MARKETING STRATEGY PRACTICES IN INSTITUTIONS OF HIGHER LEARNING IN THE PRIVATE SECTOR

MARKETING STRATEGY PRACTICES IN INSTITUTIONS OF HIGHER LEARNING IN THE PRIVATE SECTOR BUREAU OF RESEARCH AND CONSULTANCY UNIVERSITI TEKNOLOGI MARA 40450 SHAH ALAM MALAYSIA BY: ASSOCIATE PROFESOR DR. FARDDAH HJ. HASSAN NOORAIN1 MOHAMAD SHERIFF FACULTY OF BUSINESS MANAGEMENT UNIVERSITI TEKNOLOGI MARA JUNE 2003

June 30 2003 Project File No.: 600-BRC/SKK.5/3/482 Professor Dr. Azni Zain Ahmed Assistant Vice ChanceJor (Research) Bureau of Research and Consultancy Universiti Teknologi MARA 40450 ShahAlam Malaysia. Dear Prof, SUBMISSION OF BRC'S PROJECT RESEARCH REPORT: MARKETING STRATEGY PRACTICES IN INSTITUTIONS OF HIGHER LEARNING IN THE PRIVATE SECTOR With reference to the above title I hereby submit 3 copies of the project research report for your kind attention and action. On behalf of my group member Nooraini Mohamad Sheriff, we would like to express our gratitude to Universiti Teknologi MARA and Bureau of Research and Consultancy for the grant approval and all the support given during the research undertaken. Thank you. Yours sincerely, ASSOCIATE PROF. DR. FARIDAH HJ. HASSAN Research Project Leader Faculty of Business Management Universiti Teknologi MARA 40450 Shah Alam.

CONSULTANCY BIRO PENYELIDIKAN DAN PERUNDINGAN. UNIVERSITI TEKNOLOGI MARA 40450 SHAH ALAM TEL : 5544 2094/2093 FAX : 5544 2096 Tarikh Surat Kami 11 Disember2001 : feog - g&c^ulc. if 3 ^fcsl Prof. Madya Dr. Faridah Hj. Hassan Dekan Fakulti Pengurusan Perniagaan Universiti Teknologi MARA 40450 Shah Alam. Puan, PERMOHONAN GERAN PENYELIDIKAN PROJEK 'MARKETING STRATEGY PRACTICES IN INSTITUTIONS OF HIGHER LEARNING IN THE PRIVATE SECTOR' Dengan hormatnya perkara di atas adalah dirujuk. Sukacita dimaklurnkan bahawa Kertas cadangan puan telah diluluskan oleh Jawatankuasa 'adhoc' dengan keputusan-keputusan berikut i. Tempoh projek penyelidikan ini ialah 12 bulan, iaitu rnulai 15 Disember 2001 hingga 15 Disember 2002. ii. Kos yang diluluskan ialah sebanyak RM10,000.00 ^ahaja. Seperti yang puan sedia maklum puan periu membentangkan kertas kerja di Seminar Hasil Penyelidikan BRC setelah projek tamat dijalankan nanti. iii. iv. v. Penggunaan geran yang diluluskan hanya akan diproses setelah perjanjian ditandatangani. Semua pembelian peralatan yang kosnya melebihi RM500.00 satu item periu menggunakan Pesanan jabatan Universiti Teknologi MARA (LO). Pihak puan juga dikehendaki mematuhi peraturan penerimaan peralatan. Kertaskerja boleh dibentangkan di seminar setelah 75% deraf awal laporan akhir projek dihantar ke Biro untuk semakan. Walau bagaimana pun, puan periu membuat permohonan kepada Biro Penyelidikan dan Perundingan. VI. Pihak puan dikehendaki mengemukakan Laporan Kemajuan Projek Penyelidikan bagi tempoh 6 bulan pertama, iaitu sehingga Mei 2002, dan 6 bulan berikutnya iaitu sehingga November 2002. Laporan Akhir periu dihantar sebaik sahaja projek penyelidikan disiapkan. Format menulis laporan akhir boleh diperolehi di Biro Penyelidikan dan Perundingan.

Bersama-sama ini disertakan Perjanjian untuk ditandatangani oleh. pihak puan. Sila penuhkan perjanjian berkenaan dengan menggunakan pen berdakwat hitarn dan kembalikan ke BRC untuk tindakan selanjutnya. Sekian, terima kasih. "SELAMAT MENJALANKAN PENYELIDIKAN" ; benar. JF. DR. AZNIZAIN AHMED Pe{iolong>?aib Canselor (Penyelidikan) ^yelidikan dan Perundingan s.k. Pegawai Kerja Akaun Unit Kewangan Zon 17 Biro Penyelidikan dan Perundingan

ACKNOWLEDGEMENT Syukur Alhamdulillah, praise to Allah for enabling us to complete this report. Our special thanks goes to Universiti Teknologi MARA and Bureau of Research and Consultancy for providing us the grant and time in order to gather the data both primary and secondary. It encourages and motivates us to definitely be involved in more research in future. We highly appreciate the private colleges who initially were reluctant to provide confidential information. However through much persuasion finally the colleges agree to take part with the condition that their identity will not be revealed Finally to our family members we express our heartfelt gratitude for being with us through thick and thin in our lives. The continuous support and love is reassuring, energizing and comforting in the most difficult times. May Allah bless those who have lend their hands and contributed in this research. Faridah Hj. Hassan Nooraini Mohamad Sheriff

TABLE OF CONTENT PAGES ACKNOWLEDGEMENT LIST OF FIGURES LIST OF TABLES ABSTRACT i iii iii iv CHAPTER 1: INTRODUCTION 1 1.1 Preamble 1 1.2 Statement of Problem 2 1.3 Objectives 4 1.4 Significance of Study 6 1.5 Scope of Study 7 1.6 Definition of Terms 8 1.7 Limitations of Study 11 CHAPTER 2: LITERATURE REVIEW 13 2.1 Private Higher Education 13 2.2 Theoretical Model of the Study 19 2.3 The Independent and Dependent Variables 23 2.4 The Independent Variable 23 2.5 The Dependent Variable 27 CHAPTER 3: RESEARCH METHODOLOGY 31 3.1 The Questionnaire 31 3.2 The Sample 32 3.3 Sample Characteristics 32 3.4 Data Collection 32 3.5 Population of the Study 34 3.5 Development of me Questionnaires 35 3.6 Reliability Tests for the Scales 37 3.7 Analytical Procedures and Techniques 37 CHAPTER 4: FINDINGS AND ANALYSIS 40 4.1 Marketing Factors and Importance 40 4.2 Non Marketing Factors and Decision Making 41 4.3 Marketing Factors by Levels of Programme 42 4.4 Marketing Factors by Age Categories 43 4.5 Marketing Factors by Mode of Study 44 CHAPTER 5: CONCLUSION AND RECOMMENDATION 46 BIBLIOGRAPHY 48 APPENDIX 1 - QUESTIONNAIRE 51 APPENDIX 2 - PROJECT SCHEDULING 56 ii

LEST OF FIGURES Figure 1.1 Theoretical framework of the study 5 Figure 2.1 Theoretical model of the study 20 Figure 2.2 Comprehensive theoretical framework of the study 21 LIST OF TABLES Table 4.1 Marketing Factors and Importance 41 Table 4.2 Non Marketing Factors and Decision Making 42 Table 4.3 Marketing Factors by Levels of Programme 43 Table 4,4 Marketing Factors by Age Categories 44 Table 4.5 Marketing Factors by Mode of Study 45 iii

ABSTRACT Data were obtained from eighty eight currently enrolled students in the Klang valley private colleges. A two part questionnaire focusing on background data and perceived marketing strategy dimensions in private higher education was used. A Likert scale with values of T to 7 was used to solicit student's perception on the said issues. The main objective of this study is to determine student's perception of the important dimensions of marketing strategy in private higher education. The outcome of the research uncovered that several dimensions of marketing strategy have been perceived to be important by students in private colleges, namely quality of People, Process, Physical Evidence and Promotion. The research also confirms that student's overall satisfaction of the Process is related to the quality of People, Physical Evidence and Placing. This is probable because during the students Process of Interaction with People (lecturers), Physical Evidence (facilities) and at the assigned Place (location) of the private colleges they may have experienced satisfaction. Additionally, a strong association was also observed between the Overall Satisfaction of People and with Quality of Lecturers. This would be because of the student's continuous interaction with their lecturer's and administrative staffs during their study period at the private colleges. Secondly, there is a significant correlation between non marketing factors between family and need recognition, information search, evaluation; between reference group and evaluation; and between social class and need recognition, information search. Thirdly, based on the Pearson chi square uncovered that several dimensions of marketing service have been perceived important by students in private colleges, namely students in the post graduate. Students above 32 years of age category and part time students also displayed perceived importance in marketing service. These outcomes would offer valuable insights to die management of private colleges on areas where quality of student's learning can be improved. They can also be used to improve service quality assessment in terms of its scope and depth, to mirror the changing needs of students so as to deliver satisfaction and delight. In addition, feedback on student's satisfaction would facilitate strategy formulation, which in turn could aid private colleges to remain competitive in this industry which is rapidly growing. Keywords: marketing strategy, private higher education iv

CHAPTER 1 INTRODUCTION 1.1 PREAMBLE This research is being pursued to ascertain the influence of external factors on the marketing strategy practices emphasizing on the decision making process for the services of private colleges in Malaysia. Consumer behavior is characterized by dynamism. Tn Malaysia private higher educational need of consumers are rapidly evolving and choices are plentiful. This trend is accompanied by increased in legislation, rapid changes in educational technology and shift in governmental policiestofocuson knowledge based economy and Vision 20*20. Such an array of changes would propel modifications to the decision making process of consumers for private higher education. In view of this, management of private colleges must reciprocate via their marketing strategies and programstoupkeep themselves with these changes. This contemporary scenario has spurred the researcher to study how influential these external factors (marketing and non-marketing) are on consumers' decision making process. Suchfindingswould enhance the efficiency and effectiveness of strategy design by management of private colleges. This in turn would improve their competitiveness and ensure long-term profitability and survival. l

1.2 STATEMENT OF PROBLEM The private higher education sector has been long established in Malaysia. However, only in the mid-nineties it received recognition of its importance to complement the public institutions of higher learning. By the year 2010 the private higher education sector is expectedtocreate an enrollment capacity of almost 30% for students seeking higher education. Despite of its' heighten contribution to higher education, private institutions of higher learning especially private colleges are consistently faced with challenges. Among the most prevalent ones are stiff competition particularly from the big leagues, increase consumer expectations, rapid changes in educational technology and increased number of legislature. Collectively they have resulted in escalating the cost of managing these institutions, a decline in student enrollment and henceforth profit In view of this situation, it is hoped that in-depth insights on the activities consumer go through in their decision making process would aid private colleges to undertake the necessary changes to deal with these challenges and bring back the enrollment. However, studies pertaining to consumer decision making process for education service tend to focus more on the evaluation, purchase and post purchase stage. These studies too have established that there is an association between selected external factors and consumer decision making process, but they are far from being exhaustive. Moreover the magnitude of influence these factors have on the different activities in the pre-purchase stage of decision making process for education is still unclear.

to order to achieve the above, its essential that providers of private education are well guided by laws particularly in their establishment, management and operation. The private sector in Malaysia covers a wide spectrum of education namely, the Private Educational School and Private Higher Educational Institutions. However, browsing through the literature few studies have tested on the different dimensions of service quality for private higher education. Some have focused on 'process' and 'outcome'. Others on academic and non academic aspects of education service quality (Hill 1995, Joseph and Joseph 1997). Nevertheless, these dimensions are far from exhaustive and hence merits more scope and depth to be incorporated so as to improve on its completeness as well as capture the contemporary situation that would mirror the characteristics of die private higher education industry locally. Consequently, most of these studies were undertaken in the Western culture (mainly North America). Thus, there is a need to determine empirically the factors influencing activities in the pre-purchase stage of consumer decision making process for education service. This istimelysince there is little empirical work done in the area in developing countries like Malaysia. This study would ascertain more comprehensively the external factors and their magnitude of influence on the consumer decision making process for private higher education in Malaysia.

of different socio-cultural status, while they are in the early stages of their decisionmaking process, to purchase the service of a specific private college. FIGURE 1,1; THEORETICAL FRAMEWORK OF THE STUDY External Factors Pre-purchase stages Marketing Mix Awareness of need Perceived risk and information search. ^on-marketing factors Evaluation of alternative private college Sources; Adapted from Lovelock and Wright (1999), Lovelock, Patterson and Walker (1998), Donelley and George (1981), Engel, Blackwell and Milliard (1995) and Churchill, G.A. and Peter, J.P. (1998). For the purpose of this study, the marketing mix elements would include service product, promotion, pricing, placing, people, process and physical evidence. Nonmarketing factors would include family, social class, and reference group. Thus, the implication of this assumption is that the differences in consumer activities in the prepurchase stage of their decision making process is explained by the marketing activities pursued by private colleges and the non-marketing factors influencing them. 5

1J OBJECTIVES Following the established frame of thought, the objectives of this study are to provide answers to the following questions: 1) What constitutes each dimension of the marketing mix elements which are perceived to be important by prospective students when they pursue their decision making process for private higher education? 2) What are the non marketing factors that affects the decision making process for private higher education service? 3) What are the demographic factors influencing the marketing service quality? Specifically, the study seeks to determine whether selected marketing and nonmarketing factors are important factors influencing the activities in the pre-purchase stage of consumer decision-making process. In answering the questions, the study developed a theoretical framework, which treats the marketing, and non-marketing factors, as independent variables, which are deemed to influence the activities in the decisionmaking process for higher education service. The framework as briefly depicted in Figure 1.1 suggests that, in order for private colleges to gain student enrollment, they need to understand how the different elements of marketing mix, and non-marketing factors could influence consumers in their early stages of the decision-making process. This is important so that the needful can be done with the marketing mix to influence consumers 4

1.4 SIGNIFICANCE OF THE STUDY The study of external and internal influences on the consumer decision making process seems to be important both from the theoretical and practical point of view. Although theories on consumer decision making process and its related stimulus have been fairly well developed, they have almost always focused on goods. Little attention has been focused on a similar process for the purchase of services in general and higher education in specific. Empirical work in the area continues to focus primarily on establishing the relationship between specific marketing mix elements or selected non-marketing factors with all the main stages in the consumer decision making process. Therefore an empirical contribution to this limited but significandy important field of consumer behavior would provide valuable insights to the formulation of marketing strategies and programs of service organizations. This would provide a better understanding of the influences of external factors (marketing mix {7Fs} and non-marketing factors) that prospective student's undergo. The serious attention given to the pre-purchase stage is predominantly because these stages eventually leads a prospective student into the decision of buying or not from a specific service supplier (Lovelock and Wright, (1999), Lovelock, Patterson and Wright (1998) and Donelley and George (1981). This has posed immense challenges to management of private colleges who would have to do the needful in order to survive in a 6

highly competitive and dynamic environment coupled with increased consumer expectations and legislations. This study also presents its primary contribution in the testing of the hypothetical consumer behavior model, which is divided into two aspects: (a) the relationship between the marketing mix and pre-purchase stages of consumer decision making process and (b) the relationship between non-marketing factors and the pre-purchase stages of consumer decision making process. (c) the relationship between demographic and importance of decision making. Studies of this trend are undoubtedly important in understanding how a prospective student undertakes the early stages of their decision making process. An understanding of this would enable private colleges to formulate their marketing strategies and programs to influence this process so that they become the preferred choice of college. 1.5 SCOPE OF STUDY 1) A complete perspective of consumer decision making process would encompass the Pre-purchase phase, Purchase and Consumption phase and Post-Purchase phase. However, this research would only focus on the pre-purchase phase, which encompasses awareness of need, perceived risk and information search and evaluation of service suppliers. The purchase and post purchase stages are not of 7

private colleges, private universities and university colleges, foreign university branch campus and distance learning centers. Pre-purchase: A range of activities that takes place before a purchase decision is made. It includes three main activities namely awareness of need, perceived risk and information search and evaluation of alternative service suppliers (private colleges). External factors: Are marketing inputs or marketing mix of private colleges and sociocultural inputs (a wide range of non-commercial influences which exerts a major influence on consumer). Marketing mix: A set of controllable marketing variables (product, pricing, placing, promotion, people, physical evidence and process) available to an organization which is blended to shape the nature of offerings to the target market. Non-marketing factors: A wide range of non-commercial influences (such as family, informal sources, social class, culture and sub-culture) which exerts a major influence on consumers. Service product: Service product (core and augmented service) and interactions with the firms personnel to provide a desired outcome. 9

paramount importance to private colleges currently as their prime focus at the moment is to get prospective students to choose them as their provider of private higher education. 2) The marketing mix element would focus on the basic four P's namely, Service Product, Promotion, Pricing and Placing and the extended three P's that is People, Process and Physical Evidence. This would lend a greater scope and depth to improve on its completeness. 3) The selected non-marketing factors would include family, social class and reference group would provide a better understanding of their influence on a prospective students pre-purchase stages for private higher education. 1.6 DEFINITION OF TERMS Private colleges: Educational institutions of higher learning in Malaysia that are owned, managed and financed by the private sector. They must be registered with the Ministry of Education before they can be registered with the Registrar of Business or Registrar of Companies. Awards their qualification at Certificate or Diploma level or awards Degrees through collaborative ventures with universities (locally or abroad). Program structures may include "2+1", "1+2", "3+0" or fully external. Private Higher Educational Institutions (PHEI): Educational institutions in Malaysia offering courses for students with SPM and STPM qualifications or its equivalent, leading to the award of Certificates, Diploma and Degree qualifications. They include 8

Pricing: Value of utility attachedtoa service (courses) by the private colleges and it must correspond with the customers perception of value. Placing: Concerned with the accessibility and availability of service. Accessibility deals with the issue of where, when and how services are to be delivered. Availability refers to the extent a service is obtainable or capable of being purchased, used or received. Promotion: Encompasses the personal communication (salesperson, direct marketing) and impersonal communication (sales promotion, advertising, and public relations) efforts carried out with the intention of informing, persuading and reminding the target audience of the private college's offerings. Physical evidence: The physical environment that surrounds the service or 'servicescape' that can be controlled by the service organization to enhance or constrain employees and customers activities. They include three key elements, the ambient condition, the spatial layout and the signs and symbols. Process: Service delivery process which, relates to the way service is created and delivered. It is mainly concerned with the functional aspects of service delivery such as systems,timelinessand quality of delivery. People: Refers to the employees or service personnel involved in the service delivery process. 10

Students: Individuals who are currently enrolled in the private college for a three or four year undergraduate degree program. 1.7 LIMITATIONS OF THE STUDY This study has several limitations, which may be summarized as follows: 1) The researcher recognized that there are many external and internal factors that relate to the pre-purchase stage of consumer decision making process for services. However only selected factors were chosen based on the relevance in the Malaysian private higher education sector. 2) The findings derived from this study are unique to the private higher education industry and are not generalizable to the public higher education industry. The reason being, both the sectors are characteristically different and thus faces a different set of challenges. The study is limited to only private colleges within the private higher education industry. The sample does not include private universities, private college universities and distance learning centers, which are also private higher educational centers. 3) The study might suffer from the limitation attributed to inferential analysis. The conclusion would partly be based on the respondent's recollection of what influenced their decision making process prior to their registration with the respective colleges, ll

which might be accurate or otherwise depending on their ability to recall because of the lag period. 4) Due to the cost and time constraint, a survey (drop-off method) would be commissioned to obtain the required responses. This research technique would allow responses from students to be collected relatively fast at reasonable cost. Alternatively interview sessions would have been more effective because of the personalrapportand physical presence of the interviewer which is able to provide a two-way communication. 12

CHAPTER TWO LITERATURE REVIEW 2.1 PRIVATE HIGHER EDUCATION Higher education in Malaysia is disseminated through both the public and private system. The private education system is comprised of the Private Educational Schools/Educational Institutions (PES) and Private Higher Educational Institutions (PHEI) (Abu Samah and Kelch, 1999). Private higher educational institutions would encompass private colleges, private universities and university colleges, foreign university branch campuses and distance learning center. In Malaysia, the private higher educational sector made its debut in the 1930's. From its humble beginnings then, the sector's development evolved without any central direction. In 1936 Goon's Institute was established, followed by Stamford College in 1950 and Taylor's as well as Maktab Adabi both in 1969 (Disney and Adlan, 2000). The focus of the offerings then were overseas program such as A level, American Degree Program, South Australia Matriculation Program, Professional Programs (MACPA, CTMA), Twinning and Credit Transfer Program, External program (such as LLB from the University of London) and Distance Learning Program (Shahril and Habib, 1999). With its rapid expansion over the decades, the sector eventually received formal recognition for its importance through the Private Higher Educational Institution Act 1996 (Shamsul Baharin, 2001). Since then the private higher education sector has grown to its current formidable state due to the explosion of demand for higher education In the 13

1990*8 it was evident mat public universities fell short in meeting the growing demand for higher education. This was because the growth among Malaysian's taking degree level courses increased to 23% comparedtoonly 7% in the 1980's. Private colleges too have played a vital role in "exporting education". In 1999, private colleges enrolled 10,238 foreign students, which constituted 45% of all foreign students in Malaysia. However, the private higher education industry in Malaysia is currently plagued with intense competition. According to Lew, B. (1999), the growth in the number of registered players rose from 227 in 1994 to 558 in 1998 (4%). Such an intensified situation necessitates organized and aggressive marketing efforts by private colleges. Establishing their competitive advantage too is a must to generate profits and ensure future survival (Wilson, 1996). Furthermore, amendments to the Education Act 1996 for institutions of higher learning in the private sector and the formation of the National Accreditation Board has collectively, exerted pressure on private colleges to improve the quality of education rendered (Mahdzan, 1999). Private colleges are also consistently faced with an on-going quality debate and face scrutiny by parents, students, their competitors, relevant authorities and the general public. Evidently, 55.6% of the total number of complaint's submitted to the ministry's private education department are against private colleges (Chok,1999). According to Manrita (2002) the Deputy Director of Education for private higher education announced that as of 30 June 2002 there were 269 complaints levied th against private higher education pertaining to their operations. In view of this, private 14

colleges must be committed in providing quality education to show their accountability to all stakeholders in education, from students to parents, teachers and the nation at large. It would also contribute to their differentiation and competitiveness by being the preferred choice of private college. By the same token rapid changes in educational technology has also posed challenges to management of private colleges. This is because, as they become available in the market, students expect them to be provided. As a result of these consistent changes, private colleges are now faced with an increase in student's expectations, intense competition and a decline in student's enrollment In fact, most colleges operate at below optimum enrollments in most courses, even for those such as engineering and computer studies which require heavy investment (Shamsul Baharain, 2001). This turn of events clearly indicates a need for private colleges to attract new enrollments while retaining current ones. In striving to achieve this there is a need to understand die activities consumers go through in the different stages of the decision-making process. Being a service private higher education, have characteristics such as intangibility, inseparability, heterogeneity, perishability and ownership, which separates them from goods (Zeithmal etal, 1985). This makes investigation into the decision making process specifically for services important Existing research on consumer service suggests that there are differences between goods and services in terms of decision and search process (Turley and LeBIanc, 1993) as well as evaluation process (Donnelly, J and George, W., 1981). Thus, indicating 15

Coney, 2001), culture, social class, informal and non-commercial sources (Scmffinan and Kanuk, 1997). Consumers of private higher education service would not be an exception to these influences. Hill (1995) in his research on quality of higher education identified a full range of factors both academic and non-academic factors to encompass quality education service. They include: teaching, student involvement, joint consultation, placements, facilities, career service, financial service, accommodation service, students union and counseling. Likewise, Joseph and Joseph (1997) surveyed 1000 students and identified seven dimensions of quality education service for a tertiary educational institution in New Zealand. They are program issues, academic reputation, physical aspect, cost, career opportunities, location and time. These issues predominantly rest within the service product, placing, pricing, people, process and physical evidence elements, which would influence a consumer's decision making process for higher education. On the same note, Lew (1999) reported a rising phenomena in Malaysia over the past few years where parents were actively involved in the decision making process of selecting therightprogram and colleges for their children. This was deemed necessary because of the complicated and wide array of offerings from private colleges and the risk of under delivering the service promised. However, considerably less research has been done on the influence of marketing mix elements and non-marketing factors on consumer decision-making activities, particularly in the pre-purchase stage. This is so, although conceptually they have been well discussed in literature. Empirical studies tend to focus on establishing relationship between specific marketing mix element or selected non-marketing factors with stages in 17