Determinants of customer satisfaction in the personal loan service

HOANG THI THANH THANH DETERMINANTS OF CUSTOMER SATISFACTION IN THE PERSONAL LOAN SERVICE: A STUDY OF PUBLIC AND PRIVATE BANKING SECTORS IN HO CHI MINH CITY MASTER’S THESIS In Busine

HOANG THI THANH THANH

DETERMINANTS OF CUSTOMER SATISFACTION

IN THE PERSONAL LOAN SERVICE:

A STUDY OF PUBLIC AND PRIVATE BANKING SECTORS

IN HO CHI MINH CITY

MASTER’S THESIS

In Business Administration Ology Code: 60.34.01.02

Supervisor Associate Professor NGUYEN DINH THO

Ho Chi Minh City, 2012

ACKNOWLEGEMENT

This research project would not have been possible without the support

of many people Firstly I would like to express my heartfelt gratitude and deepest appreciation to my supervisor, Associate Professor Nguyen Dinh Tho for his precious guidance, share experience, ceaseless encouragement, and valuable suggestions throughout the course of my research

My thanks would also go to all of my classmates, my colleagues, especially my “old pals”, Ms Nguyen Thi Phuong Thao and Ms Le Thi Nhu Huyen for all of their friendship and encouragement

I also wish to thank my friends in Agribank, ACBank, Sacombank and Eximbank for their great support My thanks would also go to the respondents, without them, my thesis could not have been done

Finally, I would like to express my deepest gratitude and honor to my dear parents for not only the love they devote to me but also for the time I took from them which should have been my devotion to them in their aged time

ABSTRACT

This study investigates the main factors of the personal loan service affecting customer satisfaction between public and private banks in Ho Chi Minh city Data analysis over a few years reveals that bank‟s performance may be evaluated in relation to a set of satisfaction dimensions to indicate the strong and the weak points

of a business According to the results, customer satisfaction is positively related to the service An interesting finding is that five components of service quality (tangibility, reliability, responsiveness, assurance, and empathy) have a positive and significant impact on customer satisfaction, which consists of a previous study of Parasuraman (1991) On the other hand, brand image is an important determinant in relation with customer satisfaction that is measured by Akviran (1994) The different weights of customer expectation, perceived quality, and perceived value have implications for bank managers to use them as a reference source for customer satisfaction strategy The research also provides a modified model of customer satisfaction to determine the critical personal loan service dimensions in public and private banks in Ho Chi Minh city

CONTENTS

ACKNOWLEGEMENT 1

ABSTRACT 2

CONTENTS 3

LIST OF TABLES 6

LIST OF FIGURES 7

CHAPTER 1: INTRODUCTION 8

1.1 BACKGROUND OF THE STUDY 8

1.1.1 Vietnamese banking sector 8

1.1.2 The personal loan service 9

1.1.3 Customer satisfaction in Vietnam 11

1.2 RATIONALE OF THE RESEARCH 11

1.3 STATEMENT OF THE PROBLEM 12

1.4 RESEARCH OBJECTIVE 13

1.5 SCOPE OF THE RESEARCH 13

1.6 RESEARCH METHODOLOGY 14

1.6.1 Secondary data 14

1.6.2 Primary data 14

1.7 THE STRUCTURE OF THE RESEARCH 14

CHAPTER 2: LITERATURE REVIEW 16

2.1 INTRODUCTION 16

2.2 CUSTOMER SATISFACTION 16

2.3 DETERMINANTS OF CUSTOMER SATISFACTION 17

2.4 CUSTOMER SATISFACTION WITH THE PERSONAL LOAN SERVICE 18

2.5 HYPOTHESES AND MODEL 18

2.5.1 Brand image 18

2.5.2 Customer expectation 19

2.5.3 Perceived quality 20

2.5.4 Perceived value 21

2.6 CONCLUSION 23

CHAPTER 3: RESEARCH DESIGN 24

3.1 INTRODUCTION 24

3.2 RESEARCH DESIGN 24

3.3 MEASUREMENT SCALE 27

3.3.1 Introduction 27

3.3.2 Operation of measures 27

3.3.2.1 Scale to measure brand image 27

3.3.2.2 Scale to measure customer expectation 28

3.3.2.3 Scale to measure perceived quality 29

3.3.2.4 Scale to measure perceived value 30

3.4 PRILIMINARY RESEARCH 31

3.5 MAIN RESEARCH 32

3.5.1 Sample design 32

3.5.1.1 Brand selection 32

3.5.1.2 Sampling 33

3.5.1.3 Sample size 34

3.5.2 Survey method 35

3.6 CONCLUSION 35

CHAPTER 4: RESEARCH RESULTS 37

4.1 INTRODUCTION 37

4.2 SAMPLE CHARACTERISTICS 37

4.2.1 Final sample 37

4.2.2 Characteristics of sample 38

4.3 DATA ANALYSIS 42

4.3.1 Reliability evaluation through Cronbach‟s Alpha 43

4.3.2 Evaluation the measurement scale by using Exploratory Factor Analysis

(EFA) 46

4.3.2.1 Some rules in EFA test 46

4.3.2.2 EFA for determinants of customer satisfaction 46

4.3.2.3 EFA for customer satisfaction 48

4.3.3 Modeling Testing 48

4.3.3.1 Correlation coefficient analysis 48

4.3.3.2 Regression analysis 49

4.3.3.2.1 Multiple regression assumptions 49

4.3.3.2.2 Regression model 50

4.4 SUMMARY 56

CHAPTER 5: CONCLUSIONS AND IMPLICATIONS 57

5.1 INTRODUCTION 57

5.2 CONCLUSIONS FROM THE RESEARCH QUESTIONS 57

5.3 DICUSSIONS OF THE RESEARCH FINDINGS 59

5.4 CONTRIBUTIONS 61

5.4.1 Theoretical contribution 61

5.4.2 Methodological contribution 63

5.5 MANAGERIAL IMPLICATIONS OF THE RESEARCH 64

5.5.1 Managerial implications for public banks 64

5.5.2 Managerial implications for private banks 65

5.6 LIMITATIONS OF THE RESEARCH AND FUTURE RESEARCH 66

5.7 CONCLUSION 67

APPENDIX 1: GROUP DISCUSSION 74

APPENDIX 2: QUESTIONNAIRE 79

APPENDIX 3: CRONBACH‟S ALPHA ANALYSIS RESULT 83

APPENDIX 4: FACTOR ANALYSIS RESULT 87

APPENDIX 5: MUPTIPLE REGRESSION ASSUMPTIONS 90

LIST OF TABLES

Table 3.1 Measures of brand image 28

Table 3.2 Measures of customer expectation 28

Table 3.3 Measures of perceived quality 29

Table 3.4 Measures of perceived value 30

Table 3.5 Measures of customer satisfaction 30

Table 4.1 Sample characteristics of public banks 39

Table 4.2 Sample characteristics of private banks 41

Table 4.3 Reliability test of the personal loan service and customer satisfaction in public and private banks 43

Table 4.4 Final reliability test of the personal loan service and customer satisfaction in public and private banks 45

Table 4.5 EFA analysis result of determinants in public and private banks 47

Table 4.6 EFA analysis result of customer satisfaction in public and private banks 48

Table 4.7 Pearson correlation matrix in public and private banks 49

Table 4.8 Model Summary b in public and private banks 51

Table 4.9 Anova b in public and private banks 51

Table 4.10 Coefficients a in public and private banks 51

Table 4.11 Model Summary b in public banks 52

Table 4.12 Model Summary b in private banks 53

Table 4.13 Anova b in public banks 53

Table 4.14 Anova b in private banks 53

Table 4.15 Coefficients a in public banks 54

Table 4.16 Coefficients a in private banks 54

LIST OF FIGURES

Figure 2.1 Research model 22 Figure 3.1 Research process 26

CHAPTER 1: INTRODUCTION

1.1 BACKGROUND OF THE STUDY

1.1.1 Vietnamese banking sector

The banking sector in Vietnam has a significant growth rate during past two decades along with the economic development This banking system consists of five commercial state-owned banks, thirty seven commercial joint-stock banks, six joint-venture banks, thirteen 100% foreign banks, and fifty three representative branches

of foreign banks (Wikipedia, 2012) The development primarily concentrates on commercial joint-stock and foreign banks showing the attractiveness and potential development of Vietnam baking industry to inland investors as well as international financial institutions

The market changes create more challenges and difficulties for banks The public banks face adoption of technology and issues like credit proposals and personal matters Processing bad debits, finding partners to increase financial ability, dealing with difficult issues from the tight currency policy and the limited credit scale are carried out by the private banks Changing the attitude of personnel and developing strategies are justified for the strong and weak banks All banks must design a new plan to survive in the innovative period (Bui, 2011)

With the entry of new generation tech-savvy private banks and the expansion

of operations of foreign banks, the banking sector has become too competitive Well-computerized foreign banks are beginning to compete seriously with the nationalized banks They aim at a profitable and wealthy part of the market and, in contrast to the nationalized banks; they do not recognize any social responsibilities

to small account holders Almost of the banks are still controlled by Public Sector Banks (PSBs) PSBs are still dominating the commercial banking system To deal

with the emerging situations, bankers have to shed a lot of old ideas, change in practices, develop customer loyalty programs, and adopt a distinct approach to meet the challenges ahead In a fiercely competitive market, non-price factors like customer service become more important Hence, it is desirable for banks to develop a customer-centric approach for future survival and growth Efficient and speedy customer service is implemented to attract the existing customers in continuing and inducing new customers to try the services offered by a bank Vietnamese banks have already taken lot of initiatives in this regard Further, it has been realized that Vietnamese banks have miles to go to capture the recent trends and to compare with the Western counterparts As a result, many banks have introduced new customer friendly measures like 24-hour banking, 7-day and anywhere banking, internet banking, extended business hours, ATM network, etc.

1.1.2 The personal loan service

With years, banks are adding services to their customers The Vietnamese banking industry is passing through a phase of customers market The customers have more choices among the banks A competition has been established within the banks‟ operating in Vietnam

The development of business activities, manufacturing and trading, more and more individuals borrow a large of money from banks to manage their business It creates a large chance for banks extending personal loan service with different loan methods such as partial loan, loan under credit limit, installment loan, etc Besides, the Pubic Sector Banks have signed the determinant to decrease the loan interest rate to 17 - 18%/year for individuals (Nguyen, 2012) The enlarged loan objects, the loosened loan conditions, and the improved liquidity make the commercial banks give promotions In February, 2012 Oceanbank has the loan projects to buy houses with the interest rate down to 19%/year It lends up maximum 80% of house value within up to 120 months ABBank is implementing the program “Easy loans –

dream house ownership” and supporting the individual customers having income from salary, wages to loan funds in order to repair or buy a home and a residential land Customer can borrow up to 90% of the total capital needs and not exceed 70%

of collateral value At that time, it also loans to buy cars with the program

“Whistling on the desired car” with a maximum loan period being 60 months and a loan money being 75% of car value VPBank also has repayment home loan programs up to 10 years ACBank loans to buy a house or a land up to 10 - 15 years Loans for building and repairing a house are 7 years, the principal and interest money is amortized monthly with 18.5% - 19%/year of the loan interest rate, and the loan level depends on the repayment capacity of customers

Although the policy of many banks in 2012 is focusing on promoting lending products, particularly consumer credit form with preferential terms than before, loan limits continue to increase, the caution in spending money of customers makes the bank's plans have not achieved as expected To explain the problem, there are the following reasons

Firstly, banks apply the personal loan interest rate to buy a house in February, 2012 is 19% that is much lower than in 2011 but this time, a number of customers borrowing money are not much

Secondly, the consumer loan has potential risks So, the bank must apply the constraint conditions and consider the interest rates that can offset the costs and limit a part of the risk This is a reason why some customers have real loan needs but they do not meet the conditions which banks offer

Finally, the other customer groups are eligible to borrow though they consider the direction of interest rates expected to fall in coming months Even some customers purchasing cars are hesitant to wait for the policy from the management According to them, if forthcoming, the new fees as urban circulation

fees, road maintenance costs estimated at 20-50 million VND / vehicle / year is adopted, the plan to buy their cars must reconsider (Le and Huyen, 2012)

1.1.3 Customer satisfaction in Vietnam

Customer satisfaction for the personal loan service is at medium level to up and is lower than four of the five-point Likert scale Customers are less satisfied or dissatisfied with some elements such as the personal loan interest rate, network, empathy and responsiveness Specifically, the personal loan interest rate is considered as a big hindrance when customers borrow amount of money from Vietnamese banks In some cases, customers must sell mortgage properties to pay the loan interest and capital because the interest rate is higher with every passing day (Nguyen, 2011)

1.2 RATIONALE OF THE RESEARCH

In the current context, the personal consumption for purposes such as motor purchase, house reparation, expensive material purchase, dream vacation, education, wedding, business enlargement, or simply cash use for a down payment

on a new car or anything is increasing quickly However, customers still have a dilly-dallying attitude in choosing between public and private banks Public banks attract customers by good reputation and safety while customers like the low interest rate and quick process in private banks when they borrow amount of money

For the personal loan service, the interest rate in customer satisfaction measurement is appreciated high because it supposes effective measures in improving service quality, fee, and process to bring the highest satisfaction for customers and the highest profit for banks Poor customer satisfaction places banks

at a competitive disadvantage If customers perceive service as unsatisfactory, they

may be quick to take their businesses else where Thus, it is clear that the high customer satisfaction offers a way of achieving success among competitive services, particularly in banks, where establishing service may be the only way of differentiating oneself Such differentiation can yield a higher proportion of consumers‟ choices and, hence, mean the difference between financial success and failure Satisfying customers is the priority target in order to create a competitive advantage and win in the financial market

With the sharp competition, public and private banks need to pay attention to customers‟ evaluation to survive and expand business Customer satisfaction research is necessary work and must be implemented regularly and continuously to meet needs timely, serve customers better, and make them satisfied when using personal loan service

1.3 STATEMENT OF THE PROBLEM

Extensive work has been done on customer satisfaction in the banking industry Most of these studies, however, concentrate on general quality service Only a few studies compare two or more banking sectors but none of them find out the differences in the perception of customers about the personal loan service For instance, Singh and Arora (2011) examine the banking services and customer satisfaction by comparing public, private, and foreign banks Mirshra, Sahoo, Mishra, & Patra (2010) compare service quality assessment in public and private sectors It is also evident that none of these studies segregate the banking sectors into the public and private sectors They only look at the general views of banks Through a handful of studies that focus on one banking sector like Mihelis (2001), measure customer satisfaction in the private bank sector

Customer satisfaction is, however, influenced by many factors Lee and Kim identify four key dimensions in the bank – attitude, problem solving ability, service environment, and auto banking service Parasuraman et al (1988) posit that customer satisfaction dimensions include reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding customers, and tangibles In Vietnam, Hoang (2008) claims that customers‟ satisfaction is determined by trust, feedback, skill, approach, information, and service quality Nguyen (2011) accentuates that customer satisfaction of personal loan service is influenced by tangibles, trust of service supply process, promising customers, and assurance According to Ho (2012), bank service accepts determinants such as empathy, trust, price, tangibles, supply, and assurance This topic is implemented to investigate the influential factors of the personal loan service to customer satisfaction as well as customer satisfaction comparison between public and private banks in Ho Chi Minh city

1.4 RESEARCH OBJECTIVE

The main objective of this study is to examine the impacts of key factors on customer satisfaction in the personal loan service provided by public and private banking sectors Specificially, it examines the effects of brand image, customer expectation, perceived quality, and perceived value on customer satisfaction

1.5 SCOPE OF THE RESEARCH

This research focuses on customers using the personal loan service of domestic banks in Ho Chi Minh city

Quantiative research: This step is researching by delivering questionnaire to individual customers of eight public and private banks in Ho Chi Minh city directly

by face-to-face interview Statistical software SPSS version 16.0 is used to analyse and compare the level of customer satisfaction in using personal loan service among banks

1.7 THE STRUCTURE OF THE RESEARCH

The structure of the study consists of five parts:

Chapter 1: Introduction

This chapter presents research background, research problem, research objective, and the structure of the research

Chapter 2: Literature review

In this chapter, it contains the literature review of customer satisfaction,

hypotheses and empirical model

Chapter 3: Research design

Basing on research objective and research scope, it concerns details of the research design, measurement scale, preliminary research, main research as well as the questionnaire and the survey development

Chapter 4: Research results

Chapter 4 describes sampling and processing data, collected data analysis, and the findings of the research

Chapter 5: Conclusion and implications

From the results of the research, research hypotheses, this chapter discusses conclusions, contributions, implications, and limitations

CHAPTER 2: LITERATURE REVIEW

2.1 INTRODUCTION

This chapter reviews at the literature on customer satisfaction and its determinants Specifically, it reviews the literature on customer satisfaction, customer satisfaction measurement, and the empirical studies in the banking sector

2.2 CUSTOMER SATISFACTION

According to Zeithaml, Berry, and Parasuraman (1993) say that customer satisfaction is a function of the customer assessment of service quality, product quality, and price Satisfaction is a function of product performance related to customer expectations (Oliva, Oliver, and Bearden, 1995) Customer satisfaction is the customers‟ perception that a supplier has met or exceeded by their expectations (Hill, 1996) Jones and Sesser (1995) argue that customer satisfaction identifies four factors The factors are: (1) essential element of the product or service that customers expected all rivals to deliver; (2) basic support services such as customer assistance; (3) a recovery process to make up for best experiences; and (4)

“customization” which are factors that meet customers‟ personal preferences, values, or needs

Gerson (1996) proposes that a customer is satisfied whenever his or her needs, real or perceptions are met or exceeded He put it succinctly as “Customer satisfaction is simply whatever the customer says it is” (p.24) Kolter (2000) claims customer satisfaction is a response to a discrepancy between prior expectation and perceived performance after using a good or service Hansemark and Anbinsson (2004) state that “satisfaction is an overall customer attitude towards a service

provider, or an emotional reaction to the different between what customers anticipate and what they receive, regarding the fulfillment of some need, goal, or desire”

2.3 DETERMINANTS OF CUSTOMER SATISFACTION

The research of Ennew and Binks (1996) adopt tailor-made constructs of service quality and satisfaction that apply to the retail banking industry Akviran (1994) identifies four key dimensions in banking – staff conduct, credibility, communication, and access to teller services Four dimensions are also identified (physical features and facilities, reliability, conduct staff characteristics, and responsiveness) in a survey conducted in 31 major British organizations in the fields

of banking, building societies, and retail

Banking-specific research by Laroshe, Rosenblatt, and Manning (1986) reveals speed service, convenient location, staff competence, and bank friendliness

as important determinants of customer satisfaction In a similar vein, LeBlanc, and Nguyen (1988) propose a five-dimensional framework of customer satisfaction in the Canada credit sector, including factors such as corporate image, internal organization, physical environment, staff service, and customer personal interaction

In addition, Rust and Zahorik (1993) identify factors related to convenience, warmth, and easy checking as determinants of retail banking customer satisfaction

The contention of the Nordic School (Lehtinen and Lehtinen, 1994) about

“physical”, “interactive”, and “corporate” quality seems to be flexible enough to allow for the accommodation of different perceptions Corporate quality is considered to be the global measure of quality offered by the bank and the way that

is perceived by the customer At this point, this is important to distinguish between

controllable and uncontrollable components of service quality, bearing in mind the indication of expected quality prior to purchase

Based on research results of the model and reality of the banking sector in Vietnam, the specific factors to measure the variables are considered in the model

as follows: brand image, expectations, perceived quality, perceived value, price, complaint, and loyalty Each factor is composed of more specific items for a service Customer satisfaction is defined as a comprehensive evaluation of the use

or after sales operation of the service (Le, 2012)

2.4 CUSTOMER SATISFACTION WITH THE PERSONAL LOAN SERVICE

According to Axis Bank Limited (2012), customer satisfaction in personal loan service only reaches 4.42 (below average score out of 10.00) Features such as adherence to regulations, authenticity / transparency / ethics, customer friendliness / loyalty and promotion, ease of operation / user-friendliness, economy of maintenance, professionalism / qualification of staff, reliability are the same (approximately 4.00) Most of customers pay attention to the interest rate before taking personal loan There are also arrangement fees and penalties of repayment that they have to consider

2.5 HYPOTHESES AND MODEL

2.5.1 Brand image

Brand image is considered as reputation, prestige, and trust (Anderson and Weitz, 1989); it expresses the relationship between brand name and customer‟s

associations for brand name‟s attributes The operational construct of company image includes items measuring customer perceptions of the firm‟s stability, social contributions to society, and concern with customers, reliability of what the firm says and does, and innovativeness Many practical researches affirm that the brand image is an important factor that directly influences customer satisfaction (Kim & Kim 2004; LeBlanc and Nguyen 1988; and Akviran 1994) The base model also shows, as expected, a direct effect of Brand Image on satisfaction In other words, the more positive the brand image increases, the greater the satisfaction with the firm‟s service is

In the banking sector, the brand image plays an important role in determining where the borrower or depositor is, thus the banks need to locate and build its brand image on the basis of important attributes to set a good sense for most competitors, help customers easily identify the brand Customers must feel strong brand image in the personal loan service so that they are satisfied for that bank The correlation between brand image and customer satisfaction is to issue the first hypothesis as follows:

H1: Brand image has a positive impact on customer satisfaction in the personal loan service in public and private banks in Ho Chi Minh city

2.5.2 Customer expectation

Customer expectation reflects anticipated performance The satisfaction literature suggests consumers may use different “types” of expectations when forming opinions about a product‟s anticipated performance Miller (1977) identifies four types of expectations: ideal, expected, minimum tolerable expectations, and desire Day (1977) distinguishes among expectations about the nature of the product or service, expectations about the costs, and efforts in obtaining benefits, and expectations of social benefits or costs

Customer expectation has long been viewed as playing an important role in customer satisfaction (Johnson and Plott 1989; Oliver and Winer 1987; Meyer 1981; and Cadotte et al 1987) The preceding analyzers suggest that customer expectation about the goods and services also has a positive impact on customer satisfaction At the aggregate level of analysis here, expectations capture the accumulated knowledge of concerning a given supplier‟s quality In addition, expectations contain information based on not only actual consumption experience but also accumulated information about quality form outside sources such as advertising, word of mouth, and general media Like past experiences, positive information about past quality affects customer satisfaction positively In banking services, customer satisfaction with the bank depends on anticipated quality of future service as well as the ability of the service to provide for the future needs This forecast component of expectations also argues for a positive impact of expectations on satisfaction In the same service, when customers‟ expectations are high, they have a tendency to use the personal loan service in that bank The following hypothesis is issued:

H2: Customer expectation is has a positive impact on customer satisfaction

in the personal loan service in public and private banks in Ho Chi Minh city

2.5.3 Perceived quality

Perceived quality can be defined as the customer‟s judgment about the product overall excellence or superiority Perceived quality is (1) difference from objective and actual quality, (2) a higher-level abstraction rather than a specific attribute of a product, (3) a global assessment that resembles attitude in some cases, and (4) a judgment usually making within a customer‟s evoked set Most researchers suggest that the high perceived quality results in the high customer satisfaction (Parasuramen, Zeithaml, and Berry 1985, 1988) Teas (1993) mentions the perceived quality is the accumulation of consumer satisfaction

Most researchers measure perceived quality and propose that the higher perceived quality creates more satisfaction to consumers Cronin and Taylor (1992) assert that perceived quality is the antecedent of consumer satisfaction when examining four service industries of banking, pest control, dry-cleaning, and fast food to investigate the relation of perceived quality to consumer satisfaction The same conclusion also appears in other studies in this area (for example: Anderson and Sullivan 1993; Anderson, Fornell, and Lehmann,1994; Anthanassopoulos 2000; Cronin, Brady, and Hult, 2000; Fornell 1992; Oliver and Desarbo 1988) In the public and private banks, customers have high perceived quality so that they want to use the personal loan service to survey features, performance, and conformance This study then proposes the impact of perceived quality on consumer satisfaction:

H3: Perceived quality has a positive impact on customer satisfaction in the personal loan service in public and private banks in Ho Chi Minh city

2.5.4 Perceived value

Customer satisfaction, in turn, is hypothesized to be influenced by perceived value Perceived value, as it has been defined herein, is the ratio of benefits received from providers relative to the costs sacrificed by customers (Kotler 2000) For banks, it is the total payment amount (interest loans and other borrowing costs (including formal and informal costs)), the cost of time, effort and other risk costs compared to service values (tangible benefits), the value of psychology, faith and human values In essence, it is a variable that reflects the net utility derived from a provider Customer satisfaction, meanwhile, is defined as an overall positive or negative feeling about the net value of services received from a supplier Woodruff (1997) argues that perceived value represents customer cognition of the nature of relational exchanges with their suppliers, and satisfaction reflects customers‟ overall feeling derived from the perceived value On the basis of the behavioral model (Fishbein & Ajzen, 1975), affect is significantly influenced by cognition There is

also empirical evidence that customer-perceived value has a positive effect on customer satisfaction with a supplier (Anderson & Mittal, 2000) Higher levels of perceived value increase customer satisfaction in public and private banks, as well

as produce needs to use the personal loan service Thus, it is proposed that:

H4: Perceived value has a positive impact on customer satisfaction in the personal loan service in public and private banks in Ho Chi Minh city

Based on Le (2012), the customer satisfaction model for the personal loan service in public and private banks in Ho Chi Minh city is presented as follows:

Figure 2.1 Research model

The theoretical studies show that customer satisfaction depends on brand image, customer expectation, perceived quality, and perceived value. Brand image item is an important item proposed in the research model In the banking sector, brand image decides where to borrow money, which requires banks need to locate and build their brand image based on important attributes to establish a good feeling for the competitors, to help customers easily identify the brand name

H1(+) Brand image

Customer expectation

Perceived quality

Perceived value

H2(+) H3(+) H4(+)

Customer satisfaction

2.6 CONCLUSION

This chapter provides theoretical framework for the research However, with the reason regarding the perceived quality aspect as discussed above, a research model without the perceived product quality component is suggested below because the personal loan service is an intangible product The researcher also assumes that there are some adjustments of the customer satisfaction measurement in order to make the research model more suitable for the banking industry in Vietnam Chapter 3 discusses the research design of this matter in more details

CHAPTER 3: RESEARCH DESIGN

3.1 INTRODUCTION

In previous chapters, the definition of customer satisfaction has been discussed and measurement methods have been suggested This chapter particularly presents the research methodology, data, and the research design and research process

3.2 RESEARCH DESIGN

The research design provides the answers to theories and hypotheses, which leads to the next research steps Shank (2002) defines qualitative research as “a form of systematic empirical inquiry into meaning” By systematic research, he means “planned, ordered and public”, following rules agreed upon by members of the qualitative research community By empirical research, he means that this type

of inquiry is grounded in the world of experience Researchers try to understand how others make sense of their experience Denzin and Lincoln (2000) claim that

qualitative research involves an interpretive and naturalistic approach, “this means that qualitative researchers study things in their natural settings, attempting to make sense of, or to interpret, phenomena in terms of the meanings people bring to them.”

According to Cohen (1980), quantitative research is defined as social research that employs empirical methods and empirical statements He states that an empirical statement is defined as a descriptive statement about what “is” the case in the “real world” rather than what “ought” to be the case Typically, empirical statements are expressed in numerical terms Another factor in quantitative research

is that empirical evaluations are applied Empirical evaluations are defined as a form that seeks to determine the degree to which a specific program or policy

empirically fulfills or does not fulfill a particular standard or norm Creswell (1994) has given a very concise definition of quantitative research as a type of research that

is “explaining phenomena by collecting numerical data that are analyzed using mathematically based methods (in particular statistics).”

In terms of research techniques, the preliminary qualitative method and the main quantitative method are chosen Preliminary qualitative method is used to explore, adjust, and supplement the observed variables such as brand image, expectation, perceived quality, perceived value, and price This qualitative method

is conducted through technique of group discussions Quantitative method is conducted through direct interview forms with detailed questionnaires to assess the scale and test theoretical models which have been put Quantitative method results are continued to perform quantitative studies in order to confirm again the accuracy

of test results The research process is displayed as follows:

Figure 3.1 Research process

Step 3: Quantitative Research

Step 1: Measurement Scale

Step 2: Qualitative Research

Literature

review The first draft of questionnaire

Group discussion

Item modifications

The final draft of questionnaire

Interview

Cronbach’s Alpha

Exploratory Factor Analysis

Multiple Linear Regression

3.3 MEASUREMENT SCALE

3.3.1 Introduction

The first step in the research design process involves measurement scale This is achieved through a literature search which is used to specify how to measure the constructs and to design the initial questionnaire The questionnaire is initially designed in English and Vietnamese It is the first draft of the forty-three structure questionnaire

3.3.2.1 Scale to measure brand image

To measure the first dimension, brand image eight items are employed All

of these items concerning brand image are measured on a five-point Likert scale with 1 for “strongly disagree” and 5 for “strongly agree” Here, we presume that brand image includes bank image and the personal loan service and influences customer satisfaction compared with other competitors

Table 3.1 Measures of brand image

Bank [X] specializes in the personal loan service BI1

Bank [X]‟s personal loan service is very diverse BI2

Bank [X]‟s leadership board is good at management BI3

Bank [X] has high achievements in the personal loan service BI4

Bank [X] has transaction offices in all provinces BI6

Bank [X]‟s image is very impressed in your mind BI7

3.3.2.2 Scale to measure customer expectation

Customer expectation, the second component of customer satisfaction, displays the degree of quality that customers expect to get, the parameters measuring customer expectation associate with the parameters of the brand image and perceived quality of the personal loan service In this study, for the measurement of the expectation component, four scale items are employed as follows:

Table 3.2 Measures of customer expectation

Bank [X]‟s personal loan service has a high satisfaction CE1

Bank [X] has adopted policies to encourage personal loans CE2

Bank [X] is the first choice when there is demand for personal

Bank [X]‟s personal loan service is the long-term use CE4

3.3.2.3 Scale to measure perceived quality

This study adapts the scale developed by Spiros et al (2003) to measure perceived quality in commercial banks Some complement and elimination have been done after discussion with the bank customers in group discussion The perceived quality has the fifteen following items

Table 3.3 Measures of perceived quality

Bank [X]‟s staff treat you as a precious customer PQ1

Bank [X] ‟s physical facilities are securable for personal loans PQ2

Bank [X] provides personal loan services at that time it promises

When personal loan rates change, bank [X] fully informs

You feel safe in your personal loan transactions with bank [X] PQ7

There are several payment methods to choose in bank [X] PQ8

Bank [X]‟s employees are dressed elegantly and brightly PQ9

Bank [X]‟s employees capture fast and response well to

Bank [X]‟s employees deal with issues skillfully PQ11

When you have problems, bank [X] is sympathetic and

Bank [X]‟s employees are always willing to help you PQ13

Bank [X]‟s transaction locations are very comfortable and

Bank [X]‟s working environment is very professional PQ15

3.3.2.4 Scale to measure perceived value

Perceived value is the level of review or comments on the personal loan service compared to fees to pay that customers use the service For the measurement

of perceived value, five scale items are made as follows:

Table 3.4 Measures of perceived value

Bank [X]‟s interest on personal loans shows corresponding

Bank [X]‟s charges of personal loan service express

Bank [X]‟s personal loan time period is suitable values for loans PV3

Bank [X]‟s personal loan rate is commensurate with inflation

Bank [X]‟s traveling expenses to meet personal loan service is

3.3.2.5 Scale to measure customer satisfaction

Overall items of customer satisfaction involved in public and private banks

of Ho Chi Minh City in general are suggested as follows:

Table 3.5 Measures of customer satisfaction

Overall, you are satisfied with bank [X]‟s the personal loan

Overall, you find bank [X] better than other banks GE2

You are likely to recommend bank [X] to others GE3

The whole scale consists of 35 variables to capture the five dimensions that comprise customer satisfaction

3.4 PRILIMINARY RESEARCH

The preliminary research is the second step with the purpose being to eliminate possible coincidences, weaknesses and flaws in the first draft questionnaire in order to create the final questionnaire for the main research It is conducted by a group discussion of eight officers in public and private banks in Ho Chi Minh City Contents of the interview are recorded, integrated and are the basis for pretest of constructing measures to provide a preliminary evaluation and refinement of the measurement scales

The group discussion is used as a process for gaining information for questionnaire development Group discussion interviews are also used for testing wording (unable to understand, difficult to answer, etc.), or interpreting questionnaire items A focus group is particularly useful for learning about particular phenomena and the specialized language

Meeting Room of Business Administration Faculty, University of Economics, Ho Chi Minh City was chosen to organize the group discussion Banking officers attended the group discussion were considered carefully Four males and four females with the age of 30-45 years old were decided as participants

3.5 MAIN RESEARCH

The main survey is conducted with public and private banks in Ho Chi Minh city, Vietnam Firstly, the measures of each constructs are refined by Cronbach‟s alpha coefficients The purpose of this test is to provide a preliminary evaluation and refinement of the measurement scales Cronbach‟s alpha analysis is first used to remove items with low item-total correlations (<0.3) Scales with a Cronbach alpha coefficient equal to or greater than 0.6 are acceptable in some cases ((Nunnally & Bernstein 1994, as cited in Nguyen, 2012) Items those passed the test then are analyzed using an exploratory factor analysis (EFA) method to determine the actual dimensions of each construct In this step, items with factor loadings less than 0.4 are deleted Finally, the retained measures are run with multiple linear regressions (MLR) and the results are used to test the research model and hypotheses

3.5.1 Sample design

3.5.1.1 Brand selection

The public and private banks in Ho Chi Minh city were taken as brands of the study The one public bank, Vietnam Bank for Agricultural & Rural Development (Agribank), and the four private banks consisting of Asia Commercial Bank (ACB), Vietnam Technological and Commercial Joint Stock Bank (Techcombank), Vietnam Export Import Commercial Joint Stock Bank (Eximbank), and Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank) were selected as the sample for the study The selected sample seemed representative large enough to generalize the total population

Generally, customers of commercial banks were depositors, borrowers, and others who get banking services However, the present study covered personal loan type of customers

3.5.1.2 Sampling

Firstly, the population of the study needs to be chosen Population is defined

as „the complete set of units of analysis that are under investigation, while element

is the unit from which the necessary data is collected (Davis 2000, as cited in Tran, 2006) This study focuses on customers to investigate the differences between public and private banks in comparison of the dimensions of customer satisfaction,

as well as the relationships between customer satisfaction and the other dimensions

of the personal loan service Therefore, the population of the study was customers, who were in Ho Chi Minh city, the major public and private banks of Vietnam Eligible participants in the study used the personal loan service for at least one year

The second step in the sampling process is to choose the sampling frame, which is the list of elements from which a sample may be drawn In this study, the sampling frame was based on the list of customers in public and private banks in the age from 18 years old and above

The next step is to identify the sampling method to be used to select the sample for the study According to the methodology literature, there are two main sampling methods, probability and non-probability sampling (Nguyen & Nguyen, 2012) In this study, the non-probability method is chosen due to the elements in the population do not have a known or predetermined chance of being selected as subjects This means that the findings from the study of the sample cannot be confidently generalized to the population When time or other factors become critical, non-probability sampling is generally used There are four main types of non-probability sampling designs: convenience sampling, judge sampling, development sampling, and norm sampling Convenience sampling is the least reliable of all sampling designs in terms of generalisability, but sometimes it may be the only viable alternative when quick and timely information is needed, or for exploratory research purposes (Canava et al., 2001) The interviews were

implemented to customers in public and private banks based on convenience sampling

3.5.1.3 Sample size

According to Canava et al (2001), a reliable and valid sample should enable

us to generalize the findings from the sample to the population under investigation

In other words, the sample statistics should be good estimates and reflect the population parameters as closely as possible within a narrow margin of error The sample size is determined by the level of precision and confidence desired in estimating the population parameters, as well as the variability in the population itself (Canava et al 2001) Nguyen and Nguyen (2008) suggest that the issue of

„how large‟ a sample size should be, has not been entirely resolved, but does depend

on the statistical methods used (e.g Maximum likelihood, generalized least squares and asymptotically distribution free) However, some researchers suggest that the minimum sample size should be from 100 to 150 responses if using the Maximum Likelihood (ML) method (Hair et al 1988, as cited in Nguyen & Nguyen, 2008) As Hoelter (1983) demonstrate, the minimum sample size must be 200 responses Some others suggest the minimum sample size should be at least five observations per estimates parameter Based on the number of parameters to be estimated, the sample size targeted in this study was from 320 upwards (equal eight times of observed variables) To obtain the desired sample size, a total of 380 self-administered questionnaires were distributed to the respondents

The sampling rule based on the average number of customers to the banks from Tuesday to Thursday Each banking sector selected 190 customers Specifically, Agribank – Sai Gon Branch had 60 customers, Agribank – Ly Thuong Kiet Branch had 45 customers, Agribank – Phu Nhuan Branch and Agribank – Nam Sai Gon had 40 customers; ACBank had 55 customers, Eximbank had 40 customers, HD Bank had 45 customers, and Sacombank had 50 customers As a result, 349 questionnaires were returned; of which 322 were useable, making

effective response rate 84.74% Among 322 questionnaires contained 162 customers of public banks and 160 customers of private banks The data was imported and cleaned through SPSS software version 16.0

3.5.2 Survey method

The literature on research methodology has identified a number of survey methods such as face-to-face interview, telephone interview, and mail survey Among these three methods, the face-to-face survey yields higher response rates and allows researchers to use physical stimuli to facilitate the interview (Zikmund, 1997) It also allows interviewers to clarify the meanings of ambiguous or complex questions

This study used face-to-face interviews in order to conduct the research Two steps were used to conduct the research Firstly, six interviewers were recruited and trained Then, they were assigned to the banks to interview

The interviews were conducted in June 2012 over five week period Prior to beginning the questions, participants were advised that their participations were voluntary and they were free to discontinue their participation any time during the completion of the survey In an attempt to encourage candidness and honesty in their responses, participants were instructed that their responses remained confidential and were reported in aggregate form only

This chapter also describes the statistical methods employed for data analysis, including validity, dimensionality and reliability assessments The next chapter reports research results

CHAPTER 4: RESEARCH RESULTS

4.1 INTRODUCTION

The previous chapter has been discussed the research methodology including the operation of the five constructs of the theoretical model developed in Chapter 2, and the research design of both the preliminary study and the main study This chapter presents the results of the main study The following section describes the characteristics of the sample and presents descriptive statistics of the main survey Next, the study of 162 customers of public banks and 160 customers of private banks are analyzed using exploratory factor analysis to assess the reliability and validity of the construct measurement scale The findings from the survey led to the finalization of the instrument for the main study The fourth section presents the assessment of the personal loan service construct using factor analysis The fifth section reports the assessment of the hypotheses using linear regression analysis The data analysis software SPSS 16.0 is used The final section supplies a summary

4.2 SAMPLE CHARACTERISTICS

4.2.1 Final sample

The main survey was conducted by face-to-face interview through 6 trained interviewers The list of banks was chosen carefully in Ho Chi Minh City as explained in section 3.5.1.3 in chapter 3 The missing rate was 15.26 percent, with

the 31 interviewees who refused to return the answers and 27 interviewees who

missed some questions As a result, 322 questionnaires were useable The analyses reported in this chapter conducted on the final sample of 322 surveys

4.2.2 Characteristics of sample

The characteristic backgrounds of the sample respondents in eight parameters were presented in Table 4.1 and Table 4.2 to understand the customer profiles i.e., age, education, gender, occupation, income, used period, and types of personal loan services Tables described the customer profile and the type of banks they had chosen for their personal loan services Regarding to the bank name, Agribank – Sai Gon Branch and ACB were the public and private banks having the high number of customers using the personal loan service at 29.6 per cent and 27.5 per cent respectively In the field of gender, the public and private banks were dominated highly by men, approximately 74.1 per cent against 25.9 per cent and 70.6 per cent and 29.4 per cent due to males adventuring challenges and risks There was the dependence between gender variation and choice of a bank

It was evident from the tables that 22.8 per cent of the young respondents with public sector banks, while, 28.8 per cent with private banks All the respondents in different age groups had shown similar behavior, except 40-50 years age group; where the dominance of public sector banks was visible This was due to the fact that they had an account with public sector banks before the entry of private banks into their location in mid-1990s It was indicated age-groups of the respondents and their choices of the bank are dependent on each other Public and private banks were equally represented in the subject related to used period of personal loan service with using 1-2 years was dominant (58.7% of public banks and 66.9% of private banks) It was not significant in choosing banks for used period Among types of personal loan services, public banks outnumbered private banks in home equity – overseas education, home equity – other purposes, car loan because the personal loan interest in public banks was lower than private banks There was a reversion in personal installment loan and other loan It was significant

to indicate the independence between types of personal loan services and choice of

a bank

For different income groups, public sector banks were more preferred due to the influence of levels of income for choice of a bank It is observed from the same table that less educated customers (6.8%) had a choice for public banks and the post-graduates more inclined to private banks (24.3%) This trend was observed may be due to the large presence of public banks with wide ranges of personal loan services more suitable for lower income groups, while private banks were offering value-added services for special group of customers It was indicated that the influence of levels of income for choice of a bank Taking into account the occupation of the customers, staff of foreign company dominated the sample Professional career had shown more preference for public banks (11.7%); while almost trade, small business and owner of private enterprise had chosen to transact with private banks (10.6% and 6.2% respectively) It was implied that customers with occupational variations had a preference for a bank

Table 4.1 Sample characteristics of public banks

Frequency Percent Valid Percent Cumulative Percent