CHAPTER 1 INTRODUCTION

Transcription

1 CHAPTER 1 INTRODUCTION 1.1 Background This thesis project will elaborate in details about a study conducted by the author in Jakarta, Indonesia, titled: An Analysis on Customers Level of Experience toward Satisfaction, Image and Loyalty in People Based Service Industry, in Particular Hair Salon Industry in Jakarta. The research was adapted from a study done by Thomas A. Brunner, Markus Stocklin and Klaus Opwis in 2008 toward a service industry, specifically for a European night-train Company. Investigation was conducted to analyze the effect of customers level of experience toward their satisfaction, image and loyalty behavior. Through the study, author aimed to find out about the inter relationship between satisfaction, image, loyalty and level of experience. Furthermore, the author desired to comprehend the factors behind customer behavior, preferences and purchasing decision toward hair salon industry in Jakarta Previous study The study conducted by Brunner and partners in Europe was intended to propose an integrative model of satisfaction, image and loyalty and to analyze the impact of the experience within this model. While public mostly focusing their effort in satisfaction, image and loyalty while studying about customer behavior, the team identified an 1

2 2 important missing variable in the study which is level of experience. A research was conducted on a service industry as a part of a comprehensive marketing research questionnaire. Then with 941 self-administered questionnaires from a European nighttrain Company used to propose the hypotheses using structural equation modeling approach. The findings showed that customer s level of experience had a decisive role in determining their loyalty behavior. New customers with low level of experience paid more attention to satisfaction rather than image, while image was an essential factor for the experienced ones. The result of this study created new perspective in determining the role of experience level. It is important for the service industry participants to be able to identify their customer s level of experience toward the service itself since they might have varied expectation. As further implications, managers might want to develop different retention programs modified to the level of customers experience Current Setting Current study is majorly oriented to the previous study of Brunner, Stocklin and Opwis in terms of objective and hypothesis, but there are several adaptations applied to adjust to Indonesia situation and condition. Adaptations applied are in the area of research scope, questionnaire and data analysis method. CityNightLine is a sister company DB Autozug which specialized in motorail services registered in Zurich, Europe with high focus on delivering customer satisfaction and comfort. While in Indonesia, PT Kereta Api Indonesia is the only public train company

3 3 which has been a government owned corporation (BUMN1) until There are some issues related to BUMN companies such as monopoly, unhealthy competition and corrupted management. As the two companies has different company performance, vision, mission and orientation, author see that PT KAI is not a suitable setting for the study. Next, author tried to find an interesting topic yet reachable service industry with high orientation on customers satisfaction, image and loyalty that can meet the objective of the study which resulted in hair salon industry. There are some major factors that indicate hair salon industry as the most appropriate research scope to meet the objectives of this study: - Train industry is not suitable to be replicated: monopoly train service in Indonesia, with no competitor, customers have no comparison on satisfaction, image and loyalty which can caused bias on their opinion toward the service. - To implement the research on people based services. (Thomas,1978 categorized service types into equipment-based service with low people involvement and people based services with high level of people contact) - Appropriate characteristics of the hair salon industry: o Low switching cost hence easy to measure loyalty. o Frequent demand therefore easy to measure experience level and cumulative satisfaction. Badan Usaha Milik Negara is a government-owned corporation with partial or full ownership by country of Indonesia with the objective to provide product or service for the civilization (Jamal, Sukanto, & Sukiwaty) 1

4 4 o Most of hair salon do not differentiate customer based on their experience level, for this reason will contribute new insights to the industry. As the research setting is changed, the questionnaire also needs to be modified in order to match with the highlight of the study. Changes also applied in the area of data analysis method from the advance technique such as structural equation modeling of AMOS 5 to several simpler applicable methods Beauty Salon Industry In many developed countries such as United States, Japan and Korea beauty salon are mostly owned and targeted for people from middle to upper class and seen as a high prestige service business. Although the business has specific scope of target market, the business has been growing rapidly recently. Availability of beauty salon stations is rising, service offered is getting more and more vary, target market are getting wider and reaching more customers in the suburbs with lower price offered. This rapid growth in the industry is believed as contribution from the thriving economy, Baby Boomers aging crisis, and the commercialized awareness of organic benefits which resulted in the higher demand of the beauty care (Fetto, 2000, p.31; Sanabria, 2001, p.26-31). Statistics from TNS Data for Schwarzkopf Professional confirm that nearly 20 million people visited a salon at least once in the last 12 months (Know Your Customer, 2009). Hair styling accounts for almost three quarters of salon services and revenues, driving demand for styling products, devices and appliances in the retail market. The professional beauty and wellness market is worth billions of dollars in sales,

5 5 generates strong cash flows and enjoys high profit margins. It also indicates future trends in a US$250bn global personal care and cosmetics industry ( Professional Beauty and Wellness Market, n.d.). Beauty salon has always been associated with women, but in the recent days, the industry demand has enlarged its target market to both women and men. Molaro (2001) stated that a majority (63%) of medium-to-large-size salons owners and managers indicated that the number of men using their salons has increased. Men are requesting hair, skin, nail, and body treatments, and 41 percent of them purchase retail products at a salon. Aside from its prospective growth, beauty salon is mostly related with satisfaction, image and loyalty. Stewart Payne, the owner of Taylor Salon stated that they heavily rely on customers word of mouth promotion. According to Men Mean Business (2010) to a salon industry image is everything, while Gonzales (2010) in his articles of Building Customer Loyalty to Your Business by Developing a Powerful Communiction Strategy agree that bond between customer and stylists is what differentiate one salon from another and it is a powerful strategy to build customer loyalty Hair Salon Industry in Indonesia According to Wirausaha dan Keuangan (2009), In Indonesia itself, the growth of beauty salon especially hair salon has shown its massive and promising growth for the last five years. Although hair styling and make up services only categorized as tertiary sector of the economy, but market demand is high. The target market is expanding not only for the middle to high class people women, but also to middle to low class people, men and

6 6 kids. Number of hair salon outlets, in the shopping centre, business centre, hotels and apartments has been growing aggressively. Indeed, most of these outlets are always crowded by customers especially during weekends. In order to fulfill the aggressive demand in various market levels, hair salons in Indonesia often apply discrimination pricing strategy 2 depends on its location and customer characteristics. For example, Johnny Andrean Salon set higher price with more stylish and convenience salon ambience in several premium shopping centre such as Plaza Senayan and Senayan City while in other lower class shopping centre such as Blok-M Plaza and Ambassador Mal, Johnny Andrean Salon offer very affordable price. Ady Laksmana, a salon owner even said that in the middle of the industry development, the demand even surpasses the human resource capacity. He also stated that the demand of salon professional workers are keeping coming from many hair salons while there are lack of qualified and trained workers in the industry (Bisnis Bali Online, 2010). In response to the high demand of qualified salon workers, several beauty salons such as My Salon, Johny Andrean, Yopie Salon and Rudy Hadisuwarno have successfully identified the opportunity to launch beauty training schools. These schools have the objective to train human resources in order to be able to deliver remarkable services to customers. Thus, with the sufficient human resources, salon owners can do business expansion in order to fulfill market demand toward the industry. 2 Price discrimination occurs whenever price differences for the same product or service sold by a single seller (Monroe, 2003)

7 7 1.2 Scope Because of its high reliability toward the variables of satisfaction, image and loyalty hair salon is considered as the proper research setting for the study. Author also finds it is remarkably interesting to do in depth study toward this thriving booming trend in Indonesia s service industry. The research was conducted in the area of Jakarta, Indonesia, since Jakarta is one of the big cities with the highest growth rate of hair salon industry in Indonesia (Chaerunnisa, 2008). Questionnaires distributed are designed to provide better understanding regarding to customer behavior, preferences and expectations toward hair salon. Satisfaction, image, loyalty and experience level are the major variables used to measure the behavior. The salons chosen as research samples are salons with premium prices which are targeted for upper middle class people and located in shopping centre. According to Morrisey (2005), price sensitivity would vary with income level. Hence, premium priced salon is chosen because such salon customers are expected to deliver more reliable and accurate opinion about image, satisfaction and loyalty because they tend to chase quality, image and satisfaction. In comparison, budget priced salon s customers have high price sensitivity level and more price-oriented while high end salon s customers have very low price sensitivity level. Most of hair salon in Jakarta chose shopping centre because it will attract more customers and more reachable by customers. In fact, this convenience benefit of the location enables hair salon brand to grow and expand their brand (Chaerunnisa, 2008).

8 8 In order to determine the research scope in the premium priced salon industry, author held a 15 minutes focus group discussion 3 session. The respondents are 6 upper middle class people 4 from NISP Bank who are asked to recall several premium hair salon brands in shopping centre Jakarta. Focus group discussion then resulted in three most recognized hair salon brands which then chosen as the research scope area. 300 questionnaires then distributed to top three hair salons in Jakarta which are Johnny Andrean Premium, Irwan team, Toni&Guy located at EX Plaza Indonesia, Grand Indonesia, Plaza Senayan and Senayan City. Johnny Andrean is local salon and bridal industry founded in 1978 by Mr. Johnny Andrean himself. Nowadays, with the vision of delivering best service with valuable price, the salon has been a market leader in salon industry in Indonesia with almost 170 salon outlets in more than 15 cities in Indonesia (Johnny Andrean.com). Irwan Team Hairdesign is a local salon owned by Mr. Irwan Rovani Dove with high orientation on delivering superior service. Irwan Team is in cooperation with a luxury worldwide hair care brand, Kerastase, establishing the first Kerastase Institue in Indonesia. Irwan Team even won the best salon in the world 2005 according to Kerastase International (Irwan Team.com). Toni & Guy is one of the most powerful hairdressing brands in the world. It is an UK based hair care business founded in 1963 and run by Toni Mascolo. It runs franchise 3 Focus group is a panel of people (6-10) which used to exchange ideas, feelings, and experiences on a specific topic (Cooper & Schindler, 2006) 4 In the United States, the upper middle class is defined as consisting mostly of white collar professionals who not only have above-average personal incomes and advanced educational degrees (Thompson & Hickey, 2007)

9 9 salons worldwide with more than 400 salons in the organization and also has its own UK magazine and in-salon television station, manufactures many hair care and hair iron products (Toni&Guy.com, Wikipedia.org, 2010). Briefly, the targeted respondents were Johnny Andrean, Irwan Team and Toni&Guy Salon customers with vary level of experience. The respondents were asked to complete the questionnaires regarding to its experience toward the hair salon. 1.3 Research Problem According to the previous journal, satisfaction and image are thought to have high influence in determining many forms of customer loyalty. Importance of customer loyalty is considered being fundamentally important for companies, thus there are numerous studies already conducted in order to examine satisfaction, image and loyalty while very few of them have considered to add experience as the variable of the research. In Indonesia, hardly any of hair salons have developed particular customer services based on their experience level. Hair salons do not have customer s personal database and transaction records, thus new and experienced customers are treated similarly. In fact, according to Kotelnikov; new and experienced customers need different customer approach strategies. New customers require acquiring customer strategy while experienced customers can be approached using customer retention program such as membership programs and after sales satisfaction and complaint surveys. This research was conducted in order to continue the effort of the previous study in filling the gap of the consumer behavior studies. There will be studies on integrative

10 10 model of satisfaction, image and loyalty as well as analyses on the impact of experience within the constructs. Furthermore, the previous journal proposed the importance of distinguishing customers satisfaction measurement in two ways, transaction-specific and cumulative. Hence, customer satisfaction section in the questionnaire is divided into two parts of specific and cumulative satisfaction. Two intentions above are expected to be able to make contributions to the existing understanding of consumer behavior. 1.4 Purpose of Study Based on the existed research paper done by Brunner, Stocklin and Opwis, the author wants to apply the investigation in Indonesian market. Customer satisfaction and image are very important in order to build customer loyalty. But, few companies realized how customer s level of experience can affect their behavior, as the level of experience vary, customer s expectation towards the service offered will also be differed. Through this study, the author wanted to be able to reveal the role of customers level of experience toward satisfaction, image and loyalty by gathering data on customers point of view and preference that will affect their purchasing and repurchase behavior. The aims of this study are: - Facilitate hair salon owner in achieving deeper understanding toward factors that will affect customer s repurchase behavior.

11 11 - Provide benefits to hair salon in exploring model of satisfaction, image and loyalty and to analyze the impact of experience. - Give insights to hair salon in clarifying the role of experience factor in predicting customer loyalty. - As an investigation the differ characteristics between new customers from experienced ones. - Providing knowledge of the importance distinguishing specific-transaction satisfaction and cumulative satisfaction. 1.5 Structures This thesis is divided into five chapters, which consist of the following: Chapter one: Introduction This chapter will provide background, insights about previous study and hair salon industry in Indonesia as well as research scope, research problem and purpose of the study. Chapter two: Theoretical Foundation Theoretical foundation of the research scope used by the author in analyzing problems and doing the study in the research Chapter Three: Research Methodology The third chapter discusses methodology, the study, questionnaire and the sampling method used for the study that have been modified from the previous study to the current setting

12 12 Chapter four: Findings The findings consist of the result and analysis of the statistical data gathered from the respondents questionnaires. Chapter five: Conclusion Chapter five concludes the whole research and finding, comes along with the insights, recommendation and suggestion for future improvements.