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The Study of Customer Switching Behaviour toward Carbonated Soft Drink Market Mr. J.W. Abarajithan Temporary Assistant Lecturer, Department of Management, Faculty of Commerce and Management, Eastern University, Sri Lanka williams_jk@ymail.com Mrs. V.R. Ragel Coordinator- Discipline of Marketing / Senior Lecturer Gr. I, Department of Management, Faculty of Commerce and Management, Eastern University, Sri Lanka victoriaragel@yahoo.co.uk ABSTRACT With the continuous growth of competition in the market place, understanding customers has become more and more important in marketing. Moreover, customers are more mobile and knowledgeable than ever before, searching for a best alterative in their purchasing process, and finally switch to best brand. This process can be known as customer switching behaviour. The switching behaviour in products and services are not the same for all categories. The main purpose of this study was to examine whether there is customer switching behaviour in the carbonated soft drink market; and if so, what are the factors that contributed for customers’ switching behaviour. This research was limited to Manmunai North Divisional secretariat area in Batticaloa district. Customer switching behaviour is operataionalized in terms of four variables; Marketers’ Product Mix, Pricing Strategies, Distributional Strategies, and Promotional Strategies. A quantitative method was applied where for data collection structure questionnaires were used. 200 questionnaires were issued and collected data were analyzed using SPSS v.11.0 and evaluated as low, moderate, and high level influence of research variables on switching behaviour in carbonated soft drink repurchase. Family unit was considered as a unit of analysis. Descriptive analysis was used for data analysis. This study found that most of the customers are switching their brands (85%). Research found that Marketers’ promotional, distributional and product mix are heavily motivating customers’ switching tendency while pricing strategies has moderate influence on customers’ switching tendency. However, most of the respondents agree that marketers’ promotional strategies are attracting them to switch toward their brand. According to the analyzed data, the Coca-Cola Company holds 43.7%, PepsiCo holds 25.1%, and Ceylon Cold Stores Limited holds 21% of Market share. It is advisable for carbonated soft-drink marketers to concentrate more on their pricing and product strategies while maintaining present placing and promotional strategies. Finally recommendations have been given as to how carbonated soft-drink marketers can enhance their markshare further by protecting their customers from competitors’ moves. Keywords: Switching Behaviour, Loyalty, Marketing Mix -1- Electronic copy available at: http://ssrn.com/abstract=1951780 1. INTRODUCTION Nowadays many business organizations are operating in a highly competitive marketplace. Drucker (1999) states that the basic function of marketing is to attract and retain customers at a profit. However, a critical issue for the continued success of a firm is depends on its capability to retain its current customers and make them loyal to its brands (Dekimpe et al, 1997). Customer switching behaviour can be seen as serious risk to the wealth and profitability of the firm. Therefore, it is important for the companies to develop an understanding of what the customer’s decisions are influenced by. At present marketers are motivated to address the customer switching behaviour in order to ensure long-term relationships with their customers. Meanwhile customers have become more mobile and better informed than ever before, are increasingly able to get precisely what they want, when they want it, and at the price. To meet these exacting desires, new and different products and services appear unceasingly in customers’ aspect. Due to these reasons, the marketing environment has become more competitive. Therefore, the manufactures implement many strategies to create and retain customers for their product in the competitive marketing environment. Therefore concept of customer switching behaviour has become popular among the general public, business people, professionals and academic; and has gain universal recognition. As a consequence contemporary marketing managers attempt to address the customer switching behaviour. Thus, knowledge on customer switching behaviour is widely known and practiced in most of the organizations in particular in carbonated soft drink market. But, in Sri Lanka, there is an empirical gap of whether customer switching behaviour has addressed in carbonated soft drink market. This problem is examined in this study. Based on above research background and generally observed empirical knowledge gap two research questions were formulated such as whether there is customer switching behaviour in the carbonated soft drink market; if so, what is the most basic factor that contributes for customers’ switching behaviour toward the selection of carbonated soft drink products with special reference to Manmunai -North Divisional secretariat area? To what extent marketers’ Product Mix, Pricing Strategies, Distributional Strategies, and Promotional Strategies influence on customer switching behaviour? -2- Electronic copy available at: http://ssrn.com/abstract=1951780 1.1 Objectives of the Study Based on the above research questions following research objectives were formulated. 1. To examine whether there is customer switching behaviour in carbonated soft drink market; 2. To find out the level of influence which driven from marketers’ Product Mix, Pricing Strategies, Distributional Strategies, and Promotional Strategies influence on customer switching behaviour. 1.2 Literature Review Customer Switching Behaviour Susan M. Keaveney (Apr 1995) claimed that customer switching behaviour damages market share and profitability of service firms yet has remained virtually un-explored in the marketing literature. Aitzaz Saeed et al (2007) defined the concept of customer switching behaviour as a negative out come of the buyer decision-making process and the then implementation of the decision in regard with a specific product or service selection. Therefore the origin of such switching tendency can be explored using following figure I. Some purchases are followed by a phenomenon called postpurchase dissonances. This occurs when a consumer doubts the wisdom of a purchase he or she has made. Other purchases are followed by nonuse. This means the consumer keep or return the products without using it. However, most purchase is followed by product use, even if postpurchase dissonances are present. Product use often requires the disposition of the product package or the product itself. During and after use, the purchase process and the product are evaluated by the customers. Whereas, unsatisfactory evolutions may produce complains by those consumers, and the customer switching Figure I - Postpurchase Consumer Behaviour Purchase Postpurchase Dissonance Usage Product Disposal Evaluation Satisfaction Nonuse behaviour can be played in this stage. Appropriate response by the firm may reverse the initial among dissatisfactory Complaint Behaviour those who complained. The result of all these processes is a final level of satisfaction, which in Committed Customers Repeat Purchase Increased Use Brand Switching Discontinued Use Source: Del I Hawkins, Roger J Best, Kenneth A Coney, Amit Mookerjee, Consumer Behaviour – Building Marketing Strategy, 2007 -3- turn can result in loyal, committed customer, one who is willing to repurchase, or a customer who switches brands or discontinues using the product category. Marketing Mix Marketing consists of individual and organizational activities that facilitate and expedite satisfying exchange relationships in a dynamic environment through the creation, distribution, promotion, and pricing of goods, services, and ideas. (Dibb, S. &Simkin, L. & Pride, W. M. & Ferrell, O. C., 1994). In this definition made by Kotler one recognizes that the marketing mix consist out of four P’s. These four P’s are product, price, place and promotion (Kotler, P. & Wong, V. & Saunders, J. & Armstrong, G., 2005). Product : Anything that is offered to a market for attention, acquisition, use or consumption and that might satisfy a want or need, products include more than just tangible goods (Kotler and Armstrong, 2007) Price : The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service. (Kotler, Wong, Saunders and Armstrong, 2005) Place : A channel of distribution comprises a set of institutions, which perform all of the activities used to move a product and its title from production to consumption. (Bucklin, 1966) Promotion : A company’s total marketing communications mix (Kotler, Wong, Saunders and Armstrong, 2005) Target Market Source: Kotler, Wong, Saunders and Armstrong, Principles of marketing, 2005 Figure II - The Four Ps Components of the Marketing Mix Product Product Variety Quality Design Features Brand name Packaging Size Service Warranties Returns Marketing Mix Promotion Price Sales List price Promotion Discount Advertising Allowances Sales force Payment Public period Relation Credit terms Direct Marketing Place Channels Coverage Assortments Locations Inventory Transport 1.4 Measuring Customer Switching Behaviour A search of the literature revealed no existing measurement scales for customer switching behaviour. In order to achieve the study objectives the measurement was developed to measure the degree of customer switching behavior which influence by marketing mix variables. -4- 1.5 Measures In this study, Customer switching behaviour was measured by using 25 items which are representing 4 variable designed to tap the following Customer Switching Behaviour facets in a Carbonated soft-drink market such as Product Mix (11 items), Pricing Strategies (4 items), Distributional Strategies (6 items), and Promotional Strategies (4 items). In addition to the Customer Switching behavioural measure, respondent were asked to indicate their purchased brand from thirty-one soft drinks that manufactured by six companies in four different occasion such as present, two weeks before, one month before, and six month before. Finally, it was asked to indicate their decision upon their switching tendency in order to measure switching tendency in their purchase in every time between brands. Also, they were asked complete short demographics questions in the questionnaire. The study questionnaire includes questions on gender, age, and educational qualification. 2. METHODOLOGY 2.1 Study Setting, Design and Method of Survey For this study of customers switching behaviour in Manmunai North divisional secretariat area – Batticaloa district, data were collected based on primary and secondary sources. Primary data collected by issuing questionnaire and secondary data collected from past research papers, literature, reports, and internet. Two hundred questionnaires were issued to the families in Manmunai -North Divisional secretariat area on a stratified random sampling method. For this research study, cross sectional analysis is used to analyze the collected data during specific time. The unit of analysis is the family unites in the Manmunai North divisional secretariat area – Batticaloa district. Research Approach: This research is followed the pattern of quantitative research as this study is customer base and using a questionnaire to know about customer switching behaviour towards carbonated soft drink purchase. This approach is best suited to research purpose and research question. 2.2 Population and Sampling of Research As this is a quantitative study, therefore this requires a population, and the targeted population for this research is 22,774families (household units) in the Manmunai-North divisional secretariat area in Batticaloa district. -5- Researcher divided the whole population in Manmunai North divisional secretariat area – Batticaloa according to the villages in that DS division, and the sample of 200 families selected from all villages according to their contribution for total population in ManmunaiNorth divisional secretariat area. 2.3 Method of Data Analysis and Evaluation This study is following the pattern of induction, as this study analyzes the empirical data with the help of literature review. It is specially considered univariate analysis consist of mean, standard deviation and percentage etc, at the same time, those data presented by tables. The statistical package for social science statistics (SPSS 11.0) was used for analyzing the data and finding the results. Each variable is given a scale from 1-5 to show the extent of agreement, based on responses, univariate measures were calculated for each of variables. The mean value is lying in the range of 1-5 and the value of each respondent for a variable is compared with the medium values of 3. In evaluating the samples as a whole the mean value of the respondent is compared with the medium. If a respondent’s average score of an aspect is less than the mean value (2.5) it is assumed that the respondent feel low level in customer switching behaviour in relation to the particular marketing mix variables. Thus, the decision rule to measure the level of customer switching behaviour can be formulated as follows given in Table 1. Table 1: Decision Rule Range 1 ≤ X ≤ 2.5 2.5