Determinants of customer loyalty in retail banking in ho chi minh city

Keywords: Service quality, Price, switching cost, customer loyalty, retail banking... I -SBV SMEs WTO SERVQUAL EFA VCB ACB AGRI VIB HSBC CITI INDO VID SPSS TAG REL RES ASS EMP Explorator

DETERMINANTS OF CUSTOMER LOYALTY

IN RETAIL BANKING IN HO CHI MINH CITY

BY PHAM THI THU HA MDE CLASS 15

"A thesis was submitted in partial fulfillment of the requirements for the Master of Development Economics degree (MDE) of Vietnam- Netherlands

program for M.A in Development Economics"

July, 2011

i ACKNOWLEGEMENTS

I am greatly thankful to my supervisor, Dr Cao Hao Thi, whose valuable advice and guidance

at every stage of my thesis to help me to develop an understanding of this research

I also give thanks to all professors, tutors, MDE staff for giving me academic knowledge and advice and my classmates for encouragement to complete the thesis

I would like to thank Service Managers at VCB and friends who works at banks who supported me in building the questionnaires and collecting data for this study

Finally, I would like to give special thanks to my parents, aunt and sister and friends who give

me great and warm support me to follow this MDE program

In spite of my endeavour, this study may have many shortcomings and limitations I am looking forward to receive suggestions and opinions of teachers and colleagues

Keywords: Service quality, Price, switching cost, customer loyalty, retail banking

TABLE OF CONTENTS

ACKNOWLEDGEMENTS i

ABSTRACT ii

TABLE OF CONTENTS iii

LIST OF FIGURES vi

LIST OF TABLES vi

ABBREVIATIONS vii

CHAPTER I: INTRODUCTION p 1

1.1 Research Statement p 1 1.2 Research Objectives p 2 1.3 Research Questions p 2

• 1.4 Research Scope p 2

1.5 Research Structure p 2

CHAPTER II: LITERATURE REVIEW p 4

2.1 Customer Loyalty p 4 2.2 Factors affect Customer Loyalty p 5 2.2.1 Service Quality p 5 2.2.2 Price ~ p 7 2.2.3 Switching cost p 8 2.3 Conceptual framework and hypotheses p 9 2.4 Adjustment ofMeasurement Scales p.lO 2.4.1 Service Quality p.l 0 2.4.2 Price p.12 2.4.3 Switching cost p.12

2.4.4 Customer Loyalty p.13

CHAPTER III: RESEARCH METHODOLOGY p.15

3.1 Research Process p.15 3.2 Questionnaire Design p.16 3.3 Data Collection p.18 3.4 Data Analysis Technique p.18 3.4.1 Reliability p.19 3.4.2 Validity p.19 3.4 3 Multiple Regression p.19

CHAPTER IV: DATA ANALYSIS AND FINGDINGS p.20

4.1 Descriptive Statistics p.21 4.1.1 Sample size p.21 4.1.2 Demographic Characteristics p.22 4.2 Measurement Scale Refinement p.23 4.2.1 Reliability Assessment p.23 4.2.2 Exploratory Factor Analysis p.25 4.3 Hypotheses testing p.28 4.3 1 Correlation Coefficient Analysis p.29 4.3 2 Multiple Regression Results p.29 4.3 3 Interpreting Customer Loyalty Equation and testing Hypotheses p.31 4.3.4 Means Score Comparison between VCB with other banks and Industry

Average p.31 4.3.4.1 Service Quality p.32 4.3 4.2 Price p.33 4.3.4.3 Switching cost p.33

iv

4.3.4.4 Customer Loyalty p.33

CHAPTER V: CONCLUSION AND RECOMMENDATIONS p.35

5.1 Summary offindings p.35 5.1.1 Determinants of Customer Loyalty p.35 5.1.2 Comparison between Vietcombank and Industry Average p.35 5.2 Recommendations to Vietcombank p.36

5 2.1 Improving the Service Quality p.36 5.2.2 Improving Price p.38 5.2.3 Improving Switching cost , p.39 5.3 Limitations p.39 5.4 Conclusion p.39

References p.41

APPENDICES

Appendix 1 Questionnaire- English version p.46 Appendix 2 Questionnaire- Vietnamese version p.49 Appendix 3: Reliability of all variables (23 items) p.52 Appendix 4: Results of exploratory factor analysis

(EFA) p.54 Appendix 5: Correlation of coefficients p.59

LIST OF TABLES

Table 2.1: Original Scales of Service Quality and research scales p.1 0 Table 2.2: Original Scales ofPrice and Research Scales p.12 Table 2.3: Original Scales of switching cost and Research scales p.13 Table 2.4: Customer Loyalty : p.13 Table 3.1: Variable Codes p.17 Table 4.1: Sample size p.20 Table 4.2: Demographic Characteristics p.22 Table 4.3: Reliability Test Results p.23 Table 4.4: Results of Exploratory Factor Analysis p.26 Table 4.5: Result of Customer Loyalty p.27 Table 4.6: Correlation Matrix p.29 Table 4.7: Model Summary p.29 Table 4.8: Coefficients p.29 Table 4.9: Model Summary p.30 Table 4.10: Coefficients p.30 Table 4.11: Means Score Comparison between VCB and other banks

and Industry Average p.31

vi

I

-SBV SMEs WTO SERVQUAL EFA

VCB ACB AGRI VIB HSBC CITI INDO VID SPSS TAG REL RES ASS EMP

Exploratory Factor Analysis Vietcombank

Asia Commercial Bank Agribank

VIBBank Hongkong and Sanghai Bank Corporation Citibank

Indovina Bank Vid Public Bank Statistical Package for Social Science Tangibles

Reliability Responsiveness Assurance Empathy Price Service Quality Switching Cost Customer Loyalty

CHAPTER I: INTRODUCTION

l.lRESEARCH STATEMENT

From 1990 until now, number of banks increases highly especially private-owned banks and foreign-owned bank branches, shows that attractive and potential development of Vietnam's banking industry for domestic and foreign investors According to the data of State Bank of Vietnam (SBV) until October 2009, Vietnam's banking system has 3 state-owned banks, 40 private-owned banks, 5 joint-venture banks and 41 branches of foreign-owned bank Vietnam with population of 85 million people and increasing income is a potential market for commercial banks Moreover, many Government policies are issued to limit cash payment in the public such as: pay salary through cards system, accepted banking documents in deducting VAT, etc

Vietnam's accession to the World Trade Organization (WTO) with their commitments of financial services market's liberalization and deregulation, their customers have more choice between domestic and foreign banks Furthermore, the customers access financial products with no limitation, as a result, it affects to customer loyalty In Vietnam, service market is more and more improved and it is a new potential market for banks to explore However, the more increasing is personal income, the higher demands for products and services are Customers expect the higher quality of products and services than before The higher perceived service quality, the more satisfied and loyal the customers (Petruzzellis, D'Uggento and Romanazzi, 2006) Beside the competing each other about the total assets and market share (number of customers), efficiency in using the capital, ratio of bad debt, banks always find out the customers' needs and supply at the right time to get the more market share They must try to offer attractive interest rates to both savers and borrowers, which means that they must minimize their own internal operating costs and loss

Nowadays, commercial banks have intend to develop retail sector, approach the individual customers, small and medium enterprises (SMEs) because it is a large market and disperse risks in banking business Customers have opportunities to approach a lot of banks and choose the best bank suitable to their own based on the price, service quality and convenience In

2011, the competition is more and more heated when lots of commercial banks try to change technology, reduce cost to strengthen competitive ability over the others In this race, foreign-

owned banks have experience and strategy to expand their market in retail sector; owned and joint-venture commercial banks always change in technology, service quality and staff skills, is it state-owned commercial banks known as 'to be hard to please' have competitive ability with trials or not?

private-1.2 RESEARCH OBJECTIVES

The objectives of this study are:

• To identify the key factors impact on customer's loyalty

• To measure the strength of relationship between key factors and loyalty

• Based on the research results to give recommendations to improve customer loyalty in retail banking, especially Vietcombank- state-owned commercial bank

1.3 RESEARCH QUESTIONS

In order to find out the solutions to improve customer loyalty of the retail banking, this study deals with the following questions:

• Which factors affect the customer loyalty?

• How the banks improve and make their customers become loyal in retail sector?

• What recommendations to Vietcombank about how to improve customer loyalty

1.4 RESEARCH SCOPE

This study focuses on identifying the main factors influence on the customer loyalty in retail banking in Viet Nam The survey questionnaire is applied to collect data for this study with the survey time from February to March, 2011 The survey interviewees of this study are individuals who aged over 18 and usually go to the banks irrespective of purposes, gender, age, income and education

1.5 RESEARCH STRUCTURE

This study includes five sections compatible with five chapters with the names of theirs are: introduction, literature review, research methodology, data analysis and findings, and conclusions and recommendations Chapter 1 introduces the structure of the research, including research statement, research objectives, research questions and research scope Chapter 2- literature review consists of definitions of factors influencing on customer loyalty

as service quality, price and switching cost, and relevant literature review and evidence to

clarify the research topic, the conceptual framework and hypotheses also are presented in this chapter The next chapter named research methodology that presents detail of qualitative and quantitative research Chapter 4 shows the results of sample size through the assessment of measurement scale, this chapter also apply multiple regression analysis to test hypotheses The last chapter is chapter of conclusion and recommendations indicates the main findings of the research and gives out some suggestions to improve customer loyal in retail banking, finally, this chapter also shows the limitations of this research for further studies in the future

3

- CHAPTER II: LITERATURE REVIEW

This chapter presents an overview of customer's loyalty and factors influencing on customer's loyalty in retail banking This chapter also presents conceptual framework, hypotheses of this study and measurement scales of factors of customer loyalty and its affected factors

2.1 CUSTOMER LOYALTY

Service loyalty can be defined in the following way: "Service loyalty refers the degree to which a customer exhibits repeat purchasing behavior from a service provider, possesses a positive attitudinal disposition toward the provider, and consider using only this provider when a need for this service arises" (cited in Caruana, 2002, p813 )

According to Oliver (1999), there are four stages of brand-loyalty such as: cognition, affect, intentional and action loyalty At the first stage-cognition, based on the information about the brand that the customers collect, they are loyal to the brand The next stage is affective loyal, the customers have some positive attitudes toward a brand When customers have behavioral intention of purchasing, it is the intention phrase The last stage is action loyalty when customers change from intentions to actions

Loyalty plays an important role in the competition of building successful relationships with their customers in the competitive retail banking environment According to Duncan and Elliot (2002) showed that loyalty of customer takes an important part in contributing earnings and profits of an organization Nowadays, the financial institutions are in the process of competition with globalization, a suitable customer loyalty program is necessary for them to keep customers stay with their organizations The banks always find many ways to supply the most qualified services to satisfy the customers on the best way to get the maximum profit and improve the comparative position over the trials Some studies have pointed out that profitability of banks is connected to customer retention (Garland, 2002; Anderson, Fornell and Lehmann, 1994; Reichheld and Sasser, 1990) In real world, if one business increases 5% loyal customers with satisfaction about his products and services, profit will increase from 25% to 85% Customer loyalty provides the banks with great revenue and cost savings Surveys show that it is up to five times as expensive to recruit new customer as retain an existing customer (Morgan, 2007; Clemens, Reichheld and Sasser, 1990) When most banks

provide nearly identical financial products and services, customers have attention to change their behavior (Beckett, Hewer and Howcroft, 2000)

2.2 FACTORS AFFECT CUSTOMER LOYALTY

There are so many studies indicated factors influencing customer loyalty in many fields, in banking field, the previous researches showed that customer loyalty is affected by factors such as: service quality, price and switching cost

2.2.1 Service Quality

Service quality is defined as an impression of customer about the overall and service provision of an organization through the interactions between a customer and a service provider (Bitner and Hubbert, 1994) There are many definitions of service quality, the widely used one defines service quality as a measure of how well the service level provided meets customer's expectations or needs (Lewis and Mitchell, 1990; Dotchin and Oakland, 1994a; Asubonteng et al., 1996; Wisniewski and Donnelly 1996) Spathis, Petridon and Glaveli (2004) developed the perceived service quality as the customer's attitude to evaluate the overall service provision In the banking sector, Kamilia and Jacques (2000) stated that perceived service quality is the difference between the customer expectations and the perceived service provided by the bank

Parasuraman et al (1988) clearly identified service quality into five dimensions through the SERVQUAL model as follows:

• Tangibles: Physical facilities, equipment and appearance of personnel

• Reliability: Ability to perform the promised service dependably and accurately

• Responsiveness: Willing to help customers and promote service

• Assurance: Knowledge and courtesy of employees and their ability to inspire trust and confidence

• Empathy: Caring such as individualized attention which the employee provides for its customers

Tangibles relates to the effect of physical facility, equipment, personnel and communication materials on customers; and reliability, responsiveness, assurance and empathy relate to element of human intervention in the service delivery

5

The five SERVQUAL dimensions ofParasuraman eta! (1985, 1988, 1991) have been applied

in evaluating service quality For example, Levesque and McDougall (1996) based on the SERVQUAL model to find the determinants of customer satisfaction in the bank Avkiran (1994) also based on the SERVQUAL measurement to identify four dimensions including 17 items in the Australian retail banking industry, there are: staff conduct, credibility, communication and access to teller services Ennew and Bink (1996) developed three banking service quality dimension in United Kingdom, they are: knowledge, advice offered, personalization in the service delivery and general product characteristics

It is very difficult for customers to evaluate services at pre-consumption, consumption and post-consumption stage Because of intangible nature of services, it is also difficult for organizations to understand how its customers perceive and evaluate the quality of its services Service quality is a comparative function between consumer expectations and actual service performance (Parasuraman et a!., 1985) In the banking industry, there are two types

of perceived quality: (1) perceived quality product (tangible) is the assessment of customer about the banks products and (2) perceived quality service (intangible) is the assessment toward service related to products such as: service in and after purchasing, advanced and delivery condition Both perceived products and services are important attributes of perceived quality of retail banking Today's competition between organizations is comparing the products and success of business is to have to deliver a diversified product to customers Easingwood and Storey (1995) showed that the important successful strategy is to introduce new products successfully and service products related to technology can reduce transaction costs, switching rate and encourage customers to create services outcomes on their own (Bitner, Ostrom and Meuter, 2002) With intangible characteristics, perceived services of the bank are lending condition, credit information, time to release a loan, manager and staff style, transaction environment, etc

With high service quality the firm will obtain a lot of advantages such as enhancing reputation, increasing customer retention, attracting new customers through word-of-mouth, creating competitive product difference and improving financing performance and profitability (James 1998, Zeithaml et al., 1996; Julian and Ramaseshan, 1994) In the banking sector, high service quality is always connected to customer loyalty In an investigation of Berggren and Dewar (1991) in United States found that 42% of customers closed their accounts or switched to another bank as a result of service-related problem In a

empirical evidence in Asian financial market (Islamic banks in Malaysia) of Dusuki and Abdulla! (2006) showed that service quality of Islamic banks contributes to customer satisfaction and influences customer's support for Islamic banking

Service quality can affect customer's behavior, especially factors related to service quality such as: speed of delivery, efficiency, friendliness, frequent communication can increase customer's loyalty (Lewis and Soureli, 2006) Customer's behavior can be determined by service quality: loyalty will be raised depend on perceived higher standards of service quality than their expectations, on the other hand, poor service quality leads to the higher customer's defection (Leed's, 1992; Zeithaml et al, 1996) In the investigation of Mavri and Loannou (2008) of customer's switching behavior in Greek banking services, found that there is positive relationship between good service quality and customer's loyalty

2.2.2 Price

According to Zeithaml (1998), price is an attribute that must be given up or sacrificed to obtain certain kinds of products or service In a research of Keaveny (1995) stated that 'pricing' factor involves prices, rates, fees, charges, surcharges, service charges, penalties, price deals, coupons, and price promotions

Madill and colleagues (2002) showed that there are some advantages for customers and banks

in their relationships: the final goal of banks is to maximize profit, improve financial report with low risk, the customers want to easily borrow money with suitable rate, etc Thus, the good relationships with customers bring a lot of advantages to banks such as: reducing the switching rate of customers and increasing the number of new customers through the recommendations of their current customers In the financial service industry, transaction cost has wider implications than other service industries such as bank charges, interest rates charged and paid, fee implementation (Gerrard and Cunningham, 2004)

Price is an important factor that can effect on customer satisfaction and behavioral intentions (Varki and Colgate, 2001 ) Some studies of Stewart ( 1998), Colgate et al (1996) and Keaveny (1995) also showed that price has strong influence on the customer's decision Especially in the banking sector, price has a wider implication, Gerrad and Cunningham (2004) found that pricing seems to effect to customer loyalty of bank more than of other services In the study of Colgate and Hedge (2001) of customers' switching behavior determinants in Australia and

7

New Zealand, showed that price is the top switching determinant, followed by service failures and denial of services

Changing price can impact on customer's behavior (Varki and Colgate, 2001) In a survey of Keaveney (1995) found that about 30% customers had switched firms because of poor service price perceptions Martins and Monroe (1994) showed that customers are sensitive to price, any price increasing can lead to switching actions of customers (Campell, 1999) Gerrad and Cunningham (2004) suggested that price plays an important role in the banking industry, influencing customers' behavior compared with service failures and inconvenience The authors discussed that applying higher charges on customers or increasing fees can lead to opposite effects such as switching behavior (leave the banks, stop to use the bank services, etc) Moreover, Dawes (2004) showed that there is a positive relationship between prices increases and defection rates in the banking industry Therefore, transaction cost and customer's loyalty are in negative relationship

Many studies stated that there is relationship between switching cost and defection rate of customers Fomell (1992) showed that high switching cost can reduce switching rate of customer and prevent switching behavior if switching cost is higher than the expected benefits

of changing service supplier (Lees and al., 2007) Colgate and Lang (200 1) found that switching cost takes an important role in decisions of customers to stay or not when investigated the switching barriers in the New Zealand financial industry

2.3 CONCEPTUAL FRAMEWORK AND HYPOTHESES

From the research objectives and literature review, the conceptual framework is presented in Figure 2.1 and hypotheses of customer loyalty are proposed as follows:

Service Quality

Price

Switching cost

Customer Loyalty

Figure 2.1: Conceptual Framework of Customer Loyalty

Hypothesis 1: In retail banking, Service Quality has positive impact on Customer loyalty Hypothesis 2: In retail banking, Price has positive impact on Customer Loyalty

Hypothesis 3: In retail banking, Switching Cost has positive impact on Customer loyalty

9

2.4 ADJUSTMENT OF MEASUREMENT SCALES

In the previous researches, there are measurement scales of service quality, price and switching cost, however, these scales have been adjusted to be suitable with retail banking in Vietnam

• Responsiveness: the scale 'employees are willing to help' and scale 'employees are never too busy to respond to your request' will be combined into one scale 'staff of banks make every effort to help customers to solve their problems'

• Assurance: The scale 'behavior employees instills confidence in you' and scale 'feel safe in transactions' also will be combined into one scale 'I feel safe to have my bank serviced at this bank'

• Empathy: The scale 'employees who gives you personal attention' is more meaningful than the scale 'gives you individual attention'

The table below indicates the original items of Parasuraman et al (1988) and adjusted items scale fit to this study:

Table 2.1: Original Scales of Service Quality and research scales

XYZ Company has operating hours

that are convenient to all its customers opening hours)

visually appealing supporting for transactions

Materials associated with the service

4 (such a pamphlets or statements) are visually appealing at XYZ Company XYZ

5 Company's employees appear Bank staffs appear neat and sympathy

neat

6 When XYZ Company promises to do The bank provides services as committed

something by a certain time, it does so

When you have a problem, XYZ When problem happened, the bank shows a

7 Company shows a sincere interest in sincere interest in solving it

I

solving it

I XYZ Company performs the service The bank does customer's demand right at

8

XYZ Company provides its services at The bank finishes customer' transaction as

9 the time it promises to do so promised XYZ Company insists on error-free Eliminated item

10

records XYZ Company keeps customers The bank informs customers about any

i

11 informed about when services will be changes in service needs or additional

12 Employees in XYZ Company give you Bank staff can answer customers' questions prompt service or concerns quickly

Employees in XYZ Company are

13

always willing to help Bank staff makes any effort to help I

Employees in XYZ Company are customers to solve their problems

14 never too busy to respond to your request

17 Company are Bank staff always courteous with customers

consistently courteous with you during the process of doing transaction

11

XYZ Company has employees who New Year calendar, etc )

20

gives you personal attention

XYZ Company has your best interest The bank has customer's best interest at

The table 2.2 shows items of 'Price' factor

Table 2.2: Original Scales of Price and Research Scales

1 XYZ Company offers a competitive The bank offers a competitive price

• The scale 'inconvenient for me to switch to another service' is not clear and difficult

to understand so it will be replaced by scale 'I don't want to move to further location'

• The scale 'take a lot of time and effort to change to another company' and scale 'the costs in time, money and effort to switch to another company' will be combined into one scale 'take a lot of time to change to another bank'

•

The table 2.3 shows the items scale of switching cost

Table 2.3: Original Scales of switching cost and Research scales

In general, it would be a hassle for me to change It would be cost me too much to

1

to another service company change to another bank

It would be inconvenient for me to switch to

2 another service company to purchase the Eliminated item products/services I need

3 It would take a lot of time and effort to change

to another service company For me, it would take a lot of time

4 For me, the costs in time, money and effort to to change to another bank

switch to another service company are high

I don't want to move to the further

5 New

location

2.4.4 Customer Loyalty:

Scales of customer loyalty adopted from Fomell et al (1996), the table 2.4 indicates the items

of factor Customer loyalty

Table 2.4: Customer Loyalty

I Overall satisfaction with the service of

I feel satisfied with the bank service XYZ Company

2 Definitely with reuse the service of I will be the loyal customer of the bank XYZ Company

3 Definitely would recommend the I would recommend the bank service to my service of XYZ Company to others friends and relatives

13

In summary, the concepts and relevant researches related to customer loyalty and factors affect it such as: service quality, price and switching cost This chapter has presented the conceptual framework, hypothesis and measurement scales of factors affecting to customer loyalty and based on them to design the questionnaire in the next chapter

CHAPTER III: RESEARCH METHODOLOGY

Based on the findings in the chapter 2, a questionnaire design will be completed in this chapter that is very useful for collecting data This chapter also presents the research method

EF A (Exploratory Factor Analysis) used in analyzing survey data

3.1 RESEARCH PROCESS

This study will apply qualitative and quantitative method In qualitative method, measurement scales of factors will be adjusted to complete the final questionnaire Data collection and data analysis procedure will be presented in the quantitative method

The research process is presented in Figure 3.1:

Literature review of Customer loyalty and

Data collection influenced factors

•

Conceptual framework, its hypothesis and

adjustments of measurement scales Data analysis

Development of questionnaire Testing of reliability and Validity

Test pilot questionnaire Testing the hypothesis

Modify to complete final Conclusion and

Figure 3.1: Research process

15

This study mainly uses measurement scales of SERVQUAL, price and switching cost Although these scales have been tested and employed in many previous researches, the difference of culture, economic condition and society of Vietnam, these ones will have to be adjusted to suitable to Vietnam retail banking context

This qualitative study is carried out by interviewing 5 Banking Service Managers and 5 Banking Service Tellers who have more than 2 years working experience in communicating with customers in retail banking Based on the information collected during the interview, the original items scales will be adjusted- called as pilot survey to fit with the specific retail banking industry characteristics

Pilot survey will be tested by 20 customers aged 18 and over about the format and using words in the questionnaire to complete the final one And based the final questionnaire, a quantitative research will be conducted, instead of conducted in 89 commercial banks, because of limitation of time, this research will conduct in 2 state-owned banks ( Vietcombank and Agribank), 2 private-owned banks ( ACB and VIB), 2 joint-venture banks ( Vid Public and Indovina bank), and 2 foreign-owned banks (HSBC and Citibank)

3.2 QUESTIONNAIRE DESIGN

A questionnaire was designed to analyze customer loyalty in retail banking in HCM city The questionnaire was developed based on the findings from literature and adjusted from the pilot survey in practice The literature review identified factors influencing customer's loyalty in the retail banking The final questionnaire consist of 2 sections, first section includes 23 statements of factors affect to customer loyalty ( indicated in Table 2.1, 2.2, 2.3 and 2.4) and section II includes other information also impact on customer loyalty such as gender, income, education level, etc

This questionnaire will be translated into 2 languages: Vietnamese and English The design of the questionnaire was based on seven-point Likert scale measurement from 1 (strongly disagree) to 7 (strongly agree)

Table 3.1: Variable Codes

REL4 When problem happened, the bank shows a sincere

interest in solving it

Reliability

RELS The bank does customer's demand right at the first

time The bank finishes customer' transaction as REL6

I

promised The bank informs customer about any changes in I RES7 service needs or additional maintenance

I

solve their problems

Customer feels safe to have bank serviced at this ASSlO

bank

Assurance ASSll 1 Bank staff always courteous with customer during

I the process of doing transaction

ASS12 Bank staff can provide customer clear and helpful

advice The bank gives customer individual attention (send EMP13 Happy Birthday gift, Happy New Year calendar,

EMP14 The bank has customer's best interest at heart

The bank staff understand customer's service

E MP15

I needs

17

PR16 The bank offers a competitive price

Price

PR17 The charged price suitable with the used services

It would be cost customer too much to change to

SW20 I don't want to move to the further location

CL21 I feel satisfied with the bank service

CL22 I will be the loyal customer of the bank

50 for testing the R-square respectively Since there are 3 independent variables in this study,

at least 107 completed questionnaires will be required The sample size of this study will be about 150 This survey will be done in one month during the time when people usually go to the banks (from 8 am to 11 am, and from 2 pm to 4pm) And to make sure the interviewees are suitable groups for retail banking services survey, they will be first asked how often they use traditional services such as bank accounts, money deposits, savings, A TM cards, internet and SMS banking, ect

3.4 DATA ANALYSIS TECHNIQUE

This study will use Statistical Package for Social Science (SPSS) version 16 to analyze the collected data and test reliability and validity This study also uses Exploratory Factor Analysis (EF A), Multiple Regression analysis to find out the results

3.4.1 Reliability

Reliability can be used to access the measurement scale The common measurement of reliability examines the internal consistency between multiple measurements of variables (Cooper and Schindler, 2006) Cronbach's alpha is applied to test the reliability of the measures According to Hair et al., (1998), the most widely value of Cronbach's alpha is exceeds 0.60 in exploratory research Variables are considered to be not enough qualified that have Corrected Item-Total Correlation values less than 0.3 and will be eliminated to improve the reliability level ofthe model

There are two basic methods to extract factors in EF A, they are: principle component factor analysis and common factor analysis (principle axis factoring) Principle component factor analysis with V ARIMAX rotation is mainly used to evaluate unidimensionality for prediction purpose as minimize the number of factors from most the original information (Hair et al., 1998) Common factor analysis is used to assess discriminant validity and convergent validity for testing the latent dimension of the original variables (Conway and Huffcutt, 2003) The common factor analysis with the condition eigenvalue 2:1 used to decide the number of

19

extracted factors, and eliminated the factors with latent roots::; 1 because of its insignificance (Hair, Anderson, Tatham, Black, 1998)

-

-CHAPTER IV: DATA ANALYSIS AND FINDINGS

This chapter presents the results of collected data by applying Exploratory Factor Analysis and Multiple Regression in the chapter 3 This chapter also test the hypotheses mentioned in chapter 2 The results are discussed that relate to each of the relevant research objectives

SPSS software version 16 will be used to analysis the data

4.1 DESCRIPTIVE STATISTICS

4.1.1 Sample size:

A total of 138 questionnaires were returned from 150 questionnaires delivered to 8 banks due

to ownership (2 state-owned banks, 2 private-owned banks, 2 joint-venture banks and 2 foreign-owned banks) in HCMC After checking, 12 questionnaires were rejected because they were filled incompletely, the remaining 138 questionnaires used for this analysis, generating a 92% useable response rate

Table 4.1 indicates sample size of collected data and frequency of each bank in the total number of 138 returned responses

Table 4.1: Sample size

BANK Frequency Percent Valid Cumulative

4.1.2 Demographic Characteristics

The collected data includes the demographic characteristics of customers such as gender, age, incomes and education level It indicates the frequency of going to the bank of each customer's group that helps bank managers to give suitable solutions for each group

The Table 4.2 shows the demographic characteristics of customers and the frequency of each group in the sample size

Table 4.2 Demographic Characteristics

Valid Cumulative Demographic Characteristics Frequency

Percent Percent Percent

other 19 13.8 13.8 88.4 postgraduate

That above table also shows that the large ratio of customers go to the bank are in the age of 46-55 (42%), the next is 26-35 (28.3%) It indicates that is the age ofthinking ofthe life in the future and they save more than consume

About the income and education, 42.8% of the respondents have the fair high income (7-10 mil), 30.4% of customers who have high income (over 10mil); most of respondents have bachelors degree (58%), the other levels of education take a small ratio This shows that the higher income and education they have the more banking services they use, they know how to use banking services to serve their purpose easily

4.2 MEASUREMENT SCALE REFINEMENT

In this section, the measurement scales will be screened through reliability assessment before carrying out EF A to test the Cronbach Alpha of each scale whether satisfy the condition of Factor analysis

Banks' equipments and materials are

TAGl

well supporting for transactions

23

TAG2 Bank staffs appear neat and sympathy .647 a

shows a sincere interest in solving it

The bank does customer's demand

right at the first time

The bank finishes customer'

transaction as promised

Alpha= 909

The bank informs me about any

RES7 changes in service needs or additional .747 .880

Bank staff always courteous with me

ASSll during the process of doing .616 .770

transaction

Bank staff can provide me clear and

i

Alpha= 803

The bank gives me individual attention

EMP13 (send Happy Birthday gift, Happy New .609 .788

Year calendar, etc )

EMP14 The bank has my best interest at heart .715 .688

The bank staff understand my service

needs

Alpha= 803

PR16 The bank offers a competitive price .883 a

The charged price suitable with the

change to another bank

For me, it would take a lot of time to

change to another bank

I don't want to move to the further

location

Alpha= 692

CL21 I feel satisfied with the bank service .850 .840

CL22 I will be the loyal customer of the bank .863 I .828

I would recommend the bank service

to my friends and relatives

Alpha= 908

The above table shows that the Cronbach Alpha of each scale TAG, REL, RES, ASS, EMP,

PR, SW and CL is 785; 909; 890; 803; 803; 937; 692 and 908 that exceeds 0.6 and corrected item total correction value in each scale is greater than 0.3 Therefore, data set is appropriate for factor analysis

4.2.2 Exploratory Factor Analysis

With appropriate Cronbach Alpha of 23 variables, we can apply factor analysis with interdependent technique for all items to explain the pattern of correlations among the observed items

The principle component factor analysis with Varimax rotation was conducted on all of the items Only those variables were greater than 0.5 (using Kaiser's criterion) that were considered to be significant

With 20 dependent variables, the last result showed that the KMO score was 0.628 (greater than 0.5) and sig smaller than 0.5 and they accounted for 77.503% of the total variance The

25