FACTORS INFLUENCING REPURCHASE INTENTION OF SMARTPHONES Jamil Bojei and Wong Chee Hoo* ABSRTACT High proficiency and usage in Information Communication and Technology such internet is one of the main thrust in achieving Malaysia as a high income nation by 2020. Past literatures had constantly produced results that innovation characteristics are the top drivers for explaining the intention to use latest innovative product in the market. However the role of innovation and branding in the customers’ repurchase behaviour process had been scarce. This study attempts to examine the influence of brand equity and innovation characteristics and adoption on the repurchase intention of smartphone in Malaysia. A survey was carried out of which 384 real smartphone users participated. As expected, innovation characteristics (ease of use) had been found to have significant relationship in explaining the adoption and repurchase intention of smartphones. Nevertheless the role of brand equity especially brand awareness and acceptance had also been found to have significant relationship with repurchase intention. The results of this study indicated that brand awareness and acceptance use can also explain the repurchase intention of smartphones. It is important for the smartphone companies and the Government to implement programs by knowing that brands too play an important role in the repurchase intention of latest Information Technology products. Relevant parties focus their activities, in this study creating brand awareness and enhance acceptance and innovations as they are the main contributing factors that enhance continued use of latest Information Technology’s.

Keywords: Brand Equity, Innovation, Adoption, Smartphone’s repurchase intention. Research Area: Business (Branding and Innovation)

___________________________________________ *Jamil Bojei & Wong Chee Hoo Graduate School of Management, Universiti Putra Malaysia 43400 UPM Serdang Selangor. Tel: 603-8946 7701 (D/L); Fax: 03-8943 4019 [email protected], [email protected]

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1.0 INTRODUCTION It is important for marketers to gauge their customers’ intention as they make up the numbers for the new product to reach the critical mass. The existing customers play the role of diffusion agent to the other segments of the product adoption segments. The proposed research will focus on repurchase intention of an IT product, smartphone that is becoming an essential communication tool for business executives. Handphone and Internet are the two technologies that have major impact on politics, economy and social in the 21st Century (O’Leary & O’Leary, 2005). The converging of hand phone and internet (Baily et al, 2001) had gave birth to smartphone. Smartphone is an Information Technology tool to perform mobile internet (Park & Chen, 2007), capable of accessing internet at broadband speed ranging from 144 kbps to 2MBps or more. According to FCC (2009), data transfer speed of more than 200kbps can be classified as broadband speed. Malaysian Government is targeting 75% internet broadband penetration by the year 2015 (MICC, 2009). This is important as the broadband penetration rate will have positive impact to the country’s Gross Domestic Products (GDP). One of the proposed channels in reaching higher broadband penetration is through the smartphones.

2.0 LITERATURE REVIEW A brand is used to differentiate a product from the competitors (Aaker, 1991). Thus, each brand will have their value of its own. It is this value that determines the brand’s equity. Brand equity can be positive or negative depends on the customer’s perceptions (Keller, 1993). Eventually, brand owner would like to have strong brand and their primary task would be building and maintaining one (Aaker, 2008). To the customer, the brand helps them to answer “what’s different” among the competing products in the same category. Research had found out that significant differentiation can also comes from different countries (Norjaya et al, 2007). On the other hand, innovation is to produce something new to the market. Innovation can be incremental where the newness dos not generally destroy the product, while radical innovation supersedes the existing invention (Chandy and Yellis, 1998). To the customer, innovation represents “what’s new” among the competing products in the same category. As illustrated, differentiation can be achieved by having the brand and newness by having introducing innovation into the market. Meaningful differentiation and newness are the two most valuable assets a company can have however reaching the correct balance especially in using the company resources can be difficult (Tan and Mookerjee, 2005). Past literatures had shown that intention to adopt the Information Technology (IT) can be traced to innovation. This study is aimed to investigate to what extent brand could add the knowledge in explaining the repurchase intention of smartphone. 2.1 DIMENSIONS OF BRAND EQUITY According to CobbWalgren, Ruble & Donthu (1995), the individuals’ perception is influenced by the psychological and physical features of the product. The perception, in turn affect the brand equity and ultimately brand equity influence purchase intention. The perception of psychological features here were the dimensions of brand equity consisted of brand awareness and band association. CobbWalgren, Ruble & Donthu (1995) found that higher brand equity generated higher purchase intention in the choice of hotels and detergents, representing services and product respectively. Specifically, they found out that perceived quality, brand association and brand awareness significantly correlated with purchase intention. Chen & Chang (2008) took CobbWalgren, Ruble & Donthu (1995) for further study and proved that brand equity have positive relationship with purchase intention. However, this relationship had been affected in the presence of low switching cost as the moderating variable. Esch et al. (2006) had found that brand equity alone is not sufficient to built strong brand suggesting brands must have substance.

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2.1.1 Brand Awareness Brand awareness is said to be consist of brand recognition and recall. Brand recognition refers to the customers’ familiarity with the brand. A brand that is recognized by the customer will easier to get into the customers’ consideration sets. This is very true as customer will likely to purchase brands that are known to them. Petty and Cacioppo (1986) found that even thought that a low involvement product such as tissue, customer would prefer a brand that is familiar to them. The other component of brand knowledge is brand recall. Brand recall is exhibited when a customer is able to retrieve the brand from their memory given a cue of a certain product category such as their preferred toothpaste. Brand recall is said to have a deeper effect compared to brand awareness as often we hear people’s ability to recognize a familiar logo that they had encountered before however they are not be able to recall or remember the exact name. Brand awareness in this case where the brand is familiar and can be easily remembered by the customers which is reflected by recognition and recall capabilities. Brand awareness is defined as the brand recognition and brand recall of a particular brand. Higher awareness of a brand can be achieved through advertising. Advertisement has been found to be able to influence the attitude towards a particular brand. Munusamy and Wong (2007) suggested that the awareness for a new product was the most significant factor in explaining the attitude towards advertising. Marketing a new brand can be done by placing advertisement in the media to increase awareness. The current study draws upon the conceptualization by Keller (2008) where the measurement of brand equity is represented by brand awareness and brand association. Brand awareness can be increased through the familiarity of the brand by repeated exposure (for brand recognition) and forging strong associations the appropriate product category or other relevant purchase or consumption cues for brand recall (Alba and Hutchinson, 1987). The dimensions of brand equity, brand awareness and brand association will be discussed below.

2.1.2 Brand Association A brand can differ in their strength, favorability and uniqueness. It also encompassed few levels such as functional, experiential and symbolic benefits. The customer can be associating the brand with the person, product, organization and symbol (Aaker, 2008). It is the meaning of these associations that the marketers want to keep with their customers. It is these associations that assist the consumers in making an easier purchase decision. A brand that is associated with a higher image appeal will have the competitive advantage when two or more brands are prized in the similar bracket. It is the meaning of the associations that makes them to decide with certain brand compared to other brands. In this case, brand association is defined as the strength of benefits offered by the brand.

2.2 DIMENSIONS OF INNOVATION “All products that are new do not have equal potential for consumer acceptance” (Shiffmann & Kanuk, 2003, p.520). Some products seem to catch on almost overnight, whereas others takes a very long time to gain acceptance or never seem to reach critical mass. The uncertainty of product marketing could be reduced if marketing could anticipate how consumer will react to their product. Although there are no precise formulas by which marketers can evaluate a new product’s likely acceptance, diffusion researchers have identified several characteristics that seem to influence consumer acceptance. Based on previous research, it has been suggetsed that the innovation characteristics account for much of the dynamics nature of the rate of intention to acceptance. Among many the innovation characteristics frequently mentioned above are relative advantage and ease of use (Davis, 1989). The dimensions of brand equity; relative advantage and ease of use will be discussed as per below.

2.2.1 Relative Advantage There are many reasons people accept or reject a new product in the market. From the past research, two stressors had been suggested to be more prevalent among the many factors that influenced the intention to IT’s adoption. One of them is relative advantage. Relative advantage is where people

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belief that with the adoption of the latest IT product, it will enhance their job performance. Empirical research indicates that perceived relative advantage and the related concept of perceived usefulness significantly impact attitudes towards among others a computer banking system (Brown et al., 2002) and e-procurement (Murali, Wemyss & Raduan, 2010) According to Rogers (2003, p.229), relative advantage is “the degree to which an innovation is perceived as being better than the idea it supersedes”. There are several dimensions to relative advantage, including economic profitability, low initial cost, decreases in discomfort, social prestige and savings in time and effort. The idea of savings in time and effort corresponds closely with Davis’ (1989) concept of perceived usefulness. For current research, the focus is exclusively on this aspect of relative advantage since it is believed that the usefulness dimension is likely to be more important compared to others. For this study, relative advantage is defined as the degree to which an user believe that using smartphone would assist their job performance.

2.2.2 Ease of Use Even thought a product is useful, it also needs to be easy to operate. A product that is difficult to use will result in more frustrations and complaints. This happens when the efforts needed out weighted the gain from using it. The efforts consist of the resources that a person needs to invest in order to achieve a specific task. In this case, using the smartphone would be hassle free in getting their job done. When this happens, the product will be more likely to be accepted. Ease of use is defined as the degree to which an user believes that using smartphone would be free of effort. Perceived complexity and its conceptual opposite direction, perceived ease of use have been extensively studied by Information Technology researchers. Several studies find significant relationships between perceived ease of use (or complexity) and use intentions (Van Slyke et al., 2004). Ease of use had also been found to influence adoption of e-Government (Murali, Wemyss & Raduan, 2010).

2.3 ADOPTION Specifically, the models such as Technology Acceptance Model (TAM) Davis et al. (1989); Davis (1989) and its underlying theoretical base, Theory of Reasoned Action (TRA) (Ajzen & Fishbein, 1980), postulate that beliefs or perceptions about the characteristics of the target system are antecedent to behavioural intent to adopt and use the system. Theory of Reasoned Action is a general theory developed in social psychology that attempts to explain and predict individual behaviours (Ajzen & Fishbein, 1980), whereas Technology Acceptance Model has been proposed specifically for the footprint of Information Technology (Davis et al. 1989). In the current study, current use is a measure of successful new technology implementation (Delone & McLean, 2003) and for easy reference it will be called adoption in the study. Adoption is defined as the use of smartphone.

2.4 REPURCHASE INTENTION Purchase intentions are personal action tendencies relating to the product (Bagozzi et al. 1979). Intentions are different from attitudes where attitudes are summary evaluations, intentions represent the person’s motivation in the sense of his or her conscious plan to exert effort to carry out a behavior (Eagly & Chaiken 1993). In Fishbein & Ajzen’s (1975) formulation, attitudes influence behaviour through behavioural intentions. Past studies indicate that the link between attitude toward the object and behaviour is not always clear. In some cases, attitudes have a direct effect on behaviours (Bagozzi & Warshaw 1992) but no effect in Bagozzi (1992). An intention to buy a brand is based on a consumer’s attitude towards buying the brand as well as the influence of social norms about what other people expect.

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At times, intention is also difficult to measure. For instance, Bagozzi, Baumgartner & Yi (1989) commented that when an individual is unclear about his or her intention in regards to some action, there is strong tendency for him to react based on their past actions. Here, the individual is likely to report his or her habit rather than intention when responding to the intention (Warsaw & Davis, 1985). Despite issues, purchase intention is an important construct in consumer behavior (Kotler & Armstrong, 2003). Having said so, the study of repurchase intention was said to be important due to their long term inplications (Ritti & Silver, 1986). Repurchase intention is similar with purchase intention except with the element of experience. Repurchase intention is defined as the likelihood the user will repurchase the smartphone in the future.

Brand Awareness

Brand Association

Relative Advantage

Adoption

Repurchase Intention

Ease of Use

Figure 1: Proposed Research Model

Based on this motivation, the idea of examining further the relationship between them is reached and with reference to the previous cited theoretical and literatures, the following research model (Figure 1) were suggested where nine hypotheses were proposed for testing. The hypotheses are as follows: Hypothesis 1: There is a significant relationship between brand awareness and adoption. Hypothesis 2: There is a significant relationship between brand association and adoption. Hypothesis 3: There is a significant relationship between relative advantage and adoption. Hypothesis 4: There is a significant relationship between ease of use and adoption. Hypothesis 5: There is a significant relationship between brand awareness and repurchase intention. Hypothesis 6: There is a significant relationship between brand association and repurchase intention. Hypothesis 7: There is a significant relationship between relative advantage and repurchase intention. Hypothesis 8: There is a significant relationship between ease of use and repurchase intention. Hypothesis 9: There is a significant relationship between adoption and repurchase intention.

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3.0 METHODOLOGY A self-administered questionnaire was used to collect the data in Klang Valley and Selangor, Malaysia. Klang Valley and Selangor constitute the highest number of mobile internet subscribers. The conditions for selecting respondents were that they must be employed and had experience using the smartphone. The questionnaire was developed to collect quantitative data about users’ perception and their repurchase intentions of smartphone. Measures for the survey were adopted from the review of literature and previously established scales developed by the past researchers. Data was collected during the last quarter of 2010 of which 384 successful questionnaires were gathered for further analysis. As for data analysis, Confirmatory Factor Analysis (CFA) was used to analyze the items that measured each latent variable. In order to analyze the relationships between the variables, structural equation modeling (SEM) was applied. Both stages of the analysis, the CFA and SEM were performed using the AMOS software. Model fit for both the CFA and SEM with respect to the given data set can be assessed using numerous indices. For this study, Chi-square the goodness-of-fit statistic, CMIN/DF ratio and root mean square error of approximation (RMSEA) were examined.

4.0 FINDINGS 4.1 CHARACTERISTICS OF RESPONDENTS From the total samples, 66% were male and 34% female (see Table 1). The study consists mainly from the age group of 20-29 (45%) and 30-39 (34%). These two groups made up to 80% of the survey. While almost half of the respondents are Malay (49%), there are Chinese (29%) and Indians (17%) too. About 80% of the respondents are from the middle to top management level. 45% of the respondent’s monthly income earned more than five thousand. Table 1: Characteristics of Respondents Gender Male Female N Age Group Under 20 20-29 30-39 40-49 50 & Above N Race Malay Chinese Indian Others N Job Position Clerical/Executive Senior Exe/Asst.Mgr Manager Senior Manager/AGM GM/COO/CEO Advisor/Consultant

Frequency (n) 255 129 384

Percentage (%) 66.4 33.6 100.0

7 176 131 51 19 384

1.8 45.8 34.1 13.3 4.9 100.0

188 110 64 22 384

49.0 28.6 16.7 5.7 100.0

66 65 96 32 22 27

17.2 16.9 25.0 8.3 5.7 7.0

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Others N Monthly Income Less than RM5,000 RM5,001-RM10,000 RM10,001-RM15,000 More than RM15,000 Decline N Source: Survey

76 384

19.8 100.0

212 123 25 23 1 384

55.2 32.0 6.5 6.0 .3 100.0

On the market share of the smartphone, Nokia commands the highest share (41%) followed by BlackBerry(17%) and iphone (15%) as per Table 2. The combined share of BlackBerry and iphone of 31% will be near to the share of Nokia, making the top three brands commands 72% of the total market share of smartphones. Table 2: Market Share of Smartphone Brands Brands Nokia Sony Ericsson BlackBerry HTC iPhone Motorola Samsung & Others

Frequency (n) 157 47 67 21 56 8 28 384

Percentage (%) 40.9 12.2 17.4 5.5 14.6 2.1 7.2 100.0

Source: Survey

4.2 CONFIRMATORY FACTOR ANALYSIS (CFA) Confirmatory Factor Analysis (CFA) is done to improve the overall fit of the model. The unnecessary items are omitted and the similar items are correlated. In a confirmatory factor analysis, all the variables in the model are allowed to co vary, even though there is no expected relationship between the variables. Therefore, all the variables in the proposed model are included in the CFA. The CFA model was run using the valid dataset (Figure 2). Model fit for both the CFA and Structural Equation Modeling (SEM) with respect to the given data set can be assessed using numerous indices. For this study, Chi-square the goodness-of-fit statistic, CMIN/DF ratio, and the root mean square error of approximation (RMSEA). From the CFA analysis, the result shows a large Chi-square statistic relative to the degrees of freedom is an indicative of a considerable difference between the observed and the estimated matrices (Hair et al., 2006). The CFA model produced chi-square of 1318.570 at 545 degrees of freedom and were significant (p