Factors of service quality affecting customer satisfaction of highlands coffee in ho chi minh city

MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIET NAM HO CHI MINH CITY UNIVERSITY OF BANKING  NGUYEN THI THU THAO FACTORS OF SERVICE QUALITY AFFECTING CUSTOMER SATISFACTION OF HIGHLANDS COF[.]

MINISTRY OF EDUCATION AND TRAINING THE STATE BANK OF VIET NAM

HO CHI MINH CITY UNIVERSITY OF BANKING

- -

NGUYEN THI THU THAO

FACTORS OF SERVICE QUALITY

AFFECTING CUSTOMER SATISFACTION OF HIGHLANDS COFFEE IN HO CHI MINH CITY

GRADUATE THESIS MAJOR: BUSINESS ADMINISTRATION

CODE: 7340101

SUPERVISOR: Ph.D NGUYEN VAN THUY

HO CHI MINH CITY, 2022

DECLARATION

I declare that the thesis “Factors of service quality affecting customer satisfaction of Highlands Coffee in Ho Chi Minh City” is the result of my own research process Except for references from other research works as stated in the thesis, the survey data and the results of this thesis are honest and have not yet been published in any research works before

HCMC, 18th August 2022

Author

Nguyen Thi Thu Thao

Additionally, I would like to express my sincere appreciation to the professors and lecturers at the University of Banking for their guidance during my academic years there The knowledge and skills I have accumulated, have helped me complete this thesis

Finally, I would like to express thanks to my family and friends, who always motivate and support me They not only support and give advice for me during the period of completing the thesis, but they are also a source of motivation and strength in my life

ABSTRACT

The research aims to identify service quality factors that affect customer satisfaction of Highlands Coffee’s customers in Ho Chi Minh City Based on the theories of customer satisfaction, service quality and previous studies, this research is conducted using both qualitative and quantitative methods The qualitative method aims to complete the measurement scales The quantitative method with the data analysis techniques such as descriptive statistics, Cronbach's Alpha, EFA, regression and ANOVA According to the analysis of data from 160 participants in Ho Chi Minh City show that customer satisfaction when using Highlands Coffee services is impacted by three factors include: Serving competence, Tangibles and Price policy The Serving competence factor significantly affects customer satisfaction with Highlands Coffee services while the Price policy factor slightly impacts customer satisfaction with Highlands Coffee services The research also offers implications to enhance customer satisfaction for the managers of Highlands Coffee in specific and for the coffee businesses in general

Keywords: Serving competence, Tangibles, Price policy, Customer satisfaction,

Highlands Coffee, service quality

TABLE OF CONTENTS

ABSTRACT i

TABLE OF CONTENTS ii

LIST OF ABBREVIATIONS v

LIST OF FIGURES vi

LIST OF TABLES vii

CHAPTER 1: INTRODUCTION 1

1.1 Statement of the problem 1

1.2 Research objectives 2

1.2.1 Research aim 2

1.2.2 Specific objectives 2

1.3 Research questions 3

1.4 Research subject and scope 3

1.4.1 Research subject 3

1.4.2 Research scope 3

1.5 Research methods 4

1.6 Thesis structure 4

1.7 Summary 5

CHAPTER 2: LITERATURE REVIEW 6

2.1 Basic concepts 6

2.1.1 Customer satisfaction 6

2.1.2 Service quality 7

2.1.3 The relationship between service quality and customer satisfaction 11

2.2 Literature review 12

2.2.1 SERVQUAL Model 12

2.2.2 Empirical Research 14

2.2.3 About Highlands Coffee 19

2.3 Hypotheses and conceptual model 22

2.3.1 Hypotheses 22

2.3.2 Conceptual model 25

2.4 Summary 26

CHAPTER 3: METHODOLOGY 27

3.1 Research process 27

3.2 Building the scale 29

3.2.1 The scale of reliability (REL) 30

3.2.2 The scale of responsiveness (RES) 31

3.2.3 The scale of assurance (AS) 31

3.2.4 The scale of empathy (EM) 32

3.2.5 The scale of tangibles (TAN) 33

3.2.6 The scale of price policy (PRI) 34

3.2.7 The scale of customer satisfaction (CS) 34

3.3 Methods of data collection 35

3.3.1 Sample size 35

3.3.2 Questionnaire design 36

3.3.3 Survey 36

3.4 Data analysis methods 37

3.4.1 Descriptive statistics 37

3.4.2 Cronbach’s Alpha scale testing 38

3.4.3 Exploratory Factor Analysis (EFA) 39

3.4.4 Regression analysis 40

3.4.5 Analysis of Variance (ANOVA test) 41

3.5 Summary 42

CHAPTER 4: RESEARCH RESULTS AND FINDINGS 43

4.1 Descriptive statistical analysis 43

4.1.1 Descriptive statistics for nominal variables 43

4.1.2 Descriptive statistics for groups of Likert quantitative variables 46

4.2 Cronbach’s Alpha analysis 51

4.2.1 Evaluate the reliability of the reliability scale 51

4.2.2 Evaluate the reliability of the responsiveness scale 52

4.2.3 Evaluate the reliability of the assurance scale 52

4.2.4 Evaluate the reliability of the empathy scale 53

4.2.5 Evaluate the reliability of the tangibles scale 54

4.2.6 Evaluate the reliability of the price policy scale 55

4.2.7 Evaluate the reliability of the customer satisfaction scale 56

4.3 Exploratory Factor Analysis (EFA) 57

4.3.1 Factors analysis for independent variables 57

4.3.2 Factors analysis for the dependent variable 61

4.3.3 Conclusion about EFA 63

4.4 ANOVA and regression analysis 68

4.4.1 Correlation analysis 68

4.4.2 Regression analysis 69

4.4.3 Testing the hypothesis of the research model 72

4.4.4 One way ANOVA analysis 73

4.5 Discussion 75

4.6 Summary 76

CHAPTER 5: CONCLUSIONS AND IMPLICATIONS 78

5.1 Conclusions 78

5.2 Managerial implications 79

5.2.1 Serving Competence (SC) 79

5.2.2 Tangibles (TAN) 80

5.2.3 Price policy (PRI) 82

5.3 Contribution of the research 83

5.4 Limitations and future research 83

5.5 Summary 84

REFERENCES 85

APPENDIX 88

APPENDIX 1: QUESTIONNAIRE 88

APPENDIX 2: DATA ANALYSIS RESULTS 95

LIST OF ABBREVIATIONS

Organization

the Social Sciences

Analysis

LIST OF FIGURES

Figure 2.1 SERVQUAL Model 13

Figure 2.2 Logo of Highlands Coffee 19

Figure 2.3 Phin Sua Da with Banh Mi - Vietnamese Bread and Iced Milk Coffee 20

Figure 2.4 Conceptual model 26

Figure 3.1 Research process 28

Figure 4.1 Research model after EFA 68

LIST OF TABLES

Table 2.1 Previous studies summary 16

Table 2.2 Hypothesis Table 24

Table 3.1 The scale of reliability 30

Table 3.2 The scale of responsiveness 31

Table 3.3 The scale of assurance 31

Table 3.4 The scale of empathy 32

Table 3.5 The scale of tangibles 33

Table 3.6 The scale of price policy 34

Table 3.7 The scale of customer satisfaction 34

Table 4.1 Descriptive statistics for nominal variables 43

Table 4.2 Descriptive Statistics of Reliability 46

Table 4.3 Descriptive Statistics of Responsiveness 47

Table 4.4 Descriptive Statistics of Assurance 48

Table 4.5 Descriptive Statistics of Empathy 48

Table 4.6 Descriptive Statistics of Tangibles 49

Table 4.7 Descriptive Statistics of Price policy 50

Table 4.8 Cronbach’s Alpha of the reliability scale 51

Table 4.9 Cronbach’s Alpha of the responsiveness scale 52

Table 4.10 Cronbach’s Alpha of the assurance scale 52

Table 4.11 Cronbach’s Alpha of the empathy scale 53

Table 4.12 Cronbach’s Alpha of the tangibles scale 54

Table 4.13 Cronbach’s Alpha of the price policy scale 55

Table 4.14 Cronbach’s Alpha of the customer satisfaction scale 56

Table 4.15 Synthesize Cronbach’s Alpha of each scale 57

Table 4.16 KMO and Bartlett’s Test for independent variables 58

Table 4.17 Eigenvalue and the total value of deviation for independent variables

58

Table 4.18 Rotated Component Matrixa of Independent variables 59

Table 4.19 KMO and Bartlett’s Test for the dependent variable 61

Table 4.20 Eigenvalue and the total value of deviation for the dependent variable 61

Table 4.21 The factor rotation matrix of the dependent variable 62

Table 4.22 The Serving Competence scale after EFA 63

Table 4.23 The Price policy scale after EFA 64

Table 4.24 The Reliability scale after EFA 64

Table 4.25 The Tangibles scale after EFA 65

Table 4.26 The Empathy scale after EFA 65

Table 4.27 Synthesize variables of each scale after EFA 66

Table 4.28 Synthesize new hypotheses after EFA 67

Table 4.29 Pearson Correlation Analysis 68

Table 4.30 Model Summary 69

Table 4.31 ANOVAa 70

Table 4.32 Coefficientsa 70

Table 4.33 Synthesize the hypothesis testing results 72

Table 4.34 One-way ANOVA test 74

Table 5.1 Descriptive statistics of serving competence scale 79

Table 5.2 Descriptive statistics of tangibles scale 81

Table 5.3 Descriptive statistics of price policy scale 82

CHAPTER 1: INTRODUCTION

1.1 Statement of the problem

In today's market context, the market economy has many fluctuations under the pressure of globalization combined with the rapid development of technology and the opening of new markets Since joining the WTO until now, Vietnam's economy has been gradually developing and integrating into the world economy, opening up opportunities and accompanying new difficulties and challenges The rapid development of the global economy has increased fierce competition between domestic and foreign enterprises Therefore, today's businesses need to promote their prestige and strong position in the market before their competitors

to be able to survive and develop strongly To contribute to helping businesses improve their position and reputation in the market, improving service quality is

a very important thing for businesses in general and coffee businesses in particular

For service industries, restaurants or hotels, especially in Food and Beverage Industry, service quality is considered one of the most important factors to help create a sustainable competitive advantage and build trust with customers Measuring service quality benefits for the company both qualitatively and quantitatively Achieving a high level of service quality will also increase customer loyalty, helping to increase market share, and ensure competitive advantage Coffee is one of the most widely consumed beverages in the world According to a market research report, in the period 2021 - 2025, the global coffee market will grow by an average of 7.6% Vietnam is a sizable coffee-consuming country, especially in big cities According to Kantar Worldpanel in a survey of consumer behavior in the Vietnamese market, coffee accounted for 26% of the total drinks selected for a week in Ho Chi Minh City

Highlands Coffee is a very familiar name to those who are passionate about coffee or fast food in Vietnam, especially young people or those who have worked Highlands Coffee has improved over generations and quickly established many impressive milestones such as a Chain of 25 stores in 2006; broke the record of the first coffee and tea chain in Vietnam to reach 100 stores

in 2016 Highlands Coffee, one of Vietnam's largest coffee and tea businesses, has become an integral part of many Vietnamese people's daily lives, with over

300 locations in 24 provinces Over the past two decades, Highlands Coffee has always shaped intending to become the most loved coffee and tea brand, a server anytime, anywhere, proudly spreading the message " Pride of Vietnam " This message has become a strong inspiration for the brand to become part of the tea and coffee culture of millions of Vietnamese

This study was conducted to explore the customer's preferred factors when choosing a food and beverage service business and to explore more profoundly the factors of service quality that affect customer satisfaction One of the most popular coffee chains today is Highlands Coffee Therefore, this thesis decided

to choose the topic: “Factors of service quality affecting customer satisfaction

of Highlands Coffee in Ho Chi Minh City”

­ To analyze service quality factors affecting customer satisfaction of Highlands Coffee in Ho Chi Minh City

­ To propose implications to enhance service quality to meet the satisfaction

of Highlands Coffee’s customers

1.5 Research methods

The qualitative method aims to determine the research problem based on related customer satisfaction studies to build a model Following that, a trial version of the questionnaire will be carried out by random participants who have used the service of Highlands Coffee in Ho Chi Minh City

The quantitative method involves survey questionnaires for clients who used Highlands Coffee services in Ho Chi Minh City to collect data The data analysis techniques used in the research include: descriptive statistics, testing on the Cronbach's Alpha scale, Exploratory Factor Analysis (EFA), regression analysis, and Analysis of Variance (ANOVA test)

CHAPTER 2: LITERATURE REVIEW

This chapter concentrates on the theories and previous research findings on the influence of service quality on customer satisfaction In addition, this chapter also presents the theoretical framework and concepts related to service quality and customer satisfaction

CHAPTER 3: METHODOLOGY

This chapter presents the research process, sample design, study design and data analysis methods

CHAPTER 4: RESEARCH RESULTS AND FINDINGS

This chapter analyzes and concludes the survey data collected by the customers who used the service of Highlands Coffee in Ho Chi Minh City

CHAPTER 5: CONCLUSIONS AND IMPLICATIONS

This chapter concludes with the essential findings and fundamental issues relevant to service quality factors affecting Highlands Coffee’s customer satisfaction in Ho Chi Minh City It also makes some suggestions based on the research results, evaluates the study’s limitations and makes recommendations for future research

1.7 Summary

This chapter provided an overview of the current research It introduced the study background, context and research structure Besides, it discussed the fundamental problems that lead to the current study and determined the primary purpose, which is to investigate what handles the satisfaction of Highlands Coffee’s customers The following chapter will indicate theoretical perspectives

of customer satisfaction

CHAPTER 2: LITERATURE REVIEW

This chapter will introduce the concepts of service quality and customer satisfaction as well as the relationship between them Moreover, the SERVQUAL model is clearly illustrated Thence, the theoretical model of customer satisfaction will be represented based on the aforesaid definitions Finally, the hypothesized relationships between all of the variables will be discussed

2.1 Basic concepts

2.1.1 Customer satisfaction

Customer satisfaction is defined in a variety of ways, and there is quite a bit of discussion about this Several researchers think that there is a disparity in satisfaction between customer expectations and the actual perception received Customer satisfaction is a customer's general attitude toward a service provider or an emotional response that represents the disparities between what the customer expects and what they receive to fulfill needs, goals, desires (Hansemark and Albinsson, 2004) Paul Farris (2010) defines customer satisfaction is the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services exceeds specified satisfaction goals According to Kotler and Armstrong (2012), customer satisfaction is the level of a person's sensory state as a result of comparing the results gained from consuming a product/service to their expectations The range

of satisfaction depends on the difference between the received results and the expectations, if the actual results are lower than the expectations, the customer is not satisfied, if the actual results match the expectations, the customer will be satisfied, if the actual results are higher than the expectations, the customer is

extremely satisfied Customers' expectations are formed from shopping experiences, from friends and colleagues, and seller and competitor information Zeithaml and Bitner (2000) said that customer satisfaction is the result of a customer's experience after using a service Customer satisfaction is defined as a customer's perception of a product or service that meets their needs and expectations

Customer satisfaction includes two parts (Parasuraman, Zeithaml, & Berry, 1988; Carman, 1990) The first is the satisfaction derived from purchasing quality goods or services at a reasonable price The second is a relationship developed over time through the business transaction process, such as trust in service providers, staff professional abilities, and customer service attitude

Although there is still no unity among studies on the concepts, most researchers believe that there is a link between service quality and customer satisfaction (Cronin & Taylor, 1992; Sprenget al., 1996; Indra & Ibrahim, 2017; Bismoet al., 2018; Nguyenet al., 2020; and Hayder, 2020) Nevertheless, many studies have not concentrated on examining the explanatory level of service quality components for customer satisfaction, particularly in each specific service industry Consequently, an issue is needed to study more about the relationship between the elements of service quality and the level of customer satisfaction in particular areas

2.1.2 Service quality

2.1.2.1 Service

Early service definition Parasuraman et al (1985) defined service as acts, deeds, processes, performances, or endeavors In more detail, Zeithaml and

Bitners (2000) defined services as acts, processes, and methods to do all work in order to produce value to meet the demands and expectations of customers

James Fitzsimmons stated in 2008 that services are intangible activities that include engagement with clients Because the customer is a collaborator in these activities, the service cannot be produced as inventory

On the other hand, according to Kotler & Keller (2009), services are economic activities provided by one party to another with no transfer of ownership Furthermore, services may or may not have a connection with the customer According to Pride and Ferrell (2012), service is one of the intangible things associated with an act, a performance, or an effort without ownership

In conclusion, the researcher can deduce that services are economic activities provided by one party to another in order to meet their needs and expectations

On the other hand, services are tangible and do not claim ownership of the physical elements involved

2.1.2.2 Service quality

Service quality has become a topic for researchers to study in recent decades because of its tremendous impact on company efficiency There are two sides to evaluating the service quality (Lehtinen,1982) They are service providing - process and result of service

Parasuraman (1988) also provided one of the most well-known definitions of service quality He said that service quality is defined as the different levels between the customer expectation about service and the perception of the customer about the result of service To put it another way, Zeithaml et al (1990) defined service quality in marketing and management as the customer's

perception of the ability to meet or exceed the customer's expectations for that service

In general, service quality will be decided by the customer Service quality will be dependent on the level of different customers due to the diversity of clients Different consumers will have different experiences at the same level of service quality Furthermore, different people may have different experiences at certain stages

Service quality has become a measure by which the services are delivered in order to meet customers’ expectations The company has discovered that in order

to increase earnings and market share, they should be concerned about service quality Companies will use service quality as a key strategic factor to create a difference in their products and services from those of their competitors As a result, businesses can improve customer loyalty, service usage, and long-term profitability (Randall and Senior, 1996) Consequently, quality is becoming increasingly crucial in the service industry (Clow and Vorhies, 1993)

Apart from that, quality is another factor that has a direct impact on customer satisfaction when utilizing a service Reliability, responsiveness, assurance, empathy, and tangibility are five elements that demonstrate the customer's perception of service quality (Kolter and Armstrong, 1997; Zeithaml et al, 1990) Furthermore, boosting service quality is inextricably linked to consumer trends, which are the most crucial of the modern period In other words, consumers are today more than ever demanding high-quality products and services Customer satisfaction and service evaluation is the key to business success (Zrithaml et al, 1993; Parasuram et al, 1988; Lacobucci et al, 1994)

Moreover, according to Lau (2005), effective after-sales service will serve as a bridge to sustain and create long-term relationships between service providers

and their core customers However, if companies only focus on product quality and ignore the importance of service, customers may choose another firm with the same or even lower product quality but higher service quality In contrast, unlike products, services are difficult to be copied

Hence, the quality of service plays a crucial role in every business With this

in mind, factors relating to service quality will influence consumer trends Therefore, businesses should concentrate on improving and enhancing the quality of their service so that customers can experience its value when using the service (Bitner, 1990; Cronin and Taylor, 1992, 1994)

Service quality gap analysis model (SERVQUAL)

According to Parasuraman et al (1985), service quality is defined as the different levels between the customer expectation about service and the perception of the customer about the result of service Researchers can use this scale to measure the gap between service performance and customer expectations The following describes the service quality gap model:

GAP 1 is the gap between the customer's actual expectations and the manager

of the perception If this gap is spacious, it means that managers are unaware of what customers expect Consequently, the first and most important step in providing service is understanding what customers expect

GAP 2 is the gap between service managers' perceptions of what customers expect and the conversion of those perceptions into their standards for service quality

GAP 3 is the gap between service quality standards formed by the service business and primary services quality provided (that means the performance of service delivery by defined standards or not)

GAP 4 is the gap between service quality offered and the information, advertising, or promises that the service of the company provides to customers; it demonstrates whether or not the service manager can make service promises to them

GAP 5 is the gap between the expected service and experienced (perceived) service It seems that the high or low rating for service quality depends on the customer's perception of the actual service results and their expectations for that service

Parasuraman proposed that at the point where GAP 5 is zero, service quality will be ideal

2.1.3 The relationship between service quality and customer satisfaction

There are two key definitions that all organizations must understand if they are

to survive and develop in today's competitive market They are: customer satisfaction and service quality It is obvious that customer demand is increasing,

so providing high-quality service is critical to gaining a competitive advantage

In addition, customer satisfaction has a positive impact on a company's profitability Consequently, service quality and customer satisfaction must be concerned in and boosted reasonably

However, the both of two concepts of "service quality" and "customer satisfaction" have completely distinct conceptualizations Service quality is represented by numerous factors and it is also a factor that decides customer satisfaction (Parasuraman, 1985, 1988) Furthermore, customer satisfaction is the result of feelings of those who have experience in the operation of a business has fulfilled their wishes Two definitions appear to be unrelated, but there is in fact

a relationship that exists

In addition, there is an interrelationship between “service quality” and

“customer satisfaction” The first method is improving “service quality” which leads to increasing “customer satisfaction” since service quality is produced first and then impacts customer satisfaction (Prabhakaran, 2003) It's known as a

“cause-and-effect relationship”

Otherwise, customer satisfaction also influences service quality since satisfaction is dependent on the company's capacity to meet the customer's expectations (Dwyer et al., 1987; Fornell, 1992; Oliva et al., 1992) Kotler (1991) said that satisfaction is the period after the buy that the evaluation of the product and service expectations before purchase According to Murray (1996), commitment satisfaction is a constant process since no matter how good the service, customers will pursue to desire better service

Overall, there is a close relationship between service quality and customer satisfaction Furthermore, they are the interrelationship which means they influence each other even though the service quality is created first

2.2 Literature review

2.2.1 SERVQUAL Model

Measuring the quality of the merchandise is easier because it can be measured objectively with indexes such as reliability and some shortcomings, whereas the quality of service is an abstract concept It relies on customers’ perceptions, expectations, knowledge, and experiences To address this issue, Parasuraman, Berry, and Zeithaml give a scale in 1985 for the customers can assess the quality

of services based on 10 factors: security, reliability, responsiveness, competence, tangibles, communication, customer insights and access, courtesy, credibility

Although this scale included most aspects of service, this model was unable to identify the value of specific services in some circumstances As a result, Parasuraman et al (1988) finally simplified the number of components from 10

to 5 dimensions included: assurance, responsiveness, empathy, reliability and tangibles

Figure 2.1 SERVQUAL Model

The first is reliability It is abilities to implement the services exactly and quickly

The second is responsiveness It is expressed through the desire and willingness of the service staff to provide timely service to customers

The third is assurance It is the staff's capacity to transmit confidence and trust, as well as their understanding and courtesy There are a few aspects that illustrate the "assurance" component They are: staff attitude, professional service procedure, and staff knowledge of products, security assurance, or brand name quality

The fourth is empathy That is giving care and attention to each customer

The fifth is tangibles It was the presence of material foundations, facilities, human resources, and communication materials

According to the study of Parasuraman et al (1988), the rankings of the above criteria are ranked as follows:

- Reliability is most important (32%)

Minh Tri Ha (2021) investigated the impact of customer experience on customer satisfaction and loyalty at Starbucks Coffee in Ho Chi Minh City Customer experience was used to build a research model with four dimensions: sensory experience, emotional experience, social experience, and service quality The results from this study showed that all four elements of customer experience considerably affected customer loyalty through customer satisfaction

Gisella Gea Saputri (2021) aims to determine the effect of store atmosphere, service quality and product quality on customer loyalty with customer satisfaction as a mediating variable The participants in this study were all

customers of the Cold N 'Brew coffee shop in Indonesia It examined three factors: store atmosphere, service quality and product quality, with product quality being the most influential element

Ta Thi Thanh Nga (2015) examined the elements that influence customer satisfaction with high-end coffee chain service quality in Hanoi The variables in this study including: tangibles, reliability, responsiveness, assurance and empathy The empirical results showed that responsiveness, reliability and assurance significantly influenced on customer satisfaction

Allan et al (2019) investigated the effect of product quality, service quality, and price on customer satisfaction in a traditional market in Indonesia The results from this research showed that product quality, price and service quality insignificantly impacted customer satisfaction

Prameswari Purnamadewi Dhisasmito and Suresh Kumar (2020) determined the drivers of the loyalty model based on service quality, store atmosphere and price fairness mediated by customer loyalty in the coffee shop industry in Indonesia The results showed that five factors: tangibles, reliability, responsiveness, assurance and empathy significantly impacted customer loyalty Luthfy Kasim (2021) examined the factors of service quality affecting customer satisfaction of Legend Coffee Yogyakarta in Indonesia The study used five elements of SERVQUAL: tangibles, reliability, responsiveness, assurance and empathy To conclude, the results showed that responsiveness and empathy significantly affected customer satisfaction

Sun Min Lee et al (2021) determined the effect of coffee service quality on customer satisfaction and loyalty with five factors: interaction, physical environment, result quality, representativeness, and diversity The results from

this research showed that all five elements considerably influenced customer loyalty and customer satisfaction

Nguyen Yen Xuan et al (2015) used the SERVQUAL model to measure service quality by four elements: tangibles, responsiveness, reliability and assurance affected customer satisfaction of Highlands Coffee in Ho Chi Minh City The practical results showed that all four factors positively impacted customer satisfaction

Nguyen Huu Cuong (2020) analyzed the relationship between price, based brand equity, customer satisfaction and brand loyalty in chain coffee shops

customer-in Viet Nam The results from this study showed that price, quality and congruence significantly affected customer satisfaction and brand loyalty

Table 2.1 Previous studies summary

variables

Independent variables

relationship between service quality and customer satisfaction:

a case of tourist agricultural farm

customer satisfaction

Tangibles, responsiveness, reliability, empathy and assurance

Minh Tri Ha

(2021)

The impact of customer experience

on customer

customer satisfaction and loyalty

Sensory experience, emotional

satisfaction and customer loyalty

experience, social experience, and service quality

Gisella Gea

Saputri (2021)

The influence of store atmosphere, service quality, and product quality toward customer loyalty with satisfaction as a mediating Variable

customer loyalty, customer satisfaction

Store atmosphere, service quality and product quality

Ta Thi Thanh Nga

(2015)

Key factors in opening

a High-end coffee chain in Hanoi City, Vietnam through analysing customer satisfaction

customer satisfaction

Tangibles, reliability, responsiveness, assurance and empathy

Allan et al (2019) Measuring customer

satisfaction of a café and coffee shop colony

at a traditional market

customer satisfaction

product quality, service quality, and price

Prameswari

Purnamadewi

Understanding customer loyalty in the

customer loyalty

tangibles, reliability,

responsiveness, assurance and empathy

Luthfy Kasim

(2021)

Analysis of service quality toward customer satisfaction

in the Legend Coffee Yogyakarta

customer satisfaction

Tangibles, reliability, responsiveness, assurance and empathy

Sun Min Lee et al

(2021)

A Study on the Impact

of Coffee Service Quality on Customer Satisfaction and Loyalty

customer satisfaction and loyalty

Interaction, physical environment, result quality, representativene

ss, and diversity

Nguyen Yen Xuan

et al (2015)

Analyze Service Quality Impacts to Customer Satisfaction

of Highlands Coffee in

Ho Chi Minh City

customer satisfaction

Tangibles, responsiveness, reliability and assurance

Cuong (2020)

A Study on Customer Behaviors in Chain Coffee Shops in Vietnam

customer satisfaction, brand loyalty

Price, quality and congruence

Source: Compiled by the author

2.2.3 About Highlands Coffee

2.2.3.1 General introduction about Highlands Coffee

In 1995, a young Vietnamese-American entrepreneur - David Thai, had returned to Vietnam, inspired and prompted by his love for his homeland Because his parents are Vietnamese, he has heard many magnificent stories about the traditional values of his country since he was young Despite receiving Western education, Vietnamese-dragon blood still runs inside him and lets him back to find out the culture of his mother homeland

From the love for Vietnam and the passion for coffee, in 1999, the brand name Highlands Coffee was born with the passion of raising the café heritage of Vietnam and spreading the spirit of Viet pride, connecting harmoniously between tradition and modernity

Figure 2.2 Logo of Highlands Coffee

Born to serve Vietnamese values, every day at Highlands Coffee brings you the best coffee and tea, served with delicious products imbued with traditional Vietnamese identity and filled with memories For instance, the combo "Phin

Sua Da with Banh Mi - Vietnamese Bread and Iced Milk Coffee", has become a really close friend of many people

Figure 2.3 Phin Sua Da with Banh Mi - Vietnamese Bread and Iced Milk

Coffee

All the smallest details in the selection of raw materials and in the decoration are paid attention to by Highlands Coffee, to enhance Vietnamese values, and to make Highlands Coffee become the most loved brand in terms of taste and style Vietnamese coffee and tea way modern, but still keep reasonable prices, close and ready to serve every customer, anytime, anywhere

The vision and mission, are expressed by a sharp business strategy that is very specific and focused on research and development and serving the Vietnamese community with consistently high-quality products at an affordable price level

With more than 300 coffee locations in 24 provinces and cities and more Vietnamese now can conveniently enjoy the deliciously bold coffee and tea products in the comfortable and socializing café environment that is filled with all Vietnamese values, and where traditional and modern elements are perfectly harmonized

2.2.3.2 The process of formation and development

In 1999, from 700 USD with the bold decision of founder David Thai, Highlands Coffee was officially born

In 2002, the first-generation store was first launched at the Metropolitan Building, Ho Chi Minh City

Not long after that, Highlands Coffee quickly developed a new store in Hanoi

In 2006, along with the integration flow, Highlands Coffee with a chain of 25 stores nationwide continued to launch the second-generation store with major changes in brand identity and space design

In 2013, Highlands Coffee transformed into a "cafeteria" model (self-service), welcoming the first 3rd generation store at Diamond Plaza, Ho Chi Minh City Highlands Coffee once again affirms its position in the hearts of loyal customers thanks to its clear orientation and long-term vision

In 2016, Highlands Coffee became the first coffee chain to own 100 stores nationwide Commemorating this milestone, Highlands Coffee officially launched the Phin coffee symbol - a unique feature in the coffee enjoying culture

of Vietnamese people

In 2017, improving based on the 3rd generation store platform, the first 3.5G store was opened at Crescent Mall, Ho Chi Minh City - a generation of stores that shape Vietnamese identity with a design space that reflects culture, the

scenery, the people of Vietnam, Highlands Coffee elevates Vietnamese coffee and bread into art

In 2019, in just a short time, Highlands Coffee has continued to break its own record to become the largest coffee chain in Vietnam: More than 300 stores spread across 24 provinces

2.3 Hypotheses and conceptual model

2.3.1 Hypotheses

2.3.1.1 The relationship between reliability and customer satisfaction

Reliability refers to the ability to supply correct, on-time, respecting commitments, credibility, requires consistency in performing service and keeping promises to customers (Parasuraman, Zeithaml, & Berry, 1988) From the customer's point of view, if the business can create certain reliability for customers, then the customers will come back and continue to buy products (Sarah et al., 2012) According to Rozkee, Jaafar & Jalal (2017), reliability was important for increasing the level of customer satisfaction

H1: There is a relationship between reliability and customer satisfaction at Highlands Coffee in HCMC

2.3.1.2 The relationship between responsiveness and customer satisfaction

According to Parasuraman et al (1988), responsiveness refers to a company's willingness to assist its customers by providing them fast and high-quality service Every customer feels valued if they receive the best possible service quality Masrurul (2019) believes that good service contains responsiveness, employees demonstrating a passion for the service and their work, and the ability

to respond to emergencies When evaluating a company's responsiveness, customers consider how quickly and attentively staff respond to their requests,

inquiries, complaints, and problems This dimension is rated higher when requests or complaints are addressed immediately

H2: There is a relationship between responsiveness and customer satisfaction

at Highlands Coffee in HCMC

2.3.1.3 The relationship between assurance and customer satisfaction

Assurance is the level of knowledge and courtesy that an employee and a business maintain in order to earn the trust of customers (Parasuraman et al., 1988) Chanaka & Wijeratne (2014) have recognized the close relationship between assurance and customer satisfaction Assurance is one of the most important factors for customer satisfaction, which in turn can affect the business sale (Rozkee, Jaafar & Jalal, 2017)

H3: There is a relationship between assurance and customer satisfaction at Highlands Coffee in HCMC

2.3.1.4 The relationship between empathy and customer satisfaction

Empathy is the capacity and willingness to respond to each customer's unique needs (Parasuraman, Zeithaml, & Berry, 1988) Empathy service quality is a way for the business to show care and pays individualized attention to their customers

to feel more valued and unique One of the most crucial aspects of the providing businesses to the customer is understanding the customer Small service firms frequently have employees who know their customers by name and develop relationships based on their understanding of their needs and preferences When small and large companies compete, the small company clearly has an advantage due to its capacity for empathy (Zeithaml, Bitner, & Gremler, 2017) The human element should be at the heart of this success, and

service-the more a company cares about its customer, service-the capacity for empathy will increase

H4: There is a relationship between empathy and customer satisfaction at Highlands Coffee in HCMC

2.3.1.5 The relationship between tangibles and customer satisfaction

The tangibles of the service quality were demonstrated by the physical evidence of the service It covered physical facilities, personnel attire, and equipment used for the service Tangibles is considered a factor that businesses need to pay attention to because it is the first factor that customers feel when starting to use the service at the store Making positive initial impressions on consumers is crucial for developing their satisfaction with the service-providing

of the business (Parasuraman et al., 1988) According to Rozkee, Jaafar & Jalal (2017), tangibles was important for boosting the level of customer satisfaction

H5: There is a relationship between tangibles and customer satisfaction at Highlands Coffee in HCMC

2.3.1.6 The relationship between price policy and customer satisfaction

Price is a crucial indicator of quality and generates customer value (Parasuraman, Zeithaml, & Berry, 1988) Different product prices or services can have an impact on the brand's standard (Turel et al., 2006) Zeithaml and Bitner (2000) said that the price of the service can greatly impact customer satisfaction

H6: There is a relationship between price policy and customer satisfaction at Highlands Coffee in HCMC

Table 2.2 Hypothesis Table

H1 There is a relationship between reliability and

customer satisfaction at Highlands Coffee in HCMC

Positive

H2 There is a relationship between responsiveness and

customer satisfaction at Highlands Coffee in HCMC

Positive

H3 There is a relationship between assurance and

customer satisfaction at Highlands Coffee in HCMC

Positive

H4 There is a relationship between empathy and

customer satisfaction at Highlands Coffee in HCMC

Positive

H5 There is a relationship between tangibles and

customer satisfaction at Highlands Coffee in HCMC

Positive

H6 There is a relationship between price policy and

customer satisfaction at Highlands Coffee in HCMC

of customer satisfaction as a guideline for doing upcoming research According

to the SERVQUAL model of Parasuraman et al (1988) and refer to previous studies, the thesis suggests a research model includes six dimensions: Reliability (REL), Responsiveness (RES), Assurance (AS), Empathy (EM), Tangibles (TAN) and Price Policy (PRI)

Figure 2.4 Conceptual model

(Source: By author’s research)

2.4 Summary

This chapter presented the related concepts and definitions theoretically as well as built a theoretical model and hypothesis for this research to show the influence of factors on customer satisfaction at Highlands Coffee in HCMC Specifically, these factors are reliability, responsiveness, assurance, empathy and tangibles The next chapter will give the research method carried out to create, and evaluate the measurement scales and test the appropriateness of the theoretical model with market data

CHAPTER 3: METHODOLOGY

The preceding chapter offered the theoretical framework and its application, and also demonstrated specifics about the methodological research framework for the current research Chapter 3 will indicate the research design, data collection methods and data analysis methods

3.1 Research process

To conduct solid research for the thesis topic: “Factors of service quality affecting customer satisfaction of Highlands Coffee in Ho Chi Minh City”, the research must go through three essential steps The first important step is to have

a good fundamental knowledge of the subject that the research leads to, in this case, customer satisfaction Good sources of that theory-based knowledge are academic journals and credible sites Following the gathering process, the literature reviews will sort out the crucial information and some guiding ideas for the thesis, leading to providing the elements that influence Highlands customer satisfaction in general Secondly, the thesis study must be accurate and specific, which necessitates the use of research questionnaires to collect important data The questionnaire will be handed to both Highlands’ past customers and current customers Later on, the data will be analyzed through the use of software called Statistical Package for the Social Sciences (SPSS), leading to providing statistical results based on the survey’s quantitative responses Finally, after completing all of the preceding procedures (gathering and analyzing), the thesis will propose a conclusion on the current situation and also prospects

Figure 3.1 Research process

Focus group

To further understand Highlands customer satisfaction's major factors, the preliminary research used the qualitative method of group discussion and in-depth interviews Qualitative research involves interviewing a group of people in order to gather detailed information During the investigation, the study is completed by customers in two different groups to discuss and collect data for the survey

This study offers several questions in a focused group outline based on the literature review:

– How frequently do you use the Highlands Coffee service?

–What kind of drinks did you use at Highland Coffee?

–What factors that affect customer satisfaction? (Reliability, Responsiveness, Assurance, Empathy, Tangibles and Price)

– Do you have any other comments?

Two focus groups with five participants per group were performed The discussion of 10 customers indicated that reliability, responsiveness, assurance, empathy, tangibles, and price influenced their satisfaction with Highlands Coffee service

This thesis adjusted the scales for suitability through group discussion and depth interviews After that, 15 people were surveyed to test questionnaires As a result, the questionnaires were comprehended and agreed upon by 15 customers

in-3.2 Building the scale

In previous studies, research on customer satisfaction has been carried out However, after checking the theory and basing on the Parasuraman questionnaire