Determination of Product Marketing Strategy on Gen Z Loyalty to Tophat Cafe

Determination of Product Marketing Strategy on Gen Z Loyalty to Tophat Cafe

Putu Ayu Titha Paramita Pika., I Gusti Ngurah Oka Ariwangsa., Ni Putu Dea Arina Lestari

Economic and Business, Pendidikan Nasional University

DOI: https://doi.org/10.51244/IJRSI.2024.1108035

Received: 16 July 2024; Revised: 25 July 2024; Accepted: 29 July 2024; Published: 02 September 2024

ABSTRACT

This research aims to determine the influence of service quality, price competition, word of mouth on loyalty. The sample in this research was Gen Z consumers who had visited Tophat Café as many as 150 people. Data analysis techniques use Validity Test, Reliability Test, Classical Assumption Test, Multiple Linear Regression Analysis, Determination Coefficient Test, F Test and t Test. From the research results, it was found that service quality had a significant positive effect on loyalty, price competition had a significant positive effect on loyalty and word of mouth had a significant positive effect on loyalty and together service quality, price competition and word of mouth had a significant effect on loyalty. The magnitude of the influence of the independent variable on loyalty is 56.7%. The advice that researchers can give is that Tophat Café should provide quality service, create a competitive price policy and always help consumers’ word of mouth.

Keywords: Service quality, Price competition, Word of mouth, Loyalty

INTRODUCTION

Determining the optimal strategy must of course use targets as a reference in designing a marketing strategy. Because, each strategy designed of course has a different target market. Generation Z or better known as Gen Z is a generation experiencing a transition where the transition from the conventional to the digital era which of course affects the needs and lifestyle of Gen Z themselves. Quoted from Kompas.com, generation z or Gen Z itself has the characteristics of being ambitious, digital native and self-confident, so this is what compares generation z or Gen Z, which has practical and instant desires, so this is what makes Gen Z itself a consumerist generation.

Quoted from Kompas.com as of 2020, as shown in Figure 1, Gen Z itself is the largest generation in the world with the number of Gen Z alone reaching 2.5 billion. Of course, referring to data from the Central Statistics Agency (BPS) quoted from Kompas.com, in 2020 alone, Gen Z managed to dominate the population group with a quite significant percentage of 27.94%, followed by the Millennial Generation at 25.87%. and finally Gen X which amounted to 21.88%. This proves that Gen Z itself almost dominates the world of life. So it’s not surprising that many businesses, especially culinary businesses, are of course targeting Gen Z as their target market

Fig 1.1 Population Composition in Indonesia. Source: Kompas.com (Looking at Gen Z’s Shopping Style) accessed on October 4, 2023 at 16.44 WITA

Fig 1.2 Source: Kompas.com (Looking at Gen Z’s Shopping Style) accessed on 01 October 2023 at 14.17 WITA

Based on data quoted from Kompas.com in Figure 2, in just one month, the items purchased most by Gen Z themselves are dominated by snacks and beverages with a percentage of 71.76%. The results of this data confirm that Gen Z themselves spend their funds to buy food and drinks that they certainly like. Gen Z themselves will feel happy and happy if they are able to fulfill their desires, especially buying the food and drinks they like. Many Gen Zers in the current era are targeting coffee shops or cafes that provide a varied menu and are certainly able to satisfy the desires of Gen Z themselves. Apart from that, the choice of coffee shop or café is not arbitrary. Gen Z itself will of course carry out small analyzes and observations. Usually read reviews via Google or ask your closest friends or relatives about choosing a suitable café so that it won’t cause disappointment for Gen Z themselves.

Designing and establishing a marketing strategy, not only the target market must be considered, the internal business also cannot be spared from the design. A business will be able to produce optimal strategies if they are able to manage the internal business well. Currently, when providing a product or service, Gen Z will consider various things, one of which is service quality. Service quality is a business interpretation of providing satisfaction to its customers. Product quality concerns the physical condition, function and nature of the product that meets consumer needs in the form of tastes and expectations for the product compared to the value of money that consumers are willing to spend to obtain the product [1]

Apart from service quality, price is one of the factors that attracts Gen Z when buying a product or service. The price itself is usually determined by the business which of course will involve the materials used, business operational costs and others. Price can be an important decision for management, because the price set must be able to cover production costs and operational costs [2]). The increasingly rapid development of the business world must meet consumer needs both in terms of product quality and appropriate prices so as to make customers satisfied and loyal to achieve the current development of the business world [3]. On the one hand, a fairly expensive price can increase short-term profits, but on the other hand, it will be difficult for customers to reach [4]

The next factor apart from service quality and price competition, promotion is also an important part of a business. Sales promotion strategy is an important part of a business, because promotion is not only a way of communicating with potential consumers, but through promotional activities it will influence and persuade consumers to buy the products and services that will be offered in order to achieve targets so that the desired goals can be realized [5]. Implementing a marketing strategy without promotion will of course not produce results. In this digital era, promotions can be done anywhere and at any time. Through print media or electronic media and social media it is part of carrying out promotions in implementing the business strategy itself. Apart from this method, there is one method that is known to be very effective in promoting a product. Word of Mouth or better known as WOM is a product or service promotion technique whose promotional method is like recommending a product or service to other people [6].

Customer loyalty will arise when someone gets what they want and feels satisfied with the product purchased. Loyalty is very valuable for a business because if a customer is loyal to the business, then that person will keep coming back to buy the products we offer so this is a challenge for businesses in maintaining loyal customers.  Loyalty is more about behavior than about attitude. Loyal customers will make purchases which can be referred to as long-term routine purchases [6]) Customer loyalty itself certainly does not just appear, there are several factors that influence loyalty such as service quality such as dealing with complaints and criticism or serving consumers, the price offered, what is the image and product image of the business and what are people’s reviews about the place so that these are several factors that are able to create loyalty for customers, especially Gen Z itself. Maintaining their loyalty is the same as improving financial performance and maintaining the company’s survival [7]

Currently, the development of the culinary business is mushrooming, especially the Café business. Business people are competing to take advantage of the existing opportunities where currently many young people, especially Gen Z, prefer to gather with friends, do assignments individually or in groups in places that provide space for them to relax or do assignments. Doing assignments or chatting accompanied by a glass of iced coffee or other drink as well as light or heavy snacks are favorites for Gen Z in choosing and purchasing the products on offer. Tophat Café is one of the cafés in Denpasar City. Its strategic location is 1 neighborhood from the Pendidikan Nasional University (UNDIKNAS). Many of coffee shops and cafes in the same area, mainly in the South Denpasar area, is not an obstacle for Tophat in providing the best service to its customers, especially Gen Z, there are still many loyal Tophat customers who often come to Tophat to just order drinks or food.

Based on the explanation above, the author is interested in conducting research on Tophat Café. This research aims to find out from the perspective of service quality, price competition and word of mouth influence the loyalty of Gen Z. Based on background that is deemed relevant, research was conducted entitled Determination of Product Marketing Strategy Affecting Gen Z’s Loyalty at Tophat Café.

METHOD

A Location

The research location used was Tophat Café which is located on Jalan Bedugul no.39 Sidakarya, South Denpasar. Tophat Café is still located in the same campus area or area, namely Pendidikan Nasional University. The choice of this research location has several good potentials for research, such as an area close to educational areas, making this place a choice for generations, especially generation Z.

1. Method of Research and Instrument of data

In this research, the data used is quantitative method. Quantitative research is a type of research that is based on quantitative data or all types of findings obtained using statistical procedures or other methods of quantification (Rahyuda, 2016). The data’s instrument collect by a form of filling out a questionnaire which is carried out online via Google Form.

1. Sample and Population

According to Supardi (2016) a population is a unit of individuals or subjects in an area and time with certain qualities that are observed or researched. The population of this research is generation Z or Gen Z who have visited Tophat Café. Sample means that researchers can examine all elements of the population or examine some elements of the population. However, if the population is large and it is not possible for researchers to study everything in the population, for example due to limited funds, manpower and time, then researchers can use samples taken from that population. (Indriantoro and Supomo, 2022). Sampling from this data uses a non-probability sampling technique which uses purposive sampling with proposed criteria such as:

1. Is a customer of Tophat Café
2. At least you have made a purchase min. 2 times during the research period
3. Has an age range of 11 – 26 years.
4. Know at least information about Tophat cafe

Determination of the minimum sample size is calculated based on formula (26) as follows:

N = {5 to 10 x number of indicators used}

N = 10 x 15 indicators

N = 150 Respondents

From the calculation above, the number of samples to be studied is 150 respondents.

The data analysis technique used in this research is multiple linear regression analysis which is processed using the SPSS Software 24.0 program. The static techniques used in this research include the Classical Assumption Test, Multiple Linear Regression Test, partial testing (T Test) and simultaneous testing (F Test).

1. Data Quality Test

a.Likert Scale

The Likert scale is a psychometric scale that is commonly used in questionnaires and is the scale most widely used in research in the form of surveys. The scale is named after Rensis Likert, who published a report explaining its use. When responding to questions on a Likert scale, respondents determine their level of agreement with a statement by selecting one of the available options [24]

b.Validity test

The validity test is used to measure whether a questionnaire is valid or not. A questionnaire is said to be valid if the questions in the questionnaire are able to reveal something that the questionnaire will measure. So validity can measure whether the questionnaire questions that have been created can really measure what we want to measure (25).

1. Reliability Test

Reliability is a tool for measuring a questionnaire which is an indicator of a variable or construct. A questionnaire can be said to be reliable or reliable if the respondent’s answers to the questions in the questionnaire are consistent or stable over time (25).

1. Data Analysis Tehnique

The data analysis technique used in this research is multiple linear regression analysis which is processed using the SPSS Software 24.0 program. The static techniques used in this research include the Classical Assumption Test, Multiple Linear Regression Test, partial testing (T Test) and simultaneous testing (F Test).

Classic assumption test

Normality test

The normality test aims to test whether in the regression model, the independent and dependent variables are normally distributed or not. The testing criteria for the Kolmogorov-Smirnov test are a probability value (sig.) > 0.05, so the data is normally distributed, while the probability value (sig.) < 0.05, then the data is not normally distributed (25)

Heteroscedasticity Test

The heteroscedasticity test aims to test whether in the regression model there is an inequality of variance from the residuals of one observation to another. To detect the presence or absence of heteroscedasticity, you can look at the graph plot between the predicted value of the dependent variable and its residual. If there is no clear pattern, and the points are spread above and below the number 0 on the Y axis, then heteroscedasticity does not occur (25)

Multicollinearity Test

The purpose of the multicollinearity test is to test whether the regression model finds a correlation between the independent variables. The multicollinearity test is seen from the tolerance value and Variance Inflation Factor (VIF). If the VIF value < 10, it means there is no multicollinearity. If the VIF value is > 10 then there is multicollinearity in the data (25)

Multiple Regression Test

Multiple linear regression analysis is a statistical method that discusses the relationship between two variables, namely one variable X and one variable Y. The equation or formula for multiple linear regression is as follows:

Y = a + b1X1 + b2X2 + b3X3+ e

Information :

Y = Gen Z loyalty variable

a = Constant

X1 = Product quality variable

b1 = Product quality variable coefficient

X2 = Price competition variable

b2 = Price competition variable coefficient

X2 = Word of mouth variable

b2 = Word of mouth variable coefficient

e = standard error

Coefficient of Determination (R2)

The coefficient of determination test aims to measure how far the model’s ability is to explain variations in the dependent variable (25).

Hypothesis testing

F Test – (Simultaneous)

The F statistical test is the accuracy of the sample regression function in estimating the actual value. The F statistical test has a significance of 0.05. The criteria for hypothesis testing in using the F statistic are when the significance value of F < 0.05, then the alternative hypothesis is accepted, which states that all independent variables simultaneously and significantly influence the dependent variable (25)

T Test – (Partial)

The t test is used to test the significant level of influence between the independent variable and the dependent variable (25)

1. If the probability value is significant > 0.05, then the hypothesis is rejected. A rejected hypothesis means that the independent variable has no significant effect on the dependent variable.
2. If the probability value is significant <0.05, then the hypothesis is accepted. The hypothesis cannot be rejected, meaning that the independent variable has a significant effect on the dependent variable.

Research Schedule

Tabel 1. Research Schedule

RESULT AND DISCUSSION

The research data was collected using a Likert scale instrument and this research involved generation Z or Gen Z consumers who had visited Tophat Café. The data in this study was obtained from 150 respondents through distributing questionnaires for seven days. The data obtained were then processed using the SPSS Software 24.0 program

Data Quality Test

Validity Test

Tabel 2. Validity Test Result

The validity test is used to measure whether a questionnaire is valid or not. A questionnaire is said to be valid if the questions in the questionnaire are able to reveal something that the questionnaire will measure. So validity can measure whether the questionnaire questions that have been created can really measure what we want to measure (25). An instrument is said to be valid if the Pearson Correlation r value to the total score is > r table. Following are the results of the validity test as in table 2.

According to (25), if the value of r pearson correlation to the total score is greater than r table then it can be said to be valid, the value of r table is r table 0.160. Based on the results of instrument testing by distributing questionnaires to 150 respondents, as in table 4.8, it can be seen that all variable indicators in this research, namely service quality, price competition, word of mouth and loyalty, are valid because they have a correlation value greater than r table 0.160.

Reliability Test

Reliability is a tool for measuring a questionnaire which is an indicator of a variable or construct. A questionnaire can be said to be reliable or reliable if the respondent’s answers to the questions in the questionnaire are consistent or stable over time (25). A variable is said to be reliable if the Cronbach alpha value is > 0.70. In Table 4.9, the results of the reliability analysis of the variables of service quality, price competition, word of mouth and loyalty are outlined as follows:

Tabel 3. Reliability Test Result

According to (25), a variable is said to be reliable if the Cronbach alpha value is > 0.70. Based on the results of the instrument reliability test in Table 4.9, it can be seen that the Cronbach’s Alpha of the service quality variable is 0.956, price competition is 0.927, word of mouth is 0.934 and loyalty is 0.934. This is said to be reliable because each variable has an alpha value greater than 0.70.

Multiple Linear Regression Analysis

Multiple linear regression analysis is a statistical method that discusses the relationship between two variables, namely one variable X and one variable Y. The following is a summary of the results of multiple linear regression

Tabel 4. Multiple Linear Regression Analysis Result

From the results of the multiple linear regression test, the regression equation model is obtained as follows:

Y = -0.092 + 0.678X1 + 0.130X2 + 0.190X3 – 0.014X4 + e

Based on Table 4.12, a multiple regression equation is obtained as follows:

Y = a + b1X1 + b2 X2 + b3 X3 + e

Y = 2.746 + 0.252X1 + 0.400X2 + 0.342 X3 + e

From the regression equation obtained according to (25) it can be explained as follows:

1. The constant coefficient is 2.746, which means that if the variables of service quality, price competition and word of mouth are at zero (0), then loyalty is constant, namely 2.746.
2. The service quality regression coefficient value is 0.252, meaning that if the service quality variable increases by 1 unit, loyalty will increase by 0.252. This means that every improvement in service quality can increase loyalty.
3. The price competition regression coefficient value is 0.400, meaning that if the price competition variable increases by 1 unit, loyalty will increase by 0.400. This means that any increase in price competition can increase loyalty.
4. The word of mouth regression coefficient value is 0.342, meaning that if the word of mouth variable increases by 1 unit, loyalty will increase by 0.342. This means that every increase in word of mouth can increase loyalty.

T Test Result

The t test is used to test the significant level of influence between the independent variable and the dependent variable (25)). If the significant probability value is <0.05, then the hypothesis is accepted, which means that the independent variable has a significant effect on the dependent variable. Based on the research results, the results of the Partial t Test can be seen as in table 4.13 below:

Tabel 5. T Test Result

If the significant probability value is <0.05, then the hypothesis is accepted, which means that the independent variable has a significant effect on the dependent variable (25). Based on Table 4.13, the partial regression test (t test) shows that:

1. The influence of service quality on Gen Z loyalty to Tophat Café

Based on the results of the t test, it can be seen that the regression coefficient value was 0.252 and the significance was 0.000. When compared, the significance value is smaller than 0.05, which means that H0 is rejected or H1 is accepted. So that service quality has a positive and significant effect on loyalty.

2. The effect of price competition on loyalty

Based on the results of the t test, it can be seen that the regression coefficient value was 0.400 and the significance was 0.000. When compared, the significance value is smaller than 0.05, which means that H0 is rejected or H2 is accepted. So price competition has a positive and significant effect on loyalty.

3. The influence of word of mouth on loyalty

Based on the results of the t test, it can be seen that the regression coefficient value was 0.342 and the significance was 0.000. When compared, the significance value is smaller than 0.05, which means that H0 is rejected or H3 is accepted. So word of mouth has a positive and significant effect on loyalty.

Interpretation Result

1. First Hypothesis (H1): Partial influence of service quality (X1) on Gen Z loyalty to Tophat Café (Y)

Testing the effect of service quality (X1) on loyalty (Y) was partially carried out by carrying out a t test, namely by comparing the significance of t with α (0.05). Based on the test results, the regression coefficient value is 0.252 and the significance value is 0.000 < α (0.05), meaning that H0 is rejected so that H1 can be accepted, so that service quality has a significant positive effect on loyalty. This means that the better the quality of service, the loyalty of Gen Z to Tophat Café will increase, and vice versa, the worse the quality of service, the loyalty of Gen Z to Tophat Café will decrease.

This [1] and F.K.Putri, et al., (2021) stated that service quality has a positive effect on loyalty.

2. Second Hypothesis (H2): Partial influence of price competition (X2) on Gen Z’s loyalty to Tophat Café (Y)

Testing the significance of price competition (X2) on loyalty (Y) was partially carried out by carrying out a t test, namely by comparing the significance of t with α (0.05). Based on the test results, the regression coefficient value is 0.400 and the significance value is 0.000 < α (0.05), meaning that H0 is rejected so that H2 can be accepted, so that price competition has a significant positive effect on loyalty. This means that the better price competition will increase Gen Z’s loyalty to Tophat Café, and vice versa, the worse price competition will reduce Gen Z’s loyalty to Tophat Café.

This was stated by [18], [20], and [21] stating that price competition has a partially significant positive effect on loyalty.

3. Third Hypothesis (H3): Partial influence of Word of Mouth (X3) on Gen Z’s loyalty to Tophat Café (Y)

Testing the influence of word of mouth (X3) on loyalty (Y) was partially carried out by carrying out a t test, namely by comparing the significance of t with α (0.05). Based on the test results, the regression coefficient value is 0.342 and the significance value is 0.000 < α (0.05), meaning that H0 is rejected so that H3 can be accepted, so word of mouth has a significant positive effect on loyalty. This means that the better word of mouth will increase Gen Z’s loyalty to Tophat Café, and vice versa, the worse word of mouth will reduce Gen Z’s loyalty to Tophat Café.

This was stated by [23] and [17] who stated that word of mouth had a partially significant positive effect on loyalty.

4. Fourth Hypothesis (H4): Simultaneous influence of service quality (X1), price competition (X2) and word of mouth (X3) on Gen Z’s loyalty to Tophat Café (Y).

Testing the significance of service quality (X1), price competition (X2) and word of mouth (X3) on loyalty (Y) was carried out simultaneously by carrying out the F test. Based on the results of the F test, a significance value of 0.000 < α (0.05) was obtained. This means that H0 is rejected so that H4 can be accepted, so that simultaneously service quality, price competition and word of mouth have a significant effect on loyalty. This means that the better the quality of service, price competition and word of mouth, the loyalty of Gen Z to Tophat Café will increase, and vice versa, the worse the quality of service, price competition and word of mouth will reduce Gen Z’s loyalty to Tophat Café.

This was stated by Permono, et al., (2021) and [18] who stated that service quality, price competition and word of mouth had a partially significant positive effect on loyalty.

Comparison of this research with previous research where this research of course used a different place and the subjects studied were different especially using a Gen Z as a subject. Beside that, prices competition such a new object can be research especially during this time. The idea emerged when many young people, especially Gen Z, shopped at Tophat Cafe and their habits and characteristics in buying goods or necessities became one of the researchers’ factors in researching. It is hoped that the implications of this research will have a positive impact on companies in studying and observing how Gen Z buys goods, such as what they need, how we sell and what can add to the selling value of our goods to Gen Z.

CONCLUSIONS

Based on the test results in this research entitled “Determination of Product Marketing Strategy on Gen Z Loyalty at Tophat Cafe” there are 56.7% variations in the Loyalty variable which can be explained by 3 variations of variables, namely Service Quality, Price Competition and Word of Mouth. In marketing strategy, these three variables influence how a business can develop and analyze the management and marketing systems that exist in the business. Optimal service quality will produce good loyalty from consumers so that it can be profitable for the business. Price competition helps businesses analyze the surrounding market so that businesses are able to create pricing strategies that are of course reasonable and affordable for the general public so that appropriate prices can create consumer loyalty. Word of mouth promotion is one of the keys to the success of a business because a good marketing strategy is not only in terms of paid promotion, but marketing strategies using word of mouth really help a business because word of mouth itself is not created from business promotion, but is created from consumer experience. which of course is guaranteed so this promotional opportunity is very important in creating consumer loyalty to the business so that with many customers knowing the business starts from word of mouth and balanced with quality service and appropriate prices it will create consumer loyalty. The limitations of this research, namely 43.3%, can be explained by other reasons outside the research model such as store atmosphere, product quality, brand image, customer satisfaction and others which can be a reference for future researchers so that later they can know what actions should be taken to increasing Gen Z loyalty to Tophat Café.

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