AKTEL ‘One’ Pre-Paid is the only pre-paid phone in Bangladesh which offers 30 second pulse. Recently AKTEL introduced Pre-Paid Standard which has BTTB both-way connectivity. There is no other pre-paid mobile in Bangladesh which offers BTTB both-way connectivity.
Problem Statement and Objectives of the Research
Statement of the Problem
The demand estimation is a very usual practice in any kind of industry. It is indeed a continual process by every firm. Both forecasting and econometric techniques are being used for this purpose. But the application of such techniques in telecommunication sector is not common. This research is going to apply such technique in the context of Bangladesh cellular industry. Particularly this research tries to estimate the demand of ‘One’ Recharge Card among the Pre-Paid subscribers of AKTEL mobile phone in Bangladesh. To the best of my knowledge no research has yet been done in this issue.
Again it has been seen that the research results and findings always differ from country to country and product category, which create a gap in the marketing information system. This research aimed at minimizing the gap and find out the accurate result. There are some models to estimate the demand which is very much complex and difficult to understand for the decision makers. This research also tries to eliminate the complexity of those models and develop a linier regression model which is easily measurable.
Objectives of the Research
The main objective of this research is to estimate the demand of ‘One’ Recharge Card for the Pre-Paid subscribers of AKTEL mobile phone in Bangladesh.
The specific objectives of this research are to:
- estimate and analyze the demand function of ‘One’ Pre-Paid Card
- find out different elasticities
- test the statistical significance of the result, and
- find out the sensitivity of demand function with the change of parameters.
Review of Literature
Demand is one of the most important aspects of managerial decision making since a firm would not be survive if a sufficient demand for its product did not exist or could not be created. Demand is thus essential for the creation, survival, and profitability of a firm. Prof. Philip Kotler defined demand as “…wants for specific products that are backed by an ability and willingness to buy them” (1992). Demand is fulfilled by a utility, which is a power of satisfaction. The ability to pay can refer to present or future ability, paid by cash or kind. Ability depends on income or budget (amount of money to which one has the decision making authority). Willingness to pay is the fundamental to demand. Price is one of the major determinants of willingness to pay.
It is observed in most of the market that the firm faces a negatively sloped demand curve. This negatively sloped demand curve shifts due to “…the number of consumers in the market, consumers’ incomes, the price of related commodities, consumers’ tests, as well as with changes in other more specific forces that may affect the firms demand in the particular industry or market” (Salvatore, 1996).
These other forces may be price expectations, the level of advertising and other promotional efforts on the part of the firm, the pricing and promotional policies of other firms in the industry, availability of credit, and so on.
The demand curve and the law of demand emphasize the relationship between the price of a product and the quantity demanded, but price is not the only factor that determines how much of a product consumers will buy. A variety of other factors underlies the demand schedule and determines the precise position of the demand curve. These determinants of demand include income, tastes and preferences, expectations regarding future prices, the price of related goods, the number of buyers in the market, and many other factors varied based on the industry. Any demand curve is based on the assumption that these factors are held constant. Changes in one or more of these determinants will cause the entire demand curve to shift to a new position.
The most obvious determinant of demand is income. Consumers’ incomes influence their ability to purchase goods and services. For the normal goods, an increase in income will cause consumers to purchase more of a product than before at each possible price.
However, an increase in income will cause consumers to purchase less of an inferior good, thus shifting the demand curve to the left. When their incomes increase, consumers may choose to buy less of these products.
Consumers’ attitude refers to- how well they like the product relative to other products. This is also an important determinant of demand. A change in attitude will affect the demand for products.
Price expectations may also influence consumer behavior. For example, the more the expectation is closer to the actual price, the more likely that the consumer will use that product.
A somewhat less obvious determinant of demand is the price of related goods. Although all goods compete for a consumer’s income, the price of substitutes and complements may be particularly important in explaining consumer behavior. Substitutes are simply products that can be used in place of other products because to a greater or lesser extent they satisfy the same consumer wants. Complements are products normally purchased along with or in conjunction with another product.
Another determinant of demand is the number of consumers in the market. The more consumers who demand a particular product, the greater the total demand for the product. When the number of consumers increases, the demand curve for the product will shift to the right to show that a greater quantity is now demanded at each price, lithe number of consumers declines, the demand curve will shift to the left.
The demand curve for a product is generally estimated form the market data on the quantity purchased at various price over time or for various consuming units of market at one point in time. However, simply joining the price-quantity observations on a graph does not generate the demand curve for the product. The reason is that each price-quantity observation is given by the intersection of different demand and supply curve of the product. If the demand and supply curves did not shift or differ, the product would remain the same. To solve this problem we must find a mechanism to identify the actual shift in demand due to change in price, price of other products, income, test, advertising expenditure, credit incentives, and other determinants of demand. (Salvatore, 1996)
One way to solve the problem is the use of marketing research approaches where we can change the data collection technique. In this approach we can conduct a consumer survey to collect the data. It involves questioning a sample of consumers about how they would respond to particular changes in the determinants of demand. One limitation is that the survey data may be biased because the consumers are either unable or unwilling to provide accurate answer. Even if the consumers may try to give the answer as accurate as possible, their reaction may entirely different in the actual situation. It is to be noted, if the survey shows that consumers are unaware of price differences between the firm’s product and competitive products, this may be a good indication that the demand for the firms product is price inelastic. (Salvatore, 1996)
For the purpose of measuring the subscribers’ preference of AKTEL mobile phone over other operator I have used the multi-attribute attitude model. The formula of this model is,
n
Ab = ∑ Wi| Xi - Ii |
i =1
Where,
Ab = the subscribers attitude towards AKTEL.
Xi = the subscriber’s rating about the performance of AKTEL on factor i.
n = the number of attributes considered.
Wi = the importance the subscribers attach to factor i.
Ii = the subscriber’s level of belief about the performance of other mobile phone operator on factor i.
I have taken five key factors of mobile services such as tariff structure, customer service, network coverage, network connectivity and card recharge system. Since these attributes are not equally important to consumers, attributes are assigned weights based on the relative importance subscriber’s attaches to each factors. In the first step, the weight is measured with 5 point ranking order scale.
The second step involves creation of a concept of consumers believe on actual level of performance on the same attribute. Again for AKTEL an average actual level of performance is obtained from consumer’s ratings.
The third step is to construct a profile of a segment of subscriber’s level of performance with respect to other operator on the above factors. For a particular factor, an average ideal level of performance is obtained from subscriber’s ratings.
The next step is to find out the difference between the level of performance of AKTEL and other operator on each of the attribute.
Finally these differences are multiplied by the average weight assigned to each of the factor and added together to get the attitude of the consumers.
Theoretical/Conceptual Model Development
Theoretical Model
We find that the demand curve shifts with the changes in the determinants of demand. We can summarize the determinants of demand of ‘One’ Recharge Cardin the following way:
The demand of monthly usage of mobile phone is determined by,
- price of the card,
- subscribers’ income,
- tests and preferences
- price expectations,
- per-minute tariff of related product which the subscriber has access,
For the purpose of this research I need to consider all the above determinants as the independent variables. As the demand of monthly usage of mobile phone is determined by these factors, it is considered as a dependent variable.
Conceptual Model Specification
In order to estimate the demand of ‘One’ Pre-Paid Card in Bangladesh, I have identified the most important variables that are believed to affect the demand. From those variable, I can construct the following conceptual model:
Demand of monthly usage of mobile phone (Qx) = ∫ [price of the ‘One’ Recharge Card (Px), subscribers’ income (I), tests and preferences (T), price expectations (E), and per-minute tariff of related product which the subscriber has access (Py)]
or
Qx = ∫ [Px, I, T, E, Py]
Hypothesis Development
H1: If the price of the ‘One’ Recharge Card decreases, the demand of ‘One’ Recharge Card increases.
H2: If the income of the subscriber increases, the demand of ‘One’ Recharge Card increases.
H3: If the tests and preferences of the subscriber towards AKTEL increase, the demand of ‘One’ Recharge Card increases.
H4: If the expected price of the ‘One’ Recharge Card increases, the demand of ‘One’ Recharge Card increases.
H5: If the per-minute tariff of substitute product which the subscriber has access increases, the demand ‘One’ Recharge Card increases.
Methodology of the Research
Research Design
In order to develop a demand function for ‘One’ Recharge Card, we must find the quantity demanded due to the variation of price. The ‘One’ Recharge Card is available in two different prices. As the supply is unlimited thus by simply recording their average usage has given me the variation of demand due to change of price. Other determinants of demand have also been measured in the similar manner.
Sample Design
I have drawn my sample from the subscribers of ‘One’ Pre-Paid Service. For this purpose, I have applied the simple random sampling. Samples have been selected by using a random number table. A sample of 64 mobile phone subscribers (calculated through 90% confidence level, percent defective within 10% of the true value, and unknown population) have been interviewed.
Data Collection Instrument
Data is collected by using a structured questionnaire. The questionnaire includes open ended, dichotomous, rating order, and multiple choice questions. For the purpose of regression analysis from attitudinal data, I have used a bipolar symmetric differential scale.
Data Collection Procedure
As the mobile phone companies operate throughout the country it is very difficult to conduct a face-to-face interview. A telephone interview is used as the most appropriate option. A random number table is used to select the phone numbers with replacement.
The Demand Function
Following is the demand function of this research:
Qx = a0 + a1Px + a2I + a3T + a4E + a5Py + e
In my demand function the dependent variable Qx refers to the demand of ‘One’ Recharge Card in Bangladesh. It is measured by simply recording the number of different cards recharged against the respondents’ accounts.
The first independent variable Px refers to price of the ‘One’ Recharge Card. ‘One’ Recharge Card is available in two different price. So I can easily identify the shift in demand due to the variation of price.
The second independent variable I refers to the income of the subscriber. The average monthly income of the subscriber is estimated from their sources of income.
The third independent variable T refers to the subscribers’ tests and preferences regarding the ‘One’ Pre-Paid mobile phone. The multi-attribute attitude model is used to identify the subscribers’ tests and preferences regarding the ‘One’ Pre-Paid mobile phone.
The fifth independent variable E refers to the expected price of the subscriber. The subscribers are asked about their expected per minute tariff.
The forth independent variable Py refers to the per-minute tariff of related product which the subscriber has access.
Analysis of the Demand Function
Descriptive Analysis
Before going for farther analysis I must take the opportunity to discover the characteristics of the sample I have taken. As my sample is fully randomized it is a true representative of my population.
Empirical Analysis
Yet to be completed.
Test of Hypothesis
Yet to be completed.
Concluding Remarks
Yet to be completed.
REFERENCES
Yet to be completed.
* M. Saifullah is working as an Executive, Marketing Division in TM International Bangladesh Limited. He has completed his BBA from International University of Business Agriculture and Technology and doing his MBA in North South University. He has completed a number of professional training courses in DCCI, BMRC, and IUBAT in the area of research and development.
