The impact of values on customer loyalty after experiencing compensation process a study of car insurance industry in vietnam

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business --- Nguyen Quang Huy THE IMPACT OF VALUES ON CUSTOMER LOYALTY AFTER EXPERIENCING COMPENSATION PROCESS –A ST

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Nguyen Quang Huy

THE IMPACT OF VALUES ON CUSTOMER LOYALTY AFTER EXPERIENCING COMPENSATION PROCESS –A STUDY OF CAR INSURANCE INDUSTRY IN VIETNAM

MASTER OF BUSINESS (Honours)

Ho Chi Minh City – Year 2014

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Nguyen QuangHuy

THE IMPACT OF VALUES ON CUSTOMER LOYALTY AFTER EXPERIENCING COMPENSATION PROCESS –A STUDY OF CAR INSURANCE INDUSTRY IN VIETNAM

ID: 22110026 MASTER OF BUSINESS (Honours)

SUPERVISOR: DR PHAM NGOC THUY

Ho Chi Minh City – Year 2014

I also would like to thank all ISB professors, lecturersand tutors for their enthusiasm in providing invaluable knowledge, interesting lectures and additional support

I would like to express my gratitude to all ISB staffs that supported necessary materials and helped summit my papers

Especially, I would like to give my special thanks my wife for supporting me during my studying at ISB

The last, I would like to say thanks to all of my colleagues and dear friends for supporting me during my studying

Nguyen QuangHuy

Ho Chi Minh City, February 22, 2014

ABSTRACT

Customer attitude after buying and customer loyalty are very important concepts that companies must understand if they want to remain competitive and grow In today’s competitive environment high quality customer serviceis the key for a sustainable competitive advantage Customer satisfaction forms the foundation of any successful business as it leads to repeat purchase, brand loyalty, and positive word of mouth

This study is to identify the determinant factorsof customer loyalty after experiencing compensation process of car insurance Though there are many factors affecting customer’s renewal of automobile insurance, this study goes

to explore deepconsideration four factors such as functional value, economic value, emotional value and social value employing quantitative and qualitative methods Data was collected from 03 non-insurance companies in Ho Chi Minh City using a questionnaire, then analyzed with SPSS software in aspects ofCronbach Alpha coefficients,explore factor analysis (EFA) and regression analysis Testresults have showed that functional value and emotional values have the strongestimpact on customer’s insurance purchasing continuance The study cannot avoid some limitations, such as scope of research is narrow only in Hochiminh city; sample is not large enough The study only considered

in the perspective of value In fact there are many other factors that affect customer loyalty

Key Words: functional value; economic value; emotional value; social value;

andcustomer loyalty

TABLE OF CONTENTS

Acknowlegdement i

Abstract ii

Table of contents iii

List of Figure vi

List of Table vii

CHAPTER 1: INTRODUCTION 1

1.1 RESEARCH BACKGROUND 1

1.2 PROBLEM STATEMENT AND RATIONALE 1

1.3 RESEARCH QUESTIONS AND OBJECTIVES 2

1.4 RESEARCH SCOPE 3

1.5 SIGNIFICANCE OF STUDY 3

1.6 THESIS STRUCTURE 4

CHAPTER 2: LITERATURE REVIEW 5

SECTION A: OVERVIEW OF COMPENSATION PROCESS OF CAR INSURANCE 5

2.1 TWO WAY INSURANCE - CAR PHYSICAL DAMAGE INSURANCE 5

2.2 COMPENSATION PROCESS OF CAR INSURANCE 6

2.2.1 Car accident compensation claims process ….6

2.2.2 Responsibilities of the Automobile owner, driver in compensation process 6

2.3 ACCIDENT SURVEY 7

SECTION B: THEORIES AND RESEARCH MODLE 2.4 KEY CONCEPTS 8

2.4.1 Functional value 8

2.4.2 Economic value 8

2.4.3 Emotional value 9

2.4.4 Social value 9

2.4.5 Customer loyalty 9

2.5 RESEARCH MODEL AND HYPOTHESES RELATIONSHIP 9

2.5.1 Functional Value and Customer Loyalty relationship 9

2.5.2 Economic Value and Customer Loyalty relationship 10

2.5.3 Emotional Value and Customer Loyalty relationship 10

2.5.4 Social Value and Customer Loyalty relationship 10

2.5.5 Moderating variables 11

CHAPTER 3: RESEARCH METHODOLOGY 13

3.1 QUALITATIVE RESEARCH 13

3.2 QUANTITATIVE RESEARCH 14

3.2.1 Measurement scales …14

3.2.2 Adjusting measurement scales 19

3.3 QUESTIONNAIRE DESIGN 19

3.4 METHOD OF DATA ANALYSIS 19

3.5 HYPOTHESIS TESTING 20

3.5.1 Descriptive statistics 20

3.5.2 Reliability test of measurement scale 20

3.5.3 Validity test of the measurement scale by the exploratory factor analysis (EFA) 21

3.5.4 Multiple linear regression 22

3.6 SUMMARY 24

CHAPTER 4: DATA ANALYSIS 25

4.1 DESCRIPTIVE DATA ANALYSIS 25

4.2 SURVEY PROCESS 25

4.3 MEASUREMENT SCALE ASSESSMENT 26

4.3.1 Cronbach’s Alpha Reliability Analysis 26

4.3.2 Exploratory Factor Analysis 28

4.3.3 Discussion on the customer loyalty 31

4.3.4 Testing the research model and hypotheses 32

4.3.5 Testing the research model 33

4.3.6 Hypothesis testing 34

4.4 DISCUSION 35

4.5 SUMMARY 36

CHAPTER 5: CONCLUSIONS 37

5.1 OVERVIEW 37

5.2 KEY FINDINGS AND IMPLICATIONS 37

5.2.1 KEY FINDINGS 37

5.2.2 MANAGERIAL IMPLICATIONS 37

5.3 LIMITATIONS 38

REFERENCES 39

APPENDICES 42

APPENDIX I: Questionnaire 42

APPENDIX II: Results of reliability analysis (cronbach’s alpha) 47

APPENDIX III: Results of factor analysis 50

APPENDIX IV: Results of multiple linear regression analysis for whole sample 52

APPENDIX V: Results of multiple linear regression analysis for own 54

APPENDIX VI: Frequencies 57

APPENDIX VII: Descriptive analysis 58

LIST OF FIGURE

Figure 2.1: Compensation process of car insurance 6

Figure 2.2: The research model 11

Figure 3.1: Research design and how data collection method fit in 13

Figure4.1: The modified research model 31

LIST OF TABLE

Table 3.1: Measurement scales for current research 15

Table 3.2: The interpretation for Cronbach’s Alpha 21

Table 3.3: The interpretation of KMO 22

Table 3.4: The required factor loading based on the sample size 22

Table 4.1: Reliability analysis results 26

Table 4.2: EFA analysis results for the independent variables 28

Table 4.3: Total Variance Explained 30

Table 4.4: Recode variable for the multiple linear regression 32

Table 4.5: Results of multiple linear regression analysis 33

Table 4.6 Level of values between owner and driver groups 33

CHAPTER 1: INTRODUCTION

This chapter introduces the background, the rationales and the objectives of the research Besides, the chapter also includes the scope of study, the implications and the structure of the research

1.1 RESEARCH BACKGROUND

Market Non-life insurance is growing, in Vietnam, the non-life insurance has begun to take shape in 1965 From 1965 to 1994 was a period of non-life insurance activities exclusive entirely with a State insurance business only Therefore, its impact on the economyis limited.The turning point has important implications for the development of Vietnam's insurance sector is marked by 100/ND-CP decree, issued December 18, 1993 of the insurance business Vietnam now has 29 non-life insurance company both domestic and foreign licensing activities

Carinsurance is also growing strongly and the business is looking to bring big revenue source for the non-life insurance companies, with revenue leader in all other insurance product, Minh Huyen (2013) stated that sales in 2012 reached 22.7 trillion

To be able to compete and grow in the market full rigors of the non-life insurance company to pay special attention to important factor and decide factorthat is compensation service The relevance of perceived functional, economic, emotional, and social value associated with the usage of car insurance is vital information for non-life insurance companies because perceived value has high explanatory power for the loyalty of insured

1.2 PROBLEM STATEMENT AND RATIONALE

In Vietnam, many people still have several questions before buyinginsurance for their car The questions like: When I getan accident does the insurance company attend to support me? How long can I get back money from an insurance claim? Doesinsurance company comply with the commitment as they promised? Many questions and debate is still ongoing customers and the press raised, for example,Binh, N D (2013) wrote that a car owner in Quang Tri has asked

XuanThanh insurance companies compensation 29 million dong, after seven months he only received 20 million dong An insurance company refused to compensate customer for the reason of the insurance contract stipulates'deadline requirements compensation is 180 days' and he submitted after this time, (Tung

Anh, 2013) Buy car insurance easy pay hard (2012) comment that when there is a

problem, the customer is very difficult to receive compensation from insurance Every year, Vietnam has thousands of traffic accidents,Mai Xuan (2013) showed that, in 2012 there were 36.376 cases and 29.318 cases in 2013 In order to reduce risks, the car owner has to buy insurance for their cars However, when customer had an accident, they need to claim from insurance company, most of them are not satisfied because of staff attitudes; procedures for compensation; amount of money compensated, compensation processes etc

KhanhHoa (2013), write that A customer in Danang has voiced "elements" BIDV Insurance (BIC) set false information to evade liability for compensation And we can see more, Thy Tho (2010) discuss that customer have submitted 16 written requests to Dragon Insurance Company (Bao Long) compensation of $ 1.8 million over six months but has only received 10 billion advance

So the aim of study is to look for the factors that have influenced the decision psychology and buying behavior of customers for cars insurance products From that we can do better and can grow and survive in a competitive environment like the present, especially when the foreign insurance company are about to be licensed to operate in Vietnam

1.3RESEARCH QUESTIONS AND OBJECTIVES

This study is to identify, measure factors affecting loyalty intention and determine the relationship among them in car insurance of non-life insurance company The proposed research questions are as follows:

- Are there identifiable factors affecting compensation process of car insurance?

- What is the relationship between these factors and customer loyalty? Which will influence customer loyaltythe most?

The study aims to:

- Identify the value factors affecting customer loyalty after experiencing compensation process

- Explorethedifferencebetween groups in term of carowner and driver

The research objects are people who have bought and experienced the compensation process of any insurance company in Vietnam

1.4RESEARCH SCOPE

The research will conduct to study the impact of values on customer loyalty intention on car insurance Therefore, the research object must be interest people who have bought and experienced the compensation process of any insurance company in Hochiminh city, and in car insurance product of non-life insurance company

The insurance companies related in the research are PJICO, BAOMINH and LIBERTY

1.5SIGNIFICANCE OF STUDY

In non-life insurance industry, the empirical studies of the relationship between customer loyalty and car compensation process are limited Compensation service quality is one of the highest important factors in analyzing the performance of non -life insurance, since their survival depends on their service quality levels they provide for their customers (Poretla and Thanassoulis, 2005) Having a good way

in supplying good compensation process is a key to achieve customer loyalty which is the primary goal of business organizations, due to the advantages of customer retention (Ehigie, 2006) The present research intends to test whether the carcustomers are happy with the compensation process provided to them, which will eventually lead customer loyalty or not.One of the vital tasks for the insurance company is to do good service compensation What hasthe non-life insurance company done? What are the factors that affect customer loyalty, the study will help the life insurance company knows which factors will influence most that they need to invest and focus on it

1.6 THESIS STRUCTURE

This study is divided into five main chapters:

- Chapter 1: Introduces the background, rationale, the scope of research and the significant

- Chapter 2: The literature review – the overview of the framework, conceptual, theories historical research about the topic of the thesis By the in-deep theories review, the study proposes the research model and the hypotheses

- Chapter 3: The research methodology – this chapter presents the research object and how to collect data The research is designed from the questionnaire and measurement scale to the sampling design and the plan for analysis

- Chapter 4: The data analysis and discussion – the chapter gathers the collected data to analyze and test the hypotheses and discuss on the findings

- Chapter 5: The conclusion, implication and recommendation for the future research

CHAPTER 2: LITERATURE REVIEW

This chapter introduces the definitions, concepts and theories of car compensation process Moreover, this chapter also studies related to the conceptual in order to design the research model and the hypothesis for the research

SECTION A: OVERVIEW OF COMPENSATION PROCESS OF CAR INSURANCE

2.1 Two way insurance - car physical damage insurance

In car insurance we have two products: the first is car civil liability insurance and the second is car physical damage insurance (one way or two way insurances) In this study I refer to car physical damage insurance

Before the introduction of the compensation process, we first need to know the coverage of car physical damage insurance

Insurance company compensates the car physical damages caused by: Pjico (2009)

- Unexpected accident, beyond reasonable control of the Automobile owner and driver in the following cases: Collision, upturning, fall, fire, explosion, other objects impacting the automobile

- Force majeure caused by the nature: Storm, flood, lightning, earthquake, hail, landslide and Tsunami

- Loss of the whole automobile in the following cases: burglary, robbery The necessary and reasonable expenses arising out of the accident within the scope

of insurance to:

- Prevent, limit additional loss, protect and take the damaged automobile to the nearest service agent but not exceeding 10% of the sum insured at most

- Inspect loss if included in the insurance liability

- In all events, total practical sum insured must not exceed the one specified

on the Insurance policy

2.2Compensation process of car insurance

Finger 2.1: Compensation process of car insurance

Pjico (2013)

2.2.1 Car accident compensation claims process

The first step after the crash customer needs to identify any casualties and make an emergency call (hot number) to the relevant parties and insurance company

Then, after receiving your phone call, insurance company immediately ask staff expertise contact to customer to guide them to solve problem

The insurance company will pay the insurance compensation within 15 days from the receipt of full and valid request document for compensation and must not prolong for over 30 days in case that it is necessary to verify the documents

2.2.2 Responsibilities of the Automobile owner, driver in compensation process

When accident occurs, the Automobile owner, driver has responsibility for:

- Actively rescuing, limiting the bodily injury or damages to property, protecting the accident scene, at the same time must notify immediately to the nearest Police station, insurance company to coordinate in solving the accident consequences, Pjico (2009)

- Notifying in written to the Insurance company within 05 days from the occurrence of accident (except for the case the legitimate reasons are given) In case the automobile is lost, robbed, the Automobile owner (or driver) must notify immediately to the Police station or the local authority where the event happened and within 24 hours must notify in written to insurance company.Pjico (2009)

- Not allowed to move out of the accident scene It is not allowed to remove

or repair the property without the consent of insurance company has not surveyed the actual damages or insurance company surveyed but it has not agreed the reasonable repair option), except for the case that it is necessary

to ensure the safety, prevent the bodily injury or damages to property or must implement at the request of the authorized bobby.Pjico (2009)

- Transfer the right of requesting for compensation related to the third party liability.Pjico (2009)

- In case of happening loss due to partially or wholly fault of the Third Party, the Automobile owner must reserve the right of complaint and transfer the right of claiming for compensation to insurance company within the amount compensated by insurance company enclosed with all related necessary documents.Pjico (2009)

- The Automobile owner, driver must be honest in collecting and providing accident information, documents in the Request document for compensation and create favorable conditions for insurance company during the truthfulness verification of such documents.Pjico (2009)

2.3 Accident survey

- When the insurance event happens, all damages to property (such as automobile, goods, other properties….) are surveyed directly by insurance company or its authorized person in the presence of Automobile owner, driver or legal representative of the Automobile owner in order to

determine the causes and damage level The damage survey fees shall be born by insurance company.Pjico (2009)

- In case insurance company and Automobile owner cannot agree the causes and damage level, the independent surveyor shall be appointed to carry out the survey In case both parties cannot agree the appointment of independent surveyor, either party requires the Court in the place happening damages or the residence place of the Automobile owner to appoint the independent surveyor The conclusion of independent surveyor

is binding on both parties.Pjico (2009)

- For the accidents which insurance company has no condition for survey or has no accident report from the Police, the Automobile owner, driver must provide all detailed information of the causes, developments of the accident, damage level and documents, damage photos (if any) to make the grounds for determining compensation.Pjico (2009)

SECTION B: THEORIES AND RESEARCH MODEL

2.4 Key concepts

2.4.1 Functional value

Functional value is the utility derived from the perceived quality and expected performance of product(Sweeney, J.C and Soutar, G.N., 2001) In this present we refer to functional value of a compensation process, that is the helpful, considerate of the staff, the respond of insurance company when customers need help from them

2.4.2 Economic value

Economic value is the utility derived from the product due to the reduction of its perceived short term and long term costs(Sweeney, J.C and Soutar, G.N., 2001) How we know economic value compensation that are fast payment, satisfactory of customers about amount of payment, time saving and compact procedure

2.4.3 Emotional value

That is the utility derived from the feelings or affective states that a product generates(Sweeney, J.C and Soutar, G.N., 2001) Does compensation process give customer peace of mind and confidence, is it sense of security, enhanced wellbeing These feelings create emotional value in compensation process

2.4.4Social value

The utility derived from the product’s ability to enhance social concept(Sweeney, J.C and Soutar, G.N., 2001) When I buy car insurance friends and colleagues envy me, it improves the way risk transfer for society When I have car insurance it helps me to feel distinct from the other people because I can be confidence to drive

self-2.4.5Customer loyalty

Customer loyalty is the result of an organization’s creating a benefit for customers so that they will maintain andincreasingly repeat business with the organization (Anderson, & Jacobsen, 2000)

What makes people buy car insurance for their car, which is experiencing compensation process of insurance company? When I have chosen to buy car insurance of this company, I must also to encourage friends and relatives to buy, too

2.5 Research model and hypotheses relationship

2.5.1 Functional value and customer loyalty relationship

The present study refers to when customers buy insurance products, the insured generally most interested in whenever the accident occurred, the staff are very helpful and considerate, and always respond promptly and on time? Clearly, these factors greatly influence the loyalty and continued selecting next year's insurance, which is the basis of forming hypotheses

H1: perceived functional value is assumed to positively influence Customer Loyalty

2.5.2 Economic value and customer loyalty relationship

In terms of economic compensation insurance can greatly influence the customers, there are many factors affect this problem, the compensation quickly and satisfactorily, the simplest procedure is the factors directly impact the economic value and the decision to continue to work with the insurance company

Therefore, the influence of economic value on Customer Loyalty may vary between the time of compensation and amount of compensation Hence, economic value is the rationale behind the next proposed hypothesis:

H2: Economic value is assumed to positively influence on Customer Loyalty

2.5.3 Emotional value and customer loyalty relationship

An unusual incident occurred on the road always creates confusion, mental restlessness The accident is always faced with the loss of financial and emotional impact is very strong Insurance is financially secure and create confidence for our customers, and this only really play when compensation insurance gives customers the confidence andpeace of mind and safety when engaged traffic.Therefore, Emotional value is the rationale behind the proposed hypothesis:

H3: Emotional value is assumed to positively influence on Customer Loyalty

2.5.4 Social value and customer loyalty relationship

Social value: what we consider to be important in social interactions between people it was, ‘a process whereby organization meet their needs for goods, services, works and utilities in a way that achieves value for money on a whole life basis in terms of generating benefits to society and the economy, whilst minimizing damage to the environment.(Inspiring and Creating Social Value in Croydon)

Insurance provides an efficient mechanism of risk transfer by pooling idiosyncratic risks In technical terms, such risk pooling, based on the law of large numbers, provides value in that the premium paid by individual policyholders is smaller than the cost of an expected maximum loss occurrence

By charging a premium that reflects the underlying risks, insurance provides an important signal to policyholders and the economy at large, thereby offering incentives for risk mitigation Insurers also give risk management advice and services to individuals and companies Therefore, Social Value is the rationale behind the following proposed hypothesis:

H4: Social value is assumed to positively influence on Customer Loyalty

H5: There is difference impact level of values and customer loyalty between owner and driver groups

The conceptual framework guiding the present study is depicted in Figure 2.2 Based on the literature review, hypothesized relations among the latent variables have been derived

Finger 2.2: The research model

H5

Customer Loyalty

H1: Functional value is assumed to positively influence Customer Loyalty H2: Economic value is assumed to positively influence on Customer Loyalty H3: Emotional value is assumed to positively influence on Customer Loyalty H4: Social value is assumed to positively influence on Customer Loyalty

H5: There is difference impact level of values and customer loyalty between owner and driver groups

CHAPTER 3: RESEARCH METHODOLOGY

Chapter 2 presented the research model and the research hypotheses This chapter presents the research process, the research object and the way that data

is collected The research is designed from the questionnaire to the sampling design and the plan for the data analysis

The research methodology included the phase of qualitative study and quantitative study The qualitative study was conducted by in-depth interview

of focus group In the phase of quantitative study, the construction of measurement scales and the design of questionnaire based on selected and adjusted measurement scales were conducted

Finger 3.1: Research design and how data collection method fit in(Sekaran,

U and Bougie, R., 2011)

3.1 QUALITATIVE RESEARCH

The purpose of qualitative research step is to make clear the concepts and interpret the items from measurement scale based on the standpoint of customer Hence, the necessary modification can be carried out in order to increase the power of scale In addition, this step also provides the

Measurement and measures

- Operational definition Item (measure)

Purpose of the

study

- Exploration

Description

Hypothesis

testing

Data collection method

- Interviewing Questionnaire

Problem

statement

Time horizon

- One shot (Cross- sectional) Longitudinal

Sampling design

- Probability Sample size

Unit of analysis

(Population to

be studied)

- Individuals

Type of investigation

- Causal Relationship Correlations Group differences

Extent of researcher interference

- Minimal: Studying events as they normally occur Manipulationand/o

r control and/orsimulation

Study setting

- Contrived Noncontrived

1 Feel of data

2 Goodness

of data

3 Hypothesis testing

opportunities to gain new idea, new items to enhance the research model and measurement scale

The technique employed was the focus-group interview – the most well-known group interview technique - because it can provide historical information and the interaction will enrich the information for research (Donald & Pamela, 2006) It was valuable in the scenario of this research as helping researcher obtain general background about the topic, interpret existing researched findings and provide new idea for modifying and supplementing new components

The participants of focus group were the people who has experiences of compensation and who really interested in this problem, and people who worked in compensation of insurance company, who understand what the owner or driver need when they have accident

The general rule is keep conducting focus group interviews until no new insights are gained (Donald & Pamela, 2006) The script for interview was prepared in advance The researcher led the discussion in focus group interview The interviewees presented their private opinions according to the questions in script prepared by researcher before and criticized the previous ideas until no insights were gained

The findings of focus group interview got agreements of interviewers on some contents, some other contents need modified, complemented to be more appropriate

3.2 QUANTITATIVE RESEARCH

3.2.1 Measurement scales

Measurement scale for values was adapted from Koller, Floh, and Zauner (Psychology and marketing Doi: 10.1002/mar) and modified through qualitative research with 37 items (2006) and modified through qualitative research with 23 items

CONCEPT ORIGINAL SCALES CURRENT SCALES (CONTEXT) EXPLANATION Function value

Definition: The utility

derived from the perceived

quality and expected

performance of the

product (Sweeney, J.C

and Soutar, G.N.)

promised in the insurance contract

concepts are adjusted

to suit the research context

to suit the research context

Has an acceptable standard of quality

Has an acceptable standard of quality

process

concepts are adjusted

to suit the research context

Would not last a long time quick claim settlement as

commitment

concepts are adjusted

to suit the research context

Would perform consistently

Solving the compensation in a manner consistent

concepts are adjusted

to suit the research context

Staff is professional, accurate counseling and always come timely when customer have an

new concepts under study

accident

The process of compensation

of company X is simple and convenient

new concepts under study

Economic value

Definition: The utility

derived from the product

due to the reduction of its

perceived short term and

longer term costs

(Sweeney, J.C and Soutar,

G.N.)

Is a good product for the price

meaningful concept nearly overlap with other concepts in the context of research

Compared to the others cars, my car is economical

Compared to the others insurance, my insurance is economical

concepts are adjusted

to suit the research context

nearly overlap with other concepts in the context of research

Emotional value

Definition: The utility

derived from the feelings

Is one that I would enjoy Is one that I would enjoy Would make me want to

use it

Would make me want to use it

or affective states that a

the context of research

Sense of security and enhanced wellbeing

Is one that I would feel a sense of security

concepts are adjusted

to suit the research context

Social value

Definition: The utility

derived from the product’s

ability to enhance social

as having car accident

concepts are adjusted

to suit the research context

Would improve the way I

am perceived

Buying car insurance is that you have responsibility to protect the lives and property

of themselves and others

concepts are adjusted

to suit the research context

Would make a good impression on other people

concept does not fit in the context of research

Would give its owner social approval

to suit the research

context

Customer loyalty

Definition: Customer

value is assumed to be the

key determinant of post

consumption intentions

such as loyalty and word

of mouthrecommendations

(Cengiz&Yayla, 2007;

Lin, Sher, & Shih, 2005)

In the future, I will buy a car from this brand again

In the future, I will buy insurance from this Company

concepts are adjusted

to suit the research context

I consider the car my first choice

I consider buying the insurance of this company is

my first choice for my car

concepts are adjusted

to suit the research context

insurance company

concepts are adjusted

to suit the research context

I encourage friends and relatives to buy a car from the same brand

I encourage friends and relatives to buy insurance from

X

concepts are adjusted

to suit the research context

Table 3.1Measurement scales for current research

3.2.2 Adjusting measurement scales

Before carrying out main data collection, the study had a discussion with experts

in insurance industry at 02 insurance companies about using the previous measurement scale The expert find the scale is clear and fine to use in Vietnam However the research object is almost driver so some definitions may not easy for them to understand well Therefore the modification is needed

23 item of the main part measure the impact of values on customer loyalty after experiencing compensation process, they were used Likert type scale on 5 – point anchored with 1 = “strongly disagree”, 2 = “Disagree”, 3 = “Neutral”, 4 =

“Agree”, 5 = “strongly agree”

3.4METHOD OF DATA ANALYSIS

The collected data was checked before passing to the coding, inputting and analyzing on the software Computer statistic package for social science (SPSS version 20) was used as the main tool for analysis of the data collection

There are four statistical techniques have been used in this analysis process:

- Descriptive statistics

- Reliability test of the measurement scale

- Validity test of the measurement scale by the exploratory factor analysis (EFA)

- Multiple linear regression

3.5HYPOTHESIS TESTING

3.5.1 Descriptive statistics

Descriptive analysis is a discipline that describes the main characteristics of a collection of data The aim of the discipline is to summarize a set of data This is unlike inductive analysis where the data is used to learn about the entities that the data is representing or we can learn A descriptive analysis is a conclusion technique that is used to describe some key features of data in a research study They give a simple summary about a sample from the research study

3.5.2 Reliability test of measurement scale

According to Connely (2011, p 45), “Cronbach’s alpha is used as only one criterion for judging instruments or scales It only indicates if the items “hang together;” it does not determine if they are measuring the attribute they are supposed to measure Therefore, scales also should be judged on their content and construct validity”

The scale of research is usually assessed through methods Cronbach’s alpha reliability coefficient Criteria for evaluating a standard scale is: Cronbach's Alpha analysis: α> 0.6, the correlation coefficient gross> 0.3 (Nunnally&Burnstein, 1994) However it should be noted that if the Cronbach Alpha too high (> 0.95), it appears likely successor in the observed variables in the scale Turn excess is observed variables measuring a concept almost coincide with other measurement variables, similar to the case of multicollinearity in regression, whereas redundant variables are eliminated

Besides, the scale item is omitted if the corrected item-total correlation in SPSS is below 0.4 – the threshold value of corrected item-total correlation used in the research Moreover, the scale item is also taken out of the overall scale if the value

of Cronbach’s Alpha if Deleted is higher than the value of overall Cronbach’s Alpha

Table 3.2: The interpretation for Cronbach’s Alpha

3.5.3Validity test of the measurement scale by the exploratory factor analysis (EFA)

Exploratory Fator Analysis (EFA) is applied to check the uni-dimensionality and convergent validity of measurement (Hau, 2012) The research used the validity test applied method and criteria used in EFA as follow:

- Principle component analysis is used for uni-dimensional concepts, which

is using with the Varimax rotation method

- The factor extraction method – Principle Axis factoring is used for dimension concept and rotation method Promax (kappa = 4)

multi KMO (Kaisermulti Meyermulti Olkin) index measure the sampling adequacy According to Hau (2012), the KMO is higher than 0.6 (practical significant)

to support the factor analysis, and if KMO is less than 0.5 indicates it is not able to process the factor analysis

Table 3.3: The interpretation of KMO

KMO ≤ 0.5 Either collected more data or rethink

which variable to include 0.5 < KMO Acceptable values

0.5 < KMO ≤ 0.7 Mediocre 0.7 < KMO ≤ 0.8 Good 0.8 < KMO ≤ 0.9 Very good KMO > 0.9 Superb

- The value of eigenvalue ≥ 1 is used to decide the extracted factors

- The extracted variance is higher than 0.5

- Total variance explained criteria > 50%

- The factor loadings are required of ± 0.3 to ± 0.4 as the minimally acceptable; while values are greater than ± 0.5 is necessary for practical significance However, it also depends on the sample size; the required factor loading for this research is 0.45 as per (Hung, 2013)

Table 3.4: The required factor loading based on the sample size

Factor loading Sample size needed for 5% significance

3.5.4Multiple linear regressions

Multiple linear regression analysis is a method for analyzing the effects of several independent variables concurrently on a dependent variable There are some measurement scores that would be used in regression analysis: un-standardized coefficient beta, R-Square, adjusted R-quare, multi-collinearity with VIF

Multiple linear regression method is used to analyze and understand whether there are the linear correlations among the factors By this analysis, the dependence variances can be explained or predicted by the independence variances Moreover, the multiple linear regression is used to test the hypotheses of research model to find out how the factors Functional value, Economic value, Emotional value, Society value have impacted on the Loyalty of customer who have experience of compensation process

Hair et al (2010, p 156) claimed that there is the difference between the actual and predicted values of dependent variable That means the random error will occur when predicting sample data It is called the residual (ε or e) Based on these studies, the multiple regression formula will be

The multiple linear regression analysis was processed and followed the criteria as below:

- Access the model fit by adjusted R2 and F-Value

- The Sig level of relevant explanatory variable is less than 0.05, the hypothesis is supported (Hair et al 2006)

- Multicollinearity: to check the exist of the correlation among the independent variables The tolerance value and the VIF value (variance inflation factor) indicate how much of a specific independent variable is not explained by another independent variable in the model (Sekaran&Bougie, 2011) The possibility of multicollinearity exists when the tolerance value

is less than 0.1

- The standardized coefficient β explains the relationship between the independent variable and dependent variable The positive β shows the positive relationship of independent variable and dependent variable, the negative β shows the negative relationship independent variable and dependent variable And there is no relationship if the β value is equal to 0

- The β value is used to compare the impact of each independent variable to a particular dependent variable The independent variable has a higher value

of β means that independent variable has a stronger influence on the dependent variable

- To compare the impacts of a particular independent variable to different sample groups, the unstandardized coefficient B value is used

3.6 SUMMARY

The chapter presented the research process in detail which is follow the quantitative approach survey method There were 138 observations This chapter also outlined the methodology for the analysis process: from test the measurement scale to testing the model and hypotheses In the next chapter, chapter 4 shows the results of the analysis