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CHAPTER 1

INTRODUCTION

1.1 Background

The way we communicate with each other is totally different from the past 30 years.

In the past, people use to communicate with each other by sending mail, or using fax.

But nowadays, people communicate with each other through social media, or

sending email. All of these are made possible due to the introduction of the Internet.

The Internet allows information to travel from one place to another at a very fast rate

and at a very cheap price. This have also changed the way people conduct business,

where people have started to create a website. In business field, the website

represents the business in online context, where important information regarding the

company and the product or service could be presented. Website design also plays an

important role, as an attractive website tends to attract more viewer as compared to a

plain website (Laudon & Traver, 2014).

1.1.1 Number of Internet user in the world

The world depends heavily on Internet for many purposes, such as communicating

with each other, conduct business, and to gather information. But not every part of

the world use Internet evenly, there are some part of the world that uses more

Internet compared to others, the figure below showed the Internet user in different

geographic region.

 

 

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Figure 1.1- Internet users in the world by geographic regions 2014

Source: Internet World Stats (2014)

This figure 1.1 showed the number of Internet Users in the World by Geographic

Regions- 2014 Q2. It showed that Asia reached the biggest number of Internet users,

that amounting 1,38 billions user. Followed by Europe 582.4 million users, Latin

America/ Caribbean 320.3 million users, North America 310.3 million users, Africa

297.9 million users, Middle East 111.8 million users, and Oceania/Australia 26.8

million users. From both of these figures, it can be concluded that Asia is the top

continent in the world with the most number of Internet users. This also showed that

the online business was prospective in the Asia continent due to high number of

Internet users.

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1.1.2 Number of Internet user in Indonesia

Figure 1.2-Asia top Internet Countries June 30, 2014

Source: Internet World Stats (2014)

This figure 1.2 showed that Indonesia ranks 4th in Asia in terms of Internet usage.

The first one was being held by China with 642.3 million users, followed by India

243 million users, and Japan 109.6 million users. The introduction of various

smartphone in Indonesia also helps to enhance the Internet usage, as people can

connect to the Internet everywhere.

With the huge number of people using the Internet, it also provides a perfect

opportunity for people starting up a business online.

 

 

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1.1.3 E-commerce and people shopping online

E-commerce can be defined as the use of Internet, the web, and mobile application to

conduct business transaction. It enabled digital transactions between and among

organizations and individuals. Both Internet and web are two different things. The

Internet is a worldwide network of computer networks, and the Web is one of the

Internet most popular services, providing access to billions of web pages (Laudon &

Traver, 2014). The table below represents the top 5 E-commerce growth rate

between 2012-2017.

Table 1.1- Top 5 E-commerce Growth Rate (B2C) 2012-2017 Worldwide

2012 2013 2014 2015 2016 2017

China 93.7% 78.5% 63.8% 43.3% 34.4% 29.4%

Indonesia 85.0% 71.3% 45.1% 37.2% 26.0% 22.0%

India 35.9% 34.9% 31.5% 30.3% 24.5% 20.0%

Argentina 31.1% 6.3% 24.0% 18.0% 12.0% 10.0%

Mexico 55.8% 41.9% 20.0% 14.5% 10.0% 5.0%

Source: Emarketer (2014)

From the table being shown, Indonesia has got a good prospect in terms of growth

even if it stands second. The growth rate is decreasing year by year as more and

more people have already used the Internet. Every E-commerce business in

Indonesia will need to compete with each other, in order to get a chunk of that

revenue. In this case, it is very important for an online store to have a good website

to attract more customer. In which it can be done by having a good website design

and content.

A website design represents an online representation of the actual store layout. As

there is no actual store that the respondent can see, touch and experience in online

 

 

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context. A website design needs to be attractive enough in order to attract customer,

and need to have relevant information regarding the product they offer such as price,

review, and specification of the product. There are 3 important aspect of website

design that can influence viewer experience. Information design, which involves

conveying the right and relevant information to the customer, navigation design, how

easy it is for the viewer to navigate through the website. The last one involves visual

design, which includes colors, animation, shapes, font types, and photographs that

affect consumer emotional and cognitive responses (Bonanni & Cyr, 2005).

Aside from having a good website, the existing online firm can also use other

methods to increase the number of customers. In which example can be taken from

Lazada. They provide several incentives in order to attract more customers, such as

providing Rp 50,000 coupon just by becoming a member of Lazada, they also

provide other incentive, such as free shipping costs by making a minimum purchase

of Rp 200,000.

Previously, people had to shop in a physical store, for example, when people want to

purchase some groceries, they go to supermarket or any other stores. But with the

introduction of Internet, it has enabled consumers to shop online. There are several

advantages for shopping online. First, it is convenient by shopping online, there is no

need for the consumer to go to the actual physical store and queue in order to

purchase a product, they can order it online from their mobile phone or computer as

long as an Internet connection is available. The other reason is for easy comparison,

with online shopping, it is very easy for the consumer to jump from one site to

another. By doing so, it enables the consumer to compare the product details and

price in order for the consumer to get the best deals. Sometimes shopping online also

 

 

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provides a better variety of product being offered, as the consumer not only restricted

to nation wide, but can access the online store globally (Shopping Online, 2014).

Although online shopping offers many advantages for the consumer, shopping online

also involves several drawbacks, especially in the Indonesia market. One of

drawback is unable to inspect the product before purchase. In a normal physical

store, we can test the tangible aspect of the product such as color, size, shape etc. But

in online shopping, we can only depend upon the image that is being provided by the

seller; even sometimes they did not provide any image of the product. It is common

in Indonesia that the product that the consumers order might be a defective one. In a

developing country such as Indonesia, the tendency of people committing corruption

and fraud in transaction is still high, in this case many people still feel uncomfortable

as there are many cases in which they buy some product online, but the product

never come. This is still common especially in consumer-to-consumer (C2C)

transaction within Indonesia (Shopping Online, 2014).

1.1.4 Online Shopper in Indonesia

There is a variety in terms of age on who conduct online shopping in Indonesia,

According to Andry Huzein, senior VP of Lazada Indonesia (Susanta, 2015). The

one who conducted online shopping age between 18-24 and 24-36 years, but the

main online shopper age was between 24-36 years old, where most of the consumer

uses mobile phone compared to computer in doing transaction. In 2014, Indonesia

had 5.9 million online shoppers, it also known that 20% of Indonesian shoppers

prefer to shop at popular business to consumer (B2C) sites such as Lazada or Zalora.

While 26.4% prefer online social media such as Facebook, 26.6% from online forum

 

 

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such as Kaskus, and the other 27% from messaging apps such as BBM or Line

(Cosseboom, 2014). Out of the entire different category, apparel stands at the top

with 50.3% of Indonesia online shoppers made purchase in that category in 2014. In

terms of payment method, most of the customer use bank transfer, credit card, klik

pay and cash on delivery (COD).

Table 1.2- Number of respondents buying electronics, fashion, and multi product

from online shop for the past 3 months

Categories 15-20 21-30 31-40 41-50 51-65 Total

Electronics 15.1% 13.7% 11.8% 8.1% 7.5% 11.4%

Fashion 17% 24.3% 18.2% 12.4% 7.5% 17.3%

Multi-product 19.5% 20.7% 17.6% 13.7% 6.8% 11.4%

Source: Marketing (2015)

From the above table, it shows that the majority of respondent age group that

purchased electronic products came from 15-20 years old. Whereas the majority of

respondent that purchase fashion and multi-product came from 21-30 years old.

Multi product involves website that sell multiple products category to customer, such

as Lazada and Bhinneka.

1.1.5 Popular Business to Consumer (B2C) sites in Indonesia

Table 1.3- Popular Business to Consumer Sites in Indonesia

B2C multi brand retailers traffic per month (‘000s)

Lazada.co.id Multi product 6639

Bhinneka.com Multi product 3279

Zalora.co.id Clothing 1941

Tabloidpulsa.co.id Electronic Gadgets 1851

Blibli.com Multi product 1054

Source: UBS research (2014)

 

 

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Lazada, within 3 short years, has risen as the top B2C E-commerce player in

Indonesia; this online retailer sells many different products in different categories

(Lukman, 2014). From the figure above, it is shown that Lazada got the highest

online traffic within a month compared to the other online retailers. This company

mainly sells everything inside their online store. The website proved to be user

friendly, in which it is made easy for the customer to navigate. There are a total of

ten “floor” inside the website, where each “floor” offering products of different

category, on the left side of each “floor” there is a bar representing different sub

category depending upon the “floor”. For example, the first “floor” represent

electronic house appliances, the sub category would show different category such as

air conditioner, cleaner, electronic kitchenware and the newest product of that

category.

When we click on a certain product, a drop down menu will appear containing

information such as the price, specification alongside with the online review of it

(Lazada, 2015).

 

 

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Figure 1.3- Lazada Floor

Source- Lazada (2015)

Figure 1.4- Lazada Floor

Source- Lazada (2015)

Bhinneka stand second in terms of online traffic compared to other online retailer, it

is similar to Lazada where it sells almost every product category, but the difference

is that they specialize more in electronic gadgets such as Notebooks, mobile phone,

and PC. In terms of their website design, there is no different floor like Lazada, the

different product category is located at the top of the screen, where a drop down

menu will come out when we move our cursor there. When we scroll down the

 

 

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website, various discounted product and new product were displayed alongside with

their price. Different promotions were also displayed using a bigger picture, such as

limited offer for a certain product (Bhinneka, 2015).

Zalora stand third in terms of online traffic compared to other online retailer. This

website is different from the top two retailer in which it mainly concentrate on

apparel such as clothing, bag, watch, and shoes. The website design is quite unique,

in which it provides option for customer to choose between male and female apparel

in the website. Inside the website, the list of category is being put at top, while on the

left the sub category is being displayed, such as the price, size, brand, and the type

(shirt, t-shirt, and polo) if the customer choose men clothing category on top.

Products are also displayed by using different model, where it allows the customer to

have a better idea about the product (Zalora, 2015).

In the current research, two different websites were used that are Bhinneka and

Quantum. The respondents were then asked to browse through the website content

within notebook category. It would consist of two groups that are group A and B,

where group A was exposed to Bhinneka, and group B exposed to Quantum.

Bhinneka represent a high quality website where it use proper multimedia function

and website content and Quantum represent a low quality website that are not using

proper multimedia function and website content. Quantum website mainly

concentrate upon computer peripherals, accessories and notebook, this website only

contain information such as price and specification of the product without using any

pictures to represent the product, in which it can confuse the viewer who are not

 

 

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familiar with computer/notebook related product. The figure below show what the

websites look like:

Bhinneka

Figure 1.5- Bhinneka Screenshot

Source- Bhinneka (2015)

Quantum

Figure 1.6- Quantum Screenshot

Source- Quantum (2015)

 

 

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1.2 Problem Statement  Indonesia, as a potential market for e commerce, with 71.2 million users by June

2014, and still increasing especially in urban area. Based on information from

eMarketer, the growth rate of Indonesia B2C will be predicted to keep on increasing

at least for another 3 years. In which by the end of the year the growth rate will be

predicted to be 37.2%. It is also predicted that the revenue will hit $25 billion by

2016, where based on the research being conducted, several consumer who have

been influenced by information through the net will try purchase some product

online.

In the original journal titled “Role of website design quality in satisfaction and word

of mouth generation” (Ha & Im, 2012), the researcher was trying to examine a

comprehensive model explaining how a website design will influence customer

emotional (pleasure and arousal) and cognitive responses (perceived quality of

information) will affect satisfaction and Word of Mouth (WOM) intention in online

shopping context, the researcher created two mock apparel website where one of

them is creative (using colorful background, bring logo and colorful text) and the

other one is plain, and 804 female college would be the only respondent due to

female consumer are the main consumer of online apparel.

WOM is a process of conveying information from one person to another. Whereas

(S)-Stimulus (O)-Organism (R)-Response paradigm basically explain how various

external stimuli such as color, music and light can affect consumer emotional state

which result in affecting consumer responses that is approach-avoidance behavior.

 

 

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This current research is a replication study from “Role of website design quality in

satisfaction and word of mouth generation” journal, it will adopt the same model

where the S-O-R framework is use; it will also test out how emotional and cognitive

responses will affect satisfaction and WOM intention in online shopping context.

There will be three major modification in the current research.

• The research will be conducted in Indonesia, particularly in Jakarta

• The sample will be consisting of both male and female, with a smaller

sample size of 120 respondents

• The researcher is not creating any mock apparel, but using existing online

shopping websites that are Bhinneka and Quantum, where Bhinneka

represent website A whereas Quantum represent website B

This research will concentrate upon the website design quality for two different

website, analyzing how each element from a website design will affect customer

emotional (pleasure and arousal) and cognitive responses (perceived quality of

information), which lead to customer satisfaction, and on how this satisfaction will

motivate a customer to spread word of mouth (WOM). It will also analyze how

perceived quality of information and arousal variable will affect intention to spread

WOM. These questions will be analyzed, and explained further within the study.

 

 

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1.3 Scope of Research

The researcher will examine the relationship amongst the variables, on how the

variable Pleasure, Perceived Quality of Information, and Arousal would affect

customer Satisfaction, where it will affect the Word of Mouth Intention. The

researcher also tried to uncover, whether a satisfied customer will motivate that

customer to spread a positive WOM. To do this, the researcher compared two

different groups, where the first group exposed to Bhinneka website and second

group compared to Quantum website.

For presenting the websites to the respondents, website design through laptop was

used instead of layout in mobile phones. The layout in mobile phones tends to be

different from the one in PC/ laptop as in mobile phones everything is simplified due

to smaller screen size. By using a laptop layout, the respondent will be able to fully

experience what the website can offer to them.

To obtain the data required for the research, the researcher used a survey, where a

questionnaire will be used to collect data. The targeted respondent will be age in

between 18-36 years old, as according to Andry Huzein (Susanta, 2015), these age

groups were the one who conduct online shopping. The questionnaires were

distributed offline in Jakarta because it is the capital city of Indonesia and supported

with Internet connection in almost every area.

 

 

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Table 1.4- Penetration of Internet User in Java Island 2014

Name of City Total Population Internet user Internet penetration

(%)

DKI Jakarta 9.583.000 3.538.000 36.9

Surabaya 3.025.000 956.000 31.6

Bekasi 2.554.000 677.000 26.5

Bandung 2.620.000 579.000 22.1

Depok 1.902.000 502.000 26.5

Source: Statistik Internet Indonesia (2014)

From the table 1.4, it showed that Jakarta got the highest number of Internet user that

was 3.5 million users and one of the highest Internet penetrations that is 36.9%, as

compared to the other cities (Penetrasi pengguna internet di pulau jawa, 2014). The

questionnaires were distributed in universities, regardless of their occupation; it will

be distributed to both the students and non-sudents and in mall such as Mal Kelapa

Gading and Senayan City, as convenience sampling will be used, the researcher will

spread the survey to malls located nearest to the researcher.

1.4 Aims and Benefits

In this part, the researcher will specify the list of objective of this research, and also

the benefit of this research to several other parties, such as marketing knowledge,

industry firms, and society.

Objective:

• To examine how website design influences consumer emotional (pleasure

and arousal) and cognitive responses (perceived quality of information)

• To identify how each of the elements will contributes to customer satisfaction

 

 

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• To identify the most important element in website design that contribute to

customer satisfaction

Benefit

Marketing Knowledge

• To Identify the most important element of the website design, that will affect

consumer emotional and cognitive responses

• Provide a better understanding, on customer satisfaction and WOM intention

when affected by good website design.

Industry firms

• The result of this research can be used by the existing online firm as a

recommendation to improve their website, from the result of this research, it

can help the online firm to identify, what is the most important element in a

website, that would affect customer satisfaction, which in turn will lead to

positive WOM. In this way, the firm can update their existing website, in

order to better meet customer needs.

• The researcher compared several online website, so the existing firms can use

it as a reference, where they can identify who is their current biggest threat in

the market, and what is the customer perception of each of the different

websites.

Society

• From the result of this research, it would help a company to have a better

understanding of customer. Where it will enable them to design a website,

that best meets what the customer desires. This will motivate customer in

generating positive WOM as the customer will be more satisfied with the

company.

 

 

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1.5 Research Question

The following research questions are being developed, to analyze how a website

design will influence customers’ emotional and cognitive responses, where it will

affect customer satisfaction and WOM intention.

RQ 1: Will website design influence consumer’s emotional (pleasure and arousal)

and cognitive response (perceived quality of information)?

RQ2: Will emotional responses influence perceived quality of information?

RQ3: Will emotional and cognitive response influence satisfaction?

RQ4: Will emotional and cognitive response influence WOM intention?

RQ5: Will satisfaction level influence WOM intention?

1.6 Structures

CHAPTER 1: INTRODUCTION

In the first chapter, the researcher explain in detail about online shopping in

Indonesia, this includes the number of Internet user in Indonesia, who are the main

shopper, why people shop online, the list of top b2c sites in Indonesia, and

supporting figure representing the e-commerce growth rate in Indonesia. In this

chapter, the researcher will also identify the problem that need to be solved, the

objective and benefits of this research, alongside with the research questions for this

study.

 

 

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CHAPTER 2: THEORETICAL FOUNDATION

In the second chapter, the researcher explains each variable by providing list of

relevant theories and other research findings to support them. The researcher will

also explain the difference between the new and old framework model, alongside

with various hypothesis that are used in the research.

CHAPTER 3: RESEARCH METHODOLOGY

In the third chapter, the researcher will explain the research methodology and

research design used for this research. This chapter will also discuss who are the

respondent, the different criteria to be the respondent, and how the researcher will

collect the data. This chapter will also discuss how the hypotheses are going to be

tested, and the difference between the current research and the replicated research.

CHAPTER 4: RESEARCH FINDINGS

In the fourth chapter, after the researcher collect the result from the questionnaire

being distributed; the data will be analyzed using SPSS. From the result, the

researcher will determine which hypothesis is supported and which one is not,

supported by an explanation for each one of them.

CHAPTER 5: CONCLUSION AND RECOMMENDATION

In the final chapter, the researcher made a conclusion based upon the findings of the

research. It is also expected that the conclusion made by the researcher solved the

problem statement mentioned in the first chapter. The researcher will also provide

the managerial implication of the findings, the various limitation when doing this

research, and also recommendation for future research.