The impact of bonding, trust and satisfaction on customer commitment an empirical study of the vietnamese banking sector

ĐOÀN THỊ THÙY TRANG THE IMPACT OF BONDING, TRUST AND SATISFACTION ON CUSTOMER COMMITMENT: AN EMPIRICAL STUDY OF THE VIETNAMESE BANKING SECTOR MASTER THESIS HO CHI MINH CITY – 2012.

ĐOÀN THỊ THÙY TRANG

THE IMPACT OF BONDING, TRUST AND

SATISFACTION ON CUSTOMER

COMMITMENT: AN EMPIRICAL STUDY

OF THE VIETNAMESE BANKING

SECTOR

MASTER THESIS

HO CHI MINH CITY – 2012

ĐOÀN THỊ THÙY TRANG

THE IMPACT OF BONDING, TRUST AND

SATISFACTION ON CUSTOMER

COMMITMENT: AN EMPIRICAL STUDY

OF THE VIETNAMESE BANKING

SECTOR

MAJOR: BUSINESS ADMINITRATION MAJOR CODE: 60340102

MASTER THESIS SUPERVISOR: Assoc Prof Dr NGUYỄN ĐÌNH THỌ

HO CHI MINH CITY – 2012

ACKNOWLEDGEMENT

First and foremost I would like to thank my supervisor, Assoc Prof Dr Nguyễn Đình Thọ for his guidance and support His feedback is valuable for my thesis The time of coordinating with him is the valuable opportunities that helps widen my knowledge

Second, I would like to thank all of my lecturers at Business Admistration Faculty, University of Economics Ho Chi Minh City who supported my knowledge during the MBA course

Third, I also thank my friends who helped me collect data for this thesis Moreover,

I would like to express my appreciation to Mr Cao Quoc Viet for his guidance in analyzing data with SPSS

Finally, my greatest thank would go to my family who always encourage me to finish this course

Đoàn Thị Thùy Trang

Ho Chi Minh, 20 October 2012

COMMITMENT

I would like to declare that this study, “The Impact of Bonding, Trust and Satisfaction on Customer Commitment: an Empirical Study of the Vietnamese Banking Sector”, was implemented based on my independent and serious studies as well as scientific researches The data was collected in reality and it has clear origins

Đoàn Thị Thùy Trang

Ho Chi Minh, 20 October 2012

TABLE OF CONTENT ACKNOWLEDGEMENT I COMMITMENT II TABLE OF CONTENT III LIST OF TABLE VI LIST OF FIGURE VII

ABSTRACT 1

CHAPTER 1: INTRODUCTION 2

1.1 Research background 2

1.2 Statement of problem 3

1.3 Research questions 5

1.4 Research objectives 5

1.5 Research methodology 6

1.6 The structure of the research 6

CHAPTER 2: LITERATURE REVIEW 8

2.1 The Nature and Role of Commitment 8

2.2 Bonding definition and impact of bonding on customer commitment 10

2.3 Trust definition and impact of trust on customer commitment 11

2.4 Satisfaction definition and impact of satisfaction on customer commitment 14

2.5 Conceptual model 16

2.6 Summary 16

CHAPTER 3: RESEARCH METHODOLOGY 17

3.1 Research design 17

3.2 Questionnaire development 18

3.2.1 Independent variables 18

3.2.2 Dependent variable: commitment 19

3.3 Questionnaire translation 20

3.4 Research strategy 21

3.4.1 Qualitative pilot study 21

3.4.2 Quantitative pilot study 21

3.5 Target population 22

3.6 Sample size 22

3.7 Selecting the sample and collecting data 22

3.8 Methods of data analysis 24

3.8.1 Data cleaning 24

3.8.2 Reliability assessment of measurement scales (Cronbach’s alpha) 24

3.8.3 Validity assessment of measurement scales 25

3.8.4 Multiple Linear Regression (MLR) 25

3.9 Research process 25

3.10 Summary 26

CHAPTER 4: DATA ANALYSIS AND FINDINGS 27

4.1 Descriptions of sample 27

4.2 Reliability of the measurements 29

4.3 Exploratory factor analysis (EFA) 31

4.3.1 EFA implementation for independent variables 31

4.3.2 EFA implementation for dependent variable 34

4.4 Testing the research model and the hypothesis 34

4.4.1 Testing the correlations of the constructs 34

4.4.2 Testing Assumptions of Linear Regression 35

4.4.3 Multiple Linear Regression Analysis 36

4.5 Summary 39

CHAPTER 5: CONCLUSION 40

5.1 Discussion of findings 40

5.1.1 Bonding 41

5.1.2 Trust 41

5.1.3 Satisfaction 41

5.2 Practical implications 42

5.3 Contribution of the current study 45

5.4 Limitation and future research 45

REFERENCES 47

APPENDIX I 53

APPENDIX 2 56

APPENDIX 3 60

APPENDIX 4 69

LIST OF TABLE

Table 3.1 Survey items ……….……… 19

Table 4.1 Respondents’ profiles………28

Table 4.2 Reliability of the measurements and related decision ……… …… 30

Table 4.3 EFA results of independent variables ……… ……… .33

Table 4.4 EFA results of dependent variables ……… 34

Table 4.5 Correlations ……… 35

Table 4.6 MRL results using Enter technique ….……… 36

Table 4.7 ANOVA ……….… 36

Table 4.8 Coefficients……… 37

Table 4.9 Results of testing hypothesis ……… ……… 37

LIST OF FIGURE

Figure 2.1 Conceptual model ……….……… ……… .16 Figure 3.1 Research process……….………… 25 Figure 4.1 Model with Beta values……… ……….……… 38

ABSTRACT

To survive in a high competitive environment, banks must have marketing strategy

to build a long-term relationship with their customers by improving customer commitment

This thesis aimed to investigate the impact of bonding, trust and satisfaction on customer commitment in the Vietnamese banking sector by empirical evidence The thesis consisted of five chapters including introduction, literature review, research methodology, data analysis and findings, conclusion After the introduction chapter, the study indicated related literature on bonding, trust, satisfaction and the affect of these components on customer commitment Then, the research methodology introduced the procedure of the research The data analysis and findings used SPSS version 16 to analyze collected data Finally, the main conclusion and implication of the study stated in the conclusion chapter

Our findings showed that bonding, trust and satisfaction had positive effect on customer commitment Among these factors, satisfaction got highest weight influence on customer commitment Trust was more important in affecting commitment compared with bonding

CHAPTER 1 INTRODUCTION

1.1 Research background

The target of marketing is not only finding new customers but also building term relationship with existing ones In traditional marketing, marketers pay more attention to increase number of new customers Kotler (2000) shows that companies concentrate on attracting new customers rather than retaining existing ones Traditional marketing uses marketing mix to increase sales; and marketers are familiar with the concept of 4Ps to attract new customers Nowadays, when the economic environment is changing rapidly and becoming saturated, finding a good new customer becomes more and more difficult Therefore, the companies must change their mind to survive They must pay more attention on finding the best way

long-to develop the long-term relationship with their current cuslong-tomers besides finding new ones The word “loyalty” has been started to appear frequently and it has become a highly desirable marketing goal (Mele, 2001) To survive in mature market, the companies must rely on sustaining long-term relationships with stakeholders (De madariaga and Valor, 2007) Points of view in marketing are changed to fulfill the requirement of the economic reality

Relationship marketing is considered a good way to retain customers Marketers find that it is hard to satisfy their customers’ need which multiplies more and more Customers are smarter, more reluctant; and they also have more choices They can easily switch for many reasons such as dissatisfaction with existing suppliers, lower price, better services from competitors or any other personal reasons Therefore, marketing scholars emphasize the important role of relationship marketing A lot of empirical studies have been carried out to prove the importance of relationship marketing Eisingerich and Bell (2006) find that financial institutions should pay attention to the relative of individual relationship in building marketing strategy to

foster customer loyalty Empirical finding of Chaston et al.’s (2003) suggests that adoption of a relationship versus a transactional marketing orientation affect market performance of small accountancy practices According to the finding of Sheth (2000), relationship marketing is “the on going process of engaging cooperative and collaborative activities and programs with immediate and end-used customers to create or enhance mutual economic value at reduced cost” Theory and empirical study have already proved the role of relationship marketing in building long-term relationship with customers

Commitment is considered one of most important components in relationship marketing Pritchard et al (1999) find that commitment impacts strongly on customer loyalty Commitment is an essential component of the long-term loyalty (Morgan & Hunt, 1994) It helps the customers less affect the competitors’ action (Bettencourt, 1997) Morgan and Hunt (1994) prove that commitment has high influence in loyalty and vice versa Some relationship marketing models use commitment as an independent component (Kumar et al., 1995) In conclusion, commitment can help the companies build long-term relationship with customers

In Vietnamese banking industry, customer commitment is the target of any banks in building stable relationship with customers Since the Communist Party of Vietnam decided to reform the economy in 1986, the number of banks has increased quickly

in both domestic and foreign ownership The competitive environment increases rapidly in domestic as well as in foreign banks; therefore, current customers are the foundation for banks to improve their business Customer commitment can help the bank get sustainable development

1.2 Statement of problem

Since 1986, the Vietnamese economy has been transformed from a planned economy into a market-oriented economy With the permission of private sector, a lot of private banks were born According to the statistic from the State Bank of Vietnam, on 15 June 2012, there are 99 banks in Vietnam including

centrally-braches of foreign banks and 21 representative offices of foreign banks The competition has increased strongly because banks now not only compete with domestic banks but also with foreign ones Banks are facing with the risk of reducing market share Banking products are easily to imitate; therefore, banks must differentiate themselves from competitors by increasing service levels They must create competitive advantages Once a bank builds a long-term relationship with customer, the ability of shifting to another bank of its customers will be reduced Banks understand that keeping long-term relationship with customers is a wise strategy Finding new stable customers is costly and timely Gilaninia et al (2011) shows that the cost of finding and serving one new customer is five to six times more than the cost of serving one loyal customer Doing business with continuing customers saves money on a variety of recruitment costs such as:

- Costs of advertising to entice new customers;

- Costs of personal selling pitch to new prospects;

- Costs of setting up new accounts;

- Costs of explaining business procedures to new clients; and

- Costs of inefficient dealings during the customer’s learning process

5% increase in customer retention leads to 60% company’s profit growth by the fifth year (Reichheld, 1996) But continuing customers profit the company more than by saving on costs They progress to buying more of their total requirements from one supplier, and buy a more comprehensive product line from the supplier The longer a business firm can keep a customer, the greater the life-time revenue from that customer Furthermore, while revenues increase from the same customer, the costs of serving him/her decline Customers are one of the most valuable assets, therefore, banks must not only reserve but also continuously expand their relationship with customers

Retaining customers is the current problem for bank marketers in Vietnam High competitive forces banks to find ways to satisfy customers Managers must implement many strategies to get customer commitment because it is the foundation for sustaining development However, it is hard to find empirical studies on commitment in banking sector in Vietnam There are not many surveys in this field although it is really important and useful for banks to carry out their marketing strategy; hence, this study aims to investigate what factors affect customer commitment in the Vietnamese banking sector and the important of each factor on customer commitment According to the result of this study, banks can run their marketing strategies to improve their business

This study is based on the literature of relationship marketing to identify whether bonding, trust, satisfaction have impact on customer commitment

1.3 Research questions

This study examines the impact of bonding, trust, satisfaction on customer commitment Therefore, it aims to answer the questions concerned in banking industry as follows:

Question 1: Do bonding, trust and satisfaction have an impact on customer commitment?

Question 2: Do these components of relationship marketing orientation have the same impact on customer commitment?

1.4 Research objectives

The objectives of the study are:

- To examine the relationship between bonding and customer commitment

- To examine the relationship between trust and customer commitment

- To examine the relationship between satisfaction and customer commitment

- To determine which factor influences most customer commitment

1.5 Research methodology

First, this study is empirical based on the data collected in Ho Chi Minh city, Vietnam which is the economic center of Vietnam People living in Ho Chi Minh city have more chances to access banking services than other areas in Vietnam; therefore, they can give better answers about their experience in using banking services

Second, the study carries out in 02 steps: pilot study and main study The purpose of the pilot study is to do previous test of the measurement scales After the pilot test, the study collects the sample of about 300 respondents

Third, the statistical package SPSS version 16 is used to find out the result

1.6 The structure of the research

The study is presented in 5 chapters

Chapter 1: Introduction

This chapter introduces research background, research problem, research question, research objective, methodology and the organization of the research

Chapter 2: Literature review

This chapter specifies on the theory relevant to commitment and its components and empirical study customer commitment

Chapter 3: Research methodology

This chapter describes the methodology used to conduct the research

Chapter 4: Data analysis and findings

Base on the data collected, SPSS version 16 is used to test the hypothesis and answer the research questions

Chapter 5: Conclusion

The conclusion is based on the result of data analysis Limitation of the research is also indicated

CHAPTER 2 LITERATURE REVIEW

This chapter presents the related literature on commitment and the components affect customer commitment According to the literature and empirical study, bonding, trust and satisfaction have positive effect on customer commitment This chapter also indicates conceptual model and research hypothesis

2.1 The Nature and Role of Commitment

In the review of the commitment literature, commitment has various definitions Commitment is considered as critical in the literatures of organizational and buyer behavior Psychological theories consider commitment as the series of acts and cognitions between a person and his behavior (Crosby & Tylor, 1983) Commitment

is a psychological phenomenon Allen & Meyer (1990) consider commitment as

“psychological state that reflects employees’ relationship to the organization” Moorman et al (1992) define commitment as “an enduring desire to maintain a valued relationship” According to Hocutt (1998), commitment is “an intention to continue a course of action or activity or the desire to maintain a relationship” Commitment is an affective attachment to an organization values and purposes, or a relative intensity of the identification and the involvement in a particular organization (Buchanan, 1974) In the marketing context, commitment appears from the confrontation of the consumer to changes In the marketing services, commitment considers as a consumer’s will to continue in a relationship with an operator (Morgan & Hunt, 1994) It is possible to differentiate the loyal from the inert consumers

In the services relationship marketing area, mutual commitment is the foundation of relationship Commitment plays an important role on successful relationship,

especially in long-term (Anderson and Narus, 1998) Scanzoni (1979) states that commitment is an essential component of relationship marketing models Empirical studies of Wetzels et al (1998) and Farrelly & Quester (2003) prove that partners can get significant benefits through mutual commitment in relationship Morgan and Hunt (1994) define commitment as a state of believing that the relationship with exchange partner is important, hence it leads to great effort to maintain the relationship Commitment is the will of customer trying to maintain a relationship with service providers Commitment is “an implicit or explicit pledge of relational continuity between exchange partners” (Dwyer et al., 1987) It is a “pledge of continuity” (Dwyer et al, 1987) It is the most advance phase of interdependence between the service provider and the customer Commitment can prevent the customer seeking another company providing a similar advantage The durability of the relationship can get by the habit or the constraint of the market Morgan & Hunt (1994) states that customer’s commitment corresponds to a strong desire to preserve the relationship with the seller with agreeing to provide the efforts that might be essential

Commitment is considered as a multi-dimensional construct including three dimensions: continuance commitment, affective commitment and normative commitment (Meyer and Allen, 1997)

Continuance commitment is the desire to maintain a relationship due to high switching costs and scare alternatives (Meyer and Allen, 1997) Customer with strong continuance commitment attach to the organization based on financial and tangible perceived value of the relationship

Affective commitment is an emotional bonding that customer feels belonging and involving with service provider (Fullerton, 2005) Affective commitment relates to the desire to maintain a relationship valuable to customer in feeling (Morgan & Hunt, 1994) Customer with strong effective commitment attaches to the organization based on their emotion

Normative commitment is a perceived obligation to remain in the organization (Meyer et.al 2002) Customer believes staying with an organization as a responsibility and a right thing to do

To sum up, continuance commitment refers to the relationship that customer need to, affective commitment refers to the relationship that customer want to and normative commitment relates to the feeling of ought to do so (Allen and Meyer, 1990)

2.2 Bonding definition and impact of bonding on customer commitment

Bonding is an emotional relationship between two partners (customer and supplier

or buyer and seller) acting in a unified manner toward a desired goal (Callaghan et al., 1995; Sin et al., 2005b) Human bonding is the process of development of a close, interpersonal relationship Bonding derives from the relationship of family members or friends or among groups when people spend time together Bonding is

a mutual and interactive process Bonding is the results of interaction between people Any two people who spend time together, share activities may form a bond Bonding help people have close relationship with others When people have the same goal, the same value, the same character or other things and they share with their partner, the bond will arise

Bonding has two main dimensions: social bonds and structural bonds (Wilson, 1995)

In psychology, according to Hirschi (1969), social bonding includes attachment to families, commitment to social norms and institutions (school, employment), involvement in activities, and the belief that these things are important Family, friends, and other members of our social networks affect our lives in many ways People need strong positive social ties to represent society in the best way possible Social bond has four dimensions (Hirschi, 1969) including attachment, commitment, involvement and belief In marketing theory, Wilson (1995) defined social bonding

is “the degree of mutual personal friendship and liking shared by the buyer and seller” Social bond is used to investigate friendships, sexual relationships, family

and group interactions Personal social bond develops subjective social interaction Individual may develop strong personal relationships that tend to hold a relationship together Buyers and sellers who have strong personal relationship are more committed to maintain a relationship than less socially bond partners

The concept of structural bond is the vector of forces that create impediments to the termination of the relationship Although individual constructs tend to either strengthen or weaken a relationship, their interaction may be greater than the sum of their parts in creating a force to hold a relationship together Structural bond develop over time as the level of the investments, adaptations and share technology grows until a point is reached when it may be very difficult to determine a relationship Firm with high level of structural bond is found to have a higher level

of commitment to the continuance of the relationship than firms with lower levels of structural bonding In conclusion, structural bond appears when partners adapt themselves to the others in some legal, economic or technical, knowledge elements (Wilson and Mummalaneni, 1986; Wilson, 1995) For example, the relationship between the manager and his staff is structural bond

Commitment in a relationship is a result of social bond (Mummalaneni and Wilson, 1991) Building strong bonds will decrease dispute between buyer and seller (Palmatier et al., 2007) Stronger personal bonds effect stronger commitment between buyers and sellers (Willson and Mummalaneni, 1986)

H1: Bonding has a positive influence on customer commitment

2.3 Trust definition and impact of trust on customer commitment

Trust has been studies widely in the social exchange literature In the marketing context, the study of trust is mainly based on buyer-seller models Customer-company relationship requires trust Trust is a personal trait and a general disposition to believe others Morgan and Hunt (1994) define trust as “when one party has confidence in an exchange partner’s reliability and integrity” It is an important component of transition from transactional to relational conceptions It

allows preserving the long-term relations, resisting the different competitors and reducing uncertainty in terms of exchange Trust is considered a part of the partner’s integrity It relates the reliability of the partner, his expertise and his past behavior Callaghan et al (1995) define trust is a state of believing in someone or something about the truth, goodness, character, power and ability When a person relies on received information about unsure states of the environment and the consequences in a situation of risk, trust appears Dupuy et al., 1989 state that trust

is a reciprocal expectations system that helps people feel safety, predict the future behavior of the partner, rely on the partner and faithful with him The more do partners trust each other, the less do they compare profits and costs (Wetzels et al., 1998)

Trust has two dimensions: cognitive and affective (Garbarino & Johnson, 1999) Cognitive refers to partner’s integrity When a customer contact with the service provider, he appreciates the performance of the service provider and ability of making him satisfied A credible seller allows the consumer to have, on the one hand, a discriminating advantage and on the other, a predictable and stable answer Affective refers to the relational aspect which is based on the honesty This dimension is important for the success of the relationship between buyer and service provider (Morgan & Hunt, 1994) The customer evaluates the motivations of the service provider and seeks to how whether the latter remains aware about his good-willing and safety, and if he is benevolent

Trust has been treated in one of two distinct ways in the literature First, trust has been conceptualized as a feature or an aspect of relationship quality Many researchers describe trust as a feature of relationship quality, along with satisfaction and opportunism; or as a feature of relationships, in addition to power, communications, and goal compatibility

Second, consistent with the view adopted in our research, trust has been conceptualized as a determinant of relationship quality Trust is a determinant of the

amount of cooperation and the functionality of conflict between parties It is also considered as trustworthiness, in addition to believability and honesty, as part of credibility, which determines perceptions of service quality Finally, it is a determinant of communications between parties

Trust increases the partners’ willingness in sharing information and finding new mutual benefits (Hart and Saunders, 1997) When customers have positive experiences on an organization, they will trust it and hence continue the relationship with it (Vesel and Zabkar, 2010) Hocutt (1998) indicates that keeping promise and having customer’s interest at heart can increase level of trust Trust is the result of experience accumulate for long time and it is difficult to get back when it is hurted (Ossi and Joseph, 2007)

Commitment and trust play an important role on building long-term relationship with customer They can produce outcomes that promote efficiency, productivity and effectiveness Morgan and Hunt (1994) state that “they encourage marketer to (1) work at preserving relationship investments by cooperating with exchange partners, (2) resist attractive short-term alternatives in favor of the expected long-term benefits of staying with existing partners, and (3) view potentially high risk actions as being prudent because of the belief that their partner will not act opportunistically”

The effect of trust on commitment has been proved in the literature (Chenet et al., 2010) Trust is considered as behavioral antecedent of commitment (Palmatier et al., 2006) If the customer thinks that the supplier is not benevolent, honest or competent enough, he cannot rely on the supplier and will not commitment with the supplier (Morgan & Hunt, 1994) Relationships characterized by trust are so highly value that parties will desire to commit themselves to such relationships Because commitment entails vulnerability, parties will seek only trustworthy partners Trust leads to a high level of commitment (Morgan and Hunt, 1994; De Ruyter et al., 2001) Besides, it helps the relationship more stable and less risky hence it increases

commitment (Ganesan, 1994) Many empirical prove that trust is the first stage lead

to commitment (Siguaw et al., 1998; Garbarino and Johson, 1999; Chumpitaz and Paparoidamis, 2007; Cater and Zabkar, 2009, Irene et al.,2011) People are unlikely

to be committed to something they do not value Because trust increases the extent

to which partners engage in risky exchanges, trust is expected to increase the likelihood that users will become committed to relationships with researchers To sum up, trust is major determinant of commitment

H2: Trust has a positive influence on customer commitment

2.4 Satisfaction definition and impact of satisfaction on customer commitment

Customer satisfaction is one of the most important outcomes in the marketing literature It serves to link processes culminating purchase and consumption with post purchase phenomena such as attitude change, repeat purchase, and brand loyalty Satisfaction is the customer’s overall evaluation on product or service of the company after purchase and consumption (Andaleeb, 1996; Anderson et al., 1994; Garbarino and Johnson, 1999) Woodruff (1997) defines customer satisfaction as an overall positive or negative feeling based on perceived value Level of satisfaction belongs to how much the supplier can offer the services that meets requirement of the customer’s expectation (Gerpott et al., 2001) Customer satisfaction is an essential factor in establishing successful long-term relationship (Crosby et al., 1990; Gaski and Nevin, 1985; Hennig-Thurau et al., 2002; Palmatier et al., 2006)

Cumulative satisfaction is an overall evaluation that is based on the purchase and the consumption experience with a product or service through the time (Anderson et

al, 1994) In this case, satisfaction is feeling accumulated from consideration the specific products of the company and some of its components such as physical illustrations and service providers

The feeling of satisfaction appears when the customers compare their perceptions of actual products or services performance with their expectations Customer satisfaction is derived from a specific transaction represents an immediate post-

purchase evaluation It can either indicate the affective reaction toward the recent experience with the product or service Any discrepancies between the expectations and the performance create the disconfirmation According to Oliver (1980), there are three types of disconfirmation as follows:

- If the product/service performance is higher than customer’s expectations, they feel highly satisfied This situation occurs positive disconfirmation

- If the product/service performance is lower than customer’s expectations, they feel highly dissatisfied This situation occurs negative disconfirmation

- If the product/service performance equal customer’s expectations This situation occurs zero disconfirmation

Giese and Cote (2000) identified the following components of satisfaction:

- Customer satisfaction is one kind of response (cognitive or emotional)

- The response emphases on a particular focus ( product, consumption experience, expectations, etc.)

- The response occurs at a particular time (after choice, based on accumulated experience, after consumptions, etc.)

In the competitive business market, a lot of company tries to maintain a loyal customer base Most of the banks set their strategies towards increasing satisfaction and loyalty customers through the service quality Researchers have identified various determinants of customer satisfaction in the banking sector and relationship between customer satisfaction and customer commitment

Empirical study finds that satisfaction affects on customer commitment Satisfaction leads to commitment (Moliner et al., 2007a, b) Mittal et al (1998) proved that customer satisfaction has a positive effect on customer commitment This relationship is also proved in terms of low relationship customers by Garbarino and Johnson (1999)

H3: Satisfaction has positive effect on customer commitment

Trust Bonding

Satisfaction

Customer commitment

CHAPTER 3 RESEARCH METHODOLOGY

This chapter introduces the methodology used in the study The chapter includes research design, questionnaire development, questionnaire translation, research strategy, target population, sampling, data collection, methods of data analysis and research process

3.1 Research design

This study comprised two stages: a pilot study and a main study

The purpose of the pilot study was to test the design and instrumentation through probability samples before carrying out main study The pilot study contained 02 steps

In the first step, 4 people were interviewed in depth to modify the draft questionnaire This step was implemented to test if the respondent understood clearly the draft questionnaire Then the draft questionnaire was modified before using for survey in the second step

In the second step, online survey was used to collect data 50 participants were invited to complete the questionnaire This step examined the internal consistency

of the measurement scales, response rate and response quality Based on the results

of this, the draft questionnaire was modified again if necessary before came to the final questionnaire

After the pilot study, the main study was conducted using online survey method through docs.google.com and traditional paper method Both online survey and traditional survey methods were appropriate for this study Applying both methods could shorten the period of collecting data The study used SPSS version 16 for data

analysis to test the measurement scales, the hypothesis and to confirm the research model

3.2 Questionnaire development

The questionnaire was divided into two parts Part A consisted 23 items split into 4 groups including bonding, trust, satisfaction and commitment This part measured the customer commitment by a Likert Scale indicating the strength of agreement with the initial statement about the bank which customers usually had transaction Part B included the question about the demographic variables such as gender, age, education, occupation, income, frequency of monthly usage in the last three months, banking product which they often used The study had 3 independent variables and

1 dependent variable as well

The questionnaire was developed based on the survey of Laith et al (2010) which tested the relationship marketing in Jordanian banking industry

3.2.1 Independent variables

The independent variables contained bonding, trust and satisfaction According to the literature, they all had positive effect on dependent variable i.e customer commitment

3.2.1.3 Satisfaction

Satisfaction included 5 items evaluating the level that the service quality offered by the bank met customer’s perspective

3.2.2 Dependent variable: commitment

Alrubaiee et al (2010) in his survey on relationship marketing in Jordan banking industry introduced scales to measure bonding, trust, satisfaction and commitment

in banking sector Jordan and Vietnam have the same economic environment and the banking development His measurement scale concentrated on banking service Therefore, the author applied his scale for testing customer commitment in Vietnamese banking sector

The study used 23 items listed in Table 3.1

Table 3.1 Survey items

BONDING (Cronbach’s alpha 872)

BDG1 Bank sends mail in occasions

BDG2 Employees show respect to customers

BDG3 Bank has well-defined standards for customers contact

BDG4 Encourage customers’ complaints

BDG5 Bank shows a sincere interest in solving problem on time

BDG6 Try hard to understand customers’ needs constantly

BDG7 Bank always searches most reasonably priced solution for me

BDG8 Employees will search for the best services for me

BDG9 Bank has customers interest at heart

TRUST (Cronbach’s alpha 786)

TR1 Bank has high integrity

TR2 Work in close cooperation

TR3 Bank has goodwill reputation

TR4 Bank is trust worthy

TR5 Consistent in providing quality services

TR6 Bank is reliable in providing unique services

SATISFACTION (Cronbach’s alpha 834)

SA1 Bank completely meets my expectations

SA2 Bank show a sincere interest in solving complaints

SA3 Employees work in a tidy professional way

SA4 Satisfied with all services offered

SA5 Bank tries very hard to establish long-term relationship

COMMITMENT (Cronbach’s alpha 803)

COM1 Remain a client to enjoy the relationship

COM2 Feel bank is looking out for my interests

COM3 I have strong sense of loyalty towards bank

3.3 Questionnaire translation

According to Harkness & Schoua-Glusberg (1998), the original scales must be translated to the respondents’ language and then translated back to source language This stage is very important If the translated questionnaires do not reflect the original questionnaire, the scale may be incorrect for measuring the objective of the study Then the contribution of the research may be useless The study used a group

of three translators to translate the original items from English language to Vietnamese The translator must work independently and simultaneously The results of these translators were gathered to check if there were any differences in translation The group then worked together to find out the final translated draft In this stage, 2 bachelor of English and a student in eMBA course were invited to join

in the group

The draft then was translated back to English language by an English teacher in Shane English center and a student in eMBA course The results were compared

with the original scale to test the quality of the draft The draft was review again before pilot study occurred

3.4 Research strategy

3.4.1 Qualitative pilot study

This step used direct interview with 4 respondents to test if these respondents understood the questionnaire Researchers called this stage as alpha test or pretest The respondents included 1 English teacher in Shane English center, 1 self-employed, 1 employees of IDP group and 1 employees of SEAS company

One respondent confused to answer because she did not know the statement was right or wrong For example, with the statement “Ngân hàng X có sự minh bạch cao”, she did not know the “minh bạch” level of a bank, therefore she found it was difficult to answer As a result, the questionnaire must be insert a statement “Xin lưu ý: Câu trả lời dựa trên sự cảm nhận của anh/chị về ngân hàng X nêu trên” to remind the respondent that the answer was based on his/her feeling of the bank The draft questionnaire was also changed some words such as “chuẩn mực” in item 3 was changed to “tiêu chuẩn” “Liêm chính” in item 10 was changed to “minh bạch” Item 2, 3, 6, 8, 10, 13, 15 were rewrote to fit Vietnamese style After direct interview, the draft questionnaire was modified again

The questionnaire could be self-completed in form of scale and nominal to help respondents complete the form quickly but properly

3.4.2 Quantitative pilot study

Quantitative pilot study was also called beta test After modifying in the qualitative pilot study stage, the draft questionnaire was used to run a survey for collecting about 50 respondents The study used online survey to collect data through the website docs.google.com

The collected data was used to test the reliability of the measurement scales The Cronbach’s alpha was above 70 for all variables Bonding had Cronbach’s

alpha 872, trust had Cronbach’s alpha 786, satisfaction and commitment were 834 and 803 Running exploratory factor analysis, the result stated that there were three groups as per the literature model The sample was initially accepted

3.5 Target population

The survey was conducted in Ho Chi Minh city This city is the central economy of Vietnam, a large number of banks are placed in this city; therefore, the citizen in Ho Chi Minh city has more experience in using banking services than citizen in other region

Target respondent was the person using banking services The study did not have any requirements in education, income, age or any other demographic elements The person who used banking service was considered satisfying the requirement of the survey Therefore, the study adopted convenience sampling method Convenience sample method was easy to obtain and was continued until it reached the target sample size

3.6 Sample size

This study used exploratory factor analysis (EFA) to analyze data According to Hair et al (2006), EFA needed at least 50 samples and number of observations over item must not less than 5:1, the ideal was over 10:1 If the sample size was too small, the analysis result could not represent to the population If the sample size was too big, the analysis result would be too sensitive The study had 23 items (9 items for bonding, 6 items for trust, 5 items for satisfaction and 3 items for commitment); therefore, the ideal sample size was 230 responses The target sample size of this study was about 300 responses

3.7 Selecting the sample and collecting data

The target population was customers living in Ho Chi Minh city The survey questionnaire comprised 2 sections The first section was the choice criteria with 23 questions based on the study of Laith et al (2010) A five-point Likert scale rating

ranged from 1 to 5 with the agreement increasing from 1 to 5 1 was totally disagree,

2 was disagree, 3 was neutral, 4 was agree and 5 was totally agree The second section was some questions about the respondent’s personal information such as age, sex, education, etc The selected sampling procedure was convenience sampling method Data was collected through internet and paper survey

The study preferred using online survey tool of Google Docs (docs.google.com) to paper survey due to some advantages of online survey as follows:

- Online survey was less costly than paper survey

- The response was updated automatically and transfer easily as well as quickly to excel format (.xls,.xlsx), therefore, it avoided mistakes in input data and saved time in input data for surveyor

- Google Docs also recommended “required” option to prevent missing data

The survey started using Google Docs on August 04, 2012 through website:

https://docs.google.com/spreadsheet/viewform?formkey=dEk0Uk5rc1phMTZncWFPUERjTTlfb3c6MQ#gid=0 The link was sent to 120 email addresses On August

07, 2012, the number of responses was counted for 50 This data was used for pilot test The results of data analysis were accepted and the survey continued with larger samples On August 18, 2012, number of responses was 96 and did not increased anymore The response rate was counted for 80 percent

In online survey, we used the relationship to send the link to email of the respondents Because the limitation in the number of friends, we could not reach the target 300 responses We decided to use traditional paper method beside online method A total of 230 paper questionnaires were distributed directly to respondents from August 15, 2012 to September 07, 2012 After eliminating missing data, 204 questionnaires were accepted presenting for 88.70 percent With 96 responses

collected via online survey and 204 responses collected via paper survey, the study had 300 samples

3.8 Methods of data analysis

This study used SPSS version 16 for data analysis After cleaning data, the study assessed the reliability of the scales, ran the exploratory factor analysis (EFA) and the multiple linear regression (MLR)

Second, cleaning data collected from paper questionnaire was also implemented

We counted column and counted row to find out missing data The result had no missing data Illogical data was the one which did not appear in the range from 1 to

5 because the study used 5 point Likert scale After checking, there was no illogical data

All 300 responses were accepted to use for the survey This is an ideal sample in number

3.8.2 Reliability assessment of measurement scales (Cronbach’s alpha)

The study used Cronbach’s alpha to test the reliability of the scales According to Schumacker & Lomax (2004), the Cronbach’s alpha reliability was the traditional way to check the internal consistency of the scales Nummally and Bernstein (1994) also proved that Cronbach’s coefficient alpha higher than 60 was acceptable

3.8.3 Validity assessment of measurement scales

The study conducted exploratory factor analysis to identify factors and to maximize the amount of variance explained

3.8.4 Multiple Linear Regression (MLR)

Multiple linear regression analysis was processed to test the hypothesis of the study The factors resulted from EFA was used for MLR With MLR, the study could find out the significant relationship between dependent and independent variables, the direction and the degree of the relationship According to the result of MLR, the conclusion was conducted

3.9 Research process

The initial measurement scale

LITERATURE REVIEW

(Develop research model and hypothesis)

PILOT STUDY USING THE INNITIAL

MEASUREMENT SCALES

Sub-phase 1: Qualitative (n=4) (to check measurement scale wording)

Sub-phase 2: Quantitative (n=50)

(to check measurement scale’s internal consistency)

MAIN STUDY USING THE FINAL

MEASUREMENT SCALE

(Online survey and paper survey: n=300)

REPORT WRITING

The final measurement scale

Cronbach’s alpha, EFA, MLR

Figure 3.1 Research process

3.10 Summary

In conclusion, this chapter presented the methodology using in the study These included 2 stages: pilot study and main study In the pilot study, the questionnaire was modified many times to send the most suitable message of the original question

in Vietnam style Then the questionnaire was used to survey about 300 respondents The data was analyzed by SPSS version 16 The study carried out Cronbach’s alpha, EFA, MLR to find out whether the customer commitment in Vietnamese banking sector was affected by bonding, trust, satisfaction and the affected degree of each component on customer commitment

CHAPTER 4 DATA ANALYSIS AND FINDINGS

This chapter presented characteristic of the sample, reliability of the measurement, exploratory factor analysis, multiple linear regression analysis SPSS 16 software was used to analyze the data

4.1 Descriptions of sample

The respondents profile was made up of 61.7 percent males and 38.3 percent females 72.7 percent of respondents was age under 30 and 26.3 percent was age between 30-45 Majority respondents had diploma or university degree (82.3 percent) or post graduate (15.3 percent) Regarding occupation, 63.7 percent was salaried-worker 58.3 percent respondents had total income under 10 million VND per month and 35.7 percent belonged to group of 10-20 million VND The questionnaire was also listed some famous commercial banks to help respondents answer quickly BIDV was counted for 15.3 percent, 27 percent Vietcombank, 15 percent ACB, about 43 percent Techcombank and others Respondents often used saving and remittance services Most of them used under 10 times for 3 month counted for 71.3 percent, the remaining was over 10 times The respondents’ profile was presented in Table 4.1

Table 4.1 Respondents’ profiles

4.2 Reliability of the measurements

The reliability of the measurements was tested by Cronbach’s coefficient alpha The factors were accepted if their Cronbach’s coefficient alpha exceeded the minimum acceptance level of 60 (Nunnally and Bernstein, 1994) According to Nunnally & Bernstein (1994), in order to test the value of the variables that loaded onto the factors the corrected item-total correlation was set equal or above 30 Table 4.2 showed the Cronbach’s alpha and the corrected item-total correlation of the samples

In detail, Bonding measured by 9 items (Bonding 1 – Bonding 9) had Cronbach’s alpha 896 Trust measured by 6 items (Trust 1 – Trust 6) had Cronbach’s alpha 833 Satisfaction measured by 5 items (Satisfaction 1 – Satisfaction 5) had Cronbach’s alpha 820 Finally, the Cronbach’s alpha of Commitment was 818 with

3 items All factors were retained without any modification because they satisfied the criteria set above The scale reliability was good because cronbach’s alpha of all factors were higher than 80 The study continued using these items for exploratory factor analysis (EFA)

Table 4.2 Reliability of the measurements and related decision

Variables

Corrected Item-Total Correlation

Cronbach's Alpha if Item Deleted

Cronbach's Alpha

4.3 Exploratory factor analysis (EFA)

Exploratory factor analysis was used to assess the validity of the scale

4.3.1 EFA implementation for independent variables

Prior to extraction of factors, the Bartlett's Test of Sphericity and the Olkin Measure of Sampling Adequacy were carried out to test the significant correlation among the variables According to Kaiser (1974), KMO must be ≥ 0.5 KMO ≥ 90 was considered excellent and KMO ≤ 50 considered unacceptable Appendix 3.1 showed the result of exploratory factor analysis The value of KMO was 941, chi-square was 2887.588, df was 190, sig was 000 which warranted the application of factor analysis

Kaiser-Meyer-Malhotra and Birks (2006) stated that only factor which had eigenvalues equal or greater than 1 was selected According to the analysis results, 3 factors was extracted at the eigenvalues 1.087 It meant that the initial analysis of 20 variables produced 3 factors The total variance explained (TVE) value was 57.261 which implied that the 3 factors accounted for 57.261% of the variance Using the cumulative percentage, factor 1 accounted for 25.685% of the variance, followed by the factor 2 with a variance of 41.773% and 3 factors had variance of 57.261% Hair

et al (1998) proved that factor loading ensured practical significance of EFA method Factor loading ≥ 30 considered at minimum level Factor loading ≥ 40 considered necessary and factor loading ≥ 50 considered having practical significance Hair et al (1998) also stated that if factor loading ≥ 30, the sample size should be at least 350 If the sample size was about 100, factor loading should

be ≥ 55 If the sample size was about 50, factor loading should be ≥ 75 This study had 300 samples; therefore, factor loading should be ≥ 50

According to the Rotated Component Matrix(a) table (Appendix 3.1), SATISFACTION 5 which represented of the question “Bank tries very hard to establish long-term relationship” was eliminated due to its factor loading 42 less