A study on determinants of customer-oriented differentiation and market segmentation on broadband internet access service

Abstract

The rapid growth of broadband Internet access service has resulted in a competitive supply in Korea. Many ISPs are confronted with difficulties due to market saturation, price competition, and technological substitutes. Knight (2000) stated that USP communicates the differentiation among competitors. In order to identify a successful USP strategy, an ISP has to determine the differentiation factors that are important to its customers. Thus, the purpose of this study is to determine possible differentiation factors in the broadband Internet service market as a basis to identify USP as a strategy for competitive advantage. To investigate the relative importance of differentiation factors with relation to providers`` performances on broadband Internet service provision, this study examined 1) select possible differentiation factors through the consumption chain on the broadband Internet service, 2) identify the underlying dimensions, or factors extracted from the original 25 broadband service attributes, possible differentiation variables, 3) examine the relative importance of the derived differentiation factors in relation to provider’s performance, and 4) segment the market into homogeneous groups based on differentiation factors. As the result, attributes of broadband Internet service are categorized into six factors;$\emph{problem handling and service support, transmission quality, service charge, quality of service opening, coverage and promotion}$, and $\emph{use limit}$. The factors for the consumption chain are deemed appropriate by validity and reliability tests. Second, all factors are shown to be significantly important for the improvement of a provider``s performance; two factors, include $\emph{transmission quality}$ and $\emph{monthly charge}$, were emphasized from previous studies and four factors, $\emph{problem handling and customer support}$, $\emph{coverage and promotion, use limit}$, $\emph{and quality of service opening}$, were derived...