Consumer Repurchase Behaviors of Smartphones

The Business Phenomenon

Google Insight and the global market research firm CCS predicted that 1.6 billion smartphones would be sold in 2016, with an increase to two billion sold by 2019. South Korea has the highest smartphone penetration rate at 92%, followed by Japan (64%), Germany (75%), the United States of America (USA) (78%), and the United Kingdom (UK) (77%).

With the penetration rate of smartphones being so high in the Korean market, it is more effective to motivate existing consumers to repurchase rather than to focus on new consumers and markets. According to Table 1, smartphones (especially Samsung) have a very high market share, but consumers prefer to repurchase Apple's iPhone over Samsung's Galaxy.

Companies often pay large amounts of money to increase customer loyalty and lure customers away from their competitors. Verizon, a leading United States (US) telecommunications service provider, launched an unlimited plan as an aggressive marketing strategy to secure customers from competitors. Other providers in the same industry, including T-Mobile, AT&T, and Sprint, offer smartphone installment plans and early termination fees to customers who switch from competitors to their services instead. Beyond that, many smartphone manufacturers offer marketing promotions that greatly reduce the purchase price of smartphones when customers sign up for more than two years of service through alliances with mobile communication service providers. In that way, each company actively implements marketing strategies in mature markets to protect their customers and attract those of competitors. After all, companies know that retaining existing customers is more profitable than finding new ones. Added to that, companies' repurchase strategies often revolve around event promotion. Although all of those strategies can temporarily increase sales, there is a limit to maintaining sustainability. Therefore, companies conduct research on the capacity of various marketing strategies to prompt repurchases among existing customers. With advanced technology, consumers can easily find the products and services they want; however, from a business standpoint, differentiation is becoming more challenging. It is very difficult to create and provide products or services that are superior to competitors and that cannot be imitated in the actual business market. As a result, many companies must compete fiercely within the same market for consumers. In a saturated market, marketing costs often focus on retaining existing consumers rather than new ones; therefore, many companies recently adopted marketing strategies to secure their brand loyalty. It is very important to maintain consumer loyalty in order to increase profits in such a competitive market situation; research shows that, if the service industry reduces its consumer bounce rate by 5%, profits will increase by 25–85%. In other words, from a marketing standpoint, research indicates that managing relationships with existing consumers is more efficient than attracting new consumers and that consumer loyalty is positively related to corporate profit.

Smartphones have a faster repurchase cycle than other electronic devices; consumer-friendly smart devices (like smartphones) have a lifecycle of only 2.77 years. Because smartphones are used more frequently and consumed more quickly than other electronic devices, it is very important to analyze the factors affecting repurchase intention of this product with a short repurchase cycle. Thus, this study analyzes factors affecting the repurchase of smartphones by South Korean consumers, using the artificial neural network algorithm.

Research Questions

The research began with the following questions: "Why do consumers repurchase smartphones?" and "What factors affect consumer behaviors of smartphone repurchase?" Thus, this study examined the repurchase factors that influence consumers when they repurchase a smartphone, through the following questions: