1

THE EFFECT OF NEWLY-IMPLEMENTED TRAIN LAW ON

CONSUMERS’ BUYING DECISION OF COKE

IN POTRERO, MALABON

A Thesis Study
Presented to the Faculty of the College of Business
DE LA SALLE ARANETA UNIVERSITY
Victoneta Ave., Malabon City, Metro Manila

In partial fulfillment of the requirements for the degree of

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
Major in Marketing Management

By

ISAGUIRRE, RODEL P.
MEDINA, DARLENE C.

March 5, 2018
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Recommendation Sheet

Researchers: Isaguirre, Rodel P. and Medina, Darlene C.

College: Bachelor of Science and Business Administration

Title: The Effect of Newly-Implemented TRAIN Law on

Consumers’ Buying Decision of Coke in Potrero, Malabon

Recommending Approval:

_________________________ __________
Prof Maria Teresa Bernabe Date
Adviser

Approved by:

_________________________ __________
[Name of Committee Chair] Date
Chairperson

_________________________ __________
[Name of Panel Member] Date
Member

_________________________ __________
[Name of Panel Member] Date
Member

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[Name of Panel Member] Date
Member

Recorded by:

_________________________ __________
PIC, Registrar’s Office Date
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Approval Sheet

This Thesis Study entitled The Effect of Newly-Implemented TRAIN Law of

Consumers’ Buying Decision of Coke in Potrero, Malabon by Isaguirre, Rodel P. and
Medina, Darlene C. in partial fulfillment of the requirements for the degree of Bachelor
of Science in Business Administration, has been examined and is recommended for
acceptance and approval for ORAL EXAMINATION.

________________________
Prof. Ma. Teresa Bernabe
Adviser

Panel of Examiners

Approved by the COMMITTEE ON ORAL EXAMINATION with a gradeof

_______ on [DATE].

________________________
[NAME OF COMMITTEE CHAIR]
Chairperson

________________________ ________________________
[NAME OF PANEL MEMBER] [NAME OF PANEL MEMBER]
Panel Member Panel Member

________________________
[NAME OF PANEL MEMBER]
Panel Member

Accepted and approved as partial fulfillment of the requirements for the degree of
[DEGREE CONFERRED].

_______________________
[NAME OF DEAN]
Dean, [NAME OF COLLEGE]
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Acknowledgements

The Acknowledgements page is optional and limited to four pages. It follows the

Approval page. Heading is bold. It is in the same font size and style as text, and the

vertical spacing, paragraph style margins and justified alignment are the same as used in

text. Use complete sentences.

(Sample Wording)

I would like to thank my committee chair, Dr. Garcia, and my committee

members, Dr. Reyes, Dr. Dela Cruz, Dr. Martinez, and Prof. Santos, for their guidance

and support throughout the course of this research.

Thanks also go to my friends and colleagues and the department faculty and staff

for making my time at De La Salle Araneta University a great experience. I also want to

extend my gratitude to the National Science Foundation, which provided the survey

instrument, and to all the Malabon elementary teachers and students who were willing to

participate in the study.

Finally, thanks to my mother and father for their encouragement and to my wife

for her patience and love.

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Table of Contents

Page

TITLE PAGE .................................................................................................................#

RECOMMENDATION SHEET ....................................................................................#

APPROVAL SHEET .....................................................................................................#

ACKNOWLEDGEMENT .............................................................................................#

ABSTRACT ...................................................................................................................#

TABLE OF CONTENTS ...............................................................................................#

LIST OF TABLES .........................................................................................................#

LIST OF FIGURES .......................................................................................................#

LIST OF APPENDICES ................................................................................................#

1 The Problem and a Review of Related Literature

Introduction ........................................................................................................#

Review of Related Literature .............................................................................#

Theoretical Framework

Conceptual Framework

Statement of the Problem ...................................................................................#

Hypothesis

Significance of Study

Limitations
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Definition of Terms............................................................................................#

[Additional entries] ............................................................................................#

2 Methods

Research Design.................................................................................................#

Research Procedure ............................................................................................#

[Additional entries] ............................................................................................#

3 Results and Discussion

Presentation of Results .......................................................................................#

Interpretation of Data .........................................................................................#

[Additional entries] ............................................................................................#

4 Summary, Conclusion and Recommendation

Summary ............................................................................................................#

Conclusion .........................................................................................................#

Recommendation ...............................................................................................#

REFERENCES ..............................................................................................................#

APPENDICES ...............................................................................................................#

CURRICULUM VITAE ................................................................................................#

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List of Tables

Table Page

1 [Table Caption 1] ...............................................................................................#

2 [Table Caption 2] ...............................................................................................#

3 [Additional entries] ............................................................................................#

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List of Figures

Figure Page

1 [Figure Caption 1] ..............................................................................................#

2 [Figure Caption 2] ..............................................................................................#

3 [Additional entries] ............................................................................................#

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List of Appendices

Appendix Page

A [Appendix Caption A]........................................................................................#

B [Appendix Caption B] ........................................................................................#

C [Additional entries] ............................................................................................#

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Abstract

TITLE : The Effect of Newly-Implemented TRAIN Law on

Consumers’ Buying Decision of Coke in Potrero, Malabon

(September 2018)

RESEARCHER : DARLENE C. MEDINA

RODEL P. ISAGUIRRE

ADVISER :PROF. MA. TERESA BERNABE

SCHOOL : De La Salle Araneta University

DEGREE CONFERRED : Bachelor of Science in Business Administration, Major in

Marketing Management

This purpose of this research was to determine the impact of newly-implemented

TRAIN law on consumer’s buying decision of Coke in Potrero, Malabon. This study

tested by using four factors of consumer’s buying decision such as economic impact

(positive and negative), price increase, health aspect and income. The main objective was

to evaluate the impact of consumer’s buying decision of Coke when faced with such a tax

under Republic Act 10963 also known as TRAIN law. Data were gathered by a self-

administered questionnaire. This survey has been explored the level of influence of

consumer’s buying decision which consists of gender, age, civil status, occupation, and

monthly family income and also through research information which includes the
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dimensions of all variables. Information collected from 396 sample respondents in

Potrero, Malabon for this study.

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Chapter 1

The Problem and a Review of Related Literature

The Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion

also known as TRAIN Law is the first package of the comprehensive tax reform program

(CTRP) envisioned by President Rodrigo Roa Duterte’s administration. It was signed on

December 19, 2017, which reduced personal income taxes but increased those on cars,

tobacco, fuel and sugar-sweetened beverages.

The Philippines’ Bureau of Internal Revenue has published guidelines on the

country’s new TRAIN law, which includes introduction of excise tax for Sweetened

Beverages starting from January 1, 2018. The legislation imposes new tax rates on

sweetened beverages, as well as new VAT rates for these and for other products. The

guidelines explain that SSBs products currently in the market will be initially classified

according to the Inventory List price as of December 31, 2017 on or before January 31,

2018 conducted by the BIR, with items introduced since then classified using the

suggested retail price as given in a sworn statement by the manufacturer or importer.

These prices will be subject for validation by the BIR.

Consumers will start to feel the impact of the tax reform law on sweetened

beverages two weeks after January 1, 2018 when the new excise tax rates took effect

(Cordero,2018).Under Package 1 of the Tax Reform, drinks using sugar and artificial

sweeteners will have an excise tax of Php6.00 per liter (approximately 14% increase in

price) while it is Php12.00 per liter (approximately 24% increase) for drinks that use high
 13

fructose corn syrup. For instance, the retail price of a one-liter bottle of Coke is projected

to increase to P43.00 from the current P31.00 due to an increase of P12.00. It will be

further increased by four percent (4%) each year thereafter. Exempted, however, from

this law are all kinds of milk, 3-in-1 coffee products, natural fruit and vegetable juices,

and medically-indicated beverages (Department of Finance, 2017).

Department of Budget and Management Secretary Benjamin Diokno said the new

TRAIN law is expected to yield Php130 billion revenues from its first year of

implementation. It will steadily rise to as much as Php220 billion annually and will

generate close to Php1 trillion in revenues over a five-year period from 2018 to 2022

(PTV News-CD, 2018). On the other hand, expected tax will be collected from excise tax

on sugar-sweetened beverages is seen to contribute some Php52.03 billion to government

coffers this year alone, and gradually increasing over the coming years. Department of

Finance (DOF) showed that based on the medium-term revenue program, excise tax from

SSBs is the fourth largest revenue contributor among excise taxes in the country. The

taxes that will be collected will fund the government’s projects on infrastructure and

human capital formation.

Department of Finance, in an explanation on its website, said the excise tax on

SSBs “will help promote a healthier Philippines” since it discourages the public from

consuming sugar-sweetened beverages that boost their chances of being obese or have

diabetes or worsens the situation of those who already have the disease. “This is a

measure that is meant to encourage consumption of healthier products, to raise public

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awareness of the harms of SSBs, and to help incentivize the industry to develop healthier

products and complements”, it said.

Consumption of SSBs, mostly softdrinks, is significantly linked to high

incidences of overweight, obesity, and diabetes worldwide, including in low and middle

income-income countries. The National Nutrition Survey (2013-2015) indicates an

increasing trend of overweight or obese Filipinos through the years and across age

groups, especially among the poor. In addition, habitual consumption of SSB is

associated with greater incidence of Type 2 diabetes. According to the International

Diabetes Foundation, there are around 3.5 million cases of diabetes in the Philippines. In

2015, government reimbursements on hemodialysis totaled to about Php7.4 billion

covering Php1.1 million patients.

According to World Health Organization (WHO), evidence has shown that SSB

tax can reduce consumption of sugars and help prevent overweight, obesity and non-

communicable diseases (NCDs) such as diabetes and cardiovascular disease. In the

Philippines, overweight and obesity rates have been steadily increasing and diabetes and

cardiovascular disease now cause 4 out every 10 deaths among Filipinos. With 87% of

Filipinos suffering from tooth decay, the reduction of sugars intake will also reduce the

risk. The revenue to be generated from the new tax reform also has the potential to be

utilized for health-promoting purposes.

Taxation of SSBs under TRAIN is a great step forward in protecting the health of

Filipinos. However, experience in other countries had shown biggest impact on the
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consumers buying decision in poorest households. Mexico, for instance, implemented

one (1) Mexican peso per liter (approximately 10% price increase based on 2013 prices in

Mexico) excise tax on non-alcoholic beverages with added sugar. It is observed that the

purchases of sugary drinks in Mexico dropped by 5.5% in the first year after the tax was

introduced and was followed by a 9.7% decline in the second year. In the short term, the

results for Mexico show that the tax on SSBs is generally passed on through increased

prices to consumers, which reduced the purchase of the said beverages.

Although the main objective of the current administration on implementing the

newly Tax Reform is to create an affirmative way of service for the benefit of its people,

it is inevitable that the buying decision of the consumers will be affected. The

implementation of the excise taxes under RA 10963 will apparently dissuade consumers

from purchasing drinks with added sugar.

The purpose of this study is to know the impact of newly-implemented TRAIN

Law on consumers’ buying decision of Coke in Potrero, Malabon. The Act has just been

implemented and the response of consumers in buying behavior of coke are not yet clear

and know this is the main reason why the researchers chose the study.
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Review of Related Literature

Preliminaries on taxation

Taxes are the lifeblood of government, these are funds used by the government to
finance basic social services that are vital to the lives of citizens and economic growth
such as education, healthcare as well as infrastructure. According to the book of
Philippine Laws on Transfer and Business Taxes edition 2013-2014 by Virgilio G
Litonjua, CPA and Lilian M. Litonjua, CPA , the two (2) out of nine (9) essential
characteristics of tax is to imposed to raise government revenues and for public purpose.
To characterize an effective tax system, a good tax system should meet five basic
conditions: fairness, adequacy, simplicity, transparency and administrative ease.
Although opinions about what makes a good tax system will vary, there is general
consensus that these five basic conditions should be maximized to the greatest extent
possible.
The governments collect taxes to support its objectives such as building roads,
schools, and better government salaries and improve government services. These factors
can help attracting more investors and jobs in the Philippines (Yanuaria, CPA, RFP,
2013).

Importance and Effects of TRAIN Law

The TRAIN law aims to make the current tax system simpler, fairer, and more

efficient. It has two package, the package 1A and 1B.

 Package 1A of TRAIN
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Package 1 of the CTRP under TRAIN Act, was signed into law on December 19, 2017. It

reduced the personal income tax rates, but increased those on cars, tobacco, fuel and

sugar-sweetened beverages.

Thru Department of Finance, TRAIN repeals Section 35 of the National Internal Revenue

Code on personal exemptions of individual taxpayers. Whether the taxpayer is single,

married, head of the family, with or without dependents, the taxpayer is exempted from

paying personal income tax (PIT) as long as he /she is earning less than P21,000 a month.

But because the individual income tax reform will lead to substantial revenue losses,

offsetting tax measures are necessary.

The reduction of individual income taxes must go hand in hand with increasing

the excise taxes on petroleum products, automobiles, tobacco, and alcohol as well as the

introduction of an excise tax on sugar-sweetened beverages.

Simplifying Income Tax System

Thru Department of Finance, TRAIN repeals Section 35 of the National Internal

Revenue Code on personal exemptions of individual taxpayers. Whether the taxpayer is

single, married, head of the family, with or without dependents, the taxpayer is exempted

from paying personal income tax (PIT) as long as he /she is earning less than P21,000 a

month.
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Consumers must brace for higher tax rates following the passage of the first tax-

reform package into law. On December 19, President Duterte signed into law the Tax

Reform for Acceleration and Inclusion (TRAIN) Law. The TRAIN law, or Republic Act

10963, is expected to generate P130 billion in revenues.

Seventy percent of the revenues will finance the administration’s “Build, Build,

Build” infrastructure program, while the remaining 30 percent will fund socio-economic

programs. Moreover, the law is expected to reduce personal income tax. However,

increased those on cars, tobacco, fuel and sugar-sweetened beverages.

Payroll managers start adjusting their systems to reflect the new withholding tax

rates. Supermarkets, oil retailers, convenience stores, and even sidewalk vendors begin

updating their price lists (Dela Paz, 2018. Rappler).

As discussed above, the government implemented tax on some sugar-sweetened

drinks that took effect on January 1 this year, with the twin aims of raising revenue and

fighting obesity.

As cited in Department of Finance, the SSB excise tax will help promote a

healthier Philippines. Along with the Department of Health (DOH), DOF supports this as

part of a comprehensive health measure aimed to curb the consumption of SSBs and

address the worsening number of diabetes and obesity cases in the country, while raising

revenue for complementary health programs that address these problems. This is a

measure that is meant to encourage consumption of healthier products, to raise public

 19

awareness of the harms of SSBs, and to help incentivize the industry to develop healthier

products and complements.

The World Health Organization says fiscal policies that cause the price of sugary

drinks to increase by 20 percent can discourage consumption, helping reduce obesity,

type 2 diabetes, and tooth decay (ABS-CBN News, 2017).

On the other hand, the Export Development Council (EDC) expresses its

reservation to the TRAIN Law and recognizes that the objective of this act is to promote

a healthy lifestyle among Filipinos. However, the implementation of the law might

hamper the growth of the beverage industry, local sugar farmers as well as fruit farmers

since it will experience a decline caused by lower demand of fruit juices and sugar. It is

noted that beverage is one of the key export sectors cited in the Philippine Export

Development Plan (PEDP) 2015-2017.

Beverage firms, such as Coca-Cola FEMSA, the world's largest franchise bottler

of Coke products, have warned that taxing sweetened drinks could stoke inflation and

hurt manufacturers, sugar farmers and small retailers.

The Beverage Industry Association of the Philippines (BIAP) states that

consumption of SSBs is behavioral in nature and driven by the individual consumer’s

choices, habits, and attitudes. Accordingly, SSBs do not pose a health concern when

consumed normally.

According to a study, a tax of 1 centavo per ounce of beverage would increase the

cost of a 20-oz soft drink by 15% to 20%. The effect on consumption can be estimated
 20

through a price elasticity study (i.e., consumption shifts produced by the price). The price

elasticity for all soft drinks is in the range of −0.8 to −1.0. (Elasticity of −0.8 suggests

that for every 10% increase in price, there would be a decrease in consumption of 8%,

whereas elasticity of −1.0 suggests that for every 10% increase in price, there would be a

decrease in consumption of 10%.) (Brownell, Farley, Willett, Popkin, Chaloupka et.al,

2009).

 Package 1B of TRAIN

The reduction of corporate income tax and modernization of fiscal incentives to

investors were the highlights of the second proposed package of the Comprehensive Tax

Reform Program (CTRP) that the Department of Finance (DOF) submitted to the House

of Representatives after the implementation of package 1A on January this year.

According to Finance Undersecretary Karl Kendrick Chua, Package 2 of the CTRP

proposes to gradually lower the income tax (CIT) rate from 30 to 25 percent, while

modernizing incentives for companies to make these performance-based, targeted, time-

bound and transparent.“Through this tax reform package, the government would be able

to ensure that incentives granted to businesses generate jobs, stimulate the economy in

the countryside and promote research and development; contain sunset provisions so that

tax perks do not last forever and are reported, so the government can determine the

magnitude of their costs and benefits to the economy,” Chua said (Dalangin-Fernandez,

InterAksyon, January 2018).

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He said incentives enjoyed mostly by big businesses such as income tax holidays and

other perks with no time limits need to be corrected as it is costing the government over

P300 billion annually in foregone revenues. Compared to other economies in the

Association of Southeast Asian Nations (ASEAN), the Philippines imposes the highest

CIT rate but is among those at the bottom in terms of collection efficiency, resulting in a

high rate but narrow tax base.

The Philippines currently imposes a CIT rate of 30 percent but with a tax collection

efficiency rate of only 12.3 percent, while Thailand’s CIT rate is only 20 percent but it

collects almost triple–a 30.5 percent efficiency–that represents 6.1 percent of its GDP.

Vietnam’s CIT rate is 25 percent but it collects even more with a 29.2 percent tax

efficiency rate representing 7.3 percent of GDP. Malaysia’s 24 percent CIT generates a

27.1 percent efficiency rate in terms of collecting taxes, which is 6.5 percent of GDP.

Chua pointed to the “flawed and outdated system” that provides tax incentives to

companies under 123 investment laws and 192 non-investment laws as the reasons for the

country’s low CIT collection efficiency.

Under the Philippine tax code, all corporations, unless receiving fiscal incentives,

have to pay a regular CIT rate of 30 percent or a minimum CIT rate of 2 percent of gross

income beginning the fourth taxable year immediately following the year in which a

corporation commenced its business operations, when the minimum income tax is greater

than the regular tax. The optional standard deduction for corporations is 40 percent of

gross income under the tax code.(Dalangin-Fernandez. InterAksyon, January 2018).

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With respect to corporate income tax, the tax will be reduced from the current rate of

30% to 25%. This intends to make our corporate tax regime competitive vis-à-vis

similarly situated middle-income countries. The effect will be a temporary drop in

revenues. Hence, the reduction of corporate income tax must be paired with the

rationalization of fiscal incentives.

Fiscal incentive rationalization is overdue. This reform will subject fiscal incentives

to transparency and discipline. Fiscal incentives must be bound by industrial and

technology policy, performance, time limit, and redundancy criteria.

It has to be stressed though that increase in excise taxes and the rationalization of

fiscal incentives are not just about offsetting the losses arising from the individual and

corporate income tax reforms. The objective is not revenue neutrality but a significant

increase in tax effort so the government can have the resources to accelerate spending for

infrastructure and logistics, improve the quality of education, expand the coverage and

benefits of universal health care, and strengthen the systems to satisfy the requirements

arising from climate change and natural disasters. The government estimates that P600

billion, equivalent to three percent of gross domestic product (GDP), must be raised for

this strategy of economic acceleration and inclusion to work.

The TRAIN raises significant revenues to support the President’s priority social and

infrastructure programs, which will help realize his administration’s goal of reducing the

poverty rate from 21.6 to 14 percent by 2022. Some 70 percent of the incremental
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revenues will help fund the government’s infrastructure modernization program, while

the balance will go to social services.

Starting this year, the government expects to raise funds equivalent to about two-

thirds of the incremental revenues targeted under this tax reform law. The Congress has

committed to pass the rest of the TRAIN’s provisions representing the remaining one-

third of the targeted revenues in early 2018 to help us achieve our revenue and deficit

targets.

With the people’s support and understanding, all this reforms will result in more and

better jobs, lower prices, and a brighter future for every Filipino.

Consumer Buying Decision

Consumer buying behavior is the study of how individuals, groups and

organizations select, buy, use and dispose of goods, services, ideas or experiences to

satisfy their needs and wants (WebFinance Inc. 2017).

Coca-Cola went from a cocaine-infused elixir in 1886 to a ubiquitous sugary drink

by 1929.Now people in more than 200 countries drink 1.9 billion servings every

day, according to The Coca-Cola Company. Having a product people enjoy is far from

the only thing needed to become one of the world's most valuable companies. Coca-Cola

used marketing strategies well, which made it as recognizable throughout the world

(Feloni, 2016. Business Insiders).

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The international brand Coca-Cola, the biggest soft drinks and beverage company

in the world, is very successful in producing effects on consumer behaviors. Coca-Cola is

one of the most valuable and well-known brand in the world. Although the company is a

manufacture of beverage, it business has penetrated in every walk of life. The brand of

Coca-Cola itself is a symbol of taste. However, although Coca-Cola is a successful brand

and its business has covered more than 200 countries in the world, there are still lots of

choices for customers in the supermarket shelves of beverage (Coca-Cola.com, 2016).

How Coca-Cola influence consumer’s buying decison? Beside the effects of

famous brand Coca-Cola has built, the company has continued to deliver its brand value

to customers in many factors. Before customers make their purchase decision, they

collect and identify information they needed. Senses delivered by enterprises result in the

selective attention of customers. Customers get information of appearance, sound, taste,

smell, touch of a product, and then choose their preferring one. These senses and

information finally create sensation and perception in the mind of customers. Sensation

and perception create basic acceptation of a brand, and learning and memory enhanced

the acceptance. That how the psychological influences a brand, or a product, create to

customers. Thoughts and decisions of customers may be affected and changed by the

psychological factors and finally the whole customer behaviors are different (Iacobucci,

2014).

While customers decide whether to buy a brand, or a product, and whether the

brand worth a repeatedly purchase, their attitudes and decision making is very important.
 25

Attitudes toward a brand are the results of psychological perception and memory. A

significant factor effects customer’s decision making is the social-cultural

differences between the brand and preferences of customers. For example, carbonated

drinks of Coca-Cola may be well welcomed by the young aged from 16 to 28, for

children, middle age and old people, the carbonated drinks are less attractive (Coca-

Cola.com, 2016; Broniarczyk and Griffin, 2014).

A consumer is a person who spots a need or desire, and then looks for the best

way to satisfy his or her need either by purchase or acquisition (Solomon et al, 2010).

Consumer behavior as defined by Solomon et al (2006) is "the processes involved when

individuals or groups select, purchase, use or dispose of products, services, ideas, or

experiences to satisfy needs or desires". Customer retention is vital these days and

organizations are looking for the best way to please and satisfy the interest of their

consumers.

Theoretical Framework

To identify the impact of TRAIN Law on consumers buying decision we use the

framework below:
 26

Figure 2.Factors Effect Buying Decision

The factors that will affect the consumers’ buying decision for sweet sweetened

beverages are the economic factors, personal factors, cultural factors, psychological,

and social factors. (Introduction to Marketing Kathmandu: Asmita Books Publishers and

Distributors (P) Ltd., 2014.)

Normally, a consumer’s buying behavior is influenced by cultural, social,

personal and psychological factors. Consumer behavior studies individuals and groups

when they select, purchase, use and dispose products, ideas, services or experiences.

Consumers seek items to satisfy their basic needs and desires. Consumer behavior is

much more than studying what consumers buy. It attempts to understand how the

decision-making process goes and how it affects consumer’s buying behavior. (Solomon

2004, pp. 6-8.) Marketers study consumers buying patterns to solve where they buy, what

they buy and why they buy. However, why consumers buy a specific product is not easy
 27

to solve because the answer is locked deep within the consumer’s mind. (Kardes et al.

2011, p. 8; Kotler&Armstrong 2010, p. 160.) Generally consumers can be categorized to

individual and organizational consumers. Individual consumers try to satisfy their own

needs and wants by purchasing for themselves or satisfy the need of others by buying for

them. These individual consumers can come from different backgrounds, ages and life

stages. (Kardes et al. 2011, p. 8.)

A consumer’s buying decision is influenced by economic, social,

personal and psychological factors. Consumer behavior is a part of human behavior and

by studying previous buying decision, marketers can estimate how consumers might

behave in the future when making purchasing decisions. (Kotler&Armstrong 2010, p.

160.) The following chapters focus on the social, personal, psychological and economic

characteristics of consumer behavior.

 Economic Impact:

Economic factors play an important role in consumer buying decision. It also directly

affects purchasing power of the consumers. If consumer’s purchasing power is weak,

they cannot make decision to buy goods or services even if they like very much. But, if

they have purchasing power, they can take prompt decision to buy goods or services they

like. Income level and spending attitude etc. are the economic factors to determine

consumer’s buying decision.

 Negative Economic Impact:

 28

Mexico is the world’s leading consumer of soft drinks at 163 liters per capita per year. A

study conducted by the United Nations Food and Agriculture Organization (FAO) in July

2013 revealed that Mexico has the highest adult obesity rate among the member countries

of the Organization for Economic Cooperation and Development (OECD). Retrieved at

“Taxes on Sugar-sweetened Beverages as a Public Health Strategy: The Experience of

Mexico”, increase based on 2013 prices in Mexico) is levied on non-alcoholic beverages

with added sugar.15 It is observed that the purchases of sugary drinks in Mexico dropped

by 5.5% in the first year after the tax was introduced and was followed by a 9.7% decline

in the second year. In the short term, the results for Mexico show that the tax on SSBs is

generally passed on through increased prices to consumers, which reduced the purchase

of the said beverages.

 Positive Economic Impact:

Additional take-home pay, compared to the previous Tax policies. The Package 1 of the

CTRP under TRAIN Act, was signed into law on December 19, 2017. It reduced the

personal income tax rates, but increased.

Thru Department of Finance, TRAIN repeals Section 35 of the National Internal Revenue

Code on personal exemptions of individual taxpayers. Whether the taxpayer is single,

married, head of the family, with or without dependents, the taxpayer is exempted from

paying personal income tax (PIT) as long as he /she is earning less than P21,000 a month.

The additional take-home pay will help many Filipinos to re-budget their daily expenses.
 29

 Personal Factor:

When the income of the consumer increases the buying capacity of the consumer also

increases. In such stage, the consumer will give priority to the luxurious goods and

services. But if the income of the consumer is lower than the consumer will give priority

to the physical needs than the luxurious goods.

Income of all consumers’ cannot be same. Some have more and others have low income

level. If the income of consumers is high, purchasing power and readiness become high,

otherwise their purchasing power and readiness become low. TRAIN law is not focused

on the possible downfall of SSB’s industries that also affect the possible labor

unemployment to those who employed in SSBs companies that the labors are also

consumers. The studies conducted in UK pertaining to the impact of the softdrinks levy

on the industry’s regional employment. London is likely to experience the largest fall in

soft drinks related employment, with over 300 jobs lost in the on-trade element alone.

Similarly, Scotland’s soft drinks manufacturing base could lose almost 130 jobs (Oxford

Economics 2016).

An individual’s decisions are influenced by personal factors such as a buyer’s age,

occupation, and lifestyle. Consumer’s change during their life and buying of products

alter depending on age and stage of life. Age related factors are such as taste in food,

clothing, recreation and furniture. Moreover, environment, values, lifestyle, hobbies and

consumer habits evolve during lifetime. Family life stages change purchasing behavior

and productselection. Traditionally a family life cycle included only young singles and
 30

married couples with children. Nowadays marketers are focusing on alternative,

nontraditional stages such as unmarried couples, childless couples, same sex couples,

single parents and singles marrying later in life. (Kotler&Armstrong 2010, p. 170.) It can

be assumed that consumer’s taste can change during lifetime and has influence on buying

behavior in different stages of life.

A consumer’s occupation and purchasing power influence purchasing decisions and

buying behavior. The income level affects what consumers can afford and the perspective

towards money. People, who share similar occupations, tend to have similar taste in

music, clothing and leisure activities. They usually socialize with each other, and share

the same kind of values and ideas. (Solomon 2004, p. 12.) Individuals from lower income

groups are probably more interested in buying products that are necessary for survival

than spending on luxury brands or designer clothes.

Consumer’s life style tells how the person lives and spends money. It is combined from

earlier experiences, current situation and congenital characteristics. The product choices

that consumers make are related to their lifestyle. An individual’s lifestyle consists of

different life style dimensions. (Khan 2006, p. 18.) These dimensions are:

1. Activities describe how consumers spends their time, e.g. work, hobbies or

vacations.

2. Interests are consumers’ preferences and priorities e.g. family, home or food.

3. Opinions tell how consumers feel about different issues, e.g. themselves,

politics or products. (Plummer 1974, p. 34.)

 31

These life style dimensions express a person’s pattern of living. Lifestyle will influence

consumer’s buying behavior and decisions. (Kotler&Armstrong 2010, p. 170.)

 Psychological factors:

A buyer’s choices are also influenced by four psychological factors, i.e. motivation,

perception, learning, and beliefs and attitudes.

A consumer is an individual who has different kind of needs. These needs can be

biological like thirst or psychological arising from the need of recognition or belonging.

A need can be aroused to a sufficient level of intensity when it alters a motive. A motive

is basically a need that drives a person to seek satisfaction. Abraham Maslow is probably

the most know psychologist who has examined these human needs. He sought to explain

why humans are driven by different needs at different times. (Kotler&Armstrong 2010, p.

173.) Figure 3 shows Maslow’s hierarchy of needs from the most pressing at the bottom

and the least pressing at the top. The basic rule is to satisfy first the basic need before

proceeding up the ladder. When that need has been fulfilled, it stops being a motivator

and a person focuses on the next most important need. Maslow’s needs are:

1. Physiological: basic need such as sleep, food or water.

2. Safety: need to feel secured and protected.

3. Belongingness: need to feel loved and be accepted by others.

4. Ego needs: to accomplish something and have status among others.

5. Self-actualization: to have enriching experiences and feel self-fulfillment.

(Solomon 2004, p. 122.)

 32

Figure 3. Maslow’s Hierarchy of Needs

A person acts according to his or her perception of the situation. Each person receives

thousands of sensory stimuli like light, color, sound, smell, taste and texture per day.

Perception is the process through which these sensations are selected, organized and

interpret to form meaningful picture of the world. People have a possibility to form

different perceptions of the same stimuli due to three perceptual processes: selective

attention, selective distortion and selective retention. At the selective attention process an

individual focuses only on a few stimulus that he is exposed. Consumers might neglect

many stimuli in the environment and only focus on those related to their current need. For

example, a consumer feels thirsty and he/she is looking for some soft drink. The

marketing team of Coca-Cola is very efficient in recognizing the needs of the consumers.
 33

So, in their marketing activities, this team try to presents the solutions of the desired

problem by giving different kinds of advertisements (UK Essays, 2015).

Selective distortion describes how people will interpret information in the way that it

supports what they already believe. Every individual have different perception based on

own experience, beliefs and attitudes. Selective distortion leads people to situations that

are compatible with their beliefs and values. For example for brands, the message that

brands communicate will never be the same among different consumers. When people

are exposed to a huge amount of information and stimuli, they are not able to retain all of

it. Selective retention means what person will retain from particular stimuli or situation.

This can be seen when consumers remember good points about brand they favor and

forget everything good about rival brand. (Kotler&Armstrong 2010, p. 174.)

This is known as incidental learning. People can learn all the time.

Consumer’s knowledge of the world changes constantly as they are exposed to

new stimuli and situations. They can receive feedback that allows them to alter

behavior when finding themselves in the same kind of situation than before.

(Kotler&Armstrong 2010, p. 175; Solomon 2004, p. 83.)

 Social factors: Social factors affect consumer behavior significantly. Every

individual has someone around influencing their buying decisions. The important

social factors are: reference groups, family, role and status. (Perreau, 2014.)
 34

Every consumer is an individual, but still belong to a group. The group to which a

consumer belongs is called a membership group. This is a direct and simple

classification. The second group type is a reference group. The reference group

influences the self-image of consumers and consumer’s behavior. The reference group

provides some points of comparison to consumers about their behavior, lifestyle or

habits. Usually there are many smaller reference groups, which are formed by family,

close friends, neighbors, work group or other people that consumers associate with. The

groups to which a consumer does not belong yet can also influence. These aspirational

groups are groups where a consumer aspires to belong and wants to be part in the future.

(Kotler&Armstrong 2010, p. 164; Khan 2006, p. 58.)

Family members can influence individual consumer’s buying behavior. A family

forms the environment for an individual to acquire values, develop and shape personality.

This environment offers the possibility to develop attitudes and opinions towards several

subjects such as social relations, society etc. A family creates first perceptions about

brands or products and consumer habits. (Kotler&Armstrong 2010, p. 169; Khan 2006, p.

68.) For example, the consumers who have created brand perceptions when they were

young, can carry out these same brand selections in the adult life without even

recognizing that their family influenced these selections.

Individuals play many different roles in their lives. Each role consists of activities and

attitudes that are expected from an individual to perform according to the persons around
 35

him. (Kotler&Armstrong 2010, p. 170.) Social status reflects the position that individuals

have in social groups based on such things as money and wealth, education or

occupation. In many societies status is important and people want the admiration of

others. Social status can be acquired by being successful in life or being born into money.

Product and brand selection often reflects the social role and status. (Wright 200, p. 360.)

Conceptual Framework

As shown in the initial discussion above, the flow of the research process began

with getting response through surveying consumers in Potrero, Malabon.

INPUT PROCESS OUTPUT

Survey and Gather Data
on the Impact of TRAIN
Law on Consumers’
Buying Decision
Assessment and
Analysis of Results of Interpretation of result, to
Evaluation and Factors have conclusion about the
Determining consumers’ buying decision
Consumers’ Buying of SSBs
Decision

Figure 6. Conceptual Framework

Statement of the problem

 36

This study aimed to determine the impact of TRAIN law on consumer’s buying

behavior of Coke in Potrero, Malabon after facing with such a tax. Specifically, this

study seeks to answer the following questions:

1. What is the profile of the respondents in terms of these variables?

a.) Age

b.) Gender

c.) Civil Status

d.) Occupation

e.) Monthly Family Income

2. What is the level of awareness of the respondents to the TRAIN Law?

a.) What is your reason in consuming coke?

b.) Do you drink coke products BEFORE and AFTER implementation of TRAIN

Law?

c.) Are you aware of TRAIN Law?

3. How the TRAIN Law implementations affect the consumer buying behavior of

Coke in PotreroMalabon?

a.) Are you still buying Coke AFTER implementation of TRAIN Law?

b.) Is the respondent aware about the hazardous effect of consumption of

carbonated drinks?

c.) Why do you still buy Coke despite the implementation of TRAIN Law?

4. What are the implications of these on marketing?

 37

Null Hypotheses:

H1: There is no significant relationship between economic impact, price increase,

health aspect, income and advertisement in terms of consumer’s buying decision

of Coke in Potrero, Malabon.

H2: There is no significant impact of imposing tax under TRAIN Lawin

consumer’s buying decision of Coke in Potrero, Malabon.

Significance of the Study

The objective of this study was to explore the impact of newly-implemented TRAIN Law

using scripts guided by the Factors Determining Consumer Buying Decision as well as to

explore the role that habit plays in Coke consumption. This study examined the potential

impact of the TRAIN in consumer’s buying Decision of Coke that may occur when the

consumer in Potrero, Malabon are faced with such a tax.

Scope and Delimitation

 38

The scope of the study is limited only on the impact of consumers’ buying

decision of carbonated drink Coke when faced with taxes. This is to know the buying

decision of the consumers towards the tax increase under newly-implemented TRAIN

Law.

This research will be held only at Potrero, Malabon and three hundred ninety-six

(396) different respondents will be choose to participate in terms of answering the set of

questionnaire for gathering information purposes.

The study is very important because consumers were know a lot about purchasing

decision including the characteristics of consumers, purchasing decision process of

consumers as well as factors affecting the consumers buying behavior, after knowing

these consumers were able to control consumers’ purchasing decision behavior especially

in their business, not only this but also business owners were know the needs and wants

of consumers which were help them in marketing target and segmentation.

Definitions of Terms

Below are the operational definitions used in the paper.

Attitudes: a person’s feelings, both positive and negative, about the behavior in question

(Ajzen, 2006)

Behavior: the way in which someone conducts oneself or behave (Merriam

Webster, 1828)

Consumer: a person who purchases goods and services for personal use.
 39

Consumer Buying Decision: is the study of individuals, groups, or organizations and all

the activities associated with the purchase, use and disposal of goods and services,

including the consumer's emotional, mental and behavioural responses that precede or

follow these activities.

Economic factors: are the fundamental data about the market and economy taken into

consideration when an investment or business value is calculated (Retrieved by:

https://www.myaccountingcourse.com/accounting-dictionary/economic-factors)

Excise Tax: a tax on goods or services that occurs before the time of sale (Internal

Revenue Service, 2013)

Sugar Sweetened Beverage: “any beverage with added sugar or other caloric sweeteners

such as high fructose corn syrup. Examples include soda, sports drinks, fruit drinks, teas,

flavored/enhanced waters, and energy drinks” (Friedman & Brownell, 2012, p.2)

Tax reform: is the process of changing the way taxes are collected or managed by the

government and is usually undertaken to improve tax administration or to provide

economic or social benefits.

Chapter 2
 40

Method

This chapter presents the method that will be used in the study together with the

following information about the research instruments, data gathering procedure,

statistical treatment of data.

Research Locale

This study will be held only at Brgy. Potrero, Malabon City and three hundred

ninety-six (396) different respondents will be choose to participate in terms of answering

the set of questionnaire for gathering information purposes. Taken from the PSA Census

as of August 2015, we have the size of 42,768 as population.

The distribution of the questionnaires was based on the proportion of the sample

size to the total population of the chosen location of the study.

Research Procedures

This is to study the different research instrument that will be used to be successful

this study. By this method we can assure that we produce a significantly useful data to

interpret and provide solutions to the problem.

In getting the Sample size, we will be using the Slovin`s Formula:

N = ___ N ______

1+ Ne

Where: N=total population

e =error margin of 5%
 41

N= 42,768

1+42,768(.05)2

= 42,768

107.92

N = 396

Data Gathering Procedure

To obtain necessary information regarding the study, the researchers did the

following methods:

1. Internet Research Method. The researchers utilized the use of the internet to

accumulate related literature and studies. It includes technical materials, news

about industry trends and developments, and up-to-date statistics to support

the study.

2. Questionnaire. The researchers used pre-written series of questions used in

gathering important information from one or more persons. These were given

to the individuals who had a direct bearing on the study in order to satisfy the

researchers’ goals, and that was to get and measure the opinions of the

respondents of the study.

Statistical Treatment of Data

 42

Data was subjected to statistical treatment using T-test is used to compare two

different set of values. It is generally performed on a small set of data. T-test is generally

applied to normal distribution which has a small set of values. This test compares the

mean of two samples. T-test uses means and standard deviations of two samples to make

a comparison. The formula for T-test is given below:

where:

x1 Mean of the first set of values

x2 Mean of the second set of values

S1 Standard deviation of the first set of values

S2 Standard deviation of the second set of values

n1 Total number of the values in first set

n2 Total number of the values in second set.

The formula for standard deviation is given by:

where:

x = Values given
 43

x = Mean

n = Total number of values

The researchers also used F-test wherein it is a method to compare variance of two

different sets of values. F-test is applied on the F distribution. For calculating F-values,

first find the mean of two given observations and then calculate their variance. F-test

value is expressed as the ratio of variances of two observations. The comparison between

the variances of two sets of data can lead to many predictions. The formula for F-test is

given below:

Variance is given by the following formula:

where:

σ2 = Variance

x = Values given in a set of data

x = Mean of the data

n = Total number of values

Below will be used for the interpretation of the means of perception.

4.51-5.00 SA Strongly Agree

3.51-4.50 A Agree
 44

2.51-3.50 N Neutral

1.51-2.50 D Disagree

1.00-1.50 SD Strongly Disagree

Appendix A

Survey Questionnaire

The Effect of Newly-Implemented TRAIN Law on the Consumers’

Buying Decision of Coke in Potrero, Malabon

Dear Respondent:

Thank you for taking part in this survey. It is understood that you BUY the carbonated
drink Coke. Rest assured that data obtained will be kept strictly confidential and will be used
only for academic purposes. You may, however, choose to withdraw from the study anytime
without penalty.

Name (Optional) _________________

RESPONDENT’S PROFILE

Sex Age __ Occupation

O Male O Student O Self-employed
O Female O Employee

Civil Status Monthly Family Income

O Single O Widow/er O P 10,000 and below O 41,000-60,000
O Married O Separated O 11,000-25,000 O 61,000 and
O Single parent O 26,000-40,000 above

Direction: Put a check to indicate the level of agreement and disagreement you have with
each of these statements using this scale:

AWARENESS TO TRAIN LAW AND ITS EFFECTS TO CONSUMERS BUYING

DECISION
 45

Strongly Strongly Disagree

QUESTIONS Agree
Agree Disagree
1. I am aware of the existence of the
TRAIN Law
2. I believe that TRAIN Law is favorable
to consumers
3. I believe that TRAIN Law is favorable
to the government

4. I believe that price increase and not is

the reason in reduction of coke
consumption

5. I believe that TRAIN Law has a big

effect on coke consumption
6. I will ask additional monetary
assistance from my parents to maintain
my drinking habits of coke.
7. I believe that Parents of habitual coke
drinkers are happy with the
promulgation of the TRAIN Law
8. I believe that there should be a proper
dissemination of the provisions of the
TRAIN Law
9. I am greatly affected by the tax increase
of coke price
10. I am aware on how the tax rates
applies based from the TRAIN Law
11. I believe that upon implementation
of the TRAIN Law, the usual drinking
consumption of coke drinkers has
changed.
12. I believe that TRAIN Law greatly
affects coke sales
13. I believe that TRAIN Law drive
drinkers to quit coke consumption
14. I believe that TRAIN Law
motivates non-coke drinkers from
trying to patronage coke.
15. I am aware that there should be a
levied, assessed and collected Sugar-
Sweetened Beverages excise tax
 46

effective January 1, 2018.

16. I am aware that there consumers
who gave negative reactions to TRAIN
Law
17. I am aware that some consumers
complain about the price increase in
softdrinks
18. I am aware of the negative effects
of drinking softdrinks
19. I am aware of the fact that drinking
softdrinks relieve stress
20. I am aware of the fact that some
softdrinks drinkers quit to buy coke due
to health reasons and not of price
increase
21. I am aware of the fact that TRAIN
law affects consumers more than it
affects the seller.
22. I am aware of the fact that TRAIN
Law is beneficial to the health and
welfare of the general public.

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https://www.kullabs.com/classes/subjects/units/lessons/notes/note-detail/5965