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CHAPTER I

INTRODUCTION

1.1 Background

Indonesia today is a dynamic nation marked by great opportunity and one of

the best emerging country in the world. Indonesia has had one of the most consistent

growth rates among global economies over the past ten years, with annual GDP

growth averaging almost 6 percent. It is also the world’s 16th largest economy, with

GDP of USD 878 billion. (Asia Consumer Insight Center, 2013)

Indonesia is expected to account for nearly 40 percent of ASEAN growth by

2030. Key factors driving the growth include young populations—nearly 60 percent

is below 30 years of age—and a population that is expanding at a rate of 2.9 million

a year. The country is rapidly urbanizing, fueling a rise in incomes and the ability for

consumers to increasingly spend on discretionary items.

Indonesia has achieved 6.3% economic growth in 2012 and 2013. It has noted

that it hold a record as the biggest South East Asia economy. GDP is also forecasted

to increase in the next year, due to a stronger domestic demand, which also could

reduce inflation. The GDP growth itself is derived from ample of private

consumption and greater performance on fixed capital investment compared to

2012.(Outlook, 2013).

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Supported with the fact that Indonesia’s population is young, growing and

rapidly urbanizing, making it one of the fastest-growing consumer markets in the

world (Asia Consumer Insight Center, 2013).

Figure 1.1 Indonesia GDP Growth from 2007-2013

Source: Ministry of Industry, 2014

From all the fact and data above, Indonesia government also has program that

they planned to accelerate economic development called MP3EI (The Master Plan for

the Acceleration and Expansion of Indonesia’s Economic Development). unveiled in

2011 and Indonesia targetted to be 12th

largest in the world with expected income per

capita of USD $14,250-$15,500 in 2025and moreover to be 8th

largest in the world in

2045. The action plan up to now has been made to achieve that target. One of them is

to encourage a large scale investment realization in 22 main economic activities

(Indonesia-investments.com).

As an emerging market and developing country, Indonesia still can grow

rapidly and it has a lot of opportunities. Not only in infrastructure, manufacture,

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mining, maritime, but also it offers a huge opportunity and potential in food and

beverages industry, especially restaurant industry.

Restaurant industry is a promising business and will always develop because

it is a premier need of human being. Every industry tries their best effort to give the

highest contribution for the country. From the table below, we can see that the Food

&Beverages sector always kept positive growth since 2007-2013. From the data

below shows that in 2006, it started with 5,05% growth, had its highest growth in

2009 with 11,22% growth, and in 2013 with 3,34% growth.

Table 1.1 Indonesia Industrial Growth from 2007-2013

Sector Growth (%)

2007 2008 2009 2010 2011 2012 2013

Economic Growth 6,35 6,01 4,63 6,22 6,49 6,26 5,78

Manufacturing

Industry

4,67 3,66 2,21 4,74 6,14 5,74 5,56

Non Oil & Gas

Industry

5,15 4,05 2,56 5,12 6,74 6,42 6,10

F&B + Tobacco 5,05 2,34 11,22 2,78 9,14 7,57 3,34

Wood & Forestry

Indusrty

(1,74) 3,45 (1,38) (3,47) 0,35 (3,14) 6,18

Paper & Printing 5,79 (1,48) 6,34 1,47 1,40 (4,75) 4,45

Fertilizer,

Chemicals &

Rubber

5,69 4,46 1,64 4,70 3,95 10,50 2,21

Cement & Non-

Metal Mineral

3,40 (1,49) (0,51) 2,18 7,19 7,80 3,00

Textile, Leather &

Footwear

(3,68) (3,64) 0,60 1,77 7,52 7,57 3,34

Metal, Iron &

Steel

1,69 (2,05) (4,26) 2,38 13,06 5,86 6,93

Transportationand

Parts

9,73 9,79 (2,87) 10,38 6,81 7,03 10,54

Others (2,82) (0,96) 3,19 3,00 1,82 (1,13) (0,70)

Source: BPS Sorted by Ministry of Industry (Industry Facts and Figures,

2014)

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Figure 1.2 Structure of GDP by Sector 2013

Source: BPS sorted by Ministry of Industry (fact and figures, 2014)

From the data below shows that consumer expenditure is the primary driving

force of Indonesian economy with the private purchases contributing nearly 60% of

GDP and more than 40% consumer expenditure is dedicated to Food and Non

Alcoholic Beverages. (Euromonitor International, 2010)

Figure 1.3 Indonesia’s Consumer Expenditure by Category

Source: Euromonitor International, 2010

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Due the increasing number of average minimum wages, and also Indonesia as

one of the fastest-growing consumer, it has made a tight competition in all areas of

business industry especially restaurant industry. Therefore, each player and

businesses strive to win the competition or just to survive, and even can lose their

market share. The high pressure of competition not only from competitors that have

long existed, but also from new competitors that recently started their business.

Soekresno (2000)definerestaurant as a commercial enterprise that provides

food and beverage services and it is professionally managed.

Ministry of Tourism also add that the definition of restaurant is a business that

provides food and beverage services and managed commercially. In the decree also

stated that every restaurant should have someone who can lead the business as the

leader of restaurants that daily do the business, and responsible for the restaurant.

To be able to survive and continue to thrive in the food and beverage

competition, every restaurant needs to know the right strategy. Implementation of the

strategy will give added value to the product of the restaurants as well as satisfaction

for the costumer.

Hence, it is important for restaurant industry to give the excellent service for

their customer in order to make customer feel satisfy. With the fulfillment of

customer satisfaction, company hopes that customer will be loyal to them.

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Organizations focus on two types of strategic processes to devise marketing

mix. The first process is to select the market where organization wants to penetrate

and the second is the development procedure of combining all aspects of marketing

mix to satisfy the customers. Customers’ satisfaction generates positive and

productive impact on business growth. (Kanagal, 2009)

7P Marketing Mix strategies is adopted to maximize and to secure optimal

competitive advantages by satisfying customers’ needs and in service industry

nowadays especially in restaurant business is important to implement this 7P

marketing mix due the increasingly tight business competition.

From the British Journal Food (2001), shows that Mcdonald’s as one of the

biggest fast food chain in the world implemented the marketing mix to reach their

organization objective by combining and applying the elements of marketing mix.

McDonald’s succeed to implement this approach and they can continuing expand into

the international markets and they had obtain a higher market growth and

profitability.

Based on Nuseir and Madanat (2015)“Satisfaction is a major cause behind

revenue growth as satisfied customers return for another purchase.” Customer

satisfactiondoes have the potential to createcustomer loyalty. Loyalty, according to

Sasser (1990), benefits an organization in four different ways such as : (1) loyal

customers re-buy the product of the same company despite having an alternative

option , (2) spend good amount of money (3) source of recommendation to other new

customers and (4) give useful and sincere feedback to improve the services structure

or product quality.

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Based on Dapkevicius & Melnikas, (2009),Customers’ satisfaction on their

purchase is a significantfactor that leads business to success. In recenttimes, customer

satisfaction has gained new attentionwithin the context of the paradigm shift from

transactionalmarketing to relationship marketing (Grönroos, 1994; Sheth &

Parvatiyar, 1994). Customers who are satisfiedwith a purchased product will buy the

same productagain, more often (Reichheld, 1996), and will also recommendit to

others (Oliver and Swan, 1989).

Ostrom & Iacobucci, (1995) stated thatCustomersatisfaction is commonly

related to two fundamentalproperties, including thecustomer’s judgment of the

quality of the product and hisevaluation of the interaction experience he or she

hasmade with the product provider (Crosby et al., 1990).Kotler sums this up when he

states: “The key to customerretention is customer satisfaction” (Kotler, 1994)

Many restaurants are located in Indonesia, especially in Jakarta and theyhad a

tough competition in the quality of competition and the quality of products produced.

Not only that, many restaurant companieshaverealizedtheimportanceof customer

satisfaction and loyal customer.

And in the middle of the rise of new culinary business that offers a wide range

of concepts and genres of food, not many restaurants can stay consistent and exist in

the culinary industry.Oneoffastgrowing restaurant chain that implement the 7P

marketing mix in this industry is Bakmi Golek.

Nowadays, Bakmi Golek having some majorbranch outlets mostly in urban

areas (Jakarta, Sentul, Cikarang, Puncak). The 7P marketing mix that held by Bakmi

Golek basically a good location for every store in prime area like Rawamangun (near

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Pulogadung as the industrial areas), main road Dewi Sartika that can easily access

from Cawang, Jatinegara, etc. Puncak (the latest branches) that located in main road

of Puncak Pass.And Golek only run their business in stand alone location not inside

the mall, because they prioritize the parking lot and the comfortable experience of the

customers.

Not only that, According to the price of Bakmi Golek, they bid the middle low

and moslem people as their target market, by serving Halal food only in their

restaurant. And product strategies nowadays Golek not only serve Bakmi and Chinese

but also in several branches they had “Golek Coffee“ to fulfill the needs of urban

people that want to chill and relax. All the branches of Bakmi Golek is family-owned

and can not “franchise” by the others. So the quality the and taste is “well-

maintained”

According the information given by the owner of Golek, Golek is having a

new menu in every 6 months, (Indonesian food and Chinese food). Golek promotion

strategy is through word of mouth and also had a community gathering like cycling

community and motocycle community like Harley Davidson community, Ducati

community, Vespa Community that gathered in Golek branches.

In the development of 7P marketing mix, Bakmi Golek prioritize the friendly

employees and make sure they know the product and standard service given by

Bakmi Golek through training. Golek supported by loyal and motivated employees

that can improve the their business. From the information given, Golek’s employees

are very loyal such as most of them work more than 10 years even from the beginning

of Bakmi Golek, there are several employees still work for Bakmi Golek.

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(lowemployee turnover). Golek had a bonus and incentive system to their employees

so that employee can feel motivated to work.

During the process to deliver the product and services to customer, Golek

only use the fresh and new materials, and the taste of the food is concistent in every

branches (the taste of the food is similar in every branches). Golek also had a delivery

services in every branches that can cover all places in Jakarta, Bogor, Sentul,

Cikarang, and Puncak.

Not only the delivery and dine-in service, Golek also serve for outside

catering for event, party, and company event. The main important of Bakmi Golek is

Bakmi Golek’s noodle is freshly made and it has a standardize supply-chain-

management and distributed by own distribution channel to every branches and they

have several warehouse that near the restaurant location.

Physical evidence, Golek renovated their branches to be more comfortable,

cleaner and customer can feel the atmosphere of the restaurant. The physical layout of

every branches of Bakmi Golek remain similar with outdoor and indoor areas, and

provide the smoking areas for customer. And used the music background in every

restaurant and supported by the good looking and clean appreance from Golek’s

employees.

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1.1.1 Background of Food and Beverages Industry in

Indonesia

Nowadays, with the rapid advancement of science and technology and

economic growth, it may lead to changes in consumption patterns in society.

In terms of eating, in the beginning was to meet the daily needs, but now

eating is an activitiesto consume foods and also accompanied by the

orientation of satisfaction or pleasure in the consumption activities. One

industry that will never die is restaurant industry

Table 1.2 The Development of Restaurant Business in Medium andLarge Scale

year 2007 – 2010

Tahun Usaha / Perusahaan Rata-Rata Tenaga Kerja

Jumlah Pertumbuhan (%)

2007 1,615 27

2008 2,235 38,39 27

2009 2,704 20,98 27

2010 2,916 7,84 27

Source: Kementrian Pariwisata dan Ekonomi Kreatif, 2013

Based on the data above from Ministry of Tourism and Creative

Economy, (2013) shows that there is a significant growth and development

from the restaurant business.

People are eating out more frequently now, not just on special

occasions as in the past. The choice of restaurants has also diversified over the

last 5-10 years. Indonesia, Italian, Chinese and Indian restaurants have been

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around for years in Indonesia but now have been joined by French, Japanese,

Turkish,Mexican, etc.

According to the theory of needs by Maslow, food is one of the basic

human needs. Because it is a basic needs, the fulfillment of the food becomes

an absolute and important thing if we want to be able to maintain the

continuity of life. After the basic needs are fulfilled, we will be able to think

and reach the other needs. Social needs, confidence (self esteem) and self-

actualization are the top three human needs.

The development of the food and beverage businessin Indonesia is a

big opportunity to the businessman and it is a promising business, because

everyone needs food to eat and also one of the basic needs for the community.

Because of that, the restaurant industry grew fast in big cities, especially

Jakarta and its surroundings, and it is supported by the level of activity and

mobility level of people in big cities are very high that it causes them no

longer have the time to cook and prepare the food itself, and it can be habit of

many people to eat outside their house.

Based on the data below from BPS, (2012), “Percentage of Monthly

Average Expenditure per Capita on Items of Food and Non Food by Province,

March 2011 and 2012 shows that the national percentage of food expenditure

decreased 49.46 percent in 2011 to 51.08 percent in 2012. This increment

indicates that expenditure pattern for food items is prefer than non food

items.“

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Table 1.3 Percentage of Monthly Average Expenditure per Capitaon Items of

Food and Non Food by Province, March 2011 and 2012

Source : BPS, 2012

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Inthisresearch, thewriterwants toexaminetheissues ontheinfluenceon

7P Marketing Mix implementedby Bakmi Golek Restaurant Chain

towardcustomer satisfaction that will effect to their customer loyalty. This is

an interesting topic to discuss because every human being has their individual

needs. One of them is the need to consume food and drink in order to survive.

Food and drink are basic needs that must be fulfilled by every human.

1.2 Problem Indentification

Bakmi Golek as one of several player in restaurant industry (Noodle and

Chinese Food) that implemented marketing mix that give the best service and product

to customer. They have some problem according to customer satisfaction and loyalty.

And through this research, writer want to identify the problems and research for

several strategies to reach the goal.

Based on the interview from the owner and the branch manager of Bakmi

Golek, the customers turnover in the stores are relatively high, and the researcher

presume that the 7P strategy of Bakmi Golek is not optimal.

7P Marketing Mix strategies is adopted to maximize and to secure optimal

competitive advantages by satisfying customers’ needs. Supported by Craven &

Piercy, 2007 ; Li & Green, ( 2010 ) stated “ The effective integration of marketing

mix notions will make the organisation superior and at the same time helps to fasten

the relationship between customer and the organisation based on mutual respect

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backed by customer satisfaction, loyalty, and organisations initiatives of quality

standards.”

It’s important for restaurant industry to implement 7P marketing mix in their

business because it has proven that 7P marketing mix can help to enhance the

company performance and also improve Customer satisfaction and Customer Loyalty.

Why is it important to improve the customer satisfaction and loyalty ? Because

to build customer satisfaction and customer loyalty for a service product, every

aspects of marketing mix should have the ability to meet human needs ( product,

price ), easily reached by the customers ( place ) , should be able to attract the

potential customers to buy and use the products and services ( promotion ), able to

provide and deliver goods and services in order to meet the customers need ( people,

process), and must be able to give satisfaction to the customers ( physical evidence ).

The better the marketing mix programs implemented by the organisation will

make stronger customer satisfaction and loyalty. And the concept is suitable to

Bakmi Golek that run product - service industry that should meet the customer

satisfaction and they can become loyal to Bakmi Golek.

By doing this research, writer want to identify about service and products

given by Bakmi Golek through 7P marketing mix, does the customer satisfy about the

product and service, and the loyalty Bakmi Golek customers can be formed.

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1.3 Research Objective

The objective of the research is described below:

1. To measure the influence of Bakmi Golek’s marketing mix factors

(Product, Price, Place, Promotion, People, Process, and Physical Evidence)

to Customer Satisfaction

2. To measure the influence of Bakmi Golek Customer Satisfaction to

Customer Loyalty

1.4 Research Question

Based on the background, so the research question in this study are:

1. How the7P of marketing mix variables has a significant influence on

customer satisfaction ?

2. How the customer satisfaction variable has a significant influence on

customer loyalty?

1.5 Benefit of the Research

Based on the problem formulation above, this study is expected to provide

benefits to the various stakeholders, which are:

1. For the Researcher

This research is expected to enhance knowledge and understanding about

7P marketing mix, customer satisfaction and customer loyalty.And also

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help Golek to research about the 7P marketing mix towards the customer

satisfaction and customer loyalty.

2. For Bakmi Golek

a. This research is expected to be a reference and evaluation materials for

company on the effect ofproduct, price, place, Promotion, people,

process, and physical evidence on customer satisfaction and customer

satisfaction to customer loyalty

b. The company received input and advice on things that need to be

changed and enhance in order to increase customer satisfaction and

customer loyalty Bakmi Golek.

3. For Public

a) This research is expected to increase value information and knowledge

about restaurant industry in Indonesia to the public

b) This study is expected to become a reference for public especially for

food and restaurant enthusiasts in Indonesia.

1.6 Scope of the Study& Limitation

The scope of this study is limited to analyze:

1. Bakmi Golek Restaurant Chain

Bakmi Golek Restaurant is running a food and beverage business

(restaurant industry) and now Bakmi Golek is one of the biggest and

largest noodle restaurant chain in Jabodetabek.

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2. 7P Marketing Mix

The 7P Marketing Mix as the strategy of Bakmi Golek will be analyzed

and developed in this research which are product, price, place, promotion,

people, process, and physical evidence.

3. Customer Satisfaction & Customer Loyalty

Customer satisfaction and loyalty happened when the needs and wants of

the customer can be fulfilled even beyond the customer expectation.

4. Period

The research approxiamtely will be held for 4 months since September

2015 to December 2015

1.7 Systematics Writing

This study consists of five chapters which is list down as follows:

Chapter I Introduction:

This chapter contains the background, problem formulation, objectives

and benefits of the research, the scope of research, methodologies,

systematic writing, and state of the art.

Chapter II Theory and Framework:

This chapter contains the theory related to the variable under study and

research framework.

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Chapter III Research Methodology:

This chapter includes the design of the study, an operationally variables,

data types, data collection techniques, sampling techniques, analytical

methods, and design implications of the research.

Chapter IV Analysis and Discussion:

This chapter presents the results of data processing such as data and

images as well as to answer the purpose of research results.

Chapter V Conclusions and Recommendations:

This chapter contains the conclusions of the research and the advice given

to the company and further research.