Antecedents of brand loyality in Vietnam banking sector.The case of Vietnam credit card users

Results indicate that Customer Satisfaction, Brand Trust and Switching barrier are antecedents of loyalty..  Question 3: How to increase credit card holder loyalty in perspective of per

MBAVB2

NGUYEN TIEN CHUNG

ANTECEDENTS OF BRAND LOYALTY

IN VIETNAM BANKING SECTOR:

THE CASE OF VIETNAM CREDIT CARD USERS

MASTER PROJECT MASTER IN BUSINESS ADMINISTRATION

(PART-TIME)

Tutor’s Name: PhD Le Nguyen Hau

Ho Chi Minh City

(2012)

DECLARATION

I, Nguyen Tien Chung, hereby declare that this master thesis is my own original work and efforts Other sources of information used have been acknowledged The conclusion and managerial implication with recommendation are personal standpoints

Signature:

NGUYEN TIEN CHUNG

Date: November 15th, 2012

Minh City Open University Campus

First of all, I would like to express my deep thanks to the tutor - PhD Le Nguyen Hau for his profound guidance, helpful advice throughout my thesis, especially his devotion and patience to each of students he has worked with, including an-always-hurrying person like me

I would extend my gratitude to my family and relatives, specifically my wife and two little naughty sons, who will always try to keep me tranquillized to fulfill my lofty mission

My unforgettable thanks also go to Nguyen Ngoc Son and Mindmap team, classmates of MBAVB2 for continuous encouragement during the process of my study

Finally, but not least, I would like to thank Solvay Business School Alumni in Vietnam to support me in completing questionnaires and HSBC Vietnam GPU team for taking my tasks during the time I took leave for the writing

As a supplementation, I would want to show my sincere thanks in advance to the Board of Professors, who will give me a chance to defend my thesis after a long time pending

Student name: NGUYEN TIEN CHUNG Program: MBAVB2

Title:

ANTECEDENTS OF BRAND LOYALTY IN VIETNAM BANKING SECTOR:

CASE OF VIETNAM CREDIT CARD USER

This study aims to quantitatively investigate the antecedents of brand loyalty for credit card users in Vietnam banking sector In addressing this research objective, the author has spent time to review the relevant literature, based on which a model was proposed The model introduces six antecedents of customer loyalty Empirical tests were conducted with

a sample data of 250 credit cards users in Vietnam Results indicate that Customer Satisfaction, Brand Trust and Switching barrier are antecedents of loyalty Customer Satisfaction is then driven by Perceived Functional Value, Perceived Emotional Value Perceived Social value was proposed as a driver for customer satisfaction but it is not supported in this study

The student has demonstrated his ability to conduct an applied research which meets the scientific requirements of a master thesis This work achieves the quality standard of the program I strongly recommend it to be presented to the examination board

Supervisor: Assoc Prof Le Nguyen Hau

Date: November 15th, 2012

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION 1

1.1 Background 1

1.2 Problem Statement 3

1.3 Research Objectives 4

1.4 Scope of the Study 5

1.5 Research Methodology 5

CHAPTER 2: LITERATURE REVIEW 6

2.1 Introduction 6

2.2 Brand Loyalty and its benefit 6

2.2.1 Brand loyalty 6

2.2.2 Brand loyalty benefit 7

2.3 Customer Segmentation on Loyalty 8

2.4 Factors affecting Brand Loyalty 9

2.5 Loyalty in Banking Sector 10

2.6 Research Model 11

2.6.1 Customer Satisfaction 12

2.6.1.1 Perceived Value 13

2.6.1.2 Perceived Risk and relationship with Satisfaction 15

2.6.1.3 Brand Trust 18

2.6.1.4 Switching Barrier 19

2.6.1.5 Demographic Factors 21

CHAPTER 3: DATA AND METHOD 23

3.1 Introduction 23

3.2 Methodology and Research Process 23

3.3 Qualitative 23

3.3.1 Preliminary scales 24

3.3.2 Scale adjustment 31

3.4 Quantitative research 35

3.4.1 Questionnaire in quantitative research 35

3.4.2 Sampling design 35

3.4.3 Data collection 35

3.4.4 Data analysis 36

3.4.4.1 Reliability of scales assessment 36

3.4.4.2 Exploratory factor analysis 37

3.4.4.3 Regression analysis 37

CHAPTER 4: DATA ANALYSIS AND RESULT EXPLANATION 39

4.1 Introduction 39

4.2 Sample description 39

4.3 Reliability of the scale assessment 39

4.4 Exploratory Factor Analysis 44

4.4.1 EFA analysis for Functional value (FV), Emotional value (EV), Perceived risk (PR): 44

4.4.2 EFA analysis for Brand Trust (BT), Switching barrier (SB): 45

4.4.3 EFA analysis for Satisfaction (SA): 46

4.4.4 EFA analysis for Loyalty (LO): 47

4.5 Testing the research model and hypotheses 48

4.5.1 Correlations analysis 48

4.5.2 Regression analysis 49

4.5.3 Hypothesis conclusion 53

4.6 Summary 56

CHAPTER 5: CONCLUSION 57

5.1 Overview 57

5.2 Summary of findings 57

5.3 Managerial Implication and Recommendation 58

5.4 Limitations 59

REFERENCES 60

APPENDIX A 67

APPENDIX C 86

LIST OF TABLES

Table 1: Most common factors identified affecting loyalty 9

Table 2: The most factors affecting bank loyalty and its frequency appeared in recent researches 10

Table 3: Description and definition of perceived risks dimension 17

Table 4: Switching barrier dimension description 20

Table 5: Preliminary concept and its references 25

Table 6: Preliminary concept scales details 27

Table 7: Final scales and variables 33

Table 8: Information of data collection process 35

Table 4-1: Return ratio 39

Table 4-2: Cronbach’s Alpha of “Perceived Functional value” 40

Table 4-3 Cronbach’s Alpha value of “Perceived value – Emotional” 40

Table 4-4: Cronbach’s Alpha value of “Perceived Social value” 41

Table 4-5: Cronbach’s Alpha value of “Perceived Risk” 41

Table 4-6: Cronbach’s Alpha of “Customer Satisfaction” 41

Table 4-7: Cronbach’s Alpha value of “Brand Trust” scale 42

Table 4-8: Cronbach’s Alpha value of “Switching Barrier” Scale 42

Table 4-9: Cronbach’s Alpha value of “Customer Loyalty” scale Item-Total Statistics 43

Table 4-10: Cronbach’s Alpha value of the scales 43

Table 4-11: Summary analysis of FV, EV, PR independent variables KMO and Bartlett's Test 44

Table 4-12: Summary analysis of the BT, SB’s independent variables KMO and Bartlett's Test 45

Table 4-13: Summary analysis of the SA’s independent variables KMO and Bartlett's Test 46

Table 4-14: Summary analysis of LO’s independent variables KMO and Bartlett's Test 47

Table 4-15: Regression analysis value 50

Table 4-16: Regression value 51

Table 4-17: Hypothesis testing results 53

Table A.1: Factors Identified Affecting Loyalty 67

Table A.2: Most common Factors identified affecting Bank Loyalty 70

Table A.3: Conceptual and Operational Definitions in Consumer Satisfaction Literature 73

Table A.4: Satisfaction constructs 80

Table A.5: Definitions of Perceived Value 81

Table A.6: Perceived Value Dimensions 83

LIST OF FIGURES Figure 1: Research model and hypotheses 22

Figure 2: Research process 24

Figure 3: Regression analysis result 53

CHAPTER 1: INTRODUCTION

1.1 Background

Credit card in Vietnam has been developing rapidly in terms of the number of card and transaction value since the first ever credit card of Vietnam was issued by Vietcombank in 1996 By the end of 2011, there are 1,025,566 international credit cards issued by the members of Vietnam bank card association and 300,000 ones issued by the non-member of the association (Oberthur Technology Company report, 2012)

The market is far away from its potentiality in terms of number of card and its transaction value (Kimihisa Imada, 2011; Nguyen Thu Ha, 2012) Vietnamese adopt quickly usage of credit cards, which pointed to almost 9.5 million people who could become customers of card issuers (Visa Inc, 2008) It is supported by both the macro-economic and banking perspective, the domestic card market is considered very strong given the rising incomes among the country's 82-million people, rapid economic growth and improving legal system (Nguyen Thu Ha, 2012)

All major credit card service providers have a presence in Vietnam, including MasterCard, American Express, Visa, JCB and Diners Club

fees.html, April 24, 2011)

(http://www.vir.com.vn/news/business/locals-still-shun-credit-cards-due-to-high-There are two types of credit cards in term of technique One is magnet stripe and the other is chip type The second one is the latest technology and it is better than the first one in security Many merchants in US and Europe reject payment if it

is magnet credit card because they are afraid of fraud (Oberthur Technology Company, 2012)

Vietnam credit cards are accepted across the territory for making direct or online payment There are now has about 10,000 places that accept card payments,

concentrated in big cities like Hanoi and Ho Chi Minh City and other major tourism sites This number is targeted by the Government to be 250,000 by 2015 (The State Bank of Vietnam, 2011)

However, the market currently has a sluggish growth due to high interest rate

of late payment, 1.5%-1.9% for one month Customers perceive it risky to use the card because of fraud It is not safe to presume Moreover, Vietnamese customers are still not used to using cards for their shopping, and prefer to use cash instead Many shopping centers are yet to install POS machines to accept credit card payments (Business time, 2011)

Parties involved in a transactions process are card holder, card issuing agency, the merchant, the acquiring bank, an association of card issuing Besides, the

transaction network is also involved It means that the card holder’ information is

exposed to many parties It creates security risk Customer perceived more risk if the payment is online

Many benefits for credit card holders Beside the function of cash replacement for purchase, it could facilitate car holder a big amount to spend when car holder do not have real amount without time constraint due to overdraft limit granted to card holder It is interest free spending which holder could not find if do credit purchase

in merchant A squeaky clean credit card history can get high credit score from credit agency In turn, it is a criterion for loan disbursement or interest rate offered

by the bank to the card holder Credit card statement contains data of spending, so it could help card holder budget Credit card holders are preferential treatment at

shopping malls, restaurants, hotels…(The economic times, 17 January 2011)

Vietnam is the most risky for credit card The credit card fraud rises to highest within region It was nearly five times the world rate, and 17 times compared with the regions (Le Thanh Ha, 2011) The frauds in the international card payment increase rapidly in 2011 The total value of fraud transactions reached one million

dollars in the first quarter of the year and 1.5 million dollars in the second quarter, which is 3-5 times higher than the same period of the last year and the last quarters

of 2010 The ratio of fraud cases on transaction value has also increased by 2-3 times (Saigon Times, 2011) The proportion of card criminals tends to increase Criminals illegally use credit card for online shopping, especially for electronics, and air tickets Crime may create shopping webpage to lure customer to provide their credit card information The crime becomes more complicated (Le Minh Loan, 2011)

Card holder has to pay three typical fees Member fee is to maintain the card and paid to the issuing bank Transaction fee which is charged at the time card holder do payment for their purchase by credit card Currency transfer fee is charged when the currency paid to merchant is different with currency of its account The fees are different by bank to bank In Vietnam, the first and the third fees are widely found across country The second one is found limited (HSBC Vietnam, 2012)

To explore the market, many banks have launched out campaigns to attract new customer and encourage spending through their credit card It could be from free of issuance fee or free of membership for the first year (Vietcombank, techcombank…) or gift reward (HSBC, Techcombank…) or refund a part of spend

value within a specific period from purchase time (Vietcombank) or lucky draw Banks compete together to expand their number of card holder They also target to person who are holding credit card of other banks

1.2 Problem Statement

Vietnamese is known as low loyalty customer to brand Surveys by Taylor Nelson Sofres Vietnam in 1999 and 2004 reveal that, in 1999, 54 percent of

consumers paid more to “enjoy the finer things of life” However, this rate reached

80 percent in 2004 The surveys also indicate that, in 1999, 79 percent of

Vietnamese consumers agreed that they often switched brands However, this rate became 47 percent in 2004 The Wall Street (Nguyen Dinh Tho, 2009)

Many researches show that when customers lay their loyalty to a brand, they continue to buy it in future, recommend it to friend, and choose the brand over others, even the others product features and price are better It also shows that the cost to win a new customer is always higher than the current one The development and maintenance of customer brand loyalty is placed at heart of marketing plans, especially in highly competitive market with increasing unpredictability and reducing product differentiation

It has been suggested by many authors that loyal customers are a competitive asset and that a way of increasing customer retention is through secure and collaborative relationship between buyers and sellers (Chaudhuri, 1999; Chaudhuri and Holbrook, 2001; Fournier, 1998; Oliver, 1999) Customer loyalty has been universally recognized as a valuable asset in competitive markets (Srivastva, Shervani& Fahey, 2000)

For long term success, all firms should gain customer loyalty by understanding factors affecting customer loyalty

After a period of focusing on increase in number of new customers, some banks such as Vietcombank, HSBC have paid attention on building loyalty Their loyal programs have been appreciated by their card holders All the other banks understand that loyalty is important but it is a dilemma

Credit card research in Vietnam is limited especially for loyalty How to build credit customer loyalty is a big question to managers

Given the above concern, there is a need to examine the antecedents of brand loyalty for credit card users

1.3 Research Objectives

The question of what are the loyalty drivers of the market is always a big question for those bank managers to have a correct direction in promoting their customer loyalty programs This research attempts to examine antecedents of brand loyalty for credit card users in Vietnam banking sector This study’s aim to answer

for below questions:

 Question 1: What are factors affecting loyalty of credit card user?

 Question 2: How are factors affecting loyalty importance?

 Question 3: How to increase credit card holder loyalty in perspective

of perceived value and switching barriers?

1.4 Scope of the Study

By reviewing recent researches to point out findings of antecedent of loyalty and banking loyalty and discussion with experts to find the suitable factor for Vietnam market Due to resources constraints, the author narrow down to the most influence factor to the proposed research model

1.5 Research Methodology

This research just focuses on card users who are living in Vietnam

Preliminary study is qualitative through group discussion in order to explore, adjust and supplement scale for factors affecting brand loyalty Official study is quantitative with sample size of: Number of variable x 5

CHAPTER 2: LITERATURE REVIEW

2.1 Introduction

Chapter 1 pointed out the current Vietnam credit card situation and card holder loyalty problem Chapter 2 will review previous researches and discussion of theories relating brand, customer loyalty to a brand and customer loyalty in banking sector It also provides loyalty constructs researches and discussion This chapter is structured into 6 sections Section 2.1 provides a general introduction to the chapter, including the objectives and structure of the chapter Section 2.2 focuses on concepts of brand loyalty and brand loyalty benefit to an organization Section 2.3 introduces customer segmentation on loyalty Section 2.4 provides previous researches and discussion on factors affecting loyalty Section 2.5 focuses on factors affecting loyalty in banking sector Section 2.6 proposes research model after reviewing literature and adjustment for Vietnam context and this study

2.2 Brand Loyalty and its benefit

2.2.1 Brand loyalty

Customer loyalty has been widely researched and as a result the concept of loyalty has received many definition and interpretation in the literature Jacoby and Chestnut ( 1978) defined loyalty to brand as a biased behavioral response, expressed over time by some decision-making unit in relation to one or more of the alternatives within a larger set of brands Oliver (1997) defined that loyalty as a deeply held commitment to re-buy or re-patronise a preferred product or service consistently in the future, which causes repetitive same-brand or same-brand set purchasing, despite any situational influences and marketing efforts that might cause switching behavior Cunningham (2000) proposed loyalty as a percentage of overall purchases of a specific brand in comparison with other competitor brands Mowen and Minor (2001) referred to loyalty as the extent in which a customer held positive attitudes towards the brand, commitment and intention to repurchase this brand in the future Tawfeq (2007) suggested that loyalty was determined because

of customer purchasing habits Martin (2007) stated that loyalty was a state of mind,

a set of attitudes and desires of the client, but they derive from his psyche

Loyalty is a multi-dimension concept It consists of behavioral and attitudinal (Day, 1969; De Ruyter et al., 1998) Behavioral loyalty is repeated transactions (or percentage of total transactions in the category, or total expenditures in the category) and can sometimes be measured quite simply with observational techniques Attitudinal loyalty is often defined as both positive affect toward the

relationship’s continuance, and the desire to continue to remain in the relationship,

and is sometimes defined equivalently with relationship commitment (e.g Morgan and Hunt, 1994) Uncles et al (2003) suggested that loyalty is a three popular conceptualizations of loyalty exist: as an attitude that leads to a relationship with the brand; as expressed in terms of revealed behavior; and as buying moderated by individual characteristics, circumstances, and/or the purchase situation Zeithaml, Berry and Parasuraman (1996) determined that loyalty had four dimensions: the intention to repurchase, positive references, complaint behavior, or sensitivity or tolerance to price against other alternatives

2.2.2 Brand loyalty benefit

Researchers have agreed that customer loyalty bring benefits to the firm in both dimensions, economic and non-economic Loyal customers bring more sales and lower cost to the seller Statistics indicate that the cost of attracting a new customer, is between 5 to 11 times greater than the cost to keep an old customer For increasing 2 percent of customer, costs must be10 percent or more (Vahidreza Mirabi1 et al, 2012) To keep customer loyalty is easier and profitable than to attract new customer (Aaker, 1996; Burgeson, 1998) Kumar and Shah (2004) claims that customer loyalty brings most known benefits: (1) less price sensitive, (2) spend more time with the company, (3) give positive comments on the brand or company

to other

In summary, when customers have made a decision about a brand and its associations, they are often loyal to that brand, continue to buy it in the future, recommend it to friends, and choose the product over others, even those with better features or lower prices (Assael, 1991)

2.3 Customer Segmentation on Loyalty

There are different ways in differentiating loyal customer Asker (1996) states that, there are five levels of customer attitude: (1) The customer will change brands, especially for price reasons No brand loyalty; (2) Customer is satisfied No reason

to change brands; (3) Customer is satisfied and would incur cost by changing brand; (4) Customer values the brand and sees it as a friend; (5) Customer is devoted to the brand

Dick and Basu (1994), suggest customer loyalty is the result of the interaction

between a customer’ relative attitude and repeat purchase behavior to a brand,

classifies customer loyalty into four segmentations: loyalty, latent loyalty, spurious loyalty and no loyalty Loyalty is associated with people who have high relative attitude and behavior They are called true loyalty person It is highest level of loyalty They repeat purchase to a brand with highly commitment Latent loyalty is associated people who have high relative attitude, but low behavior Spurious loyalty is associated with people who have low relative attitude and with high behavior No loyalty is associated with people who have low relative attitude and low behavior It is classified as no loyalty

As Evans (1996), customers are classified into four categories: hard core loyalty, branch switcher, new users, and non-users A hard core loyal customer is the one repeatedly purchase a particular brand regardless premium price of that brand has charged

Jenifer Rowley (2005) suggests a four C’s loyalty model: Captive,

Convenience seeker, contented and commitment Captive customers are to continue

to patronize a brand because they have no real or other alternative for choice They perceive a high switching cost They also stick to a brand that is associated with

products or services where buying decisions are not frequent Convenience seeker customers are driven by convenience factors and these factors dominate the choice They are not really have and attitude to a brand because it is not relevant They may have routine re purchase but low involvement Contented customers have a positive attitude to the brand, but are inertial in their behavior They do not involve with the brand purchasing additional product or service associated with the brand For these customers, each purchase is evaluated on its merits, and brands are not significant in their purchase decisions Committed customers are positive in both attitude and behavior They are the highest loyal one to a brand They will do continuing purchases and also exchange positive and delighted word of mouth to other one

Committed customers are resistant to competitors’ attempts to attract them They

may also add value to the brand They make a positive contribution to ambience of the service experience for other customers

2.4 Factors affecting Brand Loyalty

At the earliest time, loyalty is uni-dimension construct It is attitudinal (Guest,

1944, 1955) or behavioral (Cunningha, 1956) Later researches have combined these two dimensions into one model (Baldinger and Rubinson 1996; Dick and Basu 1994) There are many follow up researches to claim that loyalty is more complex and it is multi-dimension (Chaudhuri and Hoibrook, 2011; ACSI; Oliver,

1999…) Jacoby and Chestnut (1978) propose a composite concept of loyalty It

includes favorable attitudes, intentions and repeat-purchases

To find factors affecting loyalty attracted many authors in decades Different models have been tested for different industries Table A.1 in Appendix A summarizes recent researches on loyalty and factors affecting There were 34 common factors identified from these researches listed in Table 1 below

Table 1: Most common factors identified affecting loyalty

1 Customer satisfaction 17 Brand affect

2 Image 18 Emotional value

3 Switching barrier 19 Brand relevance

4 Habit 20 Celebrity influence

5 Brand trust 21 Brand Performance

6 Awareness 22 Functional value

7 Relationship proneness 23 Culture

8 Religion 24 Attitude

9 Involvement 25 Price worthiness

10 Experience 26 Cognitive conviction

11 Perceived value 27 Equity

12 Reputation 28 Market share

13 Commitment 30 Perceived quality

14 Social value 31 Customer complaint handling

15 Repeat purchase 32 Communication

16 Brand credibility 33 Perceived relative Pprice

17 Brand affect 34 Market factors

(Source: Author extracts from previous researches and refers to Kamla-Raj, 2012)

2.5 Loyalty in Banking Sector

Banking sector is one of high class services Therefore, loyalty of this sector has attracted many authors to have deeply studies Bloemer et al (1998) defined bank loyalty as the biased behavioral response, expressed over a period of time by some decision-making unit with respect to one bank out of a set of banks, which was a psychological function Recent researches on loyalty in banking sector were listed in Table A.2 stated in Appendix A section, at the end of this writing

In summary, previous studies suggested that bank loyalty is affected by factors described in Table 2 Frequency of each factor was listed in Table 2 as well

Table 2: The most factors affecting bank loyalty and its frequency appeared in recent researches

1 Satisfaction 14 9 Service features 1

2 Switching barrier 6 10 Situational factors 1

3 Service quality 9 11 Choosing 1

(Source: Extracted from Table A.2 stated in Appendix A)

In summary, customer satisfaction, switching barrier, trust, service quality, image are repeatedly found in researches

2.6 Research Model

It is explored that bank loyalty is a multi-dimension concept and its determinants are commonly stated in Table 2 To propose model for this research, the author has conducted a group discussion with eight participants including three senior personal bankers and five credit card holder to explore the suitable determinants of credit card loyalty in Vietnam context The channel picked up the most repeated factors previous section to discuss They are customer satisfaction, switching barrier, trust, service quality, and image Based on this qualitative exploratory study, suggested determinants are customer satisfaction, trust, customer

complaint handling, perceived risk, and switching barriers However, customer

complaint could only be measured if the respondents have experience with complaint It is the fact that there is less than 5% of total customer who have this

experience (as the channel’ confirmation) Due to this constraint of availability of

correspondence, this study just studies the relation between Customer satisfaction, trust and switching barrier to loyalty These factors may have correlation each other

but it is omitted in this study because of time constraint This study just only studies the direct impact of these factors to loyalty

2.6.1 Customer Satisfaction

Customer satisfaction has attracted many authors to study The concept was different from author to author with different approaches Oliver (1997) proposed that Customer satisfaction was a response of filling to the need/desires of the consumer It was the judgment that the characteristics of a product or service, or both for themselves, will provide (or are providing) a pleasant level of filling to the

consumer’s needs Yi (1990) defined that customer satisfaction was the consumer’s

response to the evaluation of the perceived discrepancy between expectations and perceived performance of the product, expectations, perceived performance, and discrepancy or disconfirmation are the natural antecedents of consumer satisfaction There were two points of view about the formation time of customer satisfaction Some authors proposed that it was formed during the consumption (Oliver, 1992; Halstead, Hartman, and Schmidt, 1994; Westbrook, 1987; Bearden

and Teel, 1983…) The others stated it was the result of post-purchase evaluation

(Moven, 1995; Hunt, 1977; La Barbera and Mazursky, 1983…) Joan L Giese and

Joseph A Cote (2002) summarized satisfaction concept and its formation time in previous researches in Table A.3 in Appendix A, at end of this writing

There are many countries have their own Customer Satisfaction Index such as the Swedish customer satisfaction barometer (SCSB) (Fornell, 1992), the ACSI (Fornell et al., 1996), and the Norwegian Customer Satisfaction Barometer (Andreassen and Lindestad, 1998) Austria, Germany, Korea, New Zealand, Taiwan, and the European Union have also started such indexes (Fornell et al., 1996; Johnson et al., 2001) These indexes are important tool to measure country economic performance It provides useful information to buyers, investors, regulatory governments (Fornell, 1996) Yong-Jae Park at el (2008) summarized customer satisfaction construct dimensions of countries Customer Satisfaction

Index (CSI) in Table A.4 in Appendix A From this table, below factors are used in these countries CSI index

1 Perceived quality 5 Perceived hardware/software quality,

2 Perceived value 6 Customer dialogue

3 Expectation 7 Price tolerance

4 Complaint handling 8 Image

In the previous discussion, customer satisfaction direct affected customer loyalty Heskett (1993) revealed that an existence direct connection between satisfaction and loyalty Satisfied customer become loyalty and dissatisfied customer move to another When the satisfaction is low, customer have the option

to quit and joint competitor or express the complaints

The American Customer Satisfaction Framework (Fornell et al., 1996) which has been adopted to create customer satisfaction indices for many countries (Aydin and Ozer, 2005) shows that customer loyalty is leaded by customer satisfaction and customer complaints The European customer satisfaction index model states that customer satisfaction is an antecedent of customer loyalty Researchers (Bolton, 1998; Rust and Williams, 1994; File et at.,1994) stated that customer satisfaction bring greater purchase intention and positive word of mouth

It appears that unnecessary to study relationship between customer satisfaction and loyalty as many studies confirmed that there is signification positive between these two variables (Colgate and steward, 1998; Hocutt, 1998, Patterson and Spreng, 1997)

Among above factors, perceived value has been received attention from authors It is strongly positively impact on customer satisfaction Many authors have raised a concern that perceived value concept is the substitute of the concept of satisfaction (Andreas Eggert and Wolfgang Ulaga, 2002)

2.6.1.1 Perceived Value

Perceived value is discussed as an important construct of customer satisfaction Its definition is different from author to author Zeithaml (1988)

proposes that value is the consumer’s overall assessment of the utility of a product

based on perceptions of what is received and what is given Day (1990) states that perceived customer value is the surplus between customer’s perceived benefits and

customer’s perceived costs Perceived customer value equals customer's perceived

benefits minus customer's perceived costs Perceived value is tradeoff between perceived benefit and perceived cost This concept has been widely accepted by authors (Zeithaml, 1988; Day, 1990; Monroe, 1990; Urbany and Bearden, 1989; Dodds et al, 1991; Anderson et al., 1993; Gale, 1994; Cronin et al, 1997; Woodruff, 1997; Patterson and Spreng, 1997) The benefit component would include the perceived quality of the service and a series of psychological benefits (Zeithaml, 1988) The perceived cost component, what the consumer must contribute, would

be include the monetary and non-monetary cost, i.e money, time, effort and other resources (Dodds et al., 1991)

Jyoti and Harsh (2011) summarized perceived value concept proposed in recent researches listed in Table A.5 in Appendix A section

Perceived value is a multidimensional construct (Woodruff, 1997; De Ruyter

et al., 1997 and 1998; Sweeney and Soutar, 2001; Sa´nchez et al., 2006) Sweeney and Soutar (2001) propose that perceived value constructs are functional, emotional and social dimensions Functional is defined by the rational and economic valuations of individuals The quality of the product and the quality of service form part of this dimension Emotional dimension is relating to feelings or internal emotions and social dimension is relating to the social impact of the purchase Sweeney and Soutar (2001) later designed a scale of measurement of value named PERVAL

Juan Carlos Fandos Roig et al (2005) proposes customer perceived value in banking services has six dimensions by adopting three dimensions of PERVAL The authors divided functional value of PERVAL into four small functional scales

It is functional value of the installations of the establishment; functional value of the

contact personnel; functional value of the service (Quality); functional value price The social value and emotional value are accepted

Jyoti and Harsh (2011) summarized perceived value dimensions propose in recent researches in Table A.6 in Appendix A section

Components of perceived value were examined to direct affect customer satisfaction Lee et al (2007) studied the multiple dimensions of perceived value and investigated how value affects satisfaction Their results stated that all dimensions of perceived value have a significant effect on satisfaction This result is not different with findings by Wang et al (2004)

In this study, author adopt Juan at el model and its scale for perceived value in banking service but group the four functional dimensions as one as the originating model proposed by Sweeney and Soutar (2001)

Consequently, it is hypothesized that:

H1: Functional value positively influences customer satisfaction

H2: Emotional value positively influences satisfaction

H3: Social value positively influences on satisfaction

2.6.1.2 Perceived Risk and relationship with Satisfaction

Credit card is as electronic paper note It requires a workspace from card issuance, and acceptance for payment which includes internet for shopping online, POS for shopping at stores The users restricted information would be leaked to whenever the card is used for payment at shops, cinemas, website of course it is

outside the bank In some instance, customers consider perceived risks before adopting a credit card and during using the card to pay their purchases

Credit card usage behavior is impacted by Perceived usefulness, Perceived ease of use, Perceived risk (Nguyen Thi Tuyet Phuong, 2012)

Perceived Risk is to explain the risk perception and risk deduction methods used by consumers (Mitra et al., 1999) It is defined as “a common thought of as felt

uncertainty regarding possible negative consequences of using a product or service”

(Featherman and Pavlou, 2003) Five different risk dimensions identified by Jacoby and Kaplan (1972) are:(1) financial;(2) performance;(3) physical;(4)social; (5) psychological risk The sixth risk parameter identified by Roselius (1971) is time risk Time risk involved the possible loss of convenience or time associated with the satisfactory delivery of a service Definition of such dimension has been summarized in Table 3

Szymanski and Hise (2000) stated that financial risk includes both tangible and intangible assets of consumers That means consumers are quite apprehensive, not only about losing certain amounts of money, but also about losing private information required in the transaction Privacy risk is the potential loss of control over personal information, such as invasion of privacy Featherman and Pavlow (2003) also stated that privacy risk may also be identified as a common concern that prevents the adoption of internet banking Furthermore, some researches on credit card fraud have been studies recently (Barker et al., 2008; Prabowo, 2011; Yu –

Feng, 2005) As discussion in Chapter 1, In Vietnam context, fraud in credit card is the high rate in the region, privacy risk is significant Therefore this study will adopt the privacy is one of perceived risks

Given in credit card context, perceived risks have significant impact to perceived risk which impact on satisfaction are financial risks, time risk, performance risk, privacy risk (Nguyen Thi Tuyet Phuong, 2012)

Many authors claimed that perceived risk negatively and significantly influences on satisfaction (Kun Hua Tsai, 2004; Mark S Johnson et al., 2008; Huei-Huang Chen et al.,2009)

Table 3: Description and definition of perceived risks dimension

Dimension Definition

Financial risk The potential monetary outlay associated with the initial

purchase price and subsequent maintenance cost of the products (Featherman & Pavlou, 2003)

Performance

risk

“The possibility of the product malfunctioning and not

performing as it was designed and advertised and therefore failing to deliver the desired benefits” (Featherman & Pavlou,

2003)

Physical risk “The probability that a purchased products results in a threat to

human life” (Lee, 2009)

Social risk “Potential loss of status in one’s in social group as a result of

adopting a product or service, looking foolish or untrendy”

(Featherman & Pavlou, 2003) Psychological

risk

Psychological risk is the perception that a negative effect on a consumer's peace of mind may be caused by a defective product (Jacoby and Kaplan, 1972)

Time risk “Consumers may lose time when making a bad purchasing

decision, wasting time researching and making the purchase, learning how to use a product or service only to have to replace it

if it does not perform to expectation (Featherman and Pavlou, 2003)

(Source: Nguyen Thi Tuyet Phuong, 2012)

Consequently, it is hypothesized that:

H4: Perceived risk negatively influences on satisfaction

In summary, satisfaction is proposed affected by three perceived values dimensions: (1) Functional value, (2) Emotional value, (3) Social value and perceived risk Satisfaction, in turn, positively affects loyalty

Consequently, it is hypothesized that:

H5: Customer satisfaction positively influences loyalty

2.6.1.3 Brand Trust

Anderson and Narus (1990) define trust as a firm’s belief that another

company will perform actions that will result in positive outcomes for the firm and not engage in unexpected behaviors with negative outcomes Chaudhuri and Holbrook (2001) state that brand trust is the willingness of consumer to rely on the ability of the brand to perform its stated function

Trust is based on ending results A positive ending result enhances trust and negative results causes the trust to drop (Deutsch, 1958; Worchel, 1979) Spekman (1988) states that trust is built up on the bases of past experiences

Trust has multiple constructs Ganesan (1994) states that trust constructs are performance or credibility trust and benevolence trust Nick Black (2009) points out that there are six drivers of trust (1) stability, (2) innovation, (3) relationship, (4) practical value, (5) vision, (6) competence

In recent searches, brand trust is proposed to have positively impact on customer loyalty

Spekman (1988) states that trust is a cornerstone of the strategic partnership Morgan and Hunt (1994) claim that trust is a major determinant of relationship commitment It leads to brand loyalty because trust creates exchange relationships that are highly valued Moorman et al., (1992), Doney et al., (1997), Dwyer et al (1987), Morgan et al (1994) implies that in a competitive market, plenty of brand Perceived risk Satisfaction

choices are available, customers prefer popular or familiar brands or partners Brand trust is important customer retention Chauduri and Holbrook (2001) claim that brand trust is directly related to both behavioral and attitudinal loyalty

Consequently, it is hypothesized that:

H6: Brand trust positively influences on loyalty

2.6.1.4 Switching Barriers

Dissatisfaction may lead customer engage in switching provider However, not all unsatisfied customer engages in switching behavior because of switching barrier (Jones & Sasser 1995) Jones et al (2000) defined a switching barrier is any factor that makes it difficult or costly for customers to change providers It is divided into interpersonal relationship and attractiveness of alternatives Ping (1993) classified switching barriers as encompassing the following aspects for customers: a) lack of

an attractive alternative, b) high relationship investment and c) high associated costs with switching to another attractive alternative

Aldlaigan and Buttle (2005) propose that switching barrier for retail banking customers are divided into five main dimensions: organizational credibility, value congruency, relational values, switching cost and lack of attract alternatives The first relates to the level of trust that customers have with their current banks The second refers to the congruency of values between customers and their banks The third considers the personal relationships between customers and bank employees The forth implies the financial amount customers bear if switch to other bank When the costs of switching brand are high for the customer, there is a greater probability that the customer will remain with current bank (Kon, 2004)

The fifth refers to customer perceptions regarding available offers in the market place (Jones, Mothersbaugh & Beatty 2000) When alternatives are lacking, the probability of terminating an existing relationship decreases (Bendapudi and Berry, 1997; Jones et al., 2000; Sharma and Patterson, 2000)

Julander and Soderlund (2003) proposed that switching barriers can be seen as positive or negative Hirschman (1970) explains these two concepts saying that

positive switching barriers are related to ‘wanting to be in a relationship’ while negative switching barriers are related to ‘having to be in a relationship’ Aldlaigan

and Buttle (2005) agreed with the suggestion and stated in the five dimensions, the first three dimensions are proposed to have positive and the last two have negative impact on customer retention

Switching barrier dimensions for banking sector are summarized by Valenzuela (2012) in Table 4

Several studies have shown up the relationship between switching barrier and loyalty Claes-Robert Julander and Magnus Söderlund (2003) posit that the rewarding switching barriers (e.g., organizational credibility, value congruency and relational values) and punitive switching barriers (switching cost and lack of attractive alternative) have different impact on loyalty Rewarding switching barriers have a positive effect on repurchase intentions and attitudinal loyalty Punitive switching barriers are negatively associated with attitudinal loyalty, but positively associated with repurchase intentions

Table 4: Switching barrier dimensions description

Relational Values I like to build relationships with the employees at this

bank (Aldlaigan & Buttle 2005)

Value Congruency I share the same values as this bank (Aldlaigan &

Buttle 2005)

Switching Costs I am concerned about negative financial outcomes of

switching to another bank (Jackson 1985; Jones, Mothersbaugh & Beatty 2000; Kim Kliger & Vale 2003; Ping 1993)

by Julander & Soderlund (2003); Lee & Feick (2001); Ranaweera & Prabhu (2003) Other authors claim a positive relationship between switching barriers and customer loyalty (Hirshcman 1970; Julander & Soderlund 2003; Ranaweera & Prabhu 2003)

In the banking sector, Valenzuela (2012) study’s result points that rewarding

switching barrier have positive on loyalty and switching cost is negatively impact loyalty while lack of attractive alternative is not associated

This study proposed that switching barriers are unified in one concept Switching barrier and it positively impact on loyalty

Consequently, it is hypothesized that:

H7: Switching barrier positively influences on loyalty

2.6.1.5 Demographic Factors

Credit card is using to make payment through POS or internet as e-commerce Researchers pointed out that customer factors influencing customer purchase behavior in e commerce Those are age, gender, income, education, experience, and innovativeness (Dillon & Reif 2004; Dillon et al 2005; Dholakia & Uusitalo 2002; Gibbs et al 2002; Shneiderman 2003) Weibing Xuan (2007), adds Work and lifestyle, Physical shopping experience, Membership are antecedents affecting to e-commerce

In this paper, the author adopts the model proposed by Weibing Xuan (2004) with adjustment basing on the group discussion described in Chapter 1 These factors are:

H1: Functional value positively influences customer satisfaction

H2: Emotional value positively influences satisfaction

H3: Social value positively influences on satisfaction

H4: Perceived risk negatively influences on satisfaction

H5: Customer satisfaction positively influences loyalty

H6: Trust positively influences on loyalty

H7: Switching barrier positively influences on loyalty

H2

H1

H3 H4

H5

H6 H7

CHAPTER 3: DATA AND METHOD

3.1 Introduction

Chapter 2 has reviewed relevant literatures on customer loyalty, and its antecedents A research model is also suggested in the chapter 2 basing on the reviewing literature and group discussion

Chapter 3 discusses the research methodology including research design, data collection, data analysis methods, and hypothesis testing to support the model The objectives of this chapter are: (1) to justify the study’s research

methodology, (2) to explain the research methodology used in the study, and (3) to describe how research design, and data collection and analysis can be utilized in this study to answer the research questions outlined in the chapter 1

3.2 Methodology and Research Process

The research used both qualitative and quantitative methodologies It is

described as diagram in Figure 2

3.3 Qualitative

The primary scales, adapted from researchers mentioned in 3.3, were brought

to the table for discussion among people formed with eight participants Five of them are card holders, and three of them are senior card developer of HSBC, Vietcombank and Agribank The card holders are credit card customer of Vietcombank, Agribank, Vietinbank, ACB, HSBC The discussion was based on a discussion guide prepared by the author

Among the eight participants, three were women and five were men, their ages ranged from 23 to 45 All of the participants stated that they use credit card for both online purchase and physical shopping through POS during the past six months Three of them had used their credit card in overseas

The focus group discussion was conducted in Ho Chi Minh City in September,

2012

3.3.1 Preliminary scales

The building scale for the concepts in research model of antecedents of brand loyalty in Vietnam banking sector: The case of Vietnam credit card users is adopted and adjusted from different studies discussed in Chapter 2 There are 17 concepts in this study To measure these concept, this study refer to scales proposed in previous researched Table 5 describes concept to be measured and its references

Factor analysis

(Explorato-ry Factor analysis)

Regression Analysis Reliability assessment

Quantitative research (Group discussion) Research problem

Scale adjustment

Literature review

Preliminary scales Questionnaire

devel-opment Qualitative research

Figure 2: Research process (Source: developed for this study)

Table 5: Preliminary concept and its references

Customer loyalty Impact of service personal

values on service value and customer loyalty

Pham Ngoc Thuy and Le Nguyen Hau (2010)

Customer

satisfaction

Impact of service personal values on service value and customer loyalty

Pham Ngoc Thuy and Le Nguyen Hau (2010)

Monzonis (2005)

Emotional value Customer perceived value

in banking services

Juan Carlos Fandos Roig, Javier Sanchez Garcia, Miguel Angel Moliner Tena and Jaume Llorens

Brand trust The effect of switching

barriers types on customer loyalty in banking industry

Anber Abraheem Shlash Mohammad (2012)

Fredy-Roberto Valen-zuela (2012)

Switching Barrier -

Value congruency

The effect of switching barriers types on customer loyalty in banking industry

Fredy-Roberto Valen-zuela (2012)

Switching barrier-

Switching Costs

The effect of switching barriers types on customer loyalty in banking industry

Fredy-Roberto Valen-zuela (2012)

Switching barrier-

Relational Values

The effect of switching barri-ers types on customer loyalty in banking industry

Fredy-Roberto Valen-zuela (2012)

The preliminary concept scales details are described in Table 6 Observed variables used for this concept measured by Likert scale (5 levels): 1 = totally disagree; 2 = disagree; 3= neutral; 4=agree; 5=totally agree

Table 6: Preliminary concept scales details

Customer loyalty I say positive thing about this brand

I recommend this brand to others

I come back to this brand when I need this service in the futures

I encourage friends and relatives to choose this brand

Pham Ngoc Thuy and Le Nguyen Hau (2010)

It seems tidy and well organized

The installations are spacious, modern and clean

Juan at el (2005)

It is easy to find and accessible Functional value

contact

personnel

(professionalism)

The personnel know their job well

The personnel’s knowledge is up to date

The information provided by the personnel has always been very valuable to me

The personnel have knowledge of all the services offered by the entity

Juan at el (2005)

Functional value

of the service

purchased

(quality)

The service as a whole is correct

The quality has been maintained all of the time

The level of quality is acceptable in comparison with other entities

The results of the service received were as expected

Juan at el (2005)

Juan at el (2005)

Emotional value I am happy with the financial services

contracted

I feel related this branded

The personnel give me positive feelings

The personnel don’t hassle me

In general I feel at ease

Juan at el (2005)

Social value It is very well considered at a social level

The fact that I come here looks good to the people I know

Many people I know go there

Juan at el (2005)

Financial risk What are the chances that you stand to lose

money if you use the XXXX?

Using an Internet –bill-payment service subject

your checking account to potential fraud

My signing up for and using an XXXX would lead to a financial loss for me

Using an internet-bill-payment service subject to your checking account to financial risk

Nguyen Thi Tuyet Phuong (2012)

Performance risk The XXXX might not perform well and create

problem with my credit

The security systems built into the XXXX are not strong enough to protect my checking account

What is the likelihood that there will be something wrong with the performance of the XXXX or that it will not work properly

Considering the expected level of service performance of the XXXX, for you to sign up for and use it would be

XXXX servers may not perform well and process payment incorrectly

Nguyen Thi Tuyet Phuong (2012)

Time risk If you had begun to use an XXXX, what are the

chances that you will lose time due to having to switch to a different payment method?

My signing up for and using an XXXX would lead to a loss of convenience of me because I would have to waste a lot of time fixing payment errors

Considering the investment of my time involved

Nguyen Thi Tuyet Phuong (2012)

to switch to (and set up) an XXXX makes them The possible time loss from having to set up and lear how to use e bill pay make them

Privacy risk What are the chances that using an XXXX will

cause you to lose control over the privacy of your payment information

My signing up for and using an XXXX would lead to a loss of privacy for me because my personal information would be used without my knowledge

Internet hackers (criminal) might take control of

my checking account if I used and XXX

Nguyen Thi Tuyet Phuong (2012)

Brand trust I trust this brand

I rely on this brand This brand is safe This is an honest brand This brand meets my expectations

Anber Abraheem Shlash Mohammad (2012) Switching

Barrier-

Organizational

Credibility

I have every confidence in this bank

I feel secure in the hands of this bank

I trust this bank

This bank is a very credible bank

This bank is reliable

This bank caters well to my financial needs

I respect this bank

This bank gives good value for money

Roberto Valen-zuela (2012)

Fredy-Switching

Barrier - Value

congruency

I receive preferential treatment from this bank

I approve of this bank’s investment policy

I feel a sense of loyalty to this bank

Roberto Valen-zuela

Fredy-I share the same values as this bank

I have confidence that this bank provides the best deal

This bank knows my needs

I support the ethical policies and practices of this

It is difficult for me to use other banks

It would be difficult for me to switch to another bank

I feel locked into this bank

Roberto Valen-zuela (2012) Switching barrier

Fredy Lack of

attractive

alternative

All banks are the same

If I were to choose another bank I do not know what I will get

There are few other banks that are realistic alternatives for me

Roberto Valen-zuela (2012)

I like the employees in this bank

I know the employees of this bank

I like to build relationships with the employees

at this bank

Roberto Valen-zuela (2012)

Fredy-3.3.2 Scale adjustment

All participants agreed that credit card is useful, high technology, low contact with bank staffs With credit card context, those scales were discussed within the focus group and it were selected and adjusted in the context of Vietnam credit card usage The results of the group discussion are as below:

- Customer loyalty observed variables are accepted without changing Four variables still valid

- Customer satisfaction observed variables are accepted without changing Three variables are still valid

- Customer perceived value observed variables are adjusted The three scales still valid but number of observed variable is reduced Group channel suggested adding a variable of reliability into Social value

- Perceived risk scales are adjusted Time risk scales variables are eliminated while Privacy, Performance, and Financial risk variables are valid but number of scale is reduced It is suggested to combine become one scales, Perceived risk

- Brand trust scales variables are accepted with adjustment

- Switching barriers are adjusted Organization credibility, Value congruence and Relational value scales variables are eliminated The discussion panel suggested adding a variable of availability of acceptance place for credit card One member stated that his friend had a bad experience with a credit card issued by a local bank

It had been not been accepted for payment in an overseas trip They also stressed that this variable is very critical because it is the reason why the credit card exist The two remaining scales are suggested to combine become one concept, Switching barrier, because there are four variables

Group channel suggest using “X” to mean the bank respondent’s use most

After discussion, scales and variables are built up The group channel goes through again all observed variables to do rewording for easy understanding, not confused in meaning and not repeated Finally, there are eight concepts, eight scales respectively, and twenty seven variables are finalized described in Table 7 These variables are developed and translated to Vietnamese for questionnaire mentioned

in Appendix These variables are also coded for data collection purpose

Group channel also discussed on factors of target population asked in the quantitative research They are: age, gender, income, Time period of usage, using experience in overseas, education