Importance Of Consumer Attitude Toward Advertising In Smartphones Marketing Essay

Importance Of Consumer Attitude Toward Advertising In Smartphones Marketing Essay The exponential increase of smartphones in the last two years has created unique marketing opportunities for the advertising world. Lack of academic research in the realm of smartphones, and the fragmented and controversial results of studies in the field of conventional mobile advertising, insist on the need for further research in the field. The aim of this thesis is to investigate the consumer attitude toward smartphone advertising, in order to learn how consumers perceive smartphone advertisements. The study was conducted among the US consumers. A thorough review of academic literature on advertising in general, conventional mobile advertising and consumer perceptions to both set the foundation of this thesis. Using this foundation, a research framework of consumer attitudes in the context of smartphone advertising was, then, constructed. The results of the analyses indicate that all the attitudes of conventional mobile marketing affect smartphone advertising as well, and these attitudes differ with different kinds of advertisements. The attitudes are likely to be positive when the mobile advertiser has targeted actual needs of customers. This implies that mobile advertising should be based on service rather than selling. Moreover, the consumer attitudes toward internet advertising strongly correlate with that of smartphone advertising, which suggests the potential replicating of the online Ad-revenue model in the smartphone marketing. Emotional attachment appears to have no influence on the attitude toward smartphone advertising. Additionally, the results of the study show that incentives have a strong positive effect toward consumer behavior. Therefore, incentives must be used by marketers to gain user permission and acceptance for the advertisements. Keywords: smartphone advertising, mobile marketing, consumer behavior, attitudes, incentives, advertising, emotional attachment Introduction The recent rise in smartphones, coupled with advances in wireless information technologies, has placed users in a ubiquitous computing environment, with access to and possibility of exchange of information anywhere and anytime through these smartphones. The ability to see rich content on a smartphone and the larger extent of interactivity possible on it, coupled with GPS capabilities of smartphones, provides the marketers a potentially strong channel for advertising. However, for the advertising efforts to be rightly focused and, in turn, to succeed, knowledge of consumers perceptions towards these advertisements is essential. This research aims to study the consumer perception of advertising in smartphones, using the US consumers as the test case, drawing from academic theory on advertising in general, conventional mobile advertising and consumer perceptions to both. The reason US population is chosen is because smartphone penetration is still very low in other countries, and US has the second highest smartphone penetration in the world  [1]  , which provides a good base for research. This chapter is organized as follows: First, a background of the field of advertising that has recently focused a lot of interest on digital advertising on the internet and the mobile phones, followed by, a review of the recent popularity of smartphones and the growth of the smartphone industry. The importance of investigating the consumer attitude toward smartphone advertising is then emphasized, and the additional opportunity for advertising available on smartphones highlighted. Next, the research problem is defined and the structure of the research study is presented. 1.1. Background Traditional advertising media has undergone rapid change, as the technological developments have given rise to numerous new marketing media. Traditional media has diminished in the last few years due to inroads by online competitors. New media types, like the internet, then the mobile phone, and now recently the smartphone, have emerged, offering greater and greater possibilities of interaction with the consumers. However, in order to effectively benefit from using the mobile marketing channel, the unique characteristics of the mobile and the behavior of consumer interaction with this channel need to be understood. Another major development in the advertising industry has been the increase in empowerment of the consumers in advertisements. The wide-spread availability of the internet means that consumers can compare product offerings and prices before making a buying decision. Additionally, with increasing use of social media, they also share their experiences with others. The contemporary consumer is informed, connected and active (Prahalad 2004). Resultantly, consumers now expect the companies to do more than just delight them, which has resulted in companies advocating greater for their customers (Urban 2004). This means that companies are pushing harder with their marketing efforts, looking for channels that provide more interaction with the consumers: companies are re-inventing marketing services (Mitchell 2006). Communication options have increased in number. The internet has been used as a marketing channel for some time, but the use of mobile phone, and recently the smartphone, as marke ting mediums is still recent. 1.2. Rise of smartphones Mobile phones have increasingly become feature-rich and more sophisticated, since their explosion in popularity. The recent phones come with greater features to supplement, or even replace, other devices such as mp3/video players, digital cameras, and PDAs  [2]  . This technological advancement has given birth to the smartphone, a device that brings together the mobile phone and the PDA. Smartphones are more than mobile phones. They come packed with a diverse range of features and functionalities, which makes them a mobile information center and entertainment device for the user. They commonly include features such as a full-featured QWERTY keyboard, web browser, e-mail, multimedia capabilities, touch screen, built-in cameras, music players, Global Positioning System (GPS) navigation software and even the ability to read and edit Word, Excel and PDF format documents, making them an excellent all-in-one substitute for variety of other devices. Certain models have enough processor power to run complex software applications such as enterprise CRM software and car navigation softwares. Another feature rapidly becoming common is the instant messaging. As such, the definition of a smartphone, or what constitutes a smartphone, is constantly evolving. Mobile phones went from zero in the global population in 1982 to 3.3 billion in 2008, serving about half the worlds population (Alexandros Labrinidis, University of Pittsburgh computer science professor, Feb 2010). A growing majority of the population now expect to be nearly always connected and to be reachable almost instantly via e-mail. The smartphone is the instrument of that connectedness, both as a communications tool and as a status symbol (Lohr 2009). Smartphones have risen in popularity almost instantaneously, due mainly to the fact that they offer the ultimate in connectivity (Figure 1). They provide connectivity not just via phone communication, but are able to connect to the internet at almost any location via network internet services. This means that users never have to face the prospect of going without phone, email, or access to social networks. Smartphones represent a small, yet rapidly growing, segment of the mobile market. Smartphone sales at 17.5 million units in 2004 accounted for 3% of the worldwide sales of 684 million handsets (Kang 2010). This represents a significant jump from the 8.2 million units sold in 2003. The demand for smartphones is growing rapidly in the recent years. In Q3 2010, the number of smartphone units sold globally increased to 77 million, an increase of 78% y-o-y (n.d. 2010). The smartphone sales are forecasted to reach 350 million units in 2012 (Kang 2010), about 40% of total handset sales. By 2012, smartphones will, resultantly, outship the global notebook and global PC market (Meeker 2010). Figure 1. Global Smartphone Sales Source: McKinsey: Exploring Mobiles Digital Future: Smartphone and Access, 2012 This increase in smartphone use, coupled with advances in wireless information technologies, has placed users in a ubiquitous computing environment, with access to and possibility of exchange of information anywhere and anytime through these smartphones. The ability to see rich content on a smartphone and the larger extent of interactivity possible on it, coupled with location tracking due to phones GPS capabilities, provides the marketers an opportunity for greater interaction with the consumers, enabling them to provide better content and making the consumers more probable to view the advertisements. Smartphones offer marketers unique opportunities to influence consumers at the very moment they are considering their purchase decisions and comparing the product prices. Companies and marketers are, therefore, working harder than ever on ways to deliver product marketing and services over smartphones. The smartphones, thus, increasingly serve as both the engine and the vehicle for sha ring product information. Media and advertising executives expect more than a quarter of media time and spending to move away from traditional channels, while mobile and social media advertising are seen gaining steam (Goncalves 2009). The smartphones are becoming less and less about wireless online and highly as personal and customized medium. While the general media environment is typically full of noise and distraction, consumers report being surprisingly focused when using the mobile internet (Hutton and Rodnick 2009). This result provides an opportunity for advertisers, who are constantly competing with external distractions, to engage users in a meaningful way. 1.3. Importance of consumer attitude toward advertising in smartphones The emergence of smartphone advertising opens up a new area of research. For instance, given the increased possibility of presentation and interactivity, is this marketing medium more effective than the conventional mobile advertising media? How do consumers perceive smartphone advertisements? What factors need tobe kept in mind when designing smartphone advertisements? A better understanding of these issues is essential to the effective use of smartphone advertising. Researchers agree that investigating the behaviour of the mobile consumer is critical towards offering effective customer services and accelerating the diffusion of mobile marketing (Mort and Drennan 2002; Nohria and Leestma 2001; Carlsson and Walden 2002). For example, Carlsson and Walden (2002) suggest that the key question for mobile commerce is to find some way to assess the value of mobile applications to prospective users. This provides the motivation for this study in investigating the consumer attitude toward ad vertising in smartphones. 1.4. Research objectives Since the mobile phone is still a relatively new channel for advertising, academic research in this field has been, to a large extent, inconsistent and fragmented (Roach 2009). Leppà ¤niemi (Leppà ¤niemi, Sinisalo and Karjaluoto 2006) has divided the current mobile marketing research into three categories: à ¢Ã¢â€š ¬Ã‚ ¢ Consumer: acceptance, perception, attitude, responsiveness and effectiveness of mobile marketing à ¢Ã¢â€š ¬Ã‚ ¢ Business and Management: value chain, performance measurement, business models, branding and operations à ¢Ã¢â€š ¬Ã‚ ¢ General research: antecedents and consequences, legal and political factors, adoption and diffusion of mobile marketing Leppà ¤niemi notes that majority of the research has mainly dealt with the various facets of consumer behavior, with several of them dealing with consumer attitudes toward mobile marketing (e.g. Tsang et al. 2004; James 2004; Jun 2007). However, the results of these studies have been contradictory (discussed in detail in Sec 2.1.4 and Sec 2.2.8), and have been limited to SMS advertisements on conventional mobile phones. The trends in the smartphone unit sales suggest that in the next five years, about three quarters of all phones will be smartphones. With the unique marketing opportunities available in smartphones, other than just the SMS, and the background suggesting further academic research in the domain of consumer attitude towards mobile advertising, the broader purpose of this study is to deepen the understanding of the domain, looking into the specific segment of smartphones only. This study will serve as a first attempt yet to examine the consumer attitudes towards advertisements in smartphones, and is conducted by implementing an empirical research. The subject will be approached through the following primary research question: What are the underlying factors which characterize the attitudes of consumers toward mobile advertising in the domain of smartphones? The following specific questions will be used to serve as basis for addressing the primary research question: How do demographic variables influence attitude towards advertisements in smartphones? Do the factors influencing attitude toward advertising on traditional mobile phones also influence attitude toward advertising on smartphones? Does attitude toward advertising in general and attitude toward internet advertising influence the attitude toward smartphone advertising? Does the type of advertisement have an impact on the factors that influence the attitudes toward smartphone advertising? Does emotional attachment to phone impact the attitude toward advertisements? Would incentives influence consumer intention to receive advertisements? From the managerial perspective, the research will provide insight into marketing viability in smartphones. More specifically, the results of the research will enable to judge the possibilities of incorporating the different facets of the Ad-revenue model in the smartphones, and also shed light on the realities of the bet that companies like Google have put on the success of the model in the Android based smartphones. Additionally, the knowledge regarding the factors contributing to successful smartphone advertisement would help managers to fully exploit the potential of the smartphone marketing medium. 1.5. Structure of the Thesis The research will start with a literature review of the most significant research streams relevant to the research problem. Chapter 2.1 will discuss the nature of attitudes, bringing together knowledge from both social and advertising psychology. Chapter 2.2 will present the consumer viewpoint of the concept of mobile marketing. Chapter 3 will discuss the hypotheses of this thesis, and present a research framework based on it. Chapter 4 will describe the methodology used for data collection and survey construction, as well as assess the data validity and reliability, also addressing the potential biases that might arise. Chapter 5 will present the results of the various analyses, followed by conclusions in Chapter 6. Literature Review This chapter will focus on the theoretical foundation of the study. It is divided into two parts: the first part focusing on attitude toward advertising in general and the second part, specifically, on mobile advertising. The first part of the chapter will begin with an attempt to define attitudes. Next, an overview of internet based advertising will be presented. This will be followed by consumer attitude toward advertising. The second part of the literature review will then discuss the prior research specifically on mobile advertising. It will begin with the definition of the term, followed by discussion of the motivation of consumers behind the use of mobile and the emotional attachment to the device. Next the characteristics of the mobile will be presented, which validate it as a marketing channel, and interactive advertising in mobile phones will be discussed. Furthermore, permission and control in the mobile marketing context will be reviewed, and the need to provide incentives will be discussed. Additionally, academic literature regarding consumer acceptance and consumer attitudes towards the mobile advertising will be highlighted. 2.1. Academic insight on attitudes in advertising domain With different streams of advertising emerging nowadays, it is becoming increasingly difficult to stand out with a particular advertisement. The costs of marketing are getting increasingly higher, making marketers more and more concerned about the attitudes of consumers and the factors contributing to effective advertising  [3]  . In order to be able to design effective advertisements, it is, therefore, imperative to first understand advertising itself. This chapter will, therefore, begin with the literature view of attitudes. Since mobile marketing has evolved, with the rise of smartphones, to provide advertisements similar to internet based advertisements, the chapter will also provide an overview of internet based advertising. This will be followed with literature view on attitudes towards advertising in general. 2.1.1. Defining attitudes Although research on attitudes has been abundant, there is no consensus on the general definition of the concept among researchers. Eagly and Chaiken (1993) defined attitude as a psychological tendency that is expressed by evaluating a particular entity with some degree of favor or disfavor. Kotler (2000) stated that an attitude is a persons enduring favorable or unfavorable evaluations, emotional feelings and action tendencies toward some object or idea. Attitudes are typically derived from judgments, which everyone makes. Aakerman, et al. (2001) describe attitudes as mental states used by individuals to structure the way they perceive their environment and guide the way they respond to it. In general, attitude is a predisposition or a tendency to respond positively or negatively towards a certain idea,  object,  person, or situation. [à ¢Ã¢â€š ¬Ã‚ ¦] The four major components of attitude are (1) Affective: emotions or feelings, (2) Cognitive: belief or opinions held consciously, (3) Conative: inclination for action, (4) Evaluative: positive or negative response to stimuli. (BusinessDictionary  [4]  ). Triandis (1971) also defines attitudes as consisting of the three correlated components: affect, cognition and conation. 2.1.2. Internet based advertising The rise of internet has led to the evolution of commerce into the electronic age (Maamar 2003). As surfing the World Wide Web (WWW) has become ever more popular, the internet has clearly become an important information source and an integral part of daily life (Ko et al. 2005). As such, the internet represents a huge opportunity for advertisers in terms of the potential for efficient and effective communication with customers (Faber et al. 2004). Recently, internet advertising or web advertising has become one of the first choice advertising media for anyone wanting to promote their products and services to a global audience. The basic kinds of internet advertising include e-mail advertisements, banner advertisements, pop-ups, social media and endorsements from other websites. Pop-up advertising implies that an advertisement window pops up when the user visits a webpage, forcing him to see the ad before being closed. E-mail advertisement implies sending advertisement e-mails to the users. Banner advertisement is where an advertisement is placed in a section of a webpage. And social media marketing is done by putting advertisements on the homepage of users social media profile pages, e.g. in Facebook. Internet advertising has been perceived by many consumers to be intrusive and disturbing (Li et al. 2002). Banner advertisements on the Internet were found to produce dull results, with the click-through rate as low as 0.3% (Green and Elgin 2002). 2.1.3. Attitude toward advertising in general Attitude toward an advertisement is defined as a learned predisposition to respond in a consistently favorable or unfavorable manner towards an advertisement in general (MacKenzie and Lutz 1998). The general attitude toward advertising manifests itself not only through political and regulatory activities but also through the exposure of individuals to advertising, the attention they pay to it, their evaluations to specific advertisements, and their responses to those advertisements (Zhou and Zhang 2002). Brackett and Carr (2001), and James and Kover (1992), showed that the overall attitude towards advertisement had significant effect on the involvement with specific advertisements. Involvement refers to the relationship of the consumers to the advertisements encountered. (Greenwald and Leavitt 1984). James and Kover 1992, through their research, suggest that liking a particular advertisement is not enough. Instead, industry should invest efforts to help people like advertising in general. This could make all advertising more effective. The results of James and Kovers (1992) study also suggest that attitude toward advertising has no significant interaction with demographics of age, education and gender. This signifies that advertising should not be segmented on these three demographics; other variables are probably more efficient, especially the degree of involvement with the advertising. James and Kovers (1992) results indicate that attitude toward advertising in general is channel dependent, i.e. the effect of an advertisement presented to an audience depends on the chosen channel of advertising, so it should be studied channel dependently. The reason for this could be the varying extent to which the viewer can exercise control on the advertisements. So, unlike television advertising in which a commercial runs for a given time, control of time looking at print lies with the reader (James and Kover, 1992). This can be attributed to the result that consumers show more negative attitude toward television advertising compared to print. Calfee and Ringold (1994) analyzed sixty two years of survey data to find the majority view on the perceptions of advertising. The results indicated that on average 70% of consumers think that advertising is often untruthful and that it seeks to persuade people to buy things that they do not necessarily want. However, consumers still tend to find advertising as informative. Shavitt et al. (1998) report that three quarters of the respondents in their study had either positive or neutral perceptions of advertising. Coulter (2001) found similar duality in consumer opinions, with results showing that consumers can, simultaneously, hold positive as well as negative opinions about various aspects of advertising. In his study, Coulter, however, found that information and entertainment are advertisings greatest assets. The discussion above shows that consumer attitudes are, to a large extent, mixed. So, while consumers consider information and enjoyment as important antecedents of advertising, they also consider advertising as not trustworthy. 2.2. Mobile advertising As an extension of the internet environment, the high penetration of mobile phones in recent years has created a good opportunity for mobile advertising (Bauer et al. 2005; Leppà ¤niemi et al. 2006). However, the channel has not been fully embraced by the marketers, despite its cost effectiveness. This chapter will focus on mobile marketing from the consumer viewpoint, in order to study the areas that influence effective mobile advertising. The chapter will begin by defining mobile advertising, followed by discussion of the motivation of consumers behind the use of mobile and the emotional attachment to the device. Next the characteristics of the mobile will be presented, which validate it as a marketing channel, and interactive advertising in mobile phones will be discussed. Furthermore, permission and control in the mobile marketing context will be reviewed to assert the need to provide incentives in mobile marketing. Additionally, academic literature regarding consumer attitude a nd response toward the mobile advertising will be highlighted. 2.2.1. Definition At a very basic level, mobile advertisement is defined as any form of advertisement that is delivered through a mobile as the medium (Mary Mathew 2010). Mobile advertising is one of the most common forms of mobile marketing. Different from traditional advertising, which is non-personal and applicable only via mass media, mobile advertising is more individual and interactive, while informing and persuading the customer (Chowdhury, et al. 2006). Mobile advertising can, thus, be defined as the usage of interactive wireless media (such as mobile phones and pagers, [à ¢Ã¢â€š ¬Ã‚ ¦] GPS-based locators and maps) to transmit advertising messages to consumers in the form of time and location sensitive, personalized information with the overall goal to promote goods and services (Haghirian and Madlberger 2005). The high penetration rate of mobile devices among consumers has provided an opportunity for companies to utilize this means to convey advertising messages to consumers. Recently, there has been an increase in mobile marketing campaigns. Since each mobile device is used by an individual, it provides a suitable platform for delivering individual-based target marketing (Barnes and Scornavacca 2004). Therefore, mobile marketing could be the leading application of mobile commerce (Yuan and Zhang 2003). Among mobile marketing applications, the most popular format is SMS (Okazaki 2005). However, due to rise in smartphones, internet has been reinvented on the mobile devices, which as led to new forms of interactive advertising being discovered, as the internet advertising models get migrated from PCs to mobile devices. This has given rise to a broader range to mobile advertising in the form of in-search advertising to in-application placements (Laszlo 2009). However, to date these methods have not been significant (Idean 2009). 2.2.2. Consumer perception of a mobile The way consumers use their mobile phones influences how mobile advertising is perceived (Salo and Tà ¤htinen 2005). Additionally, results of Jun and Lees (2007) research indicate that consumer perception of mobile influences consumer attitudes toward mobile advertising. Understanding the motivations behind consumers use of mobile phones is, therefore, an important factor for determining the success of mobile advertising. The results of the uses and gratifications model of Leung and Wei (2000) showed that the consumers use mobile for seven distinct purposes: To look fashionable To provide affection, sociability and caring for others To relax and pass time To provide mobility and avoid queuing To provide immediate access regardless of time and location To carry out business transactions To provide security and safety in case of emergency The research stressed that as wireless technology becomes ubiquitous, there will be more freedom for consumers, in the form of mobility and immediate access anywhere, which will greatly facilitate the life of the consumers today. 2.2.3. Emotional attachment of consumers to mobile devices With the emergence of smartphones, mobile phones have now evolved into functionally sophisticated, ubiquitous and socially embedded devices. As a result, consumers now consider them indispensable and, as such, are becomingly increasingly emotionally attached (Wehmeyer 2007). Mobile phones have become mediators of expression, experience and communication of feelings and emotions. Users feel increasingly attached to their phones. This may partially be due to inherent emotional character of human communication, and may also be because mobile phones stay closer to the body. For many consumers, mobiles are an extension of themselves to the extent that removal of the device is likened to the loss of a limb (Hulme 2003). Emotional attachment is enacted in the personalization of the mobile devices. Mobile phones are not only an extension of the users own presence, but they also allow the virtual presence of those connected to the user by phone or wireless communication. As the social networking websites, like Facebook, have become increasingly popular and are now available as applications on the smartphones, the phones have become an important element in the building and maintaining of groups and communities. Users are able to act spontaneously and emotionally, whether it is spur-of-the-moment meetings, emotive text messaging or status updating on Facebook, and these attributes, in tandem with the always on facility, are crucial to the creation of emotional attachment (Kolsaker and Drakatos 2009). As such, Kolsaker and Drakatos identify four components of emotional attachment to mobile devices: the ability to strongly personalize the device, the ability to keep in touch with family and friends when on the move, the ability to manage ones private and emotional life, and the idea of feeling part of the modern world. For this study, only the first two components are used for measuring the emotional attachment, as they are considered to be most influencing, as they are cited in most research studies on emotional attachment to mobile devices. 2.2.4. Mobile phone as a marketing channel Mobile phone marketing is where internet advertising was in 1996, and now its about to really take off [à ¢Ã¢â€š ¬Ã‚ ¦] There are already more mobile phones in use worldwide than televisions and computers put together (Nylund 2009). The mobile phone offers possibilities for a very unique consumer experience, when compared to the traditional advertising channels. Sultan and Rohm (2005) divide marketing approaches along two dimensions: 1) the degree of interactivity possible on the advertising channel and 2) the degree of location based advertising possible on the channel. According to Sultan and Rohm (2005), the mobile channel provides high interactivity as high possibility of location based advertising (figure 2.). Figure 2. A Comparison of Marketing Communication approaches (Sultan and Rohm 2005) Internet and telecommunication services are constantly evolving in order to fulfill customer satisfaction. Enriching these services with innovative approaches such as context-aware, interactive, adaptable and mobile mechanisms enables users to experience a variety of personalized services seamlessly across different platforms and technologies. Rafaelis research showed that interactivity with advertisements often leads to positive attitudes toward the advertisement (Gao, et al. 2010). Moreover, Macias (2003) results indicate that interactivity leads to better understanding of the advertisement message by the user. This suggests that advertising should become more interactive. The mobile phone offers a bi-directional and individual connection to the consumer, which makes it a highly interactive marketing channel (Park, et al. 2008). 2.2.5. Mobile interactive advertising Mobile interactive advertising is defined as advertising or marketing messages delivered to portable devices, either via a synchronized download or wirelessly over the air (Laszlo 2