The factors affecting customer satisfation and loyalty of mobile telecommucation service in ho chi minh city

ABSTRACT The purpose of this research is to assess mobile telecommunication service quality in Ho Chi Minh City based on perceptions and experiences of customers, to find the linkage be

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

TRAN DUC TRUNG CANG

THE FACTORS AFFECTING

CUSTOMER SATISFACTION AND

LOYALTY OF MOBILE TELECOMMUNICATION SERVICE

IN HO CHI MINH CITY

MASTER OF BUSINESSADMINISTRATION THESIS

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

TRAN DUC TRUNG CANG

THE FACTORS AFFECTING

CUSTOMER SATISFACTION AND

LOYALTY OF MOBILE TELECOMMUNICATION SERVICE

IN HO CHI MINH CITY

ID: 22110005

MASTER OF BUSINESSADMINISTRATION THESIS

SUPERVISOR: DR TRAN HA MINH QUAN

Ho Chi Minh City – Year 2014

ACKNOWLEDGEMENT

First and foremost, I would like to thanks to my supervisor Dr Tran Ha Minh Quan for his guidance, encouragement and excellent advice throughout this research study Much appreciation goes to all lecturers at International School of Business, University

of Economics Ho Chi Minh City for their expertise in providing me continuous learning process that greatly enriched my knowledge

I would like to thank to all my classmates, my friends for their supports and encouragement

Last but not least, I would like to take this opportunity to express my profound gratitude to my beloved parents for being patience and never failed giving me continuous supports

ABSTRACT

The purpose of this research is to assess mobile telecommunication service quality in

Ho Chi Minh City based on perceptions and experiences of customers, to find the linkage between mobile telecommunication service quality attributes, customer satisfaction and customer loyalty in mobile telecommunication service sector

Based on the mobile telecommunication service quality model suggested by Lee, Lee and Freick (2001), six main dimensions (call quality, pricing structure, mobile devices, value-added services, convenience in procedures and customer support) were used to find out the relationship among mobile telecommunication service quality, customer satisfaction, and customer loyalty All the data were collected through questionnaires; the sample size of 350 mobile customers was drawn from different mobile carriers in Ho Chi Minh City Descriptive statistical approach, multiple linear regression, Anova were then used to describe and analyze these six dimensions and take them into the involvement with customer satisfaction and loyalty

The results show that six dimensions above are positively related to customer satisfaction and customer satisfaction is positive related to customer loyalty Customer support demonstrates the highest positive correlation with customer satisfaction while pricing structure demonstrates the lowest positive correlation with customer satisfaction

Keywords: Mobile, Service quality, Customer satisfaction, Customer loyalty, Call

quality, Pricing structure, Mobile devices, Value-added services, Convenience in procedures and Customer support

CONTENTS

Acknowledgement i

Abstract ii

Contents iii

Lists of Figures vi

Lists of Tables vii

CHAPTER 1: INTRODUCTION 1

1.1.Research background 1

1.2 Problem statement and research questions 3

1.3 Research purposes 4

1.4 Research scope 5

1.5 Thesis structure 5

1.6 Summary 6

CHAPTER 2: LITERATURE REVIEW 7

2.1 Introduction 7

2.2 Mobile telecommunication service quality 7

2.2.1 Service quality concept 7

2.2.2 Service quality attributes 12

2.2.3 Critique of SERVQUAL 15

2.3 Customer loyalty 17

2.4 Customer satisfaction 18

2.5 The relationship between customer satisfaction and customer loyalty 19

2.6 The research model and hypotheses 22

2.6.2 Hypotheses 22

2.7 Summary 24

CHAPTER 3: RESEARCH METHODOLOGY 26

3.1 Introduction 26

3.2 Research design 26

3.3 Research process 26

3.4 Measurement scale 27

3.5 Sample size and data collection procedures 29

3.6 Data analysis method 29

3.7 Summary 30

CHAPTER 4: DATA ANALYSIS AND RESULTS 31

4.1 Introduction 31

4.2 The general characteristics of the sample 31

4.3 Cronbach alpha reliability analysis 32

4.4 Exploratory factor analysis 34

4.4.1 Factor analysis for mobile telecommunication service quality attributes 34

4.4.2 Factor analysis for customer loyalty variable 37

4.5 Multiple linear regression 38

4.5.1 Customer satisfaction and mobile telecommunication service quality 38

4.5.2 Customer loyalty and customer satisfaction 40

4.6 Hypotheses assessment and discussion 42

4.7 ANOVA analysis 43

4.7.1 In the aspect of age with customer satisfaction 43

4.7.2 In the aspect of income with customer satisfaction 44

5.1 Introduction 46

5.2 Conclusions 46

5.3 Managerial implications 47

5.3.1 Customer satisfaction 48

5.3.2 Call quality 48

5.3.3 Pricing structure 48

5.3.4 Value-added services 49

5.3.5 Customer support 49

5.4 Limitations 50

5.5 Recommendations for future research 50

5.6 Summary 51

REFERENCES 53

APPENDIX 1 56

QUENTIONNAIRE (VIETNAMESE) 60

QUENTIONNAIRE (ENGLISH) 64

LISTS OF FIGURES

Figure 2.1 The conceptual model of service quality by Parasunaman

et al (1985) 10 Figure 2.2 The research model of service quality, customer satisfaction and service loyalty by Caruana (2002) 21 Figure 2.3 Research Model 22 Figure 3.1 Research Process 27

LISTS OF TABLES

Table 2.1: The definition of five services quality attributes 14

Table 3.1: The main measurement scales of the research 28

Table 4.1: Personal Profile of Respondents 31

Table 4.2: Cronbach’s Alpha results for main survey 32

Table 4.3: KMO and Bartlett’s Test (Mobile telecommunication service quality) 34

Table 4.4: Total variance explained (Mobile telecommunication service quality) 35

Table 4.5: EFA rotated component matrix (Mobile telecommunication service quality) 36

Table 4.6: Cronbach’s Alpha results for new variables) 36

Table 4.7: KMO and Bartlett’s Test (Customer loyalty) 37

Table 4.8: Total variance explained (Customer loyalty) 38

Table 4.9: Total variance explained (Customer loyalty) 38

Table 4.10: Model summary (Customer satisfaction) 39

Table 4.11: ANOVA (Customer satisfaction) 39

Table 4.12: Coefficients (Customer satisfaction) 40

Table 4.13: Model summary (Customer loyalty) 41

Table 4.14: ANOVA (Customer loyalty) 41

Table 4.15: Coefficients (Customer loyalty) 41

Table 4.16: Results of hypotheses test 42

Table 4.17: Descriptive of age on customer satisfaction 43

Table 4.19: Descriptive of income on customer satisfaction 44 Table 4.20: ANOVA (Income and customer satisfaction) 44

CHAPTER 1: INTRODUCTION 1.1 Research background

Bolstered by the rapid development of information and communication technologies (ICT) and high demand from customers, the paradigm of mobile telecommunication services is now shifting from voice-centred communication to a combination of high-speed data communication and multimedia Further, factors such as the growth of the wireless Internet and the upcoming introduction of mobile number portability (MNP) all contribute to emphasize the appearance of a transition period in the mobile telecommunication services market Moreover, a stagnating rate of diffusion, indicated by a fall in the rate of increase in subscriber numbers, suggests that the market may have now reached maturity (ETRI, 2002) This change of paradigm and the symptoms of a market in transition are driving the industry's restructuring efforts and intensifying competition between companies Vietnamese mobile carriers are coming to a full realization of the importance of a customer-oriented business strategy

as a condition for sustaining their competitive edge and maintaining a stable profit level, and, indeed, for their very survival

When the number of subscribers has reached its saturation point, creating and securing new customers is not only difficult but also costly in terms of marketing Hence, it is becoming an industry-wide belief that the best core marketing strategy for the future is to try to retain existing customers by heightening customer loyalty and customer value Earlier studies suggest that customer loyalty provides the foundation

of a company’s sustained competitive edge, and that developing and increasing customer loyalty is a crucial factor in companies’ growth and performance (Lee &

Cunningham, 2001; Reichheld, 1996) However, not enough studies have been conducted on the subject of the mobile telecommunication services industry inside or outside Vietnam; a mere handful of research papers have been published This is partly due to the relatively short history of the industry Only in the late 1990s did research on factors affecting customer loyalty and carrier switching begin In particular, there are few studies examining interactions between factors affecting customer loyalty This paper analyses the effects on customer loyalty of customer satisfaction and the structural relationship between these factors in the Vietnam mobile telecommunication services industry

Vietnam mobile telecom (Mobifone) offered Vietnam's first mobile telecommunication service, an analogue service, in April 1993 Until 2003, the market's structural monopoly resulted in high subscription and usage fees, and high prices for mobile devices This kept subscriber numbers and sales low, and the growth rate was equally insubstantial The entry of S-Phone Telecom in 2003 put an end to the monopoly of Mobifone and Vinaphone After the introduction of digital service, the entry of Viettel in 2004 triggered a full-scale activation of the market Competition between carriers quickly brought down subscription fees, and led to struggles to secure new subscribers by such means as subsidizing the purchase of mobile devices All these developments contributed to the rapid growth of the mobile telecommunication services market As reported by the Ministry of Information and Communications, Vietnam mobile charges in the past 10 years has decreased by more than 3 times The heated competition in the mobile market has made Vietnam from countries with high rates of goods in the world has become in every country have the

cheapest rates in the world As of June 2013, the total number of telephone subscribers that were active subscribers was 148.5 million, in which the mobile subscribers was 93.3% Recently, the ITU has ranked Vietnam ranks 8th in the world of mobile subscriber density

This high rate of growth came to an end with the new millennium, when the market, nearing its maturity phase, started to slow down (ETRI, 2002) The diffusion rate of mobile telecommunication services having surpassed 100% of the total population, factors such as the discontinuing of subsidies for mobile device purchases after June

2000 reduced the increase of subscriptions to a marginal level, and some carriers even experienced a decrease in subscriber numbers This is evident in support of the assertion that the mobile telecommunication services sector had reached its saturation point in terms of customer numbers, in other words, attained market maturity

1.2 Problem statement and research questions

In Vietnam context, the empirical studies of the relationship among service quality, customer satisfaction and customer loyalty for mobile telecommunication system are limited, the existing studies on mobile telecommunication also do not account for the changing roles of mobile telecommunication setting system in Vietnam’s economic structure Having a good way in supplying high quality services is a key to achieve customer loyalty which is the primary goal of business organizations, due to the advantages of customer retention (Ehigie, 2006) Today, the increasing awareness among mobile telecommunication customers of their rights, changing demands and highly competition requires constant progress in service quality from the telecommunication carrier for their customers to stay loyal The present research

intends to test whether the telecommunication customers are happy with the services provided to them, which will eventually lead customer loyalty or not

This study attempts to examine the effect of service dimensions on perceived service quality, customer satisfaction, and customer loyalty based on the estimated research questions which presented as follows:

1 What are the key service quality dimensions of mobile telecommunication carriers that determine satisfaction of customers in the mobile telecommunication sector in Ho Chi Minh City?

By addressing this question, managers who are working in the mobile telecommunication sector can identify their strength and weakness to drive their investment in a right direction

2 What are the specific predictors that affect the customer loyalty in the mobile telecommunication sector in Ho Chi Minh City?

By addressing this question, managers who are working in the mobile telecommunication sector can identify their strength and weakness to drive their investment in a right direction to retain customer retention

3 How important each mobile telecommunication service quality dimension placing on general customer satisfaction, customer loyalty in the mobile telecommunication sector in Ho Chi Minh City?

Resolving this question will assist mobile telecommunication carriers to prioritize their investment for a marketing communication program

1.3 Research purposes

Based on the research questions, this study was implemented to identify the mobile telecommunication service quality drivers of customer loyalty to achieve the following objectives:

(1) Explore the impact of mobile telecommunication service quality dimensions such as transaction convenience, physical facilities, perceived price, employee service, reliability, access, effectiveness and assurance on customer satisfaction

(2) Explore the impact of customer satisfaction on customer loyalty

(3) Qualify the importance level of each independent factor (mobile telecommunication service quality) in the relationship with customer satisfaction and linkage between customer satisfaction and customer loyalty

(4) Find a suitable instrument for testing the mobile telecommunication service quality in Vietnam mobile telecommunication context

1.4 Research scope

The research was conducted in Ho Chi Minh City, a commercial and financial trading center of Vietnam Ho Chi Minh City has been chosen for this research due to its centricity for Economic and Industrial activities and being a silicon valley for many other activities (such as culture, education, sport) in which requires active communication very much

The study focuses on famous mobile telecommunications in Ho Chi Minh City such

as Mobifone, Vinaphone, Vietteltelecom, Gmobile, EVNtelecom and Vietnamobile

1.5 Thesis structure

The content of this thesis is as follow:

Chapter 1 – Introduction: briefly introduces about research background, problem definition, research questions, research objectives, scope of research, significance of the research, theoretical framework, and study structure

Chapter 2 – Literature Review: provides an overview of the previous literature on service quality in order to understand the key service quality drivers of customer satisfaction and customer loyalty; The chapter also reviewed various preceding studies about service quality, customer satisfaction and customer loyalty before releasing the theoretical model and research hypotheses

Chapter 3 – Research Methodology: explains the methodology used to assess the research model and the hypotheses Sampling method, sample size, target respondents and data analysis method are also covered in this chapter

Chapter 4 – Data Analysis and Results: represents the key findings of the sample characteristics This chapter also comprises statistical procedures that were undertaken

to test hypotheses and reveals the applicable model

Chapter 5 – Conclusion and Implications: includes conclusions, managerial implications, research limitations and future research

1.6 Summary

This chapter provides the background of the study, statement of the problem, research questions, purposes of the study, and previous theoretical framework It also represents the scope and the structure of this study

CHAPTER 2: LITERATURE REVIEW 2.1 Introduction

This chapter presents the theoretical foundation, based on the previous literature appropriate to the current research, by first reviewing the service quality concepts, service quality attributes, followed by a critique of SERVQUAL, specified service quality attributes of retail banking, and introduction of MTSQ [Mobile Telecommunication Service Quality] model Next, a review of literature related to customer loyalty, and customer satisfaction is also presented This is followed by a review of researches conducted on relationship between service quality, customer satisfaction, and customer loyalty The development of a research proposal and hypotheses that result for the critical review of previous studies is the last section of this chapter

2.2 Mobile telecommunication service quality

2.2.1 Service quality concept

A service is a complicated phenomenon It has many meanings, ranging from personal service to service as a product During four decades, there are variety definitions of services Gronross (1990) proposed the definition of service as follows:

“A service is an activity or series of activities of more or less intangible nature that normally, but not necessarily, take place in interactions between the customer and service employees and/or physical resources or goods and/or systems of the services provider, which are provided as solutions to customer problems.”

In line with Gronross, many writers described that for most services, there are four basic characteristics that differentiate them from manufacturing as follow:

1) Services are more or less intangible

2) Services are activities or series of activities than things

3) Services are at least to some extent produced and consumed simultaneously

4) The consumer participates in the production process at least to some extent

For a full understanding of service quality, these characteristics of services such as intangibility, heterogeneity, and customer participation in the production process must

be acknowledged

Before discussing service quality concept, it is important to discuss service encounters, because within the service encounters, the interactive and interpersonal participation of customer and service providers becomes critical when judging service quality

Shostack (1985) defined the service encounter as “a period of time during which a customer directly interact with a service” This definition contains all aspects of the service company with which the customer may interact, including it personnel, its physical facilities, and other visible elements It means that the definition does not only limit the encounter to the interpersonal interactions between the customer and the firm, but the service encounters can also without any human interaction element There are three types of service encounters: remote encounters, phone encounters, and face to face encounters (Shostack, 1985) Remote encounters occur when a customer interacts with the service firm without any direct human contact, such as when customer interacts with a bank through the ATMs or internet system Phone encounters occur when the interaction between the end customer and the service firm occurs over the telephone, such as when customer interacts with a bank through the

phone banking system Face to face encounters are ones that occurs between a customer and an employee in direct contact, such as when bank customer interacts with the teller or customer service in a branch

The interactive and interpersonal participation of customer and service providers become critical when judging service quality Other elements that are also critical for judging service quality include: physical surroundings and tangible cues, participant’s involvement and process of service delivery

Parasuraman et al (1985) stated that service quality is more difficult for the customer

to evaluate than goods quality When customers purchase goods, they engage many tangible cues to judge quality such as style, hardness, color, label, and package When they purchase services, fewer tangible cues exist, such as service provider’s physical facilities, equipment and personnel In the absence of tangible cues customers must depend on other cues to judge quality, such as price, service portfolio

Gronross (1984) defined service quality as the fulfillment of customers’ satisfaction

He explained that service quality as it is perceived by customers consists of technical quality, functional quality, and corporate image Technical quality involves what the customer is actually receiving from the service Functional quality involves the manner in which the service is delivered Technical quality focuses on “what”, while functional quality focuses on “how” and involves consideration of issues such as the behavior of staff contacting customers, and the speed of services Corporate image is

a reflection of service organization Furthermore, Gronross (1990) stated that corporate image can impact the perception of quality in various ways If the provider

is good in minds of the customers, minor mistakes will probably be forgiven

Otherwise, if the provider is not good in the minds of the customers, the impact of any mistake will probably not be forgiven

Parasuraman et al (1985) undertook an exploratory qualitative study to investigate the concept of service quality The focus group interviews with consumers and in- depth interviews with executives Based on their research, they proposed the service quality model as displayed in Figure 2.1

The gaps revealed by the executive interviews are shown in the lower portion of Figure 2.1 (the marketer side), and the gaps revealed by the customer interviews are shown in the upper portion of Figure 2.1 (the customer side) According to the proposed model, there are five gaps including: (1) customers’ expectations and managements’ perceptions gap, (2) managements’ perceptions of customer expectations and service quality specifications gap, (3) service quality specifications and service delivery gap, (4) service delivery and external communications gap, (5) customer’s expected service and customer’s perceived service performance gap The above gap model in Figure 2.1 shows that four gaps on marketer’s side affect the level of service quality as perceived by customers Parasuraman et al (1985) showed that customers used criteria in evaluating service quality These criteria are labeled as

“service quality determinants” including: reliability, responsiveness, competence, communication, access, courtesy, credibility, security, understanding or knowing the customers, and tangibles

After they established a conceptual definition of service quality and the ten dimensions from their exploratory research, Parasuraman et al (1988) embarked on a quantitative research phase to develop an instrument for measuring consumers’ perception of service quality, later the instrument became known as SERVQUAL They defined service quality as the difference between a customers’s expected service with the perception of service received The position of customer’s perception of service quality depends on the nature of the discrepancy between the expected service and perceived service including: (i) expectations of service quality are not met: service quality is unacceptable or less than satisfactory, (ii) expectations of service quality are

met: service quality is acceptable or satisfactory, (iii) Expectations of service quality are exceeded: performance exceeds expectations

2.2.2 Service quality attributes

Olson (1977) has distinguished service quality into intrinsic and extrinsic cues Intrinsic cues are attributes that are part of the physical composition of the product, for example flavor, color, freshness, size, fit, and style They cannot be changed without changing the nature of the product and are consumed along with the product Extrinsic cues are attributes relating to the product, but actually they are not product They can serve as general indicators of quality across all types of product Examples of extrinsic attributes include price, brand name, and level of advertising

Previous studies (Zeithaml, 1988) suggested that intrinsic attributes can be more important to customers than extrinsic attributes in the following situation:

(1) During consumption of the product;

(2) In pre-purchase situations when customers are actively search for intrinsic attributes;

(3) When the intrinsic attributes have high predictive value to judge quality

In the contrasting way, extrinsic attributes can be more important than intrinsic attributes when we consider:

(1) Customer is in initial purchase situation, in which intrinsic attributes are not available;

(2) Customer has insufficient time or interest to evaluate the intrinsic attributes;

(3) Quality is difficult to evaluate

Whereas previous study that examined attributes used by customers to infer quality of tangible goods have been studied extensively, very little research has examined cues within service environment (Hartline and Jones, 1996) Because services are intangible, customers are more likely to use intrinsic cues to infer service quality prior

to the actual purchase and consumption of the service As a result, attributes such as price, brand name, advertising, word-of-mouth, and certain tangible service elements are important to customers as they attempt to judge the quality of a service prior to consumption (Parasuraman et al., 1985; Hartline and Jones, 1996)

Parasuraman et al (1988) found consistent attributes of perceived service quality across the four service industries with five dimension including reliability, responsiveness, assurance, empathy, and tangibles

In a period during the service delivery process, the customer is directly interacting with the personnel, physical facilities and other elements such as communication materials Because services are intangible, consumers use tangible clues as proxies in evaluating the quality of services If customer perceives that the appearance of physical facilities, equipment, personnel, and communication materials are good, then his or her judgment will be positively affected Parasuraman et al (1988) refer to this

as “tangibles”

The attribute termed “reliability” is associated to the ability of the service provider to perform the promised services dependably and accurately Reliability is closely related to the concept of technical quality of service The other attributes such as tangibles, responsiveness, assurance, and empathy are related to the concept of functional quality (Gronross, 1984)

The “responsiveness” attribute of service quality refers to whether the service provider has the willingness to help customers and provide prompt service (Parasuraman et al., 1988) When the service provider provides prompt service to its customers, the customer perceives that he or she is receiving good quality

Customers frequently find difficult to evaluate the quality of the service if they have not experienced yet the particular service It is believed that the level of customer’s trust play important role in assessing the quality of the service provided by the service provider The more the customer trusts the service provider, the better the customer’s perception on the service quality The attribute termed “assurance” is associated with the ability of the service provider to convey trust and confidence to the customers (Parasuraman et al., 1988)

Finally, if customers perceive that they are not receiving concerned, personal, or individual attention from the service provider, then their quality judgment will be negatively affected Parasuraman et al (1988) refer to this as “empathy” A brief description of each attribute is presented in Table 2.1:

Table 2.1: The definition of five services quality attributes

of items

Tangibles Physical facilities, equipment, personnel,

and appearance of personnel 4 Reliability Ability to perform the promised service

dependably and accurately 4 Responsiveness Willingness to help customers and provide

prompt service 4 Assurance Knowledge and courtesy of employees and

their ability to convey trust and confidence 5 Empathy Caring, individualized attention the firm

provides its customers 5

Source: cited from Parasuraman et al., 1988

2.2.3 Critique of SERVQUAL

The most popular model 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 Parasuraman et

al (1988) later reduced these ten dimensions into five by using a factor analysis Based on the five dimensions, a 22-item survey instrument for measuring service quality has been developed These five dimensions are: tangibles, reliability, responsiveness, assurance, and empathy

There has been criticism from some other researchers to SERVQUAL instrument Firstly, many researches and papers have used SERVQUAL scale to verify and to adjust in conformity with many different market situations and conditions Secondly, SERVQUAL approach covers every specific matter involving into service quality rather completely

Carman (1990) suggested that the five dimensions of SERVQUAL are not consistent when subjected to cross sectional analysis He found that some of the items did not load on the same component when compared across different type of service providers, but the validity of the 22 items that make up the SERVQUAL scale appears

to be well-supported both by the procedures used to develop the items and the subsequent use as reported in the literature Further, Carman noted that there is an operational problem with the difference of expectations and perceptions concept (gap concept) He suggested an alternative format combining both expectations and perceptions to a single item The items with this format would be presented with

anchors “greatly exceeds of my expectations” and “greatly falls short of my expectations” This format would be simpler for respondents and prevent potential problems with the gap scores

The five dimensions of SERVQUAL are not sufficiently generic Carman (1990) found that it is often necessary to incorporate additional items to dimensions because they are particularly important for some service categories A further critique addressed to SERVQUAL concerns its emphasis on service or product dimension and its neglect of the other dimensions of the marketing mix In other words, indeed, academics and practitioners in both services and physical goods marketing have focused on the first P (service and/or product) of the marketing mix to improve quality, but neglected other dimensions of the marketing mix, especially price Therefore, it means that this is not sufficient to cover all the facets of quality

As suggested by Carman (1990), Babakus and Boller (1992) maintained that the dimensionality of service quality might depend on the type of services under study In addition, they found that a number of methodological problems likely exist with SERVQUAL, due to the wording of the items and defining a construct on the basic of the gap scores The agreed with Carman’s suggestion that an alternative format combining both expectations and perceptions to a single item may prove a viable approach

Cronin and Taylor (1992) criticized SERVQUAL for the conceptualization and measurement of service quality They argued that theoretically, if service quality was

to be considered “similar in many ways to attitude”, as proposed by Parasuraman et al (1985, 1988), its operationalization could be better represented by an attitude-based

conceptualization Therefore, they suggested discarding the expectations portion of SERVQUAL in favor of just the performance measures included in a scale that they termed SERVPERF

Parasuraman et al (1991, 1993) affirm that SERVQUAL is a full measurement scale toward service quality and suitable to apply to all kinds of services However, each kind of specific service has its own traits and characteristics Some above- mentioned researchers also suggested that the dimensionality of service quality might depend on the type of services under study It is necessary to have more researches in order to explore model service quality in each service field and in each specific market

2.3 Customer loyalty

Approaches to the study of customer loyalty fall into three broad categories: the behavioural approach, the attitudinal approach and the integrated approach (Oh, 1995) The integrated approach takes account of both behavioural and attitudinal variables, in order to create its own concept of customer loyalty We adopt the integrated theory of customer loyalty as our methodological framework The concept

of customer loyalty is understood as a combination of customers’ favourable attitude and the behaviour of repurchase

Earlier studies of factors affecting customer loyalty usually set the focus on customer satisfaction and the switching barrier (e.g., Dick & Basu, 1994; Gerpott, Rams, & Schindler, 2001; Lee & Cunningham, 2001) Customers experiencing a high level of satisfaction are likely to remain with their existing providers and maintain their subscription However, according to some research, customer satisfaction, while positively influencing customer loyalty, is not always a sufficient condition, and, in

some cases, fails to produce the expected effect Hence, these researchers suggest that

it is necessary to analyse other potentially influential factors It is in this context that the concept of the switching barrier was proposed (Jones, Mothersbaugh, & Betty, 2002)

Further, it has been demonstrated that the switching barrier plays the role of an adjustment variable in the interrelationship between customer satisfaction and customer loyalty In other words, when the level of customer satisfaction is identical, the level of customer loyalty can vary depending on the magnitude of the switching barrier (e.g., Colgate & Lang, 2001; Jones et al., 2002; Lee & Cunningham, 2001) The significance of customer loyalty is that it closely relates to the company’s continued survival, and to strong future growth Hence, for a company to maintain a stable profit level when the subscription level has reached the saturation point, the market is mature, and competition is fierce, a defensive strategy which strives to retain existing customers is more important than an aggressive one, which expands the size

of the overall market by inducing potential customers (Fornell, 1992; Ahmad & Buttle, 2002)

2.4 Customer satisfaction

Customer satisfaction generally means customer reaction to the state of fulfilment, and customer judgment of the fulfilled state (Oliver, 1997) In this paper, we borrow this definition of customer satisfaction There are many benefits for a company from a high customer satisfaction level It heightens customer loyalty and prevents customer churn, lowers customers’ price sensitivity, reduces the costs of failed marketing and of new customer creation, reduces operating costs due to customer number increases,

improves the effectiveness of advertising, and enhances business reputation (Fornell, 1992)

The main factor determining customer satisfaction is the customers’ own perceptions

of service quality (Zeithamal & Bitner, 1996) In this study, we shall define service quality as the customers’ satisfaction or dissatisfaction formed by their experience of purchase and use of the service (Parasuraman, Zeithamal, & Berry, 1988)

In earlier studies on mobile telecommunication services, service quality has been measured by call quality, pricing structure, mobile devices, value-added services, convenience in procedures, and customer support (e.g., Kim, 2000; Gerpott et al.,

2001; Lee, Lee, & Freick, 2001)

2.5 The relationship between customer satisfaction and customer loyalty

As a general rule, customer satisfaction and customer loyalty are very closely related Customer satisfaction functions as an antecedent of customer loyalty It prevents customer churn and consolidates retention, thereby constituting an important cause of customer loyalty (Fornell, 1992; Reichheld, 1996) Further, while affected by market structure, customer type and customers’ individual ways of solving problems, the connection between customer satisfaction and customer loyalty is not always a linear relation, although it constitutes a positive relation- ship (Fornell, 1992; Soderlund, 1998) And when customers switch the service provider, they tend to perceive the burden of risks which becomes the switching barrier that influence customer loyalty When criticized the conceptualization and measurement of service quality, Cronin and Taylor (1992) developed a model to examine: (i) the significance of the relationships between service quality and consumer satisfaction, and (ii) the impact of service

quality and customer satisfaction on purchase intentions Regarding to the relationship between service quality, satisfaction and purchase intention, they suggested that: (a) service quality is an antecedent of consumer satisfaction, (b) consumer satisfaction has

a significant effect on purchase intentions, and (c) service quality has less effect on purchase intentions than does consumer satisfaction

Cronin et al (2000) conducted a study to assess whether their model yields a significantly better fit to the data and accounts for a greater share of the variance in behavioral intentions than the competing models Besides, they also examined the indirect influence of consumers’ service quality and value on behavioral intentions They included sacrifice, service quality, value, customer satisfaction, and behavioral intention constructs in their study The findings of their study can be presented as follows:

(1) Their research model fits well and outperforms the competing models;

(2) An unexpected finding concerned the antecedents of service value The result indicated that sacrifice has no significant effect on service value, whereas service quality has a positive effect on service value;

(3) Both service quality and service value were significant predictors for consumer satisfaction;

(4) There are direct effects of service quality on behavioral intentions, service value

on behavioral intentions, and consumer satisfaction on behavioral intentions;

(5) There are indirect effect of service quality on behavioral intentions through service value and consumer satisfaction, and indirect effect of service value on behavioral intentions through consumer satisfaction

Based on their study, they suggested considering the similar composite model and including additional decision-making variables such as the physical or tangible quality

of service product and expectation

Caruana (2002) proposed a meditational model that links the service quality to the service loyalty via service satisfaction He mentioned that service quality, customer satisfaction and service loyalty are related to each other The proposed model is as follows:

Figure 2.2: The research model of service quality, customer satisfaction and service

loyalty by Caruana (2002)

He applied this model to the customers of retail banking in Malta The results proof the hypothesized relationships in the above research model Service quality affects service loyalty via customer satisfaction This research contributes to the body of knowledge by providing support for the contention that customer satisfaction performs

a mediating role in the link between service quality and service loyalty Based on his study, he suggested that there are other elements such as value and company image that could be contributing to customer satisfaction, and service loyalty or behavioral intentions

Customer Satisfaction

Service Quality

Service Loyalty

In Vietnam context, Nguyen (2006) conducted a research to explore the relationships between the quality service of the supermarkets, and the customer satisfaction and loyalty and indicated that the quality of the service is an important factor that makes customers satisfied and loyal to a supermarket Basically, there are still very few researches of building models of service quality and measuring it in each kind of services and no study has yet investigated the service quality, customer satisfaction and customer loyalty interrelationship, especially in mobile telecommunication sector

2.6 The research model and hypotheses

2.6.1 The research model

A research model is developed to find out the relationships between service quality, customer satisfaction moand customer loyalty in mobile telecommunication sector in

Ho Chi Minh City The research model is as follow:

Figure 2.3: Research Model

2.6.2 Hypotheses

Figure 2.3 demonstrates that the hypothesized relationships between the constructs are mobile telecommunication service quality, customer satisfaction and customer loyalty Call quality provide invaluable insight into how you are performing and what

Customer Loyalty

consumers are really experiencing It is a potential marketing opportunity, and an opportunity to strengthen a customer’s loyalty to their service

The main factor determining customer satisfaction is the customers’ own perceptions

of service quality (Zeithamal & Bitner, 1996) In this study, we shall define service quality as the customers’ satisfaction or dissatisfaction formed by their experience of purchase and use of the service (Parasuraman, Zeithamal, & Berry, 1988) In earlier studies on mobile telecommunication services, service quality has been measured by call quality, pricing structure, mobile devices, value-added services, convenience in procedures, and customer support (e.g., Kim, 2000; Gerpott et al., 2001; Lee, Lee, & Freick, 2001) Thus, the hypothesized relationships are as follows:

H1.1 Call quality will have positive effect on customer satisfaction in the mobile telecommunication sector in Ho Chi Minh City

According to Lee, Lee and Freick (2001), pricing structure may reflect the customer perceptual tendency to consider the senior service as an important element to guarantee good quality and not simply as a tangible element Therefore, the following hypothesis is proposed:

H1.2 Pricing structure will have positive effect on customer satisfaction in the mobile telecommunication sector in Ho Chi Minh City

Lee, Lee and Freick (2001) purified the third dimension which essentially relates to mobile device Thus, the following hypothesis is proposed:

H1.3 Mobile device will have positive effect on customer satisfaction in the mobile telecommunication sector in Ho Chi Minh City

In the fourth dimension, value-added services refer to the variety, to a convenience service environment Therefore, the following hypothesis is proposed:

H1.4 Value-added services will have positive effect on customer satisfaction in the mobile telecommunication sector in Ho Chi Minh City

The fifth dimension, convenience in procedure focuses on the ease of subscribing and changing service Thus, the following hypothesis is proposed:

H1.5 Convenience in procedures will have positive effect on customer satisfaction

in the mobile telecommunication sector in Ho Chi Minh City

The final dimension of MTSQ deals with customer support Therefore, the following hypothesis is proposed:

H1.6 Customer support will have positive effect on customer satisfaction in the mobile telecommunication sector in Ho Chi Minh City

Customer satisfaction is measured by the gap between expectations and perceptions of the service quality (Parasuraman et al., 1988) and it is positively related to customer loyalty (Ehigie, 2006) Caruana (2002) found that service quality is positively related

to loyalty mediated by customer satisfaction Pont and McQuilken (2005) stated that satisfied customers are not always loyal customers Thus, the following hypothesis is proposed:

H2 Customer satisfaction will have positive effect on customer loyalty in the mobile telecommunication sector in Ho Chi Minh City

2.7 Summary

Based on this literature review, it can be concluded the need to examine and evaluate the effect of mobile telecommunication service attributes performance on customer satisfaction, switching barriers and customer loyalty

CHAPTER 3: RESEARCH METHODOLOGY 3.1 Introduction

This chapter presents the research methodology used to develop answers to the

research questions, including the following aspects: (a) research design, (b) research process, (c) measurement scales, (d) sample size and data collection procedures, and (e) data analysis method

3.2 Research design

To create a design for research, one should consider whether a model and measures are appropriate given the subject matter of the research The focus of this research is the relationship between mobile telecommunication service quality, switching barrier and customer loyalty with customer satisfaction serving as a mediating variable The purpose of this research model is to show the testable effects among the study constructs comprised of mobile telecommunication service quality attributes, customer satisfaction, and customer loyalty Since this research will utilize primary data that will be collected from mobile telecommunication customers in Ho Chi Minh City, a questionnaire survey design will be used as the data collecting method

3.3 Research process

The research process was executed by two phases: the first phase of the pilot research and the second phase of the main research It was initiated with literature review that built the operational model and research hypotheses The pilot research used the qualitative method by conducting deeply interview with 10 target respondents in order

to obtain the corrected items in Vietnam customer context, to check the content and

meaning of words were used in the initial measurement scales After the pilot research, the main research basing on quantitative method was conducted

Figure 3.1: Research Process

3.4 Measurement scale

Variables of this research are operationalized as follows:

1) Service quality attributes are comprised of 6 components: (1) Call Quality, (2) Pricing Structure, (3) Mobile Device, (4) Value-added Services, (5)

The initial measurement scalesLiterature Review

Research Model and Hypotheses

Pilot Research (n = 10)

Main Research (n = 350)

Reliability Measurement

Testing Hypotheses

Discussion and conclusions

The main measurement scales

Cronbach Alpha EFA Regression Anova

multiple scale items adapted from Bahia and Nantel (2000) The items indicative of each component are presented in Table 3.1 used 7-point Likert scales, ranging from “1-strongly disagree” to “7-strongly agree”

2) The construct of customer satisfaction is measured using a single-item scale Customer mobile telecommunication customer satisfaction is based on responses to a 7-point Likert scales, ranging from “very unsatisfied” to “very satisfied” as suggested by Cronin and Taylor (1992)

3) Customer loyalty is measured based on the conceptual ideas of Caruana (2002)

A 7-point Likert of scale described at either end by “extremely likely” and “not

at all likely” was used for the indicators of loyalty

Table 3.1: The main measurement scales of the research