Factors affecting customer loyalty in mobile communication service in hanoi, vietnam

Chapter 1 INTRODUCTION 1.1 Background of the study Research on factors affecting customer loyalty in mobile telecommunication services in Viet Nam is significant to discover new scale a

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SUMMATION THESIS BY NGO ANH CUONG

PREFACE

Customers are invaluable assets of the business Customer loyalty is significant

to the future development of a general company or the particular mobile service providers It contributes to maintain stable profits when the subscriber reaches the saturation point, mature market and fierce competition

In Vietnam, the mobile communication market has been transforming from a monopolistic market to competitive market with participation more and more service providers Therefore, customers have many opportunities to choose services less bound to the service provider The change of service providers by customers becomes phenomenal and increasing Subscribers starts to layoff workers because they are getting less and less number of customers to serve which showed that customers have been not loyal to their providers

To develop positively and sustainably for Vietnam’s mobile market, service providers need to find ways to maintain valuable and loyal customer

Chapter 1 INTRODUCTION 1.1 Background of the study

Research on factors affecting customer loyalty in mobile telecommunication services in Viet Nam is significant to discover new scale and a new theoretical model for managers Research result will provide information for management to formulate effective strategy for the use of telecommunications resources and helping suppliers

of mobile telecommunication services plan and implement more effective follow-up market activities and customer care services

1.2 Statement of the problem

To increase the competitiveness of the service providers as well as to increase the market demand, the dissertation would like to seek answers to the following:

- Identify factors and quantify by scales to analyze factors affecting to customer loyalty on mobile communication market in Hanoi

- Research and analyze the factors affecting customer loyalty by statistical methods: analyze the relationship between the different factors that affects customer loyalty; to use regression and correlation method for assessing the impact of each factor to customer loyalty;

- Survey to assess the customer loyalty for the suppliers of the mobile communication services;

- Based on findings, the dissertation proposes some solutions to improve customer loyalty for the mobile communication services of the supplies

1.3 Hypotheses

H1: Service quality has a positive effect on customer satisfaction

H1.1: Increasing the call quality will increase the satisfaction level on service quality;

H1.2: More reasonable price structure will increase the satisfaction level on service quality;

H1.3: Increasing the value - added service quality will increase the satisfaction level on service quality;

H1.4: More convenience in procedures will increase customer satisfaction levels on service quality;

H1.5: Customer service is related to customer satisfaction on service quality

H2: Customer satisfaction has a positive effect on loyalty

H3: Switching barriers has a positive effect on loyalty

H3.1: Loss cost affects the decision of the customer to change provider;

H3.2: Adapting cost is a switching barrier to the customer;

H3.3: Higher move – in cost is a switching barrier to the customer;

H3.4: Attractive offers of other providers are switching barrier to the customers;

H3.5: Customer relationship is a switching barrier to the customer

1.4 Significance of the study

Objectvie of the dissertation will be:

The dissertation will identify factors affecting customer loyalt

The dissertation conduct to analyze relationship between demographic factors with customer loyalty aims to provide practical information for administrators, new service providers who want to join or maintain their position in the mobile communication service market

The disertation result can help service suppilers to indentify key factors related

to customer satisfaction and customer loyalty while helping service providers develop and implement marketing stratergies to improve customer loyalty and limited

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important information for mobile service providers so they can formulate specific strategies and plans for executing more effective marketing strategies and customer care

1.5 Scope and limitation

The scope of the study is the customers who have been using mobile in Hanoi

It includes prepaid and postpaid Factors affecting customer loyalty is mentioned in this study as follows:demographics; quality services, switching barriers, etc

1.6 Definition of terms

In this research, the dissertation will present some concepts related to research content as follows: mobile telecommunications services prepaid the ground (prepaid mobile service), mobile communication services provider, mrepaid subscriber, postpaid subscriber, call quality, value – added service, monvenience in procedures, price structure, customer services support, loss cost, adapting cost, move – in cost, ,

attractiveness of other providers, customer relationship

Chapter 2 REVIEW OF RELATED LITERATURES AND STUDIES

2.1 Mobile telecommunication services

Mobile telecommunication services are clearly exhibiting signs of an abrupt industry paradigm change and symptoms of a market in transition Bolstered by the rapid development of information and communication technologies (ICT) and high demand from customers, the paradigm of mobile telecommunication services is now shifting from voice-centered communication to a combination of high-speed data communication and multimedia Factors such as the growth of the wireless Internet contribute to emphasize the appearance of a transition period in the mobile telecommunication services market

This change of paradigm and the symptoms of a market in transition are driving the industry’s restructuring efforts and intensifying competition between companies Mobile carriers are coming to a full realization of the importance of a customer-oriented business strategy as a condition for sustaining their competitive edge and maintaining a stable profit level, and, indeed, for their very survival When the number of subscribers has reached its saturation point, creating and securing new customers is not only difficult but also costly in terms of marketing Hence, it is becoming an industry-wide belief that the best core marketing strategy for the future

is to try to retain existing customers by heightening customer loyalty and customer value

2.2 Hanoi mobile communication services

In 2012, there were six providers about mobile communication service in Hanoi with big three providers (Vinaphone, Viettel and Mobifone) and small three providers (Gtel, Sfone and Vietnammobile)

* Viet Nam Telecom Services Company (Vinaphone)

As a member unit of Vietnam Post and Telecommunications Corporation (VNPT), Currently VinaPhone provides services with 6 prefix numbers (091, 094,

0123, 0125, 0127, 0129) for about over 36 million of real subscribers

* Viettel telecom company (Viettel)

Viettel Telecom Company (Viettel Telecom) is affiliated companies of the Viettel telecom military corporation Early in 2012, EVN Telecom has been merged

by Viettel, so Viettel has became a mobile communications provider with the largest market share in Vietnam Currently, Viettel is one of the leading mobile communications suppliers in Vietnam with 10 subscriber numbers (098, 097, 096,

0163, 0164, 0165, 0166, 0167, 0168, 0169) and over 47,4 million subscribers

* Viet Nam Mobile Telecom Services Company (VMS - Mobifone)

Vietnam Mobile Telecom Services Company - VMS, a state-owend company under Vietnam Posts and Telecommunications Corporation Currently Mobifone provides services with 8 prefix numbers (090, 093, 0122, 0124, 0126, 0128, 0121,

0120) for about 21 million of real subscribers

* Other suppliers

Other suppliers include SPT ( prefix number is 095); Gtel (prefix numbers are

099 and 0199) and Vietnamobile (prefix numbers are 092 and 0188) Three suppliers have a very low market share so they are very difficult to compete the largest suppliers

2 3 Customer loyalty

There are many concepts of customer loyalty

Jim Novo (2011) described customer loyalty as a tendency of a customer to choose a particular brand of business or product to fulfill their needs And Reihchhed and Detricf (2003) said that Customer loyalty is astrategy that creates mutual rewards

to benefit firms and customers.With loyalty customers, companies can maximize their

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on trying new products or services, recommend products and services to others, and give companies sincere suggestions

2.4 Affecting factors to loyal customer

* Customer satisfaction

According to Spreng at al.1996, Customer satisfaction is the emotional state of products and services have been used Satisfaction can be obtained because of what was expected The empirical studies have shown that customer relationship and service quality are distinct concept And the customers’ own perceptions of service quality are the main factor to effect customer satisfaction And service quality is determined as the customers’ satisfaction or dissatisfaction formed by their experience

of purchase and use of the service In the mobile communication service quality has been measured by call quality, pricing structure, mobile devices, value-added services, convenience in procedures, and customer support (e.g., Kim, 2000; Gerpott

et al., 2001; Lee, Lee, & Freick, 2001)

* Switching Barriers

The switching barrier refers to the difficulty of switching to another provider that is encountered by a customer who is dissatisfied with the existing service, or to the financial, social and psychological burden felt by a customer when switching to a new carrier According to a previous study, the switching barrier is made up of switching cost, the attractiveness of alternatives, and customer relationships

* Demographic factors

In addition to the factors presented above, the customer loyalty may also be affected by demographic factors: age, gender, occupation, education level

2.5 Customer loyalty models

* Proposed integrated model of service Loyalty

Figure 1: Proposed integrated model of service Loyalty

* Switching barrier model of customer loyalty

Perceived

Service Quality

Service Loyalty Customer

Satisfaction

Figure 2: Switching barrier model of customer loyalty 2.6 Several topics related to mobilecommunication services

2.6.1 Some topics researched in Viet Nam

Ky Duc Pham and Hung Nguyen Bui (2007) have has built theoretical models, test hypotheses and provide a new scale for mobile communication service market in Viet Nam According to authors, the service quality was the most important factor affecting customer loyalty

And when researching about assessment of customer satisfaction towad the mobile telecom services in Hue, Thai Ha Thanh and Ton Duc Sau (2011) showed that service quality was the most important factor effecting customer satisfaction

Duong Tri Thao and Nguyen Hai Bien (2011) have studied based on theoretical models of consumer loyalty and satisfaction, this study aims to consider relationship between service quality and consumer satisfaction of mobile phone service in Nha Trang city, Vietnam Results of the research show that models of consumer satisfaction fit well with the data, and consumer satisfaction of mobile phone was influenced positively by five factors including call quality; value added service; convenience; perceived price and consumer service

2.6.2 Some topics researched Overseas

Figure 3: Customer loyalty about mobile communication service in American

Customer Satisfation

Switching barrier

- Switching cost

- Customer relationship

- Attractive provider others

Customer loyalty

Customer satisfaction

Perceived value

Perception

quality

Customer complant

s Expecting

perception

Buy back capabilities Accepting prices

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Figure 4: The model of impacting satisfaction and switching barrier to customer

loyalty the mobile communication service in Korea

2.7 Conceptual framework

Customer loyalty

Satisfaction

Call

quality

Add – value service

Customer support

Service quality

Switching barrier

Customer relationshi

p

Loss cost Move in

cost

Switching cost

Quality services:

- Call quality

- Price structure

-Value add

services

-Convenience in

procedures

-Customer

services

Switching costs

- Loss cost

- Adapting costs

- Move-in cost

Attractiveness of

other providers

Customer

relationship

Customer satisfaction

Switching barrier

Customer loyalty

Recommendation

s to improve customer loyalty

in mobile communication service market in Hanoi area

Figure 5: The proposed model for mobile communication service in Hanoi Source: the experimental model of customer loyalty in the communication market in Ho Chi Minh city by Pham Duc ky and Bui Nguyen Hung, (2007)

Chapter 3 METHODOLOGY 3.1 Research design

The variables to determine customer loyalty were selected based from the conceptual framework at figure 5 It includes:

The quality services included: calling quality with 5 variables; price structure with 5 variables; value - add services with 5 variables; convenience in procedures with 4 variables and customer support services with 5 variables

And the switching barrier included: loss cost with 2 variables; adapting cost with 2 variables; move – in cost with 2 variables; attractive offers of providers and customer relationship with 4 variables

In addition, the questionnaire also used 3 other factors: customer satisfaction with 2 variables; switching barrier with 2 variables and customer loyalty with 2 variables

3.2 Determination of sample size

Dissertation uses the Slovin’s formula to difine the sample size for the survey

1 Ne

N

 where n : sample size

N: Population size that is 9.1 million mobile subscribers

e: Probability of error committed due to the use of sample instead of population The error level in sample survey was chosen to be at 5%

Thus, the minimum sample size to conduct the investigations would be:

1 Ne

N

 1 9100000*(0,05) 399,98 400

9100000



Thus, the sample size of the survey is 400 respondents

3.3 Sampling design and techniques

The sampling method was conducted using stratified random sampling but based on several factors: the market share of service providers, demographic (gender, age group and occupation) factors, types of services (post-paid and pre- paid)

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3.4 Research instrument

To measure the factors that affect customer loyalty in mobile communication services, the questionnaire using the Likert scale with five levels: 5: strongly agree; 4: agree; 3: normal; 2: disagree and 1: strongly disagree

The questionnaire was designed in two parts:

- Part one: The customer’s demographic profile which included the information used to classify customer groups who are using mobile communication service such as: name, gender, education level, occupation, and income

- Part two: This part deals on the questions that measured the customer’s loyalty using the selected variables or indicators

3.5 Data gathering procedure

- Secondary data: the author collected data from the managing state agencies related to mobile communication: Ministry of Information and Communications, General Statistics Office, Hanoi Department of Information and Communication and Hanoi Post Office

- Primary data: were taken from the survey results of 400 respondents who have been using the mobile communication service of providers

3 6 Data processing method

After information is collected, obtained were cleaned and processed using SPSS 16.0

3 7 Statistical treatment

In this research, dissertation used some statistical method to analyze factors affecting customer loyalty in the mobile communication service Descriptive statistics, Chi-square test were used to analyze relationship between demographic factors with the customer loyalty

For this research, linear regression analysis was used to test for the linear relationship between the variables identified in hypotheses Using correlation coefficient (r) to test relationship between variables of hypo dissertation pairs

Chapter 4 PRESENTATION ANALYSIS AND FINDINGS

NTERPRETATION OF DATA 4.1 Respondents profile

To gather sufficient information of 400 respondents, before importing data to prepare data synthesis process and analysis, the survey questionnaire was cleaning

information, encryption Results preliminary statistics of respondents was shown as follows:

Table 4.4: The summary of the distributive sample by gender, age and type of service providers The vendor

Age groups Services type Total 18-24 25-34 35-44 45-54 Over 55 Postpaid Prepaid Mobifone Gender

Vinaphone Gender

Viettel Gender Male 99 6 38 33 18 4 30 69

Others Gender

Total 400 27 154 129 75 15 130 270

4.2 Scale values test

The scale is a preliminary assessment through Cronbach Alpha coefficients Cronbach alpha coefficient is used to remove the waste variables Variables were excluded when the corrected Item –Total Correlation of Variables is less than 0.3 and the standard value to assess the better scale when it has reliability alpha to be 0.6 or higher (Nunnally & Burnstein 1994)

4.2.1 Services quality

Cronback’s alpha of “calling quality” is 0.775

Cronbach alpha of the “Pricing structure” is 0.85

The composition of “value added services” with Cronbach alpha is 0.794

The composition of “Convenience in procedures’ with Cronbach alpha is 0.806

The composition of “customer service supports” with Cronbach alpha is 0.738

4.2.2 Switching Barriers

The Cronbach’s alpha of the component “loss cost” is 0.765

The Adapting cost component with Cronbach's alpha 0.684

The Move – in cost with Cronbach’s alpha is 0.644

The Cronbach’s alpha of “attractiveness of other providers” is 0.915

The Cronbach’s alpha of the “customer relationship” is 0.852