The Analysis Influence Customer Value, Customer Satisfaction and Trust in Brand Toward Customer Loyality (Case Study of Consumer Coca-Cola in North Jakarta)

THE ANALYSIS OF INFLUENCE CUSTOMER VALUE, CUSTOMER SATISFACTION AND TRUST IN BRAND TOWARD CUSTOMER

LOYALTY

(Case Study of Consumer Coca-Cola in North Jakarta)

Submitted by: Hilmiyah Amaliyati

108081100009

DEPARTMENT OF MANAGEMENT INTERNATIONAL CLASS PROGRAM FACULTY OF ECONOMICS AND BUSINESS

SYARIF HIDAYATULLAH STATE ISLAMIC UNIVERSITY JAKARTA

THE ANALYSIS OF INFLUENCE CUSTOMER VALUE, CUSTOMER SATISFACTION AND TRUST IN BRAND TOWARD CUSTOMER

LOYALTY

(Case Study of Consumer Coca-Cola in North Jakarta)

THESIS

Submitted to Faculty of Economics and Business in Partial Requirements for Acquiring the Bachelor Degree of Economics

Submitted by: Hilmiyah Amaliyati

108081100009

DEPARTMENT OF MANAGEMENT INTERNATIONAL CLASS PROGRAM FACULTY OF ECONOMICS AND BUSINESS

SYARIF HIDAYATULLAH STATE ISLAMIC UNIVERSITY JAKARTA

SHEET STATEMENT

AUTHENTICITY SCIENTIFIC WORKS

Signatures below:

Name : Hilmiyah Amaliyati Student’s number : 108081100009

Faculty : Economics and Business

Department : Management (International Program)

Hereby declare that in the writing of this thesis, I;

1. Not use other people’s ideas without being able to develop and accountable

2. Do not do plagiarism of other people’s work manuscript

3. Do not use other people’s work without mentioning the original source or without the owner’s permission

4. Own work and able to work responsible for this work

If in the future there is a demand from the other side of my work, and have been accountably proved, was indeed found evidence that I have violated the above statement, then I am ready to be sanctioned according to rules applicable in the Faculty of Economics and Business Syarif Hidayatullah State Islamic University Jakarta.

Thus statement truly made with sincerely.

Ciputat,………

CURRICULUM VITAE

I. Personal Identity

1. Name : Hilmiyah Amaliyati 2. Place/Date of Birth : Jakarta, February 19 1991

3. Address : Jl. Tipar Cakung Rt 004/04 No: 450 kel. Sukapura kec. Cilincing Jakarta Utara

4. Phone : 087888017005

5. Email : mhiaa_qyu@yahoo.com II. Formal Education

1. 1994-1996 : Tk Mamba’ulHikmah

2. 1996-2002 : Madrasah Ibtidaiyah Jakarta 3. 2002-2005 : Madrasah Tsanawiyah Jakarta 4. 2005-2008 : SMA N 83 Jakarta

5. 2008-2011 : FEB UIN Syarif Hidayatullah Jakarta

III. Non Formal Education

IV. Conference Participation

1. Multiculturalism in Religion, Democracy and Modernization held by UIN-McGill Canadian Resource Center (December 4, 2008)

2. Insurance Goes to Campus: “Peran Asuransi Dalam Era Globalisasi” (2010)

3. Peace and Democracy: Make Your Voice Hard (2011) 4. Climate Change Economy (February 14, 2012)

V. Co-curricular Activities

1. Company visit to P.T. Sucofindo Jakarta Selatan (2008) 2. Study visit to Islamic Entrepreneur (2009)

3. Participant on GRLI competiton (2010) 4. Study visit to Sincronize (2011)

ABSTRACT

The aim of this research is to analyze the influence of customer value, customer satisfaction and trust in brand toward customer loyalty. The method of determining the sample used is the convenience sampling methods. The sample is taken from customers who have ever consumed Coca-Cola especially in North Jakarta. In collecting data, the research applies questionnaire technique which consists of 39 statements which are distributed to 60 respondents. The methodology applied in this elaboration is the multiple linear regression method. The results of this research show that there is simultaneously significant influence among customer value, customer satisfaction, trust in brand toward customer loyalty.

Keywords: customer value, customer satisfaction, trust in brand, customer loyalty

ABSTRAK

Tujuan dari penelitian ini adalah untuk menganalisa pengaruh nilai pelanggan, kepuasan pelanggan dan kepercayaan merek terhadap kesetiaan pelanggan. Metode yang digunakan untuk pengambilan sampel adalah non probability sampling dengan pendekatan convenience sampling. Sampel diambil dari konsumen yang pernah mengkonsumsi Coca-Cola khususnya di Jakarta Utara. Pengumpulan data dalam penelitian menggunakan kuesioner yang berisi 39 pernyataan yang disebarkan kepada 60 responden. Metode analisis yang digunakan dalam penelitian ini adalah analisis regresi linear berganda. Hasil dari penelitian ini menunjukkan bahwa ada pengaruh yang signifikan secara serentak antara variabel nilai pelanggan, kepuasan pelanggan dan kepercayaan merek terhadap kesetiaan pelanggan.

Kata kunci: nilai pelanggan, kepuasan pelanggan, kepercayaan merek, kesetiaan pelanggan

PREFACE

Praise and gratitude Author prayed to God Almighty, because only by His mercy and grace I can finish researching and writing a thesis entitled" "The Analysis of influence Customer Value, Customer Satisfaction and Brand Equity toward Customer Loyalty” (Case Study on consumer Coca-Cola in North Jakarta)." This thesis is one of the requirements to obtain a passing grade in the faculty of economy and business.

In completing this thesis Author has received much assistance and guidance from various parties. Therefore, with all sincerity and humility Authors would like to thank:

1. Thanks to my beloved parents (H. Subur and Hj. Cholilah) always supporting me and be my best lecturer in my life, for my beloved sisters (itqoh and chacha), nieces and large family for prayer, encouragement and enthusiasm given to the author for taking courses and completing the study.

2. Dr. Yahya Hamja, MM as the primary supervising writer who patiently provided guidance to the author in preparing the proposal.

3. Leis Suzanawaty, SE, M. Si as a second supervisor who provides extraordinary appreciation.

4. Prof Dr Abdul Hamid, MM as Dean FEB UIN Syarif Hidayatullah Jakarta, thank you for the sacrifice of time and knowledge that has been given. 5. Lecturers UIN Syarif Hidayatullah Jakarta, which has contributed his

knowledge to the author and his colleagues for this author. Thank you for the sacrifice of time and knowledge that has been given to the author and his friends other students.

6. All academic staff FEB UIN Syarif Hidayatullah Jakarta, which has worked well to serve students.

7. All students of Management and Accounting international programs and all those who have provided assistance, support and encouragement during the author to finish college and writing a thesis that can not be mentioned one by one.

May Allah SWT reward for all the help and encouragement that has being even. The author is very aware that this writing is still far from perfect that the author is very open to suggestions and constructive criticism. Hopefully this research can be useful for the development of science.

Ciputat, September 2013

LIST OF CONTENT

Page

COVER PAGE IN...i

SHEET STATEMENT AUTHENTICITY SCIENTIFIC WORKS...ii

CURRICULUM VITAE...iii

ABSTRACT...v

ABSTRAK...vi

PREFACE...vii

LIST OF CONTENT...ix

LIST OF TABLE...xiv

LIST OF PICTURE... xvii

APPENDIX LIST...xviii

I. INTRODUCTION Page A. Research Background………...……….…1

B. Problem Formulation………...………..8

C. Purpose and Benefit of Research………...………9

1. Purpose of Research………...………9

2. Benefit of Research………..………..………9

II. LITERATURE REVIEW Page A. Customer Value………...…………...10

1. Definition of Customer Value………...………...10

3. Factors that Formed Customer Value………..……15

B. Customer Satisfaction………...18

1. Definition of Customer Satisfaction……….………...18

2. Factor that Formed Customer Satisfaction………….…………...23

3. Customer Satisfaction Measurement……….………...26

C. Trust in Brand………...28

1. Trust………...………...28

2. Brand………..………...30

3. The Benefit of Brand……….………...33

4. Trust in Brand………...34

D. Customer Loyalty………...39

1. Customer Loyalty………..………...39

2. Method of Customer Loyalty Measurement………...41

E. The Previous Research………...44

F. Conceptual Framework……….………...47

G. Hypotheses………...50

III. RESEARCH METHODOLOGY Page A. The Research Scope………...……….……….54

B. Sampling Method……….…………...………54

C. Data Collection Method……….………….………...……...56

1. Primary Data……….…………...……56

2. Secondary Data……….……….……57

1. First Analysis………..…..………...57

2. Reliability and Validity Test………..………...58

a. Reliability test……….………...58

b. Validity test………..………....…59

3. Classic Assuming Test……….………..60

a. Normality Test………...60

b. Multicolinearity Test………....61

c. Heteroskesdastisity Test………...62

4. Regression Analysis………...62

a. Coefficient Correlation……….………64

b. Coefficient Determination (R²)………....64

5. Theoretical Hypotheses………...65

a. t-test (Partial)……… …………...65

b. F test (Simultaneously)……… ………...66

E. Research Operational Variable………..68

1. Independent Variable………...68

2. Dependent Variable………...68

IV. ANALYSIS Page A. General Description of Research Object………....73

1. History of Coca-Cola………..………....73

2. History of Coca-Cola Amatil Indonesia (CCAI)………73

3. General Description of Coca-Cola……….75

5. Vision and Mission……….………....77

a. Vision……….…………...77

b. Mission……….………...77

6. Market Share of Coca-Cola………....78

7. Global Unit Sales of Coca-Cola………...78

B. Analysis and Discussion………....79

1. General Description of Respondents………....79

a. General Description of Respondents based on Gender………...79

b. Based on Age………...80

c. Based on occupations………...80

d. Based on Income per Month………...81

2. Analysis………....82

a. Validity and Reliability Test………...82

1) Validity Test………...82

2) Reliability Test………...85

b. Descriptive Analysis...86

1) Descriptive Variable Customer Value...86

2) Descriptive Variable Customer Satisfaction...89

3) Descriptive Variable Trust in Brand...94

4) Descriptive Variable Customer Loyalty...100

c. Classical Assumption Test………...103

1) Normality Test………...103

3) Heteroskesdasticity Test………...106

d. Multiple Linear Regression………...107

1) Coefficient Determination (R²)………..…108

e. T-test (Partial)……… ………...109

1) Customer Value Variable………...109

2) Customer Satisfaction Variable………...110

3) Trust in Brand Variable………..………111

f. F-test (Simultaneously)……… ………...……113

V. CONCLUSIONS AND IMPLICATION Page A. Conclusions………...115

B. Implication………...116

REFFERENCES...117

List of Table

3.1 Likert Scale………..57

3.2 The Operational Variable……….69

4.1 General Description of Coca-Cola………...75

4.2 Market Share of Coca-Cola………..78

4.3 General Description Based on Gender……….79

4.4 General Description Based on Age………...….…..80

4.5 General Description Based on Jobs………...80

4.6 General Description Based on Income per Month………...……81

4.7 The Result of Try-Out for Validity………..…………82

4.8 The Result of Try-Out for Reliability………..86

4.9 Coca-Cola Non Alcoholic Soft Drink………..86

4.10 Coca-Cola Do Not Acute Health Effect……….……86

4.11Coca-Cola as Source of Increasing Calories in the Body………...87

4.12 Coca-Cola Has a Good Reputation as Soft Drink Company……….87

4.13 Coca-Cola Has Never Got Involve With Deception Case……….88

4.14 Customer Feel Relaxed When Consume Coca-Cola Product………88

4.15 Customer Feel Secured With Coca-Cola Product………..88

4.16 Customer Feel Excited When Consume Coca-Cola………..89

4.17 Coca-Cola Does Not Contain Microbe and Chemical Contamination……..89

4.18 Coca-Cola Always Mentions Production Code and Date of Expired………90

4.19 Customers Feel Fresh With Coca-Cola Product………90

4.21 Customer like Aroma of Coca-Cola………...91

4.22 Customer Feel Proud When Consumed Coca-Cola………...91

4.23 Customer Believe With Coca-Cola………...92

4.24 Coca-Cola Achievable Price………..92

4.25 Coca-Cola’s Price Associated with the Customer Quality Expectations…...93 4.26 Coca-Cola Has Cheap Price.……….…...………..93

4.27 Coca-Cola Is Easy To Find………....93

4.28 Coca-Cola Has a Good Reputation………94

4.29 Customer Know Positive News about Coca-Cola Soft Drink………...94

4.30 Coca-Cola as Soft Drink Associated with Customer’s Expectation………..95

4.31 Customer Know About Coca-Cola Product………...95

4.32 Coca-Cola Able to Loss Thirsty of Customer………96

4.33 Coca-Cola Associated With Customers Need………96

4.34 The Coca-Cola Company Will Not Deceive Customer……….97

4.35 Coca-Cola Has a Good Reputation as Multinational Company……….97

4.36 Coca-Cola Attentive the Customer………..…………..98

4.37 Customer Believe With Coca-Cola………..…………..98

4.38 Coca-Cola’s Brand Image as Customer Judge Themselves……..………….98

4.39 If Coca-Cola Brand Is Human, Customer Will Love It as Themselves…...99

4.40 Customer like Coca-Cola………...99

4.41 Coca-Cola Is Better And Associated With Customer Desired……….100

4.42 Customer Confidence with Coca-Cola Brand………..100

4.44 Customer Really Like Coca-Cola………101

4.45 Customer Will Intend To Buy Coca-Cola………102

4.46 Customer Will Consume Coca-Cola All the Time………..102

4.47 Customer Will Recommend Coca-Cola to Their Relatives or Friends……103

4.48 Normality Statistics (kolmogrov)…..………...104

4.49 Multicollinearity Statistics………..……….105

4.50 Result of Multiple linear Regression………107

4.51 Coefficient Determination………108

4.52 F test………..…..….113

List of Picture

1.1 Market Share of Coca-Cola Worldwide………...2

2.1 The Determinant of Customerr Perceived Value……….12

2.2 The Discorfimation Model on Customer Satisfaction……….22

2.3 Oliver’s Four Stage Loyalty Model……….42

2.4 Conceptual Framework………49

4.1 Organization Structure of Coca-Cola………...76

4.2 Global Sales of Coca-Cola………...………78

4.3 Normality Test Result (P-P plot residual)………..103

Appendix List

Appendix 1 Research Questionnaire………121 Appendix 2 Research Questionnaire (In Bahasa)………127 Appendix 3 Distribution the Answer of Respondents………..133 Appendix 4 Output Data Test Result………...137

CHAPTER I INTRODUCTION

A. Research Background

Beverages industry is a prominent consumer able item and there is a huge demand and potential in the market, particularly the non alcoholic ready to drink soft drink (Bearden et al, 2004). As one example, Coca-Cola Company is the world‘s leading manufacturer, marketer, and distributor of non alcoholic beverage concentrates and syrups. Coca-Cola Company is now one of the largest corporations in the world, with a global workforce of over 90,000 people and revenues of $31.9 billion in revenues in 2008. (www.thecocacolacompany.com)

According to Vebbyna Kaunang, Marketing Director of Coca-Cola stated that the Company‘s corporate headquarter at Atlanta, with local operations in over 200 countries around the world. It shows that Coca-Cola brand is so powerful that has been embedded in the minds of consumers as well as high customer loyalty to encourage customers to continue to make repeat purchases.

Over the years, the brand equity of the Coca-Cola trade mark, as well as that of other Coca-Cola products, has established Coca-Cola as a prominent figure in the non alcoholic beverages industry and allowed the company to keep both revenues and profits high. On global level Coca-Cola is the most popular brand and market leader controlling 60% of market share

(www.cocacola.com). Based on the MarkPlus Insight research, Coca-Cola occupies number one position as Indonesian Most Favorite Youth Brand for the soft drink category which gained 48.5%.

Figure 1.1

Market Share of Coca-Cola Worldwide

Source: www.thecocacolacompany.com

As the market leader of beverages soft drink, Coca-Cola should be able to protect their market share by keeping the loyal customers. According to Waheed Akhter et al., (2011:1167) customer loyalty is one of the most important issues organizations face today and keeping loyal customers has become more important due to significant increase in competition and concentrated markets. Oliver (1996) in Kotler and Keller (2012:149) defines loyalty as a deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior. Loyal customers are crucial to business survival (Semejin, Van Riel Allard et al., 2005) because attracting new customers is considerably more expensive than retaining old customers (Reichheld & Schefter, 2000). The importance of customer loyalty

has been highlighted by many researchers and academicians. Zairi (2000:331) said ―customers are the purpose of what we do and rather than them depending on us, we very much depend on them. The customer is not the source of a problem, we shouldn‘t perhaps make a wish that customers ‗should go away‘ because our future and our security will be put in jeopardy‖. That is the main reason why organizations today are focusing on maintaining customer loyalty.

Maintaining customer loyalty can be reached by developing customer value (Anderson et al., 2009:6), giving satisfaction to customer (Gandolfo Dominici and Rosa Guzzo, 2010:5) and also build trust in a brand (Chaudhuri, and Holbrook, 2001 quoted by Hasan Afzal et Al., 2010: 44). To determine the extent of customer value, customer satisfaction and trust in brand with customer loyalty researcher will conduct research in multinational beverage industry Coca-Cola, Case Study of Consumer Coca-Cola in North Jakarta.

The researcher will conduct research on consumer Coca-Cola in North Jakarta in order to know the emotional condition after purchase and consume these products. Emotional feelings that are expected to represent Coca-Cola consumer to compare what the consumer experience for consuming Coca-Cola. When the emotions it appears it will arise a state of mind that would cause the reaction to consumer behavior, so it acts as an emotional response to input of satisfaction/dissatisfaction and trust/distrust consumer.

One of factor in creating customer loyalty is to build customer value. Anderson et al., (2009:6) defines value as the economic, technical, service, and social ―benefit-worth in monetary terms” that a customer receives when

purchasing a product or service. By creating superior customer value, the firm creates highly satisfied customers who stay loyal and buy more. This, in turn, means greater long-run returns for the firm. Vargo & Lusch, (2004) quoted by Daniel J. Flint et al., (2010:1) stated that it has become relatively common knowledge that marketing managers must understand what their customers' value in order to survive and grow in competitive markets. According to Flint, Woodruff, & Gardial, (2002) yet merely knowing what customers' currently value is clearly not enough because what they value changes suggesting that suppliers must also have the capability to anticipate what customers will value. Janiszewski (2008:395) stated that creating value and meaning for consumers is at the core of contemporary marketing, allowing for experiences that make products, services, or brands an integral part of consumers‘ lives.

Christopher P. Blocker et al., (2011:216) stated that, ―competitive advantage grows fundamentally out of the value a firm is able to create for customers.‖ Companies create superior customer value by providing ongoing solutions to customers‘ articulated needs as well as their latent and future needs. According to Ulaga and Eggert (2006:120) customer value represents the trade-off between benefits and sacrifices that stem from a provider‘s product and relationship resources which customers believe are facilitating their goals.

Another factor that can be creates customer loyalty by delivering satisfaction to customers. According to Hoq et al., (2010) customer satisfaction is the most important factor that affects customer loyalty. Kotler

and Armstrong (2009:23) stated those satisfied and loyal customers are representing the opportunity to get new customer. Maintaining all existing customer generally will be more profitable to be compared with attract new customer. According to Gandolfo Dominici and Rosa Guzzo (2010:5) customer satisfaction is a business philosophy which tends to the creation of value for customers, anticipating and managing their expectations, and demonstrating ability and responsibility to satisfy their needs. Customer satisfaction is the starting point to build customer loyalty, therefore a long-term relationship. Meanwhile, Kotler and Keller (2012:150) stated that a highly satisfied customer generally stays loyal longer, buys more as the company introduces new and upgraded products, talks favorably to others about the company and its products, pays less attention to competing brands and less sensitive to price, offers product or service ideas to the company, and costs less to serve than new customers because transactions can become routine. High satisfaction or delight creates an emotional bond with the brand or company, not just a rational preference.

According to Anderson, et al., (2009) customer satisfaction occupies a strategic position for the company's existence, because a lot of benefits to be gained: first, many researchers agree that a satisfied customer tends to be loyal. Solomon, in Dwi Suhartanto (2001) stated that satisfied customer will also tend to buy back into the same manufacturer. The desire to buy back as a result of this satisfaction is the desire to repeat the good experience and avoid a bad experience. Second, the effect of customer satisfaction tends to consider

the content providers are able to satisfy the first consideration if you want to buy products or similar services.

According to Bearden et al., (2004) customer satisfaction is central to the marketing concept and is a dominant cause of customer loyalty. Increased loyalty on hence revenues, lowers the costs of individual transactions and decreases price sensitivity. Satisfaction also has benefits within the firm, cost associated with handling returns and warranty claims are reduced, as are those associated with managing complaints. Meanwhile, Kotler and Keller (2009:164), explain that satisfaction is a person‘s feelings of pleasure or disappointment that result from comparing a products perceived performance (or outcome) to their expectations. If the performance falls short of expectations, the customer is dissatisfied. If the performance matches the expectations, the customer is satisfied. If the performance exceeds expectations, the customer is highly satisfied or delighted.

Vebbyna Kaunang, Marketing Director Coca-Cola said that Coca-Cola are trying to fulfill desire of its customer by offering product range matching with trend various circle, like offering many variety products, price range and tidiness. Besides, Coca-Cola offers available of product in gathering place and have activity. So, the reason why Coca-Cola is being truly global company because of their product meets the varied taste preferences of consumers everywhere.

Customer loyalty also can be created by building customer trust in a brand. Trust has been recognized as important factors that influence customer

loyalty. Definition of consumer trust by Rangkuti (2002:13) is all knowledge of consumers and all conclusions made consumers about the objects, attributes and benefits. Chaudhuri, and Holbrook, (2001) quoted by Hasan Afzal et al., (2010:44) stated that trust is a belief which is focused on specific appropriate boundaries and limitations. To create loyalty in today‘s marketplace, marketers have to hold what is becoming subsequent nature to business marketers and focus on structuring and sustaining trust in the customer-brand relationship. According to Worchel (1997) quoted by Hasan Afzal et al., (2010:44) trust can also be considered as goodwill and willingness that enables the consumer to take risk. Goodwill is developed on the base of past experiences. Trust is an expectation, which may cause a positive outcome, despite the possibility that it may cause a negative outcome.

According to Vebbyna Kaunang, Marketing Director of Coca-Cola, trust in brand have the important rule in protecting customers based on the company‘s goal to keeping the loyal customers. According to Chaudhuri and Holbrook (2001) quoted by Hasan Afzal et al. (2010:44) trust has to be considered as the corner stone and as one of the most desirable qualities in the relationship both between a company and its customers and in the relationship between a brand and its consumers.

Based on previous research background, this research intends to analyze the influence of customer value, customer satisfaction and trust in brand toward customer loyalty‖ (Case Study on consumer Coca-Cola in North Jakarta).

B. Problem Formulation

The amount of sales achieved by Coca-Cola‘s company can occur due to wider distribution channels, the new consumers, as well as repeat purchase by usual consumers and the existence of customers who loyal on Coca-Cola brand will be able to increase sales and be able to maintain a good position in the market (www.thecocacolacompany.com). Loyalty is an old-fashioned word that has traditionally been used to describe fidelity and enthusiastic devotion to a country, cause or individual. More recently, it has been used in a business context to describe a customer‘s willingness to continue patronizing a firm over the long term, purchasing and using its goods and services on a repeated and preferably exclusive basis, and recommending firm‘s products to friends and associates. The occurrence of repeat purchases is due to customer satisfaction and trust in a brand that inherent in the minds of consumers so that it will create customer loyalty (Lovelock and Wirtz, 2004:352). To analyze the influence of customer value, customer satisfaction and trust in brand toward customer loyalty, the researcher makes the following questions.

1. Does the customer value significantly influence customer loyalty? 2. Does the customer satisfaction significantly influence customer loyalty? 3. Does the trust in brand significantly influence customer loyalty?

4. Do the customer value, customer satisfaction and trust in brand significantly influence customer loyalty?

C. Purpose and Benefit of Research 1. Purpose of Research

This research aims to:

a. Analyze the influence of customer value to customer loyalty b. Analyze the influence of customer satisfaction to customer loyalty c. Analyze the influence of trust in brand to customer loyalty

d. Analyze the influence among customer value, customer satisfaction and trust in brand to customer loyalty

2. Benefit of Research

This research is expected to provide benefits for: a. Coca-Cola‘s Company

The results of this study are expected to be used as a reference and information materials for Coca-Cola about how to maintain customer loyalty to their products with due regard to value and customer satisfaction. It‘s also useful for company to keep trust in a brand that inherent in the mind of customers.

b. The researcher

Researcher can learn how customer value, customer satisfaction and trust in brand influence customer loyalty.

c. Research is also expected to be useful as a source of information for the needy as well as useful for the intensive search-related research in the future.

CHAPTER II LITERATURE REVIEW

A. CUSTOMER VALUE

1. Definition of Customer Value

In the marketing, elementary element which make successful company in maintaining its customer is innovation assess customer superior. Zeithaml et al., (2006:187) stated that from a customer‘s perspective, customer value is what they ―get‖ (benefits) relative to what they have to ―give up‖ (costs or sacrifices). According to Gale (1994) in Alida (2007) customer value is the consumer perception to value to the quality of which offered on the market that higher relative from competitor will influence the loyalty customer story level, value perception excelsior felt by customer, hence is ever greater of possibility the happening of transaction or relation. The term customer value has many meanings (Woodall, 2003), but two dominate value for the customer (customer perceived value or customer received value) and value for the firm (value of the customer, now more commonly referred to as customer lifetime value). Woodruff (1997) in Minna Pihlstrom (2008:32) defines customer value as a customer perceived preference for and evaluation of those product attributes, attribute performance, and consequences arising from use that facilitate (or block) achieving the customer‘s goals and purposes in use situations. Holbrook (2005:46) defines customer value as an

―interactive, relativistic preference and experience‖, which is also a bit difficult to understand and apply, but is seemingly intended to capture some of the key characteristics of customer value. These include, it is perceived uniquely by individual customers; it is conditional or contextual (depending on the individual, situation, or product); it is relative (in comparison to known or imagined alternatives); and it is dynamic (changing within individuals over time).

Kotler (2000:37) stated that marketing, as a purpose, is to deliver more value to satisfy customers as well as to build a long-term and mutually profitability relationship with a customer. Lemon, Rust and Zeithaml (2001:22) define value is the keystone of the customer‘s relationship with the firm. According to Kotler and Keller (2009:161) customer value is the difference between total customer benefit and total customer cost. Total customer benefit is the perceived monetary value of the bundle of economic, functional and psychological benefits customers expect from a given market offering because of the products, services, personnel and image involved. Total customer cost is the perceived bundle of costs customers expect to incur in evaluating, obtaining, using and disposing of the given market offering, including monetary, time, energy and psychological cost. From the definition, can be concluded that customer value represent everything which is wanted by consumer in service or product by maximizing the quality of which is accepted by consumer from cost which is released.

Figure 2.1

The Determinant of Customer-Perceived Value

Source: Kotler and Keller (2009)

According to Lemon, Rust and Zeithaml (2001:22) value is delivered from three key factors: quality, price and convenience. Quality is viewed as goods and services quality. Price is the monetary sacrifice. Convenience (non-monetary sacrifice) relates to all the benefits customers received, such as time saved and effort to do business with the firm. Keegan (2002) stated that the task of marketing is to create customer value that is greater

Customer-Perceived Value

Total customer benefit

Image benefit Personnel benefit

Service benefit Product benefit

Psychological cost Energy cost Timing cost Monetary cost Total customer cost

increased by expanding or improving product and/or service benefits, by reducing the price, or by combination of these elements. Companies with cost advantage can use price as a competitive weapon. Knowledge of the customer combined with innovation and creativity can lead to a total offering that offers superior customer value. If the benefits and value are strong enough by customer, a company does not need to be the low-price competitor to win customer.

2. Customer Value Measurement

According to Kotler and Keller (2009:161) forming of customer loyalty can be done by creating value that accepted by customer represent the difference between the prospective customer‘s evaluation of all the benefit and also the costs of an offering and the perceived alternatives. Value of the customer offering can be increased by some combination of raising economic, functional or emotional benefits and/or reducing one or more of the various types of costs.

Can be seen from the equation below: Value (V) = Benefit (B)

Cost (C) Where:

V = Value

B = Benefits (product, service, personnel, and image company) C = Cost (monetary, time, energy and psychological)

According to Rostamy (2009) the following components create total customer benefit, including product benefit, service benefit, personnel benefit, and image benefit, which are:

a. Product benefit

Product benefit represents the benefit accepted by consumer at the time of consuming product or service. Product benefit, including product variety, easy repaired and cost components.

b. Service benefit

Service is accepted benefit by consumer in the form of moment service buy and consumes product and service. Service benefit, including the appearance of the stores, service waiting time, services processes and service information.

c. Personnel benefit

Personnel benefit is benefit given by company‘s personnel to customer after happened purchasing decision of goods and services. According to Tschohl (2006) personal benefits are the individuals' beliefs about what are desirable to themselves. They are self-centered; that is, personal values are closely linked to needs. Personal benefits are enduring beliefs which guide various actions and judgments across specific situations. Hence, personal benefits are more abstract and may be generalizable easier than values of actions. Personnel benefit including personnel skills and knowledge, responsiveness, communication and collaboration and friendliness components.

d. Image benefit

Including credibility, technology excellence and ability to satisfy future needs.

According to Kotler and Keller (2009:162), total customer cost is the perceived bundle of costs customers expect to incur in evaluating, obtaining, using and disposing of the given market offering, including monetary cost, time cost, energy cost and psychological cost.

a. Monetary cost is the cost of which is released by customer in the form of money at the time of getting and consuming product or service. b. Time cost is the cost of which is released by customer in the form of

time at the time of getting and consuming product or service.

c. Energy cost is the cost of which is released by customer in the form of energy at the time of getting and consuming product or service.

d. Psychological cost (psychic and mind) buyer is the cost of which is released by customer in the form of mind to get product and at the time of consuming product or service.

3. Factors That Formed Customer Value

In identifying sacrifice and benefit/expense, consumer do not only considering functional things or performance but also social and any factors emotionally ( Sheth et al., 1999; and Soutar and Sweeney, 2001) quoted by J. Brock Smith and Mark Colgate (2007:8). Therefore, the investigation of customer value consists of functional value, social value and emotional value.

a. Functional Value

Functional/instrumental value is concerned with the extent to which a product (good or service) has desired characteristics, is useful, or performs a desired function. As suggested by Woodruff (1997) in J. Brock Smith and Mark Colgate (2007:10), three key facets of functional/ instrumental value, which are:

1) Correct, accurate, or appropriate features, functions, attributes, or characteristics (such as aesthetics, quality, customization, or creativity).

2) Appropriate performances (such as reliability, performance quality, or service–support outcomes), and

3) Appropriate outcomes or consequences (such as strategic value, effectiveness, operational benefits, and environmental benefits). Sheth, Newman, and Gross (1999) quoted by J. Brock Smith and Mark Colgate (2007:8) stated that functional value represents the perceived utility of an alternative resulting from its inherent and attribute or characteristic-based ability to perform its functional, utilitarian, or physical purposes.

b. Social Value

Sheth, Newman, and Gross (1999) quoted by J. Brock Smith and Mark Colgate (2007:8) stated that social value represents the perceived utility of an alternative resulting from its image and symbolism in association or disassociation with demographic, socioeconomic, and

social image can be an important factor that affects consumers‘ decision making. Social value is the usefulness felt to be earned by consumption from an alternative as result of its association with one or more specific social group.

c. Emotional Value

Emotional value is expected to incorporate consumers‘ affective responses to service stimuli in a cognitive-oriented, means-end model. In a retailing context, Sweeney and Souter (2001) quoted by Orose and Boonchai (2011:69) found that emotional value is the strongest predictor of consumers‘ purchase intention. Chitturi, Raghunathan and Mahajan, (2007) stated that however, it was revealed that customers place higher priority on utilitarian benefits than to hedonic benefits. According to Eroglu, Machleut and Barr (2005) that in general, research also supports the positive influence of the perceived emotional value of satisfaction. Sheth, Newman, and Gross (1999) quoted by J. Brock Smith and Mark Colgate (2007:8) stated that emotional value represents the perceived utility acquired by an alternative as a result of its ability to arouse or perpetuate feelings or affective states, such as comfort, security, excitement, romance.

Roger Palmer et al., (2007:11) stated that the value of the product to the customer can be considered in two parts:

a. Economic value

Otherwise known as ‗value in use‘, this refers not just to the initial purchase price but also to wider areas such as switching costs, training and installation costs, ongoing cost of maintenance, depreciation and end-of-life disposal costs. By relating economic value in use to the requirements of the customer, a higher price can often be justified. b. Perceived value

Qualitative aspects of the product such as the brand, previous experience and reputation can all add to perceived value. Whilst product may be functionally similar, the customer may perceive one as superior to the other.

B. CUSTOMER SATISFACTION

1. Definition of Customer Satisfaction

According to Chitty et al., (2007) quoted by Mojtaba Kaveh (2011:4) customer satisfaction is a complete evaluation of the accumulated purchase and consumption experience, which reflects a comparison between the sacrifice experienced and the perceived rewards. According to Gandolfo Dominici and Rosa Guzzo (2010:3) customer satisfaction is the outcome of customer‘s perception of the value received in a transaction or relationship, where value equals perceived service quality, compared to the value expected from transactions or relationships with competing vendors. Roger Palmer et al., (2007:11) stated that customer satisfaction can be

considered as a measure of current performance, and the propensity of customers to recommend a product or service to other potential customers can be one guide to the future value of customers. Barsky and Nash (2003) stated that in order to achieve customer satisfaction, it is important to recognize and to anticipate customers' needs and to be able to satisfy them. Enterprises which are able to rapidly understand and satisfy customers' needs, make greater profits than those which fail to understand and satisfy them.

According to Gandolfo Dominici et al. (2010:5) since the cost of attracting new customers is higher than the cost of retaining the existing ones, in order to be successful, managers must concentrate on retaining existing customers implementing effective policies of customer satisfaction and loyalty. Bitner and Zeithaml (2006:110) stated that satisfaction is the customers‘ evaluation of a product or service in terms of whether that product or service has met their needs and expectations. Matzler et al., (2006:217) stated that if price will be high, the satisfaction with price will be high. If there are no hidden costs and if prices do not change unexpectedly customers will perceive high price reliability.

According to Boselie, Hesselink, and Wiele (2002) satisfaction is a positive, affective state resulting from the appraisal of all aspects of a party‘s working relationship with another. According to Hart and Stapletun (2005) consumer satisfaction is a person or organization who actually makes the purchase decision even though it may not directly

consume or user of the product or service. They also stated that, satisfaction is the union of one's feelings resulting from the comparison of the perceived usability of the product with the expectation of the product. While Gasfersz (2005) defines a consumer is any person who requires the company to meet a certain quality standards and will therefore affect the performance of the company.

Oliver (2005) in Eggert & Ulaga (2006) stated that customer satisfaction, which refers to ―the summary psychological state resulting when the emotion surrounding disconfirmed expectations is coupled with the consumer‘s prior feelings about the consumption experience‖, is often considered as an important determinant of repurchase intention and customer loyalty. According to Zeithaml and Bitner (2006:111) customer satisfaction can be defined as a consumer‘s fulfillment response that is, it is a judgment that ―a product or service feature, or product or service itself, provides a pleasurable level of consumption-related fulfillment‖. Meanwhile, Hansemark and Albinson (2004) quoted by Harkiranpal Singh (2006:1) state that ―satisfaction is an overall customer attitude towards a company, or an emotional reaction to the difference between what customers anticipate and what they receive, regarding the fulfillment of some need, goal or desire‖. On the other hand, Deng, Lu, Wei and Zhang (2009) stated that a high level of customer satisfaction may have a positive effect on customer loyalty.

Kotler and Keller, (2012:150) define customer satisfaction as a function of the closeness between expectations and the product‘s perceived performance (or outcome). If the performances fall short of expectations, the customer is disappointed. If the performances meet the expectations, the customer is satisfied. If the performance exceeds expectations, the customer is highly satisfied or delighted. These feelings make a difference in whether the customer buys the product again and talks favorably or unfavorably about it to others. Parasuraman et al., (1988) quoted by Mojtaba Kaveh, (2011:4) stated that satisfaction research is mainly influenced by the disconfirmation paradigm. This paradigm states that the customer‘s feeling of satisfaction is a result of a comparison process between perceived performance and one or more comparison standards, such as expectations.

Meanwhile, Lovelock and Wirtz (2004:44) define satisfaction as an attitude like judgment following a purchase act or a series of consumer product interactions. The confirmation/disconfirmation of preconsumption expectations is the essential determinant of satisfaction. This means that consumer have certain service standards in mind (their expectations) prior to consumption, observe service performance and compare it to their standards, and then form satisfaction judgment based on this comparison. The resulting judgment is labeled negative disconfirmation if the service is worse than expected, positive disconfirmation if better than expected, and simple confirmation if as expected.

Based on Casalo´ et al. (2008) quoted by Norazah Mohd Suki, (2010:8) satisfaction refers to an affective consumer condition that result from a global evaluation of all the aspects that make up the consumer relationship. Thus customer satisfaction remains an extremely important component in customer loyalty. A company will find it difficult to earn customer loyalty without first earning high levels of customer satisfaction. According to Ulaga and Eggert (2006) the customer is satisfied when he/she feels that the product‘s performance is equal to what was expected (confirming). If the product‘s performance exceeds expectations, the customer is very satisfied (positively disconfirming), if it remains below expectations, the customer will be dissatisfied (negatively disconfirming).

Figure 2.2

The Disconfirmation Model of Consumer Satisfaction

Source : Lovelock and Wirtz (2004)

Expected Performance Perceived Performance

Comparison

P - E

Confirmation

Neutral P > E

Positive Disconfirmation

Satisfaction

P < E

Negative Disconfirmation

2. Factors that Formed Customer Satisfaction

According to Parasuraman and Grewal, (2000:169) customer satisfaction is one measure to see the competitiveness of an enterprise. Based on some scientific research about the customer satisfaction, there are five primary factor determining the level customer satisfaction which consists of:

a. Product Quality

If a product fulfills the customer‘s expectations, the customer will be pleased and consider that the product is of acceptable or even high quality. If his or her expectations are not fulfilled, the customer will consider that the product is of low quality. This means that the quality of a product may be defined as ―its ability to fulfill the customer‘s needs and expectations‖ (Unido, 2006). The main parts of overall quality are safety, durability and freshness. A safe food should cause no unwanted physical side effects. Freshness is an individual opinion; it is how the consumer feels about the product based upon their senses. Freshness is more of a nebulous concept. Ultimately the quality of a product is going to be determined by the consumer buying it. Therefore any quality measurement should correlate to sensory changes in the product. Two of the main senses that customers use are sight and smell, it usually comes down to how the consumer feels about the product‘s general appearance and/or odor. And durability

related to the measure of the product‘s expected operating life (Dodd, 2006:5).

b. Emotional factor

Emotional factor related to the product or services arouse feelings or affect.

c. Price

The price of a product/service can be analyzed associated with customers‘ quality expectations and/or their past experiences. If the price is judged too expensive, consumers might not purchase. A low price policy causes poor positioning and neglected opportunities. However, price appears to be a standard for quality in some circumstance. ‖a higher price level equals a better quality in the minds of customers, especially when the service is highly intangible‖ (Gonroos, 2000:80).

d. Cost and ease of to gain the product or service

Customers can find products or services easily with cheap cost that can fulfill their needs and wants.

Thomas Foster (2010) explained that there are some factors which are often used in evaluating satisfaction to product manufacturing, consist of: a. Performance refers to the efficiency with which a product achieves its

intended purpose.

b. Features, refers to attributes that supplement the product‘s basic performance

c. Reliability, which is the reliability and consistency of performance of service facilities, goods and staff. This includes punctual service delivery and an ability to keep to agreements made with the customer. d. Conformance to specifications refers to the degree to which a

product‘s design & operating characteristics meet prior established standards. Conformance to specifications focuses attention on the internal & operating view of quality.

e. Durability, related to the measure of the product‘s expected operating life.

f. Serviceability refers to speed, courtesy & competence of repair. Consumers are concerned, not only about a product‘s break-down, but also about the elapsed time before service is restored, the timelines with which service appointments are kept, the nature of their dealings with service personnel & with the frequency with which service calls or repairs fail to correct outstanding problems & specific customer issues.

g. Esthetics, extent to which the components of the service package are agreeable or pleasing to the customer, including both the appearance and the ambience of the service environment, the appearance and presentation of service facilities, goods and staff.

h. Perceived quality refers to what customers think they are buying, rather than what they are actually buying. Perceived quality extends beyond what is put into the package.

3. Customer Satisfaction Measurement

Kotler and Armstrong (2003:148) discuss several methods to measure customers‘ satisfaction, which are:

a. Complaint and Suggestion system

Each customer-oriented service organization should provide the widest opportunity to its customers to submit suggestions, criticisms, opinions, and their complaints. Information obtained through this method can provide new ideas and input are valuable to the company making it possible to react quickly and respond in overcome the problems that arise.

b. Customer Satisfaction Survey

Like in this research, company does a survey to measure customer satisfaction using such as questionnaire or by phone calls to a random sample of their customers. Through the survey, companies will get responses and feedback directly from customers and give a positive sign that companies pay attention to them. Customer satisfaction survey is divided into four categories, which are:

1) Directly reported satisfaction

The respondent are being asked directly with question in order to know if they are very satisfied, satisfied, enough, dissatisfied, or very dissatisfied. This survey is used to collect the customer opinion and needs which can give the result called the customer

satisfaction index. This customer satisfaction index‘s the standard the company needs to maintain.

2) Derived dissatisfaction

The question that being asked included two aspects, how high is the customer expactation in the certain attribute, and how high is the performance that customer‘s feel of this attribute.

3) Problem analysis

Respondent are being asked to describe two things; the problem which related with the company offer and suggestion for improvement.

4) Importance performance analysis

The respondents are asked to rate the services according to the customer importance and company performance in each attributes. c. Ghost Shopping

This method use a person to pose as potential buyer to report their findings on strong and weakness points when experiencing buying the company‘s and competitor‘s products. The Ghost Shoppers can also observe how the company and its competitors in serving customer demands, answering customer questions, and solve any problems or customer complaints.

d. Lost customer analysis

The company contact customers who have stopped buying or switched to another supplier tolearn why this condition happened and in order to understand and take policies to further improve or refine. e. Some caution in measuring customer satisfaction

The company must make a well-structured questionnaire; otherwise the customer would face a huge questionnaire. The company must also be able to recognize that two customers can report being highly satisfied for two reasons. One person maybe easily satisfied most of the time, and the other one might be hard to please but was pleased on this occasion.

C. TRUST IN BRAND 1. Trust

Anderson and Weitz (2006) define trust as one party‘s belief that its needs will be fulfilled in the future by actions taken by the other party. According to Moorman et al. (2007), trust is a willingness to rely on an exchange partner in whom it has confidence. Finally, Morgan and Hunt (2008) conceptualize trust as existing when one party has confidence in an exchange partner‘s reliability and integrity. In an industrial buying context, Doney and Cannon (2007) define trust as the perceived credibility and benevolence of a target of trust. The first dimension of trust focuses on the objective credibility of an exchange partner, an expectancy that the

partner‘s word or written statement can be relied on (Lindskold, 2004). The second dimension of trust, benevolence, represents the extent to which one partner is genuinely interested in the other partner‘s welfare and motivated to seek joint gains. This definition of trust is relevant in an industrial buying context.

Mickel, (1998) quoted by Ali Sorayaei and Marjan Hasanzadeh (2012:80) stated that in the field of brand issues, trust is a kind of safety feel by the consumer in relation with the brand answering this question: ―Does the brand fulfill expectations of the consumer?‖ This feeling can be expressed based on two general dimensions, namely reliability to the brand and main intents of it toward individuals. The first dimension is associated with this assumption whether the brand has adequate capability and ability to cope with the needs of consumers. For instance, through offering proposals of new products this would be felt necessary by consumers in the future, or through suggesting different quality levels for the products. The second dimension associated with intents of the brand is more derived from emotional and sensational causes.

Moorman et al., (2007) stated that trust is especially important in relationships characterized by high levels of vulnerability and uncertainty. Without vulnerability, trust is unnecessary because the results do not have any consequences for the trust. Without uncertainty, trust is unnecessary because the trust can control or has some knowledge about his partner‘s actions.

Delgado-Ballester and Munuera-Aleman, (2005) stated that building a strong brand with loyal customers is of strategic importance for marketing managers because it provides substantial competitive and economic benefits to a firm, such as less vulnerability to competitive marketing actions, reduced marketing costs, higher rates of return on investment through increases in market shares, better cooperation with intermediaries, favorable word of mouth and greater extension opportunities. Finally, Chaudhuri and Holbrook, (2001) quoted by Hasan Afzal et al. (2010:44) stated that trust has to be considered as the corner stone and as one of the most desirable qualities in the relationship both between a company and its customers and in the relationship between a brand and its consumers. The focus on brand trust is based on findings that there is a strong positive relationship between trust and loyalty.

2. Brand

Brand is one of the important things for a company and helps buyers in many ways. With the brand allows consumers to identify or decide to make a purchase of a product. When consumers are familiar with the brand and embedded in the minds of consumers, it shows that the satisfaction they have been met and will encourage consumers to make repeat purchases. Kotler (2000:444) also stipulates that a brand is essentially a seller‘s promise to consistently deliver a specific set of features, benefits, and services to buyers. Further, a brand represents promises about what a product/service or a company can deliver.

Kotler and Armstrong (2007:241) defines brand as a name, term, sign, symbol, or design, or a combination of them, which is intended to identifies the maker or seller of a product or services and to differentiate them from those competitors. Consumers view a brand as an important part of a product, and branding can add value to a product. Buyers who always buy the same brand know that they will get the same features, benefits, and quality each time they buy. The brand name becomes the basis on which a whole story can be built about a product‘s special qualities.

According to Anber Abraheem Shlash Mohammad (2012:112) brands as intangible assets are one of the most valuable assets that companies have, and its value for the final customer. Its choice by the customer determined by its functions and its importance that plays a critical role in the formation of customer preferences. Thus, brand has become a source of purchasing decision-making. In fact, the customer considers the brand choice prior to the purchase decision. So as brand affects the behavior of the customer in relation to the repeated purchase process and affects his or her adherence to the brand that stems from the conviction of its strength and influence. In addition, brand creates a relationship with the customer, whether a positive relationship by being loyal to the brand or negative relationship by changing the brand.

According to Keller (2003) famous brand can spread the benefits of the product and lead to delivery of information related to these benefits

more than uncommon brands. In addition, brand allows the development of the product identity. Kohli and Thakor (2000) stated that in sum, brand is important for a company because it helps the organization attract customers to buy the product, influences the customer behavior and encourages him or her to repeat the purchase process. As well as, turns customers' eyes to recognize products in term of its associated brands. According to Anber Abraheem Shlash Mohammad (2012:113) brand is one of the important elements in the strategy of products' manufacturers. It represents a pillar of the strong attendance in the market and in the minds of customers. It enhances the capital value of the organization as it the mean that allows naming many of organization products within a diverse range of brands, which leads customer to give a great importance to the brand when he or she doing choice. That is, a brand responses to some benefits that translated by the functions performed for the buyer or customer.

According to Christodoulides & Chernatony (2010), a successful brand is an identifiable product, service, person or place, augmented in such a way that the buyer or user perceives relevant, unique added values which match their needs most closely. Morgan (2000) states that brand become successful only if its owners have an accurate perception of its constitutional assets. Among the most important assets of a brand, one of them is the value than customers grant to that brand. Then it is the investment for brand management, in such a way that it both preserves the

brand‘s value and do not miss the customer loyalty through the preservation of the brand‘s characteristic.

3. The Benefit of Brand

Brand can be beneficial to customers, brokers, manufacturers, and public (Nisha Jain, 2010), as follows:

a. For the buyer, the brand benefits are:

1) Help buyer identify the product that they like/dislike 2) Identify marketer

3) Helps reduce the time needed for purchase

4) Helps buyer evaluate quality of products especially if unable to judge products characteristics

5) Helps reduce buyers‘ perceived risk of purchase

6) Buyer may derive a psychological reward from owning the brand b. For sellers, the brand benefits are:

1) Differentiate product offering from competitors 2) Helps segment market by creating tailored images,

3) Brand identifies the companies‘ products making repeat purchases easier for customers.

4) Reduce price comparisons

5) Brand helps firm introduce a new product that carries the name of one or more of its existing products, half as much as using a new brand, lower cost designs, advertising and promotional costs. 6) Easier cooperation with intermediaries with well known brands

7) Facilitates promotional efforts.

8) Helps foster brand loyalty helping to stabilize market share. 9) Firms may be able to charge a premium for the brand.

According to the Temporal and Lee (2002:44), the reason the brand is important for consumers is due to:

a. Brand gives the option

Human choice and loved the brand gives them the freedom to choose. Along with her increasingly fragmented market, the company sees the importance of giving different options to different consumer segments. Brands can provide options, allowing consumers to distinguish the various companies offer.

b. Brand facilitate decision

Brand made the decision to buy easier. Consumers may not know much about a product he's attracted, but the brand can make it easier to choose. Well-known brands attract a lot more attention than those who do not, usually because the brand is known and trustworthy.

4. Trust in a Brand

Trust in a brand is defined as the customer wishes to rely on a brand with the risks faced because of expectations for the brand that will lead to positive results (Lau and Lee, 1999, quoted by Aditya, 2011:40). Brand trust is the willingness of the average consumer to rely on the ability of the brand to perform its stated function and propose a strong impact of brand

trust on attitudinal and repurchases loyalty. Brand trust leads to higher levels of loyalty as trust creates exchange relationships that are highly valued (Chaudhuri and Holbrook, 2001:91).

Building a strong brand with loyal customers is of strategic importance for marketing managers because it provides substantial competitive and economic benefits to a firm, such as less vulnerability to competitive marketing actions, reduced marketing costs, higher rates of return on investment through increases in market shares, better cooperation with intermediaries, favorable word of mouth and greater extension opportunities (Delgado-Ballester and Munuera-Aleman, 2005).

Trust in brand from the consumer point of view is the confidence that a brand is a psychological variable reflecting the number of initial assumptions that involve the accumulation of credibility, integrity and excellence that is attached to a particular brand. Therefore, companies should be able to establish three important points to retain the trust of customers in order to create commitment of customers now and in the future (Gurvez & Korchin, 2003).

There are three factors that influence trust in a brand. Third of this factor relate to three entities which come within in relation between consumer and brand. As for the third factors are brand characteristics, company characteristics, and consumer-brand characteristics. Then, Lau and Lee positioned that trust in brand will generate to brand loyalty. The

third relationship factors of trust in brand can be described as follows (Lau and Lee (1999) quoted by Hasan Afzal et al., (2010:45):

1) The brand‘s characteristics play a vital role in determining whether a consumer decides to trust in. The brand‘s properties such as brand reputation, brand predictability and brand competence have an important function in shaping consumer trust. Brand predictability, brand reputation and brand competence assist for developing consumer trust in brand. Before purchasing a brand, consumers judge brand through these characteristics. High demand of brand indicates high reputation in the mind of consumers. Reputation means trustworthiness, integrity, and honesty. It can be seen from past experience of third party‘s trustworthiness, integrity, and honesty. Brand reputation can be judged from consumer opinion, comments, estimation and beliefs, if people are suggesting the usage of a brand then it is considered as a sign of good reputation. A brand‘s reputation refers to the attitude of consumers that the brand is good and reliable. Brand reputation can be developed through advertising and public relations, and it enhances its quality. Brand predictability is ability of one buyer which is perceived by the other buyer. It is a brand which allows customer to perceive brand characteristics, with trust that brand will satisfy their needs. Predictability is also dependent on product attributes and brand worth. When a consumer predicts about a brand while being used by other consumer, then this shows that he predicts

about that product. Knowledge-based trust, stranded in behavioral certainty survives while one party has sufficient knowledge concerning another to recognize and forecast its likely performance that it will perform trustworthily. Kelly and Stahelski (1970) quoted by Hasan Afzal (2010:46) argued that predictability enhances trust, even if the other party is predictability untrustworthy, because the ways in which trust is violated can be predicted. A brand‘s predictability enhances confidence because the consumer knows that nothing unexpected may happen when it is used. As such, brand predictability enhances trust in a brand because predictability builds positive expectations. Brand competence is a competent brand is one that has the ability to crack a customer‘s problem and to meet the need competent brand includes crucial elements for solving consumers‘ problem. Utilization of brand is only one way to find out brand competency, good brands are that which are able to satisfy the needs of a customer and its attributes must be compatible with customer‘s needs. Brand ability is the properties of brand which are perceived by customer as value.

2) The characteristics of the company behind a brand also influence the degree to which consumers trust in brand. A consumer‘s knowledge about the company behind a brand is likely to affect their assessment of the brand. The characteristics of the company proposed to affect a consumer‘s trust in a brand are the customer‘s trust in the company that will not deceive customer, the company‘s reputation in the

customer‘s mind as big company, the perceived motives of the company can influences confidence. Hence, when a consumer perceives paid attention by the company behind a brand to be benevolent and acting in the consumer‘s best interest.

3) Therefore, consumer-brand characteristics can affect a consumer‘s trust in a brand. These characteristics include similarity between the consumer‘s self –concept and the brand‘s image, liking for the brand, and brand personality. Self-concept denotes the totality of an individual‘s thoughts and feelings with reference to himself or her as an object and brand‘s image can be described as the set of human characteristics associated with a given brand. Liking for the brand denotes a certain fondness one party has towards another party because the party finds the other party pleasant and agreeable. According to Fournier, S, (1998) quoted by Ali Sorayaei and Marjan Hasanzadeh, (2012:80) brand personality, defined as all personality traits used to characterize a person and associated with a brand, is a concept within the field of relational marketing. It helps better understand the development and maintaining of relations between brands and consumers. In addition, it explains how those relationships impact consumers‘ behavior.

D. CUSTOMER LOYALTY 1. Customer Loyalty

In increasingly competitive markets customer loyalty is seen as the key factor in winning market share and developing sustainable growth for over longer period of time (Afsar et al., 2010). Customer loyalty is the feelings or attitudes that incline a customer either to return to a company, shop or outlet to purchase there again, or else to re-purchase a particular product, service or brand. It affects the success and profitability of companies. Companies can achieve competitive advantage through customer loyalty and it is the way to gain the best kind of customers and thereby repeat customers (Kim et al., 2004:145)

According to Reichheld (1996) and Lee & Cunningham (2001), perception of a customer affects his judgment and in turns his loyalty towards the product or services. Eakuru and Mat (2008) quoted by Mei-Lien Li et al., (2012:1) stated that loyalty provides the foundation of a company's sustained competitive advantage. Thus, loyalty is linked to the success and profitability of a firm. Kim et al. (2004) stated that by developing and increasing loyalty, companies can ensure its proper growth and economic performance. So the marketing strategy of the companies should be framed in such a way that they will be able to try to retain the existing customers by increasing their loyalty and value.

Meanwhile, Auh and Johnson (2005) traditionally understood the concept of loyalty as a customer expectation or inclinations to buy back the

product or service. According to Taylor et al., (2004) customer loyalty is a strategic corporate asset if properly managed has the potential to provide added value such as a reduction in marketing costs, attract new customers, increase trade and provide a defense against competition.

Customer loyalty, on the other hand, according to Anderson and Jacobsen, (2000) quoted by Harkiranpal Singh, (2006:1) ―is actually the result of an organization creating a benefit for a customer so that they will maintain or increase their purchases from the organization. According to Deng et al., (2009) customer loyalty is the consequence of customer satisfaction. It has also been found to be a key determinant of a firm‘s long -term viability. Singh and Sirdeshmukh (2000:25) suggested the customer loyalty as ―the market place currency of the twenty-first century‖. Ndubisi and Pfeifer (2005:49) pointed out that the cost of serving a loyal customer is five or six times less than a new customer. This statement shows the importance of customer loyalty. Walsh (2005:440) mentioned that it is better to look after the existing customer before acquiring new customers. Gee et al. (2008:359) stated the advantages of customer loyalty are as: a. The service cost of a loyal customer is less than new customers b. They will pay higher costs for a set of products; and

c. For a company, a loyal customer will act as a word-of-mouth marketing agent.

Bansal and Gupta (2001) stated that building customer loyalty is not a choice any longer with businesses, it‘s the only way of building sustainable

competitive advantage. Building loyalty with key customers has become a core marketing objective shared by key players in all industries catering to business customers. According to Kotler (2009), loyalty can be achieved through two stages:

a. The Company shall have the ability to give satisfaction to the consumers so that consumers get a positive experience, means the purchase of re-prioritized on previous sales.

b. The Company must have a way to maintain a more distant relationship with their customers by using the method of forced loyalty that consumers want to make repeat purchases.

2. Method of Customer Loyalty Measurement

According to Lovelock and Wirtz (2004:352) loyalty is the willingness of consumers to subscribe to the company on an ongoing basis, purchasing and using goods and services on a repeated and preferably exclusive basis, and recommending the firm‘s products and services to friends and associates. In general, there are three distinctive approaches to measure loyalty:

a. The behavioral measurement b. Attitudinal measurement c. Composite measurement

The behavioral measurement considers consistent, repetitious purchase behavior as an indicator of loyalty. Thus, repeat purchase does not always mean commitment. Roger Palmer et al., (2007:10) stated that behavioral as

the act of purchase may be due to a number of factors perhaps loyalty, where the customer has a preference for the product, or simply through habitual behavior or the lack of alternatives. Attitudinal measurements use attitudinal data to reflect the emotional and psychological attachment inherent in loyalty. Roger Palmer et al., (2007:10) stated that repurchase is driven by underlying emotions which are expressed as preference for the brand, product or service despite the opportunities posed by alternative and substitute products. The third approach, composite measurements of loyalty, combines the first two dimensions and measurement of loyalty. Meanwhile, Oliver (1997) in Kotler and Keller (2009:163) divided the levels of loyalty based on the quality and quantity of re-purchase and resistance power of competitor‘s product or service.

Figure 2.3

Oliver’s Four Stage Loyalty Model

Source: Oliver (Sivadas and Prewitt, 2000).

Service Quality Relative Attitude Recommend Share of Visits

Satisfaction Repurchase Cognitive

Loyalty

Affective Loyalty

Conative Loyalty

Action Loyalty

Based on figure 2.3, the level of customer loyalty divided in some stages, which is starting from the cognitive, affective, conative and action loyalties. Cognitive and affective loyalties are still to be oriented relative and functional benefits, while the conative and action loyalties are more permanent and more oriented to emotional benefits.

a. Cognitive Loyalty

Oliver (1999) in Lovelock and Wirtz (2004:352) has argued that consumers first become loyal in a cognitive sense, perceiving from brand attribute information that one brand is batter than its alternatives that can fulfill customer desired. This means that information held by a consumer brand (consumer confidence) must point to a focal brand is considered to be superior over the competition.

b. Affective Loyalty

Lovelock and Wirtz (2004:352) stated that affective loyalty as a consumer develops a liking for the brand, based on cumulatively satisfying usage occasions. Such attitudes are not easily dislodged by counterarguments from competitors. Affective loyalty indicates the level of favorable attitudes and liking that the customer displays towards the site (or brand). Level of consumer preferences on the focal brand should be higher than rival brands, so there is a clear preference on the affective focal brand.

c. Conative Loyalty

Hennig-Thurau et al., and Janda et al. 2002) define conative loyalty as the development of behavioral intention to continue to buy the brand or the site. This loyalty state is characterized by a deeper level of commitment or purchase intentions of the customers. Commitment to the brand indicates tendency to maintain relation with a brand. Consumer commitment to the brand has been identified important in marketing (Ahluwalia, Rohini, 2000; Kotler Philip et al., 2009). Intention to repurchase can be measured by asking consumers about their future intentions to repurchase a given product or service. Consumers must have the intention to buy the focal brand, other brands are not carried out when the buying decision. The condition is that there is a tendency on the customer to perform certain actions. d. Action Loyalty

Oliver (1999) in Lovelock and Wirtz (2004:352) states that action or behavioral loyalty is the stage where behavioral intentions get converted into actions. Behavioral loyalty has been considered as repeat purchases frequency or proportion of purchase and likelihood to recommend.

E. THE PREVIOUS RESEARCH

Research conducted by Mohammad Muzahid Akbar and Noorjahan Parvez (2009) with the tittle “Impact of Service Quality, Trust and

The Result of Normality Test

Residuals Statisticsa

Minimum Maximum Mean Std. Deviation N

Predicted Value 7.76 28.93 21.75 4.533 60

Residual -4.925 6.339 .000 2.376 60

Std. Predicted Value -3.087 1.583 .000 1.000 60

Std. Residual -2.020 2.599 .000 .974 60

a. Dependent Variable: Customer Loyalty

Charts

One-Sample Kolmogorov-Smirnov Test

Unstandardiz

ed Residual

N

60

Normal

Parameters

a,

b

Mean

0E-7

Std.

Deviation

2.37585420

Most

Extreme

Differences

Absolute

0.136

Positive

0.136

Negative

-0.050

Kolmogorov-Smirnov Z

1.052

Asymp. Sig. (2-tailed)

0.218

a. Test distribution is Normal.

The Result of Multicoloniearity Test

Coefficientsa

Model Unstandardized Coefficients Standardized Coefficients

t Sig. Collinearity Statistics

B Std. Error Beta Tolerance VIF

1

(Constant) 8.158 1.736 4.700 .000

Customer Value .284 .066 .440 4.324 .000 .372 2.688

Customer Satisfaction .232 .046 .588 5.048 .000 .283 3.529

Trust in Brand -.108 .038 -.216 -2.805 .007 .647 1.545

a. Dependent Variable: Customer Loyalty

Collinearity Diagnosticsa

Model Dimension Eigenvalue Condition Index Variance Proportions (Constant) Customer Value Customer

Satisfaction

Trust in Brand

1

1 3.868 1.000 .00 .00 .00 .00

2 .069 7.473 .21 .00 .30 .01

3 .052 8.609 .05 .09 .00 .73

4 .011 18.949 .75 .91 .70 .25

The Result of Heterocesdastisity Test

Residuals Statisticsa

Minimum Maximum Mean Std. Deviation N

Predicted Value 7.76 28.93 21.75 4.533 60

Std. Predicted Value -3.087 1.583 .000 1.000 60

Standard Error of Predicted

Value .368 1.481 .603 .181 60

Adjusted Predicted Value 8.20 29.24 21.78 4.504 60

Residual -4.925 6.339 .000 2.376 60

Std. Residual -2.020 2.599 .000 .974 60

Stud. Residual -2.083 2.661 -.005 1.003 60

Deleted Residual -5.239 6.643 -.025 2.520 60

Stud. Deleted Residual -2.149 2.822 .000 1.021 60

Mahal. Distance .362 20.790 2.950 2.929 60

Cook's Distance .000 .085 .015 .021 60

Centered Leverage Value .006 .352 .050 .050 60

a. Dependent Variable: Customer Loyalty

The Result of Autocorrelation Test

Model Summaryb

Model R R Square Adjusted R Square

Std. Error of the Estimate

Durbin-Watson

1 .886a .784 .773 2.439 1.159

a. Predictors: (Constant), Trust in Brand, Customer Value, Customer Satisfaction b. Dependent Variable: Customer Loyalty

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1

Regression 1212.214 3 404.071 67.945 .000b

Residual 333.036 56 5.947

Total 1545.250 59

a. Dependent Variable: Customer Loyalty

b. Predictors: (Constant), Trust in Brand, Customer Value, Customer Satisfaction

Coefficientsa

Model Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

1

(Constant) 8.158 1.736 4.700 .000

Customer Value .284 .066 .440 4.324 .000

Customer Satisfaction .232 .046 .588 5.048 .000

Trust in Brand -.108 .038 -.216 -2.805 .007

a. Dependent Variable: Customer Loyalty

Residuals Statisticsa

Minimum Maximum Mean Std. Deviation N

Predicted Value 7.76 28.93 21.75 4.533 60

Residual -4.925 6.339 .000 2.376 60

Std. Predicted Value -3.087 1.583 .000 1.000 60

Std. Residual -2.020 2.599 .000 .974 60

The Result of Multiple Linear Regression

Variables Entered/Removeda

Model Variables Entered Variables Removed

Method

1

Trust in Brand, Customer Value, Customer Satisfactionb

. Enter

a. Dependent Variable: Customer Loyalty b. All requested variables entered.

Model Summary

Model R R Square Adjusted R Square

Std. Error of the Estimate

1 .886a .784 .773 2.439

a. Predictors: (Constant), Trust in Brand, Customer Value, Customer Satisfaction

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1

Regression 1212.214 3 404.071 67.945 .000b

Residual 333.036 56 5.947

Total 1545.250 59

a. Dependent Variable: Customer Loyalty

b. Predictors: (Constant), Trust in Brand, Customer Value, Customer Satisfaction

Coefficientsa

Model Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

1

(Constant) 8.158 1.736 4.700 .000

Customer Value .284 .066 .440 4.324 .000

Customer Satisfaction .232 .046 .588 5.048 .000

Trust in Brand -.108 .038 -.216 -2.805 .007

The Result of T test

Coefficientsa

Model Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

1

(Constant) 8.158 1.736 4.700 .000

Customer Value .284 .066 .440 4.324 .000

Customer Satisfaction .232 .046 .588 5.048 .000

Trust in Brand -.108 .038 -.216 -2.805 .007

a. Dependent Variable: Customer Loyalty

The Result of F test

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1

Regression 1212.214 3 404.071 67.945 .000b

Residual 333.036 56 5.947

Total 1545.250 59

a. Dependent Variable: Customer Loyalty