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8. WILL THOSE TARGETED PAY MORE? THE ISSUE OF HALAL LOGO

Ernest Cyril de Run*, Lau Wee Ming† ABSTRACT Halal certification plays an important role for Muslims and is much hyped in Malaysia. This paper aims to examine whether Muslim consumers are willing to pay more for a fast food related product with Halal certification as compared to one without. An advertisement of a fast food product is presented with and without Halal certification and findings compared. Two studies were carried out. The first looked at difference and the second at the relationship between the variables studied. The results indicate no significant difference in the mean value of the price of the product that respondents were willing to pay if the product was advertised with Halal signage or without. The second study showed significant relationship for willingness to pay by various attitudinal variables, notably attitude towards the brand had a positive impact. For advertisements without a Halal logo, advertiser’s sensitivity came in to play. The findings provide important managerial and further studies implications. INTRODUCTION The Malaysian government is pushing for a variety of Halal based endeavors. These ranges from the use of a simple Halal certification label to the complex Halal hubs (Muhammad, 2009). The move is to enable Muslim entrepreneurs to develop a niche for themselves. This niche could then be developed into business opportunities and further capitalized.

It is obvious that Halal certification is of importance to Muslims. Halal in itself is a Muslim requirement. Nevertheless, the issue to businesses, as usual, is an issue of profit, with a basic formula of cost versus returns (Sungkar, 2008). Does the possible return from obtaining, displaying and utilizing a Halal certification justify the cost of obtaining and maintaining a Halal certification? Logic says yes, as the Muslim market is a huge one, and ever growing (Muhammad, 2009). Within that group there will always be those that are more religious and therefore requiring such certification.

This paper sets out to determine whether the targeted groups of Halal certification,

Muslims in Malaysia, are willing to pay, and perhaps even to pay more for such a certification. This study aims to evaluate the willingness to pay for a product with Halal signage as compared with one that doesn’t have such signage, with no other explicit ethnic or religious cues. This is done by looking at the differences by the advertisement used as well as by trying to understand the relationship that willingness to pay and purchase intention has on various attitudinal components. The first section of this paper explains the underlying theoretical basis of the study. The next section covers the methodology used in the study. Then the paper states the findings and discusses it. The last section summarizes the discussion and focuses on the implication of the study’s findings for academics and managers.

* Associate Professor at Faculty of Economics and Business, Universiti Malaysia Sarawak (UNIMAS). E mail: drernest@feb.unimas.my † Master by Research (Msc) student at Faculty of Economics and Business, Universiti Malaysia Sarawak (UNIMAS).

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BRIEF LITERATURE REVIEW Religion is important for human being to reflect their value and attitude for an individual to shape their behavior. Religion can be defined as the habitual expression of life that deals with ultimate concerns and values (Cloud, 2000; Fam, 2002). Religious beliefs play an important role in shaping social behavior. Different levels of religious affiliations affect the way people live, the choices they make, the food they eat, and also the people they joined. Religious identity will influence different religious group purchase decision (Schiffman, 1999). Most of the religions may influence consumer’s behavior and attitude (Delener, 1994). It may influence food purchasing decisions and also eating habits in particular (Mennell, 1992).

Malaysia is one of the most religiously diverse nations including Buddhism, Christianity, Islam, and non-religious believers (Fam, Waller, & Erdogan, 2002). However, the majority of Malaysians practice Islam and it is recognized as the national religion (Means, 1978). In Islamic social philosophy, spiritual, social, political, and economic matters are all intermingled and based on the belief that the spheres of life are religion based (Von der Mehden, 1986). Muslim has a code that governs the morals, duties, and behavior of all Muslims in all aspects of life, known as Islamic law (Coulson, 1964). Previous studies revealed that one religion may form any number of values, beliefs, rituals, prayers, norms, requirements and taboos (Crystal, 1993). In Malaysia, there is little division between religion and social conducts (Fam, Waller, & Erdogan, 2002). Halal certification refers to a third party certification that is widely used in Malaysia. Malaysia’s Department of Islamic Development (JAKIM) has introduced Halal logo that had generated more awareness among the Muslim about the importance of consuming products that follow Islamic guidelines and principles. Halal logo is a signal that allows Muslims to frequent a food outlet without fear (Hirschman, 1981). By displaying the Halal logo, restaurants have an opportunity to show to their target consumers that their products are fixed to the Islamic standard (Osman, 2002). In term of food, Halal means it is not made of or contain parts of animal origin which is prohibit to be consumed by Islamic law (Johnstone, 1975). For example, a food without alcohol, pork, and blood is considered as Halal food. It must be prepared, processed, and manufactured by using that equipment which is clean. As an example, the slaughter process must be clean. Willingness to pay is the amount of money that someone is willing to spend on a particular product or service (Yeong-Sheng, N.D). Previous study has shown that Muslims were willing to pay more for Halal goat meat (Ibrahim, 2008). This situation has been shown to be similar with Malaysia, where Malaysian are willing to pay more to obtain Halal meat (Yeong-Sheng, N.D.). METHODOLOGY This paper is part of a larger study. The study utilises two advertisements that are the same except that one has a Halal sign on it and the other doesn’t (Refer Figure 1). The main study used a questionnaire that was distributed to 328 students of a government university in Sarawak Malaysia. Only 139 respondents were used here as they were Muslims.

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Figure 1: Advertisement Used The questionnaire contained three sections. The first portion consisted of demographics. The second consisted of questions from various scales designed to obtain information of consumer’s reaction to the advertisement they saw. The measurements used here included attitude towards the advertisement, attitude towards the company, attitude towards the product, attitude towards the brand, and advertiser’s sensitivity (Bruner and Hensel, 1996). The third section, of which this paper is based on, looks at the willingness to pay for the product in the advertisement. It consists of three questions. The first was whether respondents were willing to pay if the price of the product was increased. The second was whether they were willing to pay if the price of the product was increased by 10 sen. The third was to determine the maximum price they were willing to pay for the product. The questionnaire was presented in both Bahasa Malaysia and English. A back-translation method was used (Green & White, 1976). This was necessary as most respondents were more familiar with Bahasa Malaysia rather than English. Data collected was then analyzed by chi square, t-test, correlation and regression. FINDINGS The findings of the research are depicted here, with respondents profile shown in Table 1.

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Table 1: Respondent Profile Variable n %

Female 102 73.4 Gender Male 37 26.6

20.00 8 5.8 21.00 42 30.2 22.00 39 28.1 23.00 32 23.0 24.00 14 10.1

Age

25.00 4 2.9 RM300 below 104 74.8 Gross

Income RM301 and above 35 25.2 Malay 123 88.5 Indian 1 .7 Bumi Sabah Sarawak 13 9.4 Others 1 .7

Ethnic

NA 1 .7 Religion Islam 139 100.0

Not at all 1 .7 Somewhat 10 7.2 Religious 98 70.5 Very 28 20.1

Religiosity

NA 2 1.4 In Table 2, the frequency and means for each question studied is depicted. The Chi Square Test by different advertisement for all above statements was not significant. The first statement indicated a not significant finding (Chi Sq = 1.130, df = 1, Sig. = 0.288). A similar finding occurred for the second statement (Chi Sq = 2.383, df = 1, Sig. = 0.123). For the third statement, a t-test was conducted. Findings also show that there was no significant difference (t = 0.734, df = 124.903, Sig. = 0.464). Table 2: Frequency and Means by Statements

Overall With Halal Sign Without Halal

Sign Variable n % n % n %

Yes 33 23.7 20 27.4 13 19.7 No 104 74.8 52 71.2 52 78.8

If price raised, are you willing to pay

NA 2 1.4 1 1.4 1 1.5 Yes 33 23.7 22 30.1 11 16.7 No 41 29.5 20 27.4 21 31.8

If price raised by 10sen, are you willing to pay NA 65 46.8 31 42.5 34 51.5

Minimum 1 1 1.65 Maximum 10.20 10 10.20 Mean 6.93 7.05 6.79

How much in RM are you willing to pay

SD 1.99 1.96 2.03

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The second stage of the study looked at relationship. This was initially measured using a correlation followed by a simple regression. Table 3 shows the correlation of the variables for those who saw the advertisement with the Halal sign while Table 4 shows the same for those who saw the advertisement without the Halal sign Table 3: Pearson Correlation (Ad with Halal Sign)

**. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed).

Table 4: Pearson Correlation (Ad without Halal Sign) Variable AD ACO APROD ABRD ADSEN PI

ACO .535** APROD .509** .619** ABRD .529** .697** .648** ADSEN .468** .412** .460** .565** PI .543** .558** .568** .738** .570** WTP -.178 -.112 -.157 -.111 -.043 -.032

**. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed). Table 5 depicts the simple linear regression where Willingness to Pay was the dependent variable and attitude towards the advertisement, attitude towards the company, attitude towards the product, attitude towards the brand, and advertiser’s sensitivity were the independent variables. The findings here indicate that there is significant relationship between willingness to pay and attitude toward brand (β = .417, P < 0.046) for advertisement with Halal signage.

Variable AD ACO APROD ABRD ADSEN PI ACO .385** APROD .490** .549** ABRD .460** .675** .711** ADSEN .421** .200 .438** .362** PI .451** .505** .419** .581** .345** WTP -.145 .058 -.145 .079 -.039 .033

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Table 5: Linear Regression on Willingness to Pay Ad with Halal Sign Ad without Halal

Sign Variables Beta Beta

AD -.206 -.178 ACO .066 .043 APROD -.358 -.103 ABRD .417** -.010 ADSEN .036 .057 R2 .125 .041 Adjusted R2 .052 -.046 R2 Change .125 .041 F-Value 1.709 .475 Durbin Watson 2.346 1.616 Table 6 depicts the simple linear regression where Purchase Intention was the dependent variable and attitude towards the advertisement, attitude towards the company, attitude towards the product, attitude towards the brand, and advertiser’s sensitivity were the independent variables. The findings here indicate that purchase intention have significant relation with attitude toward brand (β = .376, P < 0.031) for advertisement with Halal signage. For advertisement without Halal signage, purchase intention has significant relationship with attitude toward brand (β = .568, P < 0.000) and advertiser sensitivity (β = .215, P < 0.038). . Table 6: Linear Regression on Purchase Intention

Ad with Halal Sign Ad without Halal Sign Variables

Beta Beta AD .197 .128 ACO .199 -.052 APROD -.114 .067 ABRD .376 ** .568 ** ADSEN .123 .215** R2 .391 .649 Adjusted R2 .341 .618 R2 Change .391 .649 F-Value 7.719 20.738 Durbin Watson 2.224 1.737 DISCUSSION AND CONCLUSION This paper examines willingness to pay on a food related product that is with and without Halal signage among young Muslim in Malaysia. The study shows there are no significant different on the mean price those respondents were willing to pay. This contradicts previous studies that showed that Muslims were willing to pay for Halal meat (Ibrahim, 2008; Yeong-Sheng, N.D). This may be because the past studies did not look at Halal signage but willingness to pay for Halal meat and not the impact of using a Halal sign. It is apparent that just by having a Halal sign is not sufficient reason to raise prices. It is also not enough to differentiate a product by. This may

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be because in Malaysia, any fast food restaurant is expected to be Halal compliant. Nevertheless, this may not be true as many restaurants that are supposedly run by Indian Muslims do not have Halal certification (Chok, 2005). Also as shown in the current controversy on the issue of a butter that was use in cake making in Sarawak was deemed as not Halal (Anonymous, 2011). The findings from the second study further support the above findings. Willingness to pay is affected by attitude towards the brand for the advertisement with Halal signage. This indicates that just by having a sign stating the product is Halal is insufficient. Companies must build their brand if they wish to increase the price of the product. Interestingly, when looking at purchase intention, the same variable is again positively significant. What the findings here hint, as seen in the findings in Table 6 for the advertisement without Halal sign, is that companies have to show advertiser’s sensitivity to the consumer (positively correlated with purchase intention). If there is a Halal sign, this is not a significant variable. This indicates that the Halal sign can be used as a proxy of the advertiser’s sensitivity to Muslims and this has a positive relationship with purchase intention. Therefore the value of a Halal sign, by itself, is not to act as justification for price increase, but to act as an indicator of the advertiser’s sensitivity to Muslim consumers. LIMITATION AND FUTURE RESEARCH This paper shows that just by having a Halal sign is not a sufficient reason for increasing price. The findings indicate that companies must develop consumer’s attitude towards their brand before considering any price increase. What a Halal sign does is to indicate that the company is sensitive to the needs of a Muslim populace and this has a positive effect on purchase intention (but not for a price hike). Nevertheless, this study only targets young consumers (21 to 25) years old with low gross income. This may influence their purchase decision on food related product that displays or doesn’t display the Halal sign. Moreover, it also may be interesting to note by manipulating age and income groups to see if such findings are replicated. Reactions from other religion group such as Buddhist, Christian, and Hindu can also be looked into. REFERENCE Anonymous (2011). Golden Vhurn butter not Halal. Retrieved on 18 August 2011 from

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