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CHAPTER II LITERATURE REVIEW
A. Marketing
According to Kotler and Keller 2009:45, marketing has been defined as an organization function and a set of processes for creating, communicating,
and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Thus, we see
marketing management as the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and
communicating superior customer value. Marketing is not just sales activities. Activities in marketing relate to each
other. Marketing activities began long before production and does not end just with the sales. If marketers want their products sold in the market, survive and
grow, then marketers must think about what products they want to make to fit the needs of consumers. Once the product is made then the marketer has to
think about how to communicate the product or advertise these products. Consumers who have purchased a product does not necessarily make the
marketers to stop thinking about the next activity, marketers must be able to ensure consumers are satisfied with the products that we sell and re-purchase.
According to Kotler Keller 2009:45, the aim of marketing is to make selling superflous and to know and understand the customer so well that the
product or services fits him and sells itself. Ideally, marketing should result in
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a customer who is ready to buy. All that should be needed then is to make the product or service available.
B. Service Marketing
Services are often seen as a complex phenomenon. The word of services itself has many meanings, from personal service to service as a product. So far
it has been a lot of marketing expert services that have attempted to define the understanding of services. Some of them are; Lovelock et al 2005:9define
service are economic activities offered by one party to another, most commonly employing time-defined performances to bring about desired result
in recipients themselves or in objects or other assets for which purchasers have responsibility. Service customers expect to obtain value from access to labor,
professional skills, facilities, networks, systems, and equipment, but no not normally take ownership of any of the physical elements involved. While
according to Kotler Keller 2009:386, a service is any act or performance one party can offer to another that is essentially intangible and does not result
in the ownership of anything.
1. Service Marketing Characteristics
Based on Kotler Keller 2009:389-391, there are four characteristics of service:
a. Intangibility Unlike physical products, service cannot be seen, tasted, felt, heard, or
smelled before the purchase, and the patient in the psy chiatrist’s office
cannot know the exact outcome of treatment.
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b. Inseparability Whereas physical goods are manufactured, put into inventory,
distributed through multiple resellers, and consumed later, service are typically produced and consumed simultaneously.
c. Variability Because the quality of service depends on who provides them, when
and where, and to whom, services are highly variable. d. Perishability
Services have little or no tangible components and therefore cannot be stored for a future use. Services are produced and consumed during the
same period of time.
2. Service Marketing Mix
According to Lovelock et al 2005:25-26, there are seven elements of service marketing mix, referred to as 7Ps of service marketing, represent a
set of interrelated decision variables facing managers of service organizations.
a. Product Elements Managers must select the features of both the core product either a
good or service and the bundle of supplementary service elements surrounding it, with reference to the benefits desired by customers and
how well competing produtcs perform. In short, we need to be attentive to all aspects of the service performance that have the
potential to create value for customers.
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b. Place and Time Delivering product elements to customers involves decisions on the
place and time of delivery, as well as the methods and channels employed. Delivery may involve physical or electronic distribution
channels or both, depending on the nature of the service being provided.
c. Promotion and Education No marketing program can succeed without effective communication.
This component plays three vital roles: providing needed information and advice, persuading target customers of the merits of a specific
product, and encouraging them to take action at specific times. In service marketing, much communication id educational in nature,
especially for new customers. Companies may need to teach these customers about the benefits of the service, where and when to obtain
it, and provide instructions on how to participate in service processes. d. Price and Other Cost of Service
This component addresses amangement of the costs incurred by customers in obtaining benefits from the service products. Service
managers not only set the selling price, trade margins, and establish credit terms; they also seek to minimize, where possible, other costs
that customers may bear in purchasing and using a service, like related costs e.g., travel expenses, time, and mental and physical effort.
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e. Physical Environment The appearance of buildings, landscapings, vehicles, interior
furnishing, equipment, staff members, signs, printed materials, and other visible cues all provide tangible evidence of a firm’s service
quality. f. Process
Creating and delivering product elements to customers require the design and implementation of effective processes. A process is the
method and sequence of actions in the service performance. Badly designed processes like slow, bureaucratic, and ineffective service
delivery, commonly annoy customers. g. People
Many services depend on direct interaction between customers and a firm’s employees like getting a haircut or talking to a call center
staff. The nature of these interactions strongly influences the customer’s perceptions of service quality.
C. Retail
In distributing products to consumers manufacturers will be faced with two options, namely the use of intermediaries or distribute their own products
to consumers. Most producers use intermediaries because of their efficiency advantage in making goods widely available and easy to obtain the target
market.
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Retailing is one form of trade intermediaries. Retailing is the final activity of a series of travel products from producer to final consumer. Retailing
activities are not limited only done by retailers, but done by anyone including manufacturers, wholesalers, and distributors, if they do direct sales to the end
consumer Munir, 2011:33. According to Dunne, Lusch, and Griffith stated in Setiawan Kunto, 2013:2, retailing is the final activities and steps needed
to place merchandise made wherever its place, into the hands of the consumer or to provide services to consumers.
According to Berman Evans 2010:4, retailing encompasses the business activities involved in selling goods and service to consumers for their
personal, family, or household use. According to Kotler Keller 2009:482 retailing is all activities covered by the sale of goods or services directly to
end consumers for personal and non-busines use. Based on some retailing definitions above, it can be concluded that the
retail business retailing is a type of trade service business which is the last line in distribution of goods and services from producer to final consumer for
personal use or family purpose. The position of the retail business is becoming increasingly important because it is closest to the end consumer.
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Figure 2.1 A Typical Channel of Distribution
Source : Levy Weitz 2012:7
In general, the main reason for using intermediaries is that they can help improve the efficiency of distribution. According to Levy Weitz 2012:7-8,
the use of intermediaries or retailers have several advantages, that are: 1. Providing Assortments.
Supermarkets typically carry 20,000 to 30,000 different items made by more than 500 companies. Offering an assortments enables their
customers to choose from a wide selection of roducts, brands, sizes, and prices at one location
2. Breaking Bulk. To reduce transportation cost, manufacturers and wholesalers typically
ship cases of frozen dinners or cartons of blouses to retailers. Retailers then offer the products in smaller quantities tailored to individual
consumer s’ and households’ consumption pattern-an activity called
breaking bulk
. Breaking bulk is important to both manufacturers and consumers. It enables manufacturers to efficiently make and ship
Manufacturer Wholesaler
Retailer Consumer
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merchandise in larger quantities and enables consumers to purchase merchandise in smaller, more useful quantities.
3. Holding Inventory A major value-providing activity performed by retailers is holding
inventory so that the product will be available when consumers want them. Thus, consumers can keep a smaller inventory of products at
home because they know local retailers will have the products available when they nedd more. This activity is particularly important
to consumers with limited storage space. 4. Providing Service.
Retailers provide service that make it easier for customers to buy and use products. For example, retailers offer credit so that consumers can
have a product now and pay for it later. They display products so that consumers can see and test them before buying. Some retailers employ
salespeople in stores or maintain Web sites to answer questions and provide additional information about products.
5. Increasing the Value of Products and Services By providing assortments, breaking bulk, holding inventory, and
providing service, retailers increase the value that consumers receive from their products and services.
6. Another advantage which can be expected by the manufacturers of these intermediaries are:
a. Assist in the consumer search b. Assist in promotion activities
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c. Assist in the provision of information d. Assist in packing and wrapping
e. Assist in the sorting Retail business can be specified in a classification based on size,
ownership, operation, and so on. Classification is relatively easy to divide the retail business into two major groups, namely large retailers and small retailers.
Included in this is a major retail specialty stores, department stores, supermarkets, discount house, hypermarkets, general stores and chain stores.
Small retail is divided into retail traders that stay in a place and retail traders that don’t stay in a place. Retail traders that stay in a place further subdivided
into fixed place e.g. kiosks, depot, stall, non permanent place e.g. street vendors, and use the tools thrust wheels, carts, tools bear Sopiah and
Syihabudhin stated in Utomo, 2009:47. Kotler Armstrong2010: 395 divides retailers into store retailing and
retail organization. 1. Store Retailing, the types are:
a. Specialty Stores is a store that carry a narrow product line with deep assortment, such as apparel stores, sporting-goods stores,
furniture store, florist, and bookstores. b. Deparment Stores is a store that carry several product lines-
typically clothing, home furnishing, and household goods-with each line specialist buyers or merchandisers.
c. Supermarkets are stores with a relatively large operation, low cost, low margin, high volume, self-service operation designed to
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serve the customer ’s total needs for grocery and household
products. d. Convenient Stores is a relatively small store and located near
residential areas, have long opening hours seven days a week, and carrying a limited line of high-turnover convenience products at
slightly higher prices. e. Discount Stores are stores that carry standard merchandise sold at
lower prices with lower margins and higer volume. f.
Off-price Retailers are stores that sell merchandise bought at less- than-regular wholesale prices and sold at less than retail, often
leftover goods, overruns, and irregulars obtained at reduced prices from manufacturesrs or other retailers. There are three types of
retailer discounts: 1 Factory Outlets are stores owned and operated by the
manufacturer and usually sell excess goods, no longer manufactured, or are not regular.
2 Independent Off-price Retailers are stores owned and run by entrepreneurs or division of a large retailer.
3 Warehouse Clubs Wholesale Clubs are which store selling a limited selection of branded food products, household items,
clothing, and a variety of other goods with big discount to members which pay annual dues.
g. Superstores are stores which have very large stores traditionally aimed at meeting consumers’ total needs for routinely purchased
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food and nonfood items. Includeds supercenters, combined supermarket and discount stores, and category killers, which carry
a deep assortment in a particular category and have a knowledgeable staff.
2. Retail Organizations, the types are: a. Corporate chain stores, are two or more stores that are commonly
owned and controlled. Corporate chains appear in all types of retailing, but they are strongest in department stores food stores,
drug stores, shoe stores, and women’s clothing stores.
b. Voluntary chain, wholesaler-sponsored group of independent retailers engaged in group buying and merchandising.
c. Retailer cooperative, group of independent retailers who set up a central buying organization and conduct joint promotion efforts.
d. Consumer Cooperative, a company retail owned by its customers. e. Franchise Organization, contractual association between a
franchise the franchiser, ie manufacturer, wholesaler, or service organization withfranchisees
franchisees, which
is an
independent businessman who bought the rights to own and operate one or more units in the franchise system.
f. Merchandising Conglomerate, a free form of company that
combines some lines and retailing shapes in centralized ownership, which also brings together the distribution and
management functions.
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According to Rohmad stated in Utomo, 2009:53, the importance of trade intermediaries or members of distribution channels in the overall marketing
process can be demonstrated by the different roles they play, include: a. Provide storage and transport for manufacturer or company, so
manufacturers can concentrate on production activities. b. Provide installation and repair, thereby reducing the role of producer.
c. Provide funding to the consumer, so that the financial burden is reduced producer.
d. Implement advertising and promotional activities of products, thereby enhancing the overall ability of market.
e. Acting as an agent for the manufacturer to obtain information about consumers, so manufacturers can develop products.
f. Creating form, time, place and ownership so that the products can be
delivered in the right market at the right time, and through the right distribution channels - including provisions regarding the suitability
of packaging. Sopiah and Syihabudhin stated in Utomo, 2009:54 explains, the retail
trade is very important for producers because through retailers producers can gain valuable information about the goods. Manufacturers could interview
retailer of consumer comments about the shape, taste, durability, price, and everything about the product. It can also knows the rival powers.
Manufacturers and retailers can foster mutually beneficial cooperation. From the explanation above, it can be concluded that the main function is
to provide a wide range of retail products and services,that is assorting
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products, breaking bulk, entering into inventory, providing services , increasing the value of products and services. The important principle in retailing is the
right product in the right place at the right time. Based on the principle that a product marketing should be sold at a place that is accessible by consumers and
through promotions. Retailers which focus on the consumer will maintain the culture to always
exceed consumer expectations. So retailers need to recruit the right people, and providing learning for employees continously, thus will increasing consumer
interaction with the employees. The elements of retailing mix is a marketing strategy undertaken by retailers.
D. Retail MarketingMix
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