The Relationships of Reputation, Advertisement Attractiveness, Community Effect with Customer Value and Positive Words of Mouth of Bear Brand Milk Consumers in Malang

International Journal of Management, Accounting and Economics Vol. 2, No. 7, July, 2015 ISSN 2383-2126 (Online) © IJMAE, All Rights Reserved www.ijmae.com 620 The Relationships of Reputation, Advertisement Attractiveness, Community Effect with Customer Value and Positive Words of Mouth of Bear Brand Milk Consumers in Malang Anung Prasetyo Nugroho 1 Management Study Programme, Tribhuwana Tunggadewi University, Jalan Telaga Warna, Tlogomas, Malang 65144, Indonesia Karunia Setyowati Suroto Animal Husbandy Study Programme, Tribhuwana Tunggadewi University, Jalan Telaga Warna, Tlogomas, Malang 65144, Indonesia Abstract One of the marketing activities undertaken by PT Nestle Indonesia to communicate Bear Brand milk in the market is by Words of Mouth marketing. However, Bear Brand Milk is only superior in several regions in Indonesia. The purpose of this study were to analyze the influence of reputation, influence of advertisement attractiveness, and community effect to customer value of Bear Brand Milk in Malang, and to analyze the influence of customer value of positive words of mouth on consumers of Bear Brand Milk in City Malang. The primary data were obtained from questionnaires spread to Bear Brand Milk consumers in Malang. The sampling technique used was accidental sampling. The analysis technique used in this study was Structural Equation Model which was operated by AMOS program 16. The variables measured were reputation, advertisement attractiveness, community effect, customer value, and word-of-mouth. Results of the study showed that reputation is an important first element in implementing customer value. The reputation effect of positive words of mouth begins with how reputation can give dominant strategic effects on increasing customer value. The advertisement attractiveness was the second variable affecting the realization of positive words of mouth. Community effect is the third important element in implementing positive words of mouth. In order to create positive words of mouth, improvement of customer value can be realized through reputation, advertisement attractiveness, and community effects. 1 Corresponding author’s email: [email protected] International Journal of Management, Accounting and Economics Vol. 2, No. 7, July, 2015 ISSN 2383-2126 (Online) © IJMAE, All Rights Reserved www.ijmae.com 621 Keywords: Marketing, structural equation model, word of mouth Cite this article: Nugroho, A. P., & Suroto, K. S. (2015). The Relationships of Reputation, Advertisement Attractiveness, Community Effect with Customer Value and Positive Words of Mouth of Bear Brand Milk Consumers in Malang. International Journal of Management, Accounting and Economics, 2(7), 620-630. Introduction The business development increasing rapidly nowadays forces companies to face stiff competitions, no exception for the competition in liquid food products, especially readyto-drink milk in cans. Facts show that the sales of ready-to-drink milk in cans are increasing quickly. This condition boosts manufacturers to improve its innovation by launching new products to enhance customer value as well in its market domination. This is in accordance with the basic principles proposed by Woodruff (1997) that, in principle, the purpose of a company is to maintain and develop the good enough understanding and knowledge of the customers. In other words the company's success is measured from the ability of the company to meet the customer needs and expectations. Customer value is a manifestation of all efforts of the company aimed to meet the expectations and needs of customers, as well as to be reflected in the goods and services offered to customers (Huber et al., 2001). Referring to the findings of Woodruff (1997); Budiman (2003); and Smith and Colgate (2007), although the customer value has been implemented by many companies for more than 2 (two) decades ago, but in fact according to them many companies still have not been able to realize the customer value in their overall marketing activities. The reference interest study was born from the criticism of DeCarlo et al. (2007) in the preceding study, which had lack of special attention from some researchers, especially the antecedent measurement of product reference interest which was still very limited. The study conducted by Mangold et al. (1999) shows that the understanding of the importance of product reference interest is still very limited in the review of the study. One of the marketing activities undertaken by PT Nestle Indonesia to communicate Bear Brand milk in the market is by Words of Mouth (WOM) marketing. Words of Mouth marketing deserves to be taken, but because the cost is relatively inexpensive as well as based on the study of Herr et al. (1991), it is found that WOM has a greater impact than written information. Furthermore, the information on WOM is believed can attract attention to the information, detain people for not turning away, and increase accessibility in order to enhance customer value (Herr et al., 1991). It is presumed that customer value to Bear Brand Milk arises because of the aggressiveness of PT Nestle Indonesia in advertising. The aggressiveness is not only recognized by Bear Brand Milk advertisement which is so intense showing on electronic media and printed media, but also by the successful slogan as the whole milk giving health. In addition, Bear Brand Milk is known by the world community because of the image embedded in society that Bear Brand Milk is a whole milk drink product bringing health. This makes consumers confident with Bear Brand Milk. The existence of a community in a society is very beneficial for a company. Community effect or often called with Bandwagon effect (herd instinct) is people often follow the crowd without International Journal of Management, Accounting and Economics Vol. 2, No. 7, July, 2015 ISSN 2383-2126 (Online) © IJMAE, All Rights Reserved www.ijmae.com 622 examining the benefit of a particular case. Community can be used as a tool for networking and retaining customers. The barrier for a company to promote its community is to build new value continuously. Thus community will increasingly feel the benefits of the product and then spread the positive effects of products to others (Smith and Colgate, 2007). The objectives of this study were to analyze the effect of reputation, advertising attractiveness, and community effects on customer value of Bear Brand Milk in Malang, and to analyze the effect of customer value on positive words of mouth on Bear Brand Milk consumers in Malang Research Method The study had been conducted in five districts of Malang, namely Klojen, Sukun, Blimbing, Lowokwaru, and Kedungkandang, from February 2014 to December 2014. Types and Sources of Data The type of data used in this study was subject data (self-report data) i.e. in the form of attitudes, opinions, experiences, or characteristic of a person or group of persons who became subjects of the study or respondents (Indriantoro and Supomo, 1999). The data used in this study were primary and secondary data sources. For this study, the primary data were obtained from questionnaires distributed among the respondents i.e. the consumers of Bear Brand Milk in Malang. Population and Sample The population used in this study was the consumers of Bear Brand milk in Malang. The sample in this study was the consumers of Bear Brand milk in Malang. In accordance with the analytical tool used i.e. Structural Equation Model (SEM), the determination of the minimum number of representative samples according to Hair et al (1998) depends on the number of indicators multiplied by 5 to 10. The minimum number of samples for this study = number of indicator x 5. The number of indicator was 18 (Table 1), so that the minimum sample size was 90, while the maximum sample size was 18 x 10 = 180. Although there is no correct sample size, the appropriate sample size is between 100-200 samples (Hair et al., 1998). Thus, in accordance with the requirements of SEM as determined, the minimum number of respondents for this study sample was 90 respondents and maximum sample was 180 respondents. Sampling Technique and Data Collection The sampling technique used was Accidental sampling i.e. sampling technique by coincidence, it means that anyone who by chance encountered by researchers could be used as a sample, if it is deemed that the person found was suitable as a data source. The data collection in this study was conducted by interview by asking personal questions using questionnaires (Personality Questionnaires). The data were collected using closed questionnaire i.e. a questionnaire used to obtain data on market orientation, innovation, entrepreneurial orientation, competitive advantage in its efforts to improve marketing performance. The questions in the list of questions were prepared by using 1 to 10 scale to obtain the data and given scores for the category of questions with answer International Journal of Management, Accounting and Economics Vol. 2, No. 7, July, 2015 ISSN 2383-2126 (Online) © IJMAE, All Rights Reserved www.ijmae.com 623 of strongly disagree or strongly agree with √ mark in the selected boxes, as exemplified as follows: Data Analysis The data analysis used in this study was Structural Equation Model (SEM) operated by AMOS program 16. The reason for the use of SEM was because SEM is a set of statistical techniques allowing an affirmation of a series of relationship which is relatively "complex" simultaneously. According to Ferdinand (2006), study modeling through SEM allows a researcher to be able to answer research questions which are regressive and dimensional (i.e. measuring what the dimensions of a concept). SEM can also identify the dimensions of a concept or construction and at the same time SEM can also measure the degree of influence or relationship factors which the dimensions will be identified. Flowchart of Conversion into Equation In the next step, the theoretical model built in the first step was illustrated in path diagram which could facilitate the researchers to recognize the causality relationship tested. The path diagram developed in this study is presented in Figure 1 with indicators presented in Table 1. Notes: X = variable indicator Z1 = error tems on the variable of customer value Z2 = error tems in the variable of Positive WOM Figure 1. The path diagram developed in this study International Journal of Management, Accounting and Economics Vol. 2, No. 7, July, 2015 ISSN 2383-2126 (Online) © IJMAE, All Rights Reserved www.ijmae.com 624 Table 1. Variable Indicators No. Variables Indicators 1 Reputation X1 Famous X2 Credibility X3 Reputation X4 Characteristics 2 Advertisement attractiveness X5 Easy-to-understand material content in the advertisement X6 Use of artist as commercials of interest X7 Easy-to-remember Jargon X8 Attractive advertising style 3 Community Effects X9 Relation X10 Style X11 Appreciation 4 Customer Value X12 performance Value X13 price Value X14 Social value 5 Word-of-Mouth X15 Happy in sharing experiences X16 Happy in recommending the product to others to consume X17 WOM communication intensity X18 Convincing others to buy Bear Brand milk In the next step, after the theoretical model was described in the flowchart, the researchers converted the specification model into a series of equations. The equations consisted of: a. Structural equation, this equation was formulated to express causality among various constructions, in which the equation was: Endogenous variables = Exogenous variables + endogenous variable + error (z) In this study the conversion of structural equation models to form the following: Customer Value = β1Reputation + β2 Advertising attractions + β3 Community Effects + z1 Positive Words of Mouth = β4 Customer Value + z2 b. The equation specification of measurement model (measurement model) in the specification it was determined which variable measure what variable, and determine a series of matrices showing correlations among variables hypothesized. Results and Discussion Structural Equation Model International Journal of Management, Accounting and Economics Vol. 2, No. 7, July, 2015 ISSN 2383-2126 (Online) © IJMAE, All Rights Reserved www.ijmae.com 625 Based on Figure 2, it could be seen that reputation affected customer value of 0.4, advertising attraction affected customer value of 0.23 and community effect affected customer value of 0.4. Based on the results of observations on the image on the full model analysis graph it could be shown that the model met the criteria of fit, it was characterized by the value of the calculation result meeting the criteria of feasible of full model. Furthermore the model met the criteria of fit; it was characterized by the value of the calculation results meeting the criteria of feasible of full model. The test results of the full model were summarized in Table 2. The calculation results of chi-square test on the full model obtained chi-square value of 154.579 which was still below the chi-square table for 128 degrees of freedom on5%level of significant as much as 155.405. The probability value was 0.055 in which these was still above the value of 0.05 as well as other criteria mostly having met the value well. These results showed that the overall models meet the criteria of fit model. Besides the above criteria, the observed indicator of reputation, advertisement attractiveness, community effect, customer value and positive words of mouth were valid because they had values above 0.5 so that no one observed indicators which was dropped (discarded). Figure 2. The Results of Testing Structural Equation Models International Journal of Management, Accounting and Economics Vol. 2, No. 7, July, 2015 ISSN 2383-2126 (Online) © IJMAE, All Rights Reserved www.ijmae.com 626 Table 2. The Full Model Test Results Criteria Cut of Value Result Evaluation Chi-Square 155.405 154.579 Good Probability > 0.05 0.055 Good GFI 0,90≤GFI≤1 0.866 Marginal AGFI 0,90≤AGFI≤1 0.821 Marginal TLI 0,95≤TLI≤1 0.977 Good CFI 0,95≤CFI≤1 0,981 Good CMIN / DF <2.00 1,208 Good RMSEA <0.08 0,044 Good Notes: ÷ 2 with df: 128; p: 5% = 155.405 Based on Figure 2 and Table 2 it was showed that each latent variable former indicator showed results meeting the criteria i.e. CR value was above 1.96 with P which was less than 0.05 and lambda value or loading factor was greater than 0.5. These results could be said that the latent variable former indicators significantly were the indicator of latent factors formed. Thus, the model used in this study may be accepted. The results of weights regression of structural equation modeling analysis is presented in Table 3. Table 2. Weights Regression of Structural Equation Modeling Analysis Paths Estimate SE CR P Label Customer value<--- Reputation .370 .098 3767 *** par_11 Customer value <--- advertisement attractiveness .236 .097 2422 .015 par_12 Customer value <--- community effect .378 .099 3,803 *** par_13 Positive WOM <--- Customer value .822 .103 7995 *** par_14 X1 <--- Reputation 1,000 X2 <--- Reputation 1,028 .092 11 222 *** par_1 X3 <--- Reputation 1,029 .098 10 548 *** par_2 X4 <--- Reputation .800 .091 8746 *** par_3 X5 <--- advertisement attractiveness 1,000 X6 <--- advertisement attractiveness .879 .085 10 327 *** par_4 X7 <--- advertisement attractiveness .985 .080 12 299 *** par_5 X8 <--- advertisement attractiveness .833 .078 10 647 *** par_6 X9 <--- community effect 1,000 X10 <--- community effect 1,065 .093 11 425 *** par_7 X11 <--- community effect 1,057 .093 11 342 *** par_8 X12 <--- Customer value 1,000 X13 <--- Customer value .906 .105 8616 *** par_9 X14 <--- Customer value .967 .108 8953 *** par_10 X15 <--- Positive _WOM 1,000 X16 <--- Positive_WOM 1,052 .096 10 970 *** par_16 X17 <--- Positive_WOM .922 .101 9092 *** par_17 X18 <--- Positive_WOM .933 .093 10 081 *** par_18 International Journal of Management, Accounting and Economics Vol. 2, No. 7, July, 2015 ISSN 2383-2126 (Online) © IJMAE, All Rights Reserved www.ijmae.com 627 Reputation Effects on Customer Value From the study done it can be concluded that the first hypothesis stated "Reputation affected positively on customer value" is acceptable. It can be concluded that the hypothesis composed in this study has the same justification and strengthens the previous study, such as the study done by Kaffashpor and Kashani (2006). The indicators of reputation were famous; credibility; reputation; and characteristics. While customer value was formed from indicators: performance value (Bear Brand Milk had a good quality); price value (the value was obtained from the expense costs); social value (there was more appreciation when consuming Bear Brand Milk). The indicators obtained based on the review of literatures and then they were developed and adapted to the circumstances existing to Bear Brand Milk. From the test results through SEM analysis tools and loading factor value obtained, it could be seen that the indicator famous and credibility were the most dominant indicators of reputation. These meant that the fame and reliability of Bear Brand Milk were the keys in determining the high reputation value of Bear Brand Milk. In this study of Bear Brand Milk it was showed that the more famous and not easily broken Bear Brand Milk, the better reputation of the company. Or it could be said that if Bear Brand Milk was famous by its high quality and not easily damaged, customers would consider that Bear Brand Milk had a good reputation. Effects of Advertisement Attractiveness on Customer Value From the study done it can be concluded that the second hypothesis stated that "Advertisement attractiveness positively affected on customer value" is acceptable. The hypothesis formulated in this study showed relatively similar results and in line with what had been formulated by the previous studies such as: Sirgy and Johar (1992). The indicators of advertisement attractiveness were easy-to-understand advertisement material content, use of celebrities as interesting commercials, easy-to-remember jargon of Bear Brand Milk, attractive advertisement style. While customer value was formed from the indicators: performance value (Bear Brand Milk had a good quality); price value (the value was obtained from the expense costs); and social value (there was more appreciation when consuming Bear Brand Milk). The indicators obtained based on the review of literatures and then they were developed and adapted to the circumstances existing to Bear Brand Milk. From the test results through SEM analysis tools and loading factor value obtained, it could be seen that easy-to-understand advertisement material content indicator was the most dominant indicator of advertisement attractiveness. It meant that easy-to-understand advertisement material content indicator was the key value in determining the advertisement attractiveness of Bear Brand Milk ad. In this study of Bear Brand Milk it was showed that the better advertisement material content value of Bear Brand Milk, the easier in creating advertisement attractiveness. This gave understanding that the reliability of the employees of PT Nestle Indonesia in providing product information through advertisement was easily understood by customers. By providing clear information through advertisement and without mistake, customers would judge that Bear Brand Milk had a high advertisement attractiveness. International Journal of Management, Accounting and Economics Vol. 2, No. 7, July, 2015 ISSN 2383-2126 (Online) © IJMAE, All Rights Reserved www.ijmae.com 628 Effects of Community Effect on Customer Value From the study done it can be concluded that the third hypothesis stated "Community effect positively affected on customer value" is acceptable. It shows that the hypotheses developed in this study are fully consistent and in accordance with what had been outlined by the previous researchers as Joo (2007). The indicators of community effects consist of relation (indicating relationships with other people), style (the fundamental and distinct expression appearing in human life) and appreciation. While customer value was formed from the indicators: performance value (Bear Brand Milk had a good quality); price value (the value was obtained from the expense costs); and social value (there was more appreciation when consuming Bear Brand Milk). The indicators obtained based on the review of literatures and then they were developed and adapted to the circumstances existing to Bear Brand Milk. From the test results through SEM analysis tools and loading factor values obtained it could be seen that the relation indicator is the most dominant indicator of the community effect. It meant that relationship was the key in determining the high effect on the community effect of Bear Brand Milk. The better relationship value of Bear Brand Milk, the better community created. Or it could be said that customers (Bear Brand Milk consumers) would acquire a broad relationship when consuming Bear Brand Milk. Effect of Customer Value on Positive WOM From the study done it can be concluded that the fourth hypothesis stated "customer value positively affected on Positive WOM" is acceptable. It can be concluded that the hypothesis composed in this study has the same justification and strengthens the previous studies such as studies carried out by Budiman (2003); Olaru et al. (2008) and Kaffashpor and Kashani (2006). The indicators of Positive WOM consisted of: Happy in sharing experiences; Happy recommending products to others; WOM communication intensity and Convincing other people to buy. While customer value was formed from the indicators: performance value (Bear Brand Milk had a good quality); price value (the value was obtained from the expense costs); and social value (there was more appreciation when consuming Bear Brand Milk). The indicators obtained based on the review of literatures and then they were developed and adapted to the circumstances existing to Bear Brand Milk. From the test results through SEM analysis tools and loading factor value obtained, it could be seen that indicators of performance value and social value were the dominant indicator of customer value. It implied that performance value and social value were important and as the key values in determining the high customer value of Bear Brand Milk. This gave understanding that performance value and social value were needed by customers (Bear Brand Milk consumer) and by the existence of performance values and social value obtained when consuming Bear Brand Milk, it could improve customer value on Bear Brand Milk. From positive WOM variable from the test results through SEM analysis tools and loading factor values obtained it could be seen that indicator of happy in sharing experiences was the most dominant indicator of Positive WOM. This gave understanding that customers were more happy sharing experiences with others when consuming Bear Brand Milk so that they could listen to pleasant experiences directly from other customers thus indirectly this had created Positive WOM.