Factors affecting customer loyalty in the vietnamese banking industry

Based on that, the study was carried out to reveal the impact of corporate image, service quality, customer satisfaction, switching cost and trust on customer loyalty in the Vietnamese b

International School of Business

-

Tran Nguyen Anh Tuan

FACTORS AFFECTING CUSTOMER LOYALTY IN THE VIETNAMESE

BANKING INDUSTRY

MASTER OF BUSINESS (Honours)

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Tran Nguyen Anh Tuan

FACTORS AFFECTING CUSTOMER LOYALTY IN THE VIETNAMESE

BANKING INDUSTRY

ID: 22110077

MASTER OF BUSINESS (Honours)

With a population of 91 million consumers and economic growth rate averaged 6.57 percent from 2006 until 2012, Vietnam has been an attractive foreign investment destination Therefore, the competition has been gradually increasing Banking industry is no exception as it has high interaction with the customers, so managers have to understand the factors which influence the loyalty of customers towards their respective banks According to Afsar et al., (2010), “it is always costly to attract new customers, so the managers always try to find ways to retain their current customers and focus on different factors which enhances the customer loyalty among the customers of the organizations”

Based on that, the study was carried out to reveal the impact of corporate image, service quality, customer satisfaction, switching cost and trust on customer loyalty in the Vietnamese banking industry

This study gathered survey data from a convenience sample of 252 consumers are living and working in Ho Chi Minh City The results demonstrate that corporate image, customer satisfaction and switching cost have positive relationships with customer loyalty The relationships of these factors are studied and the SPSS software is used to analyze the data gathered from the respondents

I would like to express my sincere thankfulness to my research advisor, Prof Dinh Thai Hoang for his support throughout the research process He had devoted his valuable time and efforts in patiently guiding me to complete this study I would like to convey my special thanks to him for his assistance and encouragement

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 family for supporting me spiritually throughout my life

I thank my friends and colleagues who provided much needed inspiration and support during this time

Ho Chi Minh City, Viet Nam

Tran Nguyen Anh Tuan

Abstract i

Acknowledgments ii

Tables of content iii

List of tables vi

List of figures vii

Chapter 1: Introduction 1

1.1 Background 1

1.2 Research problem 2

1.3 Research questions 2

1.4 Research delimitations 3

1.5 Contribution of the research 3

1.6 Outline of study 3

Chapter 2: Literature review 5

2.1 Customer loyalty 5

2.2 Factors affecting customer loyalty 6

2.2.1 Customer satisfaction 6

2.2.2 Trust 7

2.2.3 Service quality 7

2.2.4 Switching cost 8

2.2.5 Corporate image 9

2.3 Research model and hypotheses 9

Chapter 3: Research method 12

3.2 Measurement scale 14

3.2.1 Customer loyalty 14

3.2.2 Corporate image 14

3.2.3 Perceived service quality 14

3.2.4 Customer satisfaction 15

3.2.5 Switching cost 16

3.2.6 Trust 16

3.3 Measurement refinement 16

3.3.1 Qualitative research 17

3.3.2 Quantitative pilot research 17

3.4 Sample and date collection 18

3.4.1 Sample size 18

3.4.2 Sampling 19

3.4.3 Data analysis methods 19

Chapter 4: Data analysis and results 22

4.1 Pilot study 22

4.1.1 Cronbach’s alpha 22

4.1.2 Exploratory factor analysis 23

4.2 Main survey 26

4.2.1 Descriptive analysis 26

4.2.2 Cronbach’s alpha 28

4.2.3 Exploratory factor analysis 28

Chapter 5: Conclusion and implications 36

5.1 Conclusion 36

5.2 Managerial implications 36

5.3 Limitations of study and future research 38

References 40

Appendices 43

Appendix 1: Questionnaire 43

Appendix 2: Reliability analysis in Pilot study 49

Appendix 3: EFA result of service quality in pilot study 53

Appendix 4: EFA result of the remaining variables in pilot study 55

Appendix 5: Descriptive analysis 58

Appendix 6: Reliability in main study 59

Appendix 7: EFA result of service quality in main study 61

Appendix 8: EFA result of the remaining variables in main study 63

Appendix 9: Partial regression plot 65

Appendix 10: Homoscedasticity of residuals 67

Appendix 11: Charts of residual normality 68

Table 3.1: Scales of customer loyalty

Table 3.2: Scales of corporate image

Table 3.3: Scales of perceived service quality

Table 3.4: Scales of customer satisfaction

Table 3.5: Scales of switching cost

Table 3.6: Scales of trust

Table 4.1: Summarized EFA analysis for Service quality in pilot study

Table 4.2: Summarized EFA analysis of the remaining variables in pilot study

Table 4.3: Service characteristics

Table 4.4: Summarized EFA analysis for Service quality in main survey

Table 4.5: Summarized EFA analysis for the remaining variables in main survey

Table 4.6: Correlations

Tables 4.7: Coefficients

Table 4.8: Model summary and ANOVA

Table 4.9: Summary of Hypotheses testing results

Figure 2.1: A conceptual model

Figure 3.1: Research process

Figure 4.1: A revised model

CHAPTER 1 INTRODUCTION

This chapter introduces the background and problems of the research It then shows the research questions that are needed to answer It also reviews the contribution and the structure of the research

1.1 Background

During the past decade, the financial services sector has undergone drastic changes, resulting in a market place which is characterized by intense competition, little growth in primary demand and increased deregulation In the new market place, the occurrence of committed and often inherited relationships between a customer and his or her bank is becoming increasingly scarce (Levesque

& McDougall, 1996) Banking industry has traditionally operated in a stable environment for decades Today, this industry is facing fierce competition for market share Indeed, Huong Tra (2013) stated, “Currently the retail market has witnessed fierce competition from banks in Viet Nam Although this industry has developed in the early stages, it has been contributing significantly to the economic growth of the country On average, the contribution of retailers to GDP is about 14% each year By 2014, the sector’s contribution to GDP will increase to 23%” Banks begin to realize that no bank can offer all products as every bank is trying hard to retain their existing customers with all sorts of innovation in their product According to Afsar et al., (2010), “it is always costly to attract new customers, so the managers always try to find ways to retain their current customers and focus on different factors which enhances the customer loyalty among the customers of the organizations” Tariq and Moussaoui (2009) stated that “a loyal customer generally behaves better than a satisfied one and prefers to repurchase the products and

services continuously to an extent that her patronage is retained for a long period of time” (p.102)

1.2 Research Problem

Retail banking sector in Vietnam is characterized by increased competition In “Vietnam commercial banking Report Q2 2013” (2013), the researchers stated that “The State Bank of Vietnam identifies six 'state-owned credit institutions' or 'state-owned commercial banks' (SOCBs), 38 urban commercial joint stock banks (CJSBs), 32 branches of foreign banks and five joint venture banks There are also 17 finance companies and 54 representative offices of foreign banks” (page 30) With the foreign banks entering the market, competition in the banking sector has become more intense because both domestic and foreign banks fight for new customers As a customer’s relationship with the company lengthens, profit rises Indeed, Reichheld and Sasser (1990) stated, “companies can boost profits by almost 100% by retaining just 5% more of their customer” (p 2)

In comparison with Vietnamese banks, foreign banks have better infrastructure, provide more professional customer service, use more advanced technology, and have a network across many countries Therefore, managers at Vietnamese banks must understand the factors which influence the loyalty of the customers towards their respective banks

Due to the facts mentioned above, it is necessary to explore the factors that determine customer loyalty to retain and attract customer This study is conducted to identify the factors affecting customer loyalty in banking industry of Vietnam Therefore, it also helps the banks make decisions in order to selecting the most appropriate strategies for their goals

1.3 Research Questions

The aim of this research is to identify the factors affecting customer loyalty and to determine the influence of each factor on the loyalty of customer in the Vietnamese banking industry This

study attempted to answer the following research questions:

- What factors affect the customer loyalty in banking sector of Vietnamese?

- How is the relationship between these factors and customer loyalty in banking industry? Which will influence customer loyalty the most?

1.4 Research delimitations

This study focuses on individual customers in Ho Chi Minh City, who use personal banking services of different banks Therefore, this sample cannot represent the whole Vietnam In addition, there are five factors including corporate image, service quality, customer satisfaction, switching cost and trust are considered as the antecedents of customer loyalty

1.5 Contribution of the research

This research tries to present the factors which influence customer loyalty in the context of Vietnamese banking industry As it was mentioned previously in this research, loyal customers have different benefits for the industries and banking industry is no exception Having more profit is the simplest way to mention Therefore, managers can consider these findings in their business strategies in the future Especially with the transitional market as Vietnam, the more understanding what factors impact on customer loyalty, the more successful the bank received when apply appropriately

1.6 Outline of study

This research will be composed of 5 Chapters:

Chapter 1: Introduction to introduce research background, research problem, research question as well as research objective

Chapter 2: Literature review This chapter reviews theories and previous study, then formulates the research model and hypotheses

Chapter 3: Research methodology This chapter provides general idea how the research will be designed and implemented

Chapter 4: Data analysis, result and finding discussion This chapter translates data collected from survey, analyses data and discusses the result finding relating to theory

Chapter 5: Conclusion, implications, limitation This chapter concludes the research findings; provide further suggestion as well as research limitation

CHAPTER 2 LITERATURE REVIEW

This chapter is an overview of customer loyalty and its factors which have been conducted by previous researchers Based on these studies, a conceptual model is proposed

2.1 Customer loyalty

There has been much interest in the marketing literature in the concept of customer loyalty, such

as loyalty to a brand, product or service Customer loyalty is defined as those who repeat purchase from the same service provider and show a good impression towards the relationships with that service provider (Grembler and Brown, 1996, as cited in Cuong, Sirion & Howard,

2009, p.90) Customer loyalty means that the customer is loyal to the company and only turns to

a competitor in exceptional cases If the customer value decreases to such a level that offers from competitors are better, customers would engage in the others instead

Dick and Basu (1994) stated that “customer loyalty is viewed as the strength of the relationship between an individual’s relative attitude and repeat patronage” (p.99) In a similar way, Oliver (1997, p.392; as cited in Donio', Massari, and Passiante, 2006, p.446) defined customer loyalty as: “a deeply held commitment to re-buy or re-patronize 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” Beerli et al., (2004) distinguished two types of customer loyalty concepts:

(1) loyalty based on inertia, where a brand is bought out of habit merely because this take less effort and the consumer will not hesitate to switch to another brand if there is some convenient reason to do so; and

(2) true brand loyalty, which is a form of repeat purchasing behavior reflecting a conscious decision to continue buying the same brand, and it must be accompanied by an underlying positive attitude and a high degree of commitment toward the brand (para.5)

“Inertia means when the consumer is buying the products from the same brand, not because of true brand loyalty, but because it is not worth their time and efforts to search for an alternative” (Beerli et al, 2004, p.255) It is rather easily for the competitor to change a buying pattern and attract new customers If the usual brand is out of stock, another similar brand will be purchased Besides it, brand loyalty measured by repeat purchase is the result of repeated satisfaction that in turn leads to weak commitment because there is some convenient reason for customers to switch

to another brand

In relation to true brand loyalty, Oliver (1999) considers that “all three decision-making phases must point to a focal brand preference if true brand loyalty exists Thus, (1) the brand attribute ratings (beliefs) must be preferable to competitive offerings, (2) this "information" must coincide with an affective preference (attitude) for the brand, and (3) the consumer must have a higher intention (conation) to buy the brand compared with that for alternatives.” (p.35) Compared to

an inertia situation where the customer passively accepts a brand, a true brand loyal customer chooses actively with his or her favorable attitude

In short, customer loyalty is one of the most important issues of the firms Loyal customers not only increase the value of the business, but they also enable it to maintain costs lower than those associated with attracting new customers (Barroso Castro and Martin Armario, 1999, as cited in Beerli et al., 2004)

2.2 Factors affecting customer loyalty

2.2.1 Customer satisfaction

Customer satisfaction is one of the most important concepts for most marketers and consumer researchers (Jamal, 2004; as cited in Cuong, Sirion & Howard, 2009) The conceptualization of customer satisfaction is very complex and has been defined in many different situations According to Jamal and Naser (2002), customer satisfaction is the feeling or attitude of a customer towards a product or service after it has been used Satisfied customers will continue to purchase, and dissatisfied customers will stop purchasing the product Levesque and McDougall (1996) confirmed and reinforced the idea that unsatisfactory customer “had a significant and dramatic drop in customer satisfaction, willingness to recommend to friend, and, conversely, an increase in consider switching” (p.18)

2.2.2 Trust

According to Moorman, Deshpande and Zaltman (1993), “trust is defined as a willingness to rely

on an exchange partner in whom one has confidence” (p.82) It exists “when one party has confidence in an exchange partner’s reliability and integrity” (Morgan & Hunt, 1994, p.23) Trust is identified as one of the principal components of any exchange relationship Indeed, such outcomes would be expected from a partner on whose integrity one can rely In addition, Rousseau et al (1998) stated that “Trust is a psychological state comprising the intention to accept vulnerability based on positive expectations of the intentions or behavior of another” (p 395) Consequently, because there is vulnerability, trustworthy parties would maintain a long-term relationship Garbarino and Johnson (1999) demonstrated that trust is an antecedent of loyalty

2.2.3 Service quality

Service quality is the gap between what the customers want and what they actually get or perceive they are getting (Berry et al., 1988, cited in Tariq & Moussaoui, 2009) In retail

industry, service quality is measured by interacting between customers and firm employees That means “quality evaluations are not made solely on the outcome of a service; they also involve evaluations of the process of service delivery” (Parasuraman, Zeithaml, & Berry, 1988, p.42) Parasuraman et al., (1985) developed a service quality measurement instrument called SERVQUAL which included ten dimensions However, Parasuraman et al., (1988) collapsed these ten dimensions into five dimensions consisted of tangibles, reliability, responsiveness, assurance, and empathy

 Tangibles are the appearance of the physical facilities of the firms, employees, tools, equipment, and communication materials used to provide the service

 Reliability is the ability to deliver the promised service to customers dependably and accurately

 Responsiveness is readiness and willingness of employees to response the customer needs

 Assurance is the ability to inspire trust and confidence through knowledge, civilly and reliability of the employees to customers

 Empathy is a personalized attention the firm providing to a customer

Although many researchers used SERVQUAL to assess service quality in their studies, the reliability and validity of this measurement was debated by several authors Cronin and Taylor (1992) stated that the current conceptualization and operationalization of service quality (SERVQUAL) confounds satisfaction and attitude Thus, the researchers developed an alternative measurement tool for measuring service quality named SERVPERF In this study, the SERVPERF was adapted

2.2.4 Switching cost

Another brand loyalty determinant is known as switching costs, which can be defined as the technical, financial or psychological factors which make it difficult or expensive for a customer

to change brand (Shergill and Bing, 2006; as cited in Afsar et al., 2010) When the costs of switching brand are high for the customer, there is a greater probability that the customer will remain loyal in terms of repeat purchase behavior, because of the risk or expense involved in switching and because of the accompanying decrease in the appeal of other alternatives (Wernerfelt, 1991; Selnes, 1993; Klemperer, 1995; Ruyter et al., 1996; Anton Martın et al., 1998; as cited in Beerli et al., 2004)

2.2.5 Corporate image

Corporate image is the connection of the customer's memory to the corporation in general (Keller and Aaker, 1992; as cited in Tariq & Moussaoui, 2009) When the image is recorded in his memory, the customer can communicate his personal feeling about the corporation indirectly

If a good image is perceived by the customer, he or she is encouraged to repeat purchasing in the future Keaveney and Hunt (1992) have argued that the image of a retail institution is formed along the lines of category-based processing theory, i.e when a customer encounters a bank, he

or she will form a mental picture as to whether the bank matches any other categories of banks experienced in the past (as cited in Bloemer, Ruyter & Peeters, 1998) Andreassen and Lindestand (1998) have concluded that “corporate image is the main prediction of customer loyalty” (p.7)

2.3 Research model and Hypotheses

In this research, dependent variable was Customer Loyalty Factors affecting customer loyalty are independent variables These are five independent variables in this research, those are:

Corporate Image, Perceived service quality, Customer Satisfaction, Switching Cost, and Trust A Conceptual model of proposed relationships is shown in Figure 2.1

Figure 2.1: A conceptual model

Following this, hypotheses based on review of the literature are developed that are as follows: Nguyen and LeBlanc (1998) suggested that “customers who form a positive overall impression

of the image of the financial institution are more likely to prefer the organization and recommend

it to others.” (p 61) Thus, we propose that there is a positive relationship between corporate image and customer loyalty

H1: There is a positive relationship between corporate image and customer loyalty

It has been empirically proved that high service quality motivates positive customer behavioral intention to repurchase, and in turn, promotes customer retention (Zeithaml et al., 1996, as cited

in Tariq& Moussaoui, 2009) This implies that service quality is linked positively to customer loyalty

H2: There is a positive relationship between perceived service quality and customer loyalty

H5 H4 H3 H2 H1

CUSTOMER LOYALTY

If a customer is satisfied, the loyalty incurs automatically and the customer remains with the current providers for a longer and longer period of time (Fox and Poje, 2002; as cited in Afsar et al., 2010) In addition, Ehigie (2006) asserted that customer satisfaction is significant predictor of customer loyalty

H3: There is a positive relationship between customer satisfaction and customer loyalty

Switching costs can be considered as one of the factors that discourage customers from switching, enabling them to continue in maintaining the loyal relationship with the firm (Jones et al., 2002; as cited in Cuong, Sirion & Howard, 2009) Therefore, it can be expected that switching cost will have positive influence on customer loyalty

H4: There is a positive relationship between switching cost and customer loyalty

When a customer places his or her trust in a brand, and shows a willingness to rely on that brand, that customer is also to form a positive buying intention towards the brand Morgan and Hunt (1994) also suggest that brand trust leads to brand commitment because trust creates exchange relationship that have confidence and are highly valued Then, it engage in long-term customer relationship Therefore, it can be expected that trust will have positive influence on customer loyalty

H5: There is a positive relationship between trust and customer loyalty

This chapter review literature relevant to variables in the conceptual model and suggest hypotheses in order to identifying the factors affecting customer loyalty Chapter 3 will discuss the methodology was used in this study

CHAPTER 3 RESEARCH METHOD

This chapter discusses the methodology that was used in this study, the source of data, the collection of data and the analysis of data items A mixed methodology was used in this study The goal of this study is to identify critical factors that affect customer loyalty in banking industry

3.1 Research process

This study was conducted as given in the figure 3.1

Figure 3.1: Research process Source: Tho D Nguyen (2007, Figure A1)

Reliability Analysis

Exploratory Factor Analysis

Multiple regression

Final Questionnaire

Main survey (n = 252)

Main

survey

Exploratory Factor Analysis

Reliability Analysis

Delete 2 low factor loading items

Pilot survey (n = 87)

Pilot

study

Literature

In-depth interviews (n = 6)

Revision

Back Translation

Draft Questionnaire

Final Draft Questionnaire

Item

Generation

3.2 Measurement scale

There are six factors being examined in this study, based on the measurement scales adapted from previous studies Questionnaire was been used in the quantitative study with a seven-point Likert scale: Responses were scored on a 7-point scale from (1) strongly disagree to (7) strongly agree

3.2.1 Customer loyalty

Loyalty was measured indirectly by means of an attitude scale, which, as Berne´ (1997) points out, is the most commonly used system of measurement due to the difficulty involved in obtaining sequential information about purchase repetition (Beerli et al., 2004) Their scale was based on this attitude scale Scale items of customer loyalty were adapted from Beerli et al., (2004)

Table 3.1: Scales of customer loyalty

1 I do not like to change to another bank because I value the selected bank

2 I am a customer loyal to my bank

3 I would always recommend my bank to someone who seeks my advice

3.2.2 Corporate Image

The scales measuring the corporate image were based on Lee (2004), it shows in Table 3.2

Table 3.2: Scales of corporate image

1 The bank has a clean reputation in general

2 The bank’s overall image is favorable

3 Many people are impressed with the bank

4 Overall, the bank is evaluated positively in the eyes of the public

5 My overall attitude and impression towards the bank are very pleasant

3.2.3 Perceived service quality

Perceived service quality, using a 20-item SERVPERF scale, was adapted from Beerli et al., (2004) This is a second-order construct consisting of five components (tangibles, reliability,

responsiveness, assurance and empathy) Beerli et al., (2004) stated, this scale “was adopted since it is still the most widely used instrument, having been developed from data collected across five separate service categories, one of which was retail banking Furthermore, some studies show that this scale is a good interpretation of perceived quality in retail banking (Llorens Montes, 1996; Yavas et al., 1997; Bloemer et al., 1998)”

Table 3.3: Scales of perceived service quality

1 Physical facilities are attractive and comfortable

2 Bank has modern-looking equipment

3 Bank employees are tidy in appearance

4 Materials associated with the service are visually appealing at bank

5 Bank insists on error-free records

6 When you have a problem, bank shows a sincere interest in solving it

7 Bank employees solve your problems when they promise to do so

8 Bank provides its services at the time it promises to do so

9 Bank performs the service right the first time

10 Employees give you the prompt service

11 Employees are always willing to help you

12 Employees are never too busy to respond to your requests

13 Employees tell you exactly when services will be performed

14 Employees's behavior instills confidence in customers

15 Employees are constantly courteous to you

16 Employees have the knowledge to answer your questions

17 Bank gives you individual and personal attention

18 Bank has operating hours convenient to all its customers

19 Bank has your best interests at heart

20 Employees understand your specific needs

3.2.4 Customer satisfaction

Scales items of customer satisfaction were adapted from Fornell’s (1992) scale According to Beerli et al., (2004), “Fornell’s (1992) scale incorporates the three aspects of satisfaction most widely used in the literature”

Table 3.4: Scales of customer satisfaction

1 Considering everything, I am extremely satisfied with my bank

2 My bank always meets my expectations

3 The overall quality of the services provided by my bank is excellent

3.2.5 Switching cost

Switching cost was measured with three items which derived from Beerli et al., (2004)

Table 3.5: Scales of switching cost

1 To change to another bank involves investing time in searching for information about

other banks

2 To change to another bank involves much effort in deciding which other bank to use

3 To change to another bank involves a risk in choosing another bank which might turn

out not to satisfy me

1 My bank meets my expectations

2 My bank never disappoints me

3 My bank is honest and sincere in addressing my concerns

4 I can rely on my bank to solve my problems

3.3 Measurement refinement

Two phases of study were undertaken in this research: a pilot study and a main survey The pilot phase involved in-depth interview and a quantitative pilot study Its purpose was to modify and refine the measures Although most of the measures of constructs are available in the literature, it

is important to ensure they are appropriate for the context of this study

3.3.1 Qualitative research

Since the measurement scales were originally in English and translated to Vietnamese so qualitative research was required in order to ensure the meaning of the measurement scales The qualitative research was implemented on October 2012 and was done by deeply interviewing 06 consumers in

Ho Chi Minh City This qualitative research aimed to evaluate the use of terminology in questionnaire as well as to adjust the terminology to be suitable, to keep the meaning of measurement scales unchanged when being translated from English to Vietnamese before we conducted the official quantitative research The results of this round were as follows:

The first suggestion on modifications to the questionnaire was to change “bank” or “my bank”to

“bank X” and added the question about name a bank which customers have used services or have known, in order to make it more specific and clearto the interviewees

The item of “My bank always meets my expectations” of Customer satisfaction variable and the item of “My bank meets my expectations” of Trust variable had similar meanings According to the majority of interviewees (5/6 respondents), the item of “My bank meets my expectations” of Trust variable was eliminated

In measurement scales of switching cost, the item of “To change to another bank involves a risk

in choosing another bank which might turn out not to satisfy me” was replaced by item “To change to another bank involves a risk in choosing another bank which might turn out not to satisfy me compared to bank X” because it is quite difficult for the responses to understand Most of interviewees agreed on the measurement scale of other factors:Corporate image, Service quality, Customer satisfaction, Switching cost, Trust and Customer loyalty

3.3.2 Quantitative pilot research

The questionnaire was then formed after the qualitative Study and its clarity was tested and confirmed through the survey with 87 customers Data collecting from the pilot study were

assessed by Cronbach’s Alpha reliability and Exploratory Factor Analysis to explore the interrelationships among a set of variables

Results showed that the variable Trust1 and Trust2 were removed because the factor loading of: Trust1 =0.487 <0.5 and Trust2=0.484 <0.5 The variable Trust3 grouped with variable Customer satisfaction Thus, only remaining 4 variables that were Corporate image, Service quality, Customer satisfaction and Switching cost impact customer loyalty

Besides it, the result was inconsistent with five perceived service quality dimensions This study found that there were only three key components of perceived service quality for Vietnamese Then refine the questionnaire that was the final version to be launched in the following main survey

3.4 Sample and Data collection

3.4.1 Sample size

A data set is considered to be suitable for Exploratory Factor Analysis when its sample size is larger than 100 and is at least five times the number of interested variables (Hair et 2006):

n> 100 samples and n=5k (with k = the number of variables)

This study includes 35 measurement items (assuming that no modification happens) which are

32 measurement items of 4 independent variables and 3 measurement items of one dependent variable Therefore, the minimum sample size is:

n= 5*35 = 175 For standard multiple regression analysis, Tabachnick and Fidell (2007) proposed that the

desired level is:

n> 50 + 8m (with m = number of number of independent variables)

There are 4 independent variables in the main research So the minimum sample required to run multiple regression in this study is:

n> 50 + 8*4 = 82 Thus, the minimum sample size is 175

3.4.2 Sampling

The main survey was launched on October 2013 In the actual survey, the revised questionnaire was distributed directly using convenience sampling method A sample of 350 respondents who used personal banking services of different banks in Ho Chi Minh City will be surveyed to test the measurement and conceptual model The questionnaire was sent directly by hard copy to the respondents who were studying a Master degree with me or was studying a Master degree at ISB

or were my friends’ colleagues at different companies located in Ho Chi Minh city, such as Vissan limited company, A&C limited company 270 responses were received, in which 18 rejected because a number of neutral opinion occupied more than half of the questions

3.4.3 Data analysis methods

Collected data was then analyzed with SPSS software The process of data analysis was as follows:

Step (1): Data coding and entering to SPSS software

Step (2): Test reliability of measurement scales with Cronbach’s alpha analysis

Cronbach Alpha was defined to assess the measurement scale reliability by testing the internal consistency among variables of the same construct The scales was considered reliable when Cronbach‘s alpha coefficient of each scale is bigger 0.7 (Pallant et al, 2005)

Step (3): Test relationship among factors with Exploratory Factor Analysis (EFA)

Norris and Lecavalier (2010) supposed that “EFA is based upon a testable model and can

be evaluated in terms of its fit to the hypothesized population model; fit indices can be

generated to help with model interpretation” And “EFA’s purpose is to identify latent

constructs underlying a set of manifest variables” (p.9)

In order to assure the suitability of the data for factor analysis, the following conditions should

be met (Pallant et, al, 2005):

 The sample size should be appropriate: The sample size should be at least 150 and there should be a ratio of at least five cases for each variable

 The factorability of data would be appropriate if:

- The Kaiser-Meyer-Olikin value (KMO) should be 0.6 or above

- The Bartlett’s test of sphericity should be statistically significant: p < 0.05

 The number of factors were determined when:

- The components have an eigenvalue be 1 or more

- The total variance explained by these components should be above 50%

- Factor loading criteria should be 0.5 or above to ensure a practical significance

Step (4): Multiple regression analysis to see the impact of independent variables to dependent variables

The Multiple Linear Regression was used to test the research model and hypotheses in this study In accordance with Pallant (2005), the assumptions of a multiple regression are:

- The sample size is appropriate: n > 50 + 8m (where m = number of independent

- variables)

- No the multiple linearity is found

- No outlines are found or in case they are, no significant impact of outlines is

- found

- Normality and linearity should exist

All of these assumptions should be tested before digging into further data analysis

This chapter discusses the methodology that was used in this study, the source of data, the collection of data and the analysis of data items It shows all of the items in each variables and the way that they are revised and analyzed Next, chapter 4 will mention data analysis and

discuss the findings

CHAPTER 4 DATA ANALYSIS AND RESULTS

This chapter translates data collected from the surveys, analyses data and discusses the result finding in connection with the theory

4.1 Pilot study

First of all, the data was tested Cronbach’s alpha and EFA in the pilot study that consisted of 87 respondents

4.1.1 Cronbach’s alpha coefficient

Cronbach’s Alpha was computed and used Cronbach’s Alpha to inspect the reliability of the

items in the questionnaire through the following coefficients:

 Cronbach’s Alpha coefficient: the concept was relatively new research should be accepted scale Cronbach’s Alpha coefficient of 0.7 or higher

 The correlation coefficient between the questions and the total score: the item was accepted when this ratio reached 0.3 or more

- Cronbach’s Alpha of CORPORATE IMAGE of the bank

Factor had five items, the alpha of factor was 0.863, and the Corrected Item-Total Correlation of each item was achieved with values greater than 0.3, which indicates that the items form a scale that had reasonable internal consistency reliability (see Appendix 2)

- Cronbach’s Alpha of SERVICE QUALITY of the bank

Factor also had 20 items, the alpha factor was 0.950, this number was less than 0.951 and 0.952 that were Cronbach’s Alpha if delete the item SERQUA17 or SERQUA18 respectively, but when looked at the Corrected Item-Total Correlation of each first item, they were achieved with values greater than 0.3, so we did not need to delete those item With Cronbach’s Alpha = 0.950

which indicates that the items form a scale that had reasonable internal consistency reliability (see Appendix 2)

- Cronbach’s Alpha of CUSTOMER SATISFACTION of the bank

Factor had three items and the alpha was 0.839 The Corrected Item-Total Correlation of each item was also achieved with values greater than 0.3, which indicates that the items form a scale that had reasonable internal consistency reliability (see Appendix 2)

- Cronbach’s Alpha of SWITCHING COST of the bank

Factor had three items and the alpha was 0.815 The Corrected Item-Total Correlation of each item was also achieved with values greater than 0.3, which indicates that the items form a scale that had reasonable internal consistency reliability (see Appendix 2)

- Cronbach’s Alpha of TRUST about the bank

Factor had three items and the alpha was 0.866 The Corrected Item-Total Correlation of each item was also achieved with values greater than 0.3, which indicates that the items form a scale that had reasonable internal consistency reliability (see Appendix 2)

- Cronbach’s Alpha of CUSTOMER LOYALTY of the bank

This research measured the loyalty of customers through three items and the alpha of these items were 0.905, the Corrected Item-Total Correlation of each item was also achieved with values greater than 0.3, so the items form a scale that had reasonable internal consistency reliability (see

Appendix 2)

4.1.2 Exploratory Factor Analysis

Research model had 6 groups of items (variables) with 37 observed variables, affecting customer loyalty in banking industry in Vietnam After testing the reliability of the scale, we conducted exploratory factor analysis (EFA) with Promax rotation to analyze 37 observed variables Using

KMO (Kaiser-Meyer-Olkin) and Bartlett’s test method to measure the compatibility of the survey Besides it, all the variables were divided into two groups to run, one group for Service quality and one for the remaining variables

- EFA for Service quality

KMO coefficient was 0.898 (> 0.5) and sig = 0.000 <0.05 For results of EFA were considered important and practical significance, retaining only the observed variables weighted factor >0.5 The value of the eigenvalues were greater than 1 and the Extraction Sums of Squared Loadings had cumulative was 66.692%, it meant that 3 above factors explained 66.692% of Service quality (see Appendix 3)

The KMO and Barlett’s statistic show that data set was suitable for factor analysis The result was inconsistent with five perceived service quality dimensions which proposed by Cronin and Taylor (1992) through the original developed by Parasuraman et al.,(1988) This study found that there were only three key components of perceived service quality for Vietnamese banking industry The original three dimensions grouped in Component 1 were called “Tangibles”; the thirteen variables labeled Component 2 were named “Reliability”, and four variables in Component 3 were named “Empathy” Thus, the end results were summarized and presented Table 4.9 below:

Table 4.1: Summarized EFA analysis for Service quality in pilot study

Empathy Serqua17, Serqua18, Serqua19, Serqua20

+ EFA for 5 remaining variables

KMO coefficient was 0.867 (> 0.5) and sig = 0.000 <0.05, hypothesis (Ho) in this analysis, “The correlation between the observed variables equal 0 in general” would be rejected, this means that the observed variables were correlated with each other in general and EFA factor analysis was appropriate

For results of EFA were considered important and practical significance, retaining only the observed variables weighted factor >0.5, and eliminating of gradually weighted observed variables factor < 0.5 then turned the analysis process When we looked in KOM and Rotated Component Matrix result of first EFA analysis, we saw: Trust1 and Trust2 had weight observed variable < 0.5, removed 2 variables and repeated the process we had no variable that had weight observed variable < 0.5 And the final result:

The value of the eigenvalues were greater than 1 and the Extraction Sums of Squared Loadings had cumulative was 74.117%, it meant that 5 factors above explained 74.117% of the variance of the items (see Appendix 4)

After removing items with weights less than 0.5, the variables remaining 15 items, extracted into four groups of items The end result when analyzing Exploratory Factor Analysis (EFA) for the

15 items are summarized and presented Table 4.12 below

Table 4.2: Summarized EFA analysis of the remaining variables in pilot study

Corporate image Corpima1, Corpima2, Corpima3, Corpima4, Corpima5

Customer satisfaction Customsatis1, Customsatis2, Customsatis3, Trust3

Switching cost Switching1, Switching2, Switching3

Customer loyalty Cusloy1, Cusloy2, Cusloy3

From the above-mentioned results, the theoretical research model was revised with the same model for research that we suggested in Literature Review but excluded TRUST variable and H5 The revised research model and Hypotheses were described in Figure:

Figure 4.1: A revised model

Following this, hypotheses based on review of the literature are developed that are as follows:

H1: There is a positive relationship between corporate image and customer loyalty

H2: There is a positive relationship between perceived service quality and customer loyalty

H3: There is a positive relationship between customer satisfaction and customer loyalty

H4: There is a positive relationship between switching cost and customer loyalty

Descriptive analysis of the respondent profile was shown in Appendix 5 Out of 252 respondents, more than half of these respondents were female (55.56 percent) and 44.44 percent were male Most of the respondents (59.13 percent) were from 25 and 35 years-old The remaining 32.14 percent, 7.94 percent, and 0.79 percent were under 25 years, between 36 and 45 years, and over

H4

H1

H2 H3

CUSTOMER LOYALTY

CORPORATE IMAGE

PERCEIVED SERVICE QUALITY

CUSTOMER SATISFACTION

SWITCHING COST

the age of 46 years respectively In terms of marital status, it comprised 25.40 percent of married, 73.81 percent of single and 0.79 percent of others The percentage of the respondents who had high school was 1.98 percent, university was 71.83 percent and 26.19 percent of others In terms

of occupation, 13.10% were student, 60.32% were office staff, 14.68% were managerial level, and 11.90 percent were others Concerning the monthly income, 24.21 percent received less than

5 million VND, 44.44 percent reported an income of between 6 and 10 million VND, 15.08 percent received an income of between 11 to 15 million VND, 7.94 percent received an income

of between 16 to 20 million VND and 8.33 percent earned more than 20 million VND Descriptive analysis of the service characteristics was also presented in Table 4.3 Out of 252 respondents, 32.94 percent of respondents most often dealt with Vietcombank, 20.24 percent with Vietinbank, 12.70 percent with ACB, 3.57 percent with Eximbank, and 30.56 percent with other banks It also shows that 24.60 percent of respondents opened checking accounts, 30.95 percent operated a saving account, 78.17 percent had money cards, 25.40 percent used credit products and only 0.4 percent had bonds with 1.98 percent using other bank products About twenty four per cent of the respondents had been with their banks for more than 5 years.67.86 percent were reported to be dealing currently with more than one bank and only 32.14 percent deal with one particular bank 3.17 percent were motivated to join their bank through advertising

in newspapers, 3.97 percent through magazines and 2.78 percent through TV/Radio Likewise, 39.29 percent of respondents joined the bank on the recommendation of a friend or relative, and 50.79 percent did so through other means (see Appendix 5)

Table 4.3: Service characteristics

Name of selected bank

Means of joining its bank

4.2.3 Exploratory factor analysis

In the main study, research model had 5 groups of items (variables) with 35 observed variables, affecting customer loyalty in banking industry in Vietnam All the variables were run through the Principal component analysis, using the Varimax rotation method Using KMO (Kaiser-Meyer-Olkin) and Bartlett’s test method to measure the compatibility of the survey Besides it, all the variables were divided into two groups to run, one group for service quality and one for the remaining variables

- EFA for Service quality

KMO coefficient was 0.953 (> 0.5) and sig = 0.000 <0.05 For results of EFA were considered important and practical significance, retaining only the observed variables weighted factor >0.5 The value of the eigenvalues was greater than 1 and the Extraction Sums of Squared Loadings had cumulative was 70.958%, it means that 3 above factors explained 70.958% of Service quality (see Appendix 7)

Service quality still remained 20 items, but Tangibles component included one more item- service quality4 Thus, the end results were summarized and presented Table 4.3 below

Table 4.4: Summarized EFA analysis for Service quality in main survey

Empathy Serqua17, Serqua18, Serqua19, Serqua20

+ EFA for 4 remaining variables

KMO coefficient was 0.887 (> 0.5) and sig = 0.000 <0.05, hypothesis (Ho) in this analysis, “The correlation between the observed variables equal 0 in general” would be rejected, this means that the observed variables were correlated with each other in general and EFA factor analysis is appropriate