THE RELATIONSHIP BETWEEN COMPLAINT HANDLING, CUSTOMER’S SATISFACTION, TRUST AND LOYALTY AT COMMERCIAL BANKS IN HO CHI MINH CITY45466

THE RELATIONSHIP BETWEEN COMPLAINT HANDLING, CUSTOMER’S SATISFACTION, TRUST AND LOYALTY AT COMMERCIAL BANKS IN HO CHI MINH CITY Ha Van Dung Banking University Hochiminh City ABSTRACT T

THE RELATIONSHIP BETWEEN COMPLAINT HANDLING, CUSTOMER’S SATISFACTION, TRUST AND LOYALTY AT COMMERCIAL BANKS IN

HO CHI MINH CITY

Ha Van Dung

Banking University Hochiminh City

ABSTRACT

This paper focuses on identifying the relationship between the factors of

complaints handling, satisfaction, trust and loyalty of individual customers at commercial banks in Ho Chi Minh City Based on a sample of 243 customers, the paper employs Frequencies, Cronbach's Alpha test, Exploratory Factor Analysis (EFA), Affirmative Factor Analysis (CFA) and Structural Equation Model (SEM) for analysis The results show that the Complaint handling has

a positive impact on Satisfaction, Trust, Loyalty; Satisfaction positively affects Trust, Loyalty and Trust positively affects Loyalty

Keywords: Complaints handling, satisfaction, trust, loyalty, bank.

1 INTRODUCTION

Decrease of the complaints sent by the customers to the banks is a key task need

to be performed by the banks in order to attract and retain the customers nowaday Banks have received many complaints of the customer’sdissatisfaction, unbelief and desire of return However, the banks can take advantage of the customer’scomplaints

to increase their image and reputation in the eyes of customers if they handle the complaints quickly and satisfy the customer’sexpectations, which can invisibly increase customer satisfaction, improve customer trust and loyalty at a higher level Until now, there have been a few researches on the relationship among complaint handling, customer satisfaction, trust and loyalty A typical study of Yap et al (2012) showed that the complaint handling factor has a positive impact on Satisfaction, Trust, Loyalty; The Satisfaction factor positively affects Trust and Loyalty; however, Corresponding author

Email address: dunghv@buh.edu.vn

the impact of the Trust on Loyalty is not mentioned The study of Supriaddin et

al (2015) has also confirmed that the Complaint handling factor positively affects Satisfaction, Trust, Loyalty and the relationship among factors of Satisfaction, Trust, Loyalty

Therefore, the objective of this study is to identify and measure the extent of the impact of Complaint Handling on Satisfaction, Trust, Loyalty; as well as the impact

of Satisfaction on Trust, Loyalty and the impact of Trust on Loyalty of individual customers at commercial banks in the area of Ho Chi Minh City Since then, policy implications are proposed to improve Satisfaction, Trust, Loyalty of individual customers at commercial banks in the area of Ho Chi Minh City

2 THEORETICAL BASIS

Satisfaction, Trust and Loyalty

Customer’s satisfaction has been conceptualized in two different ways: Satisfaction for transactions and general satisfaction (Yap et al., 2012) Most studies have been focused on general satisfaction, which refers to customer’s satisfaction about the overall transactions and operations of banks based on all meetings and trading experience with the banks (Yap et al., 2012) If there is any dissatisfaction, customers will be less likely to use bank services in the future According to Hansemark and Albinsson (2004), satisfaction is the overall attitude of the customers towards the service supplier or the emotional response to the difference between what the customers expect and what they receive, related to meeting some of customer’s needs, goals or desires In this study, satisfaction is defined as the overall attitude of customers toward the bank

Ranaweera and Bohhu (2003) argued that belief is a stronger emotion than satisfaction and therefore it can be predicted to influence loyalty more According to Ganesan (1994), that trust is credibility, belief in everyone's actions Consequently,

in this study the trust is defined that the banks provide services reliably and meet the needs and quality of customer’s needs According to Aydin and Ozer (2005), the trust is that one party believes that other party will take actions to bring positive results to that party Therefore, in building trust, customers not only have seen positive results but also believed these positive results to be continue in the future The customer’sloyalty has been recognized as a factor that governs the success

of every organization In Lam and Burton’s studies (2006), they found that loyal customers are more likely to engage in repurchases from suppliers or increase the number of their purchases from a particular supplier There are two aspects of customer’s loyalty: loyalty in behavior and loyalty in attitude Behavior aspects refer to customer behavior on repurchases and attitude aspects refer to customer intention

to acquire and introduce services to others (Dick & Basu, 1994) According to Ehigie, (2006) loyalty is defined as a feeling of customer commitment to a product, brand, marketer or service This study is defined loyalty as the intention of customers

to continue to use, to buy or repurchase services in the future and is willing to recommend banks and services to others

Complaints and Complaint handling

Complaints are a part of negative performance due to the mismatch in the distance between one's reality and expectations (Yap et al., 2012) Customer’s complaint is a term including all customer’s dissatisfied actions to the provided purchase or service

In case of dissatisfaction, there are at least four customer’s feedback capabilities (Tjiptono, 2005), specifically as follows:

Firstly, doing nothing; that means they do not make any complaint to anyone; But,

they turn to other suppliers

Secondly, discontinuing use of products/ services and word of mouth to family, friends

and relatives As a result, organizations may lose potential and recent customers

Thirdly, making a direct complaint and or claim If this situation really happens, the

organization still has an advantage At least the organization can provide valuable feedback from the various complaints submitted and have the opportunity to solve the issue before it is widely spread If the complaint is effective and successfully solved to satisfy the customers, the previous unsatisfied customer will be satisfied and continue to buy the organization's product

Fourthly, Complaints are made via the mass media; This is the scariest form of

complaint for every organization Marketing communications and public relations play an important role in predicting and handling this type of complaint

Fifthly, customers are dissatisfied and will do something that aims to hurt or avenge

the organization Actions can be taken in various forms, such as destroying the display product, hiding or deleting things/products from the previous location Complaint handling in this study is defined as the extent to which customer’s complaints will be handled by the bank

3 OVERVIEW OF RELEVANT STUDIES AND PROPOSED RESEARCH HYPOTHESES

Customer’s satisfaction was found to have a positive correlation with customer’s loyalty (Lam & Burton, 2006; Ball et al., 2006) And it is the foundation for increasing customer trust in the banks (Yap et al., 2012) When customers are satisfied, they will often trust every bank's operation because the expectation on their transactions has been satisfactorily met (Yap et al., 2012)

It must be affirmed that customer satisfaction is the most important factor affecting customer loyalty (Kanning & Bergmann, 2009; Hoq & Amin, 2010) In the banking sector, Ladhari et al (2011) identified customer satisfaction as a total assessment of the overall level of services provided It is thought that satisfaction is likely to increase customer loyalty (Vesel & Zabkar, 2009; Akhtar et al., 2011) Therefore, the research topic proposes a hypothesis:

Hypothesis H1 Satisfaction has a positive impact on trust.

Hypothesis H2 Satisfaction has a positive impact on loyalty.

Research by Doney and Cannon (1997) showed that trust has a positive and significant impact on loyalty The trust is also demonstrated by Hsu (2007) which has a positive

impact on loyalty and helps attract new customers and then can retain existing customers in addition to affecting overall satisfaction Customer trust has a positive and meaningful impact on customer loyalty (Vauuren et al, 2012; Pratminingsih et al, 2013; Majid, 2013) Customer loyalty will be arised if customers have high trust in the Bank in resolving complaints from customers (Supriaddin et al., 2015) Therefore, the research topic has proposed a hypothesis:

Hypothesis H3 Trust has a positive impact on loyalty.

Levesque and McDougall (1996) found that if customers have a problem, they can respond by finding a new supplier, speaking up to try to fix the problem, or being loyal to the supplier because they believe that everything will be good again When customers complain, they give the organization a chance to fix the problem and interestingly, if the organization successfully solve, it will increase customer loyalty (Yap et al., 2012) Good complaint handling can make angry, frustrated customers loyal ones and help reduce dissatisfaction (Spreng et al., 1995) Johnston (2001) stated that the handling of complaints not only brings satisfaction to customers but also leads to improved operations and improved financial performance, increasing consumers trust The fact that the study of satisfaction with special grievance proce-dure has also shown a clear relationship between grievance handling and intention

of loyalty and next buy (Halstead & Page, 1992)

Hansemark and Albinsson (2004) found that consumers encouraged to complain whose satisfaction will be increased because their problems are better solved Their research showed that dissatisfied customers can become satisfied when complaints are accepted and solved Research by Levesque and McDougall (1996) showed that customer complaints handling can have an impact on customer satisfaction and maintenance of customer’s transactions In Vietnam, Ho and Le (2014) show that complaints handling has a positive impact on loyalty.Therefore, the research topic has proposed a hypothesis:

Hypothesis H4 Complaints handling has a positive impact on satisfaction.

Hypothesis H5 Complaints handling has a positive impact on trust.

Hypothesis H6 Complaints handling has a positive impact on loyalty.

4 RESEARCH METHOD

The used research methods are as follows

- Qualitative method: In order to add the observed variables to the scales and

adjust the observed variables of the scales for the factors in the research model Preliminary research is conducted in a sequential manner based on theory and an overview of previous relative studies to propose preliminary research hypotheses and models After that the author conducted a group discussion with 10 experts

to add observed variables to the factors and adjust the observed variables of the Complaints handling, Satisfaction, Trust and Loyalty factors in the preliminary research model in accoradance with the research context of commercial banks in the area of Ho Chi Minh City The research results will form the basis for building a scale and questionnaire to collect data for quantitative research

- Quantitative method: Used to study the relationship among Complaint handling,

Satisfaction, Trust and Loyalty of individual customers to the Commercial banks in the area of Ho Chi Minh City The sample in quantitative research was conducted

by a convenient sampling method with a sample size of 243 customers The data

is collected by the survey via a pre-designed questionnaire and sent directly to individual customers to interview and receive results immediately The collected data

is processed by SPSS 20 and AMOS 20 software including statistics, assessment

of reliability of scales with Cronbach's Alpha test, EFA Exploratory factor analysis with Barlett and KMO tests, CFA Chartered Financial Analyst and SEM model showed the relationship among Complaints handling, Satisfaction, Trust and Loyalty of individual customers to commercial banks in the area of Ho Chi Minh City

All variables in the research model are on the 5-level Likert scale, specific variables are in Table 1

Table 1: Measurement items for each construct

1

C o m p l a i n t

handling

KN1 How well was your most recent complaint handled?

Chatelin and Esposito Vinzi (2002)

2 KN2 Imagine you have to complain to this bank because of bad quality of service/product

3 KN3 How well do you think your complaint will

be handled?

4

Satisfaction

HL1 Overall, I am satisfied with this bank Levesque and

McDougall (1996) and Dimitriades (2006)

5 HL2 My bank meets my expectations

6 HL3 The overall quality of the service provided

by this bank is excellent 7

Trust

NT1 I feel that I can rely on this bank to serve

well

Ball and et al (2004) and Ball and et al

(2006)

8 NT2 The bank treats me in an honest way in every transaction

9 NT3 I believe that I can trust this bank will not try to cheat me

10 NT4 This bank is reliable because it is mainly

concerned with the customer’s interests 11

Loyalty

TT1 I prefer this bank above others

Beerli and et al (2004) and Ehigie (2006)

12 TT2 I intend to continue using this bank

13 TT3 I would recommend this bank to others

14 TT4 I am a customer loyal to my bank

15 TT5 I am thinking of closing my account with

this bank

Source: Author synthesis.

According to Trong Hoang and Nguyen Mong Ngoc Chu (2008), the sample size must be at least four or five times of the number of observed variables Thus, in

this study, the author used the minimum number of research sheet corresponding

to 15 observed variables: 5 x 15 = 75 observations However, in order to ensure the persuasion and quality of the model results, the author conducted a survey of 250 votes, including 243 valid questionnaires with all the information on the questionnaire

Table 2 Descriptive statistics results

Variable Content Frequency (n) Percent (%)

E d u c a -tion

Intermediate and college 56 23.0

Age

Income

< 5 million VND 29 11.9

5 – 10 million VND 156 64.2

> 10 million VND 58 23.9

Source: SPSS Analysis Results.

There were 98 women among 243 customers accounting for 40.3% and 145 men accounting for 59.7%, this result showed that, in 243 customers, the number of men accounted for more than women Education is mainly university level, accounting for 49.8% The main age group below 40 years old accounts for 81.9% The income level from 5 to 10 million VND/month accounts for the highest rate with 64.2%

5 RESULTS AND EVALUATION

5.1 Result

The results of the reliability test of the scale of factors showed that, Cronbach’s Alpha coefficient reaches the largest value of 0.904 belonging to the Trust factor; The smallest Cronbach’s Alpha coefficient of 0.766 belongs to the Complaint handling factor All Cronbach’s Alpha coefficients of the factors are relatively high from 0.7 upwards The correlation coefficient of the total variables is greater than 0.3, showing that the variables are closely correlated Hence, all variables are added

to the regression analysis

Thus, with the analysis results, the reliability of the scales can be concluded that,

15 variables (including variables of the factors) added to the analysis are all met the requirements Therefore, all variables are added to the analysis in the following sections

Table 3 Cronbach’s Alpha analysis results

Factor Cronbach’s alpha Variable

Source: SPSS Analysis Results.

Total 15 variables belonging to factors that satisfy the conditions of analysis and reliability of Cronbach's Alpha are added to the exploratory factor analysis (EFA) EFA's mission is to explore the structure of a scale of factors: KN (Complaint handling), HL (Satisfaction), NT (Trust) and TT (Loyalty) After ensuring proper implementation of the EFA procedure, the factors will be tested to clean the data

Conducting EFA analysis for a total 15 variables of the scales of factors, the obtained research results are presented in Table 4

Table 4 EFA analysis results

Bartlett's test of sphericity

Approx Chi-Square 2,808.533

Source: SPSS Analysis Results.

With the results of factor analysis of variables belonging to factors, we obtained coefficient of KMO = 0.798, Sig = 0.000 This confirmed the KMO value ensuring the appropriateness of exploratory factor analysis and the significance level of the data added to factor analysis The Chi-Square statistic of Bartlett's test has the value

of 2,808.533 with significance level of Sig = 0.000 << 0.05

Table 5 Rotated Component Matrix

Component

TT2 0.937 TT5 0.935 TT3 0.836 TT1 0.638 TT4 0.618

Eigenvalue = 1,350 Cumulaive % 34.851% 51.413% 63.017% 72.018%

Source SPSS Analysis Results.

At the same time, analysis of variance explained showed that it reaches 72.018%

This value is quite high with 72.018% data variation explained by four factors The scales are extracted and accepted The stopping point when extracting factors at the fourth factor with a specific value of 1,350 is greater than 1 (this confirmed that the added variables are arranged into four groups of factors)

The results of factor rotation showed that all factors are satisfied (factor load values are greater than 0.5) and arranged in four separate groups of factors, which are KN (Handling complaints), HL (Satisfaction), NT (Trust) and TT (Loyalty)

CFA factors analysis is studied via AMOS software with the purpose of checking the impact of factors on each other For CFA analysis’s implementation, the main groups

of factors added to the analysis are: KN (Complaint handling), HL (Satisfaction), NT (Trust) and TT (Loyalty)

After CFA factor analysis’s implementation, standardized results are shown in Table 6

Table 6 CFA analysis results according to standardized coefficients

2 Chi-square’s P-value 0.000

Source: AMOS Analysis Results.

The results showed that the value of Chi-square/df = 2.080 is less than 3, GFI = 0.917 is greater than 0.9, TLI = 0.959 is greater than 0.95, CFI = 0.969 is greater than 0.95, and RMSEA = 0.067 is smaller than 0.1; thus, it can be said that the model is consistent with market data At the same time, the standardized weights are greater than 0.5 That is statistically significant, so the concepts gain convergent value

Thus, with the results of CFA analysis, the main factors are added to the analysis, namely: KN (Complaint handling), HL (Satisfaction), NT (Trust) and TT (Loyalty)

Image 1 CFA analysis results according to standardized coefficients

Source AMOS Analysis Results

Table 7 Composite reliability and Variance extracted

No Factor Composite reliability Variance extracted

Source: Authors' calculation

Along with that, the research on calculating the total reliability value and the total variance explained is performed to assess the reliability of the scales The results showed that the general reliability values and total variance explained of all factors were greater than 0.5 This showed that the factors’ reliability added to the analysis

is ensured

In addition, the P-value calculation of the correlation coefficients for each pair showed that the P-value is less than 0.05 (ie less than 5%), so the correlation coefficient

of each concepts differ from 1 at 95% of reliability Therefore, the concepts gained discriminatory value

Table 8 SEM analysis results according to standardized coefficients

Source: AMOS Analysis Results

In order to carry out the analysis of the SEM structure model showing the relationship among Complaint handling, Satisfaction, Trust and Loyalty of individual customers at commercial banks in the area of Ho Chi Minh City, the author converted the model obtained from the results of CFA analysis to the SEM structure model

Based on the results of CFA analysis it can be easily seen that the results of the SEM linear structure model are consistent with market data This is reflected in indicators such as: value of Chi-square/ df = 2,080 is less than 3, GFI = 0.917 is greater than 0.9, TLI = 0.959 is greater than 0.95, CFI = 0.969 is greater than 0.95 and RMSEA

= 0.067 is less than 0.1

Image 2 Results of the structural model analysis Source AMOS Analysis Results

Table 9 Results of the structural model analysis

***: 0,000 (= 0,0%)

Source: AMOS Analysis Results

At the same time, based on the analysis results, we found that the P-Value of the impact relationships among the factors is less than 5% Therefore, the relationship