Primula Beach Resort

Business Research Methodology (BRM 681)

FACTORS INFLUENCING CONSUMER RETENTION TOWARD ROOM SERVICE:

A STUDY OF PRIMULA BEACH RESORT, KUALA TERENGGANU

1.0 INTRODUCTION

In managing the business which provides pure services to the customer, company need

to ensure that the service delivered is meeting with expectation and satisfied the customer. The

quality of services is considered to be a critical success factor for the service companies.

Service is close conceptual as well as empirical link to customer satisfaction turned it into the

core marketing instrument, making it the most researched area in services marketing (Fisk et

al., 1995; Bolton et al., 2000). In addition, the accumulated research has linked positively the

service with profitability (Fornell, 1992).

It is very important to retain the customer. But, nowadays, the service provider needs to

identify other factors that lead to customer retention rather than provide a quality service. On

this study, researcher has chosen Primula Beach Resort as a base company to do research on

factors that influencing customer retention, and downsize the study into room services.

According to the current situation, there are some factors recognized which have influence to

the customer retention. There are customer satisfaction, customer trust, and product value.

Currently, Primula Beach on their way for maintaining and retaining their present and

existing customer. For information, overall income of Primula Beach Resort comes from the

government and private function, while the rest from other customer. The problem or issue was

come out after much consideration regarding the current situation face by Primula Beach

Resort. As we know, the external factors such as economic condition of our country give an

impact to hotel industry. In addition, there are some other factors such as instability political

situation, many competitors, and so on. As companies that provide service as main output to

bring profitability, customer retention is very important.

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Primula Beach Resort plan offering comfortable yet elegant accommodation and quality

service, this fully equipped and also provides state of the art business and convention facilities.

So that, they can build a stronger and meaningful relationship with their current and target

customers.

The sole purpose of a business Peter Drucker once famously claimed was “to create a

customer”. However, keeping the customer has become regarded as equally, if not more

important since Dawkins and Reinchheld (1990) reported that 5 per cent increase in customer

retention generated an increase in customer net value of between 25 per cent and 95 per cent

across a wide range of business environment. It is so important to keeping the customer other

than getting the customer. Since there are many competitors around this area, Primula Beach

Resort really need to concern on how to retain their customer in order to avoid switching from

them to other hotel service provider.

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1.1 BACKGROUND OF STUDY

The title of the study is “Factors Influencing Consumer Retention toward Room Service:

A Study of Primula Beach Resort Terengganu”. This study is done to Primula Beach Resort,

focuses on the searching and identifying the potential factors that influencing consumer

retention toward room in this hotel. As noted before, it is very important for the company to

keeping the customers other than getting them. The main issue here is to find which factors is

most contributed to this problem, and at the same time try to find any possible solution that

could be used to solve it. Beside that, this result of research can be useful information to the

hotel itself and the management team to help them in improving on how they retain their existing

customer. Furthermore, it’s also could be a useful information for the management team to get

some view about their customers and take some action in order to manage their customer

feeling and indirectly can reduce the problem such as customer complaints.

This topic has been chosen because there are many other competitors around the area

in Kuala Terengganu, which struggling to compete with each other into same target market. It

included competitors such as Felda Hotel, Grand Continental Kuala Terengganu Hotel, Midtown

Hotel, Seri Malaysia Hotel and so on. As mention earlier, Primula Beach Resort has faced a

problem to dealing with current situation. Instability of economic and political situation has given

a huge impact to this hotel. Added with a rapid growing of competitor around Kuala Terengganu

area, it was quite difficult for them to achieve maximum profitability. Furthermore, Primula Beach

Resort is the hotel which offers the highest room rate than other hotel in Kuala Terengganu. For

that, they really need to know the factors and on how to retain their existing customers in order

to avoid the customer switching to other hotel.

On this study, researcher has chosen retention as main concern. Customer retention is

where they provide commitment to continue to do business or exchange with a particular

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company on an ongoing basis. Retaining existing customer also costs less than acquire new

ones. The company knows their customer and what they want, and the initial costs of attracting

the customers have already been expanded (Davidow and Uttal, 1989). Old customers also pay

less attention to competing brand and advertising, less price sensitive, and create positive word

of mouth communication (Desai and Mahajan, 1998). Customer retention also brings benefit

such as retention and satisfaction, better service, and lower cost, lower price sensitivity, positive

word of mouth, higher market share, higher efficiency, and higher productivity (Reichheld,

1995). In addition, to support the retention, researcher has identified three variables that have

influence on customer retention toward room services in Primula Beach Resort Terengganu,

which is based from literature review from former researchers.

First, customer satisfaction, which considered one of the most important competitive

factors for the future and one of the best indicators of a firm’s future profits. Some

consequences of customer satisfaction are: improvement of the firm’s reputation and image;

reduction of customer turnover; increased attention to customer needs in TQM planning;

reduction of marketing costs and, vice versa, lower transaction costs; reduction of costs related

to product/service failures; and, lastly, increased satisfaction among personnel and greater

stability of the workforce. Furthermore, customer satisfaction also creates very strong switching

barriers, thus lead to customer retention. Researcher will evaluate the degree of satisfaction of

customer experience after stay at room in Primula Beach Resort Terengganu.

Researcher has chose customer trust as second variable. Customers would probably be

reluctant to commit to a service relationship (retention) unless they have confidence in the

service provider’s ability to constantly meet their expectations in the future (reliability) and in its

willingness to avoid any behavior that could be detrimental to them. Trust should also have a

direct effect on consumer resistance to switch to another service provider when a critical

incident occurs. Trust implies uncertainty and vulnerability, and as such, is critical when services

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are intangible, difficult to evaluate, complex and technical for instant the products, staff, and so

on provide by Primula Beach Resort Terengganu.

Third variable used is the product value. A product’s (or brand’s) meaning is the

consumer’s perception or interpretation of it, as well as his/her affective reactions toward it. That

is, products mean very little in and of themselves, apart from the meanings described to them by

consumers. These meanings affect consumers, perceptions of value and purchase behaviors.

In pinpointing product meanings, marketers are challenged by the multitude of meanings that

each product can represent. Meanings may be objective or symbolic, shared or personal or

evoke a high or low emotional response. The meanings of valued possessions also are derived

from enjoyment, interpersonal ties, and a sense of identity, financial issues, and objects’

appearance. Moreover, consumers do not simply purchase and consume products at face

value, they experience them.

Researcher then measures those three variables (customer satisfaction, customer trust,

and product value) that stated above, to see whether has significant influence with retention.

When the study is complete, this valuable information can be use by the hotel for them to

improve their service, increase the room rate sales volume, and to be a leader in hotel industry

in Kuala Terengganu.

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1.2 PURPOSE OF THE STUDY

The purpose of this study is to determine the possible factors that influencing customer

retention toward room service in Primula Beach Resort. This study also will determine the

relationship between customer satisfactions, customer trust and product value towards

customer retention. Research is done to investigate the problems that arise in Primula Beach

Resort regarding how the hotel retains their customer. Retaining customer will reduce the

customer complaints at the same time. The types of complaints that usually arise regarding

room services is the cleanliness of the room, staff attitude toward customers, not enough

facilities, speed of delivery, and so on.

When the study is complete, this valuable information can be use by the hotel for them

to improve their service, increase the room rate sales volume, and to be a leader in hotel

industry in Kuala Terengganu.

1.3 PROBLEM STATEMENT

-To identify the possible factors that influencing customer retention toward room

service in Primula Beach Resort, Kuala Terengganu.

According to textbook by Naresh K. Malhotra, Marketing Research, An Applied

Orientation, page 35, the word “problem statement” is define as a broad statement of the

general marketing research problem and identification of its specific component. According to

Sekaran (2003), problem statement means a clear, precise and succinct statement of the

questions or issues that is to be investigated with the goal of finding an answer or solution. The

independent variables that have been included in this study are customer satisfaction, customer

trust and product value. Even though Primula Beach Resort is the famous hotel in Kuala

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Terengganu, they cannot avoid a problem in maintaining the existing customers. The major

problem here is because of the other competitors. The number of hotels in Kuala Terengganu

increase year by year. One of the greatest challenges facing hotel organization today is the ever

growing volume and price competition (Kandampully, 2000).

This issue has been choosing because considering of some factor such as there are

many competitors in hotel service around the area of Kuala Terengganu, the current situation of

our economic condition which give a big impact to the hotel industry, and so on. Those factors

give impact to Primula Beach Resort and they need to find a way on how to retain their existing

customer rather than getting new. As usual the main purpose of customer getting service at

hotel is to spend a night with pleasure and comfortable room beside other purposes. So that,

the important issue here is more to the room, added with the services they get while stay. There

are several potential factors that can influence consumer retention toward room services in

Primula Beach Resort. The major factor that have been identify is the customer satisfaction by

the customers, the degree of trust by the consumer, and the perceive value of product to them.

In the area of technology edge, most organizations are seeking the right way to built and

maintain long term relationship with their customers. So the organizations need to retain their

existing customer. Everyday managers must face the challenge of establishing and maintaining

positive customer relationships. The task is increasingly difficult as consumers have greater

access to information and a wide array of choices. Price-cutting and intense promotional

campaigns make the task even more complex (Edwin, 2006). Furthermore, the current situation

that arise nowadays like the increase of cost, low buying power, unstable political condition and

so on, give a huge impact for the hotelling industries in Malaysia. So in order to reduce the cost,

customer retention management is the right method because it required little sales and

advertising expenses. In other word the hotel will getting high profit. From the above statement,

the problem is to determine the factors that may have possible influence of trust, service quality

staff performance on customer retention in order to continuous choosing the room services in

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Primula Beach Resort. Meanwhile, it will help the hotel management to maintain the customer

satisfaction, increased service quality by excellent service performance by staff and increased

customer trust.

1.4 RESEARCH OBJECTIVE

The principle objective or aim of this research is to investigate the relationship between

the dimensions of trust, switching barriers, customer satisfaction and customer retention toward

room service in Primula Beach Resort, Kuala Terengganu.

To investigate the relationship between customer satisfaction and customer retention.

To investigate the relationship between customer trust and customer retention.

To investigate the relationship between product value and customer retention.

To add more literature about factors influencing customer retention.

To give suggestions to managers on how to retain their customer.

1.5 SIGNIFICANT OF THE STUDY

The importance of the study in term of practical and theoretical

Practical Significant

- Can measure how to retain customers toward this hotel in term of room service.

- Therefore can identified and improve their quality of the service that they provided

- To improve customers relationship between the organization and customers

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- Provide the input of the three (3) variables which include customer satisfaction,

customer trust, and product value to the hotel in industry in order to have customer

retention

Theoretical Significant

- Provide new knowledge in term of predicting of customer retention.

- Contribution to the existing knowledge in term of the dimension of customer retention as

well as the dimension of customer delivered value.

- Provide the new outcome is solving problem that has never done by other researcher

before.

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2.0 LITERATURE REVIEW

For the preparation of literature review, the researcher will study through the journals,

article, books, magazines, internet and newspaper. Below are some literature review chosen to

help in generating the research.

2.1 LITERATURE REVIEW ON CUSTOMER RETENTION

Retention can be defined as a commitment to continue to do business or exchange with

a particular company on an ongoing basis. A more elaborated definition is to define retention as

the customers’ liking, identification, commitment, trust, willingness to recommend, and

repurchase intentions, with the first four being emotional-cognitive retention construct, and the

last two being behavioral intention (Stauss et al. 2001).

Customer retention is very important for the hotel in order to ensure their sustainability

and growth for a long of time; therefore, it is the hotel’s duty to ensure that they had been able

to fulfill all the customer’s needs and wants from time to time. Whenever there is crises arise,

they need to be alert with the current situation and be able to respond it quickly.

We need to ensure that enable individual customer to be as satisfy as they can be. If we

are serious about helping customers succeed, retention is a necessary but not sufficient

component to their satisfaction. In fact, retention should be our minimal expectation for

customer success that they simply return to our hotel after their first year (T. Kahrig, Personal

Communication, January 14, 2005)

Retention is a strategic objective of striving to maintain long term relationship with

customer. Customer retention is the mirror image of customer defection. According to Chatura,

2003 the definition of customer retention is the propensity of the customer to stay with their

service provider. Many organization today having difficulty to attack new customer so the

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restructure their marketing department and appoint managers to give attention to their existing

customer (Rizal, 2002).

The role of customer retention in a relationship strategy and it is worth emphasizing

again the point that loyal customers who keep coming back are the most profitable type of

customer. They tend to spend more and they may even act as our ambassadors through

positive word of mouth. Obviously these satisfied customers involve very little sales and

marketing expense and thus their true profitability at the margin can be very high (Chistopher,

2003).

Retention was believed to be enhanced in the same way as satisfaction, with the

exception of service. Instead, the informants experienced introduction of changes and chemistry

to enhance retention. The strongest connections between satisfaction and retention turned out

to pertain to the experiences of relationship and confidence, and frequent contact accompanied

by open dialogue. Complaint handling was also strongly connected to both concepts. The

question as to whether a retained customer is necessarily satisfied elicited three responses: the

customer is satisfied, the customer is not necessarily satisfied, and it depends on how

satisfaction is experienced by the customer (Hansemark C, 2004).

Customer retention implies a long term commitment on the part of the customer and the

hotel to maintain the relationship. The development of mutual commitment is the same process

as creating long term service provider-customer relationship (Wilson, 1995).

Our most relevant finding may be that the informant experienced and expressed the

concept of satisfaction and retention using many different mental models. Managers should be

concerned when employee understanding of key concepts differs within the organization, and

differs also from management’s understanding. When employees perceive the concepts in

different ways they value them differently, which could result in diminishing service quality,

dissatisfied customers and lower profitability. It is not enough for managers to define the

concepts and establish goals for the employees, or even to evaluate the goals, nor is it enough

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for managers to guide employees on how to satisfy and retain the customers. They also need to

evaluate and understand the employees’ perception of the concepts.

2.2 LITERATURE REVIEW ON CUSTOMER SATISFACTION

Customer satisfaction is defined as “the individual's perception of the performance of the

product or service in relation to his or her expectations” (Schiffman and Kanuk, 2004)

Following Cronin et al. (2000), conceptualized customer satisfaction to be an evaluation

of an emotion, reflecting the degree to which the customer believes the service provider evokes

positive feelings. Numerous studies in the service sector have hypothesized and empirically

validated the link between satisfaction and behavioral intentions and behaviors such as

customer retention and word of mouth (e.g. Anderson and Sullivan, 1993; Rucci et al., 1998;

Bansal and Taylor, 1999; Cronin et al., 2000). Indeed, this link is fundamental to the marketing

concept, which holds that satisfying customer needs and wants is the key to repeat purchase

(Kotler et al., 2002). Further, the importance of satisfaction on retention is so well recognized

that some major economies now measure satisfaction at the industry level using large sample

surveys to predict customer retention and future financial performance (Fornell, 1992; Fornell et

al., 1995).

In general, satisfaction is a person’s feelings of pleasure or disappointment resulting

from comparing a product’s perceived performance (or outcome) in relation to his or her

expectations. If the performance falls short of expectations, the customer is dissatisfied. If the

performance matches the expectation, the customer is satisfied. If the performance exceeds

expectations, the customer is highly satisfied or delighted (Kotler, 2006). In simple term,

satisfaction can be thought as the extent to which a product’s perceived performance matches a

buyer expectation. If the product’s performance falls short of expectation, the buyer is

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dissatisfied. If performance matches or exceeds expectation, the buyer is satisfied or

delighted.

Satisfaction is one important element in every industry, whether the companies or

producers offered products or services to their customers. This is because by giving the superb

or high quality products or services to their customers it can be considered as one of their core

competencies compare than their competitors and at the same time they can retain their

customers and attract new prospects. Satisfaction is an extremely difficult concept to define in a

few words (Johns, 1996).

Following to Chatura, 2003, it is no surprise, therefore that a fundamental aim of firms is

to seek to manage and increase customer satisfaction because the more satisfied customers

are the greater in their retention (Aderson and Sullivan, 1993).

The connection between retention and satisfaction was experienced in many different

ways. Only one informant believed that a retained customer is necessarily satisfied. Ovenden

(1995), who argues that in order to retain a customer, it is necessary to satisfy him, supports

this. Desai and Mahajan (1998), also assume that retained customers are, in fact, satisfied, and

not retained simply because of habit, indifference or inertia. Johnston (2001), on the other hand,

finds a weak relationship between satisfaction and retention, in line with most informants’

experience. Eriksson and Löfmarck Vaghult (2000), argue that not all retained customers are

satisfied, saying they may not have achieved the kind of relationship in which they can be

satisfied. Keeping customer satisfied is what leads to customer loyalty.

Researches conduct by Jones and Sasser Jr. (1995), found that where customers have

choices the link between satisfaction and loyalty is linear; as satisfaction rises, so too does

loyalty. In this case, the higher the student satisfaction, the higher the student retention.

However, in markets where competition was intense they found a different between the loyalty

of satisfied and completely satisfied customer.

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Customer satisfaction has long been regarded as a proxy for a firm’s success on the

assumption that it is inextricably linked to customer loyalty and retention (Paul G. Patterson,

2004). According to Kotler et al., (2002), satisfying customer needs and wants is the key to

repeat purchase.

Further, the importance of satisfaction on retention is so well recognized that some

major economies now measure satisfaction at the industry level using large sample surveys to

predict customer retention and future financial performance (Fornell, 1992; Fornell, et al. 1995).

2.3 LITERATURE REVIEW ON CUSTOMER TRUST

The researcher has conceptualized trust based on Morgan and Hunt’s, (1994),

interpretation of the construct in their seminal study of the commitment-trust theory of

relationship marketing. They conceptualized trust as existing when one party has confidence in

a partner’s reliability and integrity. Indeed, trust could exist at the individual level (Rotter, 1967)

or at the firm level (Moorman et al., 1993). Furthermore, trust, when conceptualized as a

dimension of service quality, could also be thought of as “trust in the service itself”

(Parasuraman et al., 1985, 1988).

Recent research suggests that, in some cases, service providers may be unable to

retain even those customers who are satisfied (e.g. Heskett et al., 1994; Schneider and Bowen,

1999). Thus, satisfaction alone may not be adequate to ensure long-term customer commitment

to a single provider. Instead, it may be necessary to look beyond satisfaction to other variables

that strengthen retention such as trust (Hart and Johnson, 1999).

This view is consistent with research on marketing channels (e.g. Morgan and Hunt,

1994), which shows that firms often look beyond satisfaction to developing trust in order to

ensure economically viable, long-term relationships. Further, this recommendation is based on

the premise that once trust is built into a relationship, the likelihood of either party ending the

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relationship decreases due to high termination costs. Although the consequences of trust in

business-to-business relationships have been firmly established, the same cannot be said about

trust in business-to-customer relationships.

Following the lead of Parasuraman et al. (1985, 1988), many have used trust as a

dimension of the service quality construct. Gremler and Brown (1996) proposed trust as a

conceptual antecedent of customer loyalty. Hart and Johnson (1999) offered anecdotal

evidence in support of a similar argument. Gwinner et al. (1998) suggested trust as a relational

benefit. More specifically, they proposed trust as a confidence benefit rated highly by customers

in long-term relational exchanges with service firms.

Tax et al. (1998), in their seminal paper on service recovery, studied trust in the context

of consumer complaint management. Based on an analysis of both qualitative and quantitative

data, they found trust, together with commitment (an indicator of future customer behavioral

intentions) to be a consequence of satisfaction with complaint handling. Levesque and

McDougall’s (2000) recent findings, however, indicate that service recovery (similar to complaint

handling in Tax et al., 1998) could have a qualitatively different impact on trust from that on

satisfaction. These numerous uses of the trust construct in business to customer relationships

are likely to have at least partly contributed to the lack of an extensive body of literature on

trusts a mediating construct in models of customer retention.

However, Garbarino and Johnson (1999) did look at trust as a driver of customer

behavioral intentions. In a study of theatre customers, they segmented consumers based on

their relational (purchased season tickets covering a longer period of time) and transactional

orientation. They found that for relational customers, trust, as opposed to satisfaction, mediates

the relationship between component attitudes and future intentions.

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2.4 LITERATURE REVIEW ON PRODUCT VALUE

According to the representative research projects higher levels of perceived value lead

to higher levels in satisfaction of customers, greater levels of customer loyalty and retention and

to a greater success of organizations (e.g. Cronin et al., 2000; Ulaga and Chacour, 2001).

The logical and basic rule, which applies to each individual in the role of a customer, is

that his basic motive of an exchange is satisfied by a product’s reasonable or expected value.

Delivering superior value to customers is considered one of the most popular concepts among

business managers and academia (Ulaga and Chacour, 2001). Moreover, many authors

suggested that the superior value should be considered as the most fundamental challenge for

marketing strategies of organizations (e.g. Deshpande et al., 1993; Jaworski and Kohli, 1993;

Day, 1994; Slater and Narver, 2000).

One reason for the keen attention placed on product quality is because of its critical

relevance for delivering superior consumer value. Superior consumer value is the cornerstone

of competitive advantage (Day and Wensley, 1994) and, as such, must be the focus of

knowledge acquisition. Thus it is essential for companies to develop process and system that

produce superior quality, at a competitive cost leading to customer satisfaction.

A consumer’s level of knowledge about prices in a given category may be influenced by

his/her demographic background. Demographic characteristics such as age, income, and

gender are often presumed to influence one’s level of product knowledge and shopping

experience in certain product categories, and are frequently used as the basis for market

segmentation (Calantone and Sawyer, 1978; Kotler, 1997; Uncles and Ehrenberg, 1990). Since

consumers of one particular demographic background may dominate the purchases in certain

categories, it may be reasonable to expect that consumer price knowledge in a given category

would vary as a function of demographics.

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Product value to a consumer is a comparison of tangible and intangible benefits from the

generic as well as the supplementary levels of a product and the total costs of production and

usage of a product (Nilson, 1992). Product value for a consumer is created when the benefits a

consumer gets with a product are greater than the long-term costs a consumer is expected to

have with a product (Slater and Narver, 2000)

A product’s (or brand’s) meaning is the consumer’s perception or interpretation of it

(Kleine and Kernan, 1991), as well as his/her affective reactions toward it (Friedmann, 1986;

Szalay and Deese, 1978). That is, products mean very little in and of themselves, apart from the

meanings ascribed to them by consumers. These meanings affect consumers, perceptions of

value (Richins, 1994) and purchase behaviors (Kleine and Kernan, 1991). Therefore, “we

cannot hope to understand consumer behavior without first gaining some understanding of the

meanings that consumers attach to possessions” (Belk, 1988, p. 139).

In pinpointing product meanings, marketers are challenged by the multitude of meanings

that each product can represent. Meanings may be objective or symbolic, shared or personal, or

evoke a high or low emotional response (Fournier, 1991).

The meanings of valued possessions also are derived from enjoyment, interpersonal

ties, and a sense of identity, financial issues, and objects’ appearance (Richins, 1994).

Moreover, consumers do not simply purchase and consume products at face value; they

experience them (Holbrook and Hirschman, 1982).

RELATIONSHIP BETWEEN SATISFACTION, TRUST, AND PRODUCT VALUE TO

RETENTION

Customer satisfaction has traditionally been regarded as a fundamental determinant of

long-term consumer behavior (Oliver, 1980; Yi, 1990). The more satisfied customers are, the

greater is their retention (Anderson and Sullivan, 1993; Fornell, 1992), the positive word of

mouth generated through them (Reichheld and Sasser, 1990; Schneider and Bowen, 1999),

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and the financial benefits to the firms who serve them (Fornell et al., 1995). It is no surprise,

therefore, that a fundamental aim of firms is to seek to manage and increase customer

satisfaction.

However, satisfaction alone does not ensure continued customer patronage (Jones and

Sasser, 1995). In particular, it offers a cautionary note on the role of satisfaction and trusts in

service failure and recovery incidents, and also unveils alternative means of retaining

customers.

Recent research shows that while satisfaction and trust are closely related, they are also

conceptually different, have some distinct antecedents, and also have different empirical effects

on retention (Geyskens et al., 1998; Szymanski and Henard, 2001). Further, some argue that

trust is a stronger emotion than satisfaction and that it may therefore better predict retention

(e.g. Hart and Johnson, 1999). By studying the effects of trust and satisfaction together,

researcher seek to shed more light on their relative importance as well as their interaction

effects on retention. Doing so can help firms make better decisions about the relative value of

investing in developing satisfaction versus trust among their customers.

When speaking about interrelations among the variables forming perceived value, there

has been a convergence of opinion that favorable service quality perceptions lead to improved

value attributions and higher levels of sacrifices lead to reduced value (Cronin et al., 2000). The

higher levels of perceived value lead to higher levels in satisfaction of customers, greater levels

of customer loyalty and retention and to a greater success of organizations (e.g. Cronin et al.,

2000; Ulaga and Chacour, 2001).

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2.5 CONCEPTUAL FRAMEWORK

Based on a literature review that based from the journal, it was found that customer

retention toward room in Primula Beach Resort was influenced by customer satisfaction,

customer trust, and product value. Former researcher has developed a framework linking

satisfaction, trust and product value to customer retention. The framework has it a main feature

which is to examine the main effects of each of the three independent variables on retention.

Doing so allows researcher to examine, among other things, the simultaneous influence of

satisfaction, trust and product value on retention.

These relationships and the variables are illustrated by diagram below:-

INDEPENDENT VARIABLE DEPENDENT VARIABLE

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CUSTOMER SATISFACTION

- Cronin et al. (2000)- (Aderson and Sullivan

1993)- Jones & Sasser Jr. (1995)

CUSTOMER TRUST

- Morgan & Hunt (1994)- Tax et al. (1998)- Garbarino & Johnson

(1999)

PRODUCT VALUE

- Cronin et al., (2000)- Ulaga and Chacour,

(2001)- Philip Kotler (1997)

CUSTOMER RETENTION- Hansemark C. (2004)- T. Kahrig (2005)- Chatura (2003)- Christopher (1993)


Figure 2.1: Conceptual Framework of Factors Influencing Customer Retention toward Room

ServiceTh

2.6 HYPOTHESES STATEMENT

Hypothesis (H) is an unproven statement or proposition about a factor or phenomenon

that is of interest to the researcher. It may, for example, be a tentative statement about

relationships between two or more variables as stipulated by the theoretical framework or the

analytical model (Naresh K. Malhotra, Marketing Research, an Applied Orientation, page 53,).

Researcher has come out with several hypotheses regarding this research. The

hypotheses are as follows:

Hypothesis 1: Customer Satisfaction

H0: There is no relationship between customer satisfaction and customer retention.

H1: There is a relationship between customer satisfaction and customer retention.

Hypothesis 2: Customer Trust

H0: There is no relationship between customer trust and customer retention.

H1: There is a relationship between customer trust and customer retention.

Hypothesis 3: Product Value

H0: There is no relationship between product value and customer retention.

HI: There is a relationship between product value and customer retention.

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3.0 RESEARCH DESIGN AND METHODOLOGY

3.1 INTRODUCTION – RESEARCH DESIGN

This research attempts to analyze the relationship between the dependent and

independent variables. Research design can be defined as framework or blueprint for obtaining

the information needed to solve marketing research problem or research question. It specifies

the detail of the procedures necessary for obtaining the information needed to structure and

solve marketing research problem. This study is conclusive research where the objective is to

get the conclusion from the research. It is also meant to test specific hypothesis and examine

relationships between variables and to assist the decision maker in determining, evaluating, and

selecting the best course of action to take in a given situation. Researcher examines whether or

not the conjectured relationship can be substantiated and then bring the answers. The findings

and results of a conclusive research are conclusive and are used as input in decision making.

The type of conclusive research in the study is descriptive.

This research is a quantitative research where sources of information are gathered from

questionnaire distributed to the customers who spend a night in room at Primula Beach Resort.

Most of others information and data gathered from published journals, articles and books. The

researcher used convenience sampling which is non probability sampling to get the data from

the respondent. The researcher used this type of sampling because it is easy to obtain a large

number of completed questionnaires quickly, low cost, and least time consuming of all sampling

technique. The sampling unit is accessible, easy to measure, and also cooperative.

For this study, a researcher used 5 Likert scales, which originated by Rensis Likert. It is

a measurement scale with five response categories ranging from ‘strongly disagree’ to ‘strongly

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agree’, which require the respondents to indicate a degree of agreement or disagreement with

each of a series of statement related to the stimulus object.

Correlation study is adopted to delineate the important variables associated with the

subject matter, customer retention. It may be of interest to know that attempts are sometimes

made to establish cause-and-effect relationship through regression analysis. The collected data

will be analyzed and interpreted by using the computer software, which is known as Statistical

Package for Social Science (SPSS), Version 12.0. From the (SPSS) program, the computer

can provide the standard error, coefficient value-stat, R-squared, Pearson Correlation and

several other important statistical tests. After the data was computed, it was analyzed to find

the relationship between the dependent variable and each of the independent variables. It is

used to test and answer the hypothesis constructed. The clear understanding of research

problem enable researcher to identify the management problem and then start defining the

objectives of the research. After defining objectives, researcher will collect the data, normally

from primary data which is available to help with this study.

3.2 POPULATION

Population refers to the entire group of people, events, or things of interest that

the researcher wishes to investigate (Sekaran, 2000). Other definition by Naresh K. Malhotra,

Marketing Research, an Applied Orientation, page 328, population refers to the aggregate of all

elements, sharing some common set of characteristics, comprising the universe for the purpose

of the marketing research problem. On this research, the target unit is the customer that stays at

the room in Primula Beach Resort. As mentioned earlier, the customer in Primula Beach Resort

can be divided into two separated group which consist of individual and family group and

second, government and private group. These groups come to get the room in Primula Beach

Resort in various purposes such as for vacation, traveling, holiday with family or friend, function,

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meeting, and many more purpose. But for this study, researcher will narrow the target

population only to individual and family group. This is due to some factor such as the perception

of this group is different compare to other group, the purpose of staying, and their needs and

wants during the stay.

3.3 SAMPLING

In statistics, a sample is a subset of a population. Typically, the population is very large,

making a census or a complete enumeration of all the values in the population impractical or

impossible. The sample represents a subset of manageable size. Samples are collected and

statistics are calculated from the samples so that one can make inferences or extrapolations

from the sample to the population. This process of collecting information from a sample is

referred to as sampling.

In this research, a non probability sampling is chosen. The researcher used convenience

sampling method. Convenience sampling technique is to attempts to obtain a sample of

convenient elements. The selection of sampling units is left primarily to the interviewer. Often,

respondents are selected because they happen to be in the right place at the right time.

Convenience sampling is the least expensive and least time consuming of all sampling

techniques. The sampling units are accessible, easy to measure and cooperative. The

researcher does convenience sampling where manage to get sample from customer from

government and corporate firms. The researcher manages to get 160 respondents for the

research.

3.3.1 Target Population

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The specific, complete group relevant to the research project is the best definition of

target population. The population for this research is the individual and family group of customer

of Primula Beach Resort who come for many purpose. This population comes to the hotel for

example to stay a night in room, for event or function, meeting, for food and beverage, swim at

pool, gymnasium and so on. The hotel received 24,000 until 26,000 customers per year. It was

many potential customers who will come back to the hotel for that year.

3.3.2 Sampling Frame

Malhotra, N. K, (2003), page 189, defines the sampling frame as a representation of the

elements of the target population. It consists of a list or a set of directions for identifying the

target population. For this research, the researcher has selected the sampling frame that will be

those customers of individual and family group that come to the Primula Beach Resort and stay

at room, regardless of their gender, age, and income level, purpose of trip, marital status, and

race. The researcher has chose 160 customers from individual and family group that stay at

room in Primula Beach Resort as the sampling frame.

3.3.3 Sample Size

According to Naresh K. Malhotra, Marketing Research, an Applied Orientation, Page

332, sampling size refers to the number of elements to be included in a study. A sample is a

subset of the population. It comprises some members selected from it. According to Sekaran

(2003), sample size is the actual numbers of subjects chosen as a sample to represent the

population characteristics. Researcher takes 160 respondents as a sample size. Roscoe (1975)

stated that sample size which is larger than 30 and less than 500 is appropriate for most

research; where samples are to be broken into sub-samples, a minimum sample size of 30 for

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each category is necessary. Therefore, 160 samples are appropriate to analyze the data in this

study. A total of 160 questionnaires will distribute to potential respondents according to this

condition; the respondents had to be the individual and family group customers of the hotel.

3.4 DATA COLLECTION METHOD

Commonly, data collection method used by researcher in completing study is collected

from two (2) sources that are primary data and secondary data. Primary data can be defined as

the data collected or produced by the researcher specifically to address the research problem.

On the other hand, secondary data refers to the data collected for some purpose other than the

problem at hand (Malhotra N.K, Marketing Research, an Applied Orientation, Page 40).

On this study, researcher used primary data. Primary data is the data gathered and

assembled specifically for the research project at hand. It was difficult to construct and more

costly than secondary data. The researchers also faced another problem such as not enough

time and waste energy too. For this research, researcher has distributed a set of questionnaire

to the respondent to get the primary data.

3.4.1 Measurement and Scales

In the research, researcher used Likert scale to measure the attitude. The Likert Scale

is an extremely, and most popular means for measuring attitudes. With the Likert scale,

respondents indicate their own attitudes by checking how strongly they agree or disagree with

carefully constructed statements about the attitudinal object. Individuals generally choose from

approximately five response alternatives: “strongly agree,” “agree,” “neutral,” “disagree,” and

“strongly disagree.”

Typically, each scales item has five responses categories, ranging from “strongly agree”

to “strongly disagree”. Strong agreement indicates the most favorable attitudes on the

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statement, and the weight of 5 is assigned to this response. If a negative statement toward the

object were given, the weights would be reversed and “strongly disagree” would be assigned

the weight of 1. The total score is the summation of the weight assigned to an individual’s total

responses. Likert scales provide some advantages such as it is easy to construct and

administer and respondent readily understand how to use the scale.

In the Likert procedure, a large number of statements are generated and then an item

analysis is performed. The purpose of the item analysis is to ensure that final items evoke a

wide response and discriminate among those with positive and negative attitudes. Items that

are poor because they lack clarify or elicit mixed response patterns are eliminated from the final

statement list. This step in the questionnaire design is too often neglected by business

researchers.

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3.5 DATA ANALYSIS AND INTERPRETATION

After get all the information through the questionnaires that distributed, researcher will

use Statistical Package for Social Science (SPSS) version 12.0 software in the next step to get

the result. The data gathered through this analysis are illustrated in from of table; graft and

charts for easy obtain count of the number of respondent associated with values of the variables

and to express in percentage term. Then, the data analysis will be conducted to find out the

result whether the hypotheses are significant or not. Researcher will conduct a descriptive

analysis which is the transformation of raw data into a form that will make them easy to

understand and interpret. Tabulation is the orderly arrangement of data in a table or other

summary format.

Researcher used SPSS software as the tool to process the data. Then, several

statistical tests were conducted for analysis such as frequency analysis, factor analysis,

reliability test, regression test, correlation and so on. Further, the table, chart and graph will be

developed. Then each one will be interpret to make it more understandable. Next, compute the

mean, median and mode of the responses. Mean is the average, median is the central item in a

group arrayed in ascending or descending while mode is the most frequently occurring

phenomenon within a set of observations.

Finally, researcher will conclude the result and make conclusion and some

recommendation from the study. The information based from the research would help the

management of Primula Beach Resort to manage their customer very well and finally, get

customer retention.

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Primula Beach Resort