Motivation Factors for OnLine Buying: The Price Driver

84 Pages·2008·0.51 MB·English

by  Anuj Dhawan

Motivation Factors for OnLine Buying:
The Price Driver

ANUJ DHAWAN
B.A.(Delhi), B.Sc.(Agra), PostGrad. Dip. Business (AUT)

A dissertation submitted to the graduate faculty of design and creative technologies
AUT University
in partial fulfilment of the
requirements for the degree of
Master of Business

School of Computing and Mathematical Sciences

Auckland, New Zealand
2008
Declaration

I hereby declare that this submission is my own work and that, to the best of my
knowledge and belief, it contains no material previously published or written by
another person nor material which to a substantial extent has been accepted for the
qualification of any other degree or diploma of a University or other institution of
higher learning, except where due acknowledgement is made in the
acknowledgements.

...........................
Signature
Acknowledgements

This dissertation was written at the School of Computing and Mathematical Sciences
at the AUT University.
I would like to take this opportunity to thank all those people who contributed
to and made it possible for me to complete this dissertation. First and foremost I
would like to thank my supervisor, Dr. Brian Cusack for all his guidance and
supervision through the entire study. Dr. Brian Cusack had gone extra mile to help
me in completing this dissertation by providing not only academic guidance but
moral support for during stressful times
To all my lecturers in the MBUS papers, I would like to thank them for
guiding me, contributing to my knowledge and honing the skills I required to
complete the dissertation.
Abstract

Price is often argued to be the determining factor for online (eBusiness) purchasing.
The idea that buying online provides both asking and hidden cost savings is an
assumption that has been promoted by IT advocates of the commercial opportunity.
In this research Price (attribute) is to be investigated as a contributor to customer
motivations for online purchasing. The investigation is to begin with a literature
search for other factors that are claimed to influence online purchasing and studies
others have published in the focus area.
Previously research has been carried out by others to understand the changes
brought by internet and ecommerce to our lives and business opportunities. It has
been found that behavioural characteristics like shopping convenience, information
seeking, immediate possession, social interaction, and variety affects the consumer
behaviour towards shopping on the internet (Rohm, 2004). There are other factors
such as privacy and security affecting consumer attitude towards shopping online
(Shergill, 2005). In this research the factors identified from the literature are listed in
priority order and the top two used to explain the relationship to price. This approach
is taken to limit the cost (financial and time) of the survey and yet to still contribute
valuable knowledge regarding price and other factors affecting online purchasing
behaviour. The ability to collect price information and make comparisons between
the different product and offerings from various providers is argued to be defining for
competitive advantage in ecommerce (Jiang, 2002).
The research is started by asserting an initial model that suggests price is a
moderating factor for other factors when customers purchase online. This model is a
“straw man” to be tested. The resource limitations of this short study are managed by
selecting only two of the possible constructs affecting online buying motivations. The
research is operationalised by submitting banks of potential questions to experts, a
pilot study, and reliability testing and then surveying a stratified random sample of
online purchasers. Structural equation modelling method is chosen for data analysis
and the appropriate approach for confirming (or otherwise) a mediation role for price
in online customer purchasing. A metric and a path model were constructed from the
empirical data and compared with the initial model.
It was found that Price was the dominant motivating factor for those in the
sample for transacting online. The initial model was not the best fit for the empirical
data and other relationships were explored. Best fit was found by removing the
hypothesised relationship from trust to price and establishing the relationship between
trust and security. The best fit model hence showed that Price and intention to buy
was a very strong relationship.
Table of Contents
Declaration .......................................................................................................................... i
Acknowledgements ........................................................................................................... ii
Abstract ............................................................................................................................. iii
List of Tables ................................................................................................................... vii
List of Figures ................................................................................................................. viii
List of Abbreviations........................................................................................................ ix
Chapter 1 ............................................................................................................................ 1
Introduction ........................................................................................................................ 1
1.1 Background ......................................................................................................... 1
1.2 The Research Problem & Questions ................................................................. 2
1.3 Structure of the Dissertation .............................................................................. 4
2 Chapter 2.................................................................................................................... 5
Literature Review .............................................................................................................. 5
2.1 Introduction ........................................................................................................ 5
2.2 The OnLine Shopping Context ......................................................................... 5
2.3 Pricing for Transactions ..................................................................................... 7
2.3.1 Pricing Theory ............................................................................................ 8
2.3.2 Customer Decision-making ....................................................................... 9
2.3.3 Price Partitions .......................................................................................... 10
2.3.4 Buying Motivations .................................................................................. 11
2.3.5 The Cues of Shopping .............................................................................. 12
2.4 Pricing Strategy ................................................................................................ 13
2.4.1 Pricing Effects .......................................................................................... 14
2.4.2 Customer Behaviour ................................................................................. 14
2.4.3 Fixed & Discount Price ............................................................................ 15
2.5 Trust & Security ............................................................................................... 16
2.6 Conclusions ...................................................................................................... 18
3 Chapter 3.................................................................................................................. 19
Research Methodology ................................................................................................... 19
3.1 Introduction ...................................................................................................... 19
3.2 Review of Similar Studies ............................................................................... 19
3.2.1 Identifying Key Factors ........................................................................... 20
3.2.2 Trust in Internet Buying ........................................................................... 21
3.2.3 Trust and Buying Behaviour .................................................................... 21
3.2.4 Customer Perception of Security and Privacy ........................................ 22
3.2.5 Price Search Behaviour ............................................................................ 23
3.3 Research Design ............................................................................................... 23
3.4 Research Model ................................................................................................ 25
3.5 Data Requirements ........................................................................................... 28
3.5.1 Pilot Study ................................................................................................. 28
3.5.2 Sample ....................................................................................................... 28
3.5.3 Data Collection Methods ......................................................................... 29
3.5.4 Data Processing Methods ......................................................................... 29
3.5.5 Data Analysis Methods ............................................................................ 29
3.6 Limitations of Research ................................................................................... 31
3.7 Conclusion ........................................................................................................ 31
4 Chapter 4.................................................................................................................. 32
Report on Field Findings ................................................................................................ 32
4.1 Introduction ...................................................................................................... 32
4.2 Pilot study ......................................................................................................... 32
4.3 Survey Response .............................................................................................. 32
4.3.1 Demographics of Sample ......................................................................... 33
4.3.2 Shopping Frequencies .............................................................................. 34
4.3.3 Price ........................................................................................................... 36
4.3.4 Trust .......................................................................................................... 37
4.3.5 Security ..................................................................................................... 38
4.4 Field Findings ................................................................................................... 39
4.4.1 Reliability Tests on Responses ................................................................ 40
4.4.2 Normality Test of Data............................................................................. 41
4.4.3 Demographic Distribution of Sample Data ............................................ 42
4.4.4 Analysis of Research model .................................................................... 42
4.4.5 Specification of the Analysis techniques ................................................ 44
4.4.6 Analysis of Measurement Items .............................................................. 45
4.4.7 Assessing Measurement model fit ........................................................... 48
4.4.8 Assessing Structural model fit ................................................................. 49
4.5 Individual Analysis of trust, security and price.............................................. 50
4.5.1 Price ........................................................................................................... 50
4.5.2 Trust .......................................................................................................... 51
4.5.3 Security ..................................................................................................... 52
4.6 Alternate Model Fit .......................................................................................... 53
4.6.1 Result ......................................................................................................... 54
4.6.2 Regression Weights .................................................................................. 55
4.6.3 Factor Weighting ...................................................................................... 56
4.6.4 Model Fit ................................................................................................... 56
4.7 Conclusion ........................................................................................................ 57
5 Chapter 5.................................................................................................................. 59
5.1 Introduction ...................................................................................................... 59
5.2 Discussion of Findings..................................................................................... 59
5.2.1 Security and Price ..................................................................................... 59
5.2.2 Trust and Price .......................................................................................... 60
5.2.3 Trust & Security – Intention to buy......................................................... 61
5.2.4 Price as motivation driver to buy online ................................................. 61
5.3 Limitations of the Research ............................................................................. 63
5.4 Further Research .............................................................................................. 64
5.5 Conclusion ........................................................................................................ 65
6 Appendix A – Questionnaire .................................................................................. 71
7 Appendix B – Correlation Matrix .......................................................................... 74
List of Tables
Table 4.0: Descriptive Statistics.................................................................................34
Table 4.1: Demographics - Age………………………...………………………………………33
Table 4.2: Six Month Visit Data..................................................................................... 34
Table 4.3: Two Week Visit Data .................................................................................... 35
Table 4.4: Price Data ....................................................................................................... 36
Table 4.5: Trust Data....................................................................................................... 38
Table 4.6: Security Data ................................................................................................. 39
Table 4.7: Cronbach Alpher Values ............................................................................... 41
Table 4.8: Descriptive Statistics ..................................................................................... 42
Table 4.9: Initial Model Relationship Questions ........................................................... 43
Table 4.10: Correlation Matrix ....................................................................................... 45
Table 4.11: Reliability of Measurement Items………………………………………………46
Table 4.12: Factor Loadings of Measurement Items..................................................... 47
Table 4.13: Model Fit Indicies ....................................................................................... 47
Table 4.14: Regression Weights ..................................................................................... 49
Table 4.15: Price Factor .................................................................................................. 51
Table 4.16: Trust as a Single Factor ............................................................................... 52
Table 4.17: Data Mapping .............................................................................................. 53
Table 4.18: New Model Correlation Matrix .................................................................. 55
Table 4.19: New Model Regression Weights ................................................................ 55
Table 4.20: New Model Factor Weights ........................................................................ 56
Table 4.21: New Model Fit ............................................................................................. 56
List of Figures

Figure 3.1: Research Design……………………………….……………………………………25
Figure 3.2: The Initial Research Model………………...……………………………………..26
Figure 3.3: The Data Mapping……………………………………………………….…………30
Figure 4.1: Demographic Age Histogram……………...……………………………………..33
Figure 4.2: Bar Graph of 6 Month Visit Data………………………………………………..35
Figure 4.3: Bar Graph of 2 Week Visit Data ................................................................. 25
Figure 4.4: Price Data Histogram ................................................................................... 37
Figure 4.5: Trust Data Histogram................................................................................... 38
Figure 4.6: Security Data Histogram…………………………..………………………………39
Figure 4.7: The Path Model……………………………………………..……………………….44
Figure 4.8: The Price Factor ........................................................................................... 26
Figure 4.9: The Trust Factor ........................................................................................... 52
Figure 4.10: The Security Factor…………………………………………...…………………..53
Figure 4.11: The Data Mapping Best Fit Model…………………………...………………..54
List of Abbreviations

AMOS Structural Equation Modelling Software
ANOVA Analysis of Variance
AUT Auckland University of Technology
CFA Confirmatory Factor Analysis
CFI Comparative Fit Index
GFI Goodness of Fit Index
IS Information Systems
SEM Structured Equation Modelling
SPSS Statistical Package for the Social Sciences