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CHAPTER II

THEORITICAL REVIEW

2.1 Marketing Mix

Hakkanson, as quoted by Hui (2007) revealed that the concept of

Marketing Mix first introduced by Rasmunssen in 1955, then further developed

by McCarthy in 1960, and finally perfected by Philip Kotler in 1967.

Kottler (2010) defines Marketing Mix as a set of control tactical

marketing including product, price, location, and promotions that are used to

achieve the desired goal of target marketing.

And Ivy (2008) revealed that the Marketing Mix is a set of marketing

tools used by companies or institutions to create the desired response from the

target consumer.

Furthermore Ivy (2008) revealed that in the beginning, this traditional

concept of Marketing Mix consists of only 4P, namely Product, Price, Place,

Promotion. 4P concept is synonymous with the product in the form of goods

(tangible products), while for products related to services are identical with the

concept of 7P of Marketing Mix, where from the base 4P of Marketing mix

added three new elements such as People, Process, Physical Evidence.

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The purpose of the adding these three new elements are in order to meet

consumer needs of service providers. So the concept 7P of the Marketing Mix

are : Product, Price, Place, Promotion, People, Process, and Physical Evidence.

Why in this study the authors use the 7P of Marketing Mix? Because the

object of this research is engaged in air transport services and if we want to

examine on matters relating to marketing and also the service, the 7P of

Marketing Mix element will definitely participate in this research.

2.1.1 Product

Ivy (2008) defines product as what is being sold. It is more than a

simple set of tangible features, it is a complex bundle of benefits that satisfy

customer needs.

Low and Tan base on Kottler definition about product, describe

product as anything that can be offered to a market for attention, acquisition,

use or consumption; it includes physical objects, services, personalities,

places, organization services and ideas.

Dwyer (2010) states that a product has a life cycle such as that

possessed by living things. The life cycle is then referred to as Product Live

Cycle or PLC which are the cycle or stages of a product. These stages consist

of (a) Introduction, at this stage, a product was introduced to the wider

community in order to attract the attention of the public. In this stage the need

for high profits are not required, the only needs on this stage is people

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awareness and at this stage also determine the market price. (b) Growth, at

this stage the product began to gain wide attention from society, people have

started using the products, the company began to gain profit from products

sold and sales and marketing strategy began to be maximized. At this stage

also competitors of these products began to appear. (c) Maturity, to reach this

stage, a successful product must first pass through two previous stages

(introduction and growth stage). At this stage the product is in the golden

peak, a very large volume of product sales, companies get profit greatly, and

the competitors are trying to steal the position of the peak. (d) Decline, at this

stage, a product begins to lose its golden ages, people have started turning to

other products that are more interesting. At this stage a sale or discount

strategy are commenced by the companies. Companies must began to develop

a new product to replace this product. (e) Withdrawl, at this stage of a product

are not enthused by the public anymore. You could say at this stage of the

product through a phase of his death.

From the definitions above can be concluded that the product or

products are the end result of the process of fulfillment of human needs .

2.1.2 Price

Kotler (2010) define price or prices as the amount of money owed by

customers to obtain a product. More details, Kotler (2010) defines price as a

sum of money to be paid for a product / service, as well as the overall value of

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goods and services as exchanged by the customer when using the products /

services.

Meanwhile, according to Ivy (2008), price is a basic element of the

marketing mix that charged to the consumer in exchange for what they get.

Dwyer (2009) explains that the price is the money paid by the buyer to

the seller of any goods or services. Furthermore, Dwyer also explained that

the price is a very important base in the field of marketing and business.

Types of pricing (a) Premium Pricing, usually applied to the goods sold or

can only be obtained through special channels / premium only. (b)

Penetration Pricing, usually applied by giving a free subscription to a

package of a product in order to attract the target market. (c) Economy

Pricing, usually applied by selling only the units of the goods only without

any bonuses and other gifts. (d) Price Skimming, usually applied to the goods

or services that are launched first time through the internet. (e) Psychological

Pricing, usually applied by using the decimal fraction of a price, for example

Rp999.999, - (f) Product Line Pricing, the examples is if you take 1month

subscription you have to pay Rp100.000,- If you subscribe for 2 months you

only pay Rp200.000,- but if you take 3 months, you can get it only Rp

275.000,- (g) Pricing Variations, usually implemented by providing the

cheapest price for the first buyer in a given period. (h) Optional Product

Pricing, usually implemented in a way to charge extra for a product or service

are optional. (i) Captive Product Pricing, usually applied if we buy an item or

product, updates on the products come from the same manufacturer. (j)

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Product Bundle Pricing, usually applied to give a price on a product that's put

together with other products. An example is to provide a toothbrush for free

when buying two toothpaste. (k) Promotional Pricing, usually applied by

giving incentives or bonuses for their purchases have been made. (l)

Geographical Pricing, usually applied by using a different price depending on

the location of the sale of these products.

From the definitions above, the authors can conclude that the price is

the amount of money or value should we pay for services or products that we

have got.

2.1.3 Place

Ivy (2008) defines a place as the distribution method that the company

adopts to provide product or service to its market in a manner that meets, if

not exceeds, consumer expectations, and also he describe place or places as

the methods used by companies to provide product or service to its customers.

Behera (2011) explains that the place or places is a place where

consumers can obtain goods or services, and how can these products can reach

the place.

Borden (2011), explains that the place is also known as channels, or

distribution equipment which is a mechanism of how the goods / services

move from the manufacturer or producer to the consumer.

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Yanchula (2008) said that place has always been associated with

identity and our early experiences of the world and therefore has an intrinsic

“value” to all people.

Banerjee (2010), defines place as Place is also known as channel,

distribution, or intermediary. It is the mechanism through which goods and/or

services are moved from the manufacturer/ service provider to the user or

consumer. 'Place' is concerned with various methods of transporting and

storing goods, and then making them available for the customer. Getting the

right product to the right place at the right time involves the distribution

system. The choice of distribution method will depend on a variety of

circumstances. It will be more convenient for some manufacturers to sell to

wholesalers who then sell to retailers, while others will prefer to sell directly

to retailers or customers.

Based on the definitions above, it can be concluded that the place or

places are locations where the product, be it goods or services can be achieved

or obtained by the target market or customers.

2.1.4 Promotion

Ivy (2008) defines a promotion is a method or tool used by companies

to provide information to consumers. That information can include

advertisements, announcements, and promotional activities.

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Kotler (2010) defines a promotion as the process of communicating

the advantages of a product and how to influence the prospective consumer to

purchase the product.

Behera (2010) revealed that the promotion or the promotion is a

method used by companies to communicate information to customers.

Promotion consists of 4 main elements, namely advertising, sales promotion,

public relations, and personal selling.

2.1.4.1 Advertising

Advertising is any form of promotion, ideas, goods or services owned

by an identified sponsor. In the development of advertising programs,

producers must consider the following (a) Defining target, the aim of these

ads should be classified, that is to inform, persuade, or remind the public of a

product. (b) Setting the advertising budget, there are four methods used in

setting the budget, which is based on the ability of the company, a percentage

of sales revenue, and balanced competition, and awareness or task. (c)

Creating the advertising message, is a process to determine a content of the

ad. To develop the creative process is done by determine what message will

be deliver, the selection of messages, and forwarding messages to be delivered

in the content of the ad. (d) Selecting advertising media, in selecting

advertising media, things to consider is the scope of the media, frequency, and

also the effects on using that media. (e) Evaluate advertising program, to

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evaluated this by looking at sales figures after the ad aired and also compares

the level of sales from time to time.

2.1.4.2 Sales Promotion

Kottler (2010) states that companies often use sales promotions

(coupons, contest or race, etc.) to improve the response from consumers. Sales

promotions conducted in a short time in order to increase sales of a product.

Benefits of sales promotion are (a) Raising the level of attention and guide

consumers on a product. (b) Providing added value to consumers. (c) Binding

consumers to immediately perform a transaction on a product.

2.1.4.3 Public Relations

Public relations or PR (public relations) aims to create and foster good

relationships between producers and consumers by developing publicity, a

good image of the company / producer, handles bad imaging (rumors, news

and bad events). PR uses many tools in conducting their activities, such as

press releases, product publicity, corporate communications, counseling, and

lobbying.

2.1.4.4 Personal Selling

Kotler (2010) states that personal selling is the most effective on the

last stage of the buying process. Primarily to influence the minds calom a

product so that consumers will eventually want to buy the product. Kotller

further states that the sale of an individual, any sales must have:

a. Good personal interaction.

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b. Abble to create and maintain good relationship with the customer.

c. Abble to influence the customer to buy and use the product.

2.1.5 People

Behera (2010) defines people as: customers, employees, all of which

are involved in a business providing goods or services.

Banerjee (2010), People are the most important element of any service

or experience. Services tend to be produced and consumed at the same

moment, and aspects of the customer experience are altered to meet the

'individual needs' of the person consuming it.

Ivy, 2008, revealed that people are all the people involved in the

marketing process. While www.learnmarketing.net (2011) defines people as

the main ingredient that is very important in the procedure's marketing.

From the above definition and understanding, we can conclude that

people are all people, whether customers, employees, and anyone else

involved in it.

2.1.6 Process

Ivy (2008) revealed that process is all administrative and daily

activities on the company that including how to create and deliver product and

service into the customer.

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Lovelock (2009) explains that process is the architect of the service.

The process describes the operational phases of a product, how a product is

made, how these products get to consumers and they are interconnected with

each other.

Behera (2011) explained that the process is refers to the methods and

process of providing a service and is hence essential to have a thorough

knowledge on whether the services are helpful to the customers, if they are

provided in time, if the customers are informed in hand about the services and

many such things.

Banerjee (2010), process is another element of the extended marketing

mix, or 7P's.There are a number of perceptions of the concept of process

within the business and marketing literature. Some see processes as a means

to achieve an outcome,

From the above definition, it can be concluded that the process or

processes is a method used so that the consumer or the customer can get and

feel of a product be it goods or services.

2.1.7 Physical Evidence

Banerjee (2010), Physical Evidence is the material part of a service.

Strictly speaking there are no physical attributes to a service, so a consumer

tends to rely on material cues. Examples of physical evidences are packaging,

web pages, brochures, mail boxes, etc.

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Behera (2011) explains that the physical evidence is the experience of

the use of a product or service. Examples of physical evidence are :

a. Packaging.

b. Internet/web pages.

c. Paperwork (such as invoices, tickets and despatch notes).

d. Brochures.

e. Furnishings.

f. Signage (such as those on aircraft and vehicles).

g. Uniforms.

h. Business cards.

i. The building itself (such as prestigious offices or scenic headquarters).

j. Mailboxes and many others.

From the above definition, it can be concluded that the physical

evidence is the effect obtained by the consumer or service user that provides

an assessment of the goods or services itself.

From the description of the 7P Marketing Mix and it’s element inside

and also based on author analysis. The authors draw the conclusion that the

elementsof 7P Marketing Mix will influence customer satisfaction, emotional

bonding and also influence the formation of loyalty among the passengers

Sriwijaya Air.

H1 : 7P of marketing mix variables has positive influence on

customer satisfaction.

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H2 : 7P of marketing mix variables has positive influence on

brand loyalty.

H3 : 7P of marketing mix variables has positive influence on

emotional bonding?

2.2 Customer Satisfaction

Soderlund and Rosengren (2007) said that customer satisfaction has

emerged as a key variable in many firms, and it has been shown to affect

many other performance-related variables

Schiffman (2010) defines customer satisfaction or customer

satisfaction as the perception of individual consumers in term of performance

of a product in the form of goods or services in connection with consumers

expectations on these products.

Meanwhile, Kottler (2010) stated that customer satisfaction is the level

of one's feelings after comparing the performance or results which he felt

compared to his expectations. Further, Kottler states that customer satisfaction

is very instrumental in the effort to create a potential buyer. Buyers are

satisfied and happy will behave positively, they will buy more and will return

again to buy the product.

Kano (2011), customer satisfaction include 5 atributtes, which are (a)

Attractive, these attributes lead to satisfaction if successfully met, but will not

cause dissatisfaction if it fails to be met. (b) One Dimensional, these attributes

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lead to satisfaction if successfully met, and vice versa if it fails to be met will

cause dissatisfaction. (c) Must Be, this attribute must be taken and will

produce high satisfaction when successfully met. (d) Indifferent, this attribute

is not based on good or bad aspects and will have no effect on satisfaction or

dissatisfaction. (e) Reverse, this attribute is an opposite. If successfully met

will lead to dissatisfaction and, if not successfully met will result in

satisfaction.

From the previous definitions above can be concluded that customer

satisfaction is the view of individual consumers or customers that are either

good or bad for a product or service they use.

Anderson and Sullivan, as quote by Williams and Naumann (2009),

said that higher customer satisfaction leads to higher level of repurchase

intent, customer advocacy, and customer retention. In turn, higher satisfaction

and loyalty leads to improve revenue, profitability, and cash flow.

Gilbert (2006) said that satisfied customer is the key for long term

business success. High customer satisfaction will leads to greater customer

loyalty. From the Gilbert explanation of customer satisfaction definition

above, the authors draw the conclusion that customer satisfaction is one

determinant factor for the formation of loyalty to a brand and emotional

bonding.

H4 : Customer satisfaction has positive influence on emotional

bonding.

H5 : Customer satisfaction has positive effect on brand loyalty

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2.3 Emotional Bonding

Tan, as quoted by Rusch (2011) said that emotion is defined “as a

change in action readiness as a result of the subject’s appraisal of the situation

or event. Emotional responses are evoked by addressing human source

concerns like security, love, freedom, etc. which are endangered in the course

of events. The wish to restore the desirable states that result from the

fulfillment of the source concerns promotes action readiness.

Arifin (2009) said that Emotional bonding, to enhance relations

between a product with consumers. Consumers who are satisfied with a brand,

will furiously defend the brand that he believe.

Schiffman (2010) states that create emotional bond with customers is

an important factor in maintaining customer service so customers will still

come back and recommend products to others.

Lovelock (2009) states that create an emotional bond with customers

can be done by serving customers with the best, providing a high level of

customer satisfaction

Creating Emotional bonding or a strong emotional bond with

customers is one important element to create a loyalty to a product. Without a

strong emotional bond between customer and product, loyalty to a product are

impossible to achieve. So the author conclude that emotional bonding had

positive effect to form brand loyalty.

H6 : Emotional bonding has positive effect on brand loyalty

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2.4 Loyalty

In this section the author wants to further emphasize this point on

brand loyalty. Schiffman (2010) said that brand loyalty is a strong bond from

a customer who appears as the effect of the use of a product or service in the

long term. Schiffman (2010) brand loyalty divided into 2 components,

namely:

1. Behavior

The frequency and consistency of buying a given brand.

2. Attitude

The consumer’s feeling of commitment to the brand.

Solomon (2010) defines brand loyalty as a strong bond between

consumers with products that are very difficult undermined by competitors or

competing products.

According to Kotler (2010) a level of loyalty can be described in the

following pyramid. (see next page)

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Diagram 2.1 : Loyalty Pyramid

(Souce: Kotler, 2010)

a. The most basic level of loyalty is the buyer that not loyal at all, not

interested in any brands offered. In general, consumers like this are like to

move between the brand if the brand offer good bargain, they usually buy

a product based on price alone.

b. The second level of loyalty, consumers were satisfied with the products

they use or at least have not experienced the disappointment of the

product. Types of consumers who are at this stage is usually referred to as

habitual buyers.

c. The third level contains the loyalty of satisfied customers, but they bear

the costs of transition, usually referred by satisfied buyers

d. The fourth level contains the loyalty of consumers who really liked the

product. Their choice on these products based on an association as a

Level 5

Level 4

Level 3

Level 2

Level 1

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symbol, a series of experiences in using it, or the impression of high

quality. At this level of consumer disebit with his brand, because there are

emotional feelings towards the product.

e. At the top level contains the loyal customers of these products, they find a

pride when using the product. The product is very important, both in

terms of functions like the expression of who they really are (Committed

buyer).

From the above definitions of brand loyalty can we conclude that

brand loyalty is a strong bond between the consumer with a product or service

that they uses in where that bond is very difficult to be broken by the

competitors.

Keller (2007) suggested a standard measurement of a brand that if

consumers are reaching the stage of brand loyalty can be measured with the

following statement:

a. I consider myself loyal to this brand

b. I buy this brand whenever I can

c. I buy as much of this brand as I can

d. I feel this is the only brand of this product I need

e. This is the one brand I would prefer to buy / use

f. If this brand were not available, it would make little difference to me if I

had to use another brand

g. I would go out of my way to use this brand

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One example of how the airline or transport provider of aviation

services to maintain or establish loyalty among its customers is by applying

the concept of frequent flyer. This concept is a concept whereby the operator

provides an extra bonus miles for passengers who could be collected later

after that can be exchanged for free travel tickets or special souvernir. Any

passengers who fly and become a member of a frequent flyer this will get the

point, the amount of points according to the distance traveled by passengers.

Currently, many airline or operator has implemented programs such as

Singapore Airlines' frequent flyer with KrisFlyer, Cathay Pacific with

AsiaMiles, Garuda Indonesia and Garuda Frequent Flyer (GFF) and others.

The advantage of holding this program in addition to maintaining its

customers, operators hope that customers continue to fly by using their

services with the motivation that if you use their services will get extra points,

and later when it reaches a certain value customers can trade them with free

tickets, facilities free hotel or an interesting souvenir. In this manner the

operator can increase ticket sales while maintaining relationships with its

customers which will culminate in the creation of brand loyalty.

Lopez on his journal “How Will Airline Survive” explain that :

“The importance of developing customer loyalty is part of the unwieldy crisis airlines face today as charging additional fees is viewed by them as one of the top tactics to increase revenues.”

“Air carriers have reason to fret over customer loyalty and retention since a Colloquy

research firm survey of U.S. consumers found that frequent travelers are becoming less loyal to a variety of travel loyalty programs, with a 31 percent decline in active participation in frequent flier, hotel and other travel rewards programs as the economy has worsened over the last two years.”

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“The research showed that a strong customer relationship with an airline improves repeat business and a frequent flyer program can directly influence the decision to purchase a ticket from one airline versus another.” (Lopez, 2009)

From the article above the authors conclude that the nowadays airline

is increasingly aware of the importance of brand loyalty to their service

product. And of the many ways that have been Sriwijaya Air in the process of

doing business, could it create a strong brand loyalty among its customers?

2.5 HYPOTHESIS DEVELOPMENT

Marketing Mix is a set of marketing tools used by companies or institutions to create

the desired response from the target consumer. In the activities related to business

services, 7P Marketing mix is a basic element that can not be separated. This includes

product, price, place, promotion, process, people, and physical evidence. Everything

is interrelated / interconnected with each other. Everything must goes well to create

customer satisfaction, emotional bonding, and brand loyalty to a service product.

To build customer satisfaction, emotional bonding, and good brand loyalty for

a service product, every element of the marketing mix must have the ability to meet

human needs (product, price), easily obtained by consumers (place), able to attract

potential consumers and consumers to buy and use products (promotion), able to

provide good service and also able to fulfill the consumers need (people, process) and

be able to give satisfaction to their consumers (physical evidence). If these elements

can obtain by the manufacturer, the customer satisfaction, emotional bonding, and

brand loyalty can establish among the consumers. The better marketing mix activities

implemented by the company will make stronger customer satisfaction, emotional

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bonding, and brand loyalty. A study conducted by Paramita and Kuwanto (2009)

concerning the relationship between marketing mix and customer satisfaction levels,

a marketing mix had positive influence on customer satisfaction.

The phenomenon happened lately is every airline companies vying to provide

the best service to attract customers, this applies to all airlines, whether using the

concept of the LCC and a premium concept.

Based on the definition above and logical thinking, made the hypothesis as

follows:

H1 : 7P of marketing mix variables has positive influence on

customer satisfaction.

H2 : 7P of marketing mix variables has positive influence on brand

loyalty.

H3 : 7P of marketing mix variables has positive influence on

emotional bonding?

Anderson ans Sullivan (2009) said that higher customer satisfaction leads to

higher level of repurchase intent, customer advocacy, and customer retention. When

customers are satisfied with the product and services they use / they get, they will re-

use the same product and services back and also belief that if they use the service

product again they would get the same satisfaction they previously received. While

customer satisfaction has been established, customers will tend to use the product

continuously, soby the time they it will form the bond between customer and product.

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Customers who are satisfied will be difficult to switch to other brands, they tend to be

comfortable with the satisfaction they get by using the product.

Satisfaction or customer satisfaction is the key to building and maintaining

customer loyalty and the loyalty it will create long-term relationship (Zeithaml et al.,

1996). When customers feel comfortable with what they get, they tend to be more

loyal to the brand and will always use the brand. These products will always be their

first choice. They will always tend to use the product without comparing it with other

brands and will always recommend these products to family and others. A higher

customer satisfaction will lead into high emotional bonding and high brand loyalty

among the customer.

Based on the definition above and logical thinking, made the hypothesis as

follows:

H4 : Customer satisfaction has positive influence on emotional

bonding.

H5 : Customer satisfaction has positive effect on brand loyalty

Schiffman (2010) states that create emotional bond with customers is an

important factor in maintaining customer service so customers will still come back

and recommend products to others. Furthermore, Lovelock (2009) states that create

an emotional bond with customers can be done by serving customers with the best,

providing a high level of customer satisfaction. High emotional bonding between

customer and the product will create strong brand loyalty. To create loyalty on their

customer, many airline use customer loyalty program called frequent flyer. People

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who are member of the airlines frequent flyer can get extra benefit by earning point

once they fly using that airline. They can redeem the point with free upgrade to

business or first class, free hotel voucher, and other extra benefit. Another way to

create loyalty is bya using nice and warm emotional approach, they train their staff

and also the flight attendant to serve the passenger very good, able to fulfill passanger

needs, be nice to passanger, able to help passanger. This method will create emotional

bonding between the passanger and the airline.

Based on the definition above and logical thinking, made the hypothesis as

follows:

H6 : Emotional bonding has positive effect on brand loyalty