Factors Influencing Students’ Selection
of Credit Cards: Some Initial Results
Charles Blankson
University of North Texas, Denton, Texas
Sylvia J. Long-Tolbert
University of Toledo, Toledo, Ohio
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Presentation
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•
•
•
•
Rationale for the study
Research aim
Methodology: 5 steps in scale
development
Results and Discussion
Managerial contributions
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
American students
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Rationale for the study
• Importance of consumers’
selection/choice criteria in the changing
competitive financial services (banking)
sector (Lewis, 1982; Thwaites and Verre,
1995; Devlin, 2002).
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Rationale for the study contd.
• Difficulties in attracting and maintaining
college students and the youth population
(Lewis, 1982a).
• Bank advertising and promotions have
little effect upon college students’ choice
criteria (Lewis, 1982b).
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Rationale for the study contd.
• Some 82% of US college students own at
least one credit card (Roberts and Jones,
2001).
• The subject of the criteria/factors used by
college students in selecting credits card
brands is important in the banking
services sector.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Rationale for the study contd.
• “…it is of little use for an organization to
attempt to position and differentiate an
offering by emphasizing particular
attribute(s) that do not constitute
significant choice/selection criteria in the
target market…” (Devlin, 2002, pp.276).
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Research Aim
• To develop a scale that measures college
students’ decision criteria (selection)
when evaluating and/or choosing a credit
card brand.
• Note: This study does not deal with the debate about
(a) students’ credit card debt and (b) credit card
companies’ ethical behavior on college campuses.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Research Objectives
• To generate a pool of items or statements which
college students employ in their evaluation
and/or selection of credit card brands and
• To synthesize and then reduce these
statements/items into key determining factors
explaining or underpinning college students’
selection of credit card brands.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Methodology: Initial generation of
statements (step 1)
• Pre-notification announcements in class rooms.
• Focus group sessions:
– Involving a convenience sample of 70 undergraduate and
graduate business students (4 batches of 15 undergrads and
one batch of 10 evening MBA students at GVSU)
– vocabulary about the descriptions of their evaluation criteria
and rationale for their selection of their credit card brands.
• Qualitative analysis was conducted via the inductive
reasoning approach (Brady and Cronin, 2001):
– 80 statements/items were identified.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Deletion of duplicate statements (step 2)
• Examination of the 80 statements was via
the inductive reasoning – resulted in the
retention of 43 statements/items.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Initial collection of perceptions (step 3)
• The 43 items formed the questionnaire and was
pre-tested among a convenience sample of 40
undergrad and 14 MBA students from GVSU
(Parasuraman, Zeithaml, Berry, 1988).
• Finally, a self-administered survey was carried
out in class rooms using a convenience sample
of 600 students from GVSU, Cornerstone
university and Drexel university.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Initial collection of perceptions (step 3
contd.)
• The 43 statements (questionnaire) were
measured on a 7 – point Likert scale (1 =
not important at all and 7 = very
important).
• Out of the 600 questionnaires distributed
in class rooms, a total of 338 were
received, yielding a 56% response rate.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Scale development (step 4)
• The underlying structure of the data was explored via
EFA (DeVellis, 1991; Churchill, 1997; Fabrigar et al.,
1999).
• Considerable degree of inter-factor correlation.
• The Bartlett test of Sphericity (Approx. Chi-square =
18063.571; df = 1275; sig. 0.000) and
• KMO measure of Sampling Adequacy Index (0.917)
confirmed the appropriateness of the data for EFA.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Scale development (step 4 contd.)
• Principal component analysis was employed to
reduce the number of factors using the 50%
cut-off criteria.
• 9 factors were extracted and accounted for
61% of the variance.
• Examination of the communality column
further showed evidence of the overall
significance of the solution extracted.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Scale development (step 4 contd.)
• The oblique (Oblimin) rotation was applied to the data.
• The factor loading for the common factors was
subjected to the 0.5 absolute value (Hair et al., 1998).
• Internal reliability was assessed via the Cronbach
Alpha ά.
• All factors exceeded the adopted criteria.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Identification of the main factors (step 5)
• Following:
– Examination of the EFA results,
– Analysis of the internal reliability,
– Conceptual coherency of the indicated
factors….
Four factors emerged and were named
(Parasuraman, Zeithaml, Berry, 1988;
Spector, 1992).
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Internal consistency of revised structure
• Factor 1 (Buying power)
–
–
–
–
–
Good when traveling
For shopping
To order from catalogs
Easier than writing checks
Gives extra buying power
ά Value = 0.8467
• Factor 2 (Incentives)
– Cash back bonuses
– Cash back at the end of th
year
– Gain points for using card
– Pays you to use it
– Receive discounts on
purchases
ά Value = 0.8570
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Internal consistency of revised structure
contd.
• Factor 3 (Firm’s
Reputation)
–
–
–
–
–
Friendly staff
Competence
Good customer service
Good service provision
Reputation of the
organization
– Quick service Consistency
• Factor 4 (Enhance good
credit)
– To establish good credit
– To obtain credit
– ά Value = 0.7574
ά Value = 0.8603
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Results and Discussion
• This study has attempted the development of a
scale measuring factors influencing students’
selection of credit cards.
• Buying power = confidence in purchases that
the usage of the card and/or affiliation with the
card organization brings to the consumer.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Discussion contd.
• Incentives = issues about enticement and
“perks” used by organizations to woo or attract
customers to obtain and use a card.
• Firms’ reputation = a card organization’s
reputation regarding good service provision,
consistency, competence and friendly staff.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Discussion contd.
• Enhance good credit = the benefits of
establishing credit history from the usage
of the card.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Managerial contributions
• The results could be useful for managers and
advertising executives involved with
students’/youth credit card accounts.
• Employ the four factors to reflect marketing
strategies or tactics (e.g., services marketing
mix, relationship marketing):
– To change consumers’ attitudes about a card brand,
– To change the card brand’s image and
– Pursue these strategies in proactive manner to preempt the competition.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Managerial contributions contd.
• While “financial security” and “enhance
good credit” may be pursued by all card
organizations,
• we infer that “incentives” and “firm’s
reputation” are crucial factors/strategies
capable of differentiating and/or
positioning a card brand.
2006 AMS Annual Conference, May 24-27, San Antonio, Texas
Thank you
2006 AMS Annual Conference, May 24-27, San Antonio, Texas