InstructionsYour task is to offer a detailed critique of a peer-reviewed article, which
you can locate in the CSU Online Library. The article must be related to
international marketing.In your critique, address the following questions:What are the main points and arguments of the author(s)?What is your opinion of the article?How can the points and arguments of the author(s) be applied to the
lesson in this unit? (Some examples include the marketing mix, marketing
orientation, and organizational structure.)The critique should be a minimum of two pages in length in APA style;
however, a title page, a running head, and an abstract are not required. Be
sure to cite and reference all quoted or paraphrased material appropriately in
APA style.
term_8_unit_vi_article.pdf
term_8_unit_vi_study_guide.pdf
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International Journal of Management and Innovation Volume 5 Issue 1 (2013)
Does Marketing Mix Still Relevant? A Study on Herbal
Coffee in Malaysia
Shankar Chelliah, Universiti Sains Malaysia, Malaysia
Chin Kok Kwon, Open University of Malaysia, Malaysia
Sanmugam Annamalah, LimKokWing University, Malaysia
Jayaraman Munusamy, LimKokWing University, Malaysia
Abstract
Today, the major problem faced in the Tongkat Ali coffee industry is the ease of
market entry which is characterized by many new players frequently entering the
market. The industry is highly competitive and the producers are faced with the
dilemma of whether to continue to produce and sell at low profits or compete with the
many players in the fierce environment as they seek to identify and determine the
causes and factors that will lead to increased customer retention to guarantee profits.
The purpose of this research is to study the relationship between marketing mix and
customer retention for Tongkat Ali coffee. In other words, the study will attempt to
identify and link the cause and effect relationship between marketing mix and
customer retention for Tongkat Ali coffee. Therefore, many questions need to be
answered. What are the product’s attributes sought by consumers? Who are the people
that consume the product? When and where do they consume it? How frequent? What
factors affect repurchase decisions? Why do they continue to consume? For answers,
a survey was conducted on 200 Tongkat Ali coffee drinkers. The findings revealed
that product attributes and promotional activities have a positive relationship with
customer retention. Price and place do not have a relationship with customer retention.
Customer preference, positive customer experience, satisfaction and lasting customer
loyalty are factors that impact the relationship between marketing mix and customer
retention.
Keywords: Marketing Mix; Coffee industry; Marketing mix; Customer retention;
Malaysia
Introduction
Tongkat Ali is a traditional herb popular among the natives of Southeast Asia
valued for its medicinal benefits. It is also known by the scientific name of eurycoma
longifolia jack. Classified as a superior herb, it works by stimulating the natural
defensive action of the body, making it more resistant to various kinds of infections.
Tongkat Ali was first added into coffee in the late nineties and has continued to be a
popular drink since then. This study aims to examine the factors that cause and
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determine its continued preference which leads to customer retention for Tongkat Ali
coffee.
Marketing mix refers to the four major areas of decision making (4P’s) in the
marketing process that are blended and mixed to obtain the results desired by the
organization to satisfy the needs and wants of customers. It is the set of controllable,
tactical marketing tools of product, price, place and promotion (4P’s) which are the
variables that marketing managers can control in order to best satisfy customers’
needs. This study will examine the relationships between the marketing mix and
customer retention for Tongkat Ali coffee.
The research study will attempt to address the gap and identify the marketing
mix factors and its effect on customer retention for Tongkat Ali coffee. In other words,
the study will attempt to identify and link the cause and effect relationship between
marketing mix and customer retention for Tongkat Ali coffee.
In the process, the research study will also attempt to examine and reinforce two
models in customer preference, namely, ‘Customer Preference Formation’ model
(Schiffman & Kanuk, 2006) and ‘Black Box‘ model (Howard & Sheth, 1969). With
regards to customer retention, references were made to journal articles by Zineldin
(2006) on ‘The royalty of loyalty: CRM, quality and retention’ and by Mascarenhas,
Kesavan, and Bernacchi (2006) on ‘Lasting customer loyalty: a total customer
experience approach’ during the formation of the hypotheses and the research model.
Problem Statement
This involves identifying the decision problems and then translating these
problems into the research problems. The major problem faced in the Tongkat Ali
premixed coffee industry is the ease of market entry and the simple process involved
in manufacturing. Raw materials are easily available and aplenty. The basic raw
materials used are sugar, non dairy creamer, foaming powder, instant coffee powder
and Tongkat Ali powder. All the raw materials are mixed in a mixer and then
transferred to a filling machine to be filled and packed into sachets. Capital
investment is low and the product has a long shelf life of two years and not easily
perishable. Therefore, the industry is highly competitive and characterized by many
new players frequently entering the market.
Today, the market is flooded with many brands of Tongkat Ali coffee and the
consumer is spoilt for choice with the abundance of different brands of Tongkat Ali
coffee in the market. Even Nestlé has entered the fray by producing its own brand of
Tongkat Ali coffee. The entrance of Nestlé into the market has created fear and
trepidation to the existing players because of its competitive strength of brand
reputation, financial clout and vast resources.
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International Journal of Management and Innovation Volume 5 Issue 1 (2013)
Due to the abundant choice of Tongkat Ali coffee available in the market,
providers are faced with the problem of ensuring sustained preference to achieve
loyalty and retention which impacts the financial performance of the firm. The issues
faced by manufacturers and suppliers of Tongkat Ali coffee are to determine what
are the reasons for customer preference for drinking Tongkat Ali coffee and the
likelihood of sustained repurchase by the consumer or otherwise referred to as
customer retention. In other words, why do consumers want to drink Tongkat Ali
coffee and why do they continue to do so. These are the main issues faced. That is
why the marketing stimuli of product, price, place and promotion are crucial factors
that need to be examined to determine their effect and relationships with customer
retention of Tongkat Ali coffee. The variables concerned are marketing mix and
customer retention for Tongkat Ali coffee. Much research has been done on
marketing mix and customer retention individually. There is a need to link the gap
between these two variables.
This research study will attempt to address the gap and identify the marketing
mix factors and its effect on customer retention for Tongkat Ali coffee. In other words,
the study will attempt to identify and link the cause and effect relationship between
marketing mix and customer retention for Tongkat Ali coffee.
Literature Review
Marketing mix
According to the American Marketing Association, marketing mix is “a
systematic function and as a sequence of processes for originating, conveying and
transporting importance to the clients and for taking care of customer associations
with means which help the company and its stockholders.” Marketing mix can also be
defined as “a set of controllable, tactical marketing tools that work together to achieve
company’s objectives” from Wikipedia the free encyclopedia. The marketing tools of
product, price, place and promotion (4P’s) are the variables that marketing managers
can control in order to best satisfy customers in the target market. Marketing mix
refers to the four major areas of decision making (4P’s) in the marketing process that
are blended and mixed to obtain the results desired by the organization to satisfy the
needs and wants of consumers. Reference is also made to the ‘Black Box’ model of
Howard and Sheth (1969). This model is related to the black box theory of
behaviorism and is different from Schiffman et al. (2006) ‘Customer Preference
Formation’ model which studies the behavioral processes inside a consumer. Instead,
Howard et al. (1969) ‘Black Box’ model studies the interaction of stimuli, consumer
characteristics, decision process and consumer responses.
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International Journal of Management and Innovation Volume 5 Issue 1 (2013)
According to this model, environmental factors are the source of stimuli. Stimuli
are categorized under marketing stimuli and environmental stimuli. Marketing stimuli
is planned and projected by companies and comprise the marketing mix (4P’s) of
product, price, place and promotion. Companies strive to align product quality and
attributes, pricing, place or channel of distribution and promotional efforts to meet
customer’s needs and preference by identifying them through market research.
Environmental stimuli are the result of social factors based on economic, technical,
political and cultural circumstances of a society.
Economic factors affect purchasing power which in turn will influence
customer’s preference and buying decisions especially pricing. Technical factors like
new inventions and new technology products will also affect customer’s preference
and buying decisions. Political factors for example, in a country which is facing
internal fighting, will necessitate the preference and priority of basic food, shelter,
safety and amenities. Cultural factors such as religious beliefs, cultural values and
practices will also influence customer’s preference and buying decisions. The
environmental factors comprising both the marketing stimuli and environmental
stimuli will then impact the buyer’s black box. The buyer’s black box contains the
buyer characteristics and the decision process which determines the buyer’s response.
The buyer characteristics are attitudes, motivation, perceptions, personality and
lifestyle. The decision process consists of the following five stages:
( i ) Problem recognition
( ii ) Information search
( iii )Alternative evaluation
( iv ) Purchase decision
( v ) Post-purchase behaviour
The first stage is problem recognition. At this stage, the consumer has recognized
the problem and is ready to embark on a search for information on the preferred
product and service that is perceived to be able to solve the problem. The second stage
is information search. At this stage, the consumer will then conduct an internal
memory and an external search based on personal experience, commercial sources
and public sources. Perception will then play an important role in the search and
selection process. Selective exposure by the consumer will determine which type of
promotional messages the consumer will expose himself or herself to. Selective
attention by the consumer will determine which type of promotional messages the
consumer will pay attention to. Selective retention by the consumer will result in
remembering messages that are perceived more important and meaningful. The third
stage is information evaluation. At this stage, the consumer compares the various
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available products and services for consideration. In this evoked stage, the consumer
evaluates various alternatives in terms of the functional and psychological benefits
that the available product or service can offer before making the final decision. At this
point, one need to know what benefits consumers are looking for and which attributes
are important and preferred by the consumer.
The fourth stage is purchase decision. After evaluation, the consumer will select
his preference and make a purchase decision. In order for purchase intention to lead to
actual purchase certain stimuli is needed to encourage purchase, such as easy credit or
payment terms, sales promotion, free gifts, lucky draws, and competition. The final
stage is the post-purchase behavior stage. Customers normally make an evaluation of
the performance of the product or service after experiencing its use. If the customer
feels that an alternative is preferable, he will not repurchase but will more likely
switch to other alternatives. The concept of cognitive dissonance sets in because the
selection does not satisfy the customer’s needs and expectations. At this stage it is
important to convince the customer that he or she has made the right decision.
The outcome of the decision process is the buyer’s response. The response will
take the form of product choice (what to buy), brand choice (which brand), dealer
choice (where to buy), purchase timing (when to buy) and purchase amount (how
much to buy) or in short, customer preference. The important implications of this
model are as follows. It is focused on the relation between the stimuli and the
response of the consumer. Certain stimuli can act on the psychological process of the
consumer to evoke response and purchase decisions. This model encompasses
interpersonal stimuli (between people) as well as intrapersonal stimuli (within people).
It assumes that the buyer has recognized the problem and his response is a conscious,
rational decision process. It acknowledges the importance of perception in the
selection process during information search.
The limitation of this model is that it considers the buyer’s response as a result of
a conscious, rational decision process in which it is assumed that the buyer has
recognized the problem. But in reality many decisions are not made in awareness of a
determined problem by the consumer.
Customer retention
Customer retention is the tendency to keep customers buying from you.
Customer retention occurs when a customer is loyal to a company, brand or to a
specific product or service, continuing to repurchase with long-term commitment and
refusing to purchase from competitors and substitutes. The outcome of continuous
sustained customer preference is customer retention. Has anyone ever wondered why
customers continue to purchase a particular product or service repeatedly over and
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International Journal of Management and Innovation Volume 5 Issue 1 (2013)
over again? The answer lies in continuous customer preference as a result of positive
total customer experience brought about by excellent product quality and service
which may lead to customer loyalty and customer retention or sustained repurchase.
From the analysis, Mascarenhas et al. (2006) came up with the definition that
total customer experience is ‘a totally, positive, engaging, enduring and socially
fulfilling physical and emotional customer experience across all major levels of one’s
consumption chain and one that is brought about by a distinct market offering that
calls for active interaction between consumers and providers. Total customer
experience entails high interaction between customers and providers. The higher the
interactions and its quality the higher is total customer experience and thus, the higher
is lasting customer loyalty. It augments and gives added value to product and service
offer. It provides the customer an emotional, physical, intellectual, social and spiritual
engagement. It provides an enduring experience before, during and long after product
use thereby offering sustainable competitive advantages over other competing
products. It is a personal experience and changeable with the customer, product or
service.
However, Mascarenhas et al. (2006) also added a third dimension to total
customer experience which is value besides the physical and emotional aspects. The
contention is that by blending all three aspects of physical, emotional and value
elements toward target customers and achieving positive total customer experience
will build lasting customer loyalty. “We submit that when marketers offer products
and services that consistently have strong physical attributes-based satisfaction,
provide high emotional experience and high perceived value summing to a high total
customer experience they will automatically generate high and lasting customer
loyalty” (Mascarenhas et al., 2006). Based on the three major total customer
experience variables of value differentiation, provider-interaction and engaging
experiences, Mascarenhas et al. (2006) developed a multidimensional loyalty ladder
and suggested this ladder of customer loyalty a function of customer experience.
According to Zineldin’s model, the attainment of all the 5Qs of quality attributes
will lead to total quality which in turn will lead to customer satisfaction and loyalty
and the outcome is positive Customer Relationships Management (CRM). Zineldin’s
5Qs model of quality attributes is not dissimilar to the practice and concept of Total
Quality Management or popularly known under the acronym of TQM in the field of
management. Under the concept of TQM, all aspects of quality; including product,
process, procurement, delivery and service in the whole supply chain from raw
materials to the end consumer; is emphasize and all members of the organization are
committed to achieve excellent quality standards.
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Theoretical Framework
Based on literature review of past studies, a theoretical framework for marketing
mix and customer retention was formed. For an overview of the research model refer
to Figure 1 below.
Product
H1
Price
H2
Customer
H3
Retention
Place
H4
Promotion
Fig. 1 A research model for the relationship between marketing mix and customer retention
for Tongkat Ali coffee.
Research Hypotheses
Product
The physical product and service offered to the consumer. Product decisions
include product variety, quality, design, features, brand name, packaging, sizes,
services, warranties and returns. It is possibly the most important ingredient of the
marketing mix structure as product attributes provide the benefits that satisfy the
needs and wants of customers. Failure to do so will spell the end of the organization
as sales revenue generated will be limited.
Therefore, product is the most important factor in the marketing mix which
determines customer retention for Tongkat Ali coffee. The perceived product
attributes and benefits to be derived from drinking Tongkat Ali coffee is the reason
for sustained preference and customer retention. In this study, we will examine the
likelihood that the stronger the perception, the more likely the incidence of customer
retention. Therefore, this study will examine the positive relationship between product
attributes and customer retention. Based on research by Mascarenhas et al. (2006),
Howard et al. (1969), Schewe and Hiam (1998), and Mittal and Kamakara (2001),
product attributes play an important part in customer retention. According to Gale
(1999) in a report by American Productivity & Quality Centre, attributes that are
customer-defined and market-driven, reveal customer value data that organizations
can use in tactical business decisions and strategic planning. Therefore, in the context
of the Malaysian environment, we would like to know whether:
H1: Product attributes have a positive relationship with customer retention.
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International Journal of Management and Innovation Volume 5 Issue 1 (2013)
Price
Price is the amount of money that consumers pay to obtain the product. Pricing
decisions should take into account profit margins and the pricing response of
competitors. Pricing includes list price, discounts, allowances, payment period and
credit terms. Price is an important element in the marketing mix structure because low
prices may not generate enough profits for the organization. Worse still if it cannot
cover costs. Too high prices may drive away customers. This is because the amount of
money that is demanded in exchange for a product is entirely dependent on the
customer’s means, preference and needs.
According to Sherden (1997), in an article for small business reports, customer
defections may be related to price increases. Zeithaml (1988) is of the view that
monetary cost is one of the factors that influence consumer’s percep …
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