The impact of loyalty programs service quality and store reputation on customer satisfaction and loyalty

MASTEROFBUSINESS Honours HoChiMinhCity–Year2016... LOYALTY ID:22130056 MASTEROFBUSINESS Honours SU PERVISOR:Dr.PHAMNGOCTHUY HoChiMinhCity–Year2016... .i STATEMENTOFAUTHENTICATION...ii TA

MASTEROFBUSINESS (Honours)

HoChiMinhCity–Year2016

LOYALTY

ID:22130056

MASTEROFBUSINESS (Honours) SU PERVISOR:Dr.PHAMNGOCTHUY

HoChiMinhCity–Year2016

ACKNOWLEDGEMENTS

Thec o m p l e t i o n o f t h i s t h e s i s i s a r e m a r k a b l e a c h i e v e i n myl i f e I t

h a s b e e n severalmonthsandrequiredagreateffortfortheresearch.Iwouldliketoexpressmyg r a t i t u d e toa l l I S B s t a f f s t h a t supportedn e c e s s a r y materialsa n d h e l p e d

s u m m i t myp a p e r s Ialsowishtoexpressmyd e e p l y thankyouforthesupport,patienceanden co ur ag emen t frommyfamily,mycolleaguesandmyclassmateshelpedmetocompletingthisthesis

Especially,IwouldliketogivemyspecialthankstoDoctorPhamNgocThuyforsupportingandguidingmewiththisresearch

g h e r d e g r e e t o anyuniversityorinstitutionotherthanInternationalSchoolofBusiness(ISB)

Ialsocertify

thatthethesishasbeenwrittenbyme.AnyhelpandassistancethatIh a v e receivedinmythesishavebeenappropriatelyacknowledged

HoChiMinhCity,20December2015

DangBichPhuong

TABLEOFCONTENTSACKNOWLEDGEMENT .i

STATEMENTOFAUTHENTICATION ii

TABLE OFCONTENTS iii

LISTOFFIGURES v

LISTOFTABLES vi

ABSTRACT vii

Chapter1:Introduction 1

1.1 Researchbackground 1

1.2 Researchproblems 2

1.3 Researchobjectives 4

1.4 Research methodologyandscopes 4

1.5 Significanceofthestudy 5

1.6 Thestructureofthe study 5

Chapter2:Literaturereviewandhypotheses 7

2.1 CustomerLoyaltyProgram 7

2.2 CustomerLoyaltyProgramsof bigretailersinHoChiMinhCity 8

2.3 ConceptualizationofLoyaltyprogramservicequality 10

2.4 Storereputation 15

2.5 CustomerSatisfaction 17

2.6 CustomerLoyalty 18

2.7 Theconceptualmodel 19

Chapter3:Research methodology 23

3.1 Researchdesign 23

3.2 Measuresoftheconstructs 24

3.3 Researchprocess 26

3.4 Data analysismethod 28

Chapter4:Dataanalysisandfindings 31

4.1 Samplecharacteristics 31

4.2 TheCronbach’salphatest 32

4.3 Exploratoryfactoranalysis(EFA) 35

4.4 Multipleregressionanalysis 37

4.5 Revisedconceptualmodel 40

4.6 Explanationforthefindingsresultsof thehypotheses 42

Chapter5:Conclusions,inplications andlimitations 46

5.1 Conclusions 46

5.2 Managerialimplication 47

5.3 Limitationsandfutureresearch 59

References 51

Apendix 58

AppendixA:Guidelineforquanlitativein-depthinterview 58

AppendixB:Quentionnaire inEnglish 62

AppendixC:Questionnaire inVietnamese 66

Appendix D:Histogram,NormalRegression&ScatterplotofDependent 71

Table2.1:ThecomparisonbetweentheCustomerLoyaltyProgramofthreemainbrandnamesofsu

permarketinHoChiMinhCity:Co.opmart,BigCandLotteMart 9

Table2.2:Hypothesesoftheresearch 21

Table3.1:MeasurementScalesfrompreviousresearchbasements 24

Table3.2:MeasurementScalesforcustomersatisfaction 25

Table3.3:Measurementofthevariablesofcustomersatisfactionandcustomerloyalty 25

Table3.4:Measurementofthevariablesofstorereputation 25

Table4.1:DescriptiveStatisticsfortheSample(N=209) 31

Table4.2:TheresultsofCronbach’alphatest 33

Table4.3:KMOandBartlett'sTestforallvariables 35

Table4.4:TotalVarianceExplainedforallvariables 36

Table4.5:RotatedComponentMatrixforallvariables 37

Table4.6:Correlationsorallvariables 38

Table4.7:ModelSummary 38

Table4.8:ANOVAalpha 39

Table4.9:Coefficientsalpha 39

Table4.10:Finalizedhypothesesoftheresearch 41

Table4.11:Summaryofhypothesestestingresults 42

Table4.12:Statisticsoffrequencyoffactorsthataffectcustomerchoosing toshopatasupermarket 44

Table4.13:Thenumberofsupermarketbrandthatcustomersparticipateinthecustomerloyalty pro gram 45

Figure2.1:Theproposedconceptualmodelforthethesis 21Figure3.1: Theprocessofthesisresearch 23Figure4.1: Therevised andfinalizedresearchmodel 40

d h o w g o o d o f t h i s p r o g r a m p l a y s a n i m p o r t a n t r o l e ina t t r a c t a n d r e t

a i n customers.Structuralequationmodelingisusedtotesttheseimpacts,utilizingasampl

eo f 250supermarketcustomersinHoChiMinhCity.Allthecustomerswhoarei n t e r v i e w

e d m u s t havet h e memberc a r d ofoneorm o r e supermarkett ha ttheyusuallyshopat

Theresults i nd ica te tha t the t hr eee lem en ts o f l o y a l t y program’ss e r v i ce

q ual it y whichareRegulation(includedRewardsandPolicy),Serving(includedStaffand

C o m m u n i c a t i o n ) a n d Personalizationplays i g n i f i c a n t r o l e i n i n c r e a s i n g t h

e c u s t o m e r satisfactiona s wellascustomerl o y a l t y Ina d d i t i o n , t h e f i n d i n g s o f t h i

s r e s e a r c h a l s o p r o v i d e evidenceofthesimilaritybetweencustomersatisfactionandcustomerloyaltyint h e mindsetofsupermarketretailercustomer.Particularly,theeffectofstorereputationi s n e g l i g i b l e a n d t h e customersd o n o t paya t t e n t i o n t o t h i s e l e m e n

t i n j u d g i n g t h e i r satisfactionaswellastheirloyaltyforasupermarketbrandname

Thecustomersa r e persuadedbytheR e g u la t i o n , Servinga n d Personalizationo f t h

e l o y a l t y program o f o n e specifics u p e r m a r k e t c o m p a r e d t o o t h e r supermarkets.T h

e r e s e a r c h findingsalsoengagewithsomelimitationsinthestrengthofmeasurementscale,t h esamplingmethodaswellasthefitnessbetweentheresearchmodelanddata.Itresultsin thevaluabledirectionsforfurtherresearchesinfuture

CHAPTER1 INTRODUCTION

Thisc h a p t e r i n t r o d u c e s t h e b a c k g r o u n d oft h e Vietnameses u p e r m a r k

e t industrya s wellast h e statuso f c u s t o m e r satisfactiona n d customerl o y a l t y

o n andretailsectorbytheopeningofhundredsofstoresandsupermarkets.Vietnam'sretailmarkethas alwaysbeenra ted as promising,attractive fo r business, i n v e s t o r

s inandoutofVietnamterritory.ManyinternationalretailershaveoperatedinVietnamb e s i d e

s t h e l o c a l c o m p a n i e s , a n d t h e r e a r e stillm a n y o t h e r i n t e r n a t i o n a l g r

o u p sinterestedi n e n t e r i n g t h e market.A n d u n d e r r e p o r t o f A T K e r a n e y ( 2 0 1

4 ) , Vietnamretailmarketisinthetop30worldbestnewretailmarketsintheperiodfrom2 0 0 7 to2011.Moreover,basing onthe2014r ep or t ofD e l o i t t e SoutheastAsiaLtd,Vietnam’sr etailmarketi s a l s o c h a r a c t e r i z e d a s b e i n g o n e o f

t h e mostdynamicmarketsin t h e re g i o n withh i g h a n n u a l g r o w t h r a t es Hanoia n dHoC h i MinhCityhavebeenrankedamongthetop10

Asiancitiesforretailexpansionin2014.Overthel a s t fewyears,Vietnam’sretailsectorhasalsowitnessedhealthygrowthrates,withretail salesgrowingby60%from2009-

2013,andforecastedtoreachUS$109billioni n 2 0 1 7 T h e r e t a i l m a r k e t i n t h e

c o u n t r y todayisn o t onlyc o m p e t i t i o n b e t w e e n domesticenterprisesbutalsowithlargeforeignretailers.HugesystemsuchasCo.opmartsupermarketchainisleadingthemarketbutthebigretailgroupsofforeignc o u n t r i e s i n c l u d e B i g C , L o t t e , M e t r o C

a s h & C a r r y , a l s o o c c u p i e d a c o n s i d e r a b l e markets h a r e I n t h e n e a r f u t

u r e , V i e t n a m i s c u r r e n t l y u n d e r g o i n g n e g o t i a t i o n top a r t i c i p a t eintheTrans-PacificPartnershipAgreement(TPP),FreeTradeAgreement

Vietnam-EU(EVFTA).Forthesenegotiations,itwillbegreatforVietnam’se c o n o m y a n d f o r i t

s p e o p l e , a n d maya l s o p r o v i d e investorswitha t t r a c t i v e o p p o r t u n i t i e s ShouldVietnamparticipate,competitionbetweendomesticandforeignr e t a i l e r s w i l l l i k

e l y t a k e p l a c e o n a moreequalf o o t i n g I n a d d i t i o n , V i e t n a m i s e x p e

c t e d toexperienceaninfluxofretailersfromJapan,SouthKoreaandThailand.L a r

g e d ev el o p e r s, s u ch asAEONMall,CentralGroup,andCJGroup,haveexpressedg r e a t interest,graduallyexpandingtheirpresenceandannouncinglong-termplansfort h e market.Forexample,Japan-

basedbiggestretailgroup,AEON,isplanningtobuilda t leastsevenshoppingcentersinVietnam.Otherinternationalgrouphavelong-

termp l a n s tobuildupmassivenumberofsupermarketlocationsinVietnam,especiallyinHoChiMinhCity

In

thiscontext,inordertosurviveanddevelop,retailenterprisesmusthavethespecificstrategyinordertoenhancetheircompetitiveness.Inparticular,developinga n d maintainingaloyalcustomerbaseandraisingthestorereputationasbackgroundb a s i s forthedevelopmentofenterprisesisacrucialrequirement

1.2 Researchproblems

Currently,mostlarge

retailersinVietnamhasstartedbuildingcustomerloyaltyp r o g r a m fort h e i r o w n, f o r example:" C u s t o m e r L o y a l t y Program"o f Co.opmartor"BigCoinPrograms"ofBigC.Thepurposeoftheseloyaltystrategiesiscultivatingstrongr e l a t i o n s h i p s w i t h t h e

i r c u s t o m e r s , w h o a r e e x p e c t e d tor e g u l a r l y return f o r additionalp u r c h a s e (

D o w l i n g a n d U n c l e s , 1 9 9 7 )

T h e r e s e a r c h e r l e a r n a b o u t t h e l o y a l t y programservicequalityintheretailmarketofVietnam'sneighboringMalaysiat h r o u g h thestudyofOmarandMusa(2011),Omaretal(2013).ResearchbyOmara n d Musa( 2 0 1 1 ) a l s o p r o p o s e d t h e m o d e l

o f l o y a l t y p r o g r a m s e r v i c e q u a l i t y T h e studyalsopointsouttherelationshipbetweenloyaltyprogram’sservicequalitywitht h e level ofsatisfactionandloyaltycustomersuccess.R e l a t i o n s h i p be t w e e n l o y a l t y program’ss e r v i c e q u a l i t y w

i t h t h e d e g r e e ofsatisfactiona n d c u s t o m e r l o y a l t y a r e reaffirmedthroughresearchZakariaetal(2014).Inaddition,thepositiveimpactof

satisfactiononloyaltycustomersuccessisprovenbystudiesofZeithamletal(2002).B e s i

d e s the con si der ab le investmentoncu st ome r l o y a l t y program’sser vi ceq ual it

y ,r e t a i l e r nowadayspaymoreattentiononthestorereputationsincepreviousresearchesshowthatcustomersareaffectedbythestoreattributesandconsiderthemtoassessp e

n scope.Yet,i n t h e p r e s e n t e n v i r o n m e n t o f i n c r e a s e d competitionwithr a p

i d marketentryofne w storeconceptsandformats,them ana ger ia l challenge ofi n

c r e a s i n g

storeloyaltyalsopresentstheresearchchallengeofamorein-depthu n d e r s t a n d i n g andanempiricalestimationofthisimportanttypeofconsumerb e h a v i o r Thereissomeevidencethatstoreloyaltymaybe(positively)relatedtostorer e

p u t a t i o n However,ith a s r e m a i n e d u n c l e a r whatt h e e x a c t r e l a t i o n s h i pbetweensatisfaction,storereputationandloyalty

inaretailsettingis.Forinstance,oneq u e s t i o n t h a t h a s b e e n l e f t u n a n s w e r e d c o n

c e r n s t h e i s s u e whethert h e r e i s a d i r e c t relationshipbetweenstorereputationandstoreloyaltyorwhetherthereisanindirectr e l a t i o n s h i p viastoresatisfaction.Inthisarticleweattempttoanswerthisquestion

Tohelpclarifytheissuesoutlinedabove,theauthordecidedtopic:"Theimpactofloyaltyprogram’sservicequalityandstorereputationoncustomersatisfactionand

l e n t e r p r i s e s c a n u s e to a d j u s t t og a i n g r e a t e r efficiency.Researchwillbedonebasedonsurveyofmembersofloyaltyofthethreeb i g g e s t chainsofsupermarketinHoChiMinhCity:Co.opmart, BigC,LotteMart.T h e threebrandsofsupermarkettargettothesamemaincustomerwhoarewomenfr o m 20-

50yearsoldwiththemainproductisdailyconsumptionproducts

1.3 Researchobjectives

Theprimaryaimofthisstudyistoinvestigatetherelationshipbetweenloyaltyprogram’sservicequalitywiththesatisfactionandloyaltyofcustomers.Specifically,i t canbestatedasfollowed:

 Identifyandmeasuretheinfluenceleveloftheimpactofloyaltyprogram’sservicequalityandstorereputationoncustomersatisfaction

 Measuretheinfluenceofcustomersatisfactiononcustomerloyalty

1.4 Researchmethodologyandscopes

Theresearchwasconductedonmemberswhobuygoodsandjoinintheloyaltyprogram’sservicequalityofCo.opmart,BigCandLotteMartintheareaofHoChiMinhCitywhichisabigcityinVietnam.Theauthorapproachandinterviewdirectlyt h e customerswhentheygotothebikeparktofindtheirmotobikeaftershoppingatt h e supermarket

The author applieddataanalysistool(Microsoft Excel andSPSS)tohandlethecoll ect ed dat a andtop e r f o r m theresearch Andthen, usingSPSSt o testth e scaler e l i a b i l i t y (Cronbach’sAlpha),Factoranalysistodeterminewhichofafairlyla rge seto f i t e m s wereansweredmosts i m i l a r l y byt h e r e s p o n d e n t s , usingMultiple

Inthischapter,theauthorpresentsthefundamentaltheoriesanddefinitionofe a c h mentionedc o n ce p t a n d t h e o r e t i ca l modelingwitht h e p r o p os e d hypotheses.I n t h i s chapter,theconceptualmodelofthestudyisalsopresented

Thefinalchapteraddressesthemainresultsofthe

research,thecontributionofthestudyinmanagementtheoryandpractice.Summaryofthestudy,limitationsandsuggestionsforfutureresearchesarealsomade

CHAPTER2 LITERATUREREVIEWANDHYPOTHESES

Thischapterisanoverviewofcustomerloyalty

program,customerloyaltyprogram’sservicequality,storereputation,customersatisfactionaswellascustomerloyaltyandt h e i r antecedentswhichhavebeenconductedbypreviousresearchers.Basedonthesestudies,aconceptualmodelisproposed

2.1 CustomerLoyaltyProgram

Customerl o y a l t y p r o g r a m s a r e w i d e l y d e f i n e d a s combineds y s t e m o fmarketingb e h a v i o r s t h a t a i m t o makec u s t o m e r s moreloyalbyb u i l d i n g u p p e r s

o n a l i z e d relationshipwiththem(MeyerWaarden,2008).Theseprogramscanbeu t i l

i z e d a s value-sharingtools tohelpincreasingcustomer’sperceptionoftheretailers( B o l t o n etal,2000;YiandJeon,2003).TheveryfirstloyaltyprogramwasmadebyT e x a s InternationalAirlinein1979throughtherewardingtothepassengersbasedonthelengthoftheirjourney.Despitetherapidlygrowingtrendoftheseprograms,manyr e s e a r

c h e r s q u e s t i o n whetherl o y a l t y p r o g r a m a c t u a l l y c r e a t e customerl o

y a l t y o r whetherloyaltyarisesfromsomeotherfactor(HoffmanandLowitt,2008)

Inthefirststep,thecustomerwillhavetoaccumulatepointswhenshopping.Althought h i s i s n o r e a l v a l u e u n t i l i t i s s u f f i c i e n t t o e x c h a n g e t h e r e w a r d , r

e c e n t studieshaveshownt h a t th e accumulation ofpointsth at havev e r y importantimplicationsintermsofpsychology(YiandJeon,2003).Psychologicalbenefitswillincreasecustomersatisfactionwhenmakingtransactionsandtherebyalsoincreasingt h

e valueperceivedbycustomerswhentheypurchasegoodsofthebusiness.Becauseo faccumulatedpointscanbeconvertedintorewardsinthefutureitwillalsocreatecustomersexpectaniceeventforthefuture.Thepointtogiftexchangesystemwillh e l p increasetheabilitytomaintaincustomerrelationshipsandbusiness

Thesecondstepistheconversionstepfromaccumulatepointsintogifts.Inthisstep,thec

psychologicalandphysicalvaluefromloyaltyprograms.T h e r e w a r d t h a t c u s t o me r s r e

c e i ve a f t e r c o n v e r s i o n ch a r g e willh a v e t h e

functionofincreasingcustomersshoppingbehavior (HoffmanandLowitt,2008).Ther e s p e c t f u l feelingswillhelpincreasesatisfactionofcustomersanddeepentheirrelationships withenterprises.Allthepsychologicalbenefitsandmaterialbenefitsaretransformedi n t o a t t r a c t i o n f o r c u s t o m e r s , ori n o t h e r wordst o i n c r e a s e c u

s t o m e r loyalty.Inaddition,loyaltyprogramalsotargetsmanyothergoalsas:tocollectandt r a c k datarelatedtocustomerswhoareshoppingforproductsandservicesofenterprises,supportthepublicrelations

Inmostl o y a l t y p r o g r a m , b e n e f i t s playt h e mostc o m p e l l i n g rolet

o a t t r a c t customers;however,the mostsignificantpartsofloyaltyprogramarethedesignorstructurea n d c u s t o m e r service.Althought h e r e a r e manyresearchesr e

l a t e d t o t h i s t o p i c , thereisnotestedscalefortheretailersusingtomeasureloyaltyprogramserviceq u a l i t y as wellasappraisingthe successleveloftheprogram’sfactors.Zeithamletal

g o r d i f f e r e n t , c o n s u m e r s w i l l movef r o m o n e p r o g r a m toanotherinresponsetospecificpromotionalcampaigns(Mauri,2003)

herealpictureoflo yalty programsofretailers.Themostsimilaritycharacteristicsamongtheseloyalty

programsare th e allowingre tai le rs t o gat he rd ata on customerbeh av io ri no rd er to

- Informationboardi n th ecarpark,servicear ea, casharea,lockers,

- Banner,billboardi n t h e store

- ViathesoundofCo.opm artRadio

- Posters,billboardsouts idethestore

- Casharea

- Servicearea

- ViathesoundofBigC Radio

- Usingshelftalkertore marktheproductsthat savingBigCoin

- Informationboardatthe servicearea

- Posters, billboardsoutsidethesto re

- Register viawebsite

Registerdirectlyatt h e s tore

Registerdirectlyatthest ore

- Opennewmemberc a r

d withnofee

- PresentIdentityCard

- Filli n t h e registerfor m

- ReceiveThemainmem berc a r d a n d thekeyc haincard

- Opennewmembercar d withnofee

accumualtingprocesswi llstartagaini n then e w y ear.

- Relatingtot h e remainac cumulatingmarkswhich havenot beentransfered into

- 200VND=1 Big Coin

- SavingmoreBigCoin whenbuyingspecialpr oductsthatBigC c o op

e r a t e topruduce

- BigCointhatcustomer savescanb e u s e d asc ash(ex:2 00 0 BigCoin s=2000 VND)

- After30Juneeveryyea r,allremainingBigCoi

ni n t h e card

- 100VND=1Mark

- Aftersazvingu p t o 50 ,000

Marks,customerc a n u sedthisaccumulating marksas cash.

- Attheendoft h e year, customerwillbe rewar dedbasedont h e buyin grvenue:

+L e s s than3 0 millionV ND:1%

+From30tolessthan40 millionVND:2%

voucher,theprogramwil lautomaticallytransfert

o nextyearsavinga n d t

h e t h e usingexpiryda teto31Dec

willbeerase 50millionVND:3%

+Morethan50millionV ND:1%

-T h e amounto f savin gwillbecounteduntil3 1Dec

Benefits - Standardmember:150

Marks= Voucher30, 00 0VND

- GoldandPremiumMem ber:500marks=Vouche r

100,000VND

- Golda n d premiummem berwillreceivemoreacc umulating

points in thepromotion

- Refundt h e parkingfe e,busticketfeei n t o Bi gCoinaccountforeach billthatmorethan1 00,

0 00 VND

- Receivediscountwhen

u s i n g serviceof coo peratepartners

:Phở2 4 HighlandCoff ee,…

- Participatei n specialp romotionf o r BigC me mberonly.

Participateinspecialpr omotionforLottemem beronly:buyingprodu ctswithspecialprice,

-1 0 , 0 0 0 VNDforthes etcard

-1 5 , 0 0 0 VND each reissuetime

y o f l o y a l t y p r o g r a m f o r r e s e a r c h i n g L o y a l t y p r o g r a m serviceq u a l i t

y a s a n emergingi s s u e i n r e l a t i o n s h i p marketingwillremainunderdevelopeduntilitskeydimensionshavebeeni d e n t i f i e d andoperationalized.Thedefinitionofservicequalitywasfurtherdevelopeda s “theoverallevaluationofaspecificservicefirmthatresultsfromcomparingthat

firm’sp e r f o r m a n c e w i t h t h e c u s t o m e r ’ s g e n e r a l e x p e c t a t i o n s o f h o wfirmsi n t h a t i n d u s t r y s h o u l d p e r f o r m (Parasuramane t a l , 1 9 8 8 ) I n a l o y a

l t y p r o g r a m setting,servicequalityreferstot h e overalle x p e r i e n c e ofcustomersi n applying,renewing,u p d a t i n g , accumulating,redeemingandusingtheprogram.Theloyalty

programservicequalitydependsonotherfactorsthatareimportanttocustomers,suchasthea b i l i t y ofthecustomertolearnthecomplexrulesoftheprogram(FrisouandYildiz,2011),thestructureoftheprogram(Liu,2007),theidiosyncraticfitoftheprograma n d i n f o r m a t i o n a n d c o m m u n i c a t i o n a v a i l a b i l i t y ( N o b e l a n dPhillips,2 0 0 4 ) Somer e t a i l e r s haveattemptedtoachieveloyaltybygivingpersonalizedserviceandspecialtreatmenttocustomers

Aconsiderablenumberofstudieshavesuggestedthatthecustomer'svalue,orderivedb e n e f i t , p l a y s a significantr o l e i n d e t e r m i n i n g h i s orh e r long-

termr e l a t i o n s h i p with,orloyaltyto,thefirm.Acustomerloyaltyprogramisamarketingt a c t i c employedbyretailerstoenticeconsumers,throughrewards,intoloyalbuyingb eh av i o r a n d th e provisionoftheir purchasing preferencesinordertoincrease

profits.T h e collectionandanalysisofthisinformation,byassigningauniqueidentifier,suchasanumericalIDormembershipcardtoeachprogrammember.Researchrevealsthatcustomersarelesslikelytoswitchfirmsiftheycanunderstandtheactualeconomics,t i m e andenergy-

savingvalueofstayingina relationship(Gwinneretal.,1998).Inf a c t , Gwinneretal(1998)highlightedthatiftheconsumerdoesnotperceivevalueinb u i l d i n g r e l a t i o

n s h i p s withina firm,t h e n theym i g h t onlye n g a g e i n a r e l a t i o n s h i p becauseabetteroptionisnotavailable elsewhere.Fromabovediscussion,wehavet h e hypothesis

H1:Therei s a p o s i t i v e i m p a c t o f l o y a l t y p r o g r a m serviceq u a l i t y o n t h e custo mersatisfaction.

Amongg e n e r a l i n s t r u m e n t s , t h e mostp o p u l a r modelu s e d f o r e v a l u a

t i o n o f

( 1 9 8 5 , 1988).Theattributesof(Parasuramanetal.,1985),were:tangibles,reliability,

responsiveness,c o m p e t e n c y , courtesy,a s s u r a n c e , credibility,s e c u r i t y , a c

c e s s , a n d u n d e r s t a n d i n g A l t h o u g h t h e r e h a s b e e n c r i t i c i s m froms

o m e o t h e r r e s e a r c h e r s t o SERVQUALi n s t r u m e n t , yetS E R V Q U A L is

t h e i n s t r u m e n t m o s t u t i l i z e d f o r i t s confirmatory factor analyses

provent o beaparsimoniousmodelthathasbeenusedinvariousserviceorganizationsandi n d u s t r i e s tomeasureservicequality

Baseo n t h e r e v i e w o f p r e v i o u s l i t e r a t u r e p e r t a i n i n g t o service

q u a l i t y a n d l o y al t y programsuggeststhatreward,servicepersonnel,programpolicy,tangibility,c o m m u n i c a t i o n a n d p e r s o n a l i z a t i o n a r e mosti m p o r t a n

t toc u s t o m e r s ; e a c h o f t h e s e dimensionsofloyaltyprogramservicequalitywillbediscussedindetailbelow

2.3.1 Reward

Thes i m i l a r i t y o f a l l l o y a l t y p r o g r a m s e r v i c e i s b r i n g i n g b e n e f i t s

a s wella s rewardsorgiftstocustomers,depending ontheamountofmoneytheyspendonofbuyingproductsorservice.Inreality,bigretailerssuchasCo.opmart,BigCandLotteMartoffertherewardsincludedvouchers,discounttickets,Tetgiftsets,helmets,raincoats,

…

fortheircustomers.Researchershavebeenpayingattentiontotheimportantr o l e ofrewards(DowlingandUncles,1997).Moreover,Staussetal

(2005)findoutthatifcustomersdonotreceivetheworthyreward,itcancauseannoyance.Bridsoneta l

(2008)findthatanappropriatemixofprogramattributesincludinghardattributes(discounts,vouchersandcoupons)andsoftattributes(betterservice,specialattentionan drecognition)canaffectstoresatisfaction.Fromabovediscussion,wehavethefirsth y p o t h e s i s

H1a:Thereisapositiveimpactofrewardsonthecustomersatisfaction.

2.3.2 Servicepersonnel

Thebehaviorsoforienting,guidingorexplaining,solvingproblemsrelatedto

t h e program of r e t a i l e r ’ s em pl oyee wi ll i m p a c t on th e c u s t o me r ’ s pe rc ep ti o

n of t h e p ro g r am quality(BradyandCronin,2001).Previousresearchindicatethatwhenthe

thatt h e employeeshouldplaygoodrolein.Moreover,themoredisparitythatthemembercustomerc a n b e o f f e r t h r o u g h t h e f e e l i n g , t h e c l o s e r r e l a t i o n s h i p o f customer

a n d r e t a i l e r s canbemaintain(Rosenbaumetal.,2005),inotherwords,itcanincreasethecustomersatisfactionthroughgoodservicepersonneloffering.Fromaboved i s c u s

H1c:Thereisapositiveimpactofpolicyonthecustomersatisfaction

2.3.4 Tangibility

Tangibilityr e f e r s t o t h e physicalc h a r a c t e r i s t i c s a s s o c i a t e d w i t h t

h e s e r v i c e e n c o u n t e r Ithasbeenwidelyacceptedasakeycomponentoftheperceivedserviceq u al i t y (Parasuramane t a l , 1 9 8 8 ) Accordingt o D a b h o l k a r e t al

( 1 9 9 6 ) physicala s p e c t s comprisemorethanthephysicalfacilities;itcoversth

econvenienceofferedthec u s t o m e r byt h e l a y o u t o f t h e p h y s i c a l f a c i l

i t i e s I n a r e t a i l l o y a l t y p r o g r a m

context,thisconsistsoftheloyaltyprogramservicecountersbeingeasytofindwithwideenoughspacetomovearound.Generally,fromacustomer'sperspective,anythingwhichmakesreceivingtheservicemoredifficultislikelytoimpingen e g a t i v e l y onhisorherperceptionoftheservicequality.Moreover,goodtangibilityc a n helpincreasethepleasantfeelingabouttheservice,andhavegoodimpactonthesatisfactionofcustomer(Rosenbaumetal.,2005) Fromabovediscussion,wehave t h e forthhypothesis:

H1d:Thereisapositiveimpactoftangibilityonthecustomersatisfaction

2.3.5 Communication

Communicationisg e n e r a l l y e x p l a i n e d as“thef ormalasw e l l asinformalsharingofmeaningfulandt i m e l y information”(AndersonandN a r u s , 1990,p.44).T h e aspectofcommunicationoftenplaysanextremelyimportantroleforthesuccesso f maintainingthecloserelationshipofcustomersand

retailers.Customerswhor e g i s t e r tobemembersofloyaltygrouparelikelytobemorewell-

informedincasether eareanychangesinpolicyorpromotioninformationofretailers.Bridsonetal

( 2 0 0 8 ) findsthatcommunicationplaysanextremelyimportantroleofthepleasantofcustomerswhousetheserviceatretailers.Fromabovediscussion,wehavethefifthh y p

or t h e i r most

valuablesegmentsthrough personalized andprivilegedservice I n thecaseofper sonali zation , astudyofthePortugueseretailbanking(Balletal.,2006)postulateda

n dp r o v e d t h a t p e r s o n a l i z a t i o n i m p a c t s p o s i t i v e l y onb o t h satisfactiona n d loyalty.F r o m abovediscussion,wehavethesixthhypothesis:

0 1 ) , i n f o r m a t i o n iswhatformsortransformsarepresentationintherelationwhichlinksasy st em toitsenvironment,wheregood-

qualityinformationisinformationthatsatisfiest h e criteriaofappreciationspecifiedbytheuser,togetherwithacertainstandardofrequirement.Informationinthisthesiscanbeunderstoodasnewsandinformsfromt h e retailer’sofficialwebsite.Customercansearch,findinformationaboutnewgoods,k i n d ofstock,price,discount,promotions…

consumersp e r c e i v e f e w d i f f e r e n c e s b e t w e e n t h e storeso n t h e a t t r i b

u t e s t h a t a r e u s u a l l y t h e mostsalient,theywouldp r o b a b l y d i s c r i m i n a t e b

e t w e e n t h e s t o r e s o n attributesthatwouldusuallybegivenonlylowmarkings.Whileanintangiblec o n c e p t , h a v i n g a g o o d r e p u t a t i o n c a n b e n e f i t a b u s

i n e s s i n a multitudeo f waysincluding: c o n s u m e r p r e f e r e n c e ; supportf o r

a n organizationi n t i m e s ofc r i s i s orcontroversy;andthefuturevalueofanorganizationinthemarketplace

WeigeltandCamerer(1988,p.1)suggestthat,“acorporatereputationisasetofattributesascribedtoafirminferredfromafirm’spastactions”.Thesebehaviorsareb u i l t u p o v e

r a p e r i o d o f timea n d d i f f e r fromimage,which,a c c o r d i n g t o Balmer( 1 9 9 8 ) , iscomposedof

thelatestbeliefsaboutanorganization.Wordofmouth,ontheotherh a n d , mayber e l a t e

d t o s t o r e r e p u t a t i o n ( B a l m e r , 1 9 9 8 ) R o g e r s o n( 1 9 8 3 ) describedfirmswithexcellentreputationsas havingmorecustomers,enjoyingpositivew o r d - o f -

m o u t h f r o m t h o s e c u s t o m e r s , r e s u l t i n g i n h i g h e r volumeso f n e w customeracquisitionandreducedchurn

AccordingtoRogerson(1983),onetacticforensuringafavorableretailstorerepu tat io n i s a merchandisemixc o m p o s e d o f a r e l a t i v e l y h i g h numbero f b r a

n d s p o s s e s s i n g highbrandawareness,andoneormorebrandswithastrongbrandreputation,theytogetherbuildthereliabilityfromthecustomer.Fortheauthors,brandr e p u t a t i o

n andretailreputationareinextricablylinkedtooneanother,sincefavorablereputationofbrandspositivelyinfluencepatronagedecisionsandpurchasebehaviors,whileu n f a v

o r a b l e r e p u t a t i o n a d v e r s e l y i n f l u e n c e s u c h d e c i s i o n s a n d behavio

rs.I t meansthatthereputationassociatedwiththebrandsastorecarriesinfluenceastore

reputation,whichinturn,influencesconsumers'decision-makingprocessesandb e h a v i o r s Storechoiceisinfluencedbycustomers'storereputationwhich,inturn,isbasedonperceivedstoreattributes(NewmanandCullen,2001)

Newmana n d C u l l e n (2001)a l s o d e v e l o p e d structurale q u a t i o n modelconfirmingastatisticallysignificantdirectlinkbetweenstorereputationandcustomerloyalty.SivadasandBaker-

Prewitt(2000)foundthattheconsumerperceptionofstorer e p u t a t i o n islinkedtostoreloyalty.Bloemeretal

(1998)contendthattherelationshipb e t w e e n perceptions oft he storeandstorel o y a l t y ismediatedbystoresatisfaction Storechoiceisinfluencedbycustomers'storereputationwhich,inturn,isbasedonp e r c e i v e d storea t t r i b u t e s (Newmana n d C u l l e

n 2 0 0 1 ) F r o m a b o v e d i s c u s s i o n , weh av e theseventhhypothesis

H2:Higherthestorereputation,higherwillbethecustomerloyalty.

2.5 CustomerSatisfaction

Theconceptofcustomersatisfactionhaditsrootsfrommanydecadesago.As t

u d y byR e i d a n d B o j a n i c ( 2 0 0 6 )d e f i n e d customers a t i s f a c t i o n as“ a n e v a l

u a t i o n r end ered thattheproductexperiencewasatleastasgoodasitwassupposedtobe”.ReidandBojanic(2006)alsopointedoutthatcustomersatisfactionoccurredwhenafirm’sservice,asperceivedbycustomers,metorexceededexpectations.Itexisteda

st h e ultimateg o a l f o r a f i r m b e c a u s e i t l e d t o b r a n d l o y a l t y a n d r e p e a t p u

r c h a s e s R e s e a r c h e s alsosuggestedthatcustomersatisfactioninvolvedcognitiveandaffectivejudgementd u r i n g c o n s u m p t i o n Fore x a m p l e , Oliver(1996)v i e w

e d c u s t o m e r s a t i s f a c t i o n as“theconsumer’sfulfilmentresponse,thedegreetowhichtheleveloffulfilmenti s pleasant o r unpleasant”and t h e r e f l ec t i o n oft h ecustomer’semotional state(citedinHaandJang2010,p.4)

Customers a t i s f a c t i o n c a n b e d e f i n e d a s t h e p e r c e p t i o n o f p l e a s

u r a b l e fulfillmento f a service( O l i v e r , 1 9 9 6 ) whichc a n b e a s s e s s e d a s t h

e sumo f t h e satisfactionswithvariousattributesofaproductorservice(ChurchillandSurprenant,

1982).A n u m b e r o f s t u d i e s h a v e i d e n t i f i e d d e t e r m i n a n t s o f c u s t o m e r

s a t i s f a c t i o n Theseincludeeaseofobtaininginformation(Olivaetal.1992),attributelevelperformance( O l i v a e t a l 1 9 9 2 ) , p r i o r e x p e r i e n c e a n d searchtimei n

c h o o s i n g t h e service(BoltonandDrew1991)

Customersatisfactioncouldbestudiedinthe

contextofshoppingexperienceina retailstore.GieseandCote's(2000)looksatcustomersatisfactionaspost-pur ch ase/ po st-

consu mp t io n responsetoapreviouspurchase/

consumptionexperience.Individualcustomershavedifferentmotivationsforshoppinglikedailyroutine,l e a r n i n g aboutnewproducts,orenjoymentof

bargaining.Thesedifferencesmeanthattheywillderivesatisfactionfromdiverseaspectsoftheshoppingexperience(Clotteye t al.2008).Th er e isnoconsensusconcerning themeasurement oftheconstructofsatisfactioninretailcontextbutdifferentapproachesarepopular.Researchhash i s t o r i c a l l y s h o w n t h a t storeattributes,s u c h

a s quality,p r i c e ,

a n d v a r i e t y a f f e c t customersatisfaction( C l o t t e y e t a l 2 0 0 8 ) Andersone t a l ( 1 9 9 4 ) i n d i c a t e t h a t t h e l i t e r a t u r e i s n o t veryc l e a r a b o u t t h e d i s t i n c t

i o n betweenq u a l i t y a n d s a t i s f a c t i o n

Satisfactionisapost-consumptionexperiencewhichcomparesperceivedqualitywithe x p e c t e d q u a l i t y (

A n d e r s o n e t a l 1 9 9 4 ; P a r a s u r a m a n e t a l 1 9 8 5 ) T h e l i t e r a t u r emainly l oo ks a t q u a l i t y a s o n e o f t h e a n t e c e d e n t s t o satisfaction( B o l t o n a n d Drew1994;A nde rs on e t a l 1 9 9 4 ) T h i s r e s e a r c h usedt h e C l o t t e y eta l

( 2 0 0 8 ) r e s e a r c h r e su l t ofcustomersatisfactionwithrespecttoretailstoresintermsoffourantecedentstorea t t r i b u t e s : p r i c e , p r o d u c t a s s o r t m e n t , p r o d u c t quality,a n d storeservice.Satisfactionh a s b e e n shownt o i n f l u e n c e r e p u r c h a s e , a n d w

o r k - o f - m o u t h c o m m u n i c a t i o n ; tobe

agoodpredictoroffuturepurchasebehavior;toinfluenceprofita n d , inthelongrun,toleadtocustomerloyalty(Oliver,1997)

Fromabovediscussion,wehavethelasthypothesis

H3:Thereisapositiveimpactofcustomersatisfactiononthecustomerloyalty.

2.6 CustomerLoyalty

Conceptofloyaltyisformedanddevelopedthroughoutaperiodoftime.Kotleretal.(1999)confirmsthatthecostforattractinganewcustomerapproximatelyfivetimescomparedwiththecostforkeepingandmaintaininganexistingcustomer.Thecustomerloyaltyismanifestedindifferentwaysincludingacommitmenttorebuyorp a t r o n i

z e apreferredproductorservice(Oliver1997;DickandBasu1994).Zeithamle t a l

( 2 0 0 2 ) s t a t e s c u s t o m e r l o y a l t y mayb e v i e w e d a s b e i n g e i t h e r b e h a

v i o r a l o r attitudinal.Thebehaviorala p p r o a c h is thatcustomers are loyalaslongastheycontinuetobuyanduseagoodorservice(Parasuraman etal.1988;Zeithamletal.2 0 0 2 ) BloemerandKasper(1995)arguethatmererepurchasemaybeindicativeofi n e r t i a andnotloyalty.Reichheld(1990)statesthatbehavioralloyaltyisbest

m a n i f e s t e d i n w i l l i n g n e s s to recommendandrefera friend orcolleaguetoaparticularg o o d a n d / o r service.T h e a t t i t u d i n a l a p p r o a c h i s t h a t c u s

t o m e r s f e e l a senseo f b e l o n g i n g orcommitmenttothegoodorservice.DickandBasu(1994)suggestthatl o y a l t y is evidencedbothbyamorefavorableattitudetowardabrand(ascomparedtoo t h er alternatives)andrepeatpatronage

Moreover,Gremler&Brown(1996)providesadefinitionofcustomerloyalty

relatedt o thepurposeinthisstudy:therepeatdensityofpurchasingbehaviorfromaretailer,t h e expressionforapositiveattitudetowardsretailer,andonlyconsiderbuying

atthissupermarketw h e n t h e n e e d t o b u y g o o d s e x i s t s AccordingB l o e m e

r s & Kasper( 1 9 9 5) , loyaltyisinterpretedastrueloyaltyratherthanrepeatpurchasebehavior,itisa c t u a l l y purchasedataspecificbrandofsupermarket,regardlessoftheundertaking.Zeithamle t a l

( 1 9 9 6 ) c o n v i n c e s t h a t l o y a l t y i s a m u l t i d i m e n s i o n a l structurea n d i

n c l u d e d t h e positiveresponsea n d negative.However,a loyalcustomerm a y notn e c

e s s a r i l y beasatisfiedcustomer.Gremler&Brown(1996)alsonotedthatitisnotalwaysthecasethatcustomerdefection isagainst loyalty,Zeithamletal.(1996)says,"evenifaproblemisnotsolved,abouthalfofthecustomerswillstaywiththebrand"T h i s couldbeduetoswitchingcosts,alackofawarenessofthedifferentalternatives,

limitedc h o i c e onl o c a t i o n , timeorm o n e y c o n s t r a i n t s , h a b i t ori n e r t i a t h

a t i s notrelatedtoloyalty

2.7 Theconceptualmodel

Asmentioneda b o v e , Omara n d M u s a ( 2 0 1 1 ) p r o p o s e t h e

r e s e a r c h m o d e l r e l a t e d tosevenelementsofcustomerloyaltyprogramservicequalityaswellasthecustomersatisfactionandcustomerloyaltyintheretailerarea

Realizingt h a t a l l t h e elementso f c u s t o m e r l o y a l t y p ro gr am a s w e l l a s s t

o r e r e p u t a t i o n havestrongimpactonthecustomersatisfactionandplayanimportantroleinclosinguptherelationshipbetweencustomerandretailer,theauthorcombinethet w o conceptualmodelaboveinanewresearchmodel.Basingonthereviewofthe

p r e v i o u s literatureandhypothesespresented,thefollowingconceptualmodelisp ro p

o sed :

Thisc h a p t e r g i v e s a n o v e r v i e w o f t h e c u s t o m e r l o y a l t y p r o g r a m s o f someb i

g a n d famouschainsofsupermarketsinHoChiMinhCity.Thenitprovidesinformationofcustomerloyaltyprogram’sservicequality,storereputation,customersatisfactionaswellascustomerloyaltyandtheirantecedentswhichhavebeenconductedbypreviousr e s e a r c h e

r s Aconceptualmodelisalsoproposedbytheauthorinthischapter.Nextchapterisallabouttheresearchmethodologythattheauthorusesinthethesis

CHAPTER3RESEAR CHMETHODOLOGY

Figure3.1:Theprocessofthesisresearch

StandardMultipl eRegressions

3.2 Measuresoftheconstructs

Basedontheliterature,theresearchersetupthesurveyinstrument,usingscalesthat werealreadyvalidatedinpreviousstudies:

Offershigh-d giftsProvidesdesirablerewardgi

LoyaltyProgramServic eQuality,Omara n d Mu sa(2011)

Staff

ST1 Thestaffsolvescardholders’queries Loyalty Program ST2 Thestaffcaresaboutreceivingfeedback ServiceQuality,Omar ST3 Thestaffoftenhavecardholders’bestinterestsatheart andMusa(2011) ST4 Thestafflistenstocardholders’suggestions

LoyaltyProgramServic eQuality,Omara n d Mu sa(2011)

Servicecounterhasspacetomovearound

LoyaltyProgramServic eQuality,Omara n d Mu sa(2011)

Actsincardholders’best interest

LoyaltyProgramServic eQuality,Omara n d Mu sa(2011)

LoyaltyProgramServic eQuality,Omara n d Mu sa(2011)