Taiwanese Organic Food Buyers

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The Relationship among Purchase Behaviour, Product Satisfaction and Product Loyalty in the Case of Taiwanese Organic Food Buyers

Abstract

In the recent years, the environment issues are the main topics in every industry. Also, the food safety and human health are becoming the focus around the world, and people are aware of organic food. Therefore, the research is going to illustrate the concerns in the organic food market.

Base on the literature, the main stream will be on Decision Making Process of consumers. Then it will examine the motivations of consumers, the satisfaction of organic food, and finally becoming a loyal customer.

The research will be conducted with Taiwanese consumers in Taiwan where the organic issue is really popular now. The research's target is to help the marketers to know the market profile and can expand the market with earning the most profit in the future.

Introduction and Background

Organic food is the most important issues in the food market in recent years. It has been conducted that the demand of organic foods in the whole world was estimated to grow 10 to 30 percent per year in the past few years, with total sales of US$ 31.3 billion in 2005 (Sahota, 2006). Nowadays consumers worldwide have more concern about these food issues, such as nutrition, food quality, and their own health (Gil et al., 2000). In the past decade, there were two major diseases spreading over the world which are 1. Mad cow disease, and 2. Bird flu. These diseases not only affected animals' health but also damaged human health and the agricultural industry. Also the use of genetically modified food is increasing. Although the experts claim the harmless of modified food, it made people concern. With the trend of sickness and non-natural food, people in modern developing countries care more on the sources of their diet.

Taiwan is a developing country in Asia. The GDP per capita is USD$16,442 in 2009 (DSMEA, 2010). With a highly grown economics rate in the past 20 years, the average salary is higher and the household disposable income reaches NTD$ 913,687 in 2008. (NS, 2009). People in Taiwan could receive latest information and would like to change their lifestyle with international trend.

For organic food market in Taiwan, there are 782 organic food stores around the island and around 56% of the stores locate in the northern urban part of Taiwan which contains most of the total population (COA, 2007). For a typical island food supply mode, most of the food sources rely on importing from other countries. According to Liu-Chen and Miller (2004), ‘the 60% organic products in this island have to be imported from outside the island, especially from USA and Japan, including vegetables, fruits, cereal and pulses, processed food, and beverage.' The price of the organic foods is varied now in the market but it usually is higher than the same category food at least 30%, or even to 100% premium.

For the certification, in Taiwan, there are several organisations accredited by Council of Agriculture (COA) which are:

a. Taiwan Organic Product Association. (TOPA)

b. Tse-Xin Organic Farming Foundation. (TOAF)

c. Taiwan MOA International Foundation of Natural Ecology.

d. Formosa Organic Association. (FOA)

COA has defined the term ‘organic agricultural product' as the agricultural product whose production conforms to the requirements for various organic agricultural products as specified in these Operating Guidelines and the product has passed the inspection by the certifying organization (COA,2010). Besides this, United States Department of Agriculture (USDA) also stated ‘Organic agriculture is an ecological production management system that promotes and enhances biodiversity, biological cycles and soil biological activity. It is based on minimal use of off-farm inputs and on management practices that restore, maintain and enhance ecological harmony' (1995) Therefore, organic food could be considered as one of the green product which is environmental friendly.

It is also important to mention the worry in the market. Although there are these regulation and certifying organisations in Taiwan, the fake products and fraud events still happened often. There should be more effective law and regulation for responding the dynamic market.

Research Objectives

There are several studies about the purchase behaviour combine with consumer's attitude toward organic food in Taiwan. Most of the resources are from the global journals and rarely focusing on the post purchase in decision making model process. In order to define the process from the reason of buying to product loyalty, a further step for adapting the model with other psychology and marketing theory and evaluating the consumer's actual thoughts could be conducted by this research. Therefore, the research objective should be constructed as:

ü To define the profile of Taiwanese regular organic buyers.

ü To analyse the purchase motivations of consumers who have consumed organic food toward organic food.

ü To evaluate the reasons of product loyalty from the organic products satisfaction.

ü To construct the repeat buying process from the motivation with satisfaction to becoming a loyalty buyer.

Research has also focused on identifying a more comprehensive approach for the regular consumer of organic foods.

Literature Review

Consumer Decision-Making Model

In order to analyse the reasons of consumer buying process, the decision making model is applied. As figure 1 (in Appendices) shows, in this model, there are three main components which are input, process, and output (Schiffman, 2008).

Component One: Input

Marketing Inputs: The marketing activities are reaching, informing, and persuading consumers to buy the products. They usually are formed in marketing mix which is including product, promotion, people, and place.

Sociocultural Inputs: The inputs contain very wide range of the factors which are mainly about social class and culture. Also they affect the evaluation and adoption of the products.

Component Two: Process

Need Recognition: the recognition of a need happens when a consumer is faced with a ‘problem'. There are two different types of consumers divided by their orientation. Some of them are ‘actual state types' and the others are ‘desire state types'.

Pre-purchase Search: Pre-purchase search begins when a consumer perceives a need that might be satisfied by the purchase and consumption of a product. At first the consumer would search the past experience, the internal sources, then the marketing and non-commercial information, the external sources.

Evaluation of Alternatives: Consumers in this step would use two different types of information. The first one is called ‘Evoke set'. It means a list of brand list or model list from the choices they will select. The second one is the ‘Criteria used for evaluating brands' which is used for determining in terms of importance of the product.

Component Three: Output

Purchase Behaviour: There are three types of purchase made by consumers which are ‘trial purchases', ‘repeat purchases', and ‘long term commitment purchases'. For the first time purchasing, the consumer would prefer a smaller quantity for ‘trial'. If the product is satisfied by the consumers then they will go to the next step for repeat buying, in other words, they are having brand loyalty and willing to use the product for long time.

Post-purchase Evaluation: In this factor, consumers would compare the performance of the product toward their expectation. The experience will has influence on their future buying.

Profiles of Green Consumers

Green and Ethical Consumers

In order to apply consumer decision-making model to the organic market, green consumers are identified. Mintel (2007) analyses that 24% of consumers in UK are ‘keen to be green' consumers who can be regarded as green consumers. And also there is a 16% of consumer group called ‘Green- than-Thou' in UK could be categorized as the potential customers. The sociocultural and demographic characteristics of organic buyers in green consumers are defined as follows:

Gender: women are slightly more enthusiastic to be green than men.

Age: 25-34 (27%) or 55-64 (28%).

Social class: ABC1s in the family life stage group; they are willing to make changes in their lifestyle and are much more likely to be concerned with being sure that their actions will make a difference and that other agencies are also working efficiently.

Family: parents of children under 5 (34%)

Residence: urban and rural areas

Media usage: broadsheet readers

Conceptual Framework of Factors Influencing Green Consumers

Consumer's willingness to pay more for environmentally friendly products has been identified in five categories, which are demographics, behaviours, attitudes, value and knowledge (Laroche et al., 2001). As it shows in the figure 2 (in Appendices), the demographics has impact on the willingness with the other motivation. In next section, it is going to find the motivations of buying.

Motivation

Consumers' Motive

There are 15 themes of motivation for identifying among buyers or non-buyers of organic foods (Hughner R. et al. 2007). The 15 themes are:

Consumers' Purchasing Motives

1.

Health and nutrition concern

2.

Superior taste

3.

Concern for the environment

4.

Food safety, lack of confidence in the conventional food industry

5.

Concern over animal welfare

6.

Support of local economy

7.

More wholesome (product itself)

8.

Nostalgia

9.

Fashionable/curiosity

Deterrents

10.

High price premiums

11.

Lack of organic food availability, poor merchandising

12.

Skepticism of certification boards and organic labels

13.

Insufficient marketing

14.

Satisfaction with current food resource

15.

Sensory defects

In this research, it is going to use motivations to examine to relationship with the buying behaviour.

The Relationship between Satisfaction and Loyalty

Satisfaction has been defined by Oliver that ‘the summary psychological state resulting when the emotion surrounding disconfirmed expectations is coupled with a consumer's prior feelings about the consumer experience' (1997).

Furthermore, loyalty has been defined as a biased behavioural peurchase process although it's from a psychological process (Jacoby, 1971). Keller (1993) suggested that loyalty is present the favourable attitudes are manifested in repeat buying behaviour. Gronholdt and others think the loyalty could be evaluated by four indicators: the customer's intention to repurchase; intention of cross-buying (buy another product from the same company); intention to switch to a competitor (price tolerance); and intention to recommend the brand/company to other consumers (2000).

The relationship between satisfaction and loyalty are not always positively relative. There is a positively linear effect of satisfaction on loyalty, but only in the competitive markets (Gronholdt et al., 2000). Oliver also pointed out that the satisfaction may not lead to be loyalty, but the loyalty is from satisfaction (1999).

Therefore, in this research, it is also going to examine the relationship between consumer satisfactions of organic products and the degree of loyalty.
Conceptual Framework for the Research

Research Problems

Management Decision Problem

What can the marketers do to attract people consume and reach the maximum profit with loyalty customers in the Taiwanese organic market?
Marketing Research Problem

To determine the motivations of organic food buyers with the evaluation in post purchase stage leading to customer loyalty. Specific Components

In order to specify the research question, the research objectives could be defined as shown below:

。 To determine the demographic characteristics of organic food buyers

。 To determine the important motivations of organic food buyers in repeat purchase.

。 To examine the relationship between the satisfaction and loyalty of the organic food buyers.

。 To examine the relationship among the motivations, the satisfaction and loyalty.

Hypotheses of the Research

After illustrating the research problems, the hypotheses of this research are:

H1: The demographic factors have influences on the motivations.

H2: The motivations have the positive influence on the repeat purchase behaviour.

H3: There is a strong correlation between the satisfaction and loyalty of the organic food buyers through the repeat purchase.

H4: There is a strong correlation among the motivations, the satisfaction and loyalty of the organic food buyers.

Research Design and Methodology

“A research design is simply the framework or plan for a study, used as guide in collecting and analyzing data. It is the blueprint that is followed in completing a study”. (Churchill, 1999, p.98)

Research Design

The design of this study included exploratory and descriptive research.

Exploratory research: In order to have the overview of the organic consumers in the market and clarify the research problem, the secondary data analysis including literature review has conducted in the previous section.

Descriptive research: After clarifying the research problem and the research direction, the descriptive research was designed to discover by the responses of the questionnaires.

Research Approach

Sample surveys were chosen to tackle with the large number of people for data collection. This research will be conducted with the Taiwanese consumers but due to the geographical factor and the budget limitation, the surveys will mainly be conducted by online questionnaires. Moreover, to increase the validity, the questionnaires were conducted with the members from the communities of the organic stores in Taiwan.

Sampling Design

The Convenience Sample method is used in this project that the respondents are selected in the Buddhism community which the researcher was in. The respondents are chosen because the community is supported by one of the largest organic chain stores called Leezen and every member regularly buys organic food.

Sampling Design: Sample survey

Element: Taiwan resident.

Sampling Unit: The Buddhism community supporting by Leezen.

Extent: People who have bought the organic food regularly.

Sample size: 381

Sampling Frame comprising of the TW residents in different age groups.

The sampling size was decided by the formula below:

2500 * N * Z2

n = _______________

[25(N-1)] + [2500 * Z2]

n = sample size required

N = population size (license holders)

Z = number of standard errors (1.96 for 95% confidence level)

From Taiwanese Ministry of Interior statistics (2010), there are about 23,128,000 people in Taiwan. Further, there are 15,361,741people above 25 years old which could be considered as working people or at least with disposable income (DHR, 2010). And according to Mintel report (2007), it could be assumed that 24% of the total working age group is the organic consumer. The Sample size was calculated as follows:

15361741*24% = 3,686,818

2500 * 3.68 *106 *1.962

__________________________ = 381.3 Rounding to 381

25(3.68 * 106 - 1) + (2500 * 1.962)

Due to time constraints, 50% of the total sample size required takes into consideration which adds up to. It is used the most common formula to collect our sample size at 95% confidence level.

Field Work and Data Analysis

Field Work

Data collection will take place from 30th June to 10th July, 2010. The field work will focus on the respondents who are already organic food buyers in the community which is mentioned before. Therefore, the collection will be done by researcher alone through emailing the questionnaires to the members.

Data Analysis

In order to analyse the compiled data and examine the hypothesis, a variety of analytical methods will be used including descriptive statistics, one sample t-tests, regression, and multiple regressions. All data is processed and draw results with the help of SPSS and Microsoft Excel.

Reporting

The research will be submitted before 3rd September. There will be intermediate report in the formal format and oral presenting during the semester according to the decision of the tutor.

Time Scale

The following Gantt chart is illustrating the schedule of the research:

The Gantt chart is adapted from Saunders et al. (2003).

Reference

1. Council of Agriculture, Taiwan (COA) 2007 website. [online]. [Accessed 18 April 2010]. Available from http://www.coa.gov.tw/view.php?catid=12995

2. Department of Household Registration (DHR) Taiwan website. 2010. [online]. [Accessed 18 April 2010]. Available from http://www.ris.gov.tw/ch4/static/st20-0.html

3. Department of Statistic, Ministry of Economic Affairs (DSMEA) website. 2010. [online]. [Accessed 18 April 2010]. Available from http://2k3dmz2.moea.gov.tw/gnweb/Indicator/wFrmIndicator.aspx

4. Gil, J.M. Gracia, A. and Sanchez, M. 2000. Market segmentation and willingness to pay for organic products in Spain. The International Food and Agribusiness

5. Gronholdt, L., Martensen, A., Kristensen, K. 2000. The relationship between customer satisfaction and loyalty: cross-industry differences. Total Quality Management, Jul 2000,11(4-6), pp.509-514.

6. Hughner, R., Mcdonagh, P., Prothero, A., Shultz II, C.J. and Stanton, J. 2007 Who are organic food consumers? A compilation and review of why people purchase organic food. Journal of Consumer Behaviour. Mar-Jun, pp.94-110.

7. Laroche, M., Bergeron, J. and Barbaro-Forleo, G. 2001. Targeting consumers who are willing to pay more for environmentally friendly products. Journal of Consumer Marketing, Vol.18 No. 6, pp.503-520.

8. Liu-Chen, W. & Miller, J. 2004. Taiwan Organic Products 2003. GAIN Report No. TW4002, USDA Foreign Agricultural Services.

9. Ministry of Interior, Taiwan. website. 2010. [online]. [Accessed 18 April 2010]. Available from http://www.moi.gov.tw/stat/stat01.aspx

10. National Statistics of Taiwan (NS) website. 2010. [online]. [Accessed 18 April 2010]. Available from http://eng.stat.gov.tw/ct.asp?xItem=3458&CtNode=1597&mp=5

11. Oliver, R. L. 1997. Satisfaction: A behavioral perspective on consumer. New York: McGraw-Hill.

12. Oliver, R. L. 1999. Whence Customer loyalty. Journal of Marketing, 63, pp.33-44.

13. Operating Guidelines for Management of Organic Agriculture Products (2003). Council of Agriculture, Taiwan (COA) website. [online]. [Accessed 19 April 2010]. Available from http://organic.niu.edu.tw/oaic-english/data/Agricultural%20Products.htm

14. Sahota, A. 2006. Overview of the global market for organic food & drink. In Willer, H., and Yussefi, M. 2006. The world of organic agriculture: Statistics and emerging trends. International federation of Organic Agriculture Movements, Bonn, Germany.

15. Saunders, M., Lewis, P., Thornhill, A. 2003. Research Methods for Business Students, Prentice-Hall, 3rd edition, England.

16. Schiffman, L. 2008. Consumer behaviour a European outlook. Harlow: Pearson Education.

17. United States Department of Agriculture (USDA) website. 2010. [online]. [Accessed 20 April 2010]. Available from http://www.nal.usda.gov/afsic/pubs/ofp/ofp.shtml

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