Is_It_Price_a_Key_Factor_That_Determined_by_Customers_in_Buying_Car__a_Case_Study__Kota_Bharu,_Kelantan.

RESEARCH PROPOSAL IS IT PRICE A KEY FACTOR THAT DETERMINED BY CUSTOMERS IN BUYING CAR' A CASE STUDY: KOTA BHARU, KELANTAN. PREPARED BY: NOR HAZIRAH JAYA MARA (2009870852) PREPARED TO: ASSOCIATE PROF DR. HJ NIK MUHAMMAD NAZIMAN ABD. RAHMAN IS IT PRICE A KEY FACTOR THAT DETERMINED BY CUSTOMERS IN BUYING CAR' A CASE STUDY: KOTA BHARU, KELANTAN. Nor Hazirah Jaya Mara Faculty of Business Management, Universiti Teknologi MARA Kelantan 1.0 THE INTRODUCTION OF THE STUDY 1.1Background A consumer is the ultimate user of a product or service. Consumer behavior essentially refers to how and why people make the purchase decisions they do. Marketers strive to understand this behavior so they can better formulate appropriate marketing stimuli that will result in increased sales and brand loyalty. There are a vast number of goods available for purchase, but consumers tend to attribute this volume to the industrial world's massive production capacity. Rather, the giant known as the marketing profession is responsible for the variety of goods on the market. The science of evaluating and influencing consumer behavior is foremost in determining which marketing efforts will be used and when. Consumers adjust purchasing behavior based on their individual needs and interpersonal factors. In order to understand these influences, the previous researchers try to ascertain what happens inside consumers' minds and to identify physical and social exterior influences on purchase decisions. On some levels, consumer choice can appear to be quite random. However, each decision that is made has some meaning behind it, even if that choice does not always appear to be rational. Purchase decisions depend on personal emotions, social situations, goals, and values. People buy to satisfy all types of needs, not just for utilitarian purposes. These needs, as identified by Abraham Maslow in the early 1940s, may be physical or biological, for safety and security, for love and affiliation, to obtain prestige and esteem, or for self-fulfillment. Car is an automobile or any vehicle on wheels which is used to move from one place to another and normally for the long distance. Most of the time people do also consider the convenience of having an owned car rather than rushing their self in getting on the bus on time. Time wasted is considered wasting money. That is why today, cars is considered one of the basic necessities of many people, a lot of them cannot live without a car, especially those whose work is always on the go. Most people regard buying a new car as a major investment and the final choice decision is usually made after careful consideration of alternatives. In making a purchase, consumers usually take several criterions into consideration. Being aware of the dimensions that are crucial in the eyes of the consumer would enable car dealers to use their resources effectively. Therefore, the car dealers need to allocate their marketing resources in an effective and efficient way and it would result in an improved augmented product for the customer. Recently, many firms have emphasized the importance of relationship marketing and they have increasingly been devoting considerable attention to developing and maintaining close relationship with their customers, in order to create value by differentiate their offering and lowering their cost. Even in the car industry, which could formerly be characterized by a product orientation, establishing long-term relationship is currently deemed to be essential at all levels of distribution channel, although it is still a difficult process in this industry focused on mass production. As a result, knowledge about consumers and addressing their needs is considered to contribute to a car dealer’s competitive advantage. The car dealers needs to emphasized on the certain element looked by the consumers due to some relevant. First, consumer’s quality expectation levels have risen as consumers have gradually become more knowledgeable and sophisticated. Secondly, car dealers are increasingly competing with each other on the basis of the same or highly comparable marketing tactics and strategies. 1.2 Problem Statement Nowadays, as people afford to have their own car so this lead to high car demands. Posses a good job and have a stable income are the factors make them interested to buy car. Moreover, having own car is one of the investment as the car can be sold or trade-in in the future. Therefore, the low and reasonable loan rate offered by banks also encourages people to purchase their desired car. But recently, people tend to emphasize on service package, brand name and quality rather than price of the particular car. Customers are said agree to pay high to seek satisfaction for the car they are buying. This is because they are really complex and choosy in making decision as consumers have gradually become more knowledgeable and sophisticated. So, is it price a key factor in consumers buying behaviour towards car' Or it is influenced by the other factors such as service package, quality and brand of the car. 1.3 Research Questions 1.3.1 What is the main consumers’ buying behaviour in buying car' 1.3.2 Do the car dealers emphasize on service package, price, quality and brand of the car in their business' 1.4 Objectives of the Study The purpose of this study is to assess the influence of every car elements (service package, price, quality and brand of the car) on customers’ buying behaviour towards car. 1.5 Scope of Study This study selected the State of Kelantan as a research location and targeting Aman Razak Group Sdn. Bhd (the combination of Aman Razak Auto and Aman Razak Mitsubishi) which is one of the car dealers at Kota Bharu. This study is also targeting 100 respondents. 1.6 Significant of the Study Car Industry With increasing criterions emphasized by both of car dealer and car maker, it will lead to the stimulation of competition. So, they will compete and strive in order to give the best to the customers. Customers The customers may take it for granted as they have choices of criterions such as service package, price, quality and brand in buying car as car dealer and car maker take serious on customers’ needs and wants. Government High interested on foreign car may contribute to the surplus income of the country. This is because the government impose 100 percent taxes to the car dealers. So, the government may increase the income of the country. 1.7 Theoretical Framework Independent Variables Dependent Variable 2.0 LITERATURE REVIEW The element of service package We considered service package to be representing the functional aspects of the actual product offered by the car dealer of sales associates Crosby et al.’s (1990). Berry and Gresham (1986) suggested that many successful suppliers differentiate themselves from competitors not only through the offered technical aspects, but through the way in which they offer service. Therefore, a functional aspect like service have long been recognized as an important strategic weapon and is often regarded as a prerequisite to survive (Sharma and Patterson, 1999).Suppliers that offer poor service may undermine consumer attitudes, even when they provide good prices (Yoo et al.., 1998). Especially in the interpersonal and dyadic nature of buying a car, service is deemed to be an important element (Mittal and Lassar, 1996). According to Schroder, G.A (2003), three different levels of the service package were defined. The first level is called basic package, which consists of a one, three or five-year guarantee on the car, excluding the cost of maintenance. The second level is called complete package meaning a one, or five-year guarantee on the car, including the cost of maintenance. The final level distinguished is labeled plus package implying a comprehensive service package consisting of a one, three or five-year warranty on the car, including an exchange guarantee for fuel consumption, a pre-defined trade-in price after one, three or five years, but excluding cost of maintenance. The service component of business is becoming increasingly important for manufacturing companies, which has led many firms to strive towards a greater focus on service offerings (Fang et al., 2008). AB Volvo, for example, has aimed to generate 50 percent of its revenue from services, or what they call soft products, by 2015 (Witell et al., 2009), a move that will have significant effects on the company’s business model, market offering, and organization. According to the Nina Lofberg, Lars Witell and Anders Gustaffson (2010), In order to increase revenue from services, companies are extending their offerings by developing areas such as service agreements, financial services, and consulting. The focus is changing from services related to the product to services that solve customers’ problems. The common belief is that being a service-oriented manufacturer is a competitive advantage in long-term relationships and leads to improved business performance (Fang et al., 2008). Researchers suggest that increased service quality can create satisfied customers (i.e. Sawmong and Omar, 2004; Szymanski and Henard, 2001). Also, research has shown that service quality is an essential strategy for winning and retaining customers (Buzzell and Gale, 1987; Danaher, 1997; Ghobadian et al., 1994; Headley and Miller, 1993; Magi and Julander, 1996; Zeithaml, 2000). Indeed, the quality of service seems to be more important than price in differentiating a service firm from its competitors and in fostering customer loyalty (Kandampully and Suhartanto, 2000, 2003). Delivering quality service is thus vital if firms are to increase their market share and profitability. The element of car’s price There are a number of mental prices developed as consumers shop for products. These mental prices may be conceptualized as of two types: market-framed and personal (Garbarino and Slonim, 2003). A market-framed price is one that uses information about the market place as a frame of reference. One such market-framed internal price is termed reference or expected price, referring to the price that consumers expect to pay for the product at some future time (Thaler, 1985). Although price is a rather limited view of technical quality, it is usually considered as a trade-off between the financial offer a consumer is willing to pay in return for the perceived product value (Simon, 1989). Hence, the sensitivity of the consumer to price changes reflects the importance consumers attach to the value of the core product. We made a distinction between two price levels. The first price level is the manufacturer’s suggested retail price (MSRP) of a particular car. The second price level is equal to the MSRP of a particular car minus 4 per cent. According to Zeithaml (1988) price is something that must be sacrificed to obtain certain kinds of products or services from consumers’ cognitive conception. Usually, the lower the perceived price, the lower the perceived sacrifice. In addition, a sense of price fairness should be generated. If customers view a firm’s practices as unfair, negative consumer responses are likely to occur (Wirtz and Kimes, 2007). Importantly, pricing strategy is a significant part of the value challenge during economic declines. The value proposition ‘‘explains the relationships among the performance of the product, the fulfilment of the customer’s needs, and the total cost to the customer over the customer relationship life cycle’’ (Payne and Frow, 2005, p. 172). While the role and importance of price varies in the range of pricing situations which span from transactional to strategic partnerships, price becomes particularly important to buyers during demanding economic times. Determining price using the economic value model is very important during demanding economic declines. Economic value consists of the price of the customer’s best competing alternative plus the value of the supplier’s incremental offering over and above the best alternative (the positive differentiation value) (Smith and Nagle, 2005). Moreover, our study provides empirical evidence for the limited value of price as a segmentation criterion in the current car industry, supporting Crosby et al.’s (1990) assumption that price might be considered as minimal condition for consumers to engage in exchanges. 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 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 incidence of 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. The element of car’s quality Product Quality encompasses the features and characteristics of a product or service that bears on its ability to satisfy stated or implied needs. In other words, product quality is defined as “fitness for use” or ‘conformance to requirement” (Russell and Taylor, 2006). Quality refers to the correctness or appropriateness of an activity or fitness of an entity; it is compliance to a certain standard. the quality movement in the industrial world, beginning with Shewhart’s control chart technique (Shewhart, 1931), incorporating the views of operations, systems, behavioural, management function school, and encompassing Western and Eastern approaches, led to the development of the concept of TQM. Walter A. Shewhart viewed quality from two related perspectives: the objective and subjective side of quality (Shewhart, 1931). The first perspective views quality as an objective reality independent of the existence of man. In contrast, the subjective side of quality considers what we think, feel, and sense as a result of the objective reality. Zeithaml (1988) provides an overview of a debate regarding differences between objective and perceived quality. In accordance, the theory of attractive quality concerns the relationship between the objective performance of, and customer satisfaction with, an attribute. Within service management, the theory of attractive quality has been applied extensively. The theory of attractive quality explains how the relationship between the objective performance and customer satisfaction with an individual product or service attribute is dependent on how customers evaluate a product or offering (Kano et al., 1984; Kano, 2001). Customer focus practices reflect the fundamental principle of quality management – customers are the ultimate judge of quality performance (Evans and Lindsay, 2005). To satisfy customers, an organization needs to identify customers’ needs, design products and production systems to meet those needs, and measure the results as the basis for improvement. Exploitative-oriented practices pay more attention to measuring to what extent an organization has addressed customers’ current needs and wants – consistent with conformance quality. Exploratory-oriented practices aim to identify new customer needs and desires; these practices occur from the early stage of product design and are consistent with the concept of “design for quality” (Juran and Godfrey, 1999). According to a study by Ferdows (1997), firms that outsource manufacturing aim to provide high quality products at comparatively low prices. This factor combined with increased consumer awareness of quality has forced manufacturers in emerging economy countries to place more emphasis on developing technological capabilities, establishing supply networks, and enhancing quality management systems (Lee and Zhou, 2000). Quality management has long been recognized as a source of competitive advantage and one of the most important drivers of global competition (Prajogo and Sohal, 2003). Quality therefore, is critical if manufacturers are to achieve world class manufacturing and it has been identified as a crucial factor for sustainable development of ASEAN manufacturers (Phusavat and Kanchana, 2008). The element of car’s brand Over the past 20 years the literature has consistently highlighted the importance of brand perceptions and the components of these perceptions, including brand image and associations (del Rio et al., 2001; Bhat and Reddy, 1998; Keller, 1998; Aaker, 1991; Plummer, 1985). It is well documented that consumers’ perceptions of brands consist of brand awareness and brand image (e.g. Keller, 1998). Awareness of a brand is not likely to be enough to ensure a brand success, as it is not in itself likely to be sufficient reason to purchase a product. Successful brands must offer superior value to consumers and differentiate an offering from those of competitors (Fill, 2002). This is achieved by building a brand image. Brand image is defined by Keller (1993, p. 3) as “perceptions about a brand as reflected by the brand associations held in consumer memory”. This image may appeal to consumers at a functional or symbolic level (Bhat and Reddy, 1998). Products bought on a functional basis satisfy immediate and practical needs and decisions are therefore based on objective attributes and criteria, whereas symbolic (intangible) brand components satisfy symbolic needs and emotional wants, such as needs for self-expression and social identification, decisions are therefore based on subjective criteria (feelings and attitudes) (Bhat and Reddy, 1998). The functional and symbolic elements of a brand allow it to serve a number of functions to the consumer (del Rio et al., 2001). At a practical level the brand name can communicate a guarantee (e.g. quality or VFM), while product benefits can communicate benefits such as; comfort, safety, duration (del Rio et al., 2001). At an emotional level a brand name may allow the brand to serve functions in personal identification, social identification and status (symbol of power or social status, reflection of social approval, exclusivity, contribution of emotional experiences or technical superiority), product aesthetics may also contribute to this emotional appeal (del Rio et al., 2001). According to the Thanasuta (2009), firms use brands to identify and differentiate their products or services from competitors. The commercial importance of brands is undoubtedly evident. Benefits of a great brand include a short-term gain on recognition to long-term competitive advantage on loyalty, which are ultimately translated into revenues and profits. Nevertheless, there are several meanings of ‘‘brand’’ depending on whether the focus is on the narrow or broader perspective (Kandapa Thanasuta., 2009). For example, Haigh (2007) has proposed three definitions: ‘‘trademark’’ is a logo with associated visual elements, ‘‘brand’’ is a trademark with associated intellectual property rights, and ‘‘branded business’’ covers the whole organization. In principle, incremental brand-name effects are suggestive of market inefficiency, in the sense that same bundles of product characteristics are offered at different prices (e.g. Holbrook, 1992; Chao and Gupta, 1995). According to the George Baltas and Charalabos Saridakis (2009), In other words, carmakers may charge extra for little more than image. We should not however over-interpret the results. First, we remind our reader that objective product characteristics and car-type variables do explain most of price variation. Second, we have assumed that brand-name effects derive from the demand for difficult-to-quantify factors that are linked with specific brands. Unobserved product differentiation may explain, at least partially, such symptoms of market inefficiency. Third, from a theoretical standpoint brand-name premia may be regarded as returns to branding investments and incentives for carmakers to maintain their reputations. Whether brand name effects imply market inefficiency or unmeasured distinctive brand qualities remain an open and exciting question. The customer-based approach, on the other hand, contributes more extensive information on consumers’ perceptions which influence the decision making process (Kandapa Thanasuta, Thanyawee Patoomsuwan, Vanvisa Chaimahawong and Yingyot Chiaravutthi, 2009). Keller (1993) defines brand value or so-called ‘‘customer-based brand equity’’ as the ‘‘differential effect of brand knowledge on the consumer’s response to the marketing of the brand’’. Brand knowledge under this definition depends on brand awareness and image; and the favorability, strength and uniqueness of the brand association play a critical role in determining the differential response. Aaker (1991) suggests that brand equity comprises of five dimensions: brand loyalty, brand awareness, perceived quality, brand association and other proprietary assets. According to the Kandapa Thanasuta, Thanyawee Patoomsuwan, Vanvisa Chaimahawong and Yingyot Chiaravutthi (2009), each brand’s passenger car market share is a reflection of consumers’ preferences over the different car brands. Among the top five brands sold in Thailand, four are Japanese and the other is an American brand. Having entered the Thai market five decades ago, Japanese cars are viewed as the first choice for most Thai consumers due to their affordable prices, good quality and exceptional after sales service. Famous brand names can disseminate product benefits and lead to higher recall of advertised benefits than non-famous brand names (Keller, 2003). There are many unfamiliar brand names and alternatives available in the market place. Consumers may prefer to trust major famous brand names. These prestigious brand names and their images attract consumers to purchase the brand and bring about repeat purchasing behaviour and reduce price related switching behaviours (Cadogan and Foster, 2000). Furthermore, brand personality provides links to the brand’s emotional and self-expressive benefits for differentiation. This is important for brands which have only minor physical differences and are consumed in a social setting where the brand can create a visible image about the consumer itself. On other hand, fashion magazines and fashion press elaborate on the designer’s collections to the full extent and thus reinforce better images to facilitate consumer recognition (Colborne, 1996). Consumers are usually able to evaluate each of the products and brand name attributes (Keller, 2003). It is noteworthy that this information is essential for marketing managers to make informed decisions concerning product positioning, repositioning and differential advantages. According to Kohli and Thakor (1997), brand name is the creation of an image or the development of a brand identity and is an expensive and time consuming process. The development of a brand name is an essential part of the process since the name is the basis of a brand’s image. Brand name is important for the firm to attract customers to purchase the product and influence repeat purchasing behaviour. Consumers tend to perceive the products from an overall perspective, associating with the brand name all the attributes and satisfaction experienced by the purchase and use of the product. 3.0 RESEARCH METHODOLOGY 3.1 Statistical Method of Analysis This study is using primary data. A structured questionnaire was the method of data collection. Survey is distributed to the customers of Aman Razak Mitsubishi and people in Kota Bharu. The questionnaires will be distributed by face-to-face interviews. This study will require distributes 100 questionnaires to obtain sufficient data. Therefore, this study also uses SPSS to key in all the data. Then, regress the data by using AMOS software. 3.2 The Limitations of the Study In this study, there is limitation which is as my target population is in Aman Razak Group Sdn. Bhd (the combination of Aman Razak Mitsubishi and Aman Razak Auto) so the customer that come are used to have high and stable income. This leads to the limitation that the study not focuses to the customers that have low and moderate income. Besides, the second limitation is it is general study and not specific as not focusing on the particular car industry for example Proton or Produa. 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