CHAPTER II
LITERATURE REVIEW, THEORETICAL FRAMEWORK, AND
HYPOTHESIS
2.1
Marketing Definition
According to Kotler and keller (2006, p.5), Marketing is identifying and
meeting human and social needs.
According to Kotler and Armstrong (2010, p.29), Marketing is the process
the company make value for customers and build strong relationship with the
customer to capture value from customer as feedback.
According to Peter and Olson (2010, p.4), Marketing is the appropriate
philosophy for conducting business. The marketing suggest an organization should
satisfy consumer needs and wants to make profits.
From the description above, can show that’s marketing is the company
activities in identifying and meeting needs from the customer to make strong
relationship in order to get return from the customers.
2.2
Marketing Mix
According to Kotler and Armstrong (2010, p.76), Marketing mix is the set of
marketing tools (Product, Price, Place and Promotion) that firms use to produce the
response to the target market.
Marketing mix consist of everything the firm can do to influence the demand
for the product. Marketing Mix is grouped into four major categories (4P);
1) Product means the goods and services combination the company offers to the
target market.
2) Price is the amount of money costumers must pay to obtain the product.
3) Place includes company activities that make the product available to target
consumers.
4) Promotion means activities that communicate the merits of the product and
persuade target customers to buy it.
9
10
Source: Kotler and Armstrong(2010)
Figure 2. 1 4 P’s of Marketing Mix
2.3
Product
2.3.1 Product Definition
According to Kotler and Armstrong(2012, p.248), Product is anything
that can be offered to a market attention, acquisition, use, or consumption that
might satisfy a want or need.
According to Kotler and Armstrong(2012, p.250), Product fall into
two board classes based on the types of consumers that use them, there are:
1) Consumer Product: A product bought by final consumers for personal
consumption. There are 4 parts of Consumer Product:
•
Convenience goods: A consumer product that customers
usually buy frequently, immediately, and with minimal
comparison and buying effort.
•
Shopping goods: A consumer product that the customer, in the
process of selecting and purchasing, usually compares on such
attributes as suitability, quality, price, and style.
11
•
Specialty goods: A consumer product with unique characteristics or
brand identification for which a significant group of buyers is willing
to make a special purchase effort.
•
Unsought goods: A consumer product that the consumer either does
not know about or knows about but does not normally consider
buying.
2)
Industrial Product: A product bought by individuals and organizations for
further processing or for use in conducting a business. According to Kotler
and Armstrong (2003, p.408) There are 5 levels of products:
•
Core benefit: the basic benefits of a product offered to consumers.
•
Basic product: forms the basis of a product that can be perceived by the
senses.
•
Expected product: a series of product attributes and the conditions
expected by the buyer when purchasing a product.
•
Augmented product: something that distinguishes between the products
offered by the business entity with products offered by competitors.
•
Potential product: all arguments and shape changes experienced by a
product in the future.
According to Kotler and Keller (2006, p.345) products can be classified into
3 groups, there are:
1) Consumable goods are tangible goods that normally consumed in one or a few
times of use.
2) Durable goods are tangible goods that normally do not run out after a lot of use
3) Services are activities or benefits offered for sale satisfaction
2.3.2 Product Quality
According to Kotler and Armstrong(2012, p.254), Product Quality is
the characteristics of a product or service that bear on its ability to satisfy
stated or implied customer needs.
According to Bowo, Hoyyi and Mukid(2013), Product quality is a
relative measure of a good or service that can give you an idea of how far the
level of excellence of a product is able to meet customer desires.
12
The quality of products is the understanding that the products offered
by sellers have more selling points that are not owned by a competitor
product. Therefore, companies are trying to focus on the quality of the
product and compare it with the products offered by competing companies.
2.3.3 Dimension of Product Quality
According to Durianto (2004, p.38), the concept of the product, the
manufacturer in the product must think through the stages of dimensions,
there
are:
1) Performance: This dimension is the most basic and related to the primary
function of a product. Consumers will be very disappointed when their
expectations are not met on this dimension.
2) Reliability: dimensions of performance and reliability cursory look similar
but have obvious differences. Shows the probability of reliability over the
product fails to perform its functions.
3) Feature: This dimension can be regarded as a secondary aspect. Like the
example of electronic products, features - features offered targeted by
manufacturers to innovate in an effort to satisfy customers.
4) Durability: a measure of the product cycle, both technically and time. The
product called a durable if it has been widely used or has been used for a long
time. The first is there durability both technically and durable in time. He are
writing.
5) Conformance: This dimension indicates the extent to which a product can
match certain standards or specifications.
6) Design: This dimension offers emotional aspect in influencing consumer
satisfaction
2.4
Service
2.4.1 Service Definition
According to Lovelock and Wirtz (2011, p.37) Services are economic
activities offered by one party to another. Often time-based, performances
bring about desired results to recipients, objects, or other assets for which
purchasers have responsibility.
13
According to Kotler and Armstrong (2012, p.248), Service is an
activity, benefit, or satisfaction offered for sale that is essentially intangible
and does not result in the ownership of anything.
From the definition above, Service is an activities that offered by a
person to another person to give a satisfaction toward them. So, service
should be defined in their own right, not in relation to goods.
2.4.2 Characteristics of Service
Although services are products in a general sense, they have special
characteristic and marketing needs. The biggest differences come from the
fact that services are essentially intangible and that they are created through
direct interactions with customers.
According to Kotler and Armstrong (2012, p.260), there are 4
characteristics of service:
•
Intangibility: Services cannot be seen, tasted, felt, heard, or smelled before
they are bought.
•
Inseparability: Services are produced and consumed at the same time and
cannot be separated from their providers.
•
Variability: The quality of services may vary greatly depending on who
provides them and when, where, and how.
•
Perishability: Services cannot be stored for later sale or use.
Source: Kotler and Armstrong(2012)
Figure 2. 2 Characteristics of Service
14
2.4.3 Service Quality
According to Lupioyadi (2008, p.181), Service quality is a factor in
determining the success and quality of the company where the company's
ability to provide quality service to consumers and as a strategy to defend
themselves and achieve success in the face of competition.
According to Nasution (2004, p.47), Service quality is the expected
level of excellence and control over the level of excellence to meet customer
desires.
From the description above, Service quality is defines as the
difference between customer’s expectation for service output to the
service input and the perception
Customer’s expectation serves as a
of
the
service
foundation
for
received.
Therefore,
evaluating
service
received because when performance exceed expectation , it means that the
quality is high and when performance is low it means performance does
not meet their expectation.
2.4.4 Dimensions of Service Quality
According to Lovelock and Wirtz (2011, p.406), There are 5
dimensions of service:
1) Tangibles
Regard to physical attractiveness, equipment and materials used by
the company, as well as employee performance.
2) Reliability
In connection with the company's ability to provide accurate service
since it first without making any mistakes and deliver services in
accordance with the time kept.
3) Responsiveness
With regard to the willingness and ability of the employees to help
customers and respond to their requests, and informs when services
will be provided and then provide services quickly.
4) Assurance
The behavior of the employees that are able to foster customer trust
towards the company and the company can create a sense of security
15
for customers. Assurance also means that employees are always being
polite and master every knowledge and skills needed to handle any
questions or concerns customers.
5) Empathy
Means the companies understand the customer’s problem and act in
the interests of the customer, and provide personalized attention to its
customers and has convenient hours of operation.
2.5
Customer Satisfaction
2.5.1. Customer Satisfaction Definition
According to Hoyer and MacInnis (2010, p.279), Customer
Satisfaction is the feeling that results when consumers make a positive
evaluation or feel happy with their decision.
According to Peter and Olson (2010, p.387), Customer satisfaction is
a critical concept in marketing though and customer research. If customer are
satisfied with a product, service, or brand, they will be more likely to
continue to purchase it and tell others about their favorable experiences with
it. If they are dissatisfied, they will more likely switch products or brands and
complain to manufactures, retailers, and other costumers.
According to Kotler and Armstrong (2004, p.19), Customer
Satisfaction is the extent to which product’s perceived performance matches a
buyer’s expectations. Customer satisfaction depends on the product’s
perceived performance relative to a buyer’s expectations.
According to Bowo, Hoyyi and Mukid(2013), customer satisfaction is
a post-purchase evaluation of alternatives selected where at least give the
results (outcomes) equal or exceed consumer expectations.
According to Siddiqi(2011),Customer Satisfaction is one of the most
important outcomes in the marketing literature. It serves to link processes
culminating purchase and consumption with post purchase phenomena such
as attitude change, repeat purchase, and brand loyalty
From the explanation above, Customer Satisfaction is the feeling that
results when the product’s perceived performance meet the customer’s
expectations. Customer satisfaction is important to business success because
16
satisfied customers are willing to pay higher prices, particularly if they buy
the product repeatedly. The customers are also more likely to remain
customers, be brand loyal, and committed to the product.
2.5.2. Dimensions of Customer Satisfaction
According to Irawan (2003), there are 5 factors that decide the
customer satisfaction. The factors are:
1) Product Quality
Costumer will feel satisfaction if the evaluation of the product has a
good quality. There are some factors that make product quality:
•
Performance
•
Reliability
•
Conformance
•
Durability
•
Feature
2) Service Quality
Costumer will feel satisfy if they get the good service and meet their
expectations. There are 5 dimensions of service quality:
•
Reliability
•
Responsiveness
•
Assurance
•
Empathy
•
Tangible
3) Emotional Factors
The satisfy not come from the product, but from self-esteem or social
value that makes customer feel satisfy from a product
4) Price
Products that have the good quality with the lower price will give the
higher value to the customer
5) Cost and Ease of Get a Product or Service
Customers do not need pay more to get the products or service.
17
2.6
Customer Loyalty
2.6.1. Definition
According to Neal, Quester and Hawkins (2004, p.185), Customer
Loyalty is where a customer has an emotional feeling to the brand or product
and keep purchasing.
According to Griffin (2003, p.4), Customer loyalty is non random
purchase expressed over time by some decisions making unit.
From the description above, Customer loyalty is the psychological
and behavior from the customer to be loyal toward the product or service that
sell by the company and keep purchasing in the future.
2.6.2. Characteristics of Customer Loyalty
According to Heruwasto and Fatma (2011), there are 3 indicators to see the
customer loyalty:
1) Frequency of product use
The loyal customer will use the product with the high intensity
2) Repeat purchase
The loyal customer will purchase the same product continuously
3) Words of mouth
The loyal customer will tell the other people to buy the products. They
will make the efficiency to do the promotion of the products.
2.6.3. Stage of Loyalty
According to Griffin (2005) stages of loyalty is divided into the
following:
1) Suspect
People who might buy your services because it is believed or known
suspects thought they would buy but still not quite sure or all who may be
buying goods or services of the company but not yet know anything about the
company and the goods or services offered.
2) Prospects
18
Prospects are people who need your products or services and have the
ability to buy. In this prospect, even though they have not made a purchase,
they have to know the existence of the company and the goods or services
being offered, because someone has recommended goods or services to him
3) Prospects are disqualified
Prospects who are disqualified prospect remedy has learned enough to
know that they do not need, or do not have the ability to buy products or use
services
4) Consumers first
Consumers First Instance time is the person who has purchased the
product first times. That person could be a customer and a competitor at the
same time
5) Consumers repeated
Consumers repeatedly are the ones who have purchased a product or
use a service that we sell more than two times. They may have purchased a
product or service using the same two times or more
6) Clients
Clients buy and sell anything that can be used. This guy bought a
regular basis, providing a strong and continuing relationship , which makes it
immune to the pull of competitors
7) Advocates
Like the client, the buyer bought and sold anything that could be used
as well buy it on a regular basis. However, the advocates also encourage
others to re- purchase, marketing and bring customers
8) The customer or client is lost
Someone who had been a customer or client, but has not bought back
from at least one normal buying cycle
2.6.4. Type of Loyalty
According to Griffin (2005) , that kind of loyalty is divided into 5,
namely :
1) Without Loyalty
19
That some customers do not develop loyalty to a particular products
or services. Without loyalty relationship is characterized by a low combined
with a low level of purchase. In general, firms should avoid these types of
buyers because they are not going to be a loyal customer.
2) Weak Loyalty
With low involvement and the high repeat purchases generate weak
loyalty, these customers buying habit. In other word, non- attitude factors
and factors of the situation is the main reason to buy. This kind of loyalty is
common in frequently purchased product.
3) Hidden Loyalty
The linkage is relatively high and the low level of repeat purchases
show hidden loyalty, influence the situation, and not a decisive influence
attitudes to make repeat purchases .
4) Premium Loyalty
Most types of loyalty can be improved, occurs when there is a high
degree of relatedness and the re- purchase rate is also high. This type of
loyalty is preferred to all customers in each company.
2.7
The Relationship between Variables
According to Aryani and Rosinta(2010), In the journal “Pengaruh Kualitas
Layanan terhadap Kepuasan Pelanggan dalam Membentuk Loyalitas Pelanggan” ,
showed that the fifth dimensions of service quality proven to influence significantly
to the quality of service . The dimensions of the strongest in explaining the quality of
service in a row are reliability, responsiveness, assurance, empathy, and tangibility.
In addition, the results showed there is a strong and positive influence between
variables KFC service quality to customer satisfaction on the Social UI students. This
is evident from the results research which shows that 72.9 % of variable customer
satisfaction can be explained by variable quality of service , while the rest of 27.1 %
influenced by other factors outside of variables quality of service . Results of other
studies indicate that there is a strong and positive effect between Service Quality
KFC on customer loyalty in students Social UI. This is demonstrated by the 91%
20
variables that customer loyalty can be explained by the variable quality of service,
while the rest 9% is influenced by other variables outside quality of service.
According to Hidayat(2009), In the journal “Pengaruh Kualitas Layanan,
Kualitas Produk dan Nilai Nasabah Terhadap Kepuasan dan Loyalitas Nasabah
Bank Mandiri”, Conclusions obtained from this study is an integrated model that
contains relationship between service quality and product quality for customers with
satisfaction and customer loyalty. The integrated model explained that (1) the quality
of service direct effect on customer satisfaction, (2) directly affect product quality on
customer satisfaction, (3) does not directly affect the quality of service on customer
loyalty with mediated by customer satisfaction, (4) the quality of the product indirect
effect on loyalty mediated by customers with customer satisfaction,
According to Siddiqi(2011) ,In the journal “Interrelations between Service
Quality Attributes, Customer Satisfaction and Customer Loyalty in the Retail
Banking Sector in Bangladesh”, pointed out that a small increase of customer
satisfaction leads customer loyalty dramatically. Customer satisfaction has a large
positive correlation with customer loyalty in the Business. The strong positive
correlation of customer satisfaction and customer loyalty means that the customers
will recommend the product to other people. Loyal customer takes less of the
company’s time during transactions and less sensitive to price changes. The
companies with the highest customer loyalty typically grew revenues at more than
twice the rate of their competitors.
According to Monalisa and Suryani(2013), In the journal “Pengaruh Kualitas
Layanan Internet Banking Terhadap Kepuasan Dan Loyalitas Nasabah BANK
Dengan Menggunakan Sistem Dinamik”, pointed out that Internet banking service
quality plays an important role in maintaining and scaling up of bank customers'
satisfaction and loyalty. In improving bank customer satisfaction and loyalty, the
quality of service Internet banking should be increased so that scenario is needed to
view patterns increase in customer satisfaction and loyalty.
According to Susanti(2009), In the journal “The Influence Of Image And
Customers Satisfaction Towards Consumers Loyalty To Traditional Foods In
Surabaya”, pointed out that Customer satisfaction in a traditional food partially
positive and significant effect to customer loyalty in food Traditional in Surabaya.
21
The dominant variable consumer loyalty to the traditional food in Surabaya is
customer satisfaction
2.8
Theoretical Framework
Source: Researcher, 2012
Figure 2. 3 Theoretical Framework
2.9
Hypothesis
H1 = Variable Product Quality has a significant effect on Customer Satisfaction in
the purchase of raw materials for feed.
22
Ho: There is no significant effect between Product Quality to Customer
Satisfaction in the purchase of raw materials for feed.
Ha: There is significant effect between Product Quality to Customer
Satisfaction in the purchase of raw materials for feed.
H2 = Variable Service Quality has a significant effect on Customer Satisfaction in
the purchase of raw materials for feed.
Ho: There is no significant effect between Service Quality to Customer
Satisfaction in the purchase of raw materials for feed.
Ha: There is significant effect between Service Quality to Customer
Satisfaction in the purchase of raw materials for feed.
H3 = Variable Customer Satisfaction has a significant effect on Customer Loyalty in
the purchase of raw materials for feed.
Ho: There is no significant effect between Customer Satisfaction to Customer
Loyalty in the purchase of raw materials for feed.
Ha: There is significant effect between Customer Satisfaction to Customer
Loyalty in the purchase of raw materials for feed.
H4 = Variable Product Quality has a significant effect on Customer Loyalty in the
purchase of raw materials for feed.
Ho: There is no significant effect between Product Quality to Customer
Loyalty in the purchase of raw materials for feed.
Ha: There is significant effect between Product Quality to Customer Loyalty
in the purchase of raw materials for feed.
H5 = Variable Service Quality has a significant effect on Customer Loyalty in the
purchase of raw materials for feed.
Ho: There is no significant effect between Service Quality to Customer
Loyalty in the purchase of raw materials for feed.
23
Ha: There is significant effect between and Service Quality to Customer
Loyalty in the purchase of raw materials for feed.
24