concept of CATV Home shopping

According to Kolter & Amstrong (1996), nonstore purchasing is largely divided into Direct Marketing, Direct Selling and Automatic Vending Machine, among which Direct Marketing is the most representative method, which in turn can be classified into Direct Mail (DM), Catalog Marketing, Telemarketing, TV Marketing, and Electronic Shopping. Such methods of purchase through Direct Marketing are known as ‘home shopping’.

Cable TV Home shopping can be defined as “a multi-channel retail distribution industry transmitting shopping information to viewers through cable and communication channels” and “a retail distribution method using media for product sales or shopping.” It is similar to home shopping using catalogues or PC communication, for it allows the consumers to stay at home and put their orders through phone calls, but it differs from other home shopping because whereas store retail provides optional service and PC communication home shopping is one among many other service fields, CATV home shopping specializes in home shopping. The home shopping channel allows consumers to purchase various products from home and at moderate prices and thus acts as a TV shopping center, which is the main characteristic that stands out in its competition with other retail methods. (Kim, 2003). It is a new retail system that delivers the product to wherever the buyer wants. (Choi, 2004 ).

TV home shopping’s major advantage is that people can choose their products without having to go directly to the store. They can also listen to the detailed explanation of the product through the show host and can address their inquiries at any time. People can save their time and energy, all the while benefiting from free communication.

Factors affecting Purchase Decision of Consumers on TV Home Shopping

On TV home shopping, there are some factors that affect purchase decision of consumers, which are product factor (price and quality), broadcast factors (show host, broadcast organization), and service factors (delivery and payment, communication). In addition, product category can differently affect purchase decision of consumers on TV home shopping (Cox and Rich, 1964).

Purchase Decision

The purchase decision is the act seen as having a direct influence on the act of purchase, based on the set standard that the consumer has on certain product. In this study, intention of repeat purchase is considered purchase decision. Intention of repeat purchase can be defined as the willingness to use the product or services provided by a certain firm on more than one occasion. Such intention is closely related to the actual repeated purchase act and customer maintenance. The customer may experience discomfort during or after the purchase of a product and will evaluate his or her purchase decision (Engel et al., 1995). As it is more costly to maintain pre-existent customers than have new ones, it is important for the firm to be aware of the intention to repeat purchase.

Product Factor

Perception of products that can be found in certain specific retail stores is a significant element in the purchase decision making process of the buyer (Darden and Lusch, 1983). Among the various product factors, the price (Burt and Gabbott, 1995; Woodside and Trappey, 1992) and quality of product (Arnold et al., 1996) are regarded as most important factors.

The price of product is the exchange value of the product that one pays for the goods and service. When consumers evaluate a product, they consider not only the internal factors of the product, but also the external ones, such as the price. Therefore, price of the product significantly effects on purchase decision of consumers (Zeithaml, 1988). CATV home shopping, unlike other retail systems, provides information upon the product through TV and consumers can purchase the products without having to pay for the distribution cost. (Moon, 2003).

Product quality from the consumer’s perceptive is associated with capacity of a product to satisfy consumer needs (Archibald et al., 1983). Consumer’s perception of product quality is always an important aspect of a purchasing decision and market behavior. According to Lambert(1980), however, consumers often attribute quality to branded products on the basis of price, branded reputation, store image, market share, product features and country if manufacture. So, price is a significant indicator to measure the product quality. Due to this relationship, price and quality are combined as one factor in this study.

Hypothesis 1 The product factor positively affects the purchase decision of consumers on TV home shopping.

Broadcast Factors

Unlike other internet shopping means, CATV home shopping uses the media and conveys products through a screen, hence its own characteristics. People are included in this frame, such as the show host explaining the product and the models, and on the other hand, there are various equipments needed for the broadcast.

The show host, unlike anchors on TV programs or MCs, has to conduct the program live without a script and is required to catch the attention of the viewers as well as deal with unexpected moments with wit and reflexes. The broadcasting is directed according to the impromptu and subjective judgment of the show host and viewers often consider such aspect as friendly and sympathetic, which leads to their purchase (Joo et al., 2008). Furthermore, the fact that the host directly uses the products, thus providing a three-dimensional experience and explanation, has the same effect as having a direct conversation with the customer (Shin, 2003). There is therefore a high possibility of purchase based on the diverse substitute acts from the host and the high credibility he or she inspires (Park, 2001).

What this study describes as ‘broadcast organization’, includes every element that is included and organizes the CATV home shopping program, which comprises the arrangement of the background, the order and speed of the program and the appropriateness of the product exhibit and trials. TV home shopping has the advantage of reaching deep to the consumers. The fact that it uses TV as a media allows it to emphasize on reproduction, realism and entertainment, all of which have a positive impact on the consumer. (Shin, 2003),

Hypothesis 2. The broadcast factors positively affect the purchase decision of consumers on TV home shopping.

Hypothesis 2-1. The show host factor positively affects the purchase decision of consumers on TV home shopping.

Hypothesis 2-2. The broadcast organization factor positively affects the purchase decision of consumers on TV home shopping.

Service Factors

For a firm managing shopping malls to succeed, it needs to have a clear understanding and strong responsibility in order, payment, delivery, refund and A/S (After Service). Consumers’ desire for such factors is real and will directly affect on their purchase behaviors (Cox and Rich, 1964).

China adopts a system differentiated from other countries where payment is made at the point of delivery. When consumers purchase goods through home shopping, they expect fast and accurate delivery, and the level of satisfaction increases if the aforementioned factors are satisfied (Jung, 2008). Also, the easier the payment process, the more positive influence on sales figures, and the safety the consumer feels about his/her personal information can be an important factor constructing trust in the beginning (Cheskin Resaserch, 1999). With a safe and easy payment method, a safe security system and a clear policy on personal data protection, consumers will increase their purchases at the shopping mall (Jung, 2008).

CATV home shopping allows the viewers to have a direct conversation with the program host or the salesperson while the broadcast is being aired. Although the TV home shopping program is technically being run one-sidedly, it is actually supplemented by bilateral communication and this increases its penetration into the consumer (Li, 1995). The opportunity to directly talk to the salesperson can be advantage for the consumer as well (Park, 2002). The more the consumer realizes about this interaction, the friendlier image he or she will have about the shopping mall (Lee and Koo, 2001), and this active interaction between firm and customer will increase the latter’s trust in the former (Kim and Park, 2002).

Hypothesis 3. The service factors positively affect the purchase decision of consumers on TV home shopping.

Hypothesis 3-1. The delivery and payment factor positively affects the purchase decision of consumers on TV home shopping.

Hypothesis 3-2. The communication factor positively affects the purchase decision of consumers on TV home shopping.

Product Category Factor

Mano and Oliver (1993) classified products into utilitarian goods and hedonic goods in their study. Utilitarian goods define product consumption and purchases as being induced from the cognitive thinking process, and can be defined as instrumental, goal-oriented, functional and practical goods (Strahilevitz and Myers, 1998). On the other hand, hedonic goods define product consumption and purchases as inducing emotional and sensual experiences, aesthetic and hedonic pleasures, fantasies and joy (Hirshman and Holbrook, 1982). In this study, products sold through TV home shopping are largely classified into utilitarian goods and hedonic goods, and these product category can be significant effect on purchase decision of consumers.

Hypothesis 4. The product category factor differently affects the purchase decision of consumers on TV home shopping.

METHODOLOGY

Data Collection

The subjects of this survey cover men and women aged from 20s-40s, with experience in purchase through TV home shopping, within the same cable TV area and living in the Shanghai region. We distributed 3,100 surveys to students and office workers for 2 weeks and after collecting 350 copies back, we analyzed about 8% of the total, accounting for 250 copies, excluding interviewees without experience of purchase on TV home shopping and missing value. The characteristics of the subjects can be categorized as follows. (1)Gender (2) Family Size (3) Education level (4) Yearly individual income (5) Yearly family income (6) Marital status (7) Ways of access to home shopping channels (8) Average hour spent weekly watching TV home shopping channel (9) Purchasing Products. The results are as .

(Insert Table 1 around here)

For the first category, There were 53% of women and 47% of men. 53% were composed of three family members, 14.5% of more than five, 13.3% of two and 13.9% of four. 55.7% were university graduates, followed by 27.8% of high school graduates. Most (46.7%) earned less than 4000rmb individually, while 24.1% earned between 4000 and 6000rmb. Family incomes ranged from less than 6000 rmb (27.2%) to between, 6000 and 8000RMB (24.1%). 23.5% were unmarried, with an overwhelming majority of 76.5% who were married. 117 people composed the majority (46.8%) in answering that they found about home shopping by coincidence while watching TV, followed by those who found through media commercials and through other people. Most people (123 people, 49%) watched under an hour weekly, while some others watched between an hour and two. In purchasing products, 119 people purchased utilitarian goods such as home appliance, bedding, kitchenware and so on, 131 people purchased hedonic goods such as jewelry, fashion, aesthetics, travel products and so on.

Measurement of Variables

This research places as its objective the measurement of factors with an influence upon the purchase decision of Chinese consumers on TV home shopping and refers to the survey questions formerly conducted by Bongjun Ha(1999). The questions of the variables that I wished to measure used the Likert 7-point scaling method, ranging from 1 (strongly disagree) to 7 (strongly agree).

This research measures the factors having influenced on such decision making and aims at measuring the intention of repeat purchase, with actual consumers having experience in using TV home shopping.

When consumers choose their products, they decide based on the internal and external factors, and this research has classified these characteristics as pertaining to the product itself. The characteristics of the product itself include the price and quality.

The broadcast factors are part of the purchase process, only displayed in a TV home shopping media. In other words, TV home shopping is transmitted through the same media as TV commercials. This research thus measures the broadcast factors based on the show host and the broadcast organization including background and equipment.

The service factors exclude the factors that can directly be observed on the TV broadcast program, such as the product and show host, but are represented by the delivery and payment factor and communication factor. The former measures the process of delivery and payment. The latter factor measures frequency of communication between consumers and home shopping firm and satisfaction level of consumers including internet requests and phone calls.

Mano and Oliver (1993) classified products as utilitarian goods and hedonic goods in the previous matching hypothesis study. Thereupon, the researcher contacted TV home shopping companies to find out whether they classified their goods into utilitarian goods and hedonic goods. As a result, the companies were roughly defining and classifying their goods alike the study conducted by Mano and Oliver (1993). Therefore, this study was conducted by dividing the product groups based on the abovementioned product groups.

RESULTS

Firstly, this study conducted a reliability validation based on the Cronbach’s α level of 0.5, and the result is displayed in the following table. In addition, an exploratory factor analysis (EFA) has been conducted to validate the convergent validity and discriminant validity of the construct validity. In the factor analysis, the principle component analysis (PCA) method was used for factor sampling, the number of factors was based on above Eigen Value 1.0, and VARIMAX rotation was adopted for factor rotation.

(Insert Table 2 around here)

In the , price and quality factors related to the product under the properties that determine consumer purchases through TV home shopping were consisted of a high level of factor loading above 0.7, where the show host factor was consisted above 0.765, followed by the broadcast organization factor above 0.683 for broadcast factors. The delivery and payment factor was above 0.674, followed by the communication factor above 0.768 for service factors, which were classified as identical factors in order to obtain the validity of the measurement tool. Cronbach’s α, which measured the reliability, obtained reliability for price and quality factor at 0.897, show host factor at 0.941 and broadcast organization factor at 0.878 under broadcast factors, and delivery and payment factor at 0.938 and communication factor at 0.959 under service factors. Subsequently, validity was obtained by classifying the EFA result on the 3 items for measuring the dependent variables as a single factor, and reliability, too, was shown to be high with a Cronbach’s α of 0.978.

A correlation analysis was conducted to explore and contemplate on the correlation between the variables.

(Insert Table 3 around here)

According to , price and quality and purchase decision under product factors have a positive (+) correlation with 0.736 (p ................
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