Understanding consumer returning decision with the mediation of willingness to pay a case study of craft beer restaurants in vie

Understanding Consumer Returning Decision with the Mediation of Willingness to Pay: A case study of Craftbeer Restaurants in Vietnam Huyen Pham Tien Nguyen International University, Vietnam National University HCMC, Vietnam Abstract This research is aimed to explore and investigate the point of view of Vietnamese craft beer consumers about what would make them willing to pay and return to a craft beer outlet In a growing consumer market with high demand, there are also a lot of competition In such harsh condition, retaining already existed customer relationship becomes crucial for businesses The findings showed that Access, Unique seeking, Hedonic, Social influence, and Willingness to pay have positive and direct effect on Returning decision Moreover, Access, Local connection, Unique seeking, Hedonic, and Social influence have indirect effect on Returning decision through the mediation of Willingness to pay The relationship between these factors with consumer intention to return was examined by partial least squares technique Within the context of Vietnamese craft beer restaurants, this research’s findings hopefully could provide customer insight for the Food and Beverage sectors as well as provide recommendations for craft beer restaurants to attract more customer as well as keep them repeatedly coming Keyword: Craft beer restaurant; willingness to pay; return intention JEL Code: L83 1 Introduction Vietnamese hospitality and tourism industry has developed rapidly in term of both size and reputation in the region as well as the global market Based on the statistics from the Ministry of Culture, Sports, and Tourism in 2017, Vietnam welcomed 12 million outbound tourists and 62 million inbound tourists This is a big year for our country tourism because the revenue from this industry was 500,000 billion VND with the growth rate at an astonishing 27.5 percent (General Statistics Office of Vietnam, 2018) Food and beverage (F&B) is a major field of Hospitality and Tourism industry and contribute up to 70 percent of the sector’s revenue, made up by restaurant and F&B related services On October 11th, 2017 Vietnam Cuisine Culture Association (VCCA) (Pham Nguyen, 2017) VCCA currently has over 300 members, including researchers, artisans, businessmen and business organizations operating in the cuisine and tourism sector In which 33 has been selected as executive board members with Mr Ky Nguyen Quoc – General manager of Viettravel as the chairman of the 2017- 2022 tenure (An Nhien, 2017) The association’s mission is expected to contribute greatly to the tourism industry due to the fact that 70 percent of the sector’s revenue is made up by restaurant and F&B related services When asked about the target of VCCA, Mr Tuan Nguyen Van, Director General of Vietnam National Administration of Tourism, answered that developing cuisine culture into an outstanding tourism product of Vietnam is really important, introducing Vietnamese food and drink to international visitors is one of the main responsibility of the associations (Le, 2017) The establishment of VCCA show the governmental strategy that focus on the development of F&B services as the core for the tourism and hospitality industry in Vietnam, building the national brand of Vietnam as a destination with the special food culture alongside with the nature beauty This strategy was also suggested by the father of modern marketing Phillip Kottler when he visited Vietnam in 2007, which he stated that Vietnam should find a national brand and ‘kitchen of the world’ could be suitable (Tuong Vi, 2011) More and more Food and Beverage business has been opened and developed rapidly taking up many different segments of the market from the street food to high standard fine-dining restaurants, bars and wineries… With the great growing pace of the service industry as well as the growing in the demand of customer, Vietnamese Food and Beverage market is booming Hence there are many potential opportunities for service operators to take Vietnamese nowadays spend more time to consume out of their home than before, there an increasing trend in eating out Compare to the quarter of 2016, 2017 has witnessed the raise of 9% in term of turn of visitors and an annually visit per capita raised from 144 to 147 turns (Decision lab, 2017), the data was collected through the main seven channel of the F&B services market such as fine dining, fast casual, canteen, street food, hotel, alcoholic places and convenience stores Craft beer in Vietnam has been trending in recent years, even caught headwind on international media such as Wall Street Journal Hence attracting investors to pour their capital in to the new potential market (Tran, 2016) This could be witnessed by naked eyes as there are many craft beer outlets and brewers could be found in urban areas, in Ho Chi Minh city (Bia Craft Artisan ales, Pasture Street brewing co, Tê Tê brewing co, Heart of Darkness, Platinum Premium beverages, etc), Nha Trang (26 beer food fun, Lousiane brewhouse, etc), Ha Noi (iBerio Craft Beer Station, Peachy Craft Beer Pub, Craft Beer Pub, etc) and Da Nang (7 Bridges Brewing tap room, Fatfish restaurant and bar lounge, etc) All the dynamic movements in the Craft Beer sectors are due to the facts that consumer demand is increasing rapidly in the past decade In 2008, Vietnam ranked 8th in term of beer consumption in Asia, and in 2016, shockingly ranked 3rd only behind the rich Japan and China with over billion population (Tran, 2017) In 2017 alone, Vietnamese beer drinker consumed billion liters of beer and per capita that is 43 liters and these number is not going to stop there According to forecast of Vietnam alcoholic beverage association, in 2035 the total consumption shall exceed 5.5 billion liters and 52 liters per capita There is great potential for any business to develop and catch the chance from this opportunity in Vietnam beer market (Nguyen, 2018) According to an article published by Bloomberg in 2017, Vietnamese beer market expected a huge rising in consumption in the years period from 2016 to 2021 And in the mentioned period, the market would see the competition between domestic and international suppliers (Luu, Boudreau and Mai, 2017) The Vietnamese beer consumer market growing at astonishing rate following by great potential opportunities for investors and service providers to take Many opportunities also mean that there would be also challenges for the businesses as competition also increase In a market with so many competitor, retaining customer is vital for all business (Haywood, 1998) In this research, the target is to investigate and understand the consumer point of view about the craft beer services in Vietnam What factors and how they affect consumer choice of craft beer outlets The result of this research is expected to provide guideline and recommendation for the Craft Beer restaurants, bar and pub operators to improve their services to attract new customer as well retain the old one In this research, the aim is to identify the factors that influence craft beer consumer decision to return to an outlet Hence the research is designed to fulfil the following objectives: To identify the factors that influence craft beer drinker willingness to pay To identify the factors that influence craft beer drinker returning decision To give recommendation to already existed craft beer outlets as well as for investors who wish to enter the market Literature review Craft-beer restaurant There are many definitions about craft beer outlet, one definition claimed by Acitelli, T and Magee, T (2017) that explain briefly about craft beer producers: Craft beer outlets include smalls, independent owned businesses that stick to the traditional beer brewing techniques and recipes, ingredients And those are distanced from the larger regional and national producers as they often used nontraditional or industrial techniques and recipes, produce and distribute their product on a much vaster scale in term of quantity Craft beer services providers were proven to have some competitive advantages in attracting and retaining customer loyalty in comparison with the industrial and commercial producers in the sector food and beverage (Murray and O’ Neill, 2012) Craft beer businesses are able to contribute to their local region through many ways such as promoting agriculture development, entrepreneurship, etc (Kline and Murray, 2015) Consumer Returning Decision For many years, researchers have made attempt to understanding customer loyalty which plays a vital role in business One of the most obvious consequence of consumer loyalty, which this paper is focus on is the Returning Decision of consumer or in other word the repeat patronage Repeat patronage could be explained as ongoing exchange through multiple economic transactions in e output (Christopher et al 2004) Except for high traffic areas where ‘one-time only’ visits are vital, repeat patronage is the back bone of all business (Haywood, 1998) It is crucial for service providers to retain already existing customers as serving customers that are familiar which the service is cheaper than attract new ones (Reichheld and Sasser, 1990), also the existing customers usually visit frequently and broaden their base of purchase over time Alongside with the value that come from the repeat consumers, the repeat patronage also leads to the favorable word of mouth from customers (Halstead and Page, 1992) and help to recruit new customers (Nelson et al, 2010) As mentioned above, in a market with lots of competitors, finding a new customer to attract is not only difficult but also sometimes be really expensive Willingness to Pay Consumer Willingness to Pay (WTP) also being studied for decades alongside with customer loyalty WTP could be defined as the maximum amount a customer would trade for a product or services (Horowitz and McConnell, 2003) Studies often refer WTP as a self-motivated willingness to purchase a specific product in with a given price (Taylor and DiPietro, 2017; Foster et al., 1997) This factor measure of how much an individual would like to trade off in term of currency to acquire a product or to use a service WTP also had been assessed base on the price interval assigned to a product or service in term of percentage or the actual amount of dollar required (Remar et al, 2016) In the case of Craft-beer, most of which are crafted locally and sell directly to the consumer, WTP tend to be increase as the consumers are able to purchase directly from the producer (Adam and Salois, 2010; Thilmary et al., 2008) WTP also allow the service provider to know whether they are meeting the consumer expectation, hence predict the revenue they would get from selling to the customer in later visits (Taylor and DiPietro, 2017) Netemeyer et al (2004) claimed that consumer Willingness to Pay is one of the strongest predictors of consumer loyalty toward a brand, hence predict repeat patronage as well Willingness to pay was previously identified as an important component of customer loyalty (Zeithaml et al, 1996) H2.6 Willingness to Pay directly affect Returning Decision Factor affecting WTP and Returning Decision Access Access can be defined as a concept presenting the fitting degree between the client (customers) and the system (service providers) (Pechansky & Thomas, 1981) Also according to the mentioned research, access could be divided into smaller components such as: Availability (Presenting relationship between the volume and type of service offered by the providers and the actual volume and type of service needed by the customers), Accessibility (The location of the supply and the location of the customers, including times, transportation resources of the clients), Accommodation (Presenting the organizing of resources to accept the clients and in return the clients perception of the appropriateness of the organizing of resources), Affordability ( The relationship between the cost of service and the income of the client) and finally Acceptability (The clients’ attitude toward the service providers) Access could also be determined by the physical location, operating hours, reservation system via online, phone or in person (Meuter et al, 2000; Seider et al., 2000) Brown (1989) describe access into five dimensions: time (is it convenient for the consumers), place (location of the outlet), acquisition, use and execution Murray and Kline (2015) in their study about the brand loyalty of craft beer consumers in North Carolina, USA stated that access refers to the accessibility to the product and the product distributors by measuring consumers’ ability to visit and purchase craft beer In the finding of Murray and Kline (2015), access have also been found to be the second highest factor that affect Murray and Kline (2015), consumers’ loyalty toward a brewery only after the customer satisfaction Another study in the field of shopping and purchase behaviors also revealed that access play an important role in influencing consumers’ loyalty behaviors such as visit frequency and the amount of money spent (Moeller et al, 2009) Overall convenience of the service has been reported to influence customers satisfaction and positively related to repeat visit and spending (Seiders et al, 2005) This implies that access has significant impact on the customer decision to return to a place for using services In this paper, access is focus on how convenient consumers feel about going to the craft beer restaurant to use product and service H1.1 Access directly affect Willingness to Pay H2.1 Access directly affect Returning Decision H3.1 Access indirectly affect Returning Decision via its effect on Willingness to Pay Connection to local community In 1996, Shortridge introduce the concept of Neolocalism which could be understood as deliberate seeking out and attachment to the local community A study carried out by Flack in 1997 found out that there was an increasing desire for local experience of beer consumers and lead to the wave of creating a sense of place by beer producers in the USA This local identity seeking had been used in other food product since long ago, there are many food products that could be identify simply by their place of production such as cheese, fruit, spices, etc In the case of alcoholic beverages, the origin of the product is one of the most important factors that affect consumer choice, there are many examples could be listed: for liquors we have London dry gin from England, Scotch whiskey from Scotland, Cognac brandy from France, or for wines such as Sherry from Spain, Bordeaux or Champagne from France For beer as in this research, there are famous geographic location for brewing beer such as Belgium, Bavaria of Germany, Bohemia from Czech Republic, etc In the U.S this factor drove consumer decision to visit craft beer outlet (Schnell and Resse, 2003) Local connection also affects consumer WTP by making them feel they contribute to the society by promoting local culture and tradition (Brehm et al, 2004) and bring social benefits (Perdue et al, 1996) Most of craft beer is locally crafted, this increase customer WTP as they are purchasing from the direct producer and contribute to their local community (Adam and Salois, 2010) Flack (1997) in his study, suggested that one reason why a drinker drink the local brewed beer is the sense of his city’s pride In the mentioned research of Flack, he also pointed out that some visitors to the region also come seek for the local flavor at the brew pubs and restaurants It was proven that WTP tend to be as twice as much for locally produced when the shoppers shopped with the producers instead of at a grocery store (Darby et al, 2008) Campbell and his colleagues (2014) also found that WTP tends to be positively related with the origin of the food when they are locally produced H1.2 Local connection directly affect Willingness to Pay H2.2 Local connection directly affect Returning Decision H3.2 Local connection affect Returning Decision via its effect on Willingness to Pay Unique seeking The consumer desire for unique consumer product or need for uniqueness for short is a concept which state that consumers seek for products that are rare and also create a unique self or social image (Ruvio et al, 2008) This concept has been studied in several fields such as marketing, psychology and sociology (Oh et al, 2007) In the case of beer, craft beer outlet is one way for drinkers to break away from common industrial beer and this have been used to see if unique beer is favored by consumer (Murray and Kline, 2015) Customer desire for unique consumer product or Unique seeking has been proven by previous researchers as one of the most important affect brand loyalty, hence predict the return of consumer to a service provider (Murray and Kline, 2015) Mitchell and Orwig (2002) in their research found that the customer demand for unique product is one of the most significant factor drove the consumer to craft beer restaurants, bars and pubs In another paper, the researchers proved that in an experience economy the high-quality product and services are no longer be used to differentiate consumer choice, instead, the uniqueness and variety are the main factors that attract customers and make them spend money (Oh et al, 2007) The Unique aspect of the craft beer outlets also include that they offer a wide range of beer choices to offer the consumers In his research, Thompson (1996) claimed that consumers would love to see a larger set of choices Another research claimed that the uniqueness and the variety of choices attract customers and encourage to pay in the business of wine, another alcoholic drink (Olsen et al, 2015).People are often encouraged to try new things by their motivation (Kraftchick et al, 2014) which lead to the increased in amount craft beer drinkers as breweries offer unique and large variety of beers H1.3 Unique seeking directly affect Willingness to Pay H2.3 Unique seeking directly affect Returning Decision H3.3 Unique seeking affect Returning Decision via its effect on Willingness to Pay Hedonic Hedonic could be defined as the utility derived from feelings or affective states, such as pleasure, fun and entertainment acquire through consumer experience (Wang and Fesenmaier, 2004) Another definition of hedonic stated that those facets of behavior that relate to multisensory, fantasy and emotive from the consumption (Hirschman and Holbrook, 1982) These explanations are all leading to the conclusion that in the consumer view of a service providers, there is a part that related to the consumer feeling of fun and entertainments Bruwer and Alant (2009) found that the main motivation for consumer to come to tasting room were related to pleasure seeking, self-gratifying nature (hedonic) which could also be found at craft beer outlet (Murray and Kline, 2015) This implied that the desire for entertainment of the consumer could be an influencer that drive the consumer to return to an outlet to seek again, for the entertainment that they have found the last time they visited Holbrook and Hirschman (1982) in their paper suggested that the consumption is mainly driven by the fun, amusement the consumer may find when using a product or service This indicated that the fun and amusement of using a product would influence the consumer decision to pay for the product or not H1.4 Unique seeking directly affect Willingness to Pay H2.4 Unique seeking directly affect Returning Decision H3.4 Unique seeking affect Returning Decision via its effect on Willingness to Pay Social influence Another motivation for consumer to visit craft beer outlets found in the U.S is the influence of subjective norm which also known as social influence This could be defined as individuals’ belief regarding what others think that one should or should not (Ajzen, 1991) This related to one’s feeling of belonging to their surrounding society, as people tends to be affected by what the others Spark (2007), proved that between social influence is directly related to the wine consumer decision to pay a visit to wine producing region Studies previously conducted in the field of another alcoholic beverage that is wine show the direct relation between social influence and the consumer individual intention to purchase wine (Sparks, 2007; Van zanten, 2005) Taylor and DiPietro (2017), claimed that Subjective Norm or Social Influence is a significant predictor of customer repeat patronage to Craft beer breweries in North Virginia, USA H1.5 Social Influence directly affect Willingness to Pay H2.5 Social Influence directly affect Returning Decision H3.5 Social Influence affect Returning Decision via its effect on Willingness to Pay Once a month 141 53.61 59 43.28 82 63.57 2-3 times/moth 4-5 times/month 90 15 34.22 5.70 54 12 40.30 8.96 36 27.91 2.33 above times/month 1.52 2.99 0 Reliability test Indicator Reliability Test In this test, the square of each indicator’s outer loading number would be examined Those indicators that have the result equal or greater than 0.4 would be accepted and kept for further analysis, those fail to this test would be eliminated (Hulland, 1999) The result showed that in of the 35 indicators was disqualified And the analysis is started again with the remaining 32 items The three eliminated was from Access, Local Connection and Hedonic Internal consistency test Then the internal consistency reliability is tested using the composite reliability number to evaluate Analyzing the data set of this research, the result is shown in Table Table Composite Reliability Latent variables Access Local connection Uniqueness seeking Hedonic Social influence Willingness to Pay Returning Decision Composite Reliability 0.8757 0.9078 0.8854 0.8491 0.8935 0.8578 0.9183 In the result, all of the Composite Reliability values are greater than 0.7, hence all the latent variables’ internal consistency is qualified (Bagozzi and Yi, 1988) Validity test Convergent validity test After the reliability of the measurement items are checked The validity of the whole model also needed to be tested as well Bagozzi and Yi (1988) argue that if the Average Variance Extracted (AVE) of each latent variable are equal or greater than 0.5 then the Convergent validity is ensured In this study, all the AVE as show in table show that the Convergent validity is good Table Average Variance Extracted Access Local connection Uniqueness seeking Hedonic Social influence Willingness to Pay Returning Decision Discrimination validity test AVE 0.6385 0.6636 0.5636 0.5847 0.6773 0.602 0.6924 The discrimination validity is checked by using the square root of AVE of each latent variable (Fornell and Larcker, 1981) and then compare with the latent variable correlations In this test, all the squares root of AVEs are greater than the correlation among variables The result means that all of the latent variables are qualified and are suitable for further analysis in the research All of the results are shown in Table Table Discrimination Validity Access Hedonic Local Return Social Unique WTP Access 0.79906 Hedonic 0.5672 Local 0.3807 0.76466 0.4713 0.814616 Social 0.5747 0.4309 0.7049 0.5976 0.4892 0.3721 Unique 0.5976 0.7481 0.4492 WTP 0.4994 0.6117 0.45 Return 0.832105 0.5723 0.822982 0.6751 0.5514 0.7507329 75 0.7186 0.4746 0.5788 0.7758866 Hypothesis testing Factors affect Willingness to Pay In this section, the researcher examined the level of affect the independent variables have on the mediating variable, Willingness to Pay In the analysis result, the R2 value or coefficient determination is 0.452 or 45.2 percent, which indicate that the independent variables are able to describe 45.2 percent out of 100 percent the variance of Willingness to Pay The remaining 54.8 percent require further research with other factors to fully understand consumer Willingness to Pay Table Direct effects on WTP Hypothesis Path Coefficient T Value (p Willing to pay 0.144 2.161 Accepted H1.2 Local Connection-> Willing to pay 0.155 2.292 Accepted H1.3 Unique Seeking -> Willing to pay 0.160 2.173 Accepted H1.4 Hedonic -> Willing to pay 0.276 3.532 Accepted H1.5 Social Influence -> Willing to pay 0.101 1.796* Accepted * p < 0.1 After hypothesis testing for Willingness to Pay, the result draws out the conclusion about the relationship of WTP with the independent variables that affect it There are four factors that significantly affect WTP which are Access, Local Connection, Unique Seeking and Hedonic In other word, changes of these factors would lead to parallel changes in WTP through their path coefficient, hence Hedonic has the strongest influence with the path coefficient equals 0.276, following by Unique seeking with β = 0.160, Local Connection (β = 0.155) and Access (β = 0.144) Social Influence was proved to have insignificant impact on WTP, hence hypothesis H1.5 is rejected Factors affect Returning Decision Table Direct effect on Returning Decision T Value (p Returning Decision 0.109 H2.2 Local connection -> Returning Decision 0.123 1.512 Rejected H2.3 Unique seeking -> Returning Decision 0.146 2.206 Accepted H2.4 Hedonic -> Returning Decision 0.201 2.512 Accepted H2.5 Social influence-> Returning Decision 0.101 1.891* Accepted H2.6 Willingness to Pay -> Returning Decision 0.363 7.193 Accepted * p < 0.1 Evaluation Accepted There were five factors directly and positively affect Returning Decision including Willingness to Pay (β = 0.363), Hedonic (β = 0.201), Unique seeking (β = 0.146), Access (β = 0.109), and Social influence (β = 0.101) Table Indirect effects on Returning Decision Hypothesis H3.1 H3.2 H3.3 H3.4 H3.5 Path Access -> Willingness to Pay -> Returning Decision Local connection-> Willingness to Pay -> Returning Decision Unique seeking -> Willingness to Pay -> Returning Decision Hedonic -> Willingness to Pay -> Returning Decision Social influence -> Willingness to Pay -> Returning Decision Coefficient T Value (p