Factors influencing local customer loyalty, case low cost airline vietjet air in vietnam

Rationale of research The concept of customer loyalty was given by Oliver, 1999 is: “a deeply held commitment to rebury or repatronize a preferred product/ service consistently in the f

FACTORS INFLUENCING LOCAL CUSTOMER LOYALTY,

CASE: LOW COST AIRLINE VIETJET AIR IN VIETNAM

In Partial Fulfillment of the Requirements of the Degree of

MASTER OF BUSINESS ADMINISTRATION

FACTORS INFLUENCING LOCAL CUSTOMER LOYALTY,

CASE: LOW COST AIRLINE VIETJET AIR IN VIETNAM

In Partial Fulfillment of the Requirements of the Degree of

MASTER OF BUSINESS ADMINISTRATION

In International Business

by Mr: Doan Giang Son ID: MBA04033 International University - Vietnam National University HCMC

Acknowledge

To complete this thesis, I have been benefited from many people around me First of all, I specially thank my advisor, Mr Ho Nhut Quang, for guiding me patiently to complete the thesis His information and advice are very valuable not only for this research but also for my real life Thank you with all of my honors

Next, I would like to thank all of teachers in MBA department of IU, who gave me a lot of knowledge in business field It is lucky for me when I have been trained by professional teachers in professional environment Their experience and knowledge always make me admire

Finally, I am very thankful to my family and friends, who always support and encourage me to pass all of difficulties in the periods of studying MBA program

Plagiarism Statements

I would like to declare that, apart from the acknowledged references, this thesis either does not use language, ideas, or other original material from anyone; or has not been previously submitted to any other educational and research programs or institutions I fully understand that any writings in this thesis contradicted to the above statement will automatically lead to the rejection from the MBA program at the International University – Vietnam National University Hochiminh City

Contents

Chapter One - Introduction 1

1 Introduction 1

1.1 Background 1

1.2 Rationale of research 2

1.3 The problem statement 3

1.4 Research question 3

1.5 Research objectives 3

1.6 Research scope: 4

2.2 Conceptual Model of the thesis study 4

3 Research methodology 5

3.1 Research Framework 5

4 Significant of the research 7

5 Propose structure 7

Chapter Two - Literature review 9

1 Previous models 9

2 Perceived Value 12

3 Price 13

4 Service Quality 14

5 Brand Image: 15

6 Trust 16

7 Customer satisfaction 17

8 Customer loyalty 19

8.1 Customer loyalty definition 19

8.2 The influences of customer loyalty on firm‟s incomes 19

9 Research model and Hypotheses 21

Chapter Three - Methodology 23

1 Research Method 23

2 Primary data collection 24

2.1 Paper survey as the data collection method 24

2.2 Questionnaire design and data collection 25

3 Reliability and Validity 26

3.1 Reliability test 26

3.2 Validity test 26

Chapter Four - Data analysis and Research results 30

1 Sample description 30

2 Descriptive statistic 31

2.1 Price 31

2.2 Perceived Value 32

2.3 Service Quality 32

2.4 Brand Image 33

2.5 Trust 34

2.6 Customer Satisfaction 34

2.7 Customer Loyalty 35

3 Reliability tests 36

4 Validity tests 36

4.1 Tests for 1st stage 36

4.2 Tests for 2nd Stage 43

5 Path Analysis 48

5.1 Influence of Customer Loyalty: H1d, H2d and H3d tests 48

5.2 Indirect influence path analysis 49

Chapter Five - Conclusions and Recommendations 53

1 Conclusion 53

2 Suggestions for Vietjet Air 54

2.1 Price policy 54

2.2 Service quality 55

2.3 Brand Image 56

3 Limitation 56

LIST OF REFERENCES 57

APPENDIX A 63

APPENDIX B 66

LIST OF FIGURE

Figure 1: Schematic diagram of research 5

Figure 2: Research framework 6

Figure 3: European Customer Satisfaction Model 9

Figure 4: Model of impacts on Customer Loyalty in commercial airlines industry 10

Figure 5: Model of Steven A Taylor in marketing of heavy equipment 10

Figure 6: SERVQUAL Model 12

Figure 7: Conceptual research model 21

Figure 8: Questionnaire design 25

Figure 9: Respondent gender description 30

Figure 10: Final research model 51

LIST OF TABLE

Table 4.1: Number of flight that respondents made with VJ 30

Table 4.2: Number of flights that respondents made in one year 31

Table 4.3: Price descriptive statistic 31

Table 4.4: Perceived Value descriptive statistic 32

Table 4 5: Service quality descriptive statistic 32

Table 4.6: Brand image descriptive statistic 33

Table 4.7: Trust descriptive statistic 34

Table 4.8: Customer satisfaction descriptive statistic 34

Table 4.9: Customer loyalty descriptive statistic 35

Table 4.10: the Cronbach‟s Alpha of factors 36

Table 4.11: KMO and Barlett‟s test for Independent variables 37

Table 4.12: Total variance Explained for 1st Stage 37

Table 4.13: Rotated component matrix for 1st Stage 38

Table 4.14: Correlation between indirect factors and direct factors 39

Table 4.15: R-square value in H1a, H2a, H3a test 40

Table 4.16: ANOVA in H1a, H2a, H3a test 40

Table 4.17: Coefficients values in H1a, H2a, H3a test 40

Table 4.18: R-square Value in H1b, H2b, H3b test 41

Table 4.19: ANOVA in H1b, H2b, H3b test 41

Table 4.20: Coefficients in H1b, H2b, H3b test 42

Table 4.21: R-square value in H1c, H2c, H3c test 42

Table 4.22: ANOVA in H1c, H2c, H3c test 42

Table 4.23: Coefficients in H1c, H2c, H3c test 43

Table 4.24: KMO and Barlett‟s Test for 2nd Stage 43

Table 4.25: Total Variance Explained for 2nd Stage 44

Table 4.26: Rotated Component Matrix for 2nd Stage 45

Table 4.27: Correlations between TRU, CSA, BRI and LYT 46

Table 4.28: R-square value between TRU, CSA, BRI and LYT 47

Table 4.29: ANOVA between TRU, CSA, BRI and LYT 47

Table 4.30: Coefficients between TRU, CSA, BRI and LYT 47

Table 4.31: Coefficients between indirect factors and Customer Loyalty 48

Table 4.32: Interpreting Strength of Path Coefficients 50

Table 4.33: Evaluate the relationship between influence factors and Customer Loyalty 51

Table 4.34: Hypothesis testing result 52

Abstract

This study was conducted in order to evaluate the influence of relevant factors on

Customer Loyalty of Vietnam low cost airline, VietjetAir The direct factors and indirect

factors influencing loyalty of customer are defined and be built as an airline customer

loyalty model The quantitative method was used as the key method with the assistance

of statistical instrument To achieve the primary data, customers of VietjetAir were

asked to fill in the paper survey; and their remarks would be the valuable contribution

for the research completion Finally, through this research, VietjetAir may figure out

their gaps and also their strong points which help them bring out the suitable actions to

win the customer loyalty, an important determinant in today business

Chapter One - Introduction

1 Introduction

1.1 Background

Vietjetair operated its first flight in the late December 2011 After more than a year, Vietjetair has got approximate 16% market share, and it is standing higher than Jetstar Pacific (13%) and Air Mekong (3%) (Source: To Ha, Laborer‟s Newspaper, 2013) In the beginning, Vietjetair had 3 airplanes and now it has 6 with many domestic destinations as: Hochiminh, Nha Trang, Hanoi, Phu Quoc, Da Nang, Hai Phong, Hue, Vinh, Cam Ranh and 1 foreign route to Bagkok It is an amazing development in the year of economic crisis 2012

Vietjetair was established by 3 main shareholders: T&C group, Sovico Holdings and Bank for Investment and Development of Vietnam JSC (BIDV) with the initial capital is 600 billions VND Vietjetair Corporatin was got the license to flight from the Major of Ministry of Transport in 2007 In the first plan, Vietjetair intended to operate first flight in 2008 But due to many reasons such as fuel fluctuation and brand disputation, Vietjetair had to postpone opening flights After a few times delay, Vietjetair operated its first flights from Hochiminh to Hanoi in 25th December 2011 as requirement of Ministry of transport

When Vietjetair stepped into air transport industry, there are total 5 commercial airlines which serve in domestic routes They are Vietnam Airline, Jetstar Pacific, Airmekong, VASCO and Vietjetair Therefore, the competition between those Airlines have being increased and more fierce Air Mekong with the incorrect strategy decided to stop flying in late February 2013 It cannot continue maintaining the loss-making operation and Airmekong is the second looser in air transport industry after Indochina Airline

Vietjetair is going in different way It learned the model from one of the most successful low cost airline, AirAsia, to be its loadstar And Vietjetair is the second low cost airline of Vietnamese market beside Jetstar Pacific

1.2 Rationale of research

The concept of customer loyalty was given by Oliver, 1999 is: “a deeply held commitment to rebury or repatronize a preferred product/ service consistently in the future, thereby causing repetitive same brand or same brand set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior”

There are some major benefits of customer loyalty First, loyal customers are repeat customers They will return to buy product/service again and again It means that, they will bring the steady income for company which sell product or supply service Moreover, loyal customer will introduce product/service to his family, friends… and it brings more benefit to business Second, the company does not have to spend much money to advertise the product to loyal customers And the loyal customers are willing

to ignore small mistake causing by supplier

In commercial air transport, winning the customer‟s loyalty is also very important There are many strong competitors who always try to build their brands, giving reasonable ticket price, improve service… to win market share The 2 previous samples of Indochina Airline and Airmekong had to stop their business because they could not keep passengers stay with them Realize the lessons from previous Airlines, Vietjetair are trying more and more to win the loyalty from customers

1.3 The problem statement

The economy is still in the difficult periods, the fuel price is not stable, the competition is more and more fierce Vietjetair has to face many problems But the biggest issue now is that the number of consumers that uses Vietjetair more than one time is going down (Source: Vietjetair Annual report, 2012) The Board of Director of Vietjetair recognizes the issue and they are determined to find out the reasons why that issue occurs Besides that, after a year operating, they also want to have a research to examine the factors which influence the customer‟s satisfaction, customer‟s perception and their loyalty with Vietjetair

Due to those reasons above, I decided to choose the topic for my thesis:

“FACTORS INFLUENCING THE LOCAL CUSTOMER’S LOYALTY – CASE: VIETNAMESE LOW COST AIRLINE VIETJETAIR IN VIETNAM”

1.5.2 The specific objectives:

First, the thesis is going to review the theories, previous researches and building the conceptual model for the study

Second, identify the direct and indirect factors which have impact on the consumer‟s loyalty of Vietjetair

Third, analyze the result and point out recommendations for airline

1.6 Research scope:

- This research will focus on the Vienamese passengers, who have already used the service of Vietjetair The foreigners are not participating in the survey due to different culture and level of awareness

- All the secondary data related to Vietjetair will be collected from the December

2011, the day that airline started its first flight

- In this research, the survey will be used and it is going to implement only in Tan Son Nhat Airport Because in this area, there are thoundsands of passengers waiting for their flights a day; therefore it is easier for author to collect survey and it does not cost much

- The research will not count every type of ages of customer Author chooses the customers in ages from 18 to 55, because these type of passengers frequently travel and they have enough perception and apprehension after using a service

2.2 Conceptual Model of the thesis study

After searching and reading some models concerning about the thesis, a new model which is the combination between some factors and their relationships is created

as the figure below Base on this framework, a small research will be conducted to clarify the influence of the related factors to the customer loyalty in this thesis There are

3 direct impacts on Customer loyalty: Trust, Brand Image and Customer Satisfaction and 3 indirect impacts on Customer loyalty: Price, Perceived Value, Service quality

Customer Loyalty

Perceived

Value

Figure 2: Research framework Review theories and build the conceptual model: collecting the secondary data and descriptive analysis are the methods for this part There are a lot of theories, definitions, previous researches… in books, internet, magazines, articles… so it is convenient to read and collect the information from those sources

Identify factors that influence customer loyalty: in this part, both qualitative and quantitative methods are used The primary data will be made by doing the management interview and survey The questionnaires will be sent to respondents to explore their opinions about Vietjetair After getting the feedback from respondents, the information

Research Objectives

Problem Statement

Review theories and

build conceptual model

Analyze the results: when seeing the result after running SPSS, the analysis is conducted to point out some findings Furthermore, the analysis will answer the very important question: “Is this research reliability and validity?”

Conclusions and recommendations: this is the final step in the research Depending on the result analysis, it is easy to find out which factors have affect customer loyalty Hence, the conclusions and recommendations will be exposed to help airline improve their operations to win customer loyalty

4 Significant of the research

First of all, the research will help Vietjetair Corporation determine the factors which have influence on the customer‟s loyalty It also assists the company to recheck the quality of current service programs Then, it will orient the marketing plans which focus on the customer‟s loyalty effectively

This study also is a great chance for me to take part in a real research It will help

me to improve the research skill, learn more knowledge, and experience the new steps in studying, collecting data and analyzing data

5 Propose structure

CHAPTER I: INTRODUCTION

The chapter I will overview the background of research Then, it will show the reasons to choose topic, the research problem statement, the objectives and research question, the scope of research, brief methodology and conceptual framework

CHAPTER II: LITERATURE REVIEW

In chapter II, there are concepts and definitions of the research objectives The reviewing similar previous researches and proposing the theoretical framework related to are also included

CHAPTER III: METHODOLOGY

This chapter will present the method which are used to achieve all the research objectives and answering the research questions This chapter begins with research design, followed by the primary data and secondary data collection, qualitative and quantitative design, questionnaire design and data analysis Statistical tools (SPSS) will be used in the research

CHAPTER IV: ANALYSE THE RESULTS

When receiving the results by running SPSS, this chapter will examine the reliability and validity of the survey Finally, the results of the test help to answer the research question

CHAPTER V: CONCLUSION AND RECOMMENDATION

This final chapter will give out conclusions after seeing the result of the data analysis and the investigation of the influence of factors on Customer Loyalty will be clear Moreover, base on the research question, this chapter will provide few recommendations for Airline

Chapter Two - Literature review

1 Previous models

In this part, some models are mentioned as the references for the thesis conceptual framework

European customer satisfaction index

Figure 3: European Customer Satisfaction Model This model is the famous one in Europe This model, Ball et al believed that customer satisfaction is the concurrent impact of factors: image, perceived value, perceived quality and expectation He explained the customer loyalty of a product or a service through the customer satisfaction index when it is directly or indirectly influenced by those factors

Andreas H Zins, 2001

Figure 4: Model of impacts on Customer Loyalty in commercial airlines industry

In the book of International Journal of Service Industry Management, Andreas

H Zins investigated the antecedents of the customer loyalty in commercial airline industry by building a research model of direct and indirect factors that affect the customer loyalty He was going to research the image of the service provider is, along with service quality and customer satisfaction, a powerful and illustrative component for explaining future customer loyalty

Steven A Taylor, Kevin Celuch, Stephen Goodwin, (2004)

Figure 5: Model of Steven A Taylor in marketing of heavy equipment

Writing a book about marketing in industry of manufacture heavy equipment, Steven A Taylor and his partners believed that brand equity and trust are consistently the most important antecedents to both behavioral and attitudinal forms of customer loyalty There is also evidence that the models underlying the formation of behavioral versus attitudinal forms of customer loyalty may vary across research settings

Ahmad Jamal, Kyriaki Anastasiadou (2009)

Parasuraman is the pioneer in researching the quality of service in 1985 The success of research created the very useful tool that help the businessman achieve the result about service quality through the researching of customers‟ survey Servqual is a compound word from 2 words: “service” and “quality” This model received many positive praises from experts After that, the model was continued optimize through concentration on the concept “perceived quality” of consumer The perceived quality from customers is the most objective evaluation of quality of service

Ahmad Jaman and Kyryaki Anastasiadou developed their research about the effects of service quality dimension on the customer loyalty based on the SERVQUAL model of Parasuraman This research was published by the European Journal of Marketing in 2009 The 2 authors investigated the direct effect of expertise on loyalty

and the moderating effect of expertise on the link between satisfaction and loyalty

Figure 6: SERVQUAL Model

2 Perceived Value

Martin Ruiz et al., (2007) suggested that "buyers' perceptions of value represent

a tradeoff between the quality or benefits they perceive in the product relative to the sacrifice they perceive by paying the price" Here, this quality/price ratio as a 'value-for-money' approach (Huber et al., 2007) to understand customers' perceived value is preferred over a multidimensional approach The significance of the factor price for the evaluation of a service's value is further emphasized by Anderson et al (1994) Besides the actual monetary price, sacrifice components of perceived value also include non-monetary costs such as time or risk Perceived value is further highly subjective and individual, and therefore varies among consumers (Zeithaml, 1988)

Customers deem that the price paid for a service determines the level of quality that they can expect (Teboul, 1991 in: Park et al., 2006, p 364) Based on Zeithaml's proposition that perceived value is personal and idiosyncratic, the level of quality expected will vary among customers In general, this quality/price ratio is reflected by the different airline business models Low cost airlines typically offer cheap fares, concentrating on their key service of air transportation, while network carriers offer additional services at a higher price Perceived value have a positive influence on Brand

image, because customers think that it is worthy when using services and they will have the positive remark about the relationship with the given brand

Zeithaml and Bitner (1996) described value in services as the key competitive factor defining the way services are bought and sold Perceived value has further been proposed to be a major antecedent to future intentions (Bolton & Drew, 1991) Blackwell et al (1999) empirically substantiated a decisive link between value and repeat purchase behavior in pharmaceutical services Park et al (2006) confirmed that there is a positive relationship between perceived value and customer satisfaction and between perceived value and loyalty in the airline industry

According to the discussion above, there are hypotheses proposed:

H1a: Perceived Value has influence on Brand Image

H 1b : Perceived Value has influence on Trust

H1c: Perceived Value has influence on Customer Satisfaction

H1d: Perceived Value has direct influence on Customer Loyalty

3 Price

Price is the monetary cost which customer has to pay to buy products or services (Zeithaml, 1988) It is the critical determinant that influences customer buying decision Price is usually evaluated relying on the perception of customers and called perceived price Customers is exactly the one who examine that the monetary they accept to pay for a product or service is whether worthy or not How much consumers are willing to pay differs due to their different needs and wants (Regina et al., 2009) Thus, the price perceptions are different for the same service base on the individual perception Peng and Wang, 2006 stated that, when customers think that they have to pay a higher price for a product or service than they received after using that product or service, it might be negatively impact their purchase decision When consumers are attracted by a good

price perception, they usually have intention to repurchase the products (Lichtenstein et

al., 1993) It means that, price influences customer loyalty

Many researchers have pointed out that price perception influences customer

satisfaction and trust (Oliver, 1997; Peng and Wang, 2006; Cheng et al., 2008; Kim et

al., 2008) Customer often switches mainly due to some pricing issues, high price

perceived, unfair or deceptive pricing practices (Peng and Wang, 2006) Therefore, in order to increase customer satisfaction, it is essential for service firms to actively manage their customers‟ price perceptions, carrying out attractive pricing, offering reasonable prices mix, lower prices without decreasing quality, etc

According to the discussion above, there are hypotheses proposed:

H2a: Price has influence on Trust

H 2b : Price has influence on Brand Image

H2c: Price has influence on Customer Satisfaction

H2d: Price has direct influence on Customer Loyalty

4 Service Quality

The concept of satisfaction and the quality is often equated even though these two concepts have different understanding (Parasuraman & ctg, 1988) In general, satisfaction is considered to have a broader concept than service quality assessment, which specially focuses only on the service dimension

Ostrowski et al (1993) believed that "It is essential that service quality measures are customer-driven, as there could be disparity between managerial thoughts and customer expectations" Furthermore, service quality is treated as a brand performance characteristic and is thereby part of the customers' image of the brand Therefore, the conceptualization of service quality as perceived by the customer is suitable Other

Taylor, 1992) The reason is quality is related to the service supply, while the satisfaction is only evaluated after using that service If the service is improved without basing on the customer‟s needs, it will never make customer feel satisfy

Service quality has been identified as a factor of customer satisfaction and customer's choice (Ostrowski et al., 1993; Taylor & Barker, 1994; Young et al., 1994) Several different dimensions have been proposed to measure service quality in the airline setting (Nadiri et al., 2008) Here, in accordance with the results of an exploratory study conducted by Park et al (2006) to identify dimensions of airline service quality, airline service quality includes three general dimensions: reliability and customer service, in-flight service, and convenience and accessibility If the airline brand is perceived as providing excellent service to the customer, such a service quality appraisal fosters the positive evaluation of the relationship with the brand It also positively influences the confidence and trust which the customer has in the relationship with the airline brand Zahorik and Rust, 1992; Cronin & Taylor, 1992 also confirmed the exist of the positive relationship between service quality and customer loyalty

According to the discussion above, there are hypotheses proposed:

H 3a : Service Quality has influence on Brand Image

H3b: Service Quality has influence on Trust

H3c: Service Quality has influence on Customer Satisfaction

H 3d : Service Quality has direct influence on Customer Loyalty

5 Brand Image:

Accoring to Barich & Kotler, 1991, brand image is an overall image of an enterprise in customer thinking It is created through accumualted processes of evaluations and information of an enterprise such as: brand name, construction, product/service diversification An airline image can be described as the impression of

passengers which resulting from accumulated experiences made through a number of brand contacts and interactions (Keller, 2003 and Gronroos, 2004)

Zeithaml & Bitner (1996) and Andreassen & Lindestad (1998) suggest that image has an important effect on customers' company choice when the service's attributes are difficult to assess Lovelock (1984 in: Andreassen & Lindestad, 1998) has claimed that: “images are likely to play only a secondary role in customer choice decisions unless competing services are perceived as virtually identical on performance, price, and availability."

Air transport, especially on short-haul flights, is likely to transform into a rather generic service Furthermore, the airline's service attributes are difficult to evaluate prior

to the actual consumption experience An airline's image is an important factor that influences passengers' airline choice This argument is further supported by Park et al (2006) who state that the purpose of airline image is to reflect a distinctive competence

in comparison to competitors, implying that the brand represents distinctiveness and appeals to airline customers A favorable image may contribute to an airline becoming a customer's preferred choice (Andreassen & Lindestad, 1998), therefore is one aspect of customer loyalty

According to the discussion above, there is a hypothesis proposed:

H4: Brand Image has influence on Customer Loyalty

6 Trust

Trust is the resulting willingness to rely on the brand in which the customer has confidence Trust is the belief, sentiment, or expectation of a brand‟s trustworthiness (Moorman et al., 1992) A brand is perceived as trustworthy if customers believe in the brand‟s good intentions in the relationship

In addition, the trustworthiness of a brand as perceived by the customer reduces concerns of opportunistic behavior in the case of unforeseen events (Bendapudi & Berry, 1997) If airline customers consider their preferred airline brand to be reliable and

to demonstrate integrity in every situation, they can take quicker decisions on which airline to choose and thereby save time while feeling confident about their decision

Several research studies have emphasized trust as an important foundation for relationship marketing (Crosby et al., 1990; Parasuraman et al., 1991 in: Berry, 1995; Morgan & Hunt, 1994) While Chaudhuri and Holbrook (2001) have demonstrated that brand trust is directly related to both purchase and attitudinal loyalty, Hennig-Thurau et

al (2002) suggest that more recent empirical findings (Grayson & Ambler, 1999) question the direct influence of trust on loyalty Even if there is no clear understanding

of the relationship between trust and customer loyalty, Hess and Story (1995) propose that any personal relationship, whether interpersonal or between a person and a brand, is built on trust Trust is especially critical for the establishment of service based relationships because of the intangible of services

According to the discussion above, there is a hypothesis proposed:

H 5 : Trust has influence on Customer Loyalty

7 Customer satisfaction

Satisfaction is a leading factor in determining loyalty (Garbarino & Johnson, 1999; Anderson & Fornell, 1994) The operational principle is always to satisfy customer‟s demand because customer is the source of revenue and profitability for company When customer satisfies with product or service, the rate of repurchase from these customers is high Moreover, when customer feels satisfied, they tend to say good comments to other customers

Customer satisfaction and loyalty have a high relevance According to Oliver (1999), customer satisfaction occurs through the use of product, is a necessary step to determine loyalty Kotler (2000) defined that satisfaction is a person‟s feeling of pleasure or disappointment resulting from comparing a product perceived performance

in relation to his or her expectations That‟s mean, when the company‟s performance is higher than expected, the customer satisfaction increases In contrast, if the performance

is lower than expected, the customer satisfaction decreases Has the same opinion, Karma (2004) agreed that customer will be contented when the estimated performance is more than the target; conversely, dissatisfaction happens when the satisfaction is below the expectation As per Pail et al (2009) , those customer are merely satisfied and they find it simple to shift when other firm is providing a better cost or package while the importance of customer satisfaction is highlighted in business In general, satisfaction relates to whether the service meets the customer‟s need and expectations

According to Selnes (1993), an organization may increase its sale and customer loyalty by offering excellent satisfaction by the customer Therefore customer satisfaction has happened to be one of the focal point for all business especially those in service industry Customer satisfaction is gauged to sustain existing customers and as result, effectiveness and growth of business (Parahoo, 2006) Benner (2009) also argued that customer satisfaction is one of the important factors which help a company gain higher long-term performance to maintain customer loyalty Customer satisfaction is also a fundamental factor in improving production process and end user relationship

The primary objective of the airline sector is to provide excellent service and competency Rachel & Andy (2010) believed that excellent service is the vital while the number of absolutely contented customers segment is an important factor as assesses by some analysts for high profit A business organization must regularly gauge consumer

satisfaction in order to analyse and identify whether clients were delighted or not According to Torbica & Stroh (2001), particularly in the airline sector, the degree of customer happiness is plainly recognised off late in the process, whilst the majority of the customers spent the cash by now When firms study on which characteristics of a service or products affect consumer satisfaction, their duty is to adapt their current strategies in a manner that would lead to utmost consumer contentment

According to the discussion above, there is a hypothesis proposed:

H6: Customer Satisfaction has influence on Customer Loyalty

8 Customer loyalty

8.1 Customer loyalty definition

Customer loyalty has been widely researched and the concept of loyalty has presented in many literatures Several authors have their own definition and interpretation about loyalty

Dick & Basu, 1994 point out a definition of customer loyalty is the strength of the relationship between an individual‟s relative attitude and repeat patronage, mediated

by social norms and situation factors

Another definition which is frequently appeared in the marketing literatures comes from Oliver, 1999: “a deeply held commitment to rebuy or repatronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior”

8.2 The influences of customer loyalty on firm’s incomes

Customer loyalty is one of the interested topics in the marketing researches In there, the key content focuses on the issue that customer willing to create and maintain

the relationship with the service suppliers (Swan, Trawick & Carroll, 1982; Garfein, 1987; Anderson, 1998; Bolton, 1998)

In business, every company has goal of achieving profitable And the customer is

an important source that helps companies achieve their goals And several researches show that there is a direct relationship between a firm‟s loyal customer and its profitability (Reichheld & Sasser, 1990; Roger Hallowell, 1996; Berry, 1995) Some authors prove that loyal customers help increasing revenues for the firm (Schlesinger & Heskett, 1991; Berry, 1995) The loyalty is performed by more purchasing, with higher prices, and creating a reputation for the firm through positive word of mouth (Ganesh et al., 2000) These customers are not only frequently buy the firm‟s products but also is the marketing - bridge of the firm to introduce products or service to their families and friends (Hoffman et al., 1995; Zeithmal et al, 1966) Moreover, a loyal customer can help the firm decrease the costs (Reichheld, 1993; Berry, 1995), because it costs less when the firm provides services and satisfies loyal customers (Reichheld, 1996), and since the costs for sale and marketing programs for loyal customer can be extended over the period of customer lifetime (Clark & Payne, 1994)

Profit from loyalty is the revenue, the low set-up cost, and the low costs for brand recognition The revenue will increase through repeat purchasing In additional, customers are willing to for higher pay because they are familiar with company‟s staffs and services (Zeithmal et al., 1996) The company‟s profitability is also gained from low operating costs when the relationship between the customer and the supplier is really closed because the customer is easier to accept the firm‟s marketing attempt for new products or services Moreover, customer has less questions and easier to ignore the small mistakes (Zeithmal, 1996)

1 st Stage:

Indirect

2 nd Stage Direct

Normal customers typically choose to buy a certain product that they feel the best for them while loyal customers pay more attention to history, the future and the success of the brand that they trusted (Reichheld & Sasser, 1990; Clark & Payne, 1994) They always ready express what they think about the services and trust the firm will do better and better The firm will easily get the most accurate and

comprehensive information for future marketing plan when carefully contacting to such customers

9 Research model and Hypotheses

Figure 7: Conceptual research model

Hypotheses:

H1a: Perceived Value has influence on Brand Image

H1b: Perceived Value has influence on Trust

H1c: Perceived Value has influence on Customer Satisfaction

Customer Loyalty

Service

Quality

H1d: Perceived Value has direct influence on Customer Loyalty

H2a: Price has influence on Brand Image

H2b: Price has influence on Trust

H2c: Price has influence on Customer Satisfaction

H2d: Price has direct influence on Customer Loyalty

H3a: Service Quality has influence on Brand Image

H3b: Service Quality has influence on Trust

H3c: Service Quality has influence on Customer Satisfaction

H3d: Service Quality has direct influence on Customer Loyalty

H4: Brand Image has influence on Customer Loyalty

H5: Trust has influence on Customer Loyalty

H6: Customer Satisfaction has influence on Customer Loyalty

Chapter Three - Methodology

1 Research Method

There are two helpful research methodologies: quantitative and qualitative Bryman & Bell (2003) pointed out that the connection between theory and research, epistemological considerations and ontological considerations, quantitative and qualitative research can be considered as two distinctive clusters of research strategy Quantitative data may be stated as the statistical information namely figures, while qualitative may be explained briefly as the sort of information which is available as transcript

Bryman defined qualitative research as the move towards the revision of the communal across the globe that begins to portray and evaluate the traditions and invidual activities from the perceptive of those being observed Saunders et al (2007) believed that qualitative research entails the compilation of a mixture of observed sources such as case studies, individual experiences, reflective discussions, past interactions and visual presentations that explained the regular and challenging instants and significance in personal lives According to Bryman (2001), qualitative research is a research approach that generally highlights numbers relatively in the data collation and testing; and the approach that is applied is inductive and dealt with subjective conclusions

Quantitative methodology is primarily based on positivist The function of quantitative methodology is to found proper link between correlated variables (Malhotra & Birks, 2007) According to Bryman (2001), quantitative research is explained as the gathering of statistical numbers in addition to displaying an outlook of the link involving the concepts and course study as study and it final achieve intent result

In this research paper, author had chosen those two methodologies In there, quantitative is the main methodology as it targets to determine the relationship between the identical elements and also to analyse the particular problem In the other hand, qualitative is used to collect the secondary data The secondary data is collected from books, articles, previous research and from internet It is useful to review the theories of the factors which are introduced in the research model in chapter 1

2 Primary data collection

2.1 Paper survey as the data collection method

To collect the primary data needed to test the hypotheses, paper survey was chosen as the data collection method This choice has a few advantages with author when comparing to other survey methods such as personal interviewing, telephone interviewing or mail and internet survey This kind of survey presents a cost efficient method to collect a great amount of data in relative frame

In this survey, the completion questionnaire is developed The completion questionnaire is very similar method of business research, and the research instrument has to be especially easy to follow and its questions have to be particularly easy to answer (Bryman & Bell, 2003) Meanwhile, whether to ask a question in open or closed format is one of the most significant considerations for many researchers According to Bryman & Bell, 2003, closed question has some advantages: it is easy to process answer; it enhances the comparability of answers, and makes them easier to show the relationships between variables Finally, closed questionnaire is chosen for this research

self-2.2 Questionnaire design and data collection

The questionnaire is divided into 2 parts Before coming to the first part, respondents are introduced to the survey and inform about its purpose and background

In the first part, participants are asked to show their individual information by answering

4 questions about their gender, age, number of flights with Vietjet Air, and their frequencies in using Air transportation The second part is the major part which contains all seven construct in the research model with total 35 statements (each construct includes 5 statements) A 5-point Likert scale was chosen as the rating scale, ranging from „strongly disagree‟ (1 point) to „strongly agree‟ (5 point) All the statements in this research questionnaire is shown in Appendix A

A pre-test was conducted in order to ensure that the questionnaire is easy to understand and fill in The raw draft was sent to 3 participants who have great knowledge and experience in commercial airline industry which one of them is the Representative of Vietjet Air After receiving remarks from them, a new draft was composed before delivered to 30 testing respondents who had several times travel by air plane These people truly commented about the statements in questionnaire whether they are easy to understand and fill in or not Then, the questionnaire was one more time adjusted to be the final questionnaire and widely delivered to respondents

Figure 8: Questionnaire design

In order to collect data, there are 400 samples were handed in to anticipants who was waiting for boarding at the lounge As brief description in Chapter 1, the chosen respondents are from 18 to 55 years old and already used Vietjet Air at least 1 time

Interview Pilot Study

though they were waiting for Vietjet Air‟s flight or others‟ To ensure that the respondents already enjoyed the Vietjet Air service, the author asked them whether they flied with Vietjet Air or not If any customer say that he has never used Viet Air service, that one would not be received the questionnaire The sample collection was conducted

in about 3 weeks with some help from author‟s colleagues

3 Reliability and Validity

The statistical instrument SPSS is used to analyse the data After collecting samples from respondents, all complete questionnaire data was input by manual into SPSS

Each research and research method should be examined critically on its reliability and validity (Finn et al 2000) The reliability of a method is related to the consistency of the results obtained from it (Bryman & Bell, 2003), while validity is defined as how much any measuring instrument measures what it is intended to measure

The technique which is used in validity test is Exploratory Factor Analysis (EFA)

Factor analysis is an interdependence technique in that en entire set of

interdependent relationships is examined without making the distinction between dependent and independent variables (Paurav Shukla, 2010) It is used in some circumstances:

- To identify underlying dimensions, or factors, that explain the correlations among a set of variables

- To identify a new, smaller, set of uncorrelated variables to replace the original set of correlated variables in subsequence multivariate analysis (regression or discriminant analysis)

- To identify a small set of salient variables from a larger set for use subsequence multivariate analysis

3.3 Hypothesis tests

In order to test the hypothesis, Multivariable linear regression analysis and path analysis have been used

3.3.1 Multivariable Linear Regression analysis

Linear regression analysis is a statistical procedure used to find the relationships among a set of variables (Hoang Trong, Mong Ngoc C N., 2008) In regression analysis, there is one dependent variable, and one or more variables that are related to it The linear regression analysis is expressed in equation:

y = a1x1 + a2x2 + … + anxn + b

- Step 1: examine the influences of indirect factors on direct factors It means that there are three tests to define the influences of percieved value, price and service quality on Brand image; the influences of perceived value, price and service quality on Trust and the influences of perceived value, price and service quality on customer satisfaction This step tests the groups of hypotheses H1a, H2a, H3a; H1b, H2b, H3b and H1c,

H2c, H3c

- Step 2: examine the influences of factors on target factor It means that there is a test to define the influence of Brand image, Trust and Customer satisfaction on Customer loyalty This step tests the hypotheses H4, H5, H6

- Step 3: to ensure the existence of the influences of indirect factors (perceived value, price and service quality) on target factor (customer loyalty) through direct factors (Brand image, trust and customer satisfaction), the final regression analysis will

be conducted This step tests the hypotheses H1d, H2d, H3d

3.3.2 Path analysis

Path analysis is an extension of regression analysis It is a statistical technique used primarily to examine the comparative strength of direct and indirect relationships among variables (Lleras, 2005)

In this research, path analysis is conducted to calculate the strength of relationship

of the indirect factors (perceived value, price and service quality) and direct factors (brand image, trust and customer satisfaction) to the Customer loyalty factor based on the results of regression analysis De Vaus, 2012 considered the level of strength of those relationships in the table below: