The impact of loyalty programs service quality and store reputation on customer satisfaction and loyalty

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business --- Dang Bich Phuong THE IMPACT OF LOYALTY PROGRAM’S SERVICE QUALITY AND STORE REPUTATION ON CUSTOMER SATI

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Dang Bich Phuong

THE IMPACT OF LOYALTY PROGRAM’S SERVICE QUALITY AND STORE REPUTATION

ON CUSTOMER SATISFACTION AND

LOYALTY

MASTER OF BUSINESS (Honours)

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Dang Bich Phuong

THE IMPACT OF LOYALTY PROGRAM’S SERVICE QUALITY AND STORE REPUTATION

ON CUSTOMER SATISFACTION AND

LOYALTY

I D: 22130056

MASTER OF BUSINESS (Honours)

SUPERVISOR: Dr.PHAM NGOC THUY

ACKNOWLEDGEMENTS

The completion of this thesis is a remarkable achieve in my life It has been several months and required a great effort for the research I would like to express my gratitude to all ISB staffs that supported necessary materials and helped summit my papers I also wish to express my deeply thank you for the support, patience and encouragement from my family, my colleagues and my classmates helped me to completing this thesis

Especially, I would like to give my special thanks to Doctor Pham Ngoc Thuy for supporting and guiding me with this research

STATEMENT OF AUTHENTICATION

(Candidate Certificate)

I certify that the work in the thesis entitled “The impact of loyalty program’s service quality and store reputation on customer satisfaction and customer loyalty” is the result of my own research and has not been submitted for a higher degree to any university or institution other than International School of Business (ISB)

I also certify that the thesis has been written by me Any help and assistance that I have received in my thesis have been appropriately acknowledged

Ho Chi Minh City, 20 December 2015

Dang Bich Phuong

TABLE OF CONTENTS

ACKNOWLEDGEMENT i

STATEMENT OF AUTHENTICATION ii

TABLE OF CONTENTS iii

LIST OF FIGURES v

LIST OF TABLES vi

ABSTRACT vii

Chapter 1: Introduction 1

1.1 Research background 1

1.2 Research problems 2

1.3 Research objectives 4

1.4 Research methodology and scopes 4

1.5 Significance of the study 5

1.6 The structure of the study 5

Chapter 2: Literature review and hypotheses 7

2.1 Customer Loyalty Program 7

2.2 Customer Loyalty Programs of big retailers in Ho Chi Minh City 8

2.3 Conceptualization of Loyalty program service quality 10

2.4 Store reputation 15

2.5 Customer Satisfaction 17

2.6 Customer Loyalty 18

2.7 The conceptual model 19

Chapter 3: Research methodology 23

3.2 Measures of the constructs 24

3.3 Research process 26

3.4 Data analysis method 28

Chapter 4: Data analysis and findings 31

4.1 Sample characteristics 31

4.2 The Cronbach’s alpha test 32

4.3 Exploratory factor analysis (EFA) 35

4.4 Multiple regression analysis 37

4.5 Revised conceptual model 40

4.6 Explanation for the findings results of the hypotheses 42

Chapter 5: Conclusions, inplications and limitations 46

5.1 Conclusions 46

5.2 Managerial implication 47

5.3 Limitations and future research 59

References 51

Apendix 58

Appendix A: Guideline for quanlitative in-depth interview 58

Appendix B: Quentionnaire in English 62

Appendix C: Questionnaire in Vietnamese 66

Appendix D: Histogram, Normal Regression & Scatter plot of Dependent 71

LIST OF TABLES

Table 2.1: The comparison between the Customer Loyalty Program of three main brand

names of supermarket in Ho Chi Minh City: Co.opmart, Big C and Lotte Mart 9

Table 2.2: Hypotheses of the research 21

Table 3.1: Measurement Scales from previous research basements 24

Table 3.2: Measurement Scales for customer satisfaction 25

Table 3.3: Measurement of the variables of customer satisfaction and customer loyalty 25

Table 3.4: Measurement of the variables of store reputation 25

Table 4.1 : Descriptive Statistics for the Sample (N = 209) 31

Table 4.2: The results of Cronbach’ alpha test 33

Table 4.3: KMO and Bartlett's Test for all variables 35

Table 4.4 : Total Variance Explained for all variables 36

Table 4.5: Rotated Component Matrix for all variables 37

Table 4.6: Correlations or all variables 38

Table 4.7: Model Summary 38

Table 4.8: ANOVA alpha 39

Table 4.9: Coefficients alpha 39

Table 4.10: Finalized hypotheses of the research 41

Table 4.11: Summary of hypotheses testing results 42

Table 4.12: Statistics of frequency of factors that affect customer choosing to shop at a supermarket 44

Table 4.13: The number of supermarket brand that customers participate in the customer loyalty program 45

LIST OF FIGURES

Figure 2.1: The proposed conceptual model for the thesis 21 Figure 3.1: The process of thesis research 23 Figure 4.1: The revised and finalized research model 40

ABSTRACT

This study empirically examines the impact of loyalty program’ service quality and store reputation on customer satisfaction and customer loyalty, which is carried on at some biggest chains of supermarket at Ho Chi Minh city such as Big C, Co.opmart, Lotte Mart, Metro, Vinmart, The research also explores some of the factors that influence the most towards customer satisfaction in retail industry In the situation that the facilities and the prices of all supermarket brand names are similar, the loyalty program’s service quality and how good of this program plays an important role in attract and retain customers Structural equation modeling is used to test these impacts, utilizing a sample

of 250 supermarket customers in Ho Chi Minh City All the customers who are interviewed must have the member card of one or more supermarket that they usually shop at

The results indicate that the three elements of loyalty program’s service quality which are Regulation (included Rewards and Policy), Serving (included Staff and Communication) and Personalization play significant role in increasing the customer satisfaction as well as customer loyalty In addition, the findings of this research also provide evidence of the similarity between customer satisfaction and customer loyalty in the mindset of supermarket retailer customer Particularly, the effect of store reputation

is negligible and the customers do not pay attention to this element in judging their satisfaction as well as their loyalty for a supermarket brand name

The customers are persuaded by the Regulation, Serving and Personalization of the loyalty program of one specific supermarket compared to other supermarkets The research findings also engage with some limitations in the strength of measurement scale, the sampling method as well as the fitness between the research model and data It results

in the valuable directions for further researches in future

CHAPTER 1

INTRODUCTION

This chapter introduces the background of the Vietnamese supermarket industry as well as the status of customer satisfaction and customer loyalty The research questions and objective are proposed to explore the influence of loyalty program’s service quality and store reputation towards customer satisfaction and customer loyalty Based on this, the proposed delimitation of research and thesis structure is presented

1.1 Research background

After nearly nine years of joining the World Trade Organization (WTO), and more than six years commitment for the establishment of retail businesses with 100% foreign capital (from the date 01/01/2009), Vietnam has made a drastic change in the distribution and retail sector by the opening of hundreds of stores and supermarkets Vietnam's retail market has always been rated as promising, attractive for business, investors in and out of Vietnam territory Many international retailers have operated in Vietnam besides the local companies, and there are still many other international groups interested in entering the market And under report of A.T.Keraney (2014), Vietnam retail market is in the top 30 world best new retail markets in the period from

2007 to 2011 Moreover, basing on the 2014 report of Deloitte Southeast Asia Ltd, Vietnam’s retail market is also characterized as being one of the most dynamic markets in the region with high annual growth rates Hanoi and Ho Chi Minh City have been ranked among the top 10 Asian cities for retail expansion in 2014 Over the last few years, Vietnam’s retail sector has also witnessed healthy growth rates, with retail sales growing by 60% from 2009-2013, and forecasted to reach US$109 billion

in 2017 The retail market in the country today is not only competition between domestic enterprises but also with large foreign retailers Huge system such as Co.opmart supermarket chain is leading the market but the big retail groups of foreign countries include Big C, Lotte, Metro Cash & Carry, also occupied a considerable

Vietnam - EU (EVFTA) For these negotiations, it will be great for Vietnam’s economy and for its people, and may also provide investors with attractive opportunities Should Vietnam participate, competition between domestic and foreign retailers will likely take place on a more equal footing In addition, Vietnam is expected to experience an influx of retailers from Japan, South Korea and Thailand Large developers, such as AEON Mall, Central Group, and CJ Group, have expressed great interest, gradually expanding their presence and announcing long-term plans for the market For example, Japan-based biggest retail group, AEON, is planning to build

at least seven shopping centers in Vietnam Other international group have long-term plans to build up massive number of supermarket locations in Vietnam, especially in

Ho Chi Minh City

In this context, in order to survive and develop, retail enterprises must have the specific strategy in order to enhance their competitiveness In particular, developing and maintaining a loyal customer base and raising the store reputation as background basis for the development of enterprises is a crucial requirement

satisfaction on loyalty customer success is proven by studies of Zeithaml et al (2002) Besides the considerable investment on customer loyalty program’s service quality, retailer nowadays pay more attention on the store reputation since previous researches show that customers are affected by the store attributes and consider them to assess perceived benefits and attitudes (Wang, 2009)

Thus, there is very little research has been done in Vietnam to verify the effectiveness of loyalty program’s service quality in the retail sector This leads to the controversy about the contribution of these programs in the development process In addition, the elements that contribute to the loyalty program’s service quality of Vietnam retailers have not been explored yet This requires that we should have a study to learn more about the factors affecting the loyalty program’s service quality as well as the effect that the program offers During the past decades, both marketing academics and practitioners have been intrigued by the relationship between satisfaction and loyalty (Dick and Basu, 1994; Oliver, 1996) Most of these studies, however, have concentrated on products (brands) and to a somewhat lesser extent on services or channel intermediaries Surprisingly, research on the relationship between store satisfaction and store loyalty has remained limited, both in actual number as well

as in scope Yet, in the present environment of increased competition with rapid market entry of new store concepts and formats, the managerial challenge of increasing store loyalty also presents the research challenge of a more in-depth understanding and an empirical estimation of this important type of consumer behavior There is some evidence that store loyalty may be (positively) related to store reputation However, it has remained unclear what the exact relationship between satisfaction, store reputation and loyalty in a retail setting is For instance, one question that has been left unanswered concerns the issue whether there is a direct relationship between store reputation and store loyalty or whether there is an indirect relationship via store satisfaction In this article we attempt to answer this question

To help clarify the issues outlined above, the author decided topic: "The impact

of loyalty program’s service quality and store reputation on customer satisfaction and

loyalty" Research will bring a deeper understanding of the factors that contribute to the loyalty program’s service quality in the retail area, the elements affects store reputation, the relationship between this service quality, store reputation and the satisfaction as well as customer loyalty Since then, the author will make recommendations that the retailer managers who are in charge of the store reputation and customer loyalty program of retail enterprises can use to adjust to gain greater efficiency Research will be done based on survey of members of loyalty of the three biggest chains of supermarket in Ho Chi Minh City: Co.opmart, Big C, Lotte Mart The three brands of supermarket target to the same main customer who are women from 20-50 years old with the main product is daily consumption products

1.3 Research objectives

The primary aim of this study is to investigate the relationship between loyalty program’s service quality with the satisfaction and loyalty of customers Specifically,

it can be stated as followed:

 Identify and measure the influence level of the impact of loyalty program’s service quality and store reputation on customer satisfaction

 Measure the influence of customer satisfaction on customer loyalty

1.4 Research methodology and scopes

The research was conducted on members who buy goods and join in the loyalty program’s service quality of Co.opmart, Big C and Lotte Mart in the area of Ho Chi Minh City which is a big city in Vietnam The author approach and interview directly the customers when they go to the bike park to find their moto bike after shopping at the supermarket

The author applied data analysis tool (Microsoft Excel and SPSS) to handle the collected data and to perform the research And then, using SPSS to test the scale reliability (Cronbach’ s Alpha), Factor analysis to determine which of a fairly large set of items were answered most similarly by the respondents, using Multiple

Regression to check the relationship between independent variables and dependent variables

1.5 Significance of the study

The results of this study is hopefully enable retailer owners to develop the suitable strategies for the loyalty program service quality as well as raising the store reputation to attract more customers and gain more closed relationship with their clients Moreover, it will raise the competitive edge of retailers

1.6 The structure of the study

This thesis is organized into five chapters:

Chapter 1: Introduction

This chapter presents the research background of the study, research statements/ research problems, research objectives, research scopes and methodology, the significance of the study, and the research structure

Chapter 2: Literature review and hypotheses

In this chapter, the author presents the fundamental theories and definition of each mentioned concept and theoretical modeling with the proposed hypotheses In this chapter, the conceptual model of the study is also presented

Chapter 3: Research Methodology

This chapter mentions about the research design, research methodology and illustrate the process of conducting the research

Chapter 4: Data analysis and data results

For this chapter, the author summaries the characteristics of collected samples and presents the result of the research after analyzing collected data From that result, the author draws the conclusions for the research hypotheses proposed in Chapter 2

Chapter 5: Conclusions, implications and limitations

The final chapter addresses the main results of the research, the contribution of the study in management theory and practice Summary of the study, limitations and suggestions for future researches are also made

CHAPTER 2

LITERATURE REVIEW AND HYPOTHESES

This chapter is an overview of customer loyalty program, customer loyalty program’s service quality, store reputation, customer satisfaction as well as customer loyalty and their antecedents which have been conducted by previous researchers Based on these studies, a conceptual model is proposed

2.1 Customer Loyalty Program

Customer loyalty programs are widely defined as combined system of marketing behaviors that aim to make customers more loyal by building up personalized relationship with them (Meyer Waarden, 2008) These programs can be utilized as value-sharing tools to help increasing customer’s perception of the retailers (Bolton et al, 2000; Yi and Jeon, 2003) The very first loyalty program was made by Texas International Airline in 1979 through the rewarding to the passengers based on the length of their journey Despite the rapidly growing trend of these programs, many researchers question whether loyalty program actually create customer loyalty or whether loyalty arises from some other factor (Hoffman and Lowitt, 2008)

In the first step, the customer will have to accumulate points when shopping Although this is no real value until it is sufficient to exchange the reward, recent studies have shown that the accumulation of points that have very important implications in terms of psychology (Yi and Jeon, 2003) Psychological benefits will increase customer satisfaction when making transactions and thereby also increasing the value perceived by customers when they purchase goods of the business Because

of accumulated points can be converted into rewards in the future it will also create customers expect a nice event for the future The point to gift exchange system will help increase the ability to maintain customer relationships and business

The second step is the conversion step from accumulate points into gifts In this step, the customer receives the value of psychological and physical value from loyalty programs The reward that customers receive after conversion charge will have the

function of increasing customers shopping behavior (Hoffman and Lowitt, 2008) The respectful feelings will help increase satisfaction of customers and deepen their relationships with enterprises All the psychological benefits and material benefits are transformed into attraction for customers, or in other words to increase customer loyalty In addition, loyalty program also targets many other goals as: to collect and track data related to customers who are shopping for products and services of enterprises, support the public relations

In most loyalty program, benefits play the most compelling role to attract customers; however, the most significant parts of loyalty program are the design or structure and customer service Although there are many researches related to this topic, there is no tested scale for the retailers using to measure loyalty program service quality as well as appraising the success level of the program’s factors Zeithaml et al (2002, p 370) state that “knowledge about customer expectations is the key in the developing of quality services” However, there is often a gap between customers’ expectations of loyalty program and the retailer’s estimation of those expectations Consequently, the service quality of most loyalty program includes unimportant elements or neglects important ones (Vesel and Zabkar, 2009) In addition, some loyalty programs of retailers that are running have the similarity that brings a lack of distinctiveness for the customer to choose among many programs As the program’s rewards are then no longer appealing or different, consumers will move from one program to another in response to specific promotional campaigns (Mauri, 2003)

2.2 Customer Loyalty Programs of big retailers in Ho Chi Minh City

Retail loyalty programs have grown significantly in Viet Nam in recent years both in terms of availability and popularity, and these programs are now playing a strong role in influencing consumers’ choice of store Below are the three most powerful and famous customer loyalty program of Co.opmart, Big C and Lotte Mart conducted in the area of Ho Chi Minh city The author collects information from the website of each supermarket, then goes shopping in reality to have the real picture of loyalty programs of retailers The most similarity characteristics among these loyalty

programs are the allowing retailers to gather data on customer behavior in order to decipher trends, appropriately reward loyalty, and influence shopping behavior

Table 2.1: The comparison between the Customer Loyalty Program of three main brand names of supermarket in Ho Chi Minh City: Co.opmart, Big C and Lotte Mart

- Banner, billboard in the store

- Via the sound of Co.opmart Radio

- Posters, billboards outside the store

- Information board at the service area

- Posters, billboards outside the store

- Along the corridor in the shopping area

- Register directly at the store

Registration

procedures

- Present Identity Card

- Fill in the register form

- Receive The main member card and the keychain card

- Open new member card with no fee

- Present Identity Card

- Fill in the register form

- Receive The main member card and the keychain card

- Open new member card with no fee

- Present Identity Card

- Fill in the register form

- Receive The main member card and the keychain card

- Open new member card with no fee Member Card

accumualting process will start again in the new year

- Relating to the remain accumulating marks which have not been transfered into

- 200 VND = 1 Big Coin

- Saving more Big Coin when buying special products that Big C cooperate to pruduce

- Big Coin that customer saves can

be used as cash (ex:

2000 Big Coins =

2000 VND)

- After 30 June every year, all remaining Big Coin in the card

- 100 VND = 1 Mark

- After sa zving up to 50,000 Marks, customer can used this accumulating marks as cash

- At the end of the year, customer will

be rewarded based on the buying rvenue: + Less than 30 million VND : 1%

+ From 30 to less than

40 million VND : 2% + From 40 to less than

voucher, the program will automatically transfer to next year saving and the the using expiry date to 31 Dec

will be erase 50 million VND : 3%

+ More than 50 million VND : 1%

- The amount of saving will be counted until 31 Dec Benefits - Standard member: 150

Marks = Voucher 30,000 VND

- Gold and Premium Member : 500 marks = Voucher 100,000 VND

- Gold and premium member will receive more accumulating points in the promotion

- Birthday gift: Voucher discount 10%

(Standard) and 15%

(Gold & Premium)

- Special Tet gift

- Participate in special promotion for Gold and Premium member

- Refund the parking fee, bus ticket fee into Big Coin account for each bill that more than 100,000 VND

- Receive discount when using service

of cooperate partners : Phở 24 Highland Coffee,…

- Participate in special promotion for Big C member only

- Participate in special promotion for Lotte member only: buying products with special price,…

Discount rate - 2-3% - From 0.5 -1% - From 1-3%

Card reissue

fee

- Main card : 20,000 VND

- Keychain : 10,000 VND

- 10,000 VND for the set card

- 15,000 VND each reissue time

2.3 Conceptualization of Loyalty program’s service quality

It is true that customer loyalty programs are attracting more and more attention from customers since these programs bring up lots of extra values for customers shopping at supermarkets To have a look at the impact of this program to customer satisfaction and customer loyalty, the author chose the level of quality of loyalty program for researching Loyalty program service quality as an emerging issue in relationship marketing will remain underdeveloped until its key dimensions have been identified and operationalized The definition of service quality was further developed

as “the overall evaluation of a specific service firm that results from comparing that

firm’s performance with the customer’s general expectations of how firms in that industry should perform (Parasuraman et al., 1988) In a loyalty program setting, service quality refers to the overall experience of customers in applying, renewing, updating, accumulating, redeeming and using the program The loyalty program service quality depends on other factors that are important to customers, such as the ability of the customer to learn the complex rules of the program (Frisou and Yildiz, 2011), the structure of the program (Liu, 2007), the idiosyncratic fit of the program and information and communication availability (Nobel and Phillips, 2004) Some retailers have attempted to achieve loyalty by giving personalized service and special treatment to customers

A considerable number of studies have suggested that the customer's value, or derived benefit, plays a significant role in determining his or her long-term relationship with, or loyalty to, the firm A customer loyalty program is a marketing tactic employed by retailers to entice consumers, through rewards, into loyal buying behavior and the provision of their purchasing preferences in order to increase profits The collection and analysis of this information, by assigning a unique identifier, such

as a numerical ID or membership card to each program member Research reveals that customers are less likely to switch firms if they can understand the actual economics, time and energy-saving value of staying in a relationship (Gwinner et al., 1998) In fact, Gwinner et al (1998) highlighted that if the consumer does not perceive value in building relationships within a firm, then they might only engage in a relationship because a better option is not available elsewhere From above discussion, we have the hypothesis

H1: There is a positive impact of loyalty program service quality on the customer satisfaction

Among general instruments, the most popular model used for evaluation of service quality is SERVQUAL, a well-known scale developed by Parasuraman et al (1985, 1988) The attributes of (Parasuraman et al., 1985), were: tangibles, reliability,

responsiveness, competency, courtesy, assurance, credibility, security, access, and understanding Although there has been criticism from some other researchers to SERVQUAL instrument, yet SERVQUAL is the instrument most utilized for its confirmatory factor analyses in most cases Thus, up to date, SERVQUAL has proven

to be a parsimonious model that has been used in various service organizations and industries to measure service quality

Base on the review of previous literature pertaining to service quality and loyalty program suggests that reward, service personnel, program policy, tangibility, communication and personalization are most important to customers; each of these dimensions of loyalty program service quality will be discussed in detail below

2.3.1 Reward

The similarity of all loyalty program service is bringing benefits as well as rewards or gifts to customers, depending on the amount of money they spend on of buying products or service In reality, big retailers such as Co.opmart, Big C and Lotte Mart offer the rewards included vouchers, discount tickets, Tet gift sets, helmets, rain coats,… for their customers Researchers have been paying attention to the important role of rewards (Dowling and Uncles, 1997) Moreover, Stauss et al.(2005) find out that if customers do not receive the worthy reward, it can cause annoyance Bridson et

al (2008) find that an appropriate mix of program attributes including hard attributes (discounts, vouchers and coupons) and soft attributes (better service, special attention and recognition) can affect store satisfaction From above discussion, we have the first hypothesis

H1a: There is a positive impact of rewards on the customer satisfaction

2.3.2 Service personnel

The behaviors of orienting, guiding or explaining, solving problems related to the program of retailer’s employee will impact on the customer’s perception of the program quality (Brady and Cronin, 2001) Previous research indicate that when the

employee using their communication skills such as orientation, listening with high attention, customers will consider the service better and will be likely to return (Gremler and Gwinner, 2000)

Academic research investigate interaction quality (Vesel and Zabkar, 2009), personal interaction and personnel service (Sirohi et al., 1998) are three main feel that the employee should play good role in Moreover, the more disparity that the member customer can be offer through the feeling, the closer relationship of customer and retailers can be maintain (Rosenbaum et al., 2005), in other words, it can increase the customer satisfaction through good service personnel offering From above discussion, we have the second hypothesis:

H1b: There is a positive impact of staff on the customer satisfaction

2.3.3 Program policy

In a loyalty program, the importance of clearly and detail program design can

be seen as essential factor contribute to its effectiveness (Roehm et al., 2002) Fowler (2003) assumes that customers tend to register in a loyalty program that communicate

or providing information more clearly with specific regulations or rewards Recently, some researchers have indicated that the effectiveness of loyalty programs depends on the program’s policy (Liu, 2007), whose results can have good effect on customer satisfaction From above discussion, we have the third hypothesis:

H1c: There is a positive impact of policy on the customer satisfaction

2.3.4 Tangibility

Tangibility refers to the physical characteristics associated with the service encounter It has been widely accepted as a key component of the perceived service quality (Parasuraman et al., 1988) According to Dabholkar et al (1996) physical aspects comprise more than the physical facilities; it covers the convenience offered the customer by the layout of the physical facilities In a retail loyalty program

context, this consists of the loyalty program service counters being easy to find with wide enough space to move around Generally, from a customer's perspective, anything which makes receiving the service more difficult is likely to impinge negatively on his or her perception of the service quality Moreover, good tangibility can help increase the pleasant feeling about the service, and have good impact on the satisfaction of customer (Rosenbaum et al., 2005) From above discussion, we have the forth hypothesis:

H1d: There is a positive impact of tangibility on the customer satisfaction

2.3.5 Communication

Communication is generally explained as “the formal as well as informal sharing of meaningful and timely information” (Anderson and Narus, 1990, p 44) The aspect of communication often plays an extremely important role for the success

of maintaining the close relationship of customers and retailers Customers who register to be members of loyalty group are likely to be more well-informed in case there are any changes in policy or promotion information of retailers Bridson et al (2008) finds that communication plays an extremely important role of the pleasant of customers who use the service at retailers From above discussion, we have the fifth hypothesis:

H1e: There is a positive impact of communication on the customer satisfaction

2.3.6 Personalization

Personalization is essential in helping to save customers time and increase perceptions of service quality (Srinivasan et al., 2002) Companies can select and build special program as rewards for their main privileged clients to help increase the personalization as well as the value perceived in the program Moreover, just a lack of personal attention may lead to the bad result that the customers realize the difference service among suppliers and can cause the changing decision in the shopping stores Javalgi and Moberg (1997) Companies can selectively build loyalty for their most

valuable segments through personalized and privileged service In the case of personalization, a study of the Portuguese retail banking (Ball et al., 2006) postulated and proved that personalization impacts positively on both satisfaction and loyalty From above discussion, we have the sixth hypothesis:

H1f: There is a positive impact of personalization on the customer satisfaction

2.3.7 Information

Information quality is defined as the cardholders' perception that the program provides relevant and accurate information such as reminding the cardholder about expiring date of the points and informing the participating outlets that are involved in the loyalty program Results of several studies suggested that the exchange of information is important in both traditional industrial selling as well as in relationship marketing (Anderson and Narus, 1990) According to Salaün and Flores (2001), information is what forms or transforms a representation in the relation which links a system to its environment, where good-quality information is information that satisfies the criteria of appreciation specified by the user, together with a certain standard of requirement Information in this thesis can be understood as news and informs from the retailer’s official website Customer can search, find information about new goods, kind of stock, price, discount, promotions… on the website From above discussion,

we have the sixth hypothesis:

H1g: There is a positive impact of information on the customer satisfaction

2.4 Store reputation

The reputation of a business is essential to its survival The reputation of a store may be interpreted by its actions and communication It can also be defined as the overall evaluation of a retail corporation by consumers (e.g., responsibility), which is primarily determined by the firm’s corporate communications (Weiss et al, 1999) Weiss et al (1999) also asserts that a generalized view of attribute importance may offer little insight into how consumers may react to a specific competitive situation If

consumers perceive few differences between the stores on the attributes that are usually the most salient, they would probably discriminate between the stores on attributes that would usually be given only low markings While an intangible concept, having a good reputation can benefit a business in a multitude of ways including: consumer preference; support for an organization in times of crisis or controversy; and the future value of an organization in the marketplace

If a retailer has a good reputation in the marketplace, consumers may have a preference for that place even if there are similar businesses offering the same products or services for different prices The reputation of a retailer can enable a company to differentiate its product in highly competitive markets, allow it to have premium pricing, and can become the ultimate factor in whether a customer decides to patronize one business over another

Weigelt and Camerer (1988, p.1) suggest that, “a corporate reputation is a set of attributes ascribed to a firm inferred from a firm’s past actions” These behaviors are built up over a period of time and differ from image, which, according to Balmer (1998), is composed of the latest beliefs about an organization Word of mouth, on the other hand, may be related to store reputation (Balmer, 1998) Rogerson (1983) described firms with excellent reputations as having more customers, enjoying positive word-of-mouth from those customers, resulting in higher volumes of new customer acquisition and reduced churn

According to Rogerson (1983), one tactic for ensuring a favorable retail store reputation is a merchandise mix composed of a relatively high number of brands possessing high brand awareness, and one or more brands with a strong brand reputation, they together build the reliability from the customer For the authors, brand reputation and retail reputation are inextricably linked to one another, since favorable reputation of brands positively influence patronage decisions and purchase behaviors, while unfavorable reputation adversely influence such decisions and behaviors It means that the reputation associated with the brands a store carries influence a store

reputation, which in turn, influences consumers' decision-making processes and behaviors Store choice is influenced by customers' store reputation which, in turn, is based on perceived store attributes (Newman and Cullen, 2001)

Newman and Cullen (2001) also developed structural equation model confirming a statistically significant direct link between store reputation and customer loyalty Sivadas and Baker-Prewitt (2000) found that the consumer perception of store reputation is linked to store loyalty Bloemer et al (1998) contend that the relationship between perceptions of the store and store loyalty is mediated by store satisfaction Store choice is influenced by customers' store reputation which, in turn, is based on perceived store attributes (Newman and Cullen 2001) From above discussion, we have the seventh hypothesis

H2: Higher the store reputation, higher will be the customer loyalty

2.5 Customer Satisfaction

The concept of customer satisfaction had its roots from many decades ago A study by Reid and Bojanic (2006) defined customer satisfaction as “an evaluation rendered that the product experience was at least as good as it was supposed to be” Reid and Bojanic (2006) also pointed out that customer satisfaction occurred when a firm’s service, as perceived by customers, met or exceeded expectations It existed as the ultimate goal for a firm because it led to brand loyalty and repeat purchases Researches also suggested that customer satisfaction involved cognitive and affective judgement during consumption For example, Oliver (1996) viewed customer satisfaction as “the consumer’s fulfilment response, the degree to which the level of fulfilment is pleasant or unpleasant” and the reflection of the customer’s emotional state (cited in Ha and Jang 2010, p 4)

Customer satisfaction can be defined as the perception of pleasurable fulfillment of a service (Oliver, 1996) which can be assessed as the sum of the satisfactions with various attributes of a product or service (Churchill and Surprenant,

1982) A number of studies have identified determinants of customer satisfaction These include ease of obtaining information (Oliva et al 1992), attribute level performance (Oliva et al 1992), prior experience and search time in choosing the service (Bolton and Drew 1991)

Customer satisfaction could be studied in the context of shopping experience in

a retail store Giese and Cote's (2000) looks at customer satisfaction as purchase/post-consumption response to a previous purchase/consumption experience Individual customers have different motivations for shopping like daily routine, learning about new products, or enjoyment of bargaining These differences mean that they will derive satisfaction from diverse aspects of the shopping experience (Clottey

post-et al 2008) There is no consensus concerning the measurement of the construct of satisfaction in retail context but different approaches are popular Research has historically shown that store attributes, such as quality, price, and variety affect customer satisfaction (Clottey et al 2008) Anderson et al (1994) indicate that the literature is not very clear about the distinction between quality and satisfaction Satisfaction is a post-consumption experience which compares perceived quality with expected quality (Anderson et al 1994; Parasuraman et al 1985) The literature mainly looks at quality as one of the antecedents to satisfaction (Bolton and Drew 1994; Anderson et al 1994) This research used the Clottey et al (2008) research result of customer satisfaction with respect to retail stores in terms of four antecedent store attributes: price, product assortment, product quality, and store service Satisfaction has been shown to influence repurchase, and work-of-mouth communication; to be a good predictor of future purchase behavior; to influence profit and, in the long run, to lead to customer loyalty (Oliver, 1997)

From above discussion, we have the last hypothesis

H3: There is a positive impact of customer satisfaction on the customer loyalty

2.6 Customer Loyalty

Concept of loyalty is formed and developed throughout a period of time Kotler

et al (1999) confirms that the cost for attracting a new customer approximately five times compared with the cost for keeping and maintaining an existing customer The customer loyalty is manifested in different ways including a commitment to rebuy or patronize a preferred product or service (Oliver 1997; Dick and Basu 1994) Zeithaml

et al.(2002) states customer loyalty may be viewed as being either behavioral or attitudinal The behavioral approach is that customers are loyal as long as they continue to buy and use a good or service (Parasuraman et al 1988; Zeithaml et al 2002) Bloemer and Kasper (1995) argue that mere repurchase may be indicative of inertia and not loyalty Reichheld (1990) states that behavioral loyalty is best manifested in willingness to recommend and refer a friend or colleague to a particular good and/ or service The attitudinal approach is that customers feel a sense of belonging or commitment to the good or service Dick and Basu (1994) suggest that loyalty is evidenced both by a more favorable attitude toward a brand (as compared to other alternatives) and repeat patronage

Moreover, Gremler & Brown (1996) provides a definition of customer loyalty related

to the purpose in this study: the repeat density of purchasing behavior from a retailer, the expression for a positive attitude towards retailer, and only consider buying at this supermarket when the need to buy goods exists According Bloemers & Kasper (1995), loyalty is interpreted as true loyalty rather than repeat purchase behavior, it is actually purchased at a specific brand of supermarket, regardless of the undertaking Zeithaml et al (1996) convinces that loyalty is a multidimensional structure and included the positive response and negative However, a loyal customer may not necessarily be a satisfied customer Gremler & Brown (1996) also noted that it is not always the case that customer defection is against loyalty, Zeithaml et al (1996) says,

"even if a problem is not solved, about half of the customers will stay with the brand" This could be due to switching costs, a lack of awareness of the different alternatives,

limited choice on location, time or money constraints, habit or inertia that is not related to loyalty

2.7 The conceptual model

As mentioned above, Omar and Musa (2011) propose the research model related to seven elements of customer loyalty program service quality as well as the customer satisfaction and customer loyalty in the retailer area

In the research, Omar and Musa (2011) listed seven dimensions of customer loyalty program service quality including program policy, tangibility, rewards, information, courteous, personalization and communication These factors have the positive impact

on program satisfaction and the customer loyalty also

Moreover, Thomas (2013) mentioned the relationships between the three factors that are customer satisfaction, customer loyalty and store reputation According to this research, customer satisfaction has a strong impact on how loyal a customer is, and they are mediated by the element of store reputation

Realizing that all the elements of customer loyalty program as well as store reputation have strong impact on the customer satisfaction and play an important role

in closing up the relationship between customer and retailer, the author combine the two conceptual model above in a new research model Basing on the review of the previous literature and hypotheses presented, the following conceptual model is proposed:

Figure 2.1: The proposed conceptual model for the thesis

Table 2.2: Hypotheses of the research

H1(a,b,c,d,e,f,g) There is a positive impact of customer loyalty program service quality on the

customer satisfaction

H1a There is a positive impact of rewards on the customer satisfaction

H1b There is a positive impact of staff on the customer satisfaction

H1c There is a positive impact of policy on the customer satisfaction

H1d There is a positive impact of tangibility on the customer satisfaction

H1e There is a positive impact of communication on the customer satisfaction

H1f There is a positive impact of personalization on the customer satisfaction H1g There is a positive impact of information on the customer satisfaction

H2 Higher the store reputation, higher will be the customer loyalty

H3 There is a positive impact of customer satisfaction on the customer loyalty

This chapter gives an overview of the customer loyalty programs of some big and famous chains of supermarkets in Ho Chi Minh City Then it provides information of customer loyalty program’s service quality, store reputation, customer satisfaction as well as customer loyalty and their antecedents which have been conducted by previous researchers A conceptual model is also proposed by the author in this chapter Next chapter is all about the research methodology that the author uses in the thesis

CHAPTER 3 RESEARCH METHODOLOGY

This chapter mentions about the ways to find the answer for research questions, including: research design, research process, research scale, sample size, data collection procedure and the last part introduces the methods to analyze data

3.1 Research design

This research used primary data that collected from consumers who has member cards and buying goods at three chains of supermarkets in Ho Chi Minh City: Co.opmart, Big C, Lotte Mart Thus, a questionnaire survey design was used as the data collecting method

Figure 3.1: The process of thesis research

measurements

Qualitative research (n = 10)

Official measurements

Quantitative research (n=250) Cronbach’s alpha analysis

EFA Exploratory Factor Analysis

Standard Multiple Regressions

3.2 Measures of the constructs

Based on the literature, the researcher set up the survey instrument, using scales that were already validated in previous studies:

Table 3.1: Measurement Scales from previous research basements

Loyalty Program Service Quality, Omar and Musa (2011)

Loyalty Program Service Quality, Omar and Musa (2011)

Loyalty Program Service Quality, Omar and Musa (2011)

Loyalty Program Service Quality, Omar and Musa (2011)

Loyalty Program Service Quality, Omar and Musa (2011)

Loyalty Program Service Quality, Omar and Musa (2011)

Loyalty Program Service Quality, Omar and Musa (2011)

Base on the research of Omar (2011), the elements of customer satisfaction can

Table 3.3: Measurement of the variables of customer satisfaction and customer loyalty

1.I feel comfortable when shopping at the

1 I would recommend this retail store to others

2 I visit this store more frequently than other retail stores

3 In the near future, I am likely to purchase from this retail store again

4 I would continue to purchase from this retail store even if there was a slight increase in price

5 I consider the store to be my first choice of retail store

In order to measure the customer perceived value of store reputation, the author use below measurement of the variables for validity test base on the research of Chiang (2010) to measure:

Table 3.4: Measurement of the variables of store reputation

SR3 Word of mouth

3.3 Research process

The research consisted of two phases, a pilot study and a main survey The pilot study was conducted using qualitative methods and an investigation by the quantitative method This method involved the use of standardized measures so that the varying perspectives and experiences of consumers can be fit into a limited number of predetermined response categories to which numbers are assigned (Patton 2001, cited

in Golafshani 2003, p 598)

 Qualitative research

Based on literature from previous research about the impact of loyalty program quality and store reputation on customer satisfaction and loyalty, the author proposed three hypotheses which were proposed in Chapter 2 After that, the author adjusted the model and selected the preliminary the scale for questionnaire of the study

After completing the preliminary questionnaire, the researcher conducted the in-depth interviews with 10 people in Ho Chi Minh City to get the right position in the context of Vietnamese consumers, check the content and meaning of words used in the original scale and change them accordingly and more understanding Although most of the structural measures referred to in the previous study, this step is necessary

to make them appropriate and understandable in the context of research In interviews, the author has received some significant feedback and suggestions from the interviewees to implement improvements to the official questions (See Appendix A)

 Quantitative research

After qualitative research, the authors have adjusted the question again to fit better with Vietnam market and easier to understand As the authors suggest that the questions were designed to match, the main survey was conducted extensively using a convenient form which collects from consumers in Ho Chi Minh City The process of quantitative research are the following:

- Step 1: The authors include questions for the study:

The questionnaire was designed in English, then translated into Vietnamese to given to the respondents (See Appendix B & C)

- Step 2: The author defined the sample size of the research:

Findings of Bollen (1989) pointed out that the minimum sample size is 5 samples for the parameters needed estimates Also be deducted from the above documents, Hoelter (1983) suggested that the size samples must be at least 200 In addition, according to Gorsuch (1983), researchers use Exploratory Factor Analysis (EFA) method needs at least 200 samples

Ongoing studies will have 39 observed variables Thus, if this research bases on the standard of Bollen (1989), the minimum sample size was N= 5 x 39 = 195 But up to Gorsuch (1983), the sample size should have at least 200 acres Therefore, in this study, the author estimates the sample size is 200 Additionally, Tabachnick and Fidell (2007) mention the rules regarding the sample size of regression analysis, the sample N>=52+8*k, k is the number of independent variables In the paper, N> = 52 + 8*3 =

76 Therefore, questionnaires were sent to 250 private customers who are shopping at

3 biggest chains of supermarket in Ho Chi Minh city that are Big C, Co.opmart, Lotte mart as well as some others place such as Satra Mart, Vinmart, ,with member card in order to ensure the sample size 200, which met the requirements of N> 76

- Step 3: The author issued the questionnaire to the interviewees

In the main study, the data was collected from the outlets of three biggest supermarket chains in Vietnam – Big C, Co.opmart, Lotte mart As metropolitan areas had big impact on supermarket shopping demand, supermarkets in the business districts of Ho Chi Minh City were chosen as the survey sites Unlike the convenience sampling employed in the pilot test, a probability sampling was used in this stage, so that each unit in the population has a known chance of selection Probability samples had an advantage of keeping sampling error low and usually can be generalized to the population Accordingly, the questionnaires were randomly distributed in each supermarket to customers who were shopping or resting after shopping To ensure the adequate perception level to this study, the minimum cut-off age of customers was 18

years old Customers were asked to help fill out the survey questionnaire on a voluntary basis (Liu, 2007) After 6 days of surveying, a total of 250 questionnaires were collected and 209 were used for analysis after eliminating the incomplete responses

Step 4: The author received the questionnaire and checked again for suitable results

After 6 days of surveying, a total of 250 questionnaires were collected and 209 were used for analysis after eliminating the incomplete responses or answered with value number “3” for more than fifty percent of the number of questions in the questionnaire from the list of response As a result, the usable data or this study was 209 observations It is suitable with the requirement of minimum sample size: 76 observations

3.4 Data analysis method

The SPSS (Statistical Package for Social Science) software version 16.0 was used in this study to analyze the data collected Moreover, for statistical sample, compare the results, other main tools of SPSS version 16.0 and Microsoft Excel were used to describe the sample For the next steps, the reliability and validity of measurement scales were evaluated by using Cronbach’s alpha and exploratory factor analysis (EFA) Then the author uses Multiple Regression to examine the relationship between independent variables and the dependent variable as the proposed hypothesis

3.4.1 Cronbach’s alpha

In the next step, a reliability test with Cronbach’s alpha was performed by SPSS to assess the internal consistency of the result measurements According to Sekaran (1992), this coefficient alpha value is the most popular measure of reliability for a multi-item scale (cited in Ryu et al 2008, p 464)

As Leech et al (2005), the value of alpha Cronbach acceptable for reliability is above 0.7 However, it can be reduced to a range from 0.60 to 0.69, especially if only

a small number of items in the scale When Cronbach alpha was very high (greater

than 0.90), it can mean that items are repeated or there are items in the scale than is really necessary for a reliable measure of the concept (Leech et al., 2005)

Besides assessing the value of Cronbach alpha, Item Repair - Total correlation

is also very important to consider By (Leech et al., 2005), if this correlation is fairly high or high (equivalent to 0.40 or higher), the item is probably correlated with most other items and make a good composition this summated scales of assessment If the item - total correlation is negative or too low (below 0.30), it is necessary to consider the problem of vocabulary as well as wording matters and conceptual fit by modifying

or deleting such items

3.4.2 Exploratory factor analysis (EFA)

(Leech et al., 2005) states that " EFA is based upon a testable model and can

be evaluated in terms of its fit to the hypothesized population model; it indices can be generated to help with model interpretation " On the other hand, EFA method is used

to determine a large set of items go together as a group, or a similar reply as most respondents (Leech et al., 2005)

3.4.3 Multiple regression analysis

The multivariate regression analysis was used to test hypotheses and predict an outcome from a number of independent variables (Leech et al., 2005) According to Leech et al (2005), multiple regression analysis requires a lot of assumptions, but it is better to focus on the major ones checked easily with SPSS These assumptions include:

1 The independence of residuals (errors)

2 A linear relationship between each predictor variables and the dependent variable

3 Excess or errors are normally distributed

4 No multicollinearity

The author addresses research design, the process and the scale of the research

in this chapter After that, the sample size, the way to collect and analyzing data is presented In the next chapter, the author concentrates on the descriptive of collected data

CHAPTER 4 DATA ANALYSIS AND FINDINGS

This chapter presents the descriptive of collected data The reliability and validity of data will be assessed by using Cronbach’s alpha and EFA After that, the hypotheses and the effect of demographic variables on shopper loyalty will be tested

by the collected data Consequently, this chapter includes six parts: sample profiles, the Cronbach’s alpha test, Exploratory factor analysis, Multiples regression analysis, Revised conceptual model and Explanation for the finding results of the hypotheses

4.1 Sample characteristics

Table 3 showed the result of descriptive statistics for the sample As seen, the percentage of female answered the questionnaires was higher than male (61.2% compared with 38.8%) This relatively represented the current situation of Vietnam supermarket shopping market, where female was the one that decide what to buy and where to buy for their family The facts that main group of age of the respondents is among 24-30 and 31-40 This also reflected the current status of customers who buying goods at the supermarket as well as the target customers of most supermarkets

in Ho Chi Minh City As the Vietnamese income have been growing up, the main monthly salary of samples is from 9 to under 15 million VND, which if considerably good income On the other side, because nowadays rare people accept be a household that depend on their husband salary, they are both a homemaker and a staff officer which can be shown in the table with 48.3% the customers are staff officers

Table 4.1 : Descriptive Statistics for the Sample (N = 209)