Title

“THE INFLUNECE OF THE COMPETITIVE ADVANTAGES TO CUSTOMER

RETENTION AT INUL VISTA MANADO”

PROPOSAL

BY:

SELLY . Y . KORAH

070613111

FACULTY OF ECONOMICS INTERNATIONAL BUSINESS ADMINISTRATION

PROGRAM (IBA) SAM RATULANGI UNIVERSITY MANADO

2011

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 CHAPTER I

INTRODUCTION

1.1 Research Background

TERANGKAN SOAL PERKEMBANGAN CUSTOMER HIBUNRAN

PENGGEMAR HIBURAN MODERN

SALAH SATU FAKTOR YG MEMPENGARUHI ADALAH CUSTOMER

RETENTION

SOAL HUBUNGAN ANTARA CUSTOMER ADVANTAGEWS DAN CUSTOMER

RETETNTION.

PERUSAHAAN.

APAKAH SERVQUAL MEMPUNYAI PENGARUH PADA CUSTOMER

RETENTION INUL VISTA MANADO

1.2 Research Problem

There are two main problems that will be discussed in this current research, related with previous

background that is stated before.

1. Do service quality have significant influence to the customer retention at INUL VISTA

Manado?

2. Do Pricing have significant influence to the customer retention at INUL VISTA Manado?

3. Do employee retetntion have significant influence to the customer retention at INUL VISTA

Manado?

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1.3 Research Objective

There are two main objectives that will be discussed in this current research, related with

previous problems that are stated before. Rubah jadi pernyataan

1. To determine the general implementation of the informal Taxation for Taxpayers, at KPP

Pratama Manado.

2. To determine the impact of the general implementation of the informal Taxation for

Taxpayers, at KPP Pratama Manado.

Research Limitation

This research comes with several limitations. First, this research is proposed Analysis of

Informal Tax Implementation of Taxpayers in Manado

1.4 Research Benefit

1. Faculty of Economics

This research is expected to bring benefits as consideration in the formulation of economic

planning for faculty development.

2. Inul vista Manado

The results of research in the form of conclusions and suggestions put forward, can help

improve a better strategy and focus to manage the loans extended in the future.

1. Researcher

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It can be additional literature for researchers to come and to provide benefits and add insight

to the reading.

1.5 Literature Review

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Title Author Year Method Notes
Bachelor’s Mikael 2008 Informal payments are
Thesis: Hyykoski a frequently
Customer overlooked source of
Retention in a local public .nance in
Health Club developing Table 1.1
countries. We use Literature Review
microdata from ten
countries to establish
stylized facts on the
magnitude,
form, and
distributional
implications of this
"informal taxation."
Informal taxation is
wide- spread,
particularly in rural Source:
areas, with substantial
in-kind labor
payments. The wealthy
pay more, but pay less
in percentage terms,
and informal taxes are
more regressive than
formal taxes. Failing
to include informal
taxation
underestimates
household tax burdens
and revenue
Decentralization in
developing countries.
We discuss various
explanations for and
implications
of these observed
stylized facts.
Property Harry Kitchen November 19, Descriptive While tax relief for
Taxation: Issues Department of 2003. people who are
in Economics, deemed to have 5
Implementation Trent University insufficient ability
Peterborough, to pay is an important
Ontario, Canada policy objective of
 CHAPTER II

THEORETICAL FRAMEWORK

2.1 Consumer Behavior

2.2 Customer Retention

Customer retention is a part of Customer Relationship Management, or CRM.

According to Payne (2006, 4), CRM is a business approach that seeks to create and
develop relationships with carefully targeted customers in order to improve customer
value and corporate profitability and thereby maximize shareholder value. Hennig-
Thurau and Hansen (2000) argue that relationship marketing has become one of the
most prosperous branches of marketing theory in recent times, as well as one of the
most important management issues for the business community.

2.3 Service Quality

Berry and Parasuraman (1991, 5) define service quality as the foundation for
services marketing, because the core product being marketed is a performance.
Moreover, the performance is the product, and it is what customers buy. Hence,
companies can gain from strong service concepts giving them the opportunity to
compete for customers. A strong performance of the service concept builds
competitiveness by earning customers’ confidence and reinforcing branding, selling,
and pricing. According to studies, reliability seems to be the foremost criterion
customers consider in evaluating a company’s quality of service. Five general
dimensions that influence customers’ assessment of service quality are suggested in
the literature. From these, reliability has repeatedly emerged as the most crucial. The
dimensions are: (Berry and Parasuraman 1991, 16)

2.4 Pricing

Price is an important marketing tool. (Lowenstein 1995, 81; Kotler 2003, 471; Gupta
and Lehmann 2006, 122) When setting the price policy, companies must follow a sixstep
procedure. First, they select their pricing objectives. Second, they estimate the
demand curve. Third, they estimate how costs vary at different levels of output, at
different levels of accumulated production experience, and for differentiated

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marketing offers.

2.5 Employee Retention

For most industries high employee turnover can damage factors such as quality and
customer service. The financial cost of defecting staff can be high. The cost of
recruiting new staff can be up to 50 percent higher than the annual salary of key staff.
In addition to financial costs there is the loss of skills, knowledge, experience, and
the investment in training. (Curtis and Wright 2001) Organizations are increasingly
recognizing the significant value their employees contribute to the business.
Employees are instrumental in implementing customer service policy, improving
process efficiencies, and nurturing customer confidence. Employees provide the
mechanism for promoting customer satisfaction, improving productivity, assuring
quality control, and reducing costs. (Payne 2006, 373-374) According to Mullen
(2007), staff retention is crucial for establishing customer loyalty. The challenge of
building customer loyalty through staff excellence, according to Mullen, is in hiring
upper level staffers with sufficient emotional intelligence.

2.6 Corporate Image

Today’s consumers have more choices for their needs than ever before. Technology,
globalization, increased competition, and increased consumer mobility have
dramatically changed the way people think (Harwood, 2002). Bharadwaj et al. (1993)
argue that services are highly intangible, and therefore are high in experience and
credence qualities. As a consequence, brand reputation or corporate image is
important as a potential competitive advantage. Corporate image constructs,
according to Andreassen (1999), from four items. The items are opinion of the
company, company’s profile, perception of the company being customer oriented,
and company related word of mouth. These items were derived at after a pretest
among 400 respondents concerning banking and charter services, and applied in a
study. According to Dowling (1988), corporate image is a construct similar to the
construct of self-concept in psychology. Both terms refer to a set of thoughts and
feelings having reference to an object.

2.7 Switching Barriers

Switching barriers have been used as marketing strategies to make it costly for
customers to switch to another organization and create “customer lock-in” (Bonanni
et al. 1998). In their article Storbacka et al. (1994) represent reasons for a customer
to stay loyal to a company. They claim that even dissatisfied customers can be
retained through switching barriers. Establishing a new relationship represents some
sort of investment or effort, for example time and/or money, which constitute a barrier
for the customer against taking action when dissatisfied. According to Fornell (1992),
switching barriers include search costs, transaction costs, learning costs, loyal
customer discounts and emotional costs. These barriers provide disincentives for the

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customer to leave the current organization. According to Ranaweera and Prabhu
(2003), switching barriers have both a significant positive effect on customer
retention, as well as a moderating effect on the relationship between satisfaction and
retention. While service providers may be able to retain even dissatisfied customers
who perceive high switching barriers, firms should aim at a combined strategy that
makes switching barriers act as a complement to satisfaction.

2.8 Competitive Perspective

Most good marketing plans have a detailed section on competitive activity.

Companies of any size can learn from the competition and plan accordingly.
(Lowenstein 1995, 73) There are basically four ways a company can get closer to
customers and position its delivery strategy relative to competition: (Ries and Trout
1986; Kotler 2003, 255-260)
1. Defense. Companies with market dominance should defend against
competitors. They can create market entry barriers, create exclusive
distribution contracts, or use patent protection.
2. Offence. Companies that are strong but not market leaders can mount
offensive approaches designed to challenge the market leader. Companies
can use intensive advertising or try to develop new superior services. It can
also try to wear the competition down by imitating the competitor’s services
and products, or by expanding the market niches that surround the target
competitor’s market. An offensive strategy aims at getting the other
company’s customers to become your own.
3. Flanking. A surprise move which requires both competitive information and
customer need determination and market insight to identify segments or
niches where opportunity exists. Flanking involves competing in a market
segment that the competitor does not consider critical, using subtle advertising
campaigns and other discrete promotional measures.
4. Guerrilla warfare. The development of many tactical advantages that
especially small companies can use to keep constant pressure on
competitors. A company can do targeted legal attacks on the competition by
using product comparison advertising, executive raiding, short term alliances,
selective price cuts, or orchestrating negative publicity for a competitor.

According to Kotler (2003, 274), if a company aims to prepare an effective marketing

strategy, it must study its competitors as well as its customers. Companies need to
identify competitors’ strategies, objectives, strengths, weaknesses and reaction
patterns, and collect competitive intelligence intensively. In addition, companies need
to know how to prepare an affective competitive intelligence system. A company
should pay attention to latent competitors, who may offer new ways to satisfy
customers’ needs. As a conclusion Kotler states that as important as a competitive
orientation is in today’s markets, companies should not overdo the emphasis on
competitors, but maintain a good balance of consumer and competitor monitoring.

2.9 Relationship bteween Customer Advantages and Customer Retention

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2.10 Hypoteses

2.1.1 For ANOVA Analysis

For this research, the evidence of the relationship between Independent Variables, which

are divided into Overall Customer Satisfaction, Switching Barriers and Environmental

Dynamism with the Dependent Variable, Customer Retention of PT. Indosat, Manado Branch,

can be separated into:

1. Overall Customer Satisfaction:

a. Overall Customer Satisfaction has a significant influence to the Customer Retention of

PT. Indosat, Manado Branch.

b. Overall Customer Satisfaction does not have a significant influence to the Customer

Retention of PT. Indosat, Manado Branch.

2. Switching Barriers:

a. Switching Barriers has a significant influence to the Customer Retention of PT. Indosat,

Manado Branch.

b. Switching Barriers does not have a significant influence to the Customer Retention of PT.

Indosat, Manado Branch.

3. Environmental Dynamism:

a. Environmental Dynamism has a significant influence to the Customer Retention of PT.

Indosat, Manado Branch.

b. Environmental Dynamism does not have a significant influence to the Customer

Retention of PT. Indosat, Manado Branch.

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2.11 Conceptual Framework

CHAPTER III

RESEARCH METHODOLOGY

This chapter explains about method used in this research starts from source of data,

population and sample, definition of research variable (dependent variable and independent

variable) with variables measurement, and data analysis method. This research used Multiple

Regression Analysis Method to analyze the data.

3.1 Source of Data

There are two types of data that are used in this research:

1. Primary data

Primary data is data originated by the researcher specifically to address the research problem.

- Personal or face-to-face interview

Face-to-face interview is conducted with the customers of Telkomsel to support this

research.

- Self-administered Survey

The researcher also gets primary data from the result of questionnaires. Questionnaires

are distributed to respondents so they can respond directly on the questionnaire. There

were two sections in the questioner in the questioner that should be filled in by the

respondents. The first section asked about respondent’s identities and the second section

asked about things that related with the variables.

2. Secondary data

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Secondary data is data collected for some purpose other than the problem at hand. The secondary

data is taken from books, journals, and relevant literature from library and internet. These

secondary data were used in the background, literature review, research method, and discussions.

3.2 Population and Sample

3.2.1 Population

According to Sekaran (2000), population is “the entire group of people, events, of things

of interest that the researcher wishes to investigate”. The population that is mainly observed in

this current research is customers of Indosat in Manado.

3.2.2 Sample

According to Sekaran (2000), a sample is “a part of the population”. The sample of this

research is the users of Indosat products as many as 100 customers or respondents. The sampling

design is convenience sampling that is considered as the best way of getting some basic

information quickly and efficient. Convenience sampling is collecting information from

members of the population who are conveniently available to provide it (Sekaran, 2000).

3.3 Definitions and Measurement of Research Variable

3.3.1 Independent Variables (X1, X2, and X3):

3.3.1.1 Overall Customer Satisfaction (X1)

Overall Customer Satisfaction can be defined as the total satisfactory level that has been

felt by a customer or a group of customers, after the usage of the particular goods and utilization

of the given services in the market.

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3.3.1.2 Switching Barriers (X2)

Switching Barriers can be defined as factors that can affect a customer or a group of

customers to change their preference about the particular good or service that is already used

frequently into the new good or service in the market.

3.3.1.3 Environmental Dynamism (X3)

Environmental Dynamism can be defines as the changing in the general environment that

can affect the continuity of every business in the market.

3.3.2 Dependent Variable (Y): Customer Retention

Customer retention can be defined as the common behavior of every costumer to conduct

a frequent purchase or usage decision, after purchase particular goods or utilize a given service in

the market.

3.3.3 Measurement of Research Variables

A scale is a tool or mechanism by which individuals are distinguished as to how they

differ from one to another on the variables of interest to our study (Sekaran 2003:185).

Malhotra (2002:284) defined the Likert Scale as “An Interval scale that specifically uses

the five response categories ranging from ‘strongly disagree’ to ‘strongly agree’ which requires

the respondents to indicate a degree of agreement or disagreement with a series of statements

related to the stimulus.” The Likert scale has been chosen to consider that the data from decision

making is based on the respondent’s experience and attitude on Experiential Marketing and

Customer Loyalty. By using the Likert Scale, respondents will not have problems in

understanding and filling out the questionnaire, and it is easy for the researcher to measure,

interpreting and analyze the data.

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 In this kind of scale, variables will be measured on five points of scale (1, 2, 3, 4, and 5)

as shown below:

Table 3.1
Grading Point of Decision Making
Statement Score
Strongly agree 5
Agree 4
Uncertain 3
Disagree 2
Strongly disagree 1
Source: Data Processed, 2011

1.4 Data Analysis Method

1.4.1 Validity and Reliability Tests

To analyze the validity of questionnaire, Pearson Product Moment is used. An instrument

measure is valid if the instrument measure what ought to be measured.

Reliability test is established by testing for both consistency and stability of the answer of

questions. Alpha Cronbach is reliable coefficients that can indicate how good items in asset have

positive correlation one another (Sekaran, 2006: 177).

1.4.2 ANOVA Analysis Model

To effectively and efficiently analyze the general relationship between each independent

variable with the given dependent variable, the One-Way ANOVA procedure can provide a one-

way analysis of variance for a quantitative dependent variable by a single factor (independent)

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variable. Analysis of variance is used to test the hypothesis that several means are equal. This

technique is an extension of the two-sample t test.

In addition to determining that differences exist among the means, differentiation of

means is become one important aspect. There are two types of tests for comparing means: a

priori contrasts and post hoc tests. Contrasts are tests set up before running the experiment and

post hoc tests are run after the experiment has been conducted. You can also test for trends

across categories.

The general statistic for each group can be divided into: number of cases, mean, standard

deviation, standard error of the mean, minimum, maximum, and 95%-confidence interval for the

mean. Levene's test for homogeneity of variance, analysis-of-variance table and robust tests of

the equality of means for each dependent variable, user-specified a priori contrasts, and post hoc

range tests and multiple comparisons: Bonferroni, Sidak, Tukey's honestly significant difference,

Hochberg's GT2, Gabriel, Dunnett, Ryan-Einot-Gabriel-Welsch F test (R-E-G-W F), Ryan-

Einot-Gabriel-Welsch range test (R-E-G-W Q), Tamhane's T2, Dunnett's T3, Games-Howell,

Dunnett's C, Duncan's multiple range test, Student-Newman-Keuls (S-N-K), Tukey's b, Waller-

Duncan, Scheffé, and least-significant difference.

The characteristic of the Data in this analysis can be stated as follows: Factor variable

values should be integers, and the dependent variable should be quantitative (interval level of

measurement).

The general assumptions in this analysis can be stated as follows: Each group is an

independent random sample from a normal population. Analysis of variance is robust to

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departures from normality, although the data should be symmetric. The groups should come

from populations with equal variances. To test this assumption, use Levene's homogeneity-of-

variance test.

1.4.3 Factorial ANOVA Analysis Model

1.4.3.1 Several Significant Adjustments

To conduct this ongoing observation, there are two main adjustments that have been

done, to ensure that all the data that are obtained from the spreading questionnaires can be useful.

The first adjustment is related with the concept of the collecting data process. Because of the

concept of this research that is mainly focused on the relationship between one dependent

variable and three independent variables, so the data must be obtained statically, not

descriptively. The second adjustment is related with the system to arrange the overall data before

the obtained data will be tabulated and processed. Because of this main characteristic of the

overall data in this upcoming research is statistic-based data, so all the data must be arranged

systematically, according to all the criteria from each factor or variable, which can easy the

process of tabulation and processing.

1.4.3.2 The definition of Factorial ANOVA

The full utilization of the Factorial ANOVA analysis in the SPSS software can be

specified in the The GLM Univariate analysis system. The GLM Univariate procedure provides

regression analysis and analysis of variance for one dependent variable by one or more factors

and/or variables. The factor variables divide the population into groups. Using this General

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Linear Model procedure, null hypotheses about the effects of other variables on the means of

various groupings of a single dependent variable can be tested. Interactions between factors as

well as the effects of individual factors can be investigated, some of which may be random. In

addition, the effects of covariates and covariate interactions with factors can be included. For

regression analysis, the independent (predictor) variables are specified as covariates. Especially

for this current research, the program that has been used to measure the relationship from all the

variables or factors is SPSS version 15.

Both balanced and unbalanced models can be tested. A design is balanced if each cell in

the model contains the same number of cases. In addition to testing hypotheses, GLM Univariate

produces estimates of parameters.

This analysis commonly used a priori contrasts are available to perform hypothesis

testing. Additionally, after an overall F test has shown significance, post hoc tests can be used to

evaluate differences among specific means. Estimated marginal means give estimates of

predicted mean values for the cells in the model, and profile plots (interaction plots) of these

means which can easily visualize some of the relationships.

Residuals, predicted values, Cook's distance, and leverage values can be saved as new

variables in the data file for checking assumptions.

WLS Weight can specify a variable used to give observations different weights for a

weighted least-squares (WLS) analysis, perhaps to compensate for a different precision of

measurement.

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1.4.3.3 Hypotheses Testing

Hypothesis testing is based on the null hypothesis LB = 0, where L is the contrast

coefficients matrix and B is the parameter vector. When a contrast is specified, the data that has

been processed will create an L matrix in which the columns corresponding to the factor match

the contrast. The remaining columns are adjusted, so that the L matrix is estimable.

The output includes an F statistic for each set of contrasts, which also displayed for the

contrast differences are Bonferroni-type simultaneous confidence intervals based on Student's t

distribution.

For this current research, all the hypotheses that are mentioned in the previous chapter

can be simplified into one general hypothesis:

H0: µ = 0

H1: µ ≠ 0

µ = Symbol that shows how strong the influence between variables/factors.

Ho Will be accepted if p value (significant) > α (0.05), and vice versa.

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