Measurement of Determinants of Purchase Decision on Retail Products

Measurement of Determinants of Purchase Decision on Retail Products

Cut Edwina Safia Oebit^*, Septiani Juniarti

Faculty of Economic and Business, Universitas Mercu Buana Jakarta, Jl. Meruya Selatan No.1 Kembangan, Jakarta 11650

^*Correspondence Author

DOI: https://dx.doi.org/10.47772/IJRISS.2023.7834

Received: 30 July 2023; Accepted: 06 August 2023; Published: 06 September 2023

ABSTRACT

The purchase decision is an important stage in the field of marketing, both from the point of view of producers and consumers. Purchasing decisions are related to several other aspects of purchasing, namely: purchase intention, purchase planning, and supplier assessment and selection. This study focuses on purchasing decisions in relation to product price, product quality, and promotion. The influence of these three factors was measured and analyzed using a quantitative research approach, where data was collected through questionnaires. The case study in this research is on retail service products, where consumers of service products receive their products at the same time these products are produced and marketed. The results of the study show that product quality and price have a positive and significant effect on purchasing decisions on cut flower products. Rose Flower Florist. Meanwhile, Promotion has a positive and insignificant effect on purchasing decisions on cut flower products by rose flower florists.

Keywords: marketing, purchasing decision, product quality, promotion, consumer behavior

INTRODUCTION

Market demands, in this case consumer demands, develop in line with the increase in the social and economic level of society. Buying decisions are influenced by several factors, which are basically not only determined by the quality and price of the product, but also influenced by the behavior of consumers and changes in market development. Those bebavior and changes basically related to social and economic society as well as technological developments. Data from the Global WebIndex shows that Indonesia has the highest level of e-Commerce usage in the world, where 90% of internet users in Indonesia aged between 16 to 64 years buy products and services online (Global Web Index, 2019).

Other data shows that around 79% of internet users in Indonesia make purchases of the products they need using their mobile phones, more than 90% of potential buyers in Indonesia visited the online store portal to choose the product he wanted to buy (Kemp, 2021). Nearly 40% of consumers prefer to make purchases online because they feel they have a high sense of privacy rather than buying in stores directly. However, on the other hand, around 27% of the young age group (millennials) refuse to make purchases online for reasons of personal safety which carries a high risk. Whereas 32% of adult consumers are more careful in making online purchases, by ensuring the credibility of companies that offer online sales (IOT Security Laboratory, 2015).

Purchasing decisions can be seen from two perspectives, from the internal product itself, including quality, price, service and promotion of the product itself. While another point of view is from the consumer’s point of view, how do consumers perceive a product and the ease of accessibility of consumers to the product they will buy. This study focuses on the first point of view, however, on the Promotion variable, several indicators related to the second point of view, namely accessibility, will also be used. The purpose of this study is to measure and analyze the significant influence of product quality on product purchasing decisions, product prices on product purchasing decisions, and product promotion on product purchasing decisions.

LITERATURE REVIEW

In marketing theory, its developments is influenced by the social, cultural, environmental and technological factors, both the technology of the product itself and the technology related to marketing activities. The scope of marketing in a business is very broad. From the producer’s perspective, starting from product design to delivering the final product to consumers, and from a consumer perspective, promotion, marketing channels to the business environment itself. This broad scope is part of marketing management (Kotler, Philip and Keller, 1972). In this context, manufacturers need to know thoroughly and in detail about their customers, have an in-depth understanding of methods and strategies that can meet and satisfy consumers, and measure the achievement of goals and targets through optimizing internal processes.

In marketing theory, there is a marketing mix model. In this model there are 4 (four) components or known as the 4 P’s, namely Product, Price, Promotion, and Place. This model is often used as a basic framework in compiling a comprehensive marketing strategy. The 4 P’s concept was originally initiated by a Professor in Marketing from Harvard University, Prof. James Culliton in 1948. Then in 1964, Professor Neil Borden developed this concept. In his 1964 article entitled ‘The Concept of The Marketing Mix’ Borden introduced the term “Marketing Mix” (Lahtinen et al., 2020; McCarthy & Perreault, 2002; Singh, 2012). From the 4 elements above, then developed into 7 P with the addition of People, Packaging and Process (Altay et al., 2022; Goi, 2009).

2.1. Buying decision

Several factors influence customer in making the final decision in choosing the product. Although these factors are influenced by the consumer’s own background and experience, in marketing theory this must be seen from the producer’s point of view. A consumer’s purchasing decision is influenced by the product, price, place and promotion provided by the producer to the consumer (Kotler & Armstrong, 2017).

Selection of market segmentation is one of the determining factors for the success of a product in its sales (Kotler, Philip and Keller, 1972). Meanwhile, market segmentation itself is determined by social and economic factors in the community, existing technology in the product, as well as the political and cultural conditions of the community (Kotler, Philip; Armstrong, Gary; Saunders, John and Wong, 1999). All of these factors influence a company’s decision to produce certain goods in response to consumer needs. However, purchasing decisions can also be seen from a producer’s point of view, where producers make selections from their suppliers. There are several methods that can be used by manufacturers in selecting suppliers (Gegovska et al., 2020; Makhitha, 2017; Su & Zhan, 2020). The choice of the right method is generally determined by the type of product produced by the manufacturer and the characteristics of the product it supplies (Lin et al., 2018).

2.2. Product Quality

Manufacturing product quality and service quality, in definition, usually refer to the same thing, namely how well a product meets the needs of its customers, fulfills its function and of course must meet the technical standards of the product itself.

Some Quality Gurus define Quality as “Fitness for Use” or “Fitness for Purpose” (Anderson et al., 1994; A.V Feigenbaum, 1999; Juran et al., 1999).

In accordance with the theme of this study, where one of the variables to be measured is related to product quality, there are several dimensions that can be used to measure the quality of a product. Among the existing dimensions, there are 8 (eight) quality dimensions that are often used as references (Garvin, 1984; Ramasamy & Chowdhury, 2020), namely: Performance, Features, Reliability, Conformance. ), Durability, Serviceability, Aesthetics, and Perceived Quality.

2.3. Product promotion

In product promotion, which is generally is to build a product image and finally will influences consumer purchasing decisions. There are 5 components in holistic marketing (McKenna, 1992) that come together to unify the brand image of a product. The first is Relationship Marketing, defined as the relationship between producers and potential customers, business partners, and competitors. The ultimate goal of this relationship is to create strong emotional bonds which in turn build loyalty from all elements inside and outside the organization and build product and organizational images (Alakkas et al., 2022; Winit & Ekasingh, 2023).

Second is Internal Marketing. In addition to external customers who are the top priority in marketing, internal customers or employees also have an important role in marketing. Within the scope of internal marketing, the organization needs to convince all employees that they are like customers who must be convinced about the values of the organization. The purpose of this assurance is to ensure that each individual employee understands his role in relation to marketing activities (Cheng, 2020; Chiţu & Russo, 2020; Nemteanu & Dabija, 2021). The third is Integrated Marketing which aims to provide a satisfying experience for consumers about the products they choose and buy. This experience is created through various communication channels (promotion, advertising, public relations, and other marketing activities) (Nevriye AYAS, 2020; Sawmong, 2018; Tamulienė et al., 2020). Integrated and aligned communication with consumers will ultimately build a positive and strong brand image.

Next is Societal Marketing, which is corporate social responsibility to society at large. It requires a positive business ethics from the organization, in order to encourage all business stakeholders to have a positive impact on society (Rivera et al., 2019; Zhang & Ahmad, 2022). Lastly is Marketing Performance, which is the achievement measure used by the company in ensuring the success of the marketing strategy it implements. Success here is not only in the context of sales achievement, but also includes the level of customer satisfaction, product image in society to the organization’s contribution to society (Mone et al., 2013; Munir et al., 2021; Rangaswamy et al., 2021).

2.4. Product Price

Determining the price of a product is one of the main factors that determine the consumer’s decision to choose a particular product. Therefore, companies must make precise and accurate calculations in determining the price of their products. Product price is a quantitative value based on internal and external factors starting from the product is planned, designed, produced, packaged, marketed, shipped and until the product reaches the consumer. Therefore product pricing requires thinking and calculations that are not simple.

There are several approaches that are often used by manufacturers in setting product prices. One of the most common approaches is a market research. Through this market research, it will be known how much the prices of similar products are sold by competitors, who are the consumers of the competitor’s products?

While the internal approach that used by manufacturers to calculate the overall costs incurred by producers to produce the product and all other supporting costs until the product is received by consumers or the Cost of Goods Sold (COGS) generally add the amount of profit expected from the sale of these products. This is where the role of marketing strategy comes in, because of course the product that first enters the market will have a different target from products that have existed before.

METHODOLOGY

The conceptual framework describes the relationship between the independent variables, namely Product Quality (X1), Product Price (X2), and Product Promotion (X3) to the dependent variable, namely Purchase Decision (Y). The framework of thought can be described below:

Figure 1. Research Model

Research is designed with a quantitative approach, where with this approach phenomena can be expressed in quantity (Kothari, 2004). Analysis of the results of collecting and measuring data in this study used multiple regression analysis techniques with measurements of the coefficient of determination, F test and t test. The dimensions and indicators of the three variables above are:

Table 1. Variable, Dimension dan Indicator

The variables and dimensions above are determined based on preliminary research and studies related to product quality, both tangible products or product quality (Garvin, 1984) and service products or service quality (Parasuraman et al., 1991, 1993a, 1993b, 1994 ; Parasuraman & Varadarajan, 1985). Product price variable with 4 dimensions, namely price affordability, value for quality, price according to buying power, and price conformance to benefits (McFarlane, 2012; Nagle et al., 2016). Promotion variables with 3 dimensions, namely promotional messages, promotional time and promotional media (Baker, 1992; Rindfleisch & Malter, 2019). As for the dependent variable, purchasing decisions, 3 dimensions are defined, As needed, benefits value, and repeat purchases (Solomon et al., 2012; Vinayagamoorthy, 2005).

The questionnaire were distributed to all consumers who came to the Ciledug Rose Flower Florist, in the time period between the year 2018 and 2021. From the entire population, a sample was selected using the nonprobability sampling approach and accidental sampling of 100 respondent. The collected data were analyzed using Partial Least Square (PLS). PLS is an equation model of Structural Equation Modeling (SEM) with an approach based on variance or component-based structural equation modeling.

The 100 respondents consisted of male respondents (52.7%) and female (47.3%), with the majority of ages in the range of 21 years to 30 years, a total of 76 respondents (69.1%) and 66.4% have high school/vocational school education.

RESULTS AND ANALYSIS

The first test in the research was a validity testing, in order to ensure that all indicators were meet convergent validity in the good category. The following is the result of calculating the outer loading value using the smart PLS 3.0 computer program.

From the initial results of data processing, it can be seen that all the indicators within the questionnaires used to measure the variables Quality (X1), Price (X2), Promotion (X3), and Purchase Decision (Y) are able to express something that will be measured by the questionnaire. It is known that each research variable indicator has an outer loading value of > 0.6. So that the indicators are declared feasible or valid to be used to measure each research variable and can be used for further analysis

Figure 2: PLS Algorithm Results

Discriminant Validity is carried out to ensure that each concept of each latent variable is different from other variables. In this section, the results of the discriminant validity test will be described. The discriminant validity test can be identified through other methods, namely by looking at the average variant extracted (AVE) value for each indicator, it is required that the value must be > 0.5 for a good model. Based on the Discriminant Validity test, it can be concluded that the square root of the average variance extracted (√AVE) variable for Product Quality, Price, Promotion and Purchase Decision > 0.5. The AVE value is used to measure the amount of variance that can be captured by the construct compared to the variation caused by measurement errors.

The PLS output results can show that each indicator has the greatest loading factor when associated with other endogenous constructs. This shows that based on the Discriminant Validity that has been tested all indicators are valid. Another method for looking at discriminant validity is by looking at the square root of average variance extracted (AVE) value for each construct with a correlation between the construct and the other constructs in the model, so it can be said to have good discriminant validity. Results of Composite Reliability and Cronbach’s Alpha Testing.

Then tested the composite reliability and cronbach’s alpha which aims to test the reliability of the instrument in a research model. Based on the tests carried out, it shows that the results of the composite reliability graph test have a value of ≥ 0.7, which means that the construct has good reliability or the questionnaire used as a tool in this study is reliable or consistent.

In order to analyze the relationship between exogenous and endogenous variables, a Structural Model Test and a Hypothesis Test (inner model) were carried out. Testing the inner model is the development of a model based on concepts and theories that have been described in a conceptual framework. The results of the Model Test show that the model of the influence of the latent variables Product Quality, Price, and Promotion on Purchase Decisions is able to explain the Purchase Decision variable of 0.773 and the remaining 22.7 is explained by other variables outside those studied. Testing the Goodness of Fit Structural model on the inner model uses the predictive-relevance value (Q2). A Q-Square value greater than 0 (zero) indicates that the model has a predictive relevance value. The results of the calculation above show a predictive-relevance value of 0.773, which is 0 (zero) greater. This means that 77.3% of the purchase decision (the dependent variable) is explained by the independent variables used. Thus the model is said to be feasible to have relevant predictive value.

In the Hypothesis Test, it was found that the estimated value for the path relationship in the structural model must be significant. The significance value of this hypothesis can be obtained by the boostrapping procedure. The significance value of the hypothesis is was looking at the parameter coefficient values and the significance value of the T-statistic in the algorithm boostrapping report. To find out whether it is significant or not, it can be seen from the T-table at alpha 0.05 (5%) = 1.96 then the T-table is compared with the T-count (T-statistics).

Figure 3: Boostrapping Test Result

DISCUSSION AND DISCUSSION

From the test it was shown through the existing hypotheses so that you can find out how each variable influences the other variables:

1. Effect of Product Quality on Purchasing Decisions

The effect of product quality (X1) on purchasing decisions (Y) is 0.476 and has a positive value, with a t-statistic value of 4.595 and a probability value (P-value) of 0.000. Because the t-statistic value is greater than t-table (4.595 > 1.96) and the probability value is less than 0.05 (0.000 <0.05), it can be concluded that the first hypothesis (H1) which states Product Quality at Rose Flower Florist products are accepted. The results of this research support the research of Delima and Usman (2019), that product quality has a positive and significant effect on purchasing decisions. According to Kotler on Pusparani and Rastini (2015), the higher the level of quality, the higher the level of satisfaction felt by consumers, with the high satisfaction felt by consumers, consumers will recommend products to others.

In this study, one of the product quality variable indicators that has the greatest contribution or greatest influence on purchasing decisions for rose flower florist products was the K1 indicator with an indicator value of 14.337 (Bootstrapping test result value).

2. Effect of Price on Purchasing Decisions

The effect of price (X2) on purchasing decisions (Y) is 0.300 and has a positive value, with a t-statistic value of 1.549 and a probability value (P-value) of 0.002. Because the t-statistic value was greater than t-table (3.085 > 1.96) and the probability value was less than 0.05 (0.002 <0.05), it can be concluded that the second hypothesis (H2) which states the price of the product Rose flower florist accepted. The results of this study support the research of Fernandes (2017), Yulianto et al (2016) and Khakim et al (2014) who found that there is a positive and significant effect between price and purchase decision.

Based on the data collected, most agreed with the decision to purchase rose flower florist products because they received information from various rose flower florist buyers or consumers such as cheap prices, self-will towards rose flower florist products. So, it can be said that the higher the price offered by cheap producers, the more consumers who want to shop for cut flowers, the more it influences their purchasing decisions on rose flower florist products. According to Tjiptono (2017: 370), price is the amount of money (monetary unit) and/or other (non-monetary) aspects that contain certain utilities or uses needed to obtain a product.

In this study, one of the price variable indicators that has the greatest contribution or greatest influence on purchasing decisions for rose flower florist products is the H6 indicator with an indicator value of 16.217 (Bootstrapping test result value).

3. Effect of Promotion on Purchasing Decisions

The effect of promotion (X3) on purchasing decisions (Y) is 0.164 and has a positive value, with a t-statistic value of 3.085 and a probability value (P-value) of 0.112. Because the t-statistic value was greater than t-table (3.085 > 1.96) and the probability value was less than 0.05 (0.112 > 0.05), it can be concluded that the third hypothesis (H3) which states promotion of Rose flower florist is accepted but not significant. The results of this study support the research of Fifin Anggraini and Anindhyta Budiarti (2020) who found that there was an insignificant effect between promotions on customer loyalty, while different results were shown in research conducted by Yulianto et al (2016) and Tjahjaningsih (2013) who found that there is a positive and significant influence between promotions on customer loyalty. Promotion according to Sri Widyastuti (2017: 92) which unites that “Promotion is an activity conveying information about product benefits and persuading customers to buy them, reminding customers of the existence/existence of products”. For rose florists, on the other hand, this shows that rose florists need to increase promotional activities on a regular basis to attract customer attention so that customers will remain loyal to buying products from rose florists.

In this study, one of the promotional variable indicators that has the greatest contribution or greatest influence on purchasing decisions for rose flower florist products is the P5 indicator with an indicator value of 14.445 (Bootstrapping test result value).

CONCLUSION

This study was intended to determine the factors that influence purchasing decisions on Florist Bunga Rose products. Based on the data analysis and discussion put forward in the previous section, several research conclusions can stated as follows:

1. Product quality has a positive and significant effect on purchasing decisions on cut flower products from the Rose Flower Florist. That is, the better the quality of the product at the Rose Florist, it will increase the Purchase Decision at the Rose Florist.
2. Price has a positive and significant effect on purchasing decisions on cut flower products from the Rose Flower Florist. That is, the better the price at the Rose Flower Florist, the higher the Purchase Decision at the Rose Florist.
3. Promotion has a positive and not significant effect on purchasing decisions on cut flower products by rose flower florists. That is, a good promotion will affect, it will increase the Purchase Decision at the rose flower florist.

For further research, it can be seen from the results of the R-square test that the purchase decision obtained 0.773, which means that the product quality, price and promotion variables only affect 77.3% of the purchase decision for florist rsoe cut flowers. Suggestions that can be considered in future studies that wish to research can expand the research area with different characteristics of respondents so that the research sample is more accurate, and examine other variables not examined in this study such as: location, product innovation, service quality and word of mouth. And finally, researchers must be really careful in looking at the problem and observant in determining the variables to be studied.

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