Post on 10-May-2018
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CHAPTER II
THEORETICAL FRAMEWORK
2.1. Internet and E-Commerce
Today, internet is not something new and exclusive. Most people are familiar
with the words of the internet, either just listen or know, even as the user. According
to Laudon & Traver, the definition of Internet is an interconnected network of
thousands of networks and millions of computers (sometimes called host computers
or just hosts) that linking businesses, educational institutions, government agencies,
and individuals (Laudon & Traver, 2014, p. 98). In simple words, the definition of
Internet is a worldwide network of computer networks built on common standards.
Today’s Internet has evolved the last 50 or so years. The history of the Internet can be
segmented into three phases as can we see in Figure 2.1.
Figure 2.1 Stages in The Development of The Internet.
Source: (Laudon & Traver, 2014, p. 100)
Innovation
1961 - 1974
Institutionalization
1975 - 1995
Commercialization
1995 - Now
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We also can say that Internet as big infrastructure that connect mainframe
computer and their users. People in the world can connect each other by using the
Internet. As the author mentioned before, the development and growth of the Internet
and its underlying technology has already influence of human life with services such
as e-mail, apps, newsgroup, shopping, research, instant messaging, music, videos, and
news. Those services are making the Internet identical with term of online because
people can access those services throughout 24 hours. No matter if the rest of world
asleep or even the sales office closed. Similar in tourism industry, all of traveling
activities become easier than before.
E-commerce is the use of the Internet, the Web, and apps to transact business.
More formally, digitally enabled commercial transactions between and among
organizations and individuals (Laudon & Traver, 2014, p. 50). In its development, as
we can see in Figure 2.1, the Internet entered the commercialization stages since 1995
until now. There are eight unique features of e-commerce technology that both
challenge traditional business thinking and explain why we have so much interest in
e-commerce. They are ubiquity, global reach, universal standards, richness,
interactivity, information density, personalization/customization, and social
technology (Laudon & Traver, 2014, p. 50).
A brief explanation about each of the dimensions of e-commerce technology
as following:
1. Ubiquity
Ubiquity is a synonym for omnipresence. In other words, ubiquity can be
interpreted as everywhere. In traditional/conventional travel agent business, we
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need a physical office we visit in order to transact. A physical sales office has
limitation in coverage area, hours of operation, and human resources. E-
commerce by its ubiquity, a travel agent is available just about everywhere, at all
times.
2. Global Reach
E-commerce technology allows commercial transactions to cross cultural,
regional, and national boundaries far more conveniently and cost-effectively than
in traditional commerce. Thus, an online travel agent got the opportunities to
reach out travelers who will travel to Indonesia from international market.
3. Universal Standards
Standards, means the technical standards of the Internet for conducting e-
commerce that shared by all nations around the world. With e-commerce
technologies, it is possible to easily find many of the suppliers, prices or other
information, such as, hotel/hostel availability with promo price.
4. Richness
It refers to richness of information to the complexity and content of a message.
The Internet has the potential for offering considerably more information
richness than traditional media such as printing presses, radio, and television
because it is interactive and can adjust the message to individual users. Travel
agent can put all of its products through online on its website.
5. Interactivity
It means technology allows for two-ways communication between merchant and
consumer and among consumers. This e-commerce feature allowed online travel
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agent to interact with its customer about the product, price, discount/promo, or
term and condition. Also, the technology allow consumer to share the
information of online travel agent to other consumers, such as sharing by social
media.
6. Information Density
Information density is the total amount and quality of information available to all
market participants, consumers, and merchant alike. E-commerce technologies
reduce information collection, storage, processing, and also communication cost.
At the same time, these technologies greatly increase the currency, accuracy, and
usefulness of information.
7. Personalization/Customization
E-commerce technologies permit personalization. Merchants can target their
marketing messages to specific individuals by adjusting the message to a
person’s name, interest, and past purchases. The e-commerce technologies also
permit customization. It means to change the delivered products or services
based on a user’s preferences or prior behavior.
8. Social Technology
In a way quite different from all previous technologies, e-commerce technologies
have evolved to be much more social by allowing users to create and share
content with a worldwide community.
Those unique dimensions of e-commerce technologies suggest many
possibilities for marketing and selling – a powerful set of interactive, personalized,
and rich messages are available for delivery to segmented, targeted audiences. E-
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commerce technologies also make it possible for merchants to know much more
about consumers and to be able to use this information more effectively than was ever
true in the past.
As early as 1999, fledgling internet travel companies such as Priceline,
Expedia, and Travelocity were already transforming the travel industry. They
connected consumer to flight tickets from hundred airlines, hotel rooms from about
8,000 hotels worldwide, rental cars, as well as cruises and vacation package.
Tiket.com (Figure 1.4) is one of online travel agent in Indonesia that provides
complete products and services for consumer by e-commerce.
There are several different types of e-commerce. They are Business-to-
Consumer (B2C) E-commerce, Business-to-Business (B2B) E-commerce, Consumer-
to-Consumer (C2C) E-commerce, Social E-commerce, Mobile E-commerce (M-
commerce), and Local E-commerce (Laudon & Traver, 2014, p. 59). Online travel
agent position mostly in B2C (business-to-consumer) but as the development of
mobile devices, online travel agent also leads to mobile e-commerce, such as ticket
booking and online banking from mobile devices applications.
Hannes Werthner and Francesco Ricci on their journal about “E-commerce
and Tourism” mentioned online transaction in the travel and tourism industry are
continuously increasing despite tough economic problems (Werthner & Ricci, 2004).
Tourism and Travel industry is the leading application in the B2C (business-to-
consumer) arena. Whereas other industries are displaying a stronger hold to
traditional processes, the tourism industry is witnessing an acceptance of e-commerce
to the extent that the entire industry structure is changing.
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2.2. Consumer Behavior
According to Solomon, the field of consumer behavior covers a lot of ground:
it is the study of the processes involved when individuals or group selected, purchase,
use or dispose of products, services, ideas, or experiences to satisfy needs and desires.
The needs and desires we satisfy range from hunger and thirst to love, status and even
spiritual fulfillment (Solomon, 2012, p. 31). Another definition explained that
consumer behavior reflects the totally of consumer’s decisions with respect to the
acquisition, consumption, and disposition of goods, services, activities, experiences,
people and ideas by (human) decision-making units (over time) (Hoyer & Maclnnis,
2010).
Consumer behavior is a process. Process refers to the exchange, an integral
part of marketing. The exchange is a transaction in which two or more organizations
or people give and receive something of value. Although exchange theory remains an
important part of consumer behavior, the expanded view emphasizes the entire
consumption process, which includes the issues that influence the consumer before,
during and after a purchase.
The following are the stage of consumption process which is consists of each
consumer’s perspective and marketer’s perspective as we can see in Figure 2.2
(Solomon, 2012, p. 32).
1. Pre-Purchase Stage
In consumer’s perspective, the pre-purchase stage is about how does consumer
decide that they need a product. In the pre-purchase stage, a need will triggers
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consumers to start the best sources of information and learn more about
alternative choices. Meanwhile, marketer’s perspective talks about how are
consumer attitudes toward products formed and/or changed. And whether
consumers’ cues use to infer which products are superior to others.
2. Purchase Stage
In customer’s perspective, the purchase stage is talking about whether acquiring
a product a stressful or pleasant experience and what does the purchase say about
the consumer. In marketer’s perspective, the purchase is about how the
situational factors, such as time pressure or store displays, affect the consumer’s
purchase decision.
3. Post-Purchase Stage
In consumer’s perspective, the post-purchase stage is about how the products
provide pleasure or perform its intended function. How is the product eventually
disposed of, and what are the environmental consequences of this act. While in
marketer’s perspective is talking about what determines whether a consumer will
be satisfied with a product and whether he/she will buy it again. Does this person
tell others about his/her experience with the product and influence their purchase
decisions?
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Figure 2.2 Stages in the Consumption Process.
Source: (Solomon, 2012, p. 32)
2.2.1. Consumer Buying Process
Based on (Kotler & Keller, 2011, p. 188), consumer typically passes through
five stages of buying decision process which well known as the Five-Stage Model.
They consist as follow:
1. Problem Recognition
The buying process starts when the buyer recognizes a problem or need triggered
by internal or external stimuli.
2. Information Search
Information seeking activities to learn about a product or services by looking for
reading material, phoning friends, going online, and visiting stores. Major
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information sources can be divided into four consumer groups. They are
personal, commercial, public, and experiential.
3. Evaluation of Alternatives
Consumer is not immediately making a purchase decision but influences what
he/she does beliefs and attitudes. A belief is a descriptive thought that a person
holds about something and attitudes is a person’s enduring favorable or
unfavorable evaluations, emotional feelings, and action tendencies toward some
object or idea.
4. Purchase Decision
In purchase decision, consumer makes three types of purchases, they are: trial
purchase, repeat purchase, and long-term purchase.
5. Post-purchase Behavior
After the purchase stage decision, the consumer might experience dissonance
from noticing certain disquieting features of hearing favorable things about other
brands and will be alert to information that supports his or her decision. In post-
purchase, there are three behaviors that marketers have to concern. First, Post-
purchase Satisfaction, satisfaction is a function of the closeness between
expectations and the product’s perceived performance. Second, Post-purchase
Action, a satisfied consumer is more likely to purchase the product again and will
also tend to say good things about the brand to others. Third, Post-purchase Uses
and Disposal, a key driver of sales is product consumption rate ( (Solomon, 2012,
p. 194). The more quickly buyers consume a product, the sooner they may be
back in market to repurchase it.
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Within tourism industry, attitude formation separated into different stage
between information search stage and evaluation of alternatives stage. These six
different stages will lead the tourist to form an attitude about certain destinations
(Robinson, 2012, p. 34). According to above Solomon’s stage of consumption
process, the problem recognition stage, the information stage, and the evaluation of
alternatives stage are pre-purchase behavior.
2.2.2. Online Consumer Behavior
The stages of the consumer buying process are basically the same whether the
consumer is offline or online. The difference is the way of marketing communication
only to supporting the process (Laudon & Traver, 2014, p. 374).
MARKET COMMUNICATION
Awareness – Need
Recognition Search
Evaluation of Alternatives
Purchase Post-purchase –
Loyalty
Offline Communication
Mass media TV Radio Print Media Social Networks
Catalog Print ads Mass media Sales people Product raters Store visits Social Networks
Reference groups Opinion leaders Mass media Product raters Store visits Social Networks
Promotions Direct mail Mass media Print media
Warranties Service calls Parts and repair Consumer groups Social networks
Online Communication
Targeted banner ads Interstitials Targeted event promotions Social Networks
Search engines Online catalogs Site visits Targeted email Social network
Search engines Online catalogs Site visits Product review Users evaluations Social network
Online promotions Lotteries Discounts Targeted email Flash sales
Communities of consumption Newsletters Customer email Online updates Social networks
Figure 2.3 Consumer Decision Process and Supporting Communications.
Source: (Laudon & Traver, 2014, p. 374)
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Figure 2.3 above shows the consumer buying process and the types of offline
and online marketing communication that support the process and seek to influence
the consumer before, during, and after purchase decision.
In the online model, consumer behavior focus on user characteristics, product
characteristics, and web sites features, along with traditional factors such as brand
strength and specific market communications (advertising) and the influence of both
online and offline social networks as we can see in Figure 2.4 (Laudon & Traver,
2014, p. 375).
Figure 2.4 A Model of Online Consumer Behavior.
Source: (Laudon & Traver, 2014, p. 375)
In Figure 2.4 above, we can see that Web site features, along with consumer
skills, product characteristics, attitudes towards online purchasing, and perceptions
about control over the Web environment come to the fore. Web site features include
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response time in download, navigability, and confidence in a Web site’s security.
Consumer skill refers to the knowledge that consumers have about how to conduct
online transactions. For example, not all people who has credit card can settle plane
ticket payment online. Product characteristic refers to the fact that some products can
be easily described, packaged, and shipped over the Internet. Combined with the
traditional factors, such as brand, advertising, and firm capabilities, these factors lead
to specific attitudes about purchasing at a Web site and a sense that the consumer can
control his/her environment on the Web site. Clickstream behavior refers to the
transaction log that consumers establish as they move about the Web, from search
engine to a variety sites, then to single site, then to a single page, and then, finally, to
a decision purchase.
2.3. Consumer Perception
An individual perception is very influence how people acting and behaving
towards products/services. Perception makes people has their own description about
products/services which is different with others. According to Solomon, the definition
of perception is the process by which people select, organize, and interpret sensations.
These sensations refers to the immediate response of our sensory receptors (eyes,
ears, nose, mouth, fingers, skin) to basic stimuli such as light, color, sound, odor and
texture (Solomon, 2012, p. 70).
Another theory, define Perception as how consumer views and interprets to all
information input in daily life. Every information input will be processed by the
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consumer selectively to choose the most important and relevant input then organize
and interpret the information input that gives an object that has subjective truth
(personal) and has particular meaning can be perceived. The information input can be
words, music or songs or advertisement (Hasan, 2013, p. 174).
According to Hoyer & Maclnnis, perception occurs when stimuli are registered
by one of our five senses: vision, hearing, taste, smell and touch (Hoyer & Maclnnis,
2010, p. 80). For example, when demonstration happened in Bangkok last January
2014, there were so many tourists from Indonesia that changed their route to
Singapore or Malaysia to avoid bad things happen. However, there were many
travelers still went to Thailand despite the inconducive situation.
The customers in this research are internet users specific to people who has
accessed online travel agent where products/services sell through a website. Based on
prior research (Rudiyanto, 2011), the perceived value of e-service on tourism
business is the utility of e-service. It means the quality of a travel website is a
stimulus of customer perceived value, because of there is no real product/service and
it’s difficult for customer to distinguish the quality of products, quality services, and
quality of websites.
In the process, online customer will give time, cognitive, and experience to
interact with the website. In his research, the quality of product, quality services, and
quality of websites are interrelated each other.
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2.4. Brand
A brand is a product or service whose dimensions differentiate it in some way
from other products or services designed to satisfy the same need. The differences
may be functional, rational, or tangible and intangible – related to product
performance of the brand (Kotler & Keller, 2011, p. 263). The basic branding
concepts from ( (Keegan & Green, 2013, p. 313), said that a brand is a complex
bundle of images and experiences in the customer’s mind. From this definition,
brands perform two functions. First, a brand represents a promise about a particular
product. Second, brands enable customers to better organize their shopping
experience.
2.5. Website
One of consumer buying process steps in Five-Stage model is information
search which is a step where consumer is looking for information about what they
want to be satisfied by reading material, phoning friend, visiting store, and going
online (Kotler & Keller, 2011, p. 188). Website is one of tools for information
seeking activities.
Website is documents that created in a programming language called HTML
that contain text, graphics, audio, video, and others (Laudon & Traver, 2014, p. 99).
As the development of traveling activities in Indonesia, the use of Internet among
frequent travelers and potential travelers is increasing. Frequent travelers have a
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higher tendency to use the Internet for planning activities, searching for maps and
directions and looking for places to stay. Potential travelers use the Internet to find
out information about any countries, cities, theme parks or beaches in a click. They
do not have to engage in any interactions with a sales person or be limited by the
different time zone. Thus, usable website becomes important part of an online travel
agent.
2.5.1 Website Usability
The synonyms of usability are ergonomics, ease of use, user-friendliness,
accessibility, convenience, or serviceability. So, usable website is website which is
easy to use, have simple navigation features, provide useful information and enable
users to seek further clarification from the website provider for issues they have.
According to prior journal research (Dahlan & Shuib, 2011, p. 143) a website
usability evaluation is classified into four focused. The first focused on website
functionalities (e.g. design, hypertext link, response time, and search engines) and
content. The second focused is how the authors (online travel agent itself) consider
the information quality, systems quality, services quality, and attractiveness are
essential to the website. This is supported by prior research that mentioned the quality
of product, quality services, and quality of websites are interrelated each other
(Rudiyanto, 2011). The third focused highlighted service quality as a fundamental
aspect of the overall quality of website. And the last focus on perceptual opinions
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from customers on their experience. A high usability website should enable users to
move around the website and move from one page to another.
2.5.1 Online Travel Website
Figure 2.5 below illustrate four different kinds of e-commerce presence map.
There are websites, e-mail, social media, and offline media. For each of these types
there are different platforms that you will need to address.
Figure 2.5 E-Commerce Presence Map.
Source: (Laudon & Traver, 2014, p. 178)
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The conventional travel agent can applied all these types of e-commerce
presence step by step. But, in this section will be focused on website only. The first
basic thing in order to build online travel website are:
1. Domain Name
Domain name is IP address expressed in natural language. This can be the travel
company identity or a brand name that related to the online travel agent, e.g.
www.yourtravelname.com. In Indonesia, there are many providers who sell
domain and hosting with affordable price, e.g. www.idwebhost.com, or
www.rumahweb.com
2. Hosting Services
Hosting is a storage where our data online located. Two types of hosting are free
and paid. Generally, free hosting was provided by free blog service provider,
such as www.blogger.com, www.wordpress.com, and others. But, Author advice
to take self-hosting because free hosting has term and limitation.
3. Content Management System (CMS)
A content management system (CMS) is a database software program specially
designed to manage structured and unstructured data and objects in a website
environment (Laudon & Traver, 2014, p. 186). WordPress is a blogging tool with
a sophisticated content management system.
4. Search Engine Optimization (SEO)
Search engine optimization (SEO) is techniques to improve the ranking of web
pages generated by search engine algorithm.
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2.6. Pricing
Price is an important factors that affecting customer satisfaction. Pricing
directly affects the profits of a firm. Consumer will compare the price and the product
to assess whether it is worth with the value. When products and services are priced
too high, many customers will refuse to purchase them. Not only will the firm cede
market share to its competitors, but it will relegate itself as irrelevant to many
potential customers (Smith, 2012, p. 3). But, when products and services are priced
too low, the firm will lose an important opportunity to earn profits. In traditional firm,
the price of traditional goods is usually based on fixed and variable cost.