INFLUENCE OF PRODUCT INNOVATION ON CUSTOMERS’ PURCHASE INTENTION FOR BEVERAGE PRODUCTS IN ABIA STATE, NIGERIA

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ABSTRACT

The study examined the influence of product innovation on customers purchase intention for beverage products in Abia State, Nigeria. A study of Friesland Peak Choco and Cadbury hot Choco 3 in 1 products. Specifically, the study examined how package rebranding affects consumers’ willingness to buy; examined how modifications in nutritional benefits affect consumers’ trial purchase; examine how product taste improvement affect consumers’ preference; and examine how product quantity adjustment affect consumers’ purchase intention. Casual and survey research design were used for the study. The total population of study was 1,495,186 consumers above 18 years of age. With a known population, Yamane (1967) formula was adopted to select 384 sample size. Multi-stage and convenience sampling techniques were adopted for the selection of respondents. Questionnaire was the major instrument for data collection. The data were subjected to Cronbach Alpha reliability test and 0.709 value was realized which showed that the instrument was highly reliable. The data were analyzed with descriptive statistics such as mean, frequency and percentage distribution. The hypotheses were tested with simple regression analysis model. The descriptive results revealed that, 47.9% of the consumers’ strongly agreed that, the pictures and instructions on the products impelled them to buy the product. The empirical result revealed that package rebranding has significant effect on consumers’ willingness to buy. Modifications in nutritional benefits have significant effect on consumers’ trial purchase. Product taste modification has significant effect on consumers’ preference of the studied products. And product quantity adjustment has significant effect on consumers’ purchase intention. It is therefore, concluded that product innovation is one of the fundamental instruments of growth strategies to enter new markets, to increase the existing market share and to provide the company with a competitive edge. We recommended that, incorporation of nutritional value label on the package would enhance the demand and preference for the products and it would be an appropriate strategic task for the efficient innovation. Thereby, producers of Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet could compete with the other products with nutritional value labels and also it would be an ideal strategy in penetrating new markets where the nutritional values are requirement.










TABLE OF CONTENTS


Title Page                                                                                                                    i

Declaration                                                                                                                 ii

Certification                                                                                                               iii

Dedication                                                                                                                  iv

Acknowledgements                                                                                                    v

Table of Contents                                                                                                       vi

List of Tables                                                                                                              ix

List of Figure                                                                                                              x

Abstract                                                                                                                       xi


CHAPTER 1: INTRODUCTION

1.1       Background of the Study                                                                                1

1.2       Statement of the Problem                                                                               4

1.3       Objectives of the Study                                                                                  7

1.4       Research Questions                                                                                        7

1.5       Research Hypotheses                                                                                      8

1.6       Significance of the Study                                                                               8

1.7       Scope of the Study                                                                                          9


CHAPTER 2: REVIEW OF RELATED LITERATURE

2.1       Conceptual Review                                                                                         10     

2.1.1    Conceptual framework                                                                                   10

2.1.2    Product innovation                                                                                         11

2.1.3    Types of innovation                                                                                        14

2.1.4    Contributions of innovations to organizational growth                                  15

2.1.5    Effect of innovation on firms’ performance                                                   17

2.1.5.1 Areas product innovation may be introduced by firms                                  18

2.1.5.2 Product innovation stages                                                                               20

2.1.6    Consumer innovativeness                                                                               22

2.1.7    Product package innovation                                                                           24

2.1.8    Purchase intention                                                                                          29

2.1.9    Importance of purchase intention                                                                   32

2.1.9.1 Drivers for purchase intention                                                                        33

2.1.10  Consumers purchase intention approach                                                        34

2.2       Theoretical Review                                                                                        36

2.2.1    Theory of business growth by Gibrat (1931)                                                 37

2.2.2    Innovation theory (IT) by Joseph A. Schumpeter                                          37

2.2.3    The dynamic capability innovation theory                                                     38

2.2.4    The prospect innovation theory                                                                      39

2.2.5    Theory of reasoned action (TRA), Fishbein and Ajzen (1975)                    40

2.2.6    Learning or pavlovian model                                                                         41

2.3       Review of Empirical Studies                                                                          42

2.4       Gap and Summary of the Study                                                                     47


CHAPTER 3: METHODOLOGY

3.1       Research Design                                                                                             48

3.2       Area of the Study                                                                                            48

3.3       Population of the Study                                                                                  49

3.4       Sample Size Determination                                                                            49

3.5       Sampling Techniques                                                                                     50

3.6       Method of Data Collection                                                                             50

3.6.1    Description of research instrument                                                                50

3.7       Validation of the Instrument                                                                          51

3.8       Reliability of the Instrument                                                                          51

3.9       Methods of Data Analysis                                                                              51

3.10     Model Specification                                                                                       52


CHAPTER 4: RESULTS AND DISCUSSIONS

4.1       Questionnaire Administration                                                                        54

4.2       Socioeconomic Background of the Respondents                                           55

4.3       Data Presentation                                                                                            58

4.4       Test of Hypotheses                                                                                         64

4.5       Discussion of Results                                                                                     70


CHAPTER 5: SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1       Summary of Findings                                                                                     73

5.2       Conclusion                                                                                                      73

5.3       Recommendations                                                                                          74

5.4       Areas for Further Studies                                                                               75

5.5       Limitation to the Study                                                                                   75

5.6       Contributions to Knowledge                                                                          77

REFERENCES                                                                                                           78

Appendix 1: Questionnaire                                                                                         82

Appendix 2 (Results)                                                                                                  85

 

 

 

 

 

 

 

LIST OF TABLES

4.1       Questionnaire administration                                                                         54

4.2       Distribution of respondents according to gender                                           55

4.3       Distribution of respondents according to age                                                 55

4.4       Distribution of respondents according to marital status                                 56

4.5       Distribution of respondents based on educational qualification                        57

4.6       Dispersal of firms based on registration with duration of consumption   57

4.7       Package rebranding and consumers’ willingness to buy                                58

4.8       Modifications in nutritional benefits on consumers’ trial purchase                        60

4.9       Product taste improvement and consumers’ preference                                 61

4.10     Effect of product quantity adjustment on consumers’ purchase intention          62

4.11     Consumers’ purchase intention                                                                      63

4.12     Simple regression analysis result on effect of package rebranding on

willingness to buy                                                                                           64

4.13     Simple regression analysis result of modifications in nutritional

benefits on consumers’ trial purchase                                                            66

4.14     Simple regression analysis of effect of product taste modifications

on consumers’ preference                                                                               68

4.15     Simple regression analysis result of product quantity adjustment on

consumers’ purchase intention                                                                       69

 

 

 

 

 

LIST OF FIGURE

2.1       The operational and conceptual framework of the study                               10

 

 

  

 

 

CHAPTER 1

INTRODUCTION


1.1 BACKGROUND OF THE STUDY

The concept of innovation in the business world is not new, as it can be traced back to German economist Joseph Schumpeter who popularized the concept in 1949 and linked it to creativity, research and development (R&D), new processes, new products or services and advance in technologies (Rosli and Sidek, 2013). Meanwhile, the concept has changed the business world, making it more complex than simple, dynamic rather than steady and aggressive in nature, providing not only improved production and marketing strategies, service delivery, improved management practices but the right type and quantity of goods and services as well as correct mix of products to final consumers (Olughor, 2015).

Innovation which is derived from the Latin word “innovation” means the creation of something new (Johannessen, 2001), while some define innovation as the art and science of either making new products, offering new services, or adding new value to existing ones (Cassey and Guing, 2007). It is based on the result of new technology development, new combination of existing technology or the utilization of other knowledge acquired by the company (Rajinish, 2008). Klasus (2004) defined innovation as the degree to which value is created for customers through enterprise that transform new knowledge and technologies into profitable products and services for national and global markets. It covers a wide range of activities to improve firm performance, including the implementation of new or significantly improved product, service, distribution process, manufacturing process, marketing or organizational method.

Innovativeness is one of the fundamental instruments of growth strategies to enter new market, to increase the existing market share and to provide the company with a competitive edge. Motivated by the increasing competition in global markets, companies have started to grasp the importance of innovation, since swiftly changing technologies and severe global competition rapidly erode the value added of existing products and services. Thus, innovation constitutes an indispensable component of the corporate strategies for several reasons such as; to apply more productive manufacturing processes, to perform better in the market, to seek positive reputation in customers' perception and to gain sustainable competitive advantage. Particularly over the last two decades, innovativeness has turned into an attractive area of study for those researchers who tried to define, categorize and investigate its performance impact, especially due to its practical relevance. Innovation provides firms strategic orientation to overcome the problems they encounter while striving to achieve sustainable competitive advantage (e.g. Drucker, 1985; Hitt et al, 2001; Kuratko et al, 2005).

According to Schumpeter (2010), there are five areas in which companies can introduce innovation in terms of: generation of new or improved products; introduction of new production process; development of new sales market; development of new supply market, reorganization and/or restructuring of the company. Schumpeter (2010) has clearly distinguished innovation from minor changes in the makeup and/or delivering of products in form of extension of product lines, adding service components or product differentiation. Innovation is not related to production field only, but there are other fields and activities which can be innovated. Product innovation is the adoption of new or significantly improved production methods. These methods may involve changes in equipment or production organization or both. The method may be intended to produce new or improved products which cannot be produced using conventional plant or production method or essentially to increase the production efficiency of existing products (Engineering and Mathematics (STEM) Enterprise; 2009).

A marketing innovation is the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing (Organization for Economic Cooperation and Development (OECD) Oslo Manual, 2005). Marketing innovations target at addressing customer needs better, opening up new markets, or newly positioning a firm’s product on the market with the intention of increasing firm’s sales. Marketing innovations are strongly related to pricing strategies, product package design properties, product placement and promotion activities along the lines of four P’s of marketing (Kotler, 2014).

Purchase intention is the preference of consumer to buy the product or service. In another words, purchase intention has another aspect that the consumer will purchase a product after evaluation. Many factors affect the consumer’s intention while selecting the product and the ultimate decision depends on consumers’ intention with large external factors (Keller, 2001). The purchasing process to buy a particular brand or product is affected by various factors such as price of the product, design, packaging, knowledge about product, quality, celebrity endorsement, fashion and sometimes family relation as well (Shafiq et al, 2011). In developed countries of the world, the retail market is mature (Berner et al, 2001). But in developing countries markets like Nigeria, the people are sensitive about product or brand and have some questions in their minds such as what the brand offers? and how the brand fulfils their needs? (Anholt, 2000). Madahi and Sukati (2012) opined that the purchase intention has become complicated and significant in recent era. Consumers search for the products/brands that will bring them utmost satisfaction based on different unique qualities of the product.


1.2 STATEMENT OF THE PROBLEM

Firms are realizing the importance of innovation to gain competitive advantage. Accordingly, business firms are engaging themselves in various innovative activities, ranging from product development, product improvement and brand building initiatives to customer satisfaction. Today, business environment has become very dynamic with more demanding customers and intense market competition. To meet this tensed situation, firms are creating new products, solutions and services that provide a radically better experience for the customers. Consumer market grows rapidly every year and the number of competitors among different types of products and goods increases steadily. To standout against competitors, every company tries to invent something new and to get the competitive advantage for providing specious product to the end user. One of the marketing tools that have become popular and important is product innovation which allows companies to be different from others and to have more priorities among competitors. This has become a reason why there is a big variety of product packaging, uniqueness, quality, quantity amongst similar products in the same product line in the market. Consumer preferences and consumer buying behaviour are the major issues that should be taken into account when designing a new package. In spite of factors such as new technology or material development, consumers choices and desires are the important elements that drive the marketing process. Consumers are the key actors in planning and implementing product innovation.

However, the key issue for product innovation is to understand the consumer (Stewart 2004). Shammot (2011) observed that more value than cost can be achieved from successfully repackaged designs. Mohammad et al. (2012), identified that cost reduction, improved profits, improved sales can be achieved due to repackaging of products. Customer loyalty can be assured with sound packaging and repackaging of products. It has been observed that one of the reasons for product innovation is when a product has reached its saturation or maturity stage in its life cycle. Several products in the beverage industry have reached their maturity stage and are heading towards decline stage which may lead to decline in level of contributions to company market share (falling market share). This is a period during which new users of the product cannot be added and consumers are no longer interested about the product. Lately there have been a lot of quality control scandals accounting for lack of confidence on many essential commodities. Therefore, consumers are crying out for safe products that will not affect their health adversely or that of their families. There are problems of high cost of some beverages, unattractive package which have made pertinent the role of repackaging towards making products in small packs and, sachets that are affordable to meet the requirements of different classes of consumers. The desire of consumers to buy a product that can meet their needs at a lesser price led companies like Cadbury to innovate the 3 in 1 hot Choco product and Friesland followed suit with their Peak 3 in 1 Choco.

More so, there are some basic factors that basically hinder effective product innovation projects in most organizations, like the use of incompetent personnel in handling the innovation activities without the consent of the product users; not moving with the current market trend and not considering the critical values that will attract consumer purchase intentions. The odds however weight heavily against success in most cases, because some companies embark on product innovation process without a clear research on its target market, consumers’ preference, market trend and competitors and finally develop products that may not be acceptable by the customers. However, in reality innovation can be very expensive and risky, because a new product faces tough odds, as some of the improved and modified products and new brands may achieve competitive advantage at introductory stage and fails when compared with other product especially in the case of beverages. Although, effective and efficient product innovation is one of the factors that attract customers to a particular product but some manufacturers and marketers still find it difficult to select innovative attributes like name, size, colour, shapes, design and these may have serious negative effects on the consumer purchase intentions.

Furthermore, rapid changes in social, economic, political, organizational, marketing and technological environment have also triggered uncertain consumption patterns among consumers such that, acceptable product today may be rejected in nearer future due to the aforementioned changes in the business environment. Some organizations sometimes venture into innovation without analyzing the position or stage of the product life-cycle of the product. This may negatively affect consumer patronage due to inconsistent quality; and competitors may modify the innovated product and come out with a more valuable and prolific product that may divert the interest of consumers. In addition, misinterpretation of market situation is also a factor that hinders successful product innovation. The new product may be excellent in terms of technical specifications yet, no customer may be willing to pay for them since their costs may be higher than their benefits. Many organizations risk complacency once their current product offering is experiencing success, due to the fear of pulling investment, resources or consumer attention from existing offering to a relatively new area.

It worth noting that, in spite of the increasing studies on product innovation by researchers and business organizations, there is still limited literature about the implication of product innovation on customers’ perception and purchase intention in developing countries. It is a known fact that, much research have been carried out on the importance of innovation in the developed world, but studies associated with product innovation for beverages in developing countries are rarely found in developing country like Nigeria. This research contributed in curtailing this breach in literature and thereby institute the foundation to comprehension of some aspects of product innovation and customer purchase intention of selected beverage products; with reference to Friesland Peak Choco and Cadbury hot Choco 3 in 1 products in focus.

 

1.3 OBJECTIVES OF THE STUDY

The main objective of this study was to examine the influence of product innovation on customers purchase intention for beverage products in Abia State, Nigeria. A study of Friesland Peak Choco and Cadbury hot Choco 3 in 1 products. The specific objectives were to:

    i.         examine how package rebranding affect consumers’ willingness to buy Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet;

  ii.         examine how modifications in nutritional benefits affect consumers’ trial purchase of Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet;

 iii.         examine how product taste improvement affect consumers’ preference of Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet;

 iv.         examine how product quantity adjustment affect consumers’ purchase intention of Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet.


1.4      RESEARCH QUESTIONS

The following questions guided the study:

  i.         how does package rebranding affect consumers’ willingness to buy peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet?

ii.         how does modifications in nutritional benefits affect consumers’ trial purchase of Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet?

iii.         how does product taste improvement affect consumers’ preference of Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet?

iv.         how does product quantity adjustment affect consumers’ purchase intention of Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet?

 

1.5      RESEARCH HYPOTHESES

In line with the statement of the problem, the research objectives and the research questions, the following hypotheses were tested:

H01:     Package rebranding has no significant effect on consumers’ willingness to buy Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet.

Ho2:    Modifications in nutritional benefits have no significant effect on consumers’ trial purchase of Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet.

H03:    Product taste modification has no significant effect on consumers’ preference of Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet.

H04:     Product quantity adjustment has no significant effect on consumers’ purchase intention of Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet.


1.6       SIGNIFICANCE OF THE STUDY

The outcome of this study would generate interest and data for various groups of people. These data will be specifically useful or justifiable to many people such as:

The marketer: it will help the distributors, wholesalers and retailers know the consumers preference and stock the products according to the preference of the consumers.

The companies: the companies top management will find this research valuable, this is because the finding will enable them know their deficiencies and how to correct them.

Future researchers: Future researchers will also benefit a lot from the study as this work will serve as a stepping stone for further research. In addition, this study will be useful to policy makers, investors, and regulatory agencies such as National Agency for Food, Drug Administration and Control (NAFDAC), Standard Organization of Nigeria (SON) in taking informed decisions on quality control issues with respect to beverages.

 

1.7       SCOPE OF THE STUDY                                 

The study examined product innovation and its effect on customers purchase intention of beverage products in Abia State, Nigeria. conceptually, the study examined how package rebranding affect consumers’ willingness to buy Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet; examine how modifications in nutritional benefits affect consumers’ trial purchase of Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet; examine how product taste improvement affect consumers’ preference of Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet; and examine how product quantity adjustment affect consumers’ purchase intention of Peak Choco 3 in 1 sachet and Cadbury Hot Choco 3 in 1 sachet. The scope of this study was limited to beverage of Friesland Peak Choco 3 in 1 sachet and Cadbury hot Choco 3 in 1 products. Furthermore, this study was limited to consumers of these products in Umauhia and Aba metropolis due to the high population of people living in these areas. The limitation of this study was based on the fact that studying all the products produced by these manufacturing companies was cumbersome and covering the entire Abia State was unrealistic.

 


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