Market Segmentation and Service Group: Summarizing Segment Groupings and Similarities to Establish Clusters

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Published on International Journal of Economics & Business
Publicatio Date: September, 2018

Lingga Kencana
Faculty of Economic and Bussiness, University of Jember
Jember, East Java, Indonesia

Journal Full Text PDF: Market Segmentation and Service Group: Summarizing Segment Groupings and Similarities to Establish Clusters.

Abstract
This research is aimed to know and analyze the service market segment that is formed, and know the service group based on the similarity level among the existing service. The research variables are physical evidence, reliability, responsiveness, assurance, empathy, and overall service. The research analysis is cluster analysis that serves to make group classification and summarize a number of objects to be less based on similarity or distance of inequality. Cluster analysis with two methods, namely K-Means Cluster and Cluster Hierarchy. The result of the research is the café consumer market segment that formed three Cluster groups, the first Cluster as “Cluster of Physical Evidence”, the second Cluster as “Cluster Guarantee”, and the third Cluster as “Cluster of Overall Service”. There are also three groups of cafes based on service at the similarity level between cafes, namely group one is Sister Cafe, the second group is the Grand Cafe and Cafe 14 Mili, and group 3 is Glovic Cafe.

Keywords: Segments, Services, Groups, Similarities, Summarizes, and Clusters

1. INTRODUCTION
Today the business world is growing faster, It is making the level of competition between one company with another company also increased. Service companies have lagged behind production companies in marketing use because companies are relatively small, and are less professional in managing marketing. Now that it has changed, many service companies have competed well and increased their business competition. Many service companies are experiencing business growth and have loyal customers on its products. This attracts entrepreneurs to invest in services and build service businesses that may be more profitable. Business services that are often found are insurance, beauty salon, restaurant, cafe, financial services, and so forth.
As product companies increasingly difficult to defer their physical products, they turn to service differentiation. In fact, many companies find profit when they deliver good services (Kotler, 2010:35). One of the profitable businesses is service from cafe or restaurant. Now, eating and relaxing in a cafe or fast food restaurant after school, college or work from home, it is a trend of adolescent and even executive lifestyle.
The entrepreneurs in the field of service products and services still required to follow a competitive competition. In addition, changes in the business environment is very fast to make entrepreneurs face an uncertain situation so that not a few entrepreneurs who out of business because unable to maintain the viability of his business. Market-oriented thinking is an inevitable necessity in this era of globalization. According Tjiptono (2004:97), the embodiment and complexity of services affect the way consumers evaluate services purchased.
Business competition in cafes or restaurants such as the Grand Cafe, Sister Cafe, Cafe 14 Mili and Glovic Cafe as some of the biggest cafes in Jember Regency is certainly very high. The area where the cafe is located is the basis of the education area because there are several universities within the same area as University of Jember, Muhammadiyah University, Jember State Polytechnic, Mandala University, Seruji University, and IKIP University. Employers must be smarter in responding to the situation.
Consumers who are satisfied with the service of a service will make them loyal to the service. The quality of service in each cafe or restaurant has a major influence on consumer purchasing decisions. According to Parasurahman (2001:57), service quality is built on the comparison of two main factors, namely customer perception of the real service they receive. If the reality is more than expected, the services provided can be said to be of high quality, but if otherwise, the services provided are not of high quality. Therefore, whether a quality service or service depends on the ability of the service provider meet the expectations of its customers consistently.
Cafe customers who can become a potential consumer market in marketing their existing services so that it will provide the tendency of each competing service to get as many consumers as possible. Outperforming competitor services especially cafe services, it must do market segmentation in advance to more effective and efficient budget later (Gitosudarno, 2008). Market segmentation can provide information about which segments need special services so that the services available can serve consumers better and can improve their competitive position. The problems in this research are; 1) How is the café service market segment formed?; 2) How many groups of café service services are based on the level of similarity between existing services?
The purpose of this research is; 1) Knowing the services market segment that is formed, and 2) Knowing the service group based on the similarity level among the existing service.

2. LITERATURE REVIEW
Parasuraman (in Tjiptono, 2004:14), there are five main dimensions that are arranged in the order of their relative importance, namely; 1) Physical evidence. A service cannot be seen, cannot be kissed, cannot be touched, so the aspect of physical evidence becomes important as a measure of service; 2) Reliability. This dimension covers two aspects, the first one is the company’s ability to provide services as promised. Second is how far the company is able to provide accurate or no error service; 3) Responsiveness. Customer expectations of service speed can almost certainly change with an upward trend over time. Responsiveness concerns the willingness and ability of employees to help customers and respond to their requests; 4) Guarantee. Employee behavior is able to foster customer trust in the company and the company can create a sense of security for its customers. Guarantee also means that employees are always polite and master the skills knowledge that customers need, and; 5) Empathy. Understand customer problems and act in the interests of customers, and give personal attention to customers and have comfortable operating hours.
The core of the marketing consists of three main steps, namely market segmentation, target market and positioning. These three steps are often called STP (market segmentation, market target and positioning). The first step is market segmentation, which is identifying and forming separate groups of buyers that may require their own product or marketing mix. The second step is the target market, which is the act of selecting one or several segments to enter or serve. The third step is positioning, which is the act of building and communicating the special basic benefits of products in the market, Tjiptono, 1997:69).
Market segmentation is dividing the market into several groups of buyers that are distinguished by different needs, characteristics, or behaviors that may require a different product or mix (Kotler, 1997:251). According to Kasali (2005:122) there are two objectives in market segmentation, namely; 1) The main objective is to serve consumers better and improve the company’s competitive, and; 2) A narrower goal is to increase sales, predict market share, conduct better communication and promotion, and strengthen the image.
According to Lamb (2001:299), the purpose of market segmentation is to identify marketing opportunities. Steps in market segmentation include; 1) Select the market or product category to be studied. It can be a market where a company has already competed in it, a market or a new product category but is related, or entirely new; 2) Select one or several bases to market segmentation. This step is a managerial skill, creativity, and market knowledges, there is no scientific procedure for choosing segmentation variables. However, a successful segmentation scheme should produce segments that meet the four basic criteria; 3) Select segmentation descriptors. After selecting one or more basic segmentation, Marketers must select segmentation descriptor. Descriptors identify specific segmentation variables to be used; 4) Make profit and select segments. The profits should include segment size, expected growth of purchase frequency, Current brand usage, Brand loyalty, and long-term sales and potential profits. This information can then be used to rank the potential bottom segment by profit opportunities, risks, consistency with mission and organizational goals, and other important factors for the company; 5) Select target markets. Not part of the segmentation process, but from the natural results of segmentation results. Influencing decisions and often directly determining the quality of service of a company are a big decision, and; 6) Design, implement and maintain the right quality of service. Quality of service has been described as a service strategy in a place of business by providing physical evidence, reliability, responsiveness, assurance and empathy as well as integration of the whole service with the aim of providing mutually satisfying exchange relationships with the target market.
Market segmentation is dividing the market into several groups of buyers that are distinguished by different needs, characteristics, or behaviors that may require different products, services or marketing mixes (Kotler, 1997:235). The logic of market segmentation is that single services and products usually do not always appeal to consumers. Buying purpose, service knowledge, product, engagement, and consumer behavior are very different. Marketers often adapt their marketing strategies to attract certain consumer groups (Peter, 2000:135). The segmented market is the consumer market. The consumer market is a market consisting of individuals and households whose purpose is to meet their own needs or be consumed directly (Kotler, 1997:59). This consumer market research is cafe service consumers based on segmentation based on services that are measured using physical evidence variables, reliability, responsiveness, assurance, empathy and overall service.
Conceptual framework of this research is;

Figure I. Conceptual Research Framework

3. RESEARCH METHODS
This research is a descriptive research using survey method. Survey research is a study undertaken to obtain benefits for descriptive purposes, assisting and comparing existing conditions with predetermined criteria as well as in evaluation execution (Umar, 2004:88). This research is oriented to know and analyze the segment of the service market that is formed, and the service group based on the similarity level among the existing service.
Population is a generalization area consisting of the object of a subject that has certain qualities and characteristics set by the researcher to be studied and then drawn conclusion (Sugiyono, 2005:90). The population in this study was all customers in the Grand Cafe, Sister Cafe, 14 Mili Cafe and Glovic Cafe which had the same overall use of the cafe service.
The sample is part of the population selected for use as a research object. This study uses purposive sampling as a sampling method with certain criteria (Indriantoro, 2002:116). Sampling criteria; 1) Customers who have used the entire service at the four cafes which include the Grand Café, the Sister Cafe, 14 Mili Cafe, and the Glovic Café, and; 2) Customers are among students from the 3 biggest universities in Jember Regency namely Jember of University, Muhammadiyah University, and Jember State Polytechnic. This makes it possible for respondents to better understand the object of research and the location of the cafe is also close to the three universities.
Determination of the number of samples in this study refers to the opinion of Ferdinand (2002:51), namely the sample size according to which must be met depends on the number of variables used, and can be multiplied by the numbers 5 to 10. The number of variables in this study are 6 variables multiplied by number 5 (6×5 = 30). While the object of research in the study there were 3 objects which included all students of Jember State University, Muhammadiyah University, and Jember State Polytechnic. A sample of at least 30 respondents for each or every object under study, so that the total number of samples used in this study were 90 respondents. Roscoe (in Sekaran, 2006:166) states that a sample size of more than 30 and less than 500 is appropriate for most studies. Referring to this opinion, in this study the number of respondents to be taken is 90 respondents because it has exceeded the smallest opinion of Roscoe’s opinion.
The variables analyzed in this study are physical evidence (X1), reliability (X2), responsiveness (X3), assurance (X4), empathy (X5), and overall service (X6).
Measurement scale in this research is using likert scale. According to Maholtra (2003:62), the criteria in the Likert scale that are used are ordinal, that is, in the form of numbers that mean levels, namely; 1) strongly agree; 2) agree; 3) neutral; 4) disagree, and; 5) strongly disagree.
Cluster analysis is a statistical analysis technique that is shown to make individual classifications or objects into smaller groups that differ from one another. This cluster analysis procedure is used to group objects (respondents, consumers, services, products, etc.) or is a process to summarize a number of fewer objects and name them as clusters. The basis of grouping used in cluster analysis is the similarity or distance of inequality (Baroroh, 2013:85). Based on the research objectives, this study uses cluster analysis with two methods, namely; 1) K-Means Cluster. This method is used to determine the market segment of cafe customers based on the services offered. K-Means Cluster is one of the grouping procedures in the Non Cluster Hierarchy. This method aims to classify objects in such a way that the distance of each object to the center of the group in one group is the minimum; 2) Cluster Hierarchy. This method is used to determine the cafe studied in each segment. The Cluster Hierarchy method tries to categorize the cases based on the resemblance of the respondents, by comparing each pair of cases to the number of prescribed and small number of respondents.

4. RESEARCH RESULT
4.1. Instrument Test
The instrument test in this research is using 2 test that is test of validity with Product Moment Pearson’s and reliability test with Cronbach’s Alpha. The test instrument showed that validity test proved valid with significance less than 0,05 and reliability test proved reliable with delimiter 0,6.

4.2. K-Means Claster
K-Means Cluster method is used to know the market segment of cafe based on cafe service. K-Means Cluster is one of the grouping procedures in Non Hierarchy Cluster. This method aims at grouping objects such that the distance of each group centered object within a group is minimum. The results of the analysis obtained some outputs, but for the purposes of interpretation of the analysis then there will be only a few outputs analyzed ie ANOVA, Final Cluster Center, and Number of Cases in Each Claster.

4.3. ANOVA
Anova to analyze which variables can be used to distinguish between Claster used ANOVA outputs.

Tabel 1. ANOVA

Based on Table I, it shows that none of the service variables has a Significant> 0.05 value, meaning that the six service variables differ according to the respondent’s view, whether they are in Cluster 1, Claster 2 and Claster 3, so that all those variables can used to distinguish between clusters formed.

4.4 Final Claster Center
Final Cluster Center is to analyze service variables that become the dominant assessment of each Cluster. If the service variable has the highest score on a Cluster, it means that the Claster has a dominant judgment on the Claster.

Tabel 2. Final Claster Center

Clustering based on final cluster center is; 1) Cluster 1 is the respondent who attaches great importance to the physical evidence variable; attach importance to assurance variables; and not particularly concerned with the variables of reliability, responsiveness, empathy, and overall service. The naming of Claster 1 is named “Cluster of physical evidence”; 2) Cluster 2 is the respondent who is very concerned with the guarantee variable; concerned with variables of physical evidence, responsiveness, empathy, and overall service; not too concerned with reliability. The naming of Claster 2 is named “Cluster of warranties”; 3) Cluster 3 is the respondent who attaches great importance to the overall service variable; attach importance to the variables of responsiveness, assurance, and empathy; and not too concerned with variables of physical evidence, and reliability. The naming of Claster 3 is named “Cluster of the whole service”.

4.5 Number of Cases in Each Claster
Nurse of cases in each claster to analyze the number of respondents included in Cluster 1, Cluster 2, and Cluster 3. The following are the number of respondents included in Cluster 1, Cluster 2, and Cluster 3.

Table 3. Number of Cases in Each Claster

Number of cases in each cluster shows the number of Cluster 1 respondents as many as 23 people (25.56%), Cluster 2 that is as many as 36 people (40%), and Cluster 3 is 31 people (34.44%).

4.6. Hierarki Claster
Cluster hierarchy method is more trying to classify cases based on the similarities that exist in the respondents, by comparing each pair of cases for a certain number of respondents and a small number. Cluster hierarchy analysis there are two parts of output that are important for the interpretation of the Clusters that are formed. Both outputs are agglomeration schedule and Dendogram.

4.7. Agglomeration Schedule
Agglomeration schedule to analyze the process of cluster formation one by one. Individuals who have most similarities will be variable service cafe services grouped first. The degree of resemblance between individuals is indicated by the magnitude of the coefficients, the smaller the value indicates the more similar the two individuals or objects are.

Table 4. Agglomeration Schedule

Table IV, shows that the order of the level of similarity between the objects of the cafe service services studied is; 1) In stage 1 starts with see stage 1 which consists of cafes number 1 and 3 are grouped first, then see next stage showing stage 2; 2) In stage 2, it consists of cafes 1 and 4 so that cafe number 4 is combined with previously established number 1 and 3 cafes so that it becomes numbered 1, 3, 4, and; 3) In stage 3, it consists of cafes numbered 1 and 2 so that cafe number 2 is combined with the previously created number 1, 3, 4 cafes so that it becomes number 1, 3, 4, 2, because the next stage in stage 3 is 0 then it is stopped for Clusters 1. Groupings of 1, 3, 4, and 2 in the same way grouping continues at 2nd and 3rd stages where all objects have been entered on each cluster.

Table 5. Results of Object Grouping Based on Similarity Level

4.8. Dendogram
Dendogram describes the process of forming clusters expressed in the form of images. The horizontal line of the dendogram shows a scale that describes the level of similarity. The smaller the scale the value shows the more like the individual or object, and vice versa, while on the case label column shows the individual studied.

Figure II. Dendogram

Dendogram shows that cafes number 1 and 3 form clusters first, then in other parts of the cafe number 4 and 2 also form Claster. Thus the cafe is grouped into 3 Claster.

4.9. Grouping

Table 6. Cafe Grouping

Cluster 1 is the respondent who attaches great importance to the variable of physical evidence; attach importance to assurance variables; and not particularly concerned with the variables of reliability, responsiveness, empathy, and overall service. The naming of Claster 1 is named “Physical evidence”. Cluster 2 is the respondent who is very concerned with the guarantee variable; concerned with variables of physical evidence, responsiveness, empathy, and overall service; not too concerned with reliability. The naming of Claster 2 is named “Guarantee”. Cluster 3 is the respondent who attaches great importance to the overall service variable; attach importance to the variables of responsiveness, assurance, and empathy; and not too concerned with variables of physical evidence, and reliability. The naming of Claster 3 is named “Overall service”.

5. DISCUSSION
The results of research conducted on consumers using cluster analysis, shows that cluster analysis is an interdependence test so that in this analysis there are no independent variables or dependent variables (bound). Cluster analysis in principle is used to classify objects (respondents, consumers, products and others) and is a process of summarizing a number of objects to be fewer and naming them Claster. The basis of the grouping used in the analysis Cluster (similarity) is the distance of inequality (distance). The test results from the K-Means Claster analysis show that there are 3 Clusters that are successfully grouped from the 6 service variables that have been analyzed. The market segment of the café is based on services that have been analyzed, ie Cluster 1 by naming clusters of physical evidence; Claster 2 with claster naming guarantees, and; Claster 3 with overall service claster naming. The test results from the Cluster Hierarchy analysis showed that there were 3 Clusters that were successfully grouped from 4 cafes that had been used as research objects and the similarities that existed in the respondents who had been analyzed. Cafe market segment based on the similarity of cafe services that have been analyzed, namely Cluster 1 is the Sister Cafe; Cluster 2 is the Grand Cafe and Cafe 14 Mili, and; Cluster 3 is Glovic Cafe.
Catering market segmentation market based on service. Objects that are in one Claster are relatively similar in comparison to objects that are on another Claster. Often objects in different Clusters have similar responses to an existing service and are researched. If this is the case then the service variable cannot be used to describe the Cluster formed. In analyzing which variables can be used to differentiate between clusters that are formed, the existing segmentation of the cafe consumer market, as a whole the variables in the cafe service can be distinguished so that it will form Cluster 1, Cluster 2 and Cluster 3 which will later be used for distinguish between Clusters that have been formed and analyzed further.
Cluster 1 is the respondent who attaches great importance to the variable of physical evidence; attach importance to the guarantee variable; and not too concerned with the variables of reliability, responsiveness, empathy, and overall service. In order to reflect clusters in variables, Claster 1 is named “Claster Physical Proof”. Cluster 2 is the respondent who is very concerned with the guarantee variable; concerned with variables of physical evidence, responsiveness, empathy, and overall service; not too concerned with reliability. In order to reflect clusters in variables, Claster 2 is named “Claster Guarantee”. Cluster 3 is the respondent who attaches great importance to the overall service variable; attach importance to the variables of responsiveness, assurance, and empathy; and not too concerned with variables of physical evidence, and reliability; In order to reflect clusters in variables Cluster 3 is named “Cluster of Overall Services”. The number of respondents who enter Cluster 1 is as many as 23 people (25.56%), Claster 2 is as many as 36 people (40%), and Claster 3 that is as many as 31 people (34.44%).
The cafe industry in determining the target market should consider and consider each segment to be selected. If the cafe chooses to serve Cluster 1, then the customers will tend to pay close attention to physical evidence even though existing cafes have existing services such as warranties, reliability, responsiveness, empathy, and overall service. Of course with a relatively high level of tendency in the importance of physical evidence then the cafe will be able and more leverage in serving the desires of customers who prefer the physical evidence of existing services in the cafe. Cluster 1 has a total of 25.56% of respondents, so the market opportunity is still relatively large for cafes in particular who want to focus on the service of physical evidence in prioritizing its services to its customers.
Cluster 2 is the respondent who is very concerned with the guarantee variable; concerned with variables of physical evidence, responsiveness, empathy, and overall service; not too concerned with reliability. The cafe industry should also consider other services on the Claster which has the highest number of respondents among other Clusters. The large number of services in the cafe that must be considered it will be able to cause the cafe industry is less than optimal in optimizing the service guarantee in the cafe. Cluster 2 has 40% of respondents, and proves that the service is most attractive and considered important by the respondents when it will buy service at the cafe. Cluster 2 also has the largest number of respondents, but it is not necessarily able to guarantee the cafe industry has a high enough sales value for the level of consumption of its customers while in the cafe and should be considered also if you want to participate in a larger cafe market industry then the existing cafes need to consider its competitors are in the market and have a relatively strong position.
Cluster 3 that emphasizes the overall service has the least amount compared to Claster 2, so if the company chooses this Cluster then the cafe will be more focused and pay attention to the overall service within the cafe. Many customers have a desire to be satisfied by the overall service provided to their customers. Customers will feel more comfortable while in the cafe because all the needs can be met well by the cafe and service providers who have been provided by the cafe. Cluster 3 also has a relatively large number of respondents, which is 34.44%. It also shows that by selecting Claster 3 as a strategy in the cafe then the cafe will have a market opportunity that is still relatively large enough to be able to provide maximum profit in the café industry you want to target.
The cafes that exist in each segment, there are two parts that are important to know in the analysis that has been produced. Both are agglomeration schedule and dendogram. Individuals with the most similarity will be grouped first. The degree of resemblance between individuals is indicated by the value of the coefficient, the smaller the coefficient value it will show the more like two individuals or objects of the existing cafe.
There are three groups of cafes, namely group 1 includes Cafe Sister, group 2 of the Grand Cafe and Cafe 14 Mili, and group 3 is Glovic Cafe. The division of the number of groups is based on a dendogram that shows there are 3 lines that look contrast. The cafe service in group 2 is the most demanded cafe service by the consumer so that it will provide a high enough sales assessment compared to other cafes in groups 1 and 3.
So in the cafe consumer market, cafe services can be grouped into 3 groups. The grouping is based on the similarity level between existing cafes based on the consumer’s assessment of the quality of service available in the cafe. The purpose of this clustering is to simplify the process of segmenting the consumer market of the cafe will conclude that the existing cafe also has a certain group in a market that will be grouping in a heterogeneous market into a homogeneous market.

6. CONCLUSSION
Based on the results of the research analysis, it can be concluded as follows; 1) The market segment of cafe consumers formed is three clusters, namely; (a) Cluster 1 is a respondent who attaches great importance to physical evidence variables; attach importance to the guarantee variable; and do not give too much importance to the variables of reliability, responsiveness, empathy, and overall service, and are referred to as “Physical Proof Clusters”; (b) Cluster 2 is a respondent who attaches great importance to the guarantee variable; concerned with variables of physical evidence, responsiveness, empathy, and overall service; not too concerned with reliability, and named as “Cluster Guarantees”, and; (c) Cluster 3 is a respondent who attaches great importance to the overall variable of service; attach importance to the variables of responsiveness, assurance, and empathy; and does not attach too much importance to the physical evidence variable, and reliability, and is referred to as the “Claster of the Overall Service”; 2) There are three groups of cafes based on service at the similarity level between cafes, namely; (a) Group 1 namely Sister Cafe; (b) Group 2, namely the Grand Cafe and Cafe 14 Mili, and; (c) Group 3 is Glovic Cafe.

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