What Hooks M-Commerce Customers?

By some estimates, today's 533 million Internet users will mushroom to over 1.4 billion by 2007 — a vast potential market for e-commerce-savvy companies. Favorably inclined toward expanding their online access to goods and services, these users are steadily migrating to wireless technology, such as data-enabled cell phones. Currently about 16% of Internet users, wireless users are projected to total nearly 57% of users worldwide by 2007.

Even the United States, to date tradition-bound by its extensive fixed-line communications network, is shifting toward wireless means of communication. In 2002, Forrester Research speculated that within five years up to 2.3 million conventional phone subscribers will switch to wireless technology, resulting in an average of 2.2 wireless phones per U.S. household by 2007.

What affects whether these mobile users will actually transact business using wireless technology? Where better to ask than in Hong Kong, where the mobile-phone penetration rate is close to 89% — an impressive 5.77 million people?

Three researchers at the Chinese University of Hong Kong set out to identify which of three factors most significantly affect both simple m-commerce transactions (requiring short expenditures of time and little financial risk, which the authors refer to as “low involvement” transactions, such as buying movie tickets) and more-complex m-commerce transactions (demanding more effort and financial risk on the part of the customer, which the researchers term “high involvement” transactions like making stock trades).

Taking a cue from earlier studies of conventional, PC-based e-commerce, in the June 2002 paper “Product Involvement and the Importance of Factors Affecting Mobile Commerce,” associate professor of marketing Alan C. B. Tse and research assistants Frederick Hong Kit Yim and Ka Ho Tse investigated aspects of m-commerce related to convenience, Web-site design and financial security. They interviewed 192 people at three high-traffic shopping malls in Hong Kong where customers span the major socioeconomic groups.

The authors asked the randomly selected participants to evaluate the importance of convenience, site design and security in mobile commerce when presented with two situations —buying a movie ticket or conducting a stock trade online. For each scenario, before respondents indicated the likelihood of their using the channel for either transaction, the features and functionalities of the phone and Web site were described. Respondents replied within a seven-point scale about the importance of each factor.

The survey results show that, in many respects, m-commerce extends the qualities of a PC-based e-commerce experience.

Convenience is paramount for both high- and low-involvement purchases using mobile technology. “Breaking free of the traditional ‘gravitational’ commerce model, in which customers are constrained by time and location, is the essence of m-commerce,” says lead author Alan Tse. “The consumer is able to make purchases anytime, anyplace.”

However, the survey also reveals that low-involvement purchases, such as tickets, require an even greater degree of convenience. “Secure connections that enable customers to set up default profiles are essential to completing transactions quickly by inputting just a password,” Tse explains.

Contrary to conventional wisdom in e-commerce circles, those polled considered site design to be of little relevance, presumably because mobile-access devices have limited screen size and rely less on multimedia interaction than PC-based interfaces.

“However, site design does appear to play a more prominent role in high-involvement transactions,” points out Tse. “That may be linked to security concerns. An interface that constantly updates information regarding the status of a transaction puts a customer more at ease.”

Security ranked very low in importance for low-involvement purchases, probably because banks in Hong Kong, as elsewhere, limit cardholder liability for card-not-present transactions — in this case, to U.S.$64.

Surprisingly, among those polled, security was not even of great importance for high-involvement stock trades.

“We attribute this to the fact that few of these participants had ever actually bought or sold stocks using their mobile phone,” explains Tse, “whereas nearly all of them had used their mobile phone to check stock prices. The current inclination to avoid buying and selling stocks using an m-commerce channel suggests that companies offering services that entail a high level of involvement need to improve consumer confidence in financial security by employing the most advanced secured-transaction technology and assurances.”

In short, the authors suggest that managers first need to understand the level of involvement required of a customer in order to make a purchase, and, on that basis, implement a complementary degree of convenience, security and site design.

For additional information about this research, contact Alan C. B. Tse at alan@baf.msmail.cuhk.edu.hk.