Impact of Utilitarian and Hedonic Shopping Values on Individual s Perceived Benefits and Risks in Online Shopping

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1 Impact of Utilitarian and Hedonic Shopping Values on Individual s Perceived Benefits and Risks in Online Shopping Abhigyan Sarkar Marketing Management at ICFAI University-Dehradun, India [Abstract] An individual s overall perceived shopping value has two dimensions utilitarian and hedonic. Utilitarian shopping value relates to the functional aspects of the shopping context. Hedonic shopping value is derived from the perceived fun or playfulness of the shopping. An individual also assumes some benefits and risks in any shopping context. The e-shopping tendency is increasing rapidly among buyers across the world, which is the focus of this study. This study investigates how the individual buyer s perceived benefits and risks in e-shopping are influenced by his or her perceived utilitarian or hedonic shopping values. [Keywords] online shopping; utilitarian shopping value; hedonic shopping value; perceived benefits in online shopping; perceived risks in online shopping Introduction Traditional research in the field of consumer behavior have been started by drawing concepts from the field of cognitive psychology and the concepts of utilitarian shopping value, which came from the research conducted mainly in the field of micro-economics and classical decision theory (Holbrook and Hirschman, 1982 a). The utilitarian perspective assumes the buyer as a logical problem solver. However, a group of researchers have analyzed shopping from a different perspective. They focused on the emotional and irrational aspects of individual buying behavior. Ernest Dichter (1947) pioneered this research tradition, which is known as motivation research (Sheth et al., 1988; pp ). The basic assumption underlying this research tradition is that consumers made product or brand choices for emotional reasons deeply rooted in their psychology. This motivation research stream heavily relied on "Freudian psychology" (Sigmund, 1953). This stream of research was strongly criticized by the scholars who advocated rational buying behavior models. During the decades of 60s and 70s, research in emotional and irrational buying was ignored to a certain extent (Sheth et al., 1988; pp ). Again, this research tradition emerged in the decade of 80s, as Zuckerman invented the scale to measure individual sensation seeking in An individual s overall attitude towards any brand has distinct hedonic and utilitarian dimensions (Batra & Ahtola, 1990). However, they have stated that the relative dominance of either of the dimensions varies across brands. Today, one can find two basic formats of shopping: store format and non-store format. Nowadays, more and more shoppers are purchasing online in order to save time and maximize their convenience instead of physically visiting a store (Dholakia et al., 2002). The internet has become a significant means for carrying out commercial transactions. Today, more than one-half of the airline reservations are made through the internet, and online sales reached $30 billion during the 2005 holiday session, up 30% from 2004 (Pew Internet, 2005; Nielsen & NetRatings, 2005). The objective of the present study is to investigate the impact of these individual shopping values on an individual s perceived benefits and risks in the online shopping context. Literature Review Utilitarian and Hedonic Shopping Values Utilitarian buying motives include convenience-seeking, variety seeking, searching for quality of merchandise, and reasonable price rate, etc. On the other hand, hedonic buying motives are related to emotional needs of individuals for enjoyable and interesting shopping experiences (Bhatnagar & 58

2 Ghosh, 2004). Holbrook & Hirschman (1982a) have stated that in traditional information processing buying model the buyer is a rational decision maker wanting to maximize utility by focusing on tangible benefits of the product. According to this model, purchasing has been viewed as a problemsolving activity in which consumer moves through a series of logical steps. Hedonic consumption involves emotional arousal taking place while purchasing or consuming (Holbrook & Hirschman, 1982 b). In hedonic consumption, different types of emotional feelings, which are both physiological and psychological, play major roles. Hopkinson & Pujari (1999) have explained how hedonic consumption takes place in a high-involvement situation, where an individual is deeply involved in experiencing a consumption event. This research points out that the level of hedonism varies across products or brands depends on the changing levels of involvement. In high- involvement consumption situations, the level of hedonism is expected to be higher. A little research has been conducted to explore this aspect of consumption. The traditional buying decision model (utilitarian) and modern experiential model (hedonic) differs in four substantive areas: mental constructs, product classes, product usage and individual differences (Holbrook and Hirschman, 1982a). In several buying instances, emotional desires dominate the utilitarian motives. The intensity of emotive arousal largely depends on the capacity and desire for spending emotional resources on the part of the buyer, and this capacity and desire vary within one consumer over time. Batra and Ahtola (1990) have examined the composition of the overall consumer attitude towards four different brands: Pepsi, Listerine, Comet Cleanser and Cadillac. In all the cases, a two-factor structure emerged: utilitarian and hedonic. This finding reinforces the fact that any brand has both utilitarian and hedonic attributes, and their relative proportions vary across brands. Holbrook and Hirschman (1982 a) have stated that any product, however mundane it might be, carries some symbolic meanings. The above findings suggest that in the cases of most of the products or brands, the total consumer attitude is composed of at least two dimensions, utilitarian and hedonic. Online shopping is a mode of shopping where both utilitarianism and hedonism are likely to persist. Perceived Benefits in Online Shopping Consumers make online purchases for both convenience and enjoyment (Childers et al., 2001, pp ). Forsythe et al. (2006) developed a scale to measure perceived benefits and risks in online shopping. Their study shows that convenience, ease of shopping, and product selection (which are utilitarian benefits) account for larger variance explained in total perceived benefits in online shopping, compared to the perceived hedonic benefit while shopping online. Hence, it can be inferred that an individual with higher utilitarian shopping motive is likely to perceive greater benefits in online shopping compared to another individual having lower utilitarian shopping motives. The hedonic perspective includes emotive arousals accompanying a consumption act (Holbrook & Hirschman, 1982b). The authors have stated that hedonic arousal mainly takes place when the consumer is using the product. "Dynamic interaction between product and consumer" (Holbrook & Hirschman, 1982b, p 97) is an especially important requisite for hedonic arousal to take place. Apart from a few exceptional cases, like, online movie watching, game playing, hearing songs, etc., an individual is unable to interact directly with a product online. While choosing any brand online for purchasing, the individual can see only those attributes of a brand which can be expressed through the picture on the screen. The consumer cannot touch, smell, or taste a product online (Childers et al., 2001, pp ). Consumers place an order online, but actual usage of the product takes place after it is delivered. Looking from this point of view, the scope of hedonic arousal is limited in case of online shopping, and the individual with high hedonic shopping value is expected to perceive a lesser benefit in online shopping. A few researchers have also stated that hedonic motives play positive roles in shaping the attitude towards online shopping. For example, Childers et al. (2001) have concluded that both functional and hedonic motives are important predictors of online shopping attitude. Parsons (2002) 59

3 found that some social motives are applicable for online shopping, but these types of conclusion are relatively few in number. The majority of researchers state that a buyer s utilitarian motives dominate non-store shopping as it provides convenience by the way of saving time and effort (Forsythe et al., 2006). The hedonic shopping motive is dominant in the case of store-shopping where buyers can directly interact with the sales person or can feel the products on the spot. Perceived Risks in Online Shopping There are broadly three types of perceived risks in online shopping: financial risk, product risk and convenience risk (Forsythe et al., 2006). Financial risk is the perceived net loss of money and consumers perceived insecurity (like, the feeling of insecurity regarding online credit card usage). Product risk is associated with the expected future non- performance of the product (as in case of online buying, the consumers are unable to directly examine the product while making choices) or perceived delay in actual delivery. Convenience risk includes buyers perceived inconvenience while placing order online, like, technological complications faced. Bhatnagar and Ghosh (2004) have stated that the product performance risks and financial risks are very much associated with any online shopping. A potential financial risk associated with online buying is the consumer s sense of insecurity regarding online credit card usage, which has been found to be a potential obstacle to online shopping (Maignan & Lukas, 1997). Therefore, the prior literature shows that all these major types of perceived risks in online shopping (financial risk, product risk, convenience risk) are primarily utilitarian in nature or related to time and cost. So, it is likely that an individual with higher utilitarian shopping motive is likely to perceive greater risk in online shopping compared to another individual with lower utilitarian shopping motive. According to Holbrook and Hirschman (1982b), in order for the hedonic arousal to be present in any shopping context, dynamic interaction between the buyer and the product should be present. According to Alba et al. (1997), the departmental and specialty stores give the buyers the opportunity to touch and feel the merchandise and to obtain information directly from sales persons. On the other hand, the online shopping environment doesn t offer the buyer the opportunity to touch, feel, or smell the product while buying (Childers et al., 2001). Hence, it is likely that an individual having a high hedonic shopping motive will tend to prefer more direct interaction and go for store shopping. By directly interacting with the merchandise, he/she will be able to reduce his/her perceived risks in shopping. Therefore, in the online shopping context, the individual s perceived risk is likely to be high if his/her hedonic shopping motive is high. Literature Gap Limited research has been conducted investigating the impact of an individual s perceived shopping values on his/her perceived benefits and risks in online shopping. Prior literature postulates that in any shopping context, both hedonic and utilitarian shopping values coexist (Batra & Ahtola, 1991; Babin et al., 1994). Therefore, it is of prime importance to investigate how the perceived shopping values influence the perceived benefits and risks in online shopping. Hypotheses Formulation Based on the above literature review, the following hypotheses are formulated: H1: Consumers perceived utilitarian shopping value has significant positive impact on their perceived benefits in online shopping. H2: Consumers perceived hedonic shopping value has significant negative impact on their perceived benefits in online shopping. H3: Consumers perceived utilitarian shopping value has significant positive impact on their perceived risks in online shopping. H4: Consumers perceived hedonic shopping value has significant positive impact on their perceived risks in online shopping. 60

4 The following theoretical framework is developed based on the above hypotheses. In the framework, arrow flows from predictor construct to dependent construct. Positive and negative signs denote positive and negative relationship, respectively. A survey has been conducted to test the framework empirically (see the figure below). Methodology Measurement Items Perceived benefits in online shopping have been measured using 16 items taken from the scale developed by Forsythe et al. (2006). Perceived risks in online shopping have been measured using 16 items taken from the scale developed by Forsythe et al. (2006). Eleven items to measure hedonic and four items to measure utilitarian shopping values have been adopted from the scale developed by Babin et al. (1994). Sampling Technique A convenient sampling was done among the adult customers of computer game parlors located in various cities across India. A total 525 completed questionnaires was considered for final analysis. The response rate was 72%, in which 28% of the respondents didn t fill up the complete questionnaire and were excluded from the study. The age range of the respondents was 21 to 60 years, and 62 % of the respondents were male. Only those respondents who had made at least one online purchase of any good or service during the last month were eligible for participating in the study. For participating in the survey, each respondent was given an amount of Rs 100. Statistical Tools Employed Principal component factor analysis with varimax rotation has been done to test the discriminant validity of the four constructs. In order to test the above hypothesized relationships, the multiple regression technique has been used. The coefficient alpha values have been computed for examining the reliability of the constructs in Indian context. Multiple regression analysis has been done to investigate the linear relationships hypothesized between the constructs. Data Analysis and Findings A total of 47 items were in the questionnaire. Principal component factor analysis with varimax rotation has been done to examine the discriminant validity of the constructs. Only factors with an eigen value 1 or greater than that were retained for rotation. The set criteria were to retain the items with loading greater than or equal to 0.5. However, all items met the criteria and were retained. The rotated component matrix revealed four factors with eigen values greater than 1. All the items loaded highly (> 0.5) on their respective latent constructs on which they were supposed to load. There was no cross-loading (see Table 1 below for factor loadings). The four factors were clearly interpretable as 61

5 perceived risks in online shopping, perceived benefits in online shopping, utilitarian, and hedonic shopping values. Therefore, discriminant validity was established. Table 1. Loadings after Varimax Rotation Items Benefit Risk Factor Utilitarian Factor Hedonic Factor Factor I can shop in privacy of my home while shopping online. I don t have to leave home if I shop online. I can shop whenever I want when I shop online. I can save the effort of visiting stores if I shop online. In online shopping the items from everywhere are available. I can get good product information online. I get broader selection of products while shopping online. While shopping online, I can have the access to many brands and retailers. If I shop online I don t have to wait to be served. There is absolutely no hassles in online shopping. I don t get embarrassed if I don t buy I don t find any busy signal in online shopping. I get the chance to try new experiences while shopping online. It is exciting to receive the package after placing order online. I can buy on impulse in response to ads while shopping online. I can custom design products while shopping online. I can t trust the online company I may not get the delivery of the product. I may end up in purchasing something by accident. My personal information may not be kept secret. I may not get what I want My credit card number may not remain secure. I might be overcharged I can t examine the actual product Size may be a problem with clothes I can t try on clothing online I am unable to touch and feel the items I have to pay extra for shipping and handling

6 Items It is too complicated to place order online. It is difficult to find appropriate website. Pictures of merchandise on the website take too long time to come up. I just accomplish what I want to while shopping. While shopping I cannot buy what I really need. While shopping I find just the items I look for. I feel disappointed if I don t get all I need on a single store, and I have to visit many stores. Benefit Factor Risk Factor Utilitarian Factor Hedonic Factor Shopping to me is truly a joy I shop not because I have to, but 0.71 because I want to. Shopping is like an escape from 0.78 my daily routine life. The time spent in shopping is truly 0.81 enjoyable to me. I enjoy being immersed in exciting 0.75 new products while shopping. I enjoy shopping for its own sake 0.69 and not because of that I need to purchase something. While shopping, I am able to act 0.65 on the spur of the moment. While shopping I can feel the 0.74 excitement of the hunt. While shopping, I am able to forget 0.72 my other problems. While shopping I feel a sense of 0.71 adventure. Any shopping is a very nice time 0.70 out to me. Coefficient alpha values for the four latent constructs were all within the range of 0.81 and 0.85 (see Table 2) exhibiting good reliability of the constructs in Indian context. Table 2. Coefficient Alpha Values Principal Components Perceived Benefits in Online Shopping 0.82 Perceived Risks in Online Shopping 0.83 Utilitarian Shopping Value 0.81 Hedonic Shopping Value 0.85 Cronbach s Alpha Regression analysis has been done, taking the mean score of each construct for each respondent. For 63

7 each respondent, the summated score of all items representing a construct has been divided by the number of items. A mean score has been taken, as all the constructs achieved good reliability. Cronbach s Alpha values were all greater than 0.8. Two regression models have been estimated. In the first regression model, perceived benefit was regressed on utilitarian and hedonic factors. In the second regression model, perceived risk was regressed on utilitarian and hedonic factors. Both the regression models achieved statistical significance. The F-value of the first regression model was and for the3 second. Both were significant at 10% level. The adjusted R 2 values were and for the first and second regression models, respectively. In the first regression model, the coefficients of both utilitarian factor (coefficient= 0.81, p-value= 0.08) and hedonic factor (coefficient= , p-value= 0.09) emerged as significant. The impact of hedonic factor on the perceived benefit was negative and the impact of utilitarian factor on perceived benefit was positive, as expected. In the second regression model, the coefficient of the hedonic factor (coefficient = 0.77, p value = 0.04) was statistically significant and positive, as expected. In the second model, the coefficient of utilitarian factor (coefficient = 0.84, p-value = 0.05) was also significant and positive. Therefore, H1, H2, H3, and H4 were empirically supported. In the case, no regression model heteroscedasticity problem has been found. The multicolinearity problem was, also, not significant, as all the VIF values were less than 4. Discussions The findings of the above study show that consumers with high hedonic shopping values tend to avoid online shopping. They perceive more risks and lesser benefits in online shopping. They are likely to avoid online shopping, as they cannot touch the product or interact with the salespeople directly while shopping online. A customer with high hedonic shopping values tends to prefer direct interaction with the product or salespeople, which become stimuli in creating the hedonic arousal. A hedonic customer, therefore, is likely to make most of the purchases by visiting brick, rather than click stores. This finding has a very important implication in the context of e-marketing management. In order to be successful, an e-marketer must try to increase the hedonic or entertainment value of its website. The website design should be such that it provides fun to the customers. This fun element is necessary to attract and retain online customers. The results of this study also reinforce the fact that the customers with high utilitarian shopping values perceive greater benefits in online shopping. Most of the online stores provide the utilitarian benefits to their customers by saving their time and costs. Customers primarily make online purchase in order to get greater convenience. Another provocative finding of this study is that a customer with high utilitarian shopping value is also likely to perceive greater risks in online shopping. This finding has strong implication for the e-marketers. E-marketers must provide the assurance to their target customers that the risks inherent in any online shopping in terms of credit card fraud, leakage of personal and confidential information, delay in delivery or delivering defective items, etc., are minimized. This perceived security is very important to attract and retain the online customers. Conclusion Today, many customers across the globe are purchasing online. The competition is increasing rapidly in this sector. In order to be successful in online marketing, the marketers must do two things: increase the hedonic or entertainment value of the sites and increase the level of perceived security in online shopping. By increasing the hedonic value, the marketers will be able to attract those customers whose hedonic shopping value is high and who normally purchase from brick stores. By improving the security provisions, the e- marketers will be able to mitigate the risks perceived by the consumers in online shopping. Security provision must be stricter when an individual is paying using credit or debit card online. As a whole, fun, and security are two key benefits that are desired by online consumers. 64

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