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consumers
of
the
company's
competitors. Customer satisfaction is
one of the critical success factors of the
company. Besides customer satisfaction
can be a tool to compete for a firm in
the face of competitors.
In
recent
times,
customer
satisfaction has gained new attention
within the context of the paradigm shift
from transactional marketing to
relationship marketing (Grnroos 2004).
Customers who are satisfied with a
purchased product will buy the same
product again, more often (Reichheld
1996), and will also recommend it to
others (Oliver and Swan 1989.
Customer satisfaction is commonly
related to two fundamental properties
(Ostrom & Iacobucci 1995), including
the customers judgment of the quality
of the product and his evaluation of the
interaction experience he or she has
made with the product provider (Crosby
et al. 1990). Kotler sums this up when
he states: The key to customer
retention is customer satisfaction
(Kotler 2000). Even it is agreed in the
literature that price and quality has high
effect on customers satisfaction; still
3.
CHAPTER 2
LITERATURE REVIEW
Literature review is the process of
reading,
analyzing,
evaluating,
and
summarizing scholarly materials about a
specific topic (Uma Sekaran, 2003). The
results of a literature review may be made in
a report or they may serve as part of a
research article, thesis, or grant proposal. In
literature review, we will focus on the
subject of defining theory and making
hypothesis. Literature review also helps us
to find the result of research.
2.1 CUSTOMER LOYALTY
According Newman and Werbel
(1973) loyal customers are those a) who
re-buy a brand; b) think before buying
one brand; c) do not search any
information about brand. Loyalty can be
measured in two ways: re-buys dynamic
and recommendation (Pine et al. 1995).
Customers tendency to repurchase a
brand revealed through behavior which
can be measured and which impacts
directly on brand sales (Hammond et al
1996). Loyalty is consistent preference
and or purchase of one brand in a
specific product or service category
(Schiffman 1997). A deeply held
commitment to re-buy or re-patronize a
preferred product/service consistently in
the future, thereby causing repetitive
same-brand
or
same
brand-set
purchasing,
despite
situational
influences and marketing efforts having
the potential to cause switching
behavior (Oliver 1999).
Jacoby and Kryner in Dharmmesta
(1999), suggests that customer loyalty is
(1) behavioral response (ie purchase),
(2) the biased (nonrandom), (3) revealed
continuous, (4) by unit decision making,
(5) by taking into account one or more
brands alternative of a number of
PRODUCT QUALITY
Product is all that can be offered in
the market to get attention, demand,
usage or consumption that can satisfy
the desire or the needs of consumers
(Sumarni and J. Supranto, 1997 in
Tjiptono, 2006:95). Product quality
reflects the ability of the product to run
duties
that
include
durability,
reliability, progress, strength, ease of
packaging, and repair products and
other characteristics (Kotler and
Armstrong, 1997:279). According
Kotler and Armstrong (2010), in
market offering, a product is the key
element that brings value to the
customer. Products are more than just
tangible objects but inclusive of
service features, design, performance
quality. brand name and packaging. A
products quality has a significant
impact towards the product or service
performance, thus it is linked to a
Perception
of
the
available
substitutes differs widely among
customers and across purchase
situations. Customers new to a
market are usually less aware of the
discount brands than people with
more experience. Consequently, they
usually pay relatively high prices
and buy from the most visible
suppliers. Small business manager
could establish effective marketing
efforts by positioning a brand as
good value and target customers
with
a
high reference
for
comparison. This method can
influence the buyers perception of
substitutes.
2. Unique Value Effect.
Since the customers
perception of substitutes is such an
important determinant of price
sensitivity, much of the small
business effort is directed towards
reducing the effect of substitutes on
the total economic value. The goal is
to offer something unique, a
differentiation, that consumers
will pay for despite the existence of
lower-price alternatives. Buyers are
less sensitive to a products price the
more they value any unique
attributes that differentiate the
offering from competing product.
We should note, however, that
differentiation alone does not
produce this effect. Customers must
first recognize a differentiation and
then be convinced of its value.
3.
4.
5.
Fairness Effect.
Buyers are more sensitive to
a products price when it is outside
the range that they perceived as
fair or reasonable given the
purchase context. But what is fair?
Small business manager should
note that the concept of fairness has
little to do with profitability. Three
things appear to determine peoples
perception of fairness in pricing:
The
current
price
compares
to
prices
previously encountered by
the product.
Price is expected to be
different in some purchase
location or situations than
in others.
Price is expected to be fair
for a necessity product
and charging a high price
for them is perceived as
unfair.
2.5
Asghar
Afshar
Jahanshahi,
Mohammad Ali Hajizadeh Gashti,
Seyed Abbas Mirdamadi, Khaled
Nawaser, Seyed Mohammad Sadeq
Khaksar (2011) with the title of
research: Study the Effects of
Customer Service and Product
Quality on Customer Satisfaction
and Loyalty. The purpose of this,
address the following questions that
are
becoming
increasingly
important to managers: is there a
relationship between customer
b.
c.
2.6
HYPOTHESIS
According to Sekaran (2003), a
hypothesis can be defined as a
logically conjectured relationship
between two or more variables
expressed in the form of a test table
statement.
Relationships
are
conjectured on the basis of the network
of associations established in the
theoretical framework formulated for
the research study. Hypothesis can be
defined
as
logical
conjectured
relationship between two or more
variable expressed in the form of a
testable statement. Relationship are
conjectured on the basis of the network
of associations established in the
theoretical framework formulated for
the research study (John Wiley & sons,
Inc, 2003). In this research, we defined
the hypotheses that we developed from
three variables.
2.6.1 Customer Satisfaction is
significantly
associated
with
Customer Loyalty.
The current research study attempts
to find the impact of customer
satisfaction on customer loyalty and
intentions to switch. Clarke (2001)
examined that customer satisfaction is
really no more than the price of entry
to a category. For satisfaction to be
effective, it must be able to create
loyalty amongst customers. McIlroy
and Barnett (2000) stated that an
important concept to consider when
developing a customer loyalty program
is customer satisfaction. Satisfaction is
a critical scale of how well a
customers needs and demands are met
while customer loyalty is a measure of
how likely a customer is to repeat the
purchases and engage in relationship
activities. Loyalty is vulnerable
because even if consumers are satisfied
with the services they will continue to
defect if they think they can get better
value,
convenience
or
quality
elsewhere.
Therefore,
customer
satisfaction is not an accurate indicator
of loyalty. Satisfaction is essential but
not a sufficient condition of loyalty. In
other words, we can have customer
satisfaction without loyalty, but it is
too hard or even impossible to have
Customer
Loyalty
Price
CHAPTER III
RESEARCH METHODOLOGY
4.1 Research Design
This research is going to use
quantitative research method. This
research method will complete and
support the achievement of this
research. Quantitative research design
has been selected in order to find out the
appropriate answers to the research
question and to test the hypothesis
(Sekaran, 2003). This research can be
done by non-contrived study setting. All
of data and information are collected
from respondents using questionnaire
and then the result will be explained to
answer research questions.
3.2 Population and Sample
Defined by Sekaran (2003), the
population is entire group of people, events,
or things of interest that the researcher
wishes to investigate. The populations of
this study are the customers of Embroidery
and Needlework in West Sumatera. In other
statements, some elements of the population
would form the sample (Sekaran, 2003).
According to Sekaran (2006), the right
sample size to use is more than 30 and less
than 500 samples.
Researcher will contribute questionnaire
to 140 customers of embroidery and
neddlework in West Sumatera. In this study,
the researcher uses a convenience sampling
technique. It means that the researcher draw
members of the population on the basis of
convenience only
Variable
Product
quality
Operationa Definition
Indicator
-
Price
Custom
er
Satisfact
ion
Custom
er
Loyalty
Source
John F. Gaski
and Michael J.
Etzel (1986)
John F. Gaski
and Michael J.
Etzel (1986)
John F. Gaski
and Michael J.
Etzel (1986)
R.A.J. van Es
(2012
No
Scale
Score
1.
2.
Agree (A)
3.
Neutral (N)
4.
Disagree (D)
5.
Likerts Scale
3.5.2
CHAPTER IV
RESULT AND ANALYSIS
In this chapter, the data gathered
through on line questionnaires will be
processed and analyzed. As previous
chapter, researcher has explain the purpose
of this research is to analyze the influence of
product quality and price of product toward
customer satisfaction and customer loyalty
in case of purchasing embroidery and
needlework in West Sumatera. Answering
this question researcher collect information
with distributes 140 questionnaires to
consumer who has ever purchased
embroidery and needlework in West
Sumatera.
4.1 Respondents Characteristics
The questionnaires gathered from
this research are 140 questionnaires. These
questionnaires will be processed and
analyzed using SPSS and SmartPLS. The
questionnaires consist of two parts. The first
part is about the profile and background of
respondents. The second part is 16
questions. The respondents characteristics
gender, age, domicile, job, income, etc will
be analyzed using SPSS.
Survey Results
Number of
Questionnaires
140
Distributed
questionnaires
Returned questionnaires
140
Analyzed questionnaires
140
19
13.6
40-49
36
25.7
50-59
38
27.1
Total
140
100.0
40
28.6
Batusangkar
1.4
Payakumbuh
0.7
Total
140
100
Source: proceed from
questionnaires by using SPSS in 2014
4.1.4 Respondents Characteristics Based
on Job
The
result
of
respondents
characteristics based on job shows the
highest percentage is government officer
(pns) (42.9%). The second highest
percentage is 30.7% for respondents who
has job at private companies. The third
highest is 15 % for student.
Respondents Characteristics Based on
Job
Job
Frequency Percentage
BUMN
2.9
Lecturer
1.4
Civil Servant
(pns)
60
42.9
Student
21
15
Private Company
43
30.7
Housewife
10
7.1
Total
140
100.0
>5 million
4.3
15
10.7
26
18.6
21
15.0
24
17.1
6.4
6.4
Total
140
100.0
Source: proceed from questionnaires by
using SPSS in 2014
4.1.6 Respondent Characteristic Based on
Type of Handicraft
The
result
respondents
characteristics based on type of handicraft
can be seen on table. The highest percentage
shows that 69.3% of respondent who
purchase
embroidery.
The
smallest
percentage is 30.7% of respondents who
purchase needlework.
Respondent Characteristic Based on Type
of Handicraft
Type of
Frequency Percentage
Handicraft
Embroidery
97
69.3
Needlework
43
30.7
Total
140
100.0
2.1
19
13.6
19
13.6
Blouse
14
10.0
Gamis
2.1
Veil
3.6
Mukena
47
33.6
10
7.1
140
100.0
Full outfit
Kebaya
Total
43
30.7
12
8.6
5.7
12
8.6
3.6
Table 4.2.3
Response of Respondents on Customer
Satisfaction
No.
Items
Mean
KEP1 I am satisfied with
the product quality
of embroidery and 4.078571
needlework from
West Sumatera
KEP2 I am satisfied with
the price of product
of embroidery and 3.828571
needlework from
West Sumatera
KEP3 I am satisfied with
the advertisement
that I read, see, and
listen
about 3.607143
embroidery
and
needlework from
West Sumatera
KEP4 I am satisfied with
the selling process
of the embroidery
3.821429
and
needlework
from
West
Sumatera
Source: proceed from questionnaires by
using SPSS in 2014
The result on table above shows
KEP1 I am satisfied with the product
quality of embroidery and needlework from
West Sumatera has the highest value of
mean. It means that this item gets more
response from respondents. As a result, the
customers are satisfied with the product
quality of the embroidery and needlework
from West Sumatera. The lowest response is
KEP3 I am satisfied with the advertisement
that I read, see, and listen about embroidery
and needlework from West Sumatera.
The result in table response of
respondents on customers loyalty shows
CL1 I like the product of embroidery and
needlework from West Sumatera than other
province has the highest value of mean. It
means that this item gets more response
from respondents. As a result, most of the
customers like the embroidery and
needlework product from West Sumatera
than other province. The lowest response is
I want to move to others province in order
to purchase the product of embroidery and
needlework.
Table 4.2.4
Response of Respondents on Customer
Loyalty
No. Items
Mean
CL1 I like the product of
embroidery and
needlework from
4.121429
West Sumatera than
another province
CL2 I want to recommend
the
product
of
embroidery
and 3.985714
needlework
from
West Sumatera
CL3 I want to purchase the
product of embroidery
3.014286
and needlework from
others provinces
CL4 I want to repurchase
the
product
of
embroidery
and 3.885714
needlework
from
West Sumatera
CL5 I want to buy more
product of embroidery
3.878571
and needlework from
West Sumatera
Source: proceed from questionnaires by
using SPSS in 2014
4.3 Test of Instrument (Outer Model)
4.3.1 Validity Test
After collecting the data, the first
thing that is done is testing the validity or
validity test. The researcher used smartPLS
2.0 in order to test the validity of each
indicators of each variable. To measure the
validity of data, the researcher considers the
evaluation based on convergent validity and
discriminant validity. Convergent validity is
examining whether the indicators of each
variable definitely measure its variables. It
means convergent validity is measured
based on correlation between score item and
indicators (component score) with construct
score.
This test is done by measuring the
value of outer loading through algorithm
process. The indicators will be valid if the
value of outer loading is above 0.7.
However, if the value of outer loading is
higher than 0.5 and less than 0.7, it is still
accepted as long as the value of AVE and
Communality is higher than 0.5 (Chin in
Gozali, 2006). The result of data processing
Communality
Customer loyalty
0.626435
0.626435
Customer
satisfaction
Price of product
0.574211
0.574212
0.561283
0.561283
Product quality
0.513276
0.513275
Outer Loading
PRODUCT
QUALITY
PRICE OF
PRODUCT
CUSTOMER
SATISFACTION
CL1
CL2
CL3
CL4
CL5
KEP1
0.703017
KEP2
0.836143
KEP3
0.693074
KEP4
0.790036
HP1
0.090791
HP2
0.122046
HP3
0.676855
HP4
0.733774
HP5
0.183456
HP6
0.823524
KP1
0.670118
KP2
0.394958
KP3
0.730863
KP4
0.819076
KP5
0.755185
KP6
0.581941
Source: Proceed from questionnaires by using smartPLS in 2014
CUSTOMER
LOYALTY
0.778296
0.733919
0.118789
0.863054
0.774491
PRICE OF
PRODUCT
CUSTOMER
SATISFACTION
CUSTOMER
LOYALTY
0.786811
0.736670
0.870734
0.765380
CL1
CL2
CL4
CL5
KEP1
0.706369
KEP3
0.837334
KEP4
0.688495
KEP5
0.789136
HP3
0.676741
HP4
0.738850
HP6
0.824604
KP1
0.680502
KP3
0.716431
KP4
0.813824
KP5
0.744512
KP6
0.611076
Source: Proceed from questionnaires by using smartPLS in 2014
Another test that will be done to
correlation of constructs with other
test the validity is discriminant validity test.
constructs. The value of cross loading can be
To determine the discriminant validity of
seen in table below.
instrument, it can be seen from the value of
cross loading by comparing the indicator
Cross loading
Customer
Price of Product
Satisfaction
CL1
0.406453
0.482257
0.786811
CL2
0.379577
0.260404
0.736670
CL4
0.467951
0.424758
0.870734
CL5
0.372785
0.201649
0.765380
HP3
0.336480
0.279366
0.676741
HP4
0. 340973
0.303871
0.738850
HP6
0.328879
0.456699
0.824604
KEP1
0.554060
0.313377
0.706369
KEP2
0.356291
0.451955
0.837334
KEP3
0.286223
0.352983
0.688495
KEP4
0.339498
0.332232
0.789136
KP1
0.194938
0.451392
0.291660
KP3
0.115957
0.302208
0.056702
KP4
0.068922
0.305545
0.091994
KP5
0.072598
0.242699
0.182311
KP6
0.158525
0.296519
0.249987
Source: Proceed from questionnaires by using smartPLS in 2014
Customer Loyalty
Product
Quality
0.232857
0.043984
0.201061
0.086816
0.062973
0.178059
0.293415
0.292421
0.377732
0.337780
0.425541
0.680502
0.716431
0.813824
0.744512
0.611076
Price of product
Customer
satisfaction
Customer loyalty
0.716432
Customer satisfaction
0.516349
0.749188
Price of product
0.440174
0.479589
0.757767
Product quality
0.184020
0.471921
0.260326
Customer
loyalty
0.791476
Product quality
Cronbachs
Alpha
0.766305
Composite
Reliability
0.839391
Price of product
0.621828
0.792229
Customer
satisfaction
Customer loyalty
0.750505
0.842761
0.799753
0.869807
R-Square
R Square
Product quality
Price of product
Customer satisfaction
0.359221
Customer loyalty
0.266616
Sample
Mean (M)
Standard
Error
(STERR)
0.089174
T Statistics
(|O/STERR|)
0.522785
Standard
Deviation
(STDEV)
0.089174
Customer satisfaction
-> customer loyalty
0.516349
0.382669
0.393600
0.087602
0.087602
4.368252
0.372303
0.365411
0.072403
0.072403
5.142116
5.790328
Note:
Significant at p<0.05
Source: Proceed from questionnaires by using smartPLS in 2014
Table above shows the significance
of paths among variables in the structural
model of t statistics among variables. Each
independent variable tested in this structural
model study had an impact on its dependent
variable. It is proven by the value of Tstatistics that are all greater than 1.96. Test
relationships between variables shows that
the influence of customer satisfaction to
customer loyalty (0.516349) and significant
at = 0.05 with statistical value
5.790328>1.96. Price quality has positive
effect on customer satisfaction (0.382669)
and significant at = 0.05 with statistical
value 4.368252>1.96. Then, product quality
also has effect on customer satisfaction
(0.372303) and significant at = 0.05 with
statistical value 5.142116>1.96.
Hypothesis Testing Conclusion
Hypothesis
H1
H2
H3
Hypothesis
Statement
Result
Customer
supported*
satisfaction
is
positively related to
customer loyalty
Price of product is supported*
positively related to
customer satisfaction
Product quality is supported*
positively related to
customer satisfaction
4.4.2.1
The
Influence
Customer
Satisfaction on Customer Loyalty
As stated in literature review, firm
performance is hypothesized to significantly
affect customer satisfaction. The result
shows influence of customer satisfaction to
customer loyalty with statistical value is
5.790328>1.96. It means that customer
satisfaction affects customer loyalty
significantly. It can be s result supports the
previous research that loyalty is vulnerable
because even if consumers are satisfied with
the services they will continue to defect if
they think they can get better value,
convenience
or
quality
elsewhere.
Satisfaction is essential but not a sufficient
condition of loyalty. In other words, we can
have customer satisfaction without loyalty,
but it is too hard or even impossible to have
loyalty without satisfaction (McIlroy and
Barnett, 2000).
Satisfaction is essentially viewed as
the result of loyalty. Consumer satisfaction
and consumer loyalty depends on a product
type, is it a new and innovative one or isnt.
Customers satisfaction is essential for
customers loyalty. Loyalty and satisfaction
have a strong relation. It shows that
customer satisfaction significantly influence
customer loyalty.
4.4.2.2 The Influence Price of Product on
Customer Satisfaction
According to many researchers the
customer satisfaction and trust is being
influenced by the price perception (Oliver,
1997; Peng & Wang, 2006; Chengetal.,
CHAPTER V
CONCLUSION, IMPLICATION,
LIMITATION, AND
RECOMMENDATION
This chapter provides conclusions
drawn from findings and discussion
presented in the previous chapter, followed
by assessment of the potential limitations
present in this study and possible future
directions for the research. This research is
obtained to identification product quality
and price of product toward customer
satisfaction and customer loyalty. Then to
3.
5.2
customer
satisfaction
with
statistical value 4.368252>1.96.
Based on result it shows that price
of product has significant influence
to customer satisfaction. The price
have set are reasonable and can be
accepted by the customers. It means
price of product can influence the
satisfaction of the customer on
purchasing the embroidery and
needlework in West Sumatera.
This research finding the influence
of product quality toward customer
satisfaction
on
purchasing
embroidery and needlework in
West Sumatera. The result shows
the influence of product quality to
customer
satisfaction
with
statistical value 5.142116>1.96.
Based on result it shows that price
of product has significant influence
to customer satisfaction. The
products have quality that suit with
the customer expected or more
better
than
expected.
The
companies who selling the product
care with the quality of their
product. So, it means product
quality
can
influence
the
satisfaction of the customer on
purchasing the embroidery and
needlework in West Sumatera.
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