CHAPTER 1

INTRODUCTION

In this chapter, the author presents a brief background about the research; what

occurs and why it is important to be studied. This background will be followed by

the scope of the research and the problem statement, which leads into the research

questions. In addition, the author also states the aims and benefits of this research

and finally, a preview of all chapters in this research is provided in a separate section.

1.1 Background

This research is a replication from the original journal by Azize Sahin, Cemal

Zehir, and Hakan Kitapcı (2011) titled “The Effects of Brand Experiences, Trust

and Satisfaction on Building Brand Loyalty; An Empirical Research On Global

Brands”.

During the last decade, there has been a growing realization that brands are one

of the firms’ most valuable intangible assets and that businesses has put

branding as their main priority (Keller and Ailawadi, 2004; Horppu,

Kulvalainen, Tarkiainen and Ellonen, 2008). Nowadays, to differentiate and to

stay competitive on the market, businesses build a strong brand for used as their

marketing tool (Keller and Ailawadi, 2004; Armstrong, Kotler, Harker and

Brennan 2009). The definition of branding is “to create, maintain, protect and

enhance a product’s brand” (Kotler, Armstrong, Harker and Brennan, 2009). “A

brand can also be perceived as a name, term, sign, symbol or a combination of

these, that identifies the uniqueness of the maker or seller (Kotler et al., 2009;

Armstrong et al., 2009).

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However, other factors rather than only having a strong brand are important for a

business to manage in order for them to survive the competition in the long run.

Therefore, it is essential to build a long-term relationship with the customers

since it can provide loyal customers as well as expanding the customer base. The

businesses are aiming for the so called customer-brand relationship as the form

of long-term customer relationship, which is defined as the relationship between

the brand and the customer. Brand experiences, brand satisfaction and brand

trust are three factors that have become more important during the last decade as

the customer-brand relationship is depended on these factors (Bowden, 2009;

Sahin, Zehir and Kitapci, 2011).

Branding theory in recent years has been focusing on the development of

consumer-brand relationship. In a long-term consumer-brand relationship, a

brand acts as a mechanism in engaging both the buyer and seller (Davis, Oliver

and Brodie, 2000; Fournier, 1998; Keller, 1993, 1998; Rao and Ruekert, 1994).

Brand experience is the main input of this relationship and brand loyalty is the

main output of this relationship.

Consumers now wish for a more compelling experience, which means that the

traditional brand marketing method would no longer be suitable as it mostly

appeals only to functional links with consumer (Schmitt, 1999). Schmitt (1999)

indicated that experiential marketing has proven itself to be a good starting point

for studies on consumer-brand relationship. Franzen (1999) stated that out of the

stages of the mental brand responses, consumer-brand relationship is in the final

stages. He also claimed that consumer experience and brand knowledge or brand

meanings formed the consumer-brand relationship. Another study by Keller

(2001) also suggests consumer-brand relationship as the final step for building

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brand equity. A consumer’s experience can directly form brand meanings and

the success establishment of these brand meanings would build the consumer-

brand relationship. Previous studies have focused more on emotional experience

(e.g., Babin, Darden and Griffin, 1994; Mano and Oliver, 1993; C.Yoo, Park and

Maclnnis, 1998) or related experiences (e.g., Muniz and Guinn, 2001) whereas

this present study is focusing on building consumer-brand relationship from the

brand experiential view. The differences between the traditional and experential

view can be seen from table 1.1 below.

Table 1.1: The differences between the traditional and experiential view

Point of

Comparison

Traditional View Experiential View

Product

evaluation

Utilitarian function

based on objective

features

Utilitarian, hedonic

and symbolic

meanings

Stimulus

properties

Verbal product

attributes

Verbal to nonverbal

sensory cues

Communication

content

Semantic aspects;

drawing inferences

about the source of a

message than on

explaining its effects

Focus on effects

attributable to

syntactic aspects of

message contents that

exert direct effect on

hedonic responses

Resources Monetary income

constraints and price

Maximizing overall

utility even in terms

of time as a valuable

resource

Task definition Consumer is a

problem solver

Emphasizes the

importance of primary

process thinking with

the pleasure principle

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Type of

involvement

Cognitive Cognitive and

affective

Search activity Information

acquisition

Exploratory behaviour

Individual

differences

Consumer

characteristics such as

demographics and

psychographics and

socio-economic status

Consider the revival

of personality and

allied variables such

as personality

sensation seeking,

creativity

Cognition Beliefs based on

memory schemas

Subconscious,

fantasies, free

associations, pictorial

image

Affect One aspect of hedonic

response, like or

dislike of a particular

brand

All hedonic aspects

including emotions

and feelings

Behaviour Purchasing decision Consumption

experience

Output Functional results Fun, enjoyment and

pleasure

Learning Satisfaction with

purchases

Contiguity or

associations

hierarchies

Source: Holbrook and Hirschman (1982), pg. 132

1.1.1 Industry Overview

It was only around 10 years after the personal computer (PC) industry began in

the early 1970s that the first commercial portable computer, Osborne 1, began to

emerge. It was in the summer of 1995 that the new history of laptops was

created when Microsoft became the standard for the software (Windows) and

Table 1.1: The differences between the traditional and experential view (continued)Table 1.1: The differences between the traditional and experential view (continued)Table 1.1: The differences between the traditional and experiential view (continued)

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Intel for the hardware (Intel processors) used in laptops. The higher growth of

laptops compared to desktops since 2004 (Figure 1.1) resulted from the increase

of price-performance ratio, consumer preferences for mobility, and hardware life

over the past fifteen years.

Figure 1.1 Growth of Laptops is higher than desktops (In millions of units)

It was forecasted by Datamonitor that the global PC industry growing at a

compund annual growth rate (CAGR) of 5.4% in market value during 2007-

2012 (Figure1.2, Figure 1.3) (Datamonitor, 2008). The major contributor to this

growth came from laptops as its sub-segment. This growth is actually down from

the market value during 2003-2007 with a CAGR of 7.6% (Datamonitor, 2008),

in part due to the slowing econmony. Moreover, the availability of new devices

and technologies with features such as gaming, internet access, and enterprise

applications increased the competition for the laptop segment.

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Figure 1.2 Global PC Market Value Forecast: $ billion, 2007-2012

Figure 1.3 Global PCs Market Volume Forecast: Units millions, 2007-2012

The outlook for the laptop industry will continue to alter in the coming years due

to the changes in demand as well as new technologies. New competitors like

ASUSTek are created due to the new demand for netbooks, which are low cost

ultraportable laptops and has also forced companies to change their business

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models in order to succeed. The requirements of the laptop industry may be

changed from powerful stand-alone laptops to less-powerful wirelessly

networked laptops because of those new technologies such as cloud computing

(Levy, 2008) and hosted virtual desktops (HVDs) (Gartner, 2009). The

profitability of existing manufacturers will likely be affected.

However, laptop computers have become highly popular due to the portability

that allows users to carry them anywhere as it is a personal computer designed

with the full functionality of desktop computing for mobile use and is small and

light enough. This has resulted in a wide variety of brands that can be found

nowadays with several options such as lower price, higher quality, better

performance and world-class services along with the power efficiency, touch

screen functions, and etc. Along with added features to the laptops, various

companies are even coming with various attractive promotional schemes. A

further boost in the market happened with the development of wireless

infrastructure. Nowadays, it has become a necessity in establishing wireless

hotspots, especially with major hospitality chains since wireless connectivity in

the laptop was not considered to be a luxury anymore like a few years ago. Not

only wireless hotspots that has become a necessity, the laptops itself are

becoming a necessity for all types of people. The convenience of being able to

complete daily tasks on the move, the fact that people can use laptops to watch

TV online and catch up on missed programmes are some examples of why there

is a rise in laptop ownership. The increasing usage of IT as well as the start of

many businesses in encouraging their employees to work from home has spurted

the laptop usage. Today, in order to boost productivity and further encourage

users, many companies are even giving laptops to their executives and

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employees and offering easy finance and insurance schemes as well. Hospitality,

civil aviation, health care are few examples of the sectors that witnessed faster

computerization. Education sector also caught up with the trend which

emphasizes the students on using their laptops in their various programs such as

presentations, project work, or any other related activities along with the

availability of Wi-Fi facility provided by the colleges or universities. The

increase usage of laptops by faculties and students has eventually resulted in an

increased usage of computer technology in classroom teaching and learning

process. According to the latest College Explorer study from re:fuel, the average

18-34-year-old college student owns 7 tech devices (6.9 to be precise), up from

6.4 last year. The laptop computer is the most commonly owned device, by 85%

of the college student population (Figure 1.4).

Figure 1.4 Tech Devices Owned by College Students

The author therefore wanted to conduct an empirical study of customers’

perception of brand experience, brand satisfaction, brand trust and how they

affect brand loyalty on global laptop brands used among college or university

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students. This study also investigates if brand experience has a positive effect on

brand satisfaction as well as brand trust. The data found about the market share

held by leading PC vendors in Indonesia (Figure 1.5) has become one of the

references for the author in choosing the appropriate global laptop brands to be

studied. The author also did observe the laptop brands used among students in

the respective university.

Source:© Statista 2014

Figure 1.5 Market share held by leading PC vendors in Indonesia from 1st quarter 2012 to 1st

quarter 2013

1.1.2 Exploratory Studies

The author has also conducted exploratory studies to students from Binus

International University with a total of 8 questions being asked. According to the

survey completed in freeonlinesurveys.com, results gathered from 30 respondents are as

follows.

∑ Respondents were asked whether they own a laptop or not. All of them do have

a laptop.

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Figure 1.6 Laptop owners

∑ Respondents were asked to indicate the brand of laptop that they own.

Apple was found to have the most numbers of users.

Figure 1.7 Laptop Brand

∑ Respondents were asked how long they have been using their laptop.

Results showed that 8 years being the longest time of usage and 1 month

being the shortest time of usage. 10 out of 30 respondents have been

using their laptop for 3 years.

0

1

2

3

4

5

6

7

8

9

10

Laptop Brand

Laptop Brand

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Figure 1.8 Length of usage

∑ Respondents were asked whether they are willing to change their laptop

to a new brand or not. 11 people said that they are willing to and the rest

said that they are not willing to.

Figure 1.9 Brand Replacements

∑ Respondents who are willing to replace their laptop with a new brand

were asked to indicate their new brand preference. Asus is the most

preferred brand with 4 responses out of 11 people that said yes.

0 2 4 6 8 10 12

0-11 months

12 months

24 months

36 months

48 months

60 months

72 months

84 months

96 months

Length of usage

Length of usage

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Figure 1.10 New Brand Preferences

∑ Respondents were asked how many hours approximately per day are they

using their laptop. 19 people answered in the usage range of around 1-5

hours, 10 people answered in the usage range of around 6-10 hours and 1

people answered the usage is around 12 hours.

Figure 1.11 Usage (hours/ day)

∑ Respondents were asked what they think are the 3 most important criteria

of a laptop. Here is the list of the results:

Asus, 4

Apple, 3

Acer, 1

Sony, 1

Lenovo, 1

Alianware, 1

0

2

4

6

8

10

12

14

16

18

20

1-5 hours 6-10 hours 11-15 hours

Usage (hours / day)

Usage (hours / day)

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Table 1.2 List of criteria

∑ Respondents were asked for what purposes are they using their laptop.

Most of them responded that they use it for doing work or assignments

(e.g. use of microsoft word, ppt, emails), gaming, entertainment (e.g.

youtube and other social medias), surfing/ browsing (e.g. reading news),

and watching movies.

Reliability Memory

Efficient Brand

Durable Price

High spec Hard disk

Design RAM

Fast processing speed Battery life

Affordable Good keyboard

High tech Robust

Weight Agility

Size Specification

Good speaker Performance

Storage Easy to use

Parts OS quality

Graphics Service centers

Features Appearance

Retina display User friendliness

Vga Quality

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Conclusion from the exploratory study above is that consumers do have their

own choice of laptop brand and even though most of them have stay with that

brand for a quite long period of time, they still have the willingness or have

tendency to change to a new brand. This length of usage can somehow indicate

how close their relationship with the brand is from time to time but not

necessarily means that they are loyal. The frequency of daily usage showed how

heavy users are they. The criteria and purposes showed that consumers do have

their own priorities and that it can act as a guide for companies to perform

according to their needs in order to keep them away from competing brands.

1.2 Scope

There are a lot of factors that could affect brand loyalty (dependent variable).

However, the author limited the independent variables up to only 3 variables. 3

independent variables were presented based on the previous study (Sahin et al.,

2011), namely: brand experience, brand satisfaction and brand trust. On the

other hand, as brand experience is also tested on its effect on brand satisfaction

and brand trust, brand satisfaction and brand trust act as the dependent variable

in this sense. Five hypotheses were then used to investigate the already existing

hypotheses in a new durable goods category (laptop) and country (Indonesia).

Moreover, the author investigated which factor among brand experience, brand

satisfaction and brand trust that has the strongest significant relationship to brand

loyalty. The research focused in the context of Indonesian consumers who reside

in Jakarta and Binus International University, Tarumanagara University and

Binus Regular University students are the target population. The theoretical

framework that the author adopts for this study requires that the respondents

should possess experience with a particular brand. Computer industry is choosen

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based on its growing and competitiveness (Refer to figure 1.1 and figure 1.2). As

it has been stated that laptops are becoming a necessity for all types of people,

laptops are considered to be playing an important role in consumers’ daily lives.

It is interesting to study how consumers’ relationships are with the brands,

whether or not it reflects their loyalty towards the brand. Exploratory study

conducted by the author shows that students are among the heaviest users of

laptop, as in this sense laptop has become students’ partner for their academic

purposes besides any other purposes. Students are among the Generation Y or

usually refer to the Millennial Generation, people aged between 18 and 30

(Sturm, 2012). Although this Generation is widely connected, influential and

profitable, has a high purchasing power, many businesses are concern on how is

the best strategy to create lasting relationships and engage with them (Sturm,

2012). A leading customer experience company has conducted research that

shown the general brand popularity and word-of-mouth from friends and family

are the two key customer loyalty drivers among the Generation Y segment

(Sturm, 2012). Therefore, when compared between Gen Y members and that of

older generations, Gen Y members are more changeable in their decision-

making process and loyalty. Gen Y consumers are resistant to traditional

marketing efforts and this present a particular challenge for those companies

targeting this segment to capture and retain them as loyal consumers (Bush et al.,

2004; Megehee et al., 2003; Wolburg and Pokrywczynski, 2001). They are

“notoriously” disloyal to brands, and it is difficult to secure continued repeat

purchase from them (Sebor, 2006; Wood, 2004), unlike those consumers from

the Generation X which are very loyal and committed to brands (Richie, 1995).

Thus, this research focused on students as its representative of Gen Y

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consumers. If the findings of this study show that brand experience does results

in brand loyalty, companies can then build their strategy or put more emphasize

on the brand experiences to make consumers more loyal to their brand,

especially those Gen Y consumers. Global laptop brands were used in reference

to the study of the relationship between the variables.

1.3 Proble m State ment

Brands are the interface between customers and the company which indicate that

brands are highly important in the market place. Customers would develop trust

and loyalty towards a brand and that is why companies need to consider brand

loyalty as the heart of any marketing activity. In addition, companies are forced

to concentrate on developing and maintaining a long-term relationship with the

customers. The long-term relationship is developed through customers’

experience with the company as well as the brand over a period of time (Sahin et

al., 2011). A company can succeed and stay competitive on the market by

successfully building a relationship with the customer (Ailawadi and Keller,

2004; Grewal, Levy and Lehmann, 2004; Carpenter, Moore and Fairhurst,

2005).

Companies realize that the competition in the laptop market has intensified. A

huge number of notebook brand are in the market and manufacturers or

marketers face even more challenges due to the rapid development of technology

that is growing so fast, especially challenge to survive in the market resulted

from the commoditization of laptop industry. It is easy for customers or users to

switch to another brand if they feel they are not satisfied with the current brand

and choose the better notebook brand instead. Moreover, consumers might be in

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high frequency of changing their laptops because of the low switching cost.

Laptops were priced higher compared to the desktop computers, due to the

wireless technological capabilities. It affected the sales of laptops and companies

are now trying hard to provide laptops at lower cost. It then provides consumers

with affordability and that is why the switching cost is lower. This increasing

laptop affordability may ease the users to switch between brands. The loyalty is

not as strong as when the price is expensive. Expensive price would means

higher switching cost for the consumers.

According to Kotler et al (2009), customers’ needs and wants, demographics,

lifestyles as well as shopping patterns have changed during the recent years.

There has been a fundamental shift in the way consumers evaluate and purchase

products and services. Technological revolution is driving this shift with the

availability of various new tools that help consumers assess the quality of

products and services they are considering. Consumers are able to make better

decisions through aggregation tools, advanced search engines, reviews from

other users, social media, unprecedented access to experts, and other emerging

technologies. Today, people can more easily determine the absolute value of

something to them and get closer to knowing what their experience will be with

an individual product. Consumers’ past experience with a brand will continue to

be used as their key quality proxy. When someone was thinking of buying a new

laptop, the most accessible piece of information might have been in his or her

memory: “In the past, I used Dell laptop that worked fine.” This was an easy

reference point to use and it led him or her to conclude that the new Dell model

on the market must be good too. However, much better information regarding

any model made by Dell, HP, Asus, or any other company can easily be found

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by going online. This increase the probability for consumers to switch to or try

something new, which means that brand loyalty is highly affected. With these

changes taking place, companies are also forced to meet customers’ demands in

different places and find ways to have different brand appeals to those customers

(Ailawadi and Keller, 2004; Kotler et al., 2009). This implies that the adoption

of relationship marketing is crucial for companies to stand out (Sahin et al.,

2011). Companies who do not manage to adopt relationship marketing would be

at a competitive disadvantage since it will have a negative impact on customer’s

loyalty. Thus, it is substantial to consider factors such as brand experience, brand

satisfaction and brand trust in establishing a long-term relationship because these

factors are important for those companies that are aiming at gaining brand

loyalty from their customers (Sahin et al., 2011).

Customers would prefer brands that provide them with unique and memorable

experiences (Hong-Youl and Perks, 2005). Once customers have a negative

experience, it will affect the brand negatively and will also impact the

relationship, while a positive or good experience will stay longer in the

customers’ mind (Westbrook and Oliver, 1991). Those companies with weak

customer relationship will often have less loyal customers, which will also

influence customers’ purchase patterns and the company’s competitiveness

(Kay, 2006). This is suggesting that the overall experience is closely connected

to brand loyalty (Sahin et al., 2011).

On the other hand, satisfaction is influenced by a positive experience.

Satisfaction can be described as an affective, emotional response to a purchase

situation (Anderson and Narus, 1990; Bennet and Thiele, 2005; White and Yu,

2005). It is the overall outcome from pleasurable experiences, which will lead to

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a long-term relationship (Oliver, 1999; Sahin et al., 2011). A brand trust tends to

develop from satisfied customers since these customers believe that the

companies will deliver what they have promised. Brands that fail to deliver what

it promised are not seemed to be trustworthy and would therefore lead customers

to turn to other brands. Experiences and satisfaction also play role in the

development of trust over time. Companies are in the risk of falling out of

business if they lack the ability to satisfy their customers, by means failing to

provide what customers are seeking for. Hence, to avoid customers turning to

other brands, it is important for companies to keep their promise over a

significant period of time so that customers will have an emotional connection

with the brand, leading to a brand loyalty (Iglesias, Singh and Batista- Foguet,

2011; Sahin et al., 2011).

This emphasizes that brand experience, brand satisfaction and brand trust have

become the foundation towards building a strong customer brand relationship

and creating brand loyalty (Hong-Youl and Perks, 2005; Horppu et al., 2008;

Iglesias et al., 2011; Sahin et al., 2011). In previous research, a positive

relationship among the factors as well as their impact on brand loyalty has been

found, yet in different industries and countries. The problem with many

businesses that are still not being able to manage these factors in order to gain

customer loyalty, has lead to the interest of the author to investigate how these

variables further affect brand loyalty within the electronic industry (laptop) and

in the Indonesian market.

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1.4 Aims and Benefit

The main aim of this study is to test a general framework for building a

consumer-brand relationship from an experiential view; to investigate how brand

experience, brand satisfaction and brand trust affect brand loyalty in the laptop

market as well as how brand experience affects both brand satisfaction and

brand trust. In addressing this issue, a test on research hypotheses is going to be

performed by empirically cross validating the proposed conceptual model.

Many researchers have investigated the interactions between consumers and

brands, and have concluded that the brand and the consumer can be treated as

partners in their relationship. This is conceptually similar to those relationships

between people and the idea of this is also supported by Susan Fournier (1998)

in her article titled “Consumers and their brands: Developing relationship theory

in consumer research”, where she talks about brand relationships as if it is about

relationships between people, that have common qualities between the two

participants. In studying this topic, the author found it necessary to question

whether the idea that consumers form relationships with their brands is true.

This study is important seeing that in today’s dynamic and competitive

environment, companies need to be able to create a distinctive image in the

market and thus need to know how to attract and retain the customers along with

nurturing the brand relationships with them. It is important for companies to

keep in mind that the business environment has been faced by intense

competition in all industries which resulting in a highly competitive market. This

means that companies have to maintain relevance with their customers and avoid

any kind of commoditization. The only way for companies to compete in such

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kind of situation is to develop a strong brand that has a complete holistic view

(Belaid and Behi, 2010; Keller and Lehman, 2006).

This study is important especially to marketing experts since they are involved

in applying the concept of branding in their marketing strategies. It helped them

to gain insight on how to build or create a strong consumer-brand relationship

and on how to get competitive advantage in the respective market, dealing with

the fact that customers are now becoming more informed and having easy access

to a wide range of choices (Bengston, Bardhi and Venkatramann, 2010). There is

a huge possibility to get the top ranking in the market for those companies who

create a highly gripping, pleasurable, consistent and compelling brand

experience for their customers (Frank et al., 2010).

This study became an eye-opening for those companies who previously often

thought of obtaining monetary benefits as the main motive behind striving to

strengthen their brand. What really matters or should be taken into account is

creating a healthy relationship with the customers. Once negative consumer-

brand relationships were created, it would be difficult for the brands to regain

their position in the customer’s minds and it would require extensive efforts

(Frank et al., 2010). Organizations would then realize the importance of

consumer-brand relationship and develop positive emotional attachment with

their customers (Chang and Chieng, 2006).

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1.5 Research Questions

The followings research questions addressed were used to guide the

research:

RQ 1 : Does brand experience have a positively significant effect on brand

satisfaction?

RQ 2 : Does brand experience have a positively significant effect on brand

trust?

RQ 3 : Do brand satisfaction, brand trust and brand experience has a

positively significant effect on brand loyalty?

RQ 4 : Which factor among brand experience, brand satisfaction and brand

trust that has the strongest significant relationship to brand loyalty?

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1.6 Structure

Chapter 1

Introduction which covers the background of the research, scope, problem

statement, aims and benefits, research questions formulated to guide the research

and the structure of how the author put the writings in order.

Chapter 2

Literature review discussing all related theories on brand, brand experience,

brand satisfaction, brand trust and brand loyalty.It included literature review on

the relationship of each of the independent variables with the dependent

variables as well.The resulting hypotheses are then being presented after all the

existing literature has been reviewed.

Chapter 3

This chapter covers all things related to the research method. How the research

is designed, how the questionnaire is designed, what sampling method is

applied, and how the survey is being administered.

Chapter 4

The research results being examined. It started with the pretest results of the

reliability and validity test and continues with the basic information which is the

respondents’ demographic profile. After that, discussions on the linear

regression analysis were presented in this chapter.

Chapter 5

The research report ends with the conclusion, discussion on the managerial

implication, limitation of the research, and recommendations for future research.

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