10

Chapter 2

Theoretical Framework

2.1 Brand

If all marketing activities must be wrapped into one word, the word will

show up is branding. The main objective for marketing activities is to get

the brand loyalty from customer. Without a brand, a product will only

become a commodity. Brand is product which is force the consumer to

give extra sacrifice to get it. Every brand is a product, but not all products

are a brand.

Brand is “a name, term, sign, symbol or design, or a combination of them,

intended to identify the goods or service of one seller or group of seller

and to differentiate them from those competitors. A brand is thus a product

or service whose dimensions differentiate it in some way from other

products or service designed to satisfy the same need. These differences

may be functional, rational, or tangible – related to product performance of

the brand. They may also be more symbolic, emotional, or intangible –

related to what the brand represents. ( Kotler, 2000 )

From all above explanation, we can take conclusion that brand is a logo,

name, trademark, and slogan to make differences between another

company and another individual in which they are sell. Consistency of

11  

using a brand can easily recognize by consumer so can with easily will be

remembered by the consumer. So if the brand launched something new

consumer with easily can recognize it. In other word we can say that, a

brand has 3 important things:

1. Brand is describing about what is the product that a company sell.

2. Brand is describing about what activities that company doing.

3. Brand is describing about company profile itself.

A brand provides a series of promises that within about trust, consistency,

and hope. Thus, the brand is very important, both for consumers and

producers (in this case a company). For consumers, the brand is useful to

simplify the process of purchasing decisions and is a guarantee of quality.

In contrast to the company, the brand can help the effort to build loyalty

and sustainable relationships with consumers.

2.2 Loyalty

According to Aaker (1991), there are several levels of loyalty. Below are

the figure level of loyalty.

12  

Figure 2.1 The Loyalty of Pyramid

Each level represents a different marketing challenge and a different type

of asset to manage and exploit.

The bottom loyalty level is the non loyal buyer who is completely

indifferent to the brand – each brand is perceived to be adequate and the

brand name plays little role in the purchase decision. Whatever is on sale

or convenient is preferred. This buyer might be termed a switcher or price

buyer.

The second level includes buyers who are satisfied with the product or at

least not dissatisfied. Basically, there is no dimension of dissatisfaction

that is sufficient to stimulate a change especially if that change involves

effort. These buyers mignt be termed habitual buyers. Such segment can

be vulnerable to competitors that can create a visible benefit to switching.

However, they can be difficult to reach since there is no reason for them to

be on the lookout for alternatives.

Commited buyer

Likes the Brand

Considers it a friend

Satisfied Buyer

with switching cost

Satisfied / Habitual Buyer

No reason to Change

Switchers/Price Sensitive

Indifferent ‐ No brand Loyalty

13  

The third level consists of those who are also satisfied and , in addition,

having switching cost – cost in time, money, or performance risk

associated with switching. To attract these buyers, competitors need to

overcome the switching cost by offering an inducement to switch or by

offering a benefit large enough to compensate.

In forth level consists of those who are truly like the brand. Their

preference may be based upon an association such as symbol, a set of use

experiences, or a high perceived quality. Segments at this level might be

termed friends of the brand because there is an emotional/feeling

attachment.

The top level are commited customers. They have a pride of discovering

and/or being users of a brand. The brand is very important to them either

functionally or as an expression of who they are. Their confidence is such

that they will reccomend the brand to others.

2.3 Brand Loyalty

Brands introduce stability into businesses, help guard against competitive

imitation, and allow consumers to shop with confidence in an increasingly

complex world (Aaker, 1991). Once customers have made a decision

about a brand and its associations, they are often loyal to that brand,

continue to buy it in the future, recommend it to friends, and choose the

14  

product over others, even those with better features or lower prices

(Assael, 1991). Brands are natural barriers to new competitors because

branding reduces consumer risks associated with the purchase of products

or services. Thus, they support premium prices and sustain increasing

revenue because of the consumer tendency towards long-term brand

loyalty (Ehrenberg et al., 1990).

Brand loyalty is a very important concept in marketing strategy. The

existence of the brand loyal consumers is needed, so the company can

survive. Loyalty can be interpreted as a re-commitment to make purchases

of products or services into a consistent preference in the future by buying

back the same brand despite situational influences and marketing efforts

that can lead to behavior.

Brand loyalty provides predictability and security of demand for the firm,

and it creates barriers to entry that it make difficult for other firms to enter

the market. Loyalty also can translate into customer willingness to pay a

higher price – often 20% to 25% more than competing brands. Although

competitors may duplicate manufacturing processes and product designs,

they cannot easily match lasting impressions left in the minds of

individuals and organizations by years of product experience and

marketing activity. In this sense, branding can be powerful means to

secure a competitive advantage. (Kotler, 2000)

15  

Companies that have customer base that has a high brand loyalty to reduce

marketing costs because the cost to retain customers is far cheaper than

getting new customers. Brand loyalty can increase the purchase and to be

able to attract new customers because they have the belief that buying a

branded product at least to reduce the risk of disappointment. Another

advantages that can be obtained that the company can respond more

quickly to competitors' movements.

2.3.1 Importance of Brand Loyalty

According to Tepeci ( 1999 ), The advantages of brand loyalty are :

1. Continues profit. The advantages of customer loyalty are long-

term and cumulative. The longer a customer remains loyal, the

more profit a business can get from that single customer.

2. Reduce marketing cost. Business has to invest money to attract

new customers, such as advertising. For loyal customer, these

costs are eliminated or minimized.

3. Increase per-customer revenue growth. Customer spending

tends to increase over time. For example, a customer who

repeatedly stays at the same hotels becomes more familiar with

the hotel’s full product line, such as gift shop and banquet

16  

rooms and that customer will be likely to sample other product

lines of the company which is helping the company achieve a

larger share of customer.

4. Decreases operating costs. For a loyal customer, the front desks

clerk does not need to spend time entering data into computer.

Loyal customer’s familiarity with the company’s product

makes them less dependent on its employee for information

and service, thus decreasing servicing costs.

5. Increase referrals. Satisfied customers recommended the

business to friends and others. Referrals are vital sources of

new customers who show up on the strength of a personal

recommendation tend to stay longer.

6. Increase price premiums. Brand loyal customers pay more for a

brand because they perceive some unique value in the brand

that no other alternative can provide, and they are less likely to

be lured away by discount.

7. Provides competitive advantage. As consumers become loyal to

a brand, they become less sensitive to a price increase. The

company can maintain a price differentiation over the

17  

competition because of the product’s ability to satisfy their

needs.

2.4 Measurement of Brand Loyalty

2.4.1 Brand Reputation

Brand reputation refers to opinion of other that the brand is good

and reliable. Brand reputation can be developed through

advertising and public relations, but it also likely to be influenced

by product quality and performance. Creed and Miles ( 1996 )

found that reputation of a party could lead to positive expectation,

which resulted in the development of reciprocity between the

parties. If a consumer perceives that other people are of the opinion

that a brand is good, the consumer may trust the brand sufficiently

to purchase it. After the usage experience, if the brand at least

meets the consumer’s expectations, a good reputation serves to

reinforce the consumer’s trust.

Conversely, if a brand does not have a good reputation, a consumer

is likely to be more suspicious. As a result of heightened

awareness, they may be sensitized to any flaws that the brand may

have. This makes it more difficult for the brand to be trusted.

18  

2.4.2 Company reputation

If a consumer perceives that other people are of the opinion that the

company behind a brand is known to be fair and just, that

consumer may feel more secure in acquiring and using the

company’s brand. This translates to greater trust in that brand (

Anderson and Weitz, 1992 ). By making scarifies and showing

concern for other channel members, some retailers and vendors

have developed a reputation for fairness within industry. When

customer perceive their reputation for fairness, they are more likely

to trust and loyal for the company.

2.4.3 Brand Competence

A competent brand is one that has the ability to solve customer’s

problem and meet their needs. Ability refers to skill and

characteristic that enables party to have influence within a domain

(Butler and Cantrell, 1984). All considered ability as an essential

element in influencing trust and loyal to the brand.

A consumer may find out about a brand’s competence through

direct usage of WOM communication. Once convinced that a

brand is able to solve their problem, a consumer may be willing to

rely on that brand ( Lau and Lee, 1999 )

19  

2.4.4 Price Worthiness

Why are different customers willing to pay more or less for the

same product? Price image is important to retailers because it can

influence many of the perceptions that consumers from and the

decision they make (Hamilton and Chernev). Price serves as the

strongest loyalty driver (Ryan et al., 1999). Loyal consumers are

expected to be in the market for their particular brand often; in

some sense they need the brand. Because of their strong preference

for the brand’s attribute, consumer will choose the brand most of

the time regardless of price ( Krishanamurthi and Raj, 1991). In

other word, consumers with high brand loyalty are less price

sensitive (Cadogan and Foster, 2000).

Consumer not loyal to a brand should be quite sensitive to the price

of the brand in the choice decision because they have no

compelling need to buy this particular brand, the will be persuaded

to buy the brand only if its price is low enough. This is reflected in

high choice elasticity ( Krishanamurthi and Raj, 1991).

2.4.5 Repeat purchase

According to Oliver (1999), brand loyalty as a deeply held

commitment to rebuy or repatronise a preferred product / service

20  

quality consistently in the future, thereby causing repetitive same

brand or same brand – set purchasing despite situational influences

and marketing efforts are having the potential to cause swithcing

behavior.

According to Knox and Walker (2001), With the exception of a

very few product categories, a major objective of marketing

strategy is to facilitate the process of consumers repurchasing a

brand through preference. The reason why repeat purchasing is

important to marketing management is simple: retaining customers

often requires less marketing resources than recruiting new ones

and, thus, is economically desirable.

Repeat purchase behavior is an axiomatic term which simply refers

to the extent to which consumers repurchase the same brand after

experiencing the brand. Since it is a purely behavioral construct, it

is simply measured as the number of times a given brand is

repurchased by a consumer in any given period of time (Ehrenberg,

1988). The consistent repeat purchase is one kind of Loyalty-Prone

behavior. The strength of behavioral brand loyalty is, therefore,

directly a function of the repetitive occurrence of purchase or

consumption behavior. The consumer establishes a systematic

biased response or habit simply due to the frequency of encounters.

Once the behavioral brand loyalty is strongly manifested by the

21  

customer, it is very difficult to change the systematic bias away

from the brand.

2.5 Company Profile ( Asia Pulp and Paper )

2.5.1 Overview

APP is one of the world's leading pulp and paper companies and is

ranked one of the largest vertically integrated pulp & paper

producer in Asia, excluding Japan.

Its combined pulp, paper and packaging capacities in Indonesia

amount to over 7 million tones, using fiber from plantations and

wood residues of plantation development. APP currently has its

principal operations located in Indonesia, and markets its products

to more than 65 countries on six continents.

Over the years it has expanded its operations significantly, through

acquisitions and expansions in several of its pulp and paper mills.

It is APP's commitment to customer satisfaction that enables us to

grow our share in paper sales worldwide and broadening our

presence through marketing offices in many countries.

22  

"Tradition and modernity go hand in hand" is key to the company's

success. We always esteem long term relationships with our

customers as a part of our eastern tradition whilst we are also eager

to embrace modern values as continuous innovation, efficiency and

punctuality. (http://www.asiapulppaper.com/)

2.5.2 Philosophy

1. Growth is a pre requisite for life and progress.

2. Human resources is the key success.

3. The satisfaction of our shareholders, potential investors,

employees, management, business partner, the government and

society is one of the highest priorities.

4. Preservation of the environment is an integral part of the

company’s operation and main concerns.

2.5.3 Vision

1. As part of APP, Sinarmas Tissue Business Unit vision is to

consistently accomplishments to improve quality of life of its

people

2. To provide satisfactory returns for its shareholders and further

strengthen the APP foundation to build an even better

tomorrow for its shareholder. 

23  

2.5.4 Mission

Our Mission is to become the 21st century’s number one tissue

manufacture company with the highest international standards in

the world, and with the strongest commitment to providing

superior value to customers, shareholders, employees, and the

community.

2.6 Paseo

2.6.1 Overview

Paseo is the brand that has been internationally recognize for its

premium quality tissue which brings hygienic, soft and natural

values for the whole family. Paseo color is naturally white and

gives a very clean and comfortable feeling.

2.6.2 Advantage Paseo Compare to Competitor’s

Product

1. Paseo is made from 100% natural fiber so it makes Paseo soft

and not easily tear.

2. In process, through 4500 Celsius heating so it makes Paseo

hygiene and free from germs and safe to use.

24  

3. Not contain of bleacher so it will not make an allergic or

irritation for your skin.

4. Has international standard quality from ISO 9001.

2.6.3 Segmentation

1. Velvet

Advantage : Premium tissue with value added.

Target market : Women 25 – 35 years old , A SES class.

For her quality is the important thing.

Figure 2.2 Velvet Segmentation

2. Elegant

Advantage : Essential, high quality, and suitable for

everyday use.

Target market : Women 25 – 35 years old , A SES class.

For her quality is the important thing.

25  

Figure 2.3 Elegant Segmentation

3. Smart

Advantage : Good quality with affordable.

Target market : Women 25 – 35 years old; B,C SES class;

housewife whom concern about affordable price and good

quality.

Figure 2.4 Smart Segmentation

2.6.4 Category

1. Facial tissue

Facial tissue is used for cleaning and wiping tissue for face.

26  

Figure 2.5 Facial tissue

2. Bathroom tissue

Bathroom tissue is used for bathroom needs.

Figure 2.6 Bathroom tissue

3. Napkin tissue

Napkin tissue is used generally for party and dining.

Figure 2.7 Napkin tissue

27  

4. Handkerchief tissue

Handkerchief tissue is used for cleaning and wiping tissue for

face. The difference from facial tissue is from the size.

Handkerchief tissue is smaller than facial tissue and can be

entered in to pocket.

Figure 2.8 Handkerchief tissue

5. Towel tissue

Towel tissue is generally used in kitchen. The benefit from this

category is has highly absorption level for oil and any dirt

things which usually happen at kitchen.

Figure 2.9 Towel tissue

28  

2.7 Framework Theory

From two journal that writer used for this study, there are several variable

that influence brand loyalty. Writer decided take 5 variable which

influence brand loyalty. The variable that writer take for this research are :

1. Brand reputation

The reason why writer take brand reputation for this research

because brand reputation gave big contribution in Lau and Lee

(1999) result. That’s why writer take the brand reputation as one of

the factors that writer test for this research. Moreover, Paseo is

created with good reputation (with advantage compare to

competitor’s product) and with this research writer can get the

result is customer know the good reputation that APP created and

will lead to brand loyalty.

2. Company reputation

This variable is come from consumer’s trust in a brand link to

brand loyalty. Why writer take this variable even this variable was

not at revised model? Because on July 2010, Sinarmas faced

problem with Greenpeace and several big manufacture such as

Carrefour was stop to buy Sinarmas’s product. Moreover, the

publication for this problem is huge in society so they knew about

29  

this problem. It was really give bad image in society and it can

decrease the intention to buy Sinarmas’s product (Paseo is one of

Sinarmas products) and the scare thing is customer did not want to

buy Paseo and loyal customer will switch the brand into

competitor’s product. That’s why writer want to study is company

reputation lead to Paseo brand loyalty.

3. Brand competence

The reason why writer take brand competence for this research

because brand reputation gave big contribution in Lau and Lee

(1999) result. That’s why writer take the brand competence as one

of the factors that writer test for this research. Writer want to see is

this Paseo competence is greater than competitor’s product. The

perception in society, tissue is like a commodity product which is

customer may not care about the brand. They need the competence

of tissue. But it is not true. Because there is tissue product which

contain chemical and using bleacher in process or it can make from

recycled tissue. That’s why writer want to study about this things

and related to Paseo’s brand loyalty.

30  

4. Price

This variable is come from an empirical model for brand loyalty

measurement journal. The reason why writer take this variable for

this research because like already mentioned at chapter one, there

is tight competition between Tessa and Paseo. In this competition,

Tessa is playing in middle class but Paseo is playing in upper class.

Paseo’s price is higher than Tessa but even give higher price, Paseo

has added value that Tessa does not have it. That’s why writer

want to see is price one of the factors which is giving influence to

Paseo’s brand loyalty.

5. Repeat purchase

This variable is come from an empirical model for brand loyalty

measurement journal. This variable is giving the highest score in

that journal. That’s why writer take this variable as one of the

variables for this research. Writer want to see is customer repeat

purchase for the same product will lead customer to be loyal with

Paseo or not.