Journal of Product & Brand Management

Dynamics of price sensitivity among mobile service customers

Juha Munnukka
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Juha Munnukka, (2005),"Dynamics of price sensitivity among mobile service customers", Journal of Product & Brand
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Juha Munnukka, (2008),"Customers' purchase intentions as a reflection of price perception", Journal of Product & Brand
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Ronald E. Goldsmith, Stephen J. Newell, (1997),"Innovativeness and price sensitivity: managerial, theoretical
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 Pricing strategy and practice

Dynamics of price sensitivity among mobile

service customers
Juha Munnukka
University of Jyväskylä, Jyväskylä, Finland

Abstract
Purpose – Price sensitivity is one of the key factors affecting to companies pricing choices. Yet in mobile services sector business practitioners are
facing problems in pricing decisions as they are short of knowledge on their customers’ price sensitivity levels and dynamics. Therefore this study aims
to focus on this unexplored field in order to provide more accurate tools for mobile service providers to price their services more effectively.
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Design/methodology/approach – This study is conducted on Finnish mobile services markets. The focus is on examining how customers’ price
sensitivity differs between different customer segments and which factors affect to the price sensitivity levels. The sample data is collected through a
quantitative postal survey in which 3,000 questionnaires was sent to mobile service customers of a Finnish teleoperator. In analyzing the empirical data
the explanatory factor analysis and multiple regression analysis was applied.
Findings – It was discovered that mobile service customers differ significantly in their price sensitivity levels; customers with moderate usage of mobile
services are least price sensitive, while intensive and low-end users are most sensitive to price changes. Important was also the notion that customers’
price perceptions and innovativeness levels were accurate indicators of their price sensitivity.
Research limitations/implications – This paper has concentrated only on Finnish mobile services markets. In order to construct a robust set of
indicators for international use, cross-cultural study on testing the factors of this study should be conducted.
Practical implications – For business practitioners, the most distinctive finding of this paper are a new set of factors through which segmenting of
their customers can be made more accurately.
Originality/value – With the findings of this paper a mobile service provider is able to increase efficiency of pricing of mobile services.

Keywords Pricing, Mobile communication systems, Surveys, Finland

Paper type Research paper

Introduction mobile services and in comparison to prices of other optional

service delivery channels.
Price has been observed as an important element affecting the Further challenges for pricing of mobile services is brought
diffusion of new products and services, but pricing of a new
by the fast evolving new wireless technologies and business
product or service is particularly difficult (Foxall, 1984). To
practices. In this new service environment traditional pricing
enable accurate pricing decisions for new products or services,
strategies have brought unsatisfactory results, a need to
a detailed knowledge on the potential customers’ perceptions
develop pricing has generated. For that purpose it is
and characteristics is needed. However, though it is known
that price is an integral part of diffusion enhancement necessary to study the customers’ subjective price
activities, we have a very limited knowledge on its actual perceptions to enable the creation of more effective pricing
effects on the diffusion of mobile services. schemes.
It is also more or less unknown how customers of mobile In this study we therefore concentrate on studying how
services perceive the charged prices and what are the mobile service customers perceive the prices, do customers
dynamics affecting to price perceptions. The perceived price differ in their price sensitivity levels, and could customers’
is formed from the bases of a customer’s experience about price sensitivity levels be accurately predicted. For these
purposes we have divided mobile service customers into three
segments which are believed to differ in terms of their price
The Emerald Research Register for this journal is available at sensitivities:
www.emeraldinsight.com/researchregister
1 mobile segment;
The current issue and full text archive of this journal is available at 2 combined segment; and
www.emeraldinsight.com/1061-0421.htm 3 fixed-line segment (defined later).
The study examines the Finnish mobile service markets.
Journal of Product & Brand Management
14/1 (2005) 65– 73
q Emerald Group Publishing Limited [ISSN 1061-0421] The author would like to express his gratitude to Professor Minna Mattila
[DOI 10.1108/10610420510583761] for her assistance throughout this survey.

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 Dynamics of price sensitivity among mobile service customers Journal of Product & Brand Management
Juha Munnukka Volume 14 · Number 1 · 2005 · 65 –73

Literature review and hypotheses service” (Olson, 1977). This means that there is trade-off
between price and service quality (Tse, 2001) which is most
At an aggregated level, price sensitivity is often used as a often materialized in terms of customer satisfaction. The
synonym for price elasticity (Link, 1997) and thus also in this existence of the exchange relationship between price and
study these two terms are seen to as synonyms. Sensitivity of service quality (i.e. service satisfaction) is supported also by
demand refers to how volume-sensitive a product or a service McConnell (1968) and Monroe and Krishman (1985).
is to price changes. Sensitivity represents a valuable strategic Perceived service satisfaction has found to be an important
tool in pricing (Tucker, 1966). factor influencing on customers’ price sensitivity. For example
Price sensitivity on the individual adopter level appears to Fornell et al. (1996) have stated that “through satisfaction
be equivalent to the concept of price consciousness for a there can be increased/decreased price sensitivity”. And
potential buyer of any product. Price consciousness has been Zeithaml et al. (1990) have suggested that improving service
defined as: quality in the eyes of customers creates “true customers”
. . . the degree to which he or she is unwilling to pay a high price for a product
and willing to refrain from buying a product whose price is unacceptably through higher customer satisfaction. Therefore service
high (Monroe, 1990). satisfaction should be included into studies dealing with
customers’ perceptions, e.g. price sensitivity.
Price consciousness is related to the price acceptability level as Perceived level of satisfaction, price acceptance, and price
well as to the width of latitude of price acceptability sensitivity are closely related to the economic concept of
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(Lichtenstein et al., 1988). Individuals, who are price consumer surplus. Marshall (1980) wrote that the excess of
conscious, are generally not willing to pay high prices for the price which a man would be willing to pay rather than go
the product in question. Furthermore, the range of acceptable without having a thing over what he actually does pay is the
prices is relatively narrow for price conscious individuals economic measure of his satisfaction surplus. The second
(Link, 1997). hypothesis states therefore:
In studies on price sensitivity in telecommunication
industry three different consumer segments have been H2. A customer’s price sensitivity can be significantly
identified (e.g. Kollmann, 2000). It has been found that in explained by a customer’s level of satisfaction to
both ends of pricing (high-end versus low-end) the price operator’s services.
sensitivity is substantially lower, in other words insensitive.
Influencing on these two market segments with pricing would Price perception
be most probably ineffective. Thus, for these market segments Perception is the process by which people select, organize,
it would be most effective to pursue quality-focused and interpret information to form a meaningful picture of the
marketing strategies (e.g. improvement of service/speech world. Although Nagle and Holden (2002) believe that price
quality). merely represents the monetary value a buyer must give to a
seller as part of a purchase agreement, we go on suggesting
Innovativeness that customer’s price perception is closely related on her
Innovativeness is defined as the degree to which an individual perception of quality, value and other beliefs. The work on
adopts an innovation relatively earlier than other members in price perceptions and adoption of innovations has produced a
the surrounding environment do (Engel et al., 1986). large number of contradicting research findings. Related to
Goldsmith and Hofacker (1991) have stated that price perceptions, Goldsmith and Newell (1997) found
innovativeness is “the tendency to learn about and adopt shopping innovators to be less price sensitive than laggards
innovations (new products) within a specific domain of whereas Korgaonkar and Smith (1986) reported no
interest”. But the most well-known definitions for associations between purchase behaviour and price
innovativeness is the one introduced by Rogers (e.g. 1983), consciousness. However, earlier Korgaonkar (1984) had
according to which innovativeness is defined as relative-time- concluded that non-store shopping would be most appealing
of-adoption. to price oriented individuals.
According to Kirton (1976), the innovator prefers to think Along with consumer attitudes and shopping orientation,
tangentially, challenges, rules and procedures and is less there has been significant weight given to price perceptions of
inhibited about breaking with established methods and consumers, and its impact on the adoption of product and
advocating novel perspectives and solutions. The innovator service innovations. This body of work on price perceptions
is easily bored by routine and seeks novelty and stimulation in and adoption of innovations has produced significantly
discontinuous change. He or she tends to lean towards risk- differing findings. Related to price perceptions, Goldsmith
taking exploration and trial. (Foxal, 1995) According to Engel and Newell (1997) found shopping innovators to be less price
et al. (1986), income is almost always useful in profiling sensitive than later buyers, whereas Korgaonkar and Smith
innovativeness as higher-income people have the ability to (1986) reported no associations between purchase behaviour
take the risk of trying new products. However, in the case of and price consciousness. However, earlier Korgaonkar (1984)
low-priced products, this relationship may not be as evident as had concluded that non-store shopping would be most
it is in the case of more expensive products. The first appealing to price oriented individuals. The third hypothesis
hypothesis is therefore constructed as follows: is created:
H1. A customer’s price sensitivity can be significantly H3. A customer’s price sensitivity can be significantly
explained by a customer’s level of innovativeness. explained by a customer’s price perception.

Satisfaction to operator’s services Demographic background

Among the several factors which affect customers’ buying A consumer’s level of knowledge about price and price
behaviours, two important ones are “price” and “quality of sensitivity of any given product or service may be influenced

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 Dynamics of price sensitivity among mobile service customers Journal of Product & Brand Management
Juha Munnukka Volume 14 · Number 1 · 2005 · 65 –73

by his/her demographic background. Demographic importance of price. Customers also typically use the
characteristics such as age, income, and gender are often “psychophysics-of-price” heuristic in that they perceive the
assumed to affect one’s level price sensitivity and price expected savings from price search in relative terms rather
perception, and are therefore frequently used as the basis for than in absolute amounts (Grewall and Marmorstein, 1994).
market segmentation. Because the value of a bundle is higher than that of a
Lack of demographically-driven differences in price component, customers expect higher absolute savings on a
knowledge may be due to the equal ability of the various bundle than on its components. Because the savings on the
demographic groups in processing product-related component are smaller than the savings on the bundle as a
information (e.g. Meyer-Levy and Sternthal, 1991). An whole, customers attach less importance to price and are less
alternative explanation might be that the limited incentives likely to search for better prices for the component.
given to respondents, and the demographically homogeneous Therefore, we expect the online medium to intensify the
samples used in previous studies, may have led to the tendency of price bundling to decrease price sensitivity. The
observed null effects of demographics (Estelami, 1998). final hypothesis states therefore:
Therefore, the role of demographics on price knowledge and H5. A customer’s price sensitivity can be significantly
price sensitivity remains open for further empirical inquiry. explained by a customer’s willingness to acquire mobile
While high exposure to price information may result in services in bundles.
more precise knowledge on prices, a high level of variability in
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prices may lead to low quality knowledge. Such variability can

be introduced due to significant product differentiation efforts Methodology and data collection
by sellers, and perceived or actual product/service quality According to the classifications of Churchill and Iacobucci
variations. (Estelami, 1998) It is therefore anticipated that (2002) on sampling techniques, this research is considered as
across service/product categories, significant variations in probabilistic. A postal survey was conducted in May 2003.
consumers’ sensitivity of prices exist. For which reason the The sample was drawn from TeliaSonera Finland’s customer
fourth hypothesis and six sub-hypotheses are created: database. The sample was stratified in three active user
H4. A customer’s price sensitivity can be significantly segments of mobile users, fixed-line users and combined users
explained by a customer’s demographic variables. equal in size depending on the main electronic service delivery
H41. Gender explains significantly differences in customers’ channel in their use. The questionnaires were tailored
price sensitivity levels. respectively. We called the customers, who did not own,
H42. Age explains significantly differences in customers’ according to the database, a private fixed-line connection at
price sensitivity levels. home, the mobile users. The customers collected under this
H43. Marital status explains significantly differences in sample had the highest volume of mobile data transfers
customers’ price sensitivity levels. (GPRS, high-speed data) during the last six months in
H44. Number of children in household explains significantly comparison to other customers in the database. They
differences in customers’ price sensitivity levels. represented in every way the most active mobile internet
H45. Education explains significantly differences in users the database had. The combined users had a private
customers’ price sensitivity levels fixed-line internet connection in use at home. Further, their
H46. Income explains significantly differences in customers’ customer record showed active usage of mobile internet
price sensitivity levels. (GPRS, high-speed data) connection and WAP-services
during the last six months. The fixed-line users owned a
Service bundles mobile phone and they were using regular mobile phone
Customers’ price sensitivity is also influenced by intermediary services such as SMS. There was no sign of internet related
services available online and offline. Two intermediary factors activities during the last six months in their customer record.
are likely to affect the degree of price sensitivity: They had a private fixed-line internet connection (mainly
1 price comparison using intermediary; and ADSL) in use at home.
2 price bundling. After a second follow-up, 778 responses were accepted
under further analyses. The final response rate was 25.9
If customers use intermediaries, which provide comparative percent, which is acceptable according to economic science
prices of competitors, their price sensitivity could increase. standards. The response rate is normal considering the
Comparative prices increase the salience of price as a decision research method (postal survey) and the profile of the sample
criterion and reduce the costs of price search. Although price (mobile or internet customers). The respondents were asked
comparison tends to increase price sensitivity, this effect is to fill out a structured questionnaire on a seven-point Likert
likely to be lower online than offline. Comparative prices scale concerning their preferences, experiences and beliefs
provide reference prices for customers. When the search costs towards usage of mobile and internet services. There were up
are low, as in the online environment they are, the reference to 27 questions in each tailored questionnaire. The mobile
prices have little effect on price search tendency (Urbany et al., users were answering mobile internet specific questions
1988). whereas the fixed-line users were answering fixed-line
Product bundles are typically offered by intermediaries and internet specific questions. As the combined users segment
often involve savings on individual items. If customers choose had knowledge on both types of electronic services and
from a product bundle, they may focus more on the value of delivery channels, half of them received a questionnaire
the bundle and less on prices of individual components. This regarding the mobile internet seamless use experience and the
is because the value of the bundle has a strong impact on other half was answering to questions concerning the fixed-
customers’ perceptions of transaction value (Yadov and line services. The survey questionnaire included questions
Monroe, 1993). To this extent, bundles may lower concerning the respondent’s basic demographic variables,

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 Dynamics of price sensitivity among mobile service customers Journal of Product & Brand Management
Juha Munnukka Volume 14 · Number 1 · 2005 · 65 –73

psychological determinants such as level of innovativeness and which provided sufficient values for each factor. Thereafter
mobile internet usage, which was further categorized under linear multiple-regression analysis was applied for H1, H2,
for main themes: usage context, service content, seamless H3, and H5; and analysis of variance (ANOVA) and Pearson
interface dimensions and use experience. rho product moment correlation tests for H4.
For constructing measures for testing the hypothesis, the According to, for example, Churchill (1995), a regression
first issue was to construct the four latent factors. For that model is considered to be valid when the following
purpose we applied explanatory factor analysis, in which assumptions are fulfilled:
principle axis factoring was carried out, followed by varimax .
linearity of the relationship between dependent and
rotation with Kaiser Normalization. The variables with factor independent variables;
loadings over 0.5 were selected for the factors. Reliability of .
constant variance of the error term, i.e. homoscedasticity
factor constructs was confirmed by Cronbach’s alpha (critical assumption;
value 06, Nunnally, 1967). Then we constructed summated .
independence of the error terms; and
scales from the variables according to results of the factor .
normality of the error term distribution and individual
analyses by summing the variables together and then taking variables; and
mean values. .
the predictor variables are not correlated among
themselves, i.e. multicollinearity.
Results
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In this study, all the presented requirements were fulfilled.

The respondents’ demographic profiles are presented in For testing the goodness of the data and the model we
Table I. One-third (33.9 percent) of the respondents were applied two basic tests: t-test and F-test. In multiple
women and two-thirds (64.8 percent) were men. The majority regression analyses, the F-test has an overall role for the
(59.8 percent) of the respondents were 25-49 years old and model, and each of the independent variables is evaluated
their annual household income (28.1 percent) before taxes with an independent sample t-test. (Cooper and Emory,
was in a range of 20 000-30 000 euros; which matches with 1995) From these choices we have applied F-test or analyses
the average annual income of two adults family in Finland. of variance summary table for comparing relative magnitudes
Only every fifth (18.2 percent) of the respondents had two or of the mean square. A squared multiple correlation
more children living at home. The majority were workers coefficient, R 2, was also applied, which reflects the
(40.6 percent) in profession status which was in line with their proportion of variation explained by the regression line.
educational backgrounds as most of them (29.0 percent) had (Zikmund, 1991)
vocational school education. Obviously mobile internet
services are becoming available for all the consumer Mobile segment
segments regardless of their annual household income or
educational background. As this segment is the segment of intense mobile service
The differences of customer segments were measured with users, it is in the greatest interest of business practitioners.
three different scales: usage frequency of mobile services, Users in this segment were using the most frequently mobile
price perception, and price sensitivity. Price sensitivity levels services though being at the same time the most price-
differed most distinctively between the mobile segment and sensitive. Therefore, it was in our interest to further
the other two segments. According to Figure 1 customers in investigate the factors, which would better explain the
the mobile segment were clearly more price sensitive than customers’ price sensitivity levels in this segment. In Table II
customers in the other two segments. Customers in the we have constructed four factors through explanatory factor
mobile segment were the most price sensitive with the mean analyses. The factor loadings presented are above 0.6 in the
sensitivity of 2.19 (std. 2.06; 0 ¼ very price sensitive; 6 ¼ not each case, exceeding the critical level of 0.5. Also reliability
sensitive at all). Meaning that, though they used mobile of the factor constructs were confirmed, Cronbach alphas
services most frequently they perceived the services more provided sufficient and satisfactory values for the each factor
expensive than other customers. The combined segment (. 0.7). The factors can be thus seen sufficiently
provided opposite results. Customers in this segment were constructed.
distinctly less price sensitive and also perceived mobile After constructing the latent factors, four hypotheses were
services clearly less expensive with the mean sensitivity 4.47 tested through regression analyses. The results of the
(std. 1.91). The fixed-line segment was rather similar to the regression analyses testing H1, H2, H3 and H5 are
combined segment in terms of price sensitivity with the mean presented in Table III. Out of the four hypothesized factors
of 4.07 (std. 2.258); though they used mobile services least two were found to explain significantly customers’ price
frequently. sensitivity levels: price perception and innovativeness. While
For acquiring more accurate knowledge on the dynamics service bundle and service satisfaction factors did not obtain
behind the price sensitivity among the mobile service adequate significance values in the regression analysis.
customers, the factors influencing on the customers’ price Reliability of the factors was confirmed with the significant
sensitivity levels must be explored. Cronbach’s alpha values.
The overall explanation power of the four factors reached a
Hypotheses testing sufficient level as almost 20 percent (R2 ¼ 0:194) of the
For testing the hypotheses based on the literature review and variances in the customers’ price sensitivity levels could be
measuring the strength of the relationships of the factors on predicted through the factors. Price perception was found to
customers’ price sensitivity, we applied explorative factor be the most accurate in predicting the customers’ price
analysis for constructing the latent factors. The reliability of sensitivity in the mobile segment (b ¼ 0.274

) though also
the factor constructs were confirmed by Cronbach alphas innovativeness factor obtained adequate relationship values

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 Dynamics of price sensitivity among mobile service customers Journal of Product & Brand Management
Juha Munnukka Volume 14 · Number 1 · 2005 · 65 –73

Table I Demographic profile of the respondents

Mobile users Combined users Fixed-line users Total
No % No % No % No %
Demographic characteristics
Total 211 100.0 257 100.0 310 100.0 778 100.0

Gender
Male 157 74.4 192 74.7 155 50.0 504 64.8
Female 54 25.6 55 21.4 155 50.0 263 33.9
Missing 0 0 10 3.9 0 0 10 1.3
SD 0.437 0.417 0.501

Age
Under 24 years of age 64 30.3 33 12.9 43 13.9 140 18.0
25-34 years 81 38.4 96 37.4 62 20.0 239 30.7
35-49 years 43 20.4 83 32.3 100 32.3 226 29.1
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Over 50 years of age 20 9.5 41 15.9 104 24.5 129 16.6

Missing 3 1.4 4 1.6 1 0.3 8 1.0
SD 0.998 0.974 1.196

Annual household income

Less than 10,000 euros 33 15.6 21 8.2 43 13.9 97 12.3
10,001-20,000 euros 54 25.6 48 18.7 82 26.5 184 23.7
20,001-30,000 euros 59 28.0 87 33.9 73 23.5 219 28.1
30,001-40,000 euros 25 11.8 37 14.4 40 12.9 102 13.1
More than 40,001 euros 29 13.8 53 20.5 60 19.3 142 18.3
Missing 11 5.2 11 4.3 12 3.9 34 4.5
SD 1.650 1.875 1.741

Marital status
Married 27 12.8 101 39.3 128 41.3 256 33.0
Cohabitation 60 28.4 69 26.8 58 18.7 187 24.0
Single (incl. widow, divorced) 115 54.5 80 31.1 116 37.5 311 39.9
Missing 9 4.3 7 2.7 8 2.6 24 3.1
SD 0.940 1.154 1.397

Number of children living at home

0 165 78.2 152 59.1 176 57.0 493 63.4
1 21 10.0 45 17.5 71 23.0 137 17.6
2 14 6.6 29 11.3 42 13.6 85 11.0
3 or more 8 3.8 28 10.9 20 6.5 56 7.2
Missing 3 1.4 3 1.2 1 0.3 7 0.8
SD 0.791 1.074 1.019

Education
Elementary school 24 11.4 31 12.1 48 15.5 103 13.2
Secondary education 34 16.1 63 24.5 64 20.7 161 20.7
Vocational school 69 32.7 85 33.1 72 23.2 226 29.0
University degree 48 22.8 39 15.2 82 26.4 169 21.7
Other 33 15.6 36 14.1 41 13.2 110 14.2
Missing 3 1.4 3 1.2 3 1.0 9 1.2
SD 1.952 1.916 2.063

Profession
Leading position 10 4.7 20 7.8 20 6.5 50 6.4
Worker 96 45.5 116 45.1 104 33.5 316 40.6
Public servant 28 13.3 31 12.1 40 12.9 99 12.7
Other 71 33.6 85 33.0 144 46.3 300 38.5
Missing 6 2.8 5 1.9 2 0.6 13 1.8
SD 2.367 2.526 2.547

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Juha Munnukka Volume 14 · Number 1 · 2005 · 65 –73

Figure 1 Customers’ price sensitivity and perception of mobile services the regression analysis (Table III) H1 and H2 were supported
while H3 and H5 were rejected in the mobile segment.
For testing the H4 the analysis of variance (ANOVA) and
correlation test (r) were applied. Nine different demographic
variables were tested. First we have tested relationships of the
four demographic variables through analysis of variance.
According to the test results, surprisingly, none of the variables
proved to have significant effect on customers’ price sensitivity.
The F-values were left clearly under the critical values in the
case of each variable. The influence of the three variables –
customers’ age (r ¼ 0:012), number of adults (r ¼ 0:033) and
children in household (r ¼ 0:031) – were tested by Pearson
product moment correlation. The results of the correlation
analysis were similar with the analysis of variance, none of the
three variables proved to have significant affect to customers’
Table II Explanatory factor analysis for constructing factors explaining price sensitivity. As also gender (t ¼ 1:450, p , 0:05) was
price sensitivity of mobile service customers found to have no significant effect to customers’ price
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Factor 1 Factor 2 Factor 3 Factor 4 sensitivity, there can be concluded that the H4 as a whole is
(a 5 0.807) (a 5 0.826) (a 5 0.866) (a 5 0.872) rejected.
Innovat1 0.780
Innovat2 0.765 Combined segment
Innovat3 0.629
Customers in the combined segment are using mobile services
Innovat4 0.604
clearly less than customers in the mobile segment. Therefore,
Innovat5 0.728
it is of high interest to investigate whether this difference is
Innovat6 0.712 reflected to their price sensitivity. It was found that in general
Innovat7 0.689 the combined segment was clearly less price sensitive than the
Perception1 0.898 mobile segment (mean ¼ 4:47, std: ¼ 1:911). In order to
Perception2 0.868 investigate more in detail factors that might explain these
Bundle1 0.933 differences, in Table IV we have constructed four factors to
Bundle2 0.930 explain the differences in the customers’ price sensitivity
Satisfaction1 0.805 levels. The presented factor loadings are well above the
Satisfaction2 0.757 critical 0.5 level in the each case; especially factors 2 and 3
Satisfaction3 0.756 obtained high loading values. Also reliability of the factor
Satisfaction4 0.718 constructs was confirmed by Cronbach alphas which
Satisfaction5 0.701 exceeded the critical 0.6 level in the each factor. The factors
are thus sufficiently constructed.
Notes: Innovat1-7, variables for respondents’ innovativeness; perception1-2,
for respondents’ price perception; bundle1-2, for respondents’ willingness to
acquire mobile services in bundles; satisfaction1-5, variables for service
satisfaction; rotated factor loadings with values 0.6 or over are presented Table IV Explanatory factor analysis for constructing factors explaining
price sensitivity of combined service customers
Factor 1 Factor 2 Factor 3 Factor 4
(a 0.743) (a 0.733) (a 0.788) (a 0.820)
Table III Factors affecting customers’ price sensitivity in the mobile
Innovat1 0.679
segment
Innovat2 0.657
Dependent Independent Hypothesis Innovat3 0.629
variable R2 variables b result Innovat4 0.604
Price sensitivity 0.194 Innovativeness 0.191
H1 supported Perception1 0.889
Price perception 0.274

H2 supported Perception2 0.889
Service bundles 20.023 H3 rejected Bundle1 0.869
Service satisfaction 0.134 H5 rejected Bundle2 0.844
Bundle3 0.621
Notes:
p , 0:01;


p , 0:001 Satisfaction1 0.692
Satisfaction2 0.629
Satisfaction3 0.620
(b ¼ 0:191

). The factors fulfilled the assumptions, laid for Satisfaction4 0.616
the regression analyses, rather well in the cases of the all
Notes: Innovat1-4, variables for respondents’ innovativeness; perception1-2,
assumed items. However, factor titled “innovativeness” rated
for respondents’ price perception; bundle1-3, for respondents’ willingness to
rather high in terms of multicollinearity values. Slight acquire mobile services in bundles; satisfaction1-4, variables for service
collinearity was indicated by high condition index values satisfaction; rotated factor loadings with values 0.6 or over are presented
(VIF-values however remained satisfactory). Thus, based on

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Juha Munnukka Volume 14 · Number 1 · 2005 · 65 –73

After constructing the factors, the four hypotheses were tested Table VI Explanatory factor analysis for constructing factors explaining
through regression analyses, 1, 2, 3, and 5. As expected, the price sensitivity of fixed-line customers
combined customers differed clearly from the mobile
customers in their usage experiences and price sensitivities. Factor 1 Factor 2 Factor 3 Factor 4
The most distinctive difference was found from the multiple (a 5 0.804) (a 5 0.705) (a 5 0.608) (a 5 0.863)
correlation coefficient value (R2 ¼ 0.087) which was Innovat1 0.749
prominently lower than in the mobile segment. The Innovat2 0.731
differences were found also in testing the hypotheses (Table V). Innovat3 0.695
As in the mobile segment case, also in the combined Innovat4 0.688
segment two factors with significant explanation powers were Innovat5 0.688
found: service satisfaction (b ¼ 0:161) and price perception Innovat6 0.637
(b 0.157). In the case of this segment price perception factor Perception1 0.779
was found to influence significantly in customers’ price
Perception2 0.694
sensitivity instead of innovativeness factor which was
Perception3 0.641
supported in the mobile segment case. Despite of the rather
Bundle1 0.743
weak explanation value multi-collinearity and autocorrelation
Bundle2 0.692
were in a good shape in the cases of the each factors.
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The fourth hypothesis concentrated on analysing the Bundle3 0.659

influences of demographic variables towards customers’ Satisfaction1 0.775
price sensitivity levels. For testing the hypothesis analysis of Satisfaction2 0.760
variance (ANOVA), Pearson’s correlation analysis, and t-test Satisfaction3 0.759
were applied as in the mobile segment, and nine demographic Satisfaction4 0.758
variables were tested. And, as was the case in the mobile Notes: Innovat1-6, variables for respondents’ innovativeness; perception1-3,
segment, none of the variables proved to have significant for respondents’ price perception; bundle1-3, for respondents’ willingness to
effect on customers’ price sensitivity as was the case in the acquire mobile services in bundles; satisfaction1-4, variables for service
mobile segment. Thus, also the customers’ price sensitivity satisfaction; rotated factor loadings with values 0.6 or over are presented
levels in this segment cannot be predicted according to their
demographic backgrounds.
Customers’ age, number of adults and children in As in the cases of the previous segments, after constructing
household were tested by Pearson’s correlation analysis. The factors, the four hypotheses were tested through regression
results of the correlation analysis were similar with the analyses, 1, 2, 3, and 5, and H4 through analysis of variance,
analysis of variance, none of the three variables proved to have Pearson correlation analysis and t-test. In the case of this
significant affect to customers’ price sensitivity. As also gender segment price perception factor was found to influence most
(t ¼ 21:413, p , 0:05) was found to have no significant effect strongly on the customers’ price sensitivity ðb ¼ 0:270)
to customers’ price sensitivity, the H4 as whole was rejected. though also the service bundle (b ¼ 0:228) and
innovativeness ( b ¼ 0:129) factors obtained sufficient
Fixed-line segment b-values. The most distinctive difference with this segment
and the mobile or combined segments was that three out of
In the fixed-line segment, the price sensitivity was practically the four factors in the regression analysis were supported.
on the same level as in the combined segment (mean ¼ 4:07, Only the service satisfaction factor was found to be
std: ¼ 2:258) but the level of mobile service usage was clearly insufficient for explaining variances in the customers’ price
lower. To investigate factors hypothesized to have significant sensitivity levels.
influence in the customers’ price sensitivity levels, four factors In the fixed-line segment the H4 faced the same result as in
were constructed through factor analysis (Table VI). The the mobile and combined segments. According to analysis of
factor loadings presented were well above the critical 0.5 level variance, Pearson’s correlation analysis, and t-test, the
in the each case. Also reliability of the factor constructs was hypothesis was rejected in the cases of the each variable.
confirmed by Cronbach alpha. In the case of the factors 1, 2, Thus, we can conclude that also in the fixed line segment the
and 4 the critical 0.6 level was clearly exceeded. The factor 3 customers’ demographic background does not indicate
obtained rather low alpha-value exceeding only slightly the statistically significantly their price sensitivity levels. The
critical level. factors presented in Table VII are obviously of highest

Table V Factors affecting to customers’ price sensitivity in the Table VII Factors affecting customers’ price sensitivity in the fixed-line
combined segment segment
Dependent Independent Hypothesis Dependent Independent Hypothesis
variable R2 variables b result variable R2 variables b result
Price sensitivity 0.087 Innovativeness 0.122 H1 rejected Price sensitivity 0.239 Innovativeness 0.129
H1 supported
Price perception 0.157
H2 supported Price perception 0.270

H2 supported
Service bundle 2 0.040 H3 rejected Service bundle 0.228

H3 supported
Service satisfaction 0.161
H5 supported Service satisfaction 0.007 H5 rejected
Note:
p , 0:05 Notes:
p , 0:05;


p , 0:001

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 Dynamics of price sensitivity among mobile service customers Journal of Product & Brand Management
Juha Munnukka Volume 14 · Number 1 · 2005 · 65 –73

Table VIII Result table of the tested hypotheses in the three segments
Hypotheses Mobile users Combined users Fixed-line users
H1. Price sensitivity can be significantly explained by a customer’s level of Supported Rejected Supported
innovativeness
H2. Price sensitivity can be significantly explained by a customer’s level of Supported Supported Supported
satisfaction to operator’s services
H3. Price sensitivity can be significantly explained by a customer’s price Rejected Rejected Supported
perception
H4(1-9) Price sensitivity can be significantly explained by a customer’s Rejected Rejected Rejected
demographic variables
H5. Price sensitivity can be significantly explained by a customer’s Rejected Supported Rejected
willingness to acquire mobile services in bundles

importance when customers’ price sensitivity levels are to be H5 proposed that customers’ preference to acquire mobile
investigated. services in bundles explains significantly the customers’ price
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sensitivity. This factor was one of the weakest factors in

Discussion explaining and predicting the customers’ price sensitivity. The
factor was found to be significant only in the combined
The three segments of mobile service customers differed segment, while in the other two segments it did not obtain
distinctly in the levels of price sensitivity. Based on the sufficient significance.
literature review, five hypotheses were proposed, which were By observing Table VIII we notice distinctive differences
expected to explain significantly the differences in the between the segments. This supports the differences in the
variances of price sensitivities in the three customer levels of usage frequency of mobile services and the price
segments. The four of the hypotheses were tested by linear sensitivity between the segments. Thus, when investigating
multiple regression analyses and one hypothesis by analysis of mobile service customers’ price sensitivity levels an
variances, Pearson’s correlation analysis, and t-test. investigator should use different indicators depending on the
H1 suggested that customers’ level of innovativeness
customers’ level of usage of mobile services. By following the
explains significantly the customers’ levels of price
results of this paper a mobile service provider is able to
sensitivity. The hypothesis was accepted in the mobile and
enhance its pricing strategies by more accurate predictions of
fixed-line segments. The explanation power of the
its customers’ price sensitivity levels.
innovativeness factor did however remain on a rather
moderate level in the both segments. This factor should
however be considered as applicable for analyzing customers’
price sensitivity levels in these segments, yet not be widely
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