the relationship between marketing mix and intention to purchase towards coops 1 malaysia product in...
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THE RELATIONSHIP BETWEEN MARKETING MIX AND INTENTION TO
PURCHASE TOWARDS COOPS 1 MALAYSIA PRODUCT IN PUTATAN
DISTRICT
by
ARDIANA BT AMRAN
PE 2011 7001C
1
CHAPTER I – INTRODUCTION
1. BACKGROUND OF STUDY
This study explores the relationship between selected marketing mix
elements and the customer intention to purchase Coop 1Malaysia
products. For a good understanding of the study, a case study on Coop
1Malaysia products has been used by considering the lack of theoretical
studies being conducted on the sales of Coop 1Malaysia products.
2. PROBLEM STATEMENT
Nowadays, because of the globalization, prices of food increase rapidly
and have a direct effect on developing countries where the citizens of the
country began to feel the burden of the cost of living is rising. This
followed with the attitude of some traders take advantages to also
increase their prices, particularly on the grounds of lack of food supplies to
profiteer. (Dewan Ekonomi,2013).
Cooperatives Commission of Malaysia has taken appropriate action to
introduce Coop 1Malaysia. Coop 1Malaysia product offer a cheaper price,
from 30 to 40 percent and should not doubt halal status. By using existing
cooperative network throughout Malaysia to sell these products, they can
reduce the cost of manufacturing and marketing. As a result, consumer
may enjoy savings and the Coop1Malaysia product channelled directly to
users so that the users can enjoy quality products but with a cheaper
price.
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Although the price is very low, there are still many who do not know about
the existence of this product. In addition, there are also individuals who
are not responsible for disseminating negative perceptions about this
product. Among the negative perception is a product sold at a cheap price
because the product is manufactured without quality. In addition, this
product also has an unattractive packaging due to want to save costs in
order to be sold at a cheap price.
3. RESEARCH OBJECTIVE
In general this study is to determine the intention to purchase the Coop
1Malaysia products. Specifically, this study will explore Coop 1Malaysia brand
from the following aspects:
1. Marketing mix relation with the product. How the marketing mix can
help to market the product?
2. Strategies and processes, including product positioning, expansion
channel, improvement of product quality, loyalty to the product, and identity.
What are the strategies used to compete with other products?
3. Human resources and organizational structure and arrangement of style
created in the production process, including the management structure
products, advertising and marketing. Use of human resources, organizational
structure and order management style created also emphasized.
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4. Product performance in the area by looking at benchmarks, statistics
and the index used to measure the success or failure. How to measure the
performance of the product in Putatan area?
4. RESEARCH QUESTION
More specifically, this study is conducted to ravel out the following
questions:
4.1 What are the marketing mixes that influencing intention to
purchase towards Coop 1Malaysia products?
4.2 Is there any relationship between price and intention to purchase
towards Coop 1Malaysia products?
4.3 Is there any relationship between promotion and intention to
purchase towards Coop 1Malaysia products?
4.4 Is there any relationship between place and intention to purchase
towards Coop 1Malaysia products
4.5 Is there any relationship between promotion and intention to
purchase towards Coop 1Malaysia products?
5. SIGNIFICANT OF STUDY
This section will provide brief description on the various significances of
the study given the two categories Educational and Economic.
To Cooperative Commission of Malaysia .
The proposed study serves the Cooperative Commission of Malaysia as
their reference or guide in creating their program. It will also help the
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Cooperative Commission of Malaysia to enhance their program to identify
the best product that been choose by customer.
To Customer.
The proposed study will help customer to buy a product by choosing price
or quality. By this study they will come up with good decision making.
To Future Researcher
The proposed study will benefits and help the future researcher as their
guide. The study can also open in development of this study.
6. LIMITATION
As with most research, this research is also subject to limitations despite
its contribution to some interesting findings. Due to the time and cost
constraints, people in this research were confined only to one district, that
is Putatan district, with a sample size of only 300 respondents. This may
limit the generalizability of the findings as intention to purchase towards
Coop 1Malaysia of people in Putatan may differ from those other district in
the state. Furthermore, intention to purchase towards Coop 1Malaysia
product of the people in Putatan district may also be different across race.
Such differences could be important for marketing strategies in a
multiracial state like Sabah. However, due to the time constraint no
comparison of brand purchase influences across race was attempted in
this study. Another limitation of this research is the inclusion of only for
Coop 1Malaysia products. Different product may have different response
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from the people and I have to bear in mind that not all off the people have
intention to purchase Coop 1Malaysia products. In addition, some of the
respondents may not be honest and sincere in answering the
questionnaire. The results of this study should also be interpreted with
care. The development of a process measure for referent influence would
add to the strength of the findings and is a limitation of this study. Despite
these limitations, the study makes some contribution by providing
important information regarding to factors that affect Coop 1Malaysia
product in Sabah for marketing strategies and promotional planning.
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CHAPTER II – LITERATURE REVIEW
1.0 INTRODUCTION
Malaysia is no exception to this phenomenon in the face of an immediate
initiative step taken by the Government to reduce the burden to be borne
by the citizens. Ministry of Domestic Trade, Cooperatives and
Consumerism, take opportunity together with the participation
Cooperative Commission of Malaysia and Felda Investment Cooperative in
Coop1Malaysia products. According to Cooperative Commission of
Malaysia (2010), Coop 1Malaysia is brand new to the commonly purchased
products (Common Household items). According to Cooperative
Commission of Malaysia (2011), Coop 1Malaysia products are everyday
household products most of which are co-operatives and local
entrepreneurs gathered and repackaged and distributed by Felda Trading
Sdn. Limited. (FTSB). Memorandum of understanding (MoU) between FTSB
and MGS FTSB sealed since 2010 and was appointed as a consultant to
implement a pilot project Retail Shop Transformation (Change) on retail
stores owned cooperatives. Up to now there are about 89 types of
products on the market 1M COOP brand and this brand will market 150
products COOP 1M next year.
Coop 1Malaysia product is not a rival to products sold Kedai Rakyat
1Malaysia (KR1M). This mission is to meet the government's efforts to
ease the burden of the citizen due to rising prices of essential goods and
cost of living. Coop 1Malaysia product brand are an alternative to the
branded items available in the market. With the quality and appearance
comparable to products from well-known brands Coop 1Malaysia product
offer a cheaper price, from 30 to 40 percent and should not doubt halal
status (Utusan Malaysia, 2012). By using existing cooperative network
throughout Malaysia to sell these products, they can reduce the cost of
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manufacturing and marketing. As a result, consumer may enjoy savings
and the Coop1Malaysia product channelled directly to users so that the
users can enjoy quality products but with a cheaper price. Coop1Malaysia
product quality is also same with other branded products available in the
market. (Cooperative Commission of Malaysia, 2012)
2.0 LITERATURE REVIEW
2.1 Coop 1Malaysia Products
In line with Malaysian government transformation program to emphasize
on the citizen through the official slogan “Rakyat Didahulukan”, the
national brand of “Coop 1Malaysia” products was introduced not just for
the sake of unity of various races, but also to provide basic fast moving
consumer products necessities at affordable prices. The low costs in
advertising and packaging incurred by local entrepreneurs have made
their products sellable at low prices. Prices that are between 30 to 50
percent lower than other well-known manufacturing brands have
enlightened societies especially those price-conscious shoppers and low
income earners in the urban areas. The products are available at Kedai
Rakyat 1 Malaysia (KR1M) (Utusan Malaysia, 2012) and selected
hypermarkets.
2.2 Marketing Mix
The marketing mix is defined as 4P’s namely the product, price, promotion
and place (Kotler & Armstrong, 2006). They are often designed to
influence consumer decision-making and lead to profitable exchanges.
Each element of the marketing mix can affect consumers in many ways (Peter
& Donnelly, 2007). The marketing mix is the set of marketing tools a firm
utilizes to pursue its marketing objectives in the target market (Borden, 1984).
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When a store markets its products, it needs to create a successful mix of
the right product, sold at the right price, in the right place and using the most
suitable promotion. According to the American Marketing Association,
marketing mix is “a systematic function and as a sequence of processes for
originating, conveying and transporting importance to the clients and for taking
care of customer associations with means which help the company and its
stockholders.” Marketing mix can also be defined as “a set of controllable,
tactical marketing tools that work together to achieve company’s
objectives”. The marketing tools of product, price, place and
promotion (4P’s) are the variables that marketing managers can
control in order to best satisfy customers in the target market. Marketing mix
refers to the four major areas of decision making (4P’s) in the marketing
process that are blended and mixed to obtain the results desired by the
organization to satisfy the needs and wants of consumers. Reference is
also made to the ‘Black Box’ model of Howard, J. et.al. This model is
related to the black box theory of behaviorisms and is different from
Schiffman et al. (2006) ‘Customer Preference Formation’ model which
studies the behavioral processes inside a consumer. Instead, Howard et al.
(1969) ‘Black Box’ model studies the interaction of stimuli, consumer
characteristics, decision process and consumer responses. According to
this model, environmental factors are the source of stimuli. Stimuli are
categorized under marketing stimuli and environmental stimuli. Marketing
stimuli is planned and projected by companies and comprise the marketing
mix (4 Ps) of product, price, place and promotion. Companies strive to
align product quality and attributes, pricing, place or channel of distribution and
promotional efforts to meet customer’s needs and preference by identifying
them through market research. Environmental stimuli are the result of social
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factors based on economic, technical, political and cultural circumstances of a
society. Economic factors affect purchasing power which in turn will influence
customer’s preference and buying decisions especially pricing. Technical factors
like new inventions and new technology products will also affect customer’s
preference and buying decisions. Political factors for example, in a country
which is facing internal fighting, will necessitate the preference and priority of
basic food, shelter, safety and amenities. Cultural factors such as religious
beliefs, cultural values and practices will also influence customer’s
preference and buying decisions. The environmental factors comprising
both the marketing stimuli and environmental stimuli will then impact the
buyer’s black box. The buyer’s black box contains the buyer characteristics and
the decision process which determines the buyer’s purchase intention.
2.1.1 Price
According to Cadogan and Foster (2000), price is probably the most
important consideration for the average consumer. Consumers with high
brand loyalty are willing to pay a premium price for their favoured brand, so,
their purchase intention is not easily affected by price. In addition, customers
have a strong belief in the price and value of their favourite brands so much so
that they would compare and evaluate prices with alternative brands (Evans
et al., 1996; Keller, 2003). Consumers’ satisfaction can also be built by
comparing price with perceived costs and values. If the perceived values
of the product are greater than cost, it is observed that consumers will
purchase that product. Loyal customers are willing to pay a premium even if
the price has increased because the perceived risk is very high and they
prefer to pay a higher price to avoid the risk of any change (Yoon and
Kim, 2000). Basically, long-term relationships of service loyalty make
loyal customers more prices tolerant, since loyalty discourages customers from
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making price comparison with other products by shopping around. Price
has increasingly become a focal point in consumers’ judgments of
offer value as well as their overall assessment of the retailer (De Ruyter et
al., 1999). According to Bucklin et al. (1998), price significantly
influences consumer choice and intention to purchase. He emphasized
that discount pricing makes households switch brands and buy products
earlier than needed. Price is described as the quantity of payment or
compensation for something. It indicates price as an exchange ratio
between goods that pay for each other. Price also communicates to the
market the company’s intended value positioning of its product or brand. Price
consciousness is defined as finding the best value, buying at sale prices or
the lowest price choice (Sproles and Kendall, 1986). Additionally, consumers
generally evaluated market price against an internal reference price, before
they decide on the attractiveness of the retail price.
2.1.4 Promotion
Promotion is a marketing mix component which is a kind of
communication with consumers. Promotion includes the use of advertising,
sales promotions, personal selling and publicity. Advertising is a non-
personal presentation of information in mass media about a product,
brand, company or store. It greatly affects consumers’ images, beliefs and
attitudes towards products and brands, and in turn, influences their purchase
behaviours (Evans et al., 1996). This shows that promotion, especially
through advertising, can help establish ideas or perceptions in the
consumers’ minds as well as help differentiate products against other brands.
According to Rowley (1998), promotion is an important element of a firm’s
marketing strategy. Promotion is used to communicate with customers with
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respect to product offerings, and it is also a way to encourage purchase or
sales of a product or service. Sales promotion tools are used by most
organisations in support of advertising and public relations activities, and
they are targeted toward consumers as final users. She also states that
promotion has a key role in determining profitability and market success and is
one of the key elements of the marketing mix which includes advertising;
direct marketing; sales promotion; public relations and publicity; personal selling
and sponsorship.
2.2 Purchase Intention
Morwitz et al., (2007) defined purchase intention as a situation in which
consumer is propelled to purchase a product according to certain
conditions. Prior literature has studied the relationship between purchase
intention and advertisement effectiveness. For this purpose Baker and
Churchill, 1977 have developed a scale to measure advertisement
effectiveness. Kwek et al., (2010) identifies purchase intent to be one
attribute concerning with cognitive behaviour. Some researcher’s states
customer consideration in buying to be a measure of purchase intention.
Intentions and attitudes are two distinct measures. Attitudes can be
referred as summary evaluations, while intentions represent “the person’s
motivation in the sense of his or her conscious plan to exert effort to carry
out a behavior”. Purchase intention refers to the customer’s willingness to
buy the brand, increase and continue its usage. Research conducted by
(Walgren, et al., 1995) examines brand equity, brand preference and
purchase intention, where relationship of brand equity with purchase
intention still remains to be explored.
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Consumers’ buying decision is very complex. Usually purchasing intention
is related with consumers’ behavior, perception and their attitude.
Purchase behavior is an important key point for consumers during
considering and evaluating of certain product (Keller, 2001). Ghosh
(1990) stated that purchase intention is an effective tool use in predicting
purchasing process. Once the consumers decide to purchase the product
in certain store, they will be driven by their intention. However, purchase
intention might be altered by the influence of price, quality perception and
value perception (Zeithaml, 1988) and Grewal et al (1998). In
addition, consumers will be interrupted by internal impulse and external
environment during purchasing process. Their behavior will be driven by
the physiological motivation that stimulates their respond which bring
them to the retail store to fulfill their need (Kim and Jin, 2001).
Intentions are different from attitudes where attitudes are summary
evaluations while intentions represent the person’s motivation in the sense of
his or her conscious plan to exert effort to carry out a behavior (Eagly &
Chaiken 1993). In Fishbein and Ajzen’s (1975) formulation, attitudes
influence behaviour through behavioural intentions. Past studies indicate that
the link between attitude toward the object and behaviour is not always
clear. In some cases, attitudes have a direct effect on behaviours (Bagozzi &
Warshaw 1992) but no effect in Bagozzi (1992). An intention to buy a brand
is based on a consumer’s attitude towards buying the brand as well as the
influence of social norms about what other people expect. At times, intention is
also difficult to measure. For instance, Bagozzi, Baumgartner and Yi
(1989) commented that when an individual is unclear about his or her
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intention in regards to some action, there is strong tendency for him to
react based on their past actions. Here, the individual is likely to report his
or her habit rather than intention when responding to the intention
(Warsaw & Davis, 1985). Despite issues, purchase intention is an
important construct in consumer behavior (Kotler & Armstrong, 2003).
CHAPTER III – METHODOLOGY
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9.1 Methodology
Based on literature review of past studies, a theoretical framework for
marketing mix and intention to purchase was formed. For an overview of the
research model refer to figure 1 below. In accordance with the research
question, the conceptual framework (see Figure 1) was developed to guide this
study.
Figure 1: Proposed Theoretical Framework
RESEARCH DESIGN
The questionnaire will be divided into two parts. The first is concerned with
the demographic. The second part is thirty variables associated with the
marketing mix. A Likert-scale of 1 to 5 was adopted for all the marketing mix
measures with the anchors ‘strongly disagree’ (1) and ‘strongly agree’ (5). The
items were developed with reference to the empirical studies of Yoo and
Donthu (2001) and Lassar et al (1995). The reason for referring to their scale
development studies is that their scales are the most commonly accepted
measure of customer-based brand equity (Washburn and Plank, 2002).
9.2 PRICE
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MARKETING MIX
- Price
-Promotion
-Place
-Product
Intention to Purchase Coop 1Malaysia
Product
Price is the amount of money that consumers pay to obtain the product.
Pricing decisions should take into account profit margins and the pricing
response of competitors. Pricing includes list price, discounts, allowances, and
payment period and credit terms. Price is an important element in the
marketing mix structure because low prices may not generate enough profits
for the organization and worse still cannot cover costs. Too high prices may
drive away customers. This is because the amount of money that is
demanded in exchange for a product is entirely dependent on the customer’s
means, preference and needs.
According to Sherden (1997), in an article for small business reports,
customer defections may be related to price increases. Zeithaml (1988) is of
the view that monetary cost is one of the factors that influence consumer’s
perception of a product’s value. Gale (1999) used a technique called
Customer Value Analysis (CVA) to measure perceived value. This perceived
value metric was used to link performance of companies to the firm’s relative
market share. The value metric was defined as customer’s response to a
‘worth what paid for’ question. Gale posed a value question ‘considering the
products and services that your vendor offers are they worth what you paid for
them?’ Price becomes an important element in the marketing mix that retains
Coop 1Malaysia products. In this study, we will be examining the negative
relationship between price and customer retention. Therefore, this study will
examine the likelihood that lower prices will increase intention to purchase
and higher prices will reduce intention to purchase. In other words:
H1: Price has a positive relationship with intention to purchase
9.3 Promotion
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Promotions are activities that persuade target customers to try the
product. Promotion decisions are those related to communicating and selling
to potential consumers. Promotion decisions involve advertising, sales
promotion, sales force, public relations, direct marketing, media types, word of
mouth and point of sale. Promotion is a very important element in the
marketing mix because it is a means of communication to the customer to
promote product awareness, product knowledge, product attributes and
benefits and persuade the customer to buy the product. It provides the
stimulus to which customers’ response. Chung et al. (2003) in his study
also mentioned that promotion is an important factor in the marketing mix.
Promotion yields great influences on intention to purchase for Coop
1Malaysia products. This study will examine whether more effective
promotional activities will result in higher intention to purchase for Coop
1Malaysia products.
Therefore, the study will examine whether:
H2: Promotional activities are positively related to intention to purchase.
9.4 Place
Place refers to the company activities that make the product available.
Place decisions are those associated with channels of distribution that serve as
the means for getting the product to the target customers. The distribution
system performs transactional, logistical and facilitating functions. Distribution
decisions include market coverage, channel member selection, assortments,
locations, inventory and transport. Place is an important aspect of the
marketing mix because obviously the location of your business and the
availability and accessibility of your products should be as convenient as
possible for the customer to reach. Based on the study by Chung et al. (2003),
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site image or place is therefore, another important factor in the marketing
mix which affects intention to purchase for Coop 1Malaysia products. This
study will examine the likelihood that the more accessible and available the
product to the customer, the higher will be intention to purchase for Coop
1Malaysia products. Therefore, the study will attempt to establish:
H3: There is a positive link between place and customer retention.
9.5 Promotion
Promotions are activities that persuade target customers to try the
product. Promotion decisions are those related to communicating and selling
to potential consumers. Promotion decisions involve advertising, sales
promotion, sales force, public relations, direct marketing, media types, word of
mouth and point of sale. Promotion is a very important element in the
marketing mix because it is a means of communication to the customer to
promote product awareness, product knowledge, product attributes and
benefits and persuade the customer to buy the product. It provides the
stimulus to which customers’ response. Chung et al. (2003) in his study
also mentioned that promotion is an important factor in the marketing
mix. Promotion yields great influences on intention to purchase for Coop
1Malaysia products. This study will examine whether more effective
promotional activities will result in higher customer intention to purchase
for Coop 1Malaysia. Therefore, the study will examine whether:
H4: Promotional activities are positively related to customer retention.
Sample
A total of 300 respondents were selected from customers who have
potential to purchase Coop 1Malaysia products from grocery and supermarket
in Putatan, Sabah.
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Measurement
In general, the measurement employed in this study was modified from
previous research in order to reflect situational conditions. The five-point
Likert scale was developed to measure perceived price, promotion, place and
product towards Coop 1Malaysia products. As the Likert scale is an interval-
scale instrument, it is, therefore, appropriate for measuring the above
continuous variables.
The measurements for gauging respondents’ perceived price, promotion,
place and product towards Coop 1Malaysia products were adapted from the
studies of N.Hafizah (1999), W.M. Jasmin (1999) and L. Pebrianti (2005).
Methods:
Samples and procedures:
A survey instrument in the form of close-ended questionnaire was
developed for the purpose of data collection. The people of Putatan district
were chosen as the target population of the study in order to reflect the
actual user of Coop 1Malaysia products.
In addition, the people of Putatan district are normally households and
comprehending the knowledge towards their buying behavior and their
loyalty towards a brand would be beneficial for marketers who wish to
target this market segment. Furthermore, this segment will have their own
purchasing power in the next 2 to 4 years. Thus, understanding their current
behavior is crucial for the company to exploit future opportunities.
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A total of 300 respondents from one Putatan district were selected as a
sample of the study. The respondents were selected from households to have
a mixture of races and study background. The actual field survey was conducted
in within one month period.
Statistical tools:
Data on demographic variables are processed and reported in descriptive
analysis. Descriptive analysis refers to the transformation to describe a set of
factors that will make them easy to understand and interpret.
Frequency distribution of the respondents, according to age, gender, race,
family monthly income, and budget for monthly shopping will be
presented.
Hypotheses:
A hypothesis is a statement or proposition that can be tested by referring
to a collection of empirical studies. Hypotheses are usually stated in a form
that predicts either the differences or association between two variables
under study (Churchill and Brown, 2004). Development of a hypothesis
involving causal ordering where possible and measurable would be useful in
guiding the analysis strategy. Often such hypotheses can be made if the
meaning of an item is carefully analyzed within a chronological context.
(Arcelo et al., 1987)
A null hypothesis predicts there is no difference between the tested
groups in relation to some variable, or that there is no relationship between
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two variables (Malhotra, 2004). Null hypothesis in this research is noted
as H0 while alternate hypothesis is noted as H1. It is important to note that a
researcher can never actually prove that an alternate hypothesis is true
(Malhotra, 2004) because of the many potential errors, either known or
unknown, involved in the measurement of variables and the selection of
research subjects. It is usual for the researcher to test whether the null is
probably true or probably false to accept the alternate hypothesis as the
alternate logical solution of the research problem (Churchill and Brown,
2000)
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