CHAPTER I INTRODUCTION

1 CHAPTER I INTRODUCTION 1.1. Background The rapid information technology development today has important effects for all human life. Since Alexander Graham Bell founded telephone in 1876, technology is growing continuously and changing the way of our social life. Information technology is not only helping us in our daily activities and making our life become easier, but the implementation of information technology also making a business organization become easier to do its businesses. According to Turban and Volonino, information technology has capabilities to support business objectives, such as, to improve productivity, to reduce the costs, improved the ability to make informed decisions, enhance customer relationships, or even to develop new analytical capabilities (Turban & Volonino, 2012, p. 10) Internet is a part of technology that has important role in today s human life. The definition of Internet is an interconnected network of thousands of networks and millions of computers linking businesses, educational institution, government agencies, and individual (Laudon & Traver, 2014, p. 98). In 2013, there are estimated that 2.56 billion Internet users worldwide and it represents only about 36 percentage

2 of the world population (Internetworldstats.com, 2012). The Internet has important roles not only influencing of human life but also influencing our way of doing businesses. Currently, the Internet provides services such as e-mail, apps, newsgroups, shopping, research, instant messaging, music, videos and news. The Web itself is one of the Internet s most popular services that providing access to billions, perhaps trillions, of Web pages, which are documents created in a programming language that contain text, graphics, audio, video and other objects. Meanwhile, the use of the Internet, the Web and apps in business transaction was called E-commerce (Laudon & Traver, 2014, p. 51). In its development since 1990, e- commerce has become tools that support company s strategies, structures and system for particular organization to conduct business with their buyers, sellers and participants. Now, every company who has products and services face the issue of E- commerce whether they like it or not. In this background section, the author would like to explain briefly about internet in Indonesia. A research and marketing company from Singapore, We Are Social, issued a major report for the highlight of Internet, Mobile and Social in Asia Pacific (APAC) mentioned that Indonesia, with 251 million populations, has 72.7 million Internet users (id.techinasia.com, 2014). The report also mentioned that Internet users in Indonesia spend average time about 5 hours and 27 minutes using the internet each day through a desktop or laptop. Other data from Indonesia Internet Service Provider Association (Asosiasi Penyelenggara Jasa Internet Indonesia) (apjii.or.id, 2013), as Figure 1.1, mentioned that there are estimated 107 million in

3 2014 and estimated 139 million in 2015 of Internet users in Indonesia, increase 13 percentage in average. Meanwhile, the Internet penetration in Indonesia is about 29%. Figure 1.1 Statistics of Indonesia Internet Users. Source: (apjii.or.id, 2013) In 2013, a survey held by APJII and Central Bureau of Statistic in 78 districts and nearest city in 33 province in Indonesia, about the use of internet in business sector that covered tourism industry (restaurant and hotel), and large and medium industry. The research begins form July until December, 2013. The results was showing that the use of email (send and received) is on the top about 95.75 percentage. Second, about 78.49 percentages is to search information and news. Third, about 77.81 percentages business community used the internet to search products and services. All results that related to survey as provide in Figure 1.2. From

4 those data, we also can see that there are 45.07 percent of internet users in business community have done the e-commerce transactions of products/services in internet. Another results from same survey mentioned that North Sulawesi province is already using internet about 100 percents, West Kalimantan province is about 94.12 percents, and DKI Jakarta as Indonesia Government base is about 90.83 percents of using the Internet. The lowest rate of using the Internet in Indonesia is in province of North Maluku as a new province in Indonesia, 40 percents. Figure 1.2 Currently Indonesia s Internet Business Users Profile. Source: (apjii.or.id, 2013) From those data, we can see that the use of internet in Indonesia is already distributed in almost all of province, both personal user and business organization user although the internet network infrastructure has not equally distributed. So, now

5 business organization in every field cannot just take wait and see action and do nothing to take opportunity from implementation of e-commerce on its business. E- commerce does not need marketplace physically, so companies are getting closer to consumer. E-commerce will become an online distribution channel. Travel agency is one of the business organization that also facing the issue of e-commerce. Many number of travel industry players such as airlines and hotelier mostly has implemented e-commerce technology in their businesses. For example, AirAsia already implemented e-commerce technology for searching, booking and payment. All buying activities have been done on the Web. We can see AirAsia s website in Figure 1.3. Figure 1.3 AirAsia s Homepage Source: (Airasia.com, 2014)

6 This is going to threaten the existence of travel agencies because now people can buy products/services directly to travel services providers. But the biggest threat encountered by travel agencies is from Internet Based Travel Agent or Online travel agent. Internet Based Travel Agent (Online travel agent) is travel agent that using full of the advantages of Internet, such as e-commerce technology, the Web, apps or even mobile-commerce (using smart phone). For example: Expedia, Travelocity, Agoda.com, Priceline.com, etc. The phenomenon of online travel agent in Indonesia has occurred since early 2010 coincide with booming of doing travel. Online travel market in Indonesia currently is still 12 percent and will grow although still dominated by foreign players (Detik.com, 2013). In Indonesia, the Online travel agent such as Tiket.com (Figure 1.4), Gonla.com, Pegipegi.com, RajaKamar.com, Traveloka.com, etc. Figure 1.4 Tiket.com Homepage Source: (Tiket.com, 2014)

7 Although the market of online travel agent is small, but online travel agency becomes threat to Traditional Travel Agency, because the online travel agent operated 24 hours a day and 7 days a week different from conventional travel agency that has operating hours. The presence of booking site and online travel agent and changes in consumer behavior and perception make traditional travel agent companies tends to decrease the number of customers who come to office sales. A review about The Travel Agent is dying, but it s not dead yet (CNN.com, 2013) mentioning that the travel agent in United States market down from 34,000 to 13,000. However, they still made USD95 billion in 2011. But, this phenomenon is not happened in Indonesia yet, because of the internet network infrastructure is not ready yet and also people in Indonesia still need the traditional travel agents services, such as: to arrange and manage a trip, or even for delay the payment. How can the traditional travel agencies compete with the online travel agent and also with other member in travel industries? The answer is traditional travel agency has to take advantage and should adopt the e-commerce traditional while still running its usual businesses. 1.2. Research Problem Now we know that people are become more dependent on information technology. Moreover, there are hardly people live without the assistance of information technology. Internet provides trillion of information through web pages and people allowed to access all of that information. However, people can get

8 confused with lot of information as well as to people/consumer who are looking for information regarding to traveling. According to Solomon, perception is the process by which people select, organize, and interpret sensations (Solomon, 2012, p. 70). Information influence individual perception and accordingly affects their action and behaving. Perception makes people has their own preference about product/services. Thus, the Internet which offers millions of information influences perception as well. Before the traditional travel agent applied e-commerce technology in its business, they have to know how customer perception toward online travel agency. Because e-commerce is related to internet, website and pricing, author wants to analyze the factors that influence customer perception in selecting online travel agent. Factors that will be analyzed are Brand, Website Usability, and Pricing. These factors are related to basic stimuli of perception such as vision, hearing, sound, and color. So, the problem questions of this research as follow: 1. Is Brand factor influence customer perception in selecting an online travel agent? 2. Is Website Usability factor influence consumer perception in selecting an online travel agent? 3. Is pricing factor influence consumer perception in selecting an online travel agent? 4. Are Brand, Website Usability, and Pricing factors influence consumer perception in selecting an online travel agent?

9 1.3. Importance of Research The reasons why this research should be conducted are to understand about customer perceptions towards online travel agent. Web is changing the consumer behavior and as we know from above data that there is significant growth of internet users in Indonesia, so this is the opportunity for the conventional travel agent to take advantage from implementation of e-commerce technology. Travel agency companies who are left behind the technology tend to be left by customers and even push company to close down its business. 1.4. Objective and Benefit 1.4.1. Research Objective The aims of the research are as follow: 1. To identify whether Brand factor influence customer perception in selecting an online travel agent. 2. To identify whether Website Usability factor influence customer perception in selecting an online travel agent. 3. To identify whether pricing factor influence customer perception in selecting an online travel agent. 4. To identify whether Brand, Website Usability and Pricing factor influence customer perception in selecting an online travel agent.

10 1.4.2. Research Benefit are: The contribution and benefits are expected to be obtained from this research 1. To provide information and suggestion to the conventional travel agencies about how brand, website usability, and pricing factors influence customer perception before implement the e-commerce technologies. 2. To give existing online travel agents management information about how brand, website usability, and pricing factors can influence customer perception. Thus, they can make adjustments with its online travel websites. 1.5. Research Scope The research is conducted by distributing questionnaires online from internet users who have access to online travel agency in the last 6 months from January to August 2014. The research scope is about customer perception towards brand, website usability, and pricing. Customer perception in this research was limited to customer s vision and hearing in which related to brand, and pricing factors such as from search engine, banner, TV commercials, and/or online advertising, also from customer s perception when access an online travel websites.

11 1.6. Overview of Thesis Below are the details of the structure of this thesis as follows: Chapter I INTRODUCTION This chapter contains the background, research problem, the objective and benefit of this thesis, research scope and thesis structure. Chapter II REVIEW OF LITERATURE This chapter discusses the basic theories that are relevant to the study to solve existing problems and achieve the expected goals. Chapter III RESEARCH METHODOLOGY This chapter contains a systematic measures used in research with the aim of solving the problems. Also, explained about the frameworks or guiding step needed to produce the expected output and how these data are processed to solve existing problems. Chapter IV RESULT AND DISCUSSION This chapter contains analysis of data that required in conducting research through data collection process. Chapter V CONCLUSION & RECOMMENDATION This chapter contains the conclusion of this study and suggestion for further research development.