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TABLE OF CONTENTS

TABLE OF CONTENTS i
LIST OF TABLES iii
LIST OF FIGURES iv

1. INTRODUCTION 1
1.1 Research Background 1
1 Research Question 3
2 Research Objective 4
3 Research Benefit 4
2. THEORETICAL BACKGROUND 6
2.1 Introduction 6
2.2 Consumer Behavior 6
2.2.1 Internal Factor 6
2.2.1.1 Motivation 6
2.2.1.2 Perception 7
2.2.1.3 Self-Concept 7
2.2.1.4 Attitudes and Beliefs 7
2.2.1.5 Personality 7
2.2.1.6 Learning 8
2.2.2 External Factor 8
2.2.2.1 Family 8
2.2.2.2 Small Reference Group 8
2.2.2.3 Social Class 9
2.2.2.4 Culture 9
2.3 Brand Image 9
2.3.1 Brand Definition 9
2.3.2 Brand Image 11
2.3.2.1 Brand Image Measurement 12
2.4 Brand Trust 14
2.4.1 Brand Trust Definition 14
2.4.1.1 Self-Concept 15
2.4.1.2 Maslows Hierarchy of Needs 16
2.4.2 Brand Trust Dimension 17
2.5 Word of Mouth Communication 18
2.5.1 Electronic Word of Mouth (eWOM) 18
2.5.2 Effect of WOM on Consumer Decision Making Process 19
2.6. Purchase Intention 20
2.6.1 Factors that Influence Purchase Intention 22
2.7 Theoretical Framework 22
2.8. Hypotheses 23
3. RESEARCH METHODOLOGY 25
3.1 Introduction 25
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3.2 Foundations of the Researcher 25
3.2.1 Researchers Philosophy 25
3.2.2 The Research Methodology 25
3.2.1 The Ethics 25
3.3 Description of Variables 26
3.4 Description of Data 29
3.4.1 Type of Data 29
3.4.2 Source of Data 29
3.4.3 Sampling Method 29
3.5 Methods of Data Analysis 30
3.5.1 Piloting 30
3.5.2 Validity and Reliability 30
3.5.2.1 Validity Test 31
3.5.2.2 Reliability Test 32
3.5.3 Analytical Procedures 32
3.5.3.1 Descriptive Statistic Analysis 32
3.5.3.2 Top Two Boxes Bottom Two Boxes Analysis 33
3.5.3.3 Data Analysis Method 34

REFERENCES 36

LIST OF TABLES

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1.1 Millennials Behavior 3
2.1 Types of Family 8
2.2 Class in society 9
2.3 Six Levels of Brand Definition 14
2.4 Consumers desired value of a product 15
2.5 Components of Self Concept 16
2.6 Maslows Hierarchy of Needs 16
2.7 Brand Trust Factors 17
2.8 Indicators of purchase intention 20
2.9 Factors that Influence Purchase Intention 22
3.1 Research Variables 27
3.2 Likert Scale Measurement 30
3.3 Likert Scale Interval Class 33

LIST OF FIGURES

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2.1 Brand Image Signals 13
2.2 A conceptual model of WOM 19
2.3 Consumer Decision Making Process 21
2.4 Stages between evaluation of alternatives and Purchase Decision 21
2.5 Theoretical Framework 22

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1. INTRODUCTION

1.1 Research Background


Smartphone had been increasingly demanded in the market nowadays and
it seems that the trend of smartphone will not decrease due to the improvements of
technology. This increase in demand was also caused by most consumers who are
very dependent on their smartphones. Back then, mobile phones were used by
consumers mostly to do phone calls and text message. By the technological
development and the implementation of it in smartphones, consumers started to
see smartphones as their daily need since smartphones can make their life better
and easier. Smartphone has the ability to deliver the function of computer
programs called application in a small computing device (Weinberg, 2012).
The need of smartphone by consumers cannot be separated by the fact that
internet addiction is getting bigger in the market. Internet addiction is viewed as
personals psychological dependence on the internet (Lu and Wang, 2008). This
internet addiction can be seen from people who: keep increasing their online time,
feel uncomfortable when they are offline and have relational and occupational
problems without any visible reasonable thing. Most people these days cannot go
outside without their smartphones since they need the Internet provided by their
smartphones. Furthermore, this dependency on internet will lead to future
smartphone purchase behavior.
The behavior of smartphone consumers can be understood by reviewing
the theories on consumer behavior especially in the decision making process.
These decision making can be categorized into 3 types: nominal decision making,
limited decision making, and extended decision making (Kotler and Keller, 2012).
Nominal decision making is decision where people dont need to consider picking
a brand because of past experiences with the brand or product to make decision.
Limited decision making is a consumer decision making used when purchasing
products that commonly used by the consumer, but still need to find more
information about which brand or model will best fit the consumers needs.
Extended decision making is a consumer decision making that involve more
information and going to a further intention or aim which is to satisfy a need.

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These stages of consumer behavior and decision making also differently applied
through different market segmentation.
Previously, extended decision making mostly only applied to perhaps
expensive and unfamiliar products. However, with the improvements of
technology which makes research towards products in the market become easier
over time, consumers with high technological literacy often make limited or
extended decision making. Therefore, businessmen have to know the desired
target market so that the marketers can aware of what they are facing in the
market, obviously by knowing the characteristic of the targeted segment.
The starting point of deciding market segmentation is the question of to
whom the product should be marketed. If the target is not segmented, its called
Mass Marketing with mass production and mass distribution with the purpose of
reducing the cost of production. Nowadays, this might not valid anymore since the
cost of mass marketing is becoming higher and more difficult to reach targeted
market (Kotler and Keller, 2009)
When entering the market by selling smartphone products, marketers
obviously know that the amount of consumers are greater in younger generation.
Every generation has its own characteristics and level of significance towards the
market. People are influenced based on their society and the time they grew up.
The factors that can influence an individual consist of music, movie, politic, and
local event in certain period (Kotler and Keller, 2012). Generation Y or
Millennials has been the generation who are impacted the most by the changes in
the market and also bring the most changes in the market by electronic word-of-
mouth (eWOM). Millennials consist of people born from 1980 to 2000 (Stein,
2013). The idea is; millennials love to buy. This fact forced the businessmen to
reshape the business and be adaptive to the new demands in the market.
Most of smartphones and internet users come from Millennials. As per
2014, over 85% of millennials owns smartphones. Millennials also have the
highest social networking penetration compared to any other generation. Over
past two decades, millennials have great significance impact toward the market
and became important market segment to be considered by businessmen (Noble,

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Hoytko & Phillips, 2009). In fact, this generation has the highest purchasing
power compared to any other generation (Morton, 2002).
Its true that most businessmen have to consider or focus more on targeting
millennials; however, its hard to deliver the brand loyalty to millennials.
According to Kotler and Keller (2012), here are millennials attitudes about
causes:
Table 1.1 Millennials Behavior
85% millennials are likely to switch from one brand to another brand that is
about the same in price and quality, if the brand is associated with a good cause

86% millennials consider a companys social or environmental commitments


when deciding which products and services to recommend to others

84% millennials consider a companys social or environmental commitments


when deciding what to buy or where to shop

87% millennials consider a companys social or environmental commitments


when deciding where to work

86% millennials say when a product or company supports a cause whether its a
social or environmental issue they care about, they have a more positive image
of that product, even the company.

The biggest issue that exists here is the brand loyalty of millennials. They
tend to change the brand or product especially technological products which are
very fast changing and improving through years. Brand loyalty originally came
from single purchase made by customer; however, as a human with unlimited
needs, consumers tend to purchase certain kind of product more than once.
Therefore, consumers will have a choice whether to loyal to the previous brand or
change to another brand (Odin and Florence, 2001)

For a customer to reach brand loyalty, there are four stages: Liking,
Satisfaction, Commitment, and Trust (East, Gendall, Hammond, & Lomax, 2005).

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Liking is done when the first research toward a product of a brand to fulfil a need
of a customer. After the process of buying, there will be satisfaction. This
satisfaction later will bring a customer a commitment to a product based on the
trust toward the product of the brand. This brand loyalty doesnt only come from
the repeated buying attitude itself, but also come from recommendation from
relations or the society of the individual especially eWOM.
1.2 Research Question
1. Does eWOM have significant impact toward brand image and brand trust?
2. Do eWOM, brand image, and brand trust have significant impact toward
smartphone purchase intention?
1.3 Research Objective
The research objectives for this study are as follows:
1. To analyse the significance of eWOM in brand image and brand trust.
2. To analyse the significance of eWOM, brand image, and brand loyalty in
smartphone purchase intention.
3. To analyse how do the existing theories can be used in the research of the
issue in fast changing market condition.
1.4 Research Benefit
For Businessmen:
The businessmen especially smartphone manufacturer can be more aware
toward the millennials, who have huge power in the market, to survive in the
future. The result of this research also can be used as an opportunity to build
customer loyalty which results in stable profitability. Smartphone manufacturers
also can have the idea of how they should design and build their future product
based on what the customers want.
For Customers:
This can be used as a self-reflection when they want to purchase a
smartphone. This research will increase brand awareness of customers; therefore,
customers can be smarter in choosing brand for their future smartphone. This also
can make customers faster in choosing smartphone in the future due to the
knowledge of the factors that can be considered when choosing the brand.
For researches in the future:

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This research will be beneficial to other researches in the future which
related to customer purchasing behavior, smartphone marketing, and brand
loyalty.

2. THEORETICAL BACKGROUND
2.1 Introduction

In the last chapter, the researcher has explained about In this chapter the
researcher will provide a review and synthesize the consumer decision making
process with the model used as the research framework. This explains the factors
that influence purchase intention of customers.
2.2 Consumer Behavior

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Marketing Subject and Object are humans, therefore, approach of the
marketing cannot be separated with the behavior of the human itself. Company
who can understand and follow the trending consumer behavior and demand in
the market will have the advantage in taking the opportunity to become market
leader.
Consumer behavior is the study of individuals, groups, or organizations
and the processes they use to select, secure, use, and dispose of products, services,
experiences, or ideas to satisfy needs and the impacts that these processes have on
the consumer and society (Hawkins & Mothersbaugh, 2014).
The purpose of understanding consumer behavior is to know how
consumers make decision based on sources and knowledge of the consumer which
are: basic knowledge of the product, location of the purchase, purchasing habit,
time of the purchase, and in what condition does the customer buy certain
product. There are two factors that influence consumer behavior:
2.2.1 Internal Factor
Internal Factor is a set of factors that came from an individual and have
huge impact on the process of decision making (Hawkins & Mothersbaugh,
2014). This factors are the impact strongly correlated with individual valuation
towards alternatives available which finally come up with a decision. These
internal factors are:
2.2.1.1 Motivation
Every activity done by an individual came from self-intention. This
intention is called motivation. The concept of motivation itself is a power within
an individual which boost the desire to do things in order to achieve a goal
(Swasta and Handoko, 2000).

2.2.1.2 Perception
According to Hawkins and Mothersbaugh (2014), perception is a process
where consumers aware and interpret the environmental aspects. It also can be
said as comprehension process which involves stimulation in the internal and
external environment. The result of this personal experience will shape a
perception of a process. Furthermore, perception can cover variables of a product
marketing. Consumers will have perception towards product, price, advertisement,
and marketing activities of a company.
2.2.1.3 Self-Concept

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Self-concept is the totality of the individuals thoughts and feelings having
reference to himself of herself as an object (Hawkins & Mothersbaugh, 2014).
Psychologists differentiate self-concept to real self-concept and ideal self-concept
(ones desire of how self-concept should be). Companies should be able to
identify consumers purpose. In some case, companies can decide this purpose if
they understand about self-concept of the consumer. Every individual has their
own self-concept, which may vary the perception toward companies marketing
effort.
2.2.1.4 Attitudes and Beliefs
Attitude is an enduring organization of motivational, emotional,
perceptual, and cognitive processes with respect to some aspect of our
environment (Hawkins & Mothersbaugh, 2014). Attitude itself affect belief and
trust which furthermore will affect behavior. Consumers will always give either
positive or negative feedback towards something. This feedback is somehow
based on perception came from the consumer. Attitudes is a predisposing, a
condition which people are easily affected, to give response of environmental
stimuli which guide ones attitude.
2.2.1.5 Personality
Personality is an individuals characteristic response tendencies across
similar situation (Hawkins & Mothersbaugh, 2014). Consumer personalitys
impact towards perception and behavior is a very common thing and the efforts to
connect personality norm with purchasing behavior are not always successful.
This forces the marketers to segment consumers as a function of their personality
differences.

2.2.1.6 Learning
Learning is a behavior which relatively happened because of past
experience. This learning result will give appropriate responses to stimuli which
has certain purpose.
2.2.2 External Factor
External factor is factor that came from outside an individual and not the
basic reason of a humans decision making. However, human will always interact
with surrounding environment which will impact the behavior of an individual.
Different environment will result in different view of attitudes and will differ the
needs. Those external factors are:

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2.2.2.1 Family
According to Schiffman and Kanuk (2007), there are three type of family:
Table 2.1 Types of Family (Schiffman and Kanuk, 2007)

Married Couple A couple with no child

Nuclear Family A small family with no more than three children

Extended Family Big family with children and other family


members.

In a family, every individual can choose what to decide in purchase or


choose something. Every family member has their own role in the family, ideally.
Seeing this fact, a company should know who will be in charge of a companys
activity.
2.2.2.2 Small Reference Group
This small group affect consumer purchasing behavior and often being
used as a guide by consumers in their decision making (Hawkins &
Mothersbaugh, 2014). Therefore, consumers always pay attention to particular
group whether the groups behavior or mentality. Small reference group can
consist of: friends, neighborhood, social organization, religious associations, and
others. In further review, there will always be an opinion leader which strongly
affects the behavior of the group.
The groups interactions are often being done individually, which cause a
person to be easily influenced since the reference form a close related person is
somehow much stronger than the existing marketing effort by a company.
2.2.2.3 Social Class
Social class is a difference in society in term of multilevel class. According
to Swasta and Handoko (2000), society can be divided to three class:
Table 2.2 Class in society (Swasta and Handoko, 2000)

The upper class: High officials, wealthy businessmen

The middle class Medium level entrepreneurs, private employees,


government employees.

The lower class Small traders, petty official, factory workers, etc

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For marketing concern, this classification can be a huge consideration in
making the decision for the target market.
2.2.2.4 Culture
According to Schiffman and Kanuk (2007), culture is an overall value,
beliefs, and tradition which guide the society in term of decision making. The
symbol of this culture is somehow not physically visible. They are attitude,
language, religion, opinion, traditional value, moral law.
2.3 Brand Image
2.3.1 Brand Definition
Every product in the market has brand, which differentiate between one
product and the others. Brand become one of the most important factors in
marketing strategy. But for some producers, brand choice is not a crucial aspect
even though they put much attention towards brand (Maulana, 2006).
Keller (1993), Durianto et al., (2001), and Simamora (2002) defined brand
as a name, term, sign, symbol, or design, or a combination of them, intended to
identify the goods or services of one seller or group of sellers and to differentiate
them from competitors. Brand of a product often identify the producers. Brand
promises the consumer consistency in quality and benefit and that kind of things
have been achieved by many big brands in the market.
Brand is more than just a product differentiator, the existence of brand
brings benefits to the consumers, society, and the sellers (Kotler, 2000). Benefits
for customer is to tell them the quality and help them to give awareness to new
products that may be beneficial. For society, brand is used to boost buying
efficiency since product can give information about the products quality. This
brand also can bring innovation towards new products. For the sellers, brand can
ease the distribution of the goods, give legal protection toward the patented
product, attract loyal customers, and segment the market
According to Kotler (2000), there are six levels of brand definition:
Table 2.3 Six Levels of Brand Definition (Kotler, 2000)

Attributes Brand will remind the customers to certain


attribute of a product. For example, iPhone offers
high quality and high price smartphone

Benefits As customers buy product, they do not only


buy the attribute of it, but also the benefits.

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Attribute of a product can be expanded into
functional benefits

Values Brand will express the value of the


producer and the consumer of the product

Culture Brand will also represent the culture of the


area of origin.

Personalit Brand reflects the personality of the user.


y Using product used by well-known figure
somehow shows the personality of the user

User Brand will show what kind of user is


suitable for the product. No one expects iPhone is
to be used for 7 years old boy, but its used for
people who respects technology, value, and the
functionality of the product

Brand is a complex symbol of a product. If brand is used for product


name, the company is not taking serious about how the brand should be taken
care. If a product can be seen from six dimensions mentioned above, then the
product is good and not seen as shallow. Its a common mistake that producers
often market a product just only for the attributes. By marketing just the attributes,
the consumers are not interested with this attribute compared to the benefits,
competitors are easily copy the attributes made, current attribute will slowly
decreasing in value (Kotler, 2000).
2.3.2 Brand Image
Purchasing things is more than just choosing a product based on the price
and quality, but also by choosing brand image of the product. Its because brand
can give additional value to ones lifestyle. Companies nowadays compete one
another in making good brand image to the stakeholders.
Image is total perception of the object that is formed by processing
indormation from various sources over time (Assael, 1992). By this, producers are

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trying to achieve positive image of a product, service, company name, and their
brand so that their business and product can be accepted by stakeholders.
Brand image can be said as the set of beliefs consumers hold about a
particular brand (Kotler et al., 2002). This belief is built when the consumers are
experiencing the product from the marketing effort done by the company down to
the usage of the product. Keller (1993) also said that brand image is perceptions
about brand as reflected by the brand association held in consumers memory.
Brand image cannot be separated with brand association, which is
anything linked in memory to a brand (Aaker, 1991). Association that exists in a
brand can help the process of recall about product information. Brand association
is classified into three categories:
a. Attributes
A form of descriptive which give characteristic to a product or service.
This attributes can be directly and indirectly connected to the product. Directly
connected attributes is the ones which form the function of the product. Indirect
attributes are related to sales, consumption, pricing, packaging, etc.

b. Benefit
Benefit is a personal appraisal towards a product or service. There are
three king of benefits: functional benefit, benefit experienced, and symbolic
benefit.
c. Brand Attitudes
Consumer behavior towards a brand is correlated with overall evaluation
done by the consumers.
2.3.2.1 Brand Image Measurement
Positive brand image can be measured by consumers feedback about
brand association which consist of favorability of brand associations, strength of
brand associations, and uniqueness of brand associations (Keller, 1998). Here are
the brief explanation about the measurements by Keller:
a. Favorability of brand associations
Consumers believe that attributes and benefits given by a brand can satisfy
needs and wants of the consumers, which will create positive attitude towards the
brand.
b. Strength of brand associations
It is about how the information about a product are managed by sensoric
data within the consumers memory. When the consumers are actively thinking

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about information of a product, there will be a stronger association in consumers
memory.
c. Uniqueness of brand associations
A brand has to be able to create desire within a consumer to know about
the brand further which leads the consumer to have desire to buy the product.
However, Low and Lamb (2000) said that measuring brand image, based
on product category, has been used in different ways in recent studies. But these
always have taken into account that not only must the physical attributes of the
products be considered, but also the functional, emotional, and self-expressive
benefits. Based on the statement, the measurement of brand image can be
separated into some attributes:

a. Physical attributes
Measurement of a brand image is affected by physical appearance of a
brand. Within smartphone industry, brand image also depends on the physical
appearance and the aesthetics.
b. Performance
Functional measurement of a product is also a variable of brand image.
Performance can be measured based on:
- Emotional benefit
Capability of a brand in creating positive emotion to the consumers as user
of the product.
- Self-expressing benefit
Benefits that can be achieved related to the consumption of a product are
also the basic variable in measuring consumers image to a brand.
Kapferer (1992) stated that consumers create image based on synthesis
from all signals or association created by a brand, such as brand name, symbol,
product, advertisement, and sponsorship which furthermore will be expanded and
interpreted by the consumers. The signals can be drawn as:

Brand Identity

Signal Transmitted Brand Image

Other sources of inspiration:


Opportunism
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Competition and Noise

Figure 2.1 Brand Image Signals (Kapferer, 1992)

2.4 Brand Trust


2.4.1 Brand Trust Definition
Brand trust is defined as a safety feeling of a product user within a
connection with a product based on perception of trustworthy of a brand.
Chaudhuri and Holbrook (2001) defined brand trust as a consumers willingness
to depend on brands capability to do the functions of the product. Dawar and
Pillutla (2000) explained brand trust as trustworthy and credible.
According to Gurviez and Korchia (2003), there are some variables that
can be identified from trust:
a. Trust and commitment.
They are the most important variables to keep the long term relationship
with industrial partner and business. Explanation of trust and commitment
variable in business relationship give supplements to the economic theory
especially transaction agreements.
b. Basic cognitive and affective
Based on research by Tezinde at al. (2001), proved that trust, commitment,
and satisfaction will affect relations with consumers and furthermore will affect
loyalty. Brand trust is a consumers response towards the usage of a product where
the user got the cognitive effect which is trust and consuming experience.
Based on European Journal of Marketing (Delgado & Aleman, 1999),
measurement which is often used to measure trust is a multi-item scale type which
explains dimensions from concept of specific attitudes and attributes. In detail,
trust scale to a brand consists of six items which represent some characteristics
from brand which are connected with the capability to be trusted.
- Offers a product with sustainable quality.

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- Supports a problem resolving within the usage of the product.
- Offers new products needed by the previous users.
- Concerns with customer satisfaction.
- Sees users as a valuable figure.
- Gives recommendations and suggestions to maximize the product usage.

Another explanation of brand trust is a willingness of the average


consumer to rely on the ability of the brand to perform its stated function (Morgan
& Hunt, 2002). However, Dooney and Canyon (2001) defined brand trust as a
calculative process based on the ability of an object or brand to continue to meet
its obligation and on an estimation of the cost versus rewards of staying in the
relationship. Therefore, it can be said that consumers trust can be made by
fulfilling self-concept, needs, and value.
According to Mowen and Minor (2003), value which is desired by
consumers toward a product consist of:

Table 2.4 Consumers desired value of a product (Mowen and Minar,


2003)

Internal Value Self-fulfillment, sense of accomplishment,


self-respect, and excitement.

External Value Sense of belonging, being well of respecting,


and security.

Internal Orientation Value Orientation of interpersonal relationship.

2.4.1.1 Self-Concept
Self-concept is a form of overall feeling and approximation from
individual towards an object which reflects the individual. Here is the he
components of self-concept:

Table 2.5 Components of Self Concept

Actual self How an individual actually understand him or herself.

Ideal self How an individual will understand him or herself in an


ideal way.

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Social self How an individual believe that others understand him
or her.

Ideal social self How an individual wants others understand him or her
the way he or she desires.

Expected self How an individual acts.

Situational self How an individual behave in certain situation

Extended self Personality concept of an individual who capable of


influencing image of him or herself.

Possible self How an individual wants to be.

2.4.1.2 Maslows Hierarchy of Needs


Needs based on Maslows theory can be explained in five steps:
Table 2.6 Maslows Hierarchy of Needs

Physiological Needs This category holds basic survival needs such as


food, clothes, shelter and sexual satisfaction.

Safety Needs This category encompasses the need to feel safe


within your environment. As this includes
emotional as well as physical safety, the need to be
free from anxiety is part of this group of needs.

Social Needs This need category is about companionship, it


includes the need for love, friendship and
belonging.

Esteem needs This higher level need focuses on things that make
a person feel better about themselves, the need for
self-respect, status and recognition from others.

Self-Actualization This category is about excelling in your life,


personal achievement and reaching your potential.

2.4.2 Brand Trust Dimension

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Brand characteristic plays vital role in determining whether the consumers
will trust to a brand or not (Lau and Lee, 2000). In context of relationship between
consumer and brand, consumers trust is build based on brand reputation, brand
predictability, and brand competence. Here is the explanation:
Table 2.7 Brand Trust Factors (Lau and Lee, 2000)

Brand Reputation Related to opinion from others that certain brand is


good and reliable.

Brand Related to capability of a group to predict the


Predictability behavior of other group.

Brand Competence Brand who has the capability to solve problems faced
by the consumers and can fulfill the need of the
customer.
Company characteristics also influence level of trust by the
consumers. Consumers knowledge to a company will affect the trust to the brand.
Consumer can evaluate a company from the reputation, other consumers opinion,
companys motivation, and companys integrity (Lau and Lee, 2000).
Consumer-Brand Characteristics is a two-way connection which allows
the connection to interplay. This somehow will make the characteristic between
the brand and the consumer become alike.
a. Similarity between consumer self-concept & brand personality
Interpersonal connection shows that similarities and characteristics
between both parties can give tendency to build trust. A consumer will evaluate
and assess a brand if the brand has similarity with the consumers characteristic.
b. Brand liking
To start a relationship, a party has to be loved with others. Within
marketing, if a consumer likes a brand, he or she will tend to trust the brand
c. Brand Experience
Good experience to consumers will grow trust within them.

d. Brand Satisfaction
Brand trust will be gained if a product can exceed the expectation of the
consumer and the product can sustain the performance.
e. Peer support

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Social influence is a huge factor in brand trust if one individual can affect
others perception towards a brand.
2.5 Word of Mouth (WOM) Communication
WOM, interpersonal communication between consumers to deliver the
information about a product without commercial purpose (Litvin et al., 2008), has
been named as a powerful determinant in influencing consumers purchase
decision (Katz and Lazarsfeld, 1955).
It is true that many companies take advantage from positive WOM to
advertise their products. However, negative WOM spreads faster and wider than a
positive WOM. This is somehow cannot be controlled by the producers and if the
negative WOM not immediately treated it will lead to customer lost. Therefore,
preventing the reputation of product and company from decreasing is a critical
issue for the business practitioners.
2.5.1 Electronic Word of Mouth (eWOM)
With the improvements of technology, form of WOM began to shift from
face-to-face to web based platform such as forums and review sites (Cheng and
Zhou, 2010). Although eWOM differs from WOM in the way it transmits, the
power of the impact does not decrease. The importance of influencers in eWOM
on consumers decision making process has been proven in various researches
(Litvin et al., 2008; Xiang and Gretzel, 2010). With the help of technology,
consumers are able to actively participate and spread the WOM.
In smartphones industry, its very common that people are trying to find
review of a product before buying. Consumers use eWOM as their first
information resource or use eWOM as third party opinion to verify the factuality
of information provided in advertisements (Gretzel, Hyan-Yoo, and Purifoy, 2007;
OConnor, 2008).

2.5.2 Effect of WOM on Consumer Decision Making Process


WOM plays a critical role in decision making process which involved in
both pre-purchase and post-purchase stages. Before the decision making and
purchasing stage, consumers intend to seek for information to maximize the value
of their money. And then the satisfied or unhappy experiences motivate consumers
to share their opinions with others. Figure 1 shows Litvin, Goldsmith, and Pans
(2008) conceptual model of WOM transfer.

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Figure 2.2 A conceptual model of WOM (Litvin et al., 2008)

In general, smartphone buyers search for their product information online


rather than just seeing advertisements or just learning for their past experience due
to the fast-changing technology.
2.6 Purchase Intention
Purchase intention is a psychological power within an individual, which
makes the decision of the individual (Schiffman and Kanuk, 2007). Decision in
purchasing product is influenced by the evaluated product. If the benefit received
is bigger than the effort to get the product, then the intention to purchase is getting
higher. According to Kotler and Keller (2012), customer buying decision is all
their experience in learning, choosing, using, even disposing of a product.
Ferdinand (2002) explained indicators of purchase intention as follows:
Table 2.8 Indicators of purchase intention (Ferdinand, 2002)

Transactional Interest Tendency of an individual to buy product

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Referential Interest Tendency of an individual to reference a product
to others

Preferential Interest Interest which describes the behavior of an


individual who has a primary interest. This
primary interest can only be changed if something
happens to the interest product.

Explorative Interest Behavior of an individual who is always looking


for information about product enthused by the
individual.

Kotler and Keller (2012) explains about five steps in decision making. In
the process of decision making, consumer do not have to go through every steps
or even change the order.

Need Recognition
Initial stage when a consumer perceives a need and becomes motivated to solve the
problem.

Information Search
Consumers utilise their buying power and seek further information before deciding
on a resolution.

Alternative Evaluation
Consumers assess the product through information gathered and compare the
attributes.

PurchaseDecision
Figure 2.3 Consumer DecisionMaking Process
Consumers have to desist and resist from continuing to collect and analyse
information and evaluate the alternative brands and searching for a finally product.

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Post-Purchase Evaluation
Comparison to the expectations the consumer gives the product after using it.
Kotler also explained about the steps between Evaluation of
Alternatives and Purchase Decision:

Figure 2.4 Stages between evaluation of alternatives and Purchase


Decision (Kotler & Keller, 2012)

2.6.1 Factors that Influence Purchase Intention


Swastha and Irawan (2001) explained factors that influence purchase
intention are connected with feeling and emotion. If an individual is feeling happy
when purchasing a product, it will boost the intention even more, while
dissatisfaction feeling will reduce the intention.
Lidyawatie (1998) explained about the factors that influence purchase
intention.
Table 2.9 Factors that Influence Purchase Intention (Lidyawatie, 1998)

Profession Difference Different job means different daily and


leisure activities, which leads to different
needs.

Social-Economy Difference Higher financial capability will lead to


higher purchase intention due to higher
purchasing power.

Hobby Difference People have different needs in their leisure


time.

Gender Difference Men and women will have different needs


and different spending patterns.

Age Difference Children, teenager, adults will have different


needs and interests.

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2.7 Theoretical Framework

Brand Image

Electronic Word of Mouth Purchase Intention

Figure 2.5 Theoretical Framework


Brand Trust
As pictured above, the writer believes that the purchase intention is
affected through several factors and steps. eWOM become the main informal
communication tools used by the consumers to gather information about a
product. This can influence consumers short and long term decision making.
eWOM can directly influence purchase intention of a consumers like what the
writer has explained that people trust unassociated review done by others. This
WOM can directly influence others awareness, expectations, perception,
attitudes, and behavior. However, the decision made by the consumers are
sometimes impacted by their image and trust toward certain product. Brand image
also can increase loyalty of consumers, trust, and also interest in buying another
product within the same brand. Brand trust also can influence the impact of
purchase intention since the consumers have more cautious attitude towards
certain brand in the market.
2.8 Hypotheses

In this subsection, the researcher targets to formulate the hypotheses that


are needed to be accepted or rejected to answer the research question. The
hypotheses will be done in two stages. The first hypothesis is as follows:
H0: Not all factors are significant in explaining the changes in smartphone
purchase intention.
H1: all factors are significant in explaining the changes in smartphone
purchase intention.
The reason the writer formulated the first stage hypothesis is to find out if
all factors in the framework truly have significant influence to other factors which
finally leads to change in the purchase intention, and if not, it will show which

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factors do have the most significant influence. The second stage hypothesis is to
be tested after the first stage of hypothesis has been properly accepted or rejected:
H0: Amongst the significant dimensions, Electronic Word of Mouth is not
the most significant in its influence over smartphone purchase intention.
H1: Amongst the significant dimensions, Electronic Word of Mouth is the
most significant in its influence over smartphone purchase intention.
The reason why the writer formulated the second stage of hypothesis is to
find out furthermore which one of the significant factors holds the most
significance in influencing smartphone purchase intention. The writer suspects
eWOM to be the most significant since with the existence and improvements of
technology, people are getting easier to post and comment about whatever
concerns a product and it can enhance brand value, reputation, recognition, and
the content of eWOM may varies greatly. Therefore, the writer suspects physical
environment to be the most influential factor.

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3. RESEARCH METHODOLOGY
3.1 Introduction
In the previous chapter, the researcher has explained about the theories in
order to answer the research question. In this chapter, the researcher will explain
the methodology of the research. Research methodology is an important part of
this study. The researcher will furtherly explain about foundations of the
researcher, description about the variables and data, methods of data analysis.
3.2 Foundations of the Researcher
In this section, the researcher will explain about the researchers
philosophical stance, methodology, and the ethics in the research.
3.2.1 Researchers Philosophy
A research philosophy is a belief about the way in which data should be
gathered, analysed, and used. Two major research philosophies has been known in
the tradition of scientific researches named Positivist and Constructionistic
(Galliers, 1991; Sekaran & Bougie, 2016)
The researcher is a positivist. Positivist believe that the reality is stable and
can be observed and described from an objective point of view (Levin, 1998).
Positivism is an epistemological position that advocates the application of the
methods of the natural sciences to the study of social reality and beyond (Bryman,
2012).
3.2.2 The Research Methodology
Research methodology is a way to find out the result of a given problem
on a specific matter. In methodology, researcher uses different criteria in solving
the problem in the research. In other words, methodology in a research refers to
the way of solving the research problem (Sekaran & Bougie, 2016).

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The complete term research methodology combines between the way of
solving problem and a systematized effort to gain new knowledge. The researcher
has to always try to search the given question systematically in the way the
researcher wants to (Redman & Mory, 2009)
3.2.3 The Ethics
Ethics in business research refers to a code of conduct or expected societal
norms of behavior in conducting a research (Sekaran & Bougie, 2016). The
research conducted by the researcher will not harm the participants, not lacking of
informed consent, no invasion of privacy, and no deception involved (Bryman,
2012)
3.3 Description of Variables
Operational Variable is the explanation of variable theory, which can be
measured by determining things required to achieve certain goal. Variable is
characteristic which can be observed from an object, and can give values.
Independent variable (X) is a variable that influence in a change or existence of a
dependent variable. In this research, the independent variable is eWOM.
Intervening variable (Y) is a variable that be an indirect influencer and connector
between independent and dependent variable. In this research, there are two
intervening variables which are brand image (Y1) and brand trust (Y2).
Dependent variable (Z) is a variable influenced or exist by independent variable.
In this research, the dependent variable is the purchase intention (Sugiyono,
2007). Those variables can be measured based on the dimensions:
1. eWOM (X) is a marketing technique used to spread the information of a
product in a website by the users which further can create exponential
growth in terms of users. The indicators are:
a. Concern for others
b. Expressing positive feelings.
c. Social benefits
d. Helping the company
e. Platform assistance
2. Brand Image (Y1) is a set of mindset by consumers regarding the brand.
The indicators are:
a. Product Attribute
b. Brand Association
c. Consumer benefit

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3. Brand Trust (Y2) is a feeling of safety by consumers, which in the
interaction with a product is based on perception that the brand is trusted
and is fulfilling the demand of the consumers. The indicators are:
a. Brand characteristics
b. Company characteristics
c. Consumer characteristics
4. Purchase intention (Z) is a psychological capability within an individual
which boost the individual to do an action (Schiffman & Kanuk, 2007).
The indicators are:
a. Problem Recognition
b. Information Search
c. Evaluation of Alternatives

In order to be abler to be operationalized, research variables of eWOM can


be seen in the table below:
Table 3.1. Research Variables
eWOM (X)
Concern for Others Information gathered through web,
chat, or trusted blogs
Expressing positive feelings All information or interactions
through web, chat or trusted blogs are
being done with the purpose of
sharing the experience honestly
Social Benefits Information exchange through web,
chat, or blogs with the purpose of
building sense of togetherness
Information exchange through web,
chat, or blogs with the purpose of
getting social communities
Helping the company Information sharing of a product
through web, chat, or blog based on
real experience on the product
Platform assistance If there is any wrong information or
comment of a product in a web, chat,
or blog, its revamped by the
community members.
Brand Image (Y1)
Product attribute Physical appearance of the product is

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interesting
The smartphone has complete features
and can be operationalized well
Brand association The smartphone brand has futuristic
impression
The smartphone brand has advanced
technology
Consumer Benefit The smartphone brand ease people to
communicate
The smartphone brand can give higher
social status impression
Brand Trust (Y2)
Brand Characteristic The smartphone is produced by trusted
company
The smartphone is produced by
company that has good reputation for
communication products
The smartphone is produced by
company who has motivation to
advance the technology
The smartphone is produced by
company with high integrity
Company characteristic The smartphone brand has positive
reputation for a long time
The smartphone brand can be
predicted that it will have long life
cycle in the market
The smartphone brand is superior
compared to its competitors
Consumer characteristics The user likes the brand
The user has good experience in using
the smartphone of the brand
The user is satisfied to the brand
The usage of smartphone of the brand
is supported by friends
Purchase intention (Z)
Problem recognition The user bought the smartphone based
on the needs

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Information search The user bought the smartphone based
on the information searched
Evaluation of alternatives The user bought the smartphone based
on the evaluation of alternatives

3.4 Description of Data


In this section, the researcher will explain about the data being used in this
research including type of data, source of data, and sampling method.
3.4.1 Type of Data
Type of data used in this research is quantitative. Quantitative data is data
that describe reality symbolized by numeric data. Quantitative data that is being
used later on is in form of Linkert Scale obtained by spread the questionnaire.
3.4.2 Source of Data
In this research, the researcher will use primary data to gather the
information and analyse them further. Primary data is data obtained by the
researcher directly from the source of data. To get the data, the researcher has to
directly obtain the data to the targeted object of research and in this case, the
researcher will use questionnaire spread randomly to people in Surabaya.
3.4.2 Sampling Method
Sugiyono (2007) argues that sampling is a part of characteristic owned by
the population. And according to Bougie and Sekaran (2016), there are two major
types of sampling design: probability and nonprobability sampling. In this
research the researcher will use nonprobability sampling. Its a sampling
technique that in which the elements do not have a known chance of being
selected as subjects.
Considering the topic of the research is about smartphone and almost
everybody has it, it can be said that the sampling is using convenience sampling.
Its a sampling that refers to the collection of information from members of the
population who are easily can provide the data.
The sample size used by the researcher is based on the theory that is being
developed by Isaac and Michael, which is the determination of sample number
from unlimited population with 5% error is 249 samples (Sugiyono, 2007).

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Data measurement of the questionnaire will use Ordinal Likert scale. The
variables being measured will be outlined as variable indicators which later on
being used as the standard to arrange instrument items. Likert scale result may
vary from very negative to very positive answer (Sugiyono, 2007):
Table 3.2. Likert Scale Measurement
Sangat Tidak Setuju (STS) 1
Tidak Setuju (TS) 2
Netral (N) 3
Setuju (S) 4
Sangat Setuju (SS) 5

3.5 Methods of Data Analysis


In this section the researcher will explain about the method used in
processing the data collected from respondents from piloting, validity and
reliability test, and analytical procedures.
3.5.1 Piloting
In order to get the questionnaire to be considered as a decent one, the
researcher will conduct a pilot research to test whether the questionnaire is
feasible to be spread or not. This pilot experiment will be done before the larger
number of questionnaire being spread to avoid time and money being wasted on
inadequate mistakes by the researcher.
3.5.2 Validity and Reliability
According to Sekaran and Bougie (2016), the result of a research has to be
accurate (valid) and trustworthy (reliable). In order to get this result, then the
questionnaire has to be valid and reliable. Reliability is a test of how consistently
a measuring instrument can measure in any type of concept. Validity is a test of
how well an instrument that is developed measures the result consistently.
The researcher analyse data based on the gender, age, occupation, and
consumers perception. And to ease the data processing in this research, the
researcher uses Statistical Package for the Social Sciences (SPSS) and Partial
Least Square (PLS) with Smart PLS.
3.5.2.1 Validity Test

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A questionnaire can be said as a valid one if the questions can reveal
things that are being measured by the researcher (Ghozali, 2011). Validity test can
be done by calculating the correlation partially from each questionnaire with the
total scored variable. If the variable shows the significance level below 5%,
therefore the questions can be said as valid question to be used in further analysis.
Steps in validity test is as shown below (Arikunto, 1999):
1. Define the things that are being measured
2. Doing a test of measurement scale to some respondents. Respondents
are being asked to declare whether they are willing to be researched or
not.
3. Prepare the cross tabulation table.
4. Calculate the correlation of every question with the total score, using
the formula:

(3.1)

Where:
r: Correlation coefficient
X: Score in every item/question
Y: Total score of items/questions
N: Number of respondents

5. Compare the calculation result with the r value with significance level
of 5%
a. A correlation is valid if the significance level is below 0.05
b. A correlation is not valid if the significance level is exceeding
0.05
3.5.2.2 Reliability test
A good questionnaire has to be consistently measure things across time
and across the various items in the instrument without any bias (Sekaran &
Bougie, 2016). In other words, a reliable questionnaire is a questionnaire that
provide similar and consistent data.

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Reliability test used by the researcher utilize the Cronbach Alpha method
since it has the most popular testing technique and can show good consistency
index.

(3.2)
Where:
: Cronbach Alpha coefficient
K: Number of valid questions
Sj2: Variation of questions
Sx2: Total variation

Comparing calculation result with critical number of correlation table to


determine the significant correlation. The questionnaire can be said a s
reliable if in a variable can have consistent result from time to time, and
with the criteria of alpha value is more than 0.6 (Ghozali, 2011).
3.5.3 Analytical Procedures
3.5.3.1 Descriptive Statistic Analysis
Descriptive Statistic is used to describe data characteristic both in diagram
or narrative. Statistic descriptive also can be used to determine the level of
connection between variables through correlation analysis, doing prediction with
regression analysis, and making comparison with analysing the sample or
population data (Sugiyono, 2007). This analysis will give general description of
brand image, eWOM, and brand trust toward smartphone purchase intention.

Mean (X) is the average of the data:

(3.3)
Where:
X: Average (Mean)
N: Number of data

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This research will calculate all the means of every variable. To determine
classification ratings to all variables, interval class will be calculated with the
formula:
Interval Class = Highest Value Lowest Value
Number of Class (3.4)

Based on the class number, therefore the interval class is as shown:


Table 3.3. Likert Scale Interval Class
0 1.8 Sangat Tidak Setuju (STS)
1.9 2.6 Tidak Setuju (TS)
2.7 3.4 Netral (N)
3.5 4.2 Setuju (S)
4.3 5.00 Sangat Setuju (SS)

Standard deviation is calculated as shown:

( 3.5)
Where:
S: Standard deviation
X1: Data value
X: Data value
n: Number of data

3.5.3.2 Top Two Boxes Bottom Two Boxes Analysis


Its a method to combine the percentage from Likert scale. This analysis
will reveal the comparison between bottom option (Sangat Tidak Setuju
and Tidak Setuju) with the top option (Sangat Setuju and Setuju). From
now, Top Two Boxes is TTB, while Bottom Two Boxes is BTB. The
formulation is as follow:
BTB = fBi x 100%
(fTi)+(fNi)+(fBi) (3.6)

TTB = fTi x 100%


(fTi)+(fNi)+(fBi) (3.7)

Where:
fB: Bottom frequency
fT: Top frequency
fN: Neutral frequency

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3.5.3.3 Data Analysis Method
Analysis method in this research will use Structural Equation Modeling
(SEM). Its a general statistical modelling technique used to establish relationship
among variables. SEM can be used as the combination of regression and path
analysis. Path diagram can give basic concept of SEM model and can be used to
be math SEM.
Application of SEM is based on covariance from sample values, while the
predicted residual differences is based on covariance observed. The function that
is minimized is the difference between the two covariance. Fundamental model of
SEM is = (), with as covariance matrix of population from variable
observed while () is covariance matrix from specified model. While in the
common statistic the emphasis is to reject H0, SEM is trying to accept H0.
SEM model specification broadly grouped into three main points:
a. Measurement model specification, which consisting of the
following steps: definition of latent variables, definition of
observed objects, and definition of the relationship between latent
and observed objects variable.
b. Structural model specification, defining the relationship between
latent variables.
c. Pictures the path diagram, which is a combination of measurement
and structural models.
Parameter estimation of SEM is to get the estimated value in the specified
model and create matrix (), until the parameter value as close as possible to
the S matrix (covariance matrix of variables observed). Estimation of the model
can be done by several methods, but commonly the ones being used are Maximum
Likelihood, and Weighted Least Square. SEM also evaluate the suitableness or
Goodness of Fit (GOF) between data and models. GOF evaluation is done through
some steps which are: suitableness of overall model, suitableness of measurement
model, and suitableness of structural model.

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