Study on the elements that affect the buying decision of milk bottle DR. Brown in new generation company limited

Students: Lý Vinh Kiên Class : OUM MBA 0512-1C STUDY ON THE ELEMENTS THAT AFFECT THE BUYING DECISION OF MILK BOTTLE “DR.. Students: Lý Vinh Kiên Class : OUM MBA 0512-1C The research is

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RESEARCH PROJECT

(BMBR5103)

STUDY ON THE ELEMENTS THAT AFFECT THE BUYING

DECISION OF MILK BOTTLE “DR BROWN” IN NEW

GENERATION COMPANY LIMITED

Research Proposal

STUDENT’S FULL NAME : Ly Vinh Kien ID# 2448464 Huynh Pham Ngoc Lam ID# 2448452 INTAKE : May 2012 ADVISOR’S NAME & TITLE : Dr Ut Tran October 2013 Students: Lý Vinh Kiên Class : OUM MBA 0512-1C Advisor’s assessment

Advisor’s signature

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Students: Lý Vinh Kiên Class : OUM MBA 0512-1C

STUDY ON THE ELEMENTS THAT AFFECT THE BUYING DECISION OF MILK

BOTTLE “DR BROWN” IN NEW GENERATION COMPANY LIMITED

EXECUTIVE SUMMARY: 4

I INTRODUCTION 5

1.1 Research Background 5

1.2 Problem Statement 5

1.3 Research Objectives and the Scope of the Research 6

II LITERATURE REVIEW 7

2.1 Research definition (operational definition of key words) 7

2.2 Related research 10

2.3 Related Model in an analysis 13

III CONCEPTUAL FRAMEWORK 15

IV HYPOTHESIS AND OPERATIONAL DEFINITION 16

V Methodology 17

1 Type of research choice 17

2 Research design 18

3 Estimated budget of the research 21

4 Activity plan: 22

5 Conclusion 22

REFERENCES 23

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EXECUTIVE SUMMARY:

Due to the economic recession, all enterprises are facing with the income and

benefits, our company also face those problems too We would to make research on “The

elements that affect the buying decision of milk bottle “Dr Brown” in New Generation

Company Limited” to discover the elements and give the solutions for those problems

The research is processed by 2 phases: preliminary research with the peer interview to

discover the elements affecting on Dr Brown milk bottle buying decisions and the official

research with the 100 samples to find out the elements in addition, we can use more

descriptive statistics, EFA, Cronbach alpha to make our research more clearly In the

limitation of research, the researchers are only the references and it also helps to find

solutions of business activities and distribution products efficient The research will be

arranged as following

EXECUTIVE SUMMARY:

I INTRODUCTION

II LITERATURE REVIEW

III CONCEPTUAL FRAMEWORK

IV HYPOTHESIS AND OPERATIONAL DEFINITION

V.METHODOLOGY

REFERENCES

APPENDICES

I INTRODUCTION

1.1 Research Background

The world economy has tendency of being in risk The weaker domestic demand and

slower growth in several countries cause the import and export to slow down The New Generation Company is an importer of milk bottle products from USA which were also

affected by those changes in the world economy today

The sales situation of this product line is being decreased since the first quarter this year while inventory increased There must be several key reasons for that Therefore, this research will be focused solely on identifying the causes of that situation, and then offering some suggestion to overcome the difficulties and get the business back on track

1.2 Problem Statement

1.2.1 Main Problem The sales volume status and profit of this milk bottle product “Dr Brown” are decreasing since 1st

quarter 2013 It caused the company fail to obtain the goals

1.2.2 Sub –Problems:

a The price of Dr Brown milk bottle is no match against competitors It is quite high

in comparison with the other milk bottle products in the market According to Mankins (2005) concluded that the quantity demanded falls when the price rises and the quantity demanded rises if the price falls, and the quantity demanded is negatively related to the price

He also proposed the law of demand “Other things equal, when the price of a good rises, the quantity demanded of the good falls”

b Brand awareness: More competitive products with unknown origin appear on the market which affected the customer’s brand awareness against the milk bottle products of New Generation Co., Ltd Brand awareness has great influences on buying purpose from the customers who intend to pay money for well-known product (Keller, 1993; Macdonald & Sharp, 2000)

c Advertising is not good and attractive Due to the change of advertising budget, the advertising methods are changing so much, the managers does not make advertisement in the retail shop, but they did in the small website column Mohamad et al (2013) used the multiple regression analysis and applied Pearson correlation to examine the connection

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between the advertising and buyer decision making, and they conclude that there is relation

between two variables

d Customer satisfactions play an important role in the business The customers feel

that the new milk bottle 240 ml is not satisfied because there is leak of milk from the milk

bottle neck and the customers feel very annoying when they feed the milk to their babies and

they expect that the milk bottle will be design better at the milk bottle’s neck Besides,

Murekio (2010) uses the revenue data, and customer satisfaction survey data in ten retails

center in Nairobi, she concludes that there is significant relationship between the customer

satisfaction and the revenue in 10 retail center

e Personal factors: The current economic recession is presently a source of concern

for marketers’ attempts to determine the current buying behaviors of the consumers,

consumers are changing their buying behaviors and greatly decreasing there overall spending

According to Armstrong & Kotler (2009) proposed that if economic indicators point to a

recession, marketers can take steps to redesign, and reprise and their product closely, they

also concludes that a person’s economic situation such as personal income, savings, and

interest rates will influence their product choices in the store

If not being reviewed and reacted properly, this problem may get worse:

-“Dr Brown” milk bottle manufacturing line may have to declined or shut down due

to overstock

-Inventory of milk product increases and unusable

-Workers of this manufacturing line might lose their jobs, increase unemployment

-The company competitive position will suffer damage

1.3 Research Objectives and the Scope of the Research

1.3.1 Research Objectives

This research is to identify the important aspects which affect the buying decision of

milk bottle’s consumers within Ho Chi Minh City area, Vietnam, in 2013 Base in the

information found, we will suggest the solutions for improving buying decisions and the sales

revenue of Dr Brown milk bottle product in New Generation Company Limited

Despite some limitations, the study results are considering valuable references; we

would like to offer useful solutions to enhance the product recognition and its sales

1.3.2 The scope of the proposed research?

The research is intended of making the research of the element affecting on buying decision in New Generation Company and finding the solution to resolve the low sale and profit

1.3.3 Limitation of the research The proposed research is limited on the mother and children shops in Ho Chi Minh City area, we also narrow the target customers’ income to over 7 million VND, assuming the retailers average purchase volume is 10 million VND per month

The research is conducted within Ho Chi Minh City, so the result is not intended to be used and compared in any other areas due to geographic differences

The research is limited to baby product market in Ho Chi Minh city, Vietnam It will only look at the market share and competitions that may affect Dr.Brown milk bottle product directly It may use other similar products such as baby care, toys, baby medical products etc

as references for analysis, but should not consider them as key factors for comparison It also should not refers and mention other product lines of New Generation Co., Ltd

1.3.4 Research significance Once completed, the research can help the management of New Generation Co., Ltd realizing the situation and prepare a clear strategy for future business of this milk bottle product line It also may help the consumers to be aware of how important it is to choose an appropriate baby product

II LITERATURE REVIEW

2.1 Research definition (operational definition of key words)

1 Consumer behavior: Cook (2009) conclude that consumer behavior is described in this way: set of activities is directly achieved, use and disposal of goods and services

2 Buying decision process: Engel et al., (1986) suggest that high involvement with a product results in which starts with problem recognition, an information search, alternative evaluation, purchase, and post purchase activities

3 Customer satisfaction: According to Blackwell, Engel & Miniard (2006), there are three major factors of satisfaction such as product performance, consumption feelings, and

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expectations The study showed that building customer satisfaction resulted in better returns

to companies (Reichheld, 1996)

4 Price acceptability: Herrmann, Huber & Wricke (2001) and Homburg, Hoyer &

Koschate (2005) stated that consumer satisfaction has a positive relationship with price

acceptability and readiness to pay From that research, these author want to say that higher

consumer satisfaction will make higher price acceptance and readiness to pay and low

price sensitivity appear In contrast, a low consumer satisfaction will affect price

acceptance and readiness to pay positively, and make price sensitive in high level

5 Advertising: Moschis and Mitchell proposed that the effect of TV advertising and

interpersonal influences and social structured on family consumption decisions Batra et al

(1995), the effectiveness of advertising is considered for the effects on sales in the short term

6 Brand awareness: Brand awareness is essential because consumers remind the

brand in the time of a specific product, and the brand will be a part of the mindset Awareness

can also effect on consumer decision making by influencing brand associations that create the

brand image (Keller, 1998)

A brand name gives a characteristic which leads the retailers and consumers to find

out service providers and expect the outcomes of the services Kan (2002) suggests the brand

awareness can make to increased profitability evaluation Brand awareness has great

influences on buying purpose from the customers who intend to pay money for well-known

product Keller (1993); Macdonald & Sharp (2000) Addition, Nazia et al (2011) use the

regression to test on 200 retailers on two brands i.e L’Oreal and Ganiers with 3 variables

brand awareness and perceived quality, customer loyalty They concluded that the study was

brand awareness significantly influences the profitability

7 Personal factor: Linehan and Cadogan (2000) conclude that personal factors

influence buying decisions such as economic, age, gender, occupation, and lifestyle

Armstrong and Kotler also has similar opinions and argued that if people with a good secure

job and income, have the tendencies of buying more expensive and even luxury product,

where people with less income and less secure jobs tend to buy cheaper products

8 Brand loyalty: Chaudhuri & Holbrook (2001) said that brand loyalty has the

relationship with brand price In addition Aaker (1996) shows that price is the first sign of

brand loyalty In addition, Aaker also emphasized that Price premium is distinguished as

a customer is willing to pay for the brand loyalty in comparison with another brand which

bring the same benefits, but the benefit can be bad or good factors which are dependent on the 2 brands in a group of comparisons

9 Package design: According to Stewart (2007), packaging design skill is communicating design thinking effectively He defines the elements of design as: material choices, color, text, photography and illustration According to Sustainable Packaging Coalition (SPC), strategies for sustainable packaging design are: package Design for sustainability , transport environmental best practices

However, Soroka (2002) proposed that packaging is the combination of the science, technology, art and fashion to protect and keep the products to customers Variawa (2010) analyzed the effects of packaging on decision making process of Consumer Goods in retail shopping

10.Supplier : Keeping good relationships with suppliers is recognized as an

impressive factor in sustaining a competitive advantage (Stevenson 2009:525)

11 Buying decision: Sproles and Kendall (1986) proposed that buying decision is also having related a confused over choice form the customers They feel very confusing

when they choose suitable product because it’s over choice

12 Supplier-manufacturer relationship: Michael Maloni and W.C Benton (1999), in their research stated that the power source of the supplier, once overrun the manufacturer, could affect their relationship and damage the business of the manufacturer

13 Mothers’ communication orientation and consumer socialization: Carlson, Grossbart and Walsh (1990) explored that mothers’ communication orientation and consumer socialization have the close relationship tendencies on buying decision

14 Need Recognition: Neal and Questel (2006) stating that need recognition occurs due to several factors such as personal, professional and lifestyle which ead to formation of idea of purchasing

15 Information search: Schiffman and Kanuk (2007) stated that consumer finds

information related to desired product

16 Evaluation of alternatives: Kotler and Keller (2005) consider this stage as one of

the important stages as the consumer considers when they take into account the factors such

as size, quality and price

17 Purchase decision made: Kacen (2002) stated purchasing decision can be divided

into planned purchase

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18 Post-purchase evaluation: Neal et al (2004) proposed that the important process in

the consumer decision making process when it makes the influences on the consumers’

purchases of the same product or service from the same supplier

19 Internal search refers to the process where consumers rely on their personal

experiences and believes (Rose and Samouel, 2009)

20 Life style: Due to Morganosky (1986) He states that Life style in relation to the

purchase of different consumer products, shopping behavior, retail behavior and online

purchasing behavior were also found in the consumer literature

21 Self-concept: Self-concept is another factor affecting consumer decision-making

It is defined as “the totality of the individual’s thoughts and feelings having reference to

him/herself as an object (Rosenberg, 1979)

22 Social factor : Kim et al (2002) concluded consumers product choice for a brand

are affected by a social influence, and Linehan and Cadogan (2000) proposed that social

factor also influence on consumers behavior, like family, peer group

23 Psychological factor: Armstrong & Kotler (2009) proposed that person’s buying

decisions are influenced by motivation attitude and perception

24 Personal value: Rokeach (1973) and Kahle (1983) proposed that a personal value

is an enduring belief that a specific end-state of existence or specific mode of conduct is

preferred over others

25 Purchasing strategy segments: Blattberg, Gary, and Joshua (1981) conclude

purchasing strategy segments based on three purchase areas: brand loyalty (single brand

many brands), type of brand preferred (national, national and private label), and price

sensitivity (regular price, deal price)

2.2 Related research

2.2.1 Kotler’s Consumer decision -making process

In the process of buying decision, Kotler (2003) stated that the consumers always go

through 5 steps: problem recognition, information search, and evaluation of alternative,

purchase decision, post purchase evaluation It showed that the process of buying has

been formed for a long time and it also stretches for long time after the customers sell

the products

Figure 1 Kotler’s Consumer decision -making process

From this model, it implies that the buyers must go through 5 steps when they buy the products Actually, it is not true in real life; the buyers can eliminate one steps or steps when buying the goods

2.2.2 Kotler's model of stimulus response of buyer behavior

Figure 2 Kotler's model of stimulus response of buyer behavior

The consumer’s personal characteristics will illustrate in order to stimulate the buying decision and help the company classifying the buyers due to the way of buying, and assist the marketing ways implementing better The characteristics include:

-Social: family and reference groups -Personal: age & lifecycle stage, economic circumstances and lifestyle -Psychological: Beliefs, perception, attitudes and motivation 2.2.3 Sproles and Kendall research

Problem recogniti

on style

Information search style Evaluation

of alternative

Purchase decision

Post purchase evaluation

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Sproles and Kendall concluded that the decision making is the basic consumer personality

The model is consisted of 8 elements: Perfectionism consciousness, brand consciousness,

novelty and fashion consciousness, recreational and hedonistic consciousness, price and value

consciousness, impulsiveness and carelessness, confused by over choice, habitual and brand

loyal

Figure 3 Sproles and Kendall‘s Consumer decision making style

Price and value

consciousness

Novelty and fashion

consciousness

Brand consciousness

Recreational and

hedonistic consciousness

Perfectionism

consciousness

Impulsiveness and

carelessness

Confused by over choice

Habitual and brand loyal

Consumer decision making style

2.3 Related Model in an analysis

2.3.1 Model of Phuoc’s research proposal According to Bharadwaj (2004), there are 4 elements which effects on buying decision such as quality, delivery, price, service In addition, Nguyen Kim Phuoc (2007) analyses the research of Lehman and O’Shaughnessy (1974)

Kelly and Coaker (1976), Demssey (1978), he concluded with four criteria: delivery – quality – price, guarantee system, technology ability, implementation ability which are popular and analyses and validated in the past research From that synthesis, Phuoc uses them into applying his research proposal on the topic: the elements affecting buying decision of A4 printing paper in the state enterprise, private enterprise, foreign company

in Ho Chi Minh City In her research, she does not pay much attention quality of A4 Printing Paper; the quality also plays an important factor which causes the effect of buying decision

Figure 4 Phuoc’s model of buying decision of A4 printing paper

2.3.2 Kwan’s model research proposal

Price paper Quality paper

Guarantee paper system Delivery

Technology ability to make good paper

Buying decision of A4 printing paper

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Besides, according to Kwan Chui Yan (2006) , she made the PhD thesis on the factor

affecting young Chinese consumers’ decision making behaviors towards casual wear

purchase to observe the decision making styles existing in young Chinese choices of

casual wear and check the relationship between decision making styles and the others

factors In addition, she gives the model which comprises of 4 major elements including

consumer individual characteristic (personal values, life style characteristics,

self-concept, and fashion involvement), environmental characteristics (social factor and

culture factor, clothing choice criteria and consumer decision-making styles

To me, the research of Kwan Chui Yan has limitations which he choose the area of

research so large and diversifies, because the Hong Kong, Taiwan and China also share

the same culture, but taste of life style are also different due to the different incomes in 3

areas To my research, I would like to make the limitation; I only focus on the Ho Chi

Minh City with average income customers

Figure 5 Kwan’ model of Consumer decision making styles

Consumer decision making styles Clothing choice criteria

Individual characteristics:

Personal values

Lifestyle characteristics

Self-concept

Fashion involvement

Environmental characteristics:

Social factor Cultural factor

III CONCEPTUAL FRAMEWORK

The model is designed on the retail buying theory and former research at 2.3 about the elements affecting on buying decision and the distinguished elements of baby products such

as milk bottle, we will process the model as follow

H1 H2

H3

H4

Dependent Variable H5

Independent Variables

Figure 6: The Theoretical Framework buying decision of milk bottle “Dr

Brown” in New Generation Company Limited

The model is consisted of 5 basic elements: Customer satisfactions, Price, advertising, Brand awareness, and Personal factors They are considered as independent variables The core component and the major dependent variable of the framework is the last component-consumer decision making The purpose of the study (as mentioned above) is to find out the relationship between independent variables and dependent variable

Personal factors

Advertising Price

Brand awareness

Customer satisfaction

The buying decision of milk bottle

“Dr Brown”

Generation Company Limited

Suggested solutions

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IV HYPOTHESIS AND OPERATIONAL DEFINITION

Operational definitions are instrumental in determining the exact process by which

research data should be collected and processed Because operational definitions outline how

data will be measured, we can know the elements that affect the buying decision of milk

bottle “Dr Brown” in New Generation Company In addition, we would like to give the

definition of 6 variables According to Wikipedia; all the definitions are given as following:

Customer satisfaction, a term used in marketing, is a measurement of how products

and services supplied by a company adapt and give to customer expectation

Price refers to the quantity of payment settled by a seller of goods or services, rather

than the eventual payment amount

Advertising or advertising is a form of communication for marketing and used to

encourage, support, an audience such as viewers, readers or listeners; a specific group to

continue some new action

Brand Awareness is the extent which a brand is known by potential customers, and is

associated with a distinguished product

Personal factors help us understand the buying tendencies and spending actions of

consumers

The following hypothesis was tested in this study as following:

Hypothesis 1: There is a positive relationship between customer satisfaction and the buying

decision of Dr.Brown milk bottle product

Hypothesis 2: There is a positive relationship between Price and the buying decision of

Dr.Brown milk bottle product

Hypothesis 3: There is a positive relationship between Advertising and the buying decision

of Dr.Brown milk bottle product

Hypothesis 4: There is a positive relationship between Brand awareness and the buying

Hypothesis 5: There is a positive relationship between Personal factors and the buying

V Methodology

1 Type of research choice

There are three types of research design, describing their purpose very well The Exploratory research is to discover ideas, information and insights Descriptive research is usually to describe a population with respect to important variables Causal research is used

to establish cause – and - effect relationships between variables

Since we are dealing with the elements affecting on buying decision of milk bottle Dry Brown In New Generation Company Limited, the method used in this research should be Descriptive In the process of making the questionnaire, we will use the Linker for 5 related variables such as customer satisfaction, price, advertising, brand awareness, personal factors Those variables reflect the important observations in the process of buying milk bottle Here

is the diagram to be followed in the research

Writing the research and making a deep interview in some case

QUALITATIVE RESEARCH Making observations on retails shops in HCM City Coding and putting the data

Refresh the data Analyzing ANOVA, Cronbach’Alpha, etc

PRETEST OBSERVATION Adjusting the interview draft, the sample is 30 retail shops

QUALITATIVE APPROACH Making peer interview with 7 correspondents

LITERATURE REVIEW Using buying decision theory from Kotler, Sproles and Kendall research and Phuoc’ master thesis model and Kwan’ PhD thesis model

RESEARCH PROBLEMS Researching on the elements affect the buying decision of milk bottle

“Dr Brown” in New Generation Company

Figure 7: Research Process

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2 Research design

a Data collection (Secondary and Primary data collection)

Primary data is information which the author gather by himself and secondary data

is information gathered by others sources such as scientists or institutions (Andersen,

1998) In this research, the primary data consists of interviews with the retailers, and

questionnaire in the retail shops and customers which I have chosen to investigate In the

secondary data, the author use to gather data and facts about the retailers and retailers’

customers and markets from different websites, retail stores

b Data analysis:

The questionnaire is processed by the pretest interview with 30 samples to distinguish

and discover the mistakes and unclear elements so that we can adjust the mistakes and adjust

them

 Qualitative approach: our qualitative approach is to identify the elements affecting

on buying decision of DR Brown milk bottle in the New Generation Company From

the qualitative information, we can create the suitable questionnaire The peer

interview is rather good and suitable because we can use the face to face method to

gather information and collect the data from the correspondents The chosen people

are seven such as sale person, shop owner, customers in the retail store The highest

age is 50, and the lowest age is 22, and the peer interview is processed from

02/07/2013 to 25/09/2013 All participants’ information will be recorded and

classifies to determine the elements affecting on buying decision of milk bottle in

New Generation LTD This data and literature review will be synthesized in the

preliminary interview From the preliminary interview, we will make the official

interview sheet

 Quantity approach: this method permits us measure and analysis the data in the real

number Basing on the quantity research method and literature review, we can adjust

the preliminary model and give the suitable model, questionnaire, and scales in the

official research

 The statistical results will help determine the level of loyalty and accepting among

Vietnamese consumers Furthermore, the survey with retailers will help determine the

type of measurement they use on determining customer’s loyalty By reviewing the positive and negative points, it is hoped that the researcher can conclude the reasons for Dr.Brown milk bottle’s product declining and from that find possible solutions for improving the situation

 Assumptions :

- That the 100 milk bottle customers will represent the total number of customers

- The 10 stores responses will represent the total number of retailers

- Those 90% respondents will answer the questionnaires truthfully

- Those results will reveal the factors of why Dr.Brown milk bottle product buyers decrease their purchases and go to substitute or competition’s products

 The questionnaire is designed:

The questions related to the elements affecting buying decision of milk bottle from the customers and retailers shop owner include Customer satisfactions, Price, advertising, Brand awareness, and Personal factors In addition, the deep information relating to the buyers, the product efficient, the price, the distribution, the buying capacity, etc will be mentioned

 Individual research: the customers and owners of shop retailers buying and selling Dr Brown milk bottle and others milk bottle in the area of HCM city

 Sampling: The respondents of the study will consist of consumers of New Generations and its retailers/distributors The reason for this is to determine that they have enough time experience to evaluate the milk bottle product, whether they have satisfied with it and, if not, what are the reasons The retailers/distributors to be surveyed, on the other hand, should have knowledge about consumers’ complains and customer satisfaction of the product They should be aware of what is usually being complained and being praised, as well as what makes consumers happy about the product or what are their substitute’s products According to Hair & CTG (1998), we should use at least about 100 samples or 150 samples if we use SEM Besides, Hoelter (1983) proposed that we also need 200 samples Meanwhile, Hatcher (1994) suggested that the samples can be multiplied 5 times by the variables, or there must be

100 samples From that reason, we will take 100 samples for our research

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