Improving customer services and satisfaction a case study of HSBC, vietnam master project in business administration

This research therefore, focused on measuring customer satisfaction level of existing customer in HSBC Vietnam and from result of the findings analysis the recommendation are elaborated

TRƯỜNG NG NG ĐẠI HI HI HỌC MC MC MỞ TP HCM TP HCM TP HCM UNIVERSITY LIBRE DE BRUXELLES UNIVERSITY LIBRE DE BRUXELLES

HO CHI MINH CITY OPEN UNIVERSITY

HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSEL SCHOOL SOLVAY BRUSSEL SCHOOL

MBAVB3MBAVB3

LUU CAM HOA LUU CAM HOA

IMPROVING CUSTOMER SERVICE

IMPROVING CUSTOMER SERVICES S S AND AND AND SATISFACTION SATISFACTION SATISFACTION

A CASE STUDY OF HSBC, VIETNAM

A CASE STUDY OF HSBC, VIETNAM

MASTER PROJECT MASTE

MASTER IN BUSINESS ADMINISTRATION R IN BUSINESS ADMINISTRATION

(PART (PART – –– – TIME) TIME)

Tutor:

Tutor: Dr Dr Dr Nguyen Minh KieuNguyen Minh KieuNguyen Minh Kieu

Ho Chi Minh City (2010)

STATEMENT ORIGINAL OF AUTHORSHIP

STATEMENT ORIGINAL OF AUTHORSHIP

I certify that the substance of this thesis has not been already submitted to any degree and is not currently being submitted for any other degree

I also certify that to the best of my knowledge any assistance received in preparing this thesis, and all sources used, have been acknowledged and referenced in this thesis

Signed: _ Date: _

COMMENTS OF TUTOR

February 2

February 24444, 2011, 2011, 2011

TO WHOM IT MAY CONCERN

TO WHOM IT MAY CONCERN

Dr Nguyen Minh Kieu Dr Nguyen Minh Kieu

Date: …… /………./ 2011

ABSTRACT ABSTRACT

Recently banking industry has become severely competitive environment than ever before When the banking products are easy to imitate, then the services quality becomes more important and significant for banks to increase their competitive advantage This research therefore, focused on measuring customer satisfaction level

of existing customer in HSBC Vietnam and from result of the findings analysis the recommendation are elaborated to improve the services quality and customer satisfaction level

The research was conducted based on data collected from existing SME customers which are considered as the main driven in Vietnam economic in future There are 125 respondents was collected from 200 questionnaires sent out to customers The collected data was analyzed by using SPSS 16.0 with main analyses were reliability with Cronbach’s Alpha, exploratory factors analysis and multiple linear regression

The result addressed that the key satisfactions of SME customers in HSBC Vietnam were assurance, reliability, pricing, empathy and tangible dimension The factor of responsiveness was not significant impact to the research model

Accordingly, the recommendations have been elaborated for the board of management

of HSBC Vietnam to focus on key factors for improving services quality and customer satisfaction level

Table of Contents

ABSTRACT iv

LIST OF TABLES V LIST OF FIGURES .Vi V

ABBREVIATION .V ii CHAPTER 1: INTRODUCTION TO THE RESEARCH 1

1.1 GENERAL BACKGROUND 2

1.2 RATIONALE OF THE RESEARCH 3

1.3 STATEMENTS OF THE PROBLEM 4 44 4 1.4 RESEARCH QUESTIONS 4

1.5 RESEARCH OBJECTIVE 5

1.6 SCOPE OF THE RESEARCH 6

1.7 ORGANIZATION OF THE RESEARCH 6

CHAPTER 2: LITERATURE REVIEW 8

2.1 BANKING SERVICES AND PRODUCTS 8

2.1.1 GENERAL ACTIVITIES OF COMMERCIAL BANKS 8

2.1.2 HSBC VIETNAM BANKING SERVICES AND PRODUCTS 9

2.2 CUSTOMER SATISFACTION AND SERVICES QUALITY IN BANKING SECTOR 11

2.2.1 CUSTOMER SATISFACTION IN BANKING SECTOR 11

2.2.2 SERVICES QUALITY DIMENSTION IN BANKING SECTOR 11

2.3 SERVICE QUALITY (SERVQUAL) 13

2.4 THE GAP MODEL 16

2.5 PRICING DIMENSION 19

2.6 CUSTOMER SATISFACTION 19

2.7 PREVIOUS RESEARCH MODEL 21

CHAPTER 3: RESEARCH METHODS 23

3.1 RESEARCH MODEL AND HYPOTHESES STATEMENTS 23

3.1.1 THE RELATIONSHIP BETWEEN SERVICE QUALITY AND CUSTOMER SATISFACTION 23

3.1.2 THE RELATIONSHIP BETWEEN PRICING DIMENSION AND CUSTOMER SATISFACTION 24

3.1.3 RESEARCH MODEL 25

3.2 RESEARCH DESIGN 27

3.2.1 PRIMARY AND SECONDARY DATA RESOURCES 27

3.2.2 QUESTIONNAIRES 28

3.2.2.1 QUESTIONNAIRES DESIGN 28

3.2.2.2 SENDING QUESTIONNAIRES 28

3.3 MEASUREMENT SCALE 29

3.4 RESEARCH SAMPLE SIZE AND SCALE 30

CHAPTER 4: DATA ANALYSIS AND FINDINGS 31

4.1 SAMPLE CHARACTERISTICS 31

4.2 DESCRIPTIVE STATISTIC ANALYSIS 33

4.3 DATA ANALYSIS 34

4.3.1 RELIABILITY EVALUATION THROUGH CRONBACH’S ALPHA 34

4.3.2 EXPLORATORY FACTOR ANALYSIS 35

4.4 REGRESSION ANALYSIS 37

CHAPTER 5: CONCLUSION AND RECOMMENDATIONS 42

5.1 CONCLUSION 42

5.2 RECOMMENDATIONS 44

5.3 RESEARCH LIMITATION 46

REFERENCE 48

APPENDIX 1 52

APPENDIX 2 59

APPENDIX 3 60

APPENDIX 4 65

APPENDIX 5 72

LIST OF TABLES

Table 1: Summary of factors and scale 29

Table 2: Overall customer satisfaction and scale 30

Table 3: Likert scale 30

Table 4: Characteristics of the sample 32

Table 5: Descriptive statistics of the sample 33

Table 6: Cronbach's Alpha of the respondents 35

Table 7: Summary results from first step of factors analysis of items (SPSS) 36

Table 8: Model summary 38

Table 9: Anova result 38

Table 10: Multiple regression of the research model 39

LIST OF FIGURES

Figure 1: Gap model of services quality by Parasuraman et al., 1985 18

Figure 2: Research model on retail banking sector 21

Figure 3: Research model in the Romanian banking sector 22

Figure 4: Proposed Research Model 25

Figure 5: Confirmed research model with Standardized Coefficient 39

SEVQUAL Service Quality

Techcombank Vietnam Technological and Commercial Joint Stock Bank

These steps quickly brought positive results by impressive of high economic growth rate that Vietnam has recorded in the 20 years Vietnam recorded average annual economic growth rate of 6.5% over that period, one of the highest rate among developing countries And with annual per capita income of USD 1,000 in 2008, Vietnam was removed from the list of world least develop countries

As a result of economic reform and opening, Vietnam financial market has been developed very significantly in this period To date, there are about 6 state owned banks, 37 private commercial banks, 5 banks with 100% of foreign capital, 48 foreign bank branches and over

47 Representative offices of foreign bank operating in Vietnam (State bank of Vietnam)

In Vietnam, HSBC first opened an office in Saigon in 1870 (now Ho Chi Minh City) In August 1995, HSBC opened a full-service branch in Ho Chi Minh City In 2005, HSBC also opened its second branch in Hanoi and established a representative office in Cantho

HSBC has acquired 20% share capital of Vietnam Technological and Commercial Joint Stock Bank (Techcombank), one of the largest joint stock commercial banks in Vietnam by equity and became the first foreign bank in Vietnam to hold a 20% interest in a domestic

Bao Viet Holdings to 18% from 10% for VND1.88 trillion (approximately US$105.3 million)

On 1 January 2009, HSBC started operating its locally incorporated entity and became the first foreign bank to incorporate in Vietnam, after gaining approval from the State Bank of Vietnam (SBV) to set up a Wholly Foreign-Owned Bank (WFOB) in Vietnam in September

2008 The new entity, HSBC Bank (Vietnam) Ltd., is headquartered at the Metropolitan Building, 235 Dong Khoi Street, District 1 in Ho Chi Minh City With a registered capital of VND 3,000 billion, HSBC Bank (Vietnam) Ltd is 100 per cent owned by The Hongkong and Shanghai Banking Corporation Limited, the founding and principal member of the HSBC Group

HSBC is now the largest foreign bank in Vietnam in terms of investment capital, network, product range, staff and customer base HSBC’s history in Vietnam and knowledge of its culture reflects its commitment to delivering excellence in customer service However, the competition in the banking industry is very aggressive recently because many local banks have improved their services quality to retain existing customers as well as to complete with foreign banks, especially in the retail banking sectors that most of the foreign banks are intended to extend its business operation

Acknowledge that customer services and customer satisfaction are the key element for the bank growth in coming years, HSBC has conducted many activities to improve services standard and increase customer satisfaction level Mr Tom Tobin (The CEO of HSBC Vietnam) had stressed that customer services and customer satisfaction are the main focus that HSBC would like to base on for business expansion, especially in SMEs segmentation given its dynamic and potential growth in Vietnam economy (HBSC source) According to the present survey which was conducted in joint coordinated by Central Institution for Economic Management (CIEM), Institute Labor Science and Social Affairs (ILLSA) and Copenhagen University (Denmark), SMEs segment in Vietnam has been considered as the main driven of the Vietnam economy This segment has accounted about 95% of total enterprise entity, employed 50% of labor force of Vietnam And therefore, Vietnamese

government has been implementing a number of measures and policies to encourage and support SMEs sector

1

1.2 2 2 RRRATIONAL OF THE RESEAATIONAL OF THE RESEAATIONAL OF THE RESEARCHRCHRCH

Vietnam banking industry has gained a significant growth in recent years a long with the developing of the economic Many banks have expanded business operation by setting up branches, products and services to attract new customers As the result, local banks have made significant investment to improve its customer services for improving customer satisfaction of existing customers

There are about 500,000 SMEs in nationwide and this segmentation has been considered as the key driven for Vietnam economy For the long term development, therefore, HSBC has established SME division inside of Commercial Department to targeting this segmentation

At the time being, there are nearly 3,000 of SME have maintained bank account at HSBC and the target for next 3 years is 15,000 SME Therefore, improving customer satisfaction

by deliver excellent customer services is the key role for management team because the expense of acquiring customer is incurred only in the beginning stages of the relationship (Reichheld and Kenny, 1990) Beside that, longer-term customers buy more and, if satisfied, may generate positive word-of-mouth promotion of the bank Hence, this is the opportunity as well as challenging period for the bank to enhance its quality services and improve customer satisfaction to attract more customers

With the long term commitment to Vietnam market, HSBC has implemented many activities to delivery international standard services to SME customers such as customer appreciated day event, customer feed back survey, customer’s complaints log system, Welcome customer onboard program (HSBC source) However, these activities are for the whole bank level and not specify for SME customers Therefore a full study of the perception of SME customer is very essential and necessary for the bank to improve service quality and customer satisfaction This is also in line with the slogan of HSBC to be

Customer satisfaction is influenced by main factors such as price, products quality, services quality, personal factor and situation factor (V.Zeithaml, M.Bitner, and D.Grembler ,2006) According to Lewis (1993), service quality is one of the effective means in building a competitive position in services industry So banks have to differentiate themselves by delivering quality service and maintain customer satisfaction is essentially an effective tool that banks can use to gain a strategic advantage and survive in today banking environment

According to Abratt and Russell (1999) the key factors influencing customer’s selection of a bank include the range of services, rates, fees and price charged Hence, it is apparent that superior services alone are not sufficient to satisfy customers Prices are essential, if not more important than service and relationship quality Further more, services excellent, meeting clients needs, and providing innovative products are very essential to succeed in the banking industry

This study is to test the relationship between the services quality and the pricing element with the customer satisfaction regarding SME segmentation And from that, HSBC could have a sound understanding to adjust or revise its customer services to improve customer satisfaction level

What are the most important factors in service quality in relationship with

customer satisfaction of SME customers in HSBC Vietnam?

What is the satisfaction level of pricing in relationship with customer satisfaction

of SME customers in HSBC Vietnam?

What changes in banking policies and services products are required to improve

customer satisfaction level of SME customers?

et al., 1988);

From the above method, the board of Management of HSBC Vietnam can adjust its products, services and pricing so that to enhance customer satisfaction level of SME customers Over all, the objective of the research will be focused on these factors

• To measure and evaluate the relationship between service quality and customer satisfaction of SME customers

• To measure and evaluate the pricing factor on the overall of SME customers perception in banking with HSBC Vietnam

• To recommend the solution in order to improve the service quality and customer

The research will not mention other department because these customer segmentations have difference demand and services products

Chapter 1hapter 1hapter 1:::: I I INTRUDUCTION TNTRUDUCTION TNTRUDUCTION TO THE RESEARCHO THE RESEARCHO THE RESEARCH

This is the introduction of the research The chapter will describe the research problem, the statement of the problem and the research objective This part also covers the limitation of the research as well as the organization of the research

Chapter 2

Chapter 2:::: LLLITERATURE REVIEWITERATURE REVIEWITERATURE REVIEW: : : :

This chapter presents an overview of theories and previous research models As the result the author has proposed the research model to address the research problem

Chapter 3:

Chapter 3: R R RESEARCH MODEL AND RESEARCH DESIGNESEARCH MODEL AND RESEARCH DESIGNESEARCH MODEL AND RESEARCH DESIGN: : :

This chapter will focus on the research model in details and from that hypothesis have been presented This chapter also addresses the research design as well as the methodology to approach the research model

Chapter 4

Chapter 4:::: DATA ANALYSIS AND DATA ANALYSIS AND DATA ANALYSIS AND FFFINDINGINDINGINDING: : :

The chapter will present what have been found in the research model by using SPSS (version 16) tool to analyzing the collected data

Chapter 5

Chapter 5:::: C C CONCLUSION AND RECOMMENDATIONSONCLUSION AND RECOMMENDATIONSONCLUSION AND RECOMMENDATIONS: : :

This chapter wills summary the entire research model Then the author will conduct the conclusion basing on the findings have been addressed in chapter 4 There are some recommendations to improve services quality as well as customer satisfaction level of HSBC Vietnam

C CHAPTER HAPTER HAPTER 2 2 2: LITERATURE REVIEW : LITERATURE REVIEW : LITERATURE REVIEW

This chapter presents an overview of banking services and products of HSBC, the theories and previous research models to address the research questions Theories and models will

be addressed including: Service quality in banking sector, research model SERVQUAL and GAP model, customer satisfaction and other factors affecting customer satisfaction

Currently in most countries banks are regulated by government entities and require a special bank license to operate on financial market The requirements for the issue of a bank license vary between jurisdictions but typically include following criteria: minimum capital; minimum capital ratio; eligible and proper requirements for the bank’s controllers; owners; directors or senior officers; an approval of the bank’s business plan as being sufficiently prudent and plausible

The banking law is based on a contractual analysis of the relationship between the banks and the customers who defined as any entity for which the bank agrees to conduct an account Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments

There are many types of banks which are mostly based on the activities of its business It can be divided into retail banking, dealing directly with individuals and small businesses; commercial banking, providing services to mid-market business; corporate banking, directed at large business entities; Private banking, providing wealth management services

to high net worth individuals and families; and investment banking, relating to activities on the financial market (Wikipedia, , , , http://en.wikipedia.org/wiki/Bank))))

In the banking industry, the commercial banking is the more popular to other type of banking business The commercial banks engage in the following business activities:

• Processing of payments by way of telegraphic transfer, internet banking

• Issuing bank drafts and bank cheques

• Accepting money on term deposit

• Lending money by overdraft, installment loans, un-secured loans, term loans, bridge loans, syndicated loans

• Providing documentary and standby letter of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures

• Safekeeping of documents and other items in safe deposit boxes

• Sale, distribution or brokerage with or without advice, of insurance, unit trusts and similar financial products as a “financial supermarket”

• Cash management and treasury services

• Merchant banking and private equity financing

• Traditionally, large commercial banks also underwrite bonds, and make markets in currency, interest rates, and credit-related securities Today large commercial banks usually have an investment bank arm that is involved in the mentioned activities

In 1/1/2009, HSBC Bank Vietnam has been established which was converted by HSBC

Through an international network spanning over 88 countries and territories with over 9500 offices worldwide, HSBC has been considered as the leading financial institution in the world It is also has been considered as the biggest foreign bank in Vietnam The company has put diversified direction to expand business in Vietnam market and the commercial banking department is the best team in the organization which was taking as the major role

in revenue generator There are 2 teams in commercial department: SME banking team and Middle Market Enterprise banking team (MME) The MME banking team will cover enterprise that have annual turnover over USD10M and SME banking team will take responsible and serve companies that have annual turnover less than USD10M

Although the operating time of HSBC as a 100 percent foreign-owned bank in Vietnam has been only one year, the profit of HSBC is already equal to that of a medium scale domestic joint stock bank, which has been in operation for decades In 2009, HSBC published financial statement showed that after one year (2009) operating as a 100 percent foreign-owned subsidiary bank in Vietnam, the total assets of HSBC Vietnam is 36.689 trillion dong; profit before tax is 2.405 trillion dong; return on equity ratio is 19 percent; capital adequacy ratio is 58 percent; and lending over mobilized funds ratio is 51.3 percent (HSBC, 2010)

Thomas Tobin, general director of HSBC Vietnam affirmed that HSBC considered Vietnam

as one of the strategic markets among the emerging markets in the region (HSBC, 2010) The bank has provided comprehensive financial services for both retails banking and whole sales services Below is the list of these services

- Personal transactional financial Services

- Personal lending products

- Credit card and debit card services

- Automatic teller machinery

- Commercial banking services

- Trade and supply chain services

- Payment and cash management

of the difficulty in distinguishing services offered among bankers and the promptness in matching a new offering by competitors Rust and Zahorik, (1993) applied a mathematical framework enables manager to determine the greatest influencing factors to customer satisfaction in banking industry Athanassopoulos, (2000) conducted a complete survey on customer satisfaction in banking in Greece and suggested an instrument of customer satisfaction containing services quality and other attributes In general, the research in this area suggests that services quality is an important indicator of customer satisfaction Services quality is also attractive to retail banks as a competitive differentiator (Newman, 2001)

Lewis, (1993) gave out dimension of services quality applied in other services sectors and along with banking industry as follow

• Technical dimension: The outcome of the services process comprising systems and technology

• Functional dimension: The way the services are delivered includes inter-personal interactions between staffs and customers such as appearance, personality and approachability of staffs

• The corporate image dimension: It is about how customer perceived the firm, technical and functional quality of services

Sureshchander et al., (2002) suggested that the services quality is based on five dimensions which are relevant to banking sector:

• Core services or services products

• Human element of services delivery: It is mentioned to the bank services as promised by the banking staffs, effectiveness the bank staff’s skill and ability for action whenever a critical incident takes place, willingness of bank staff to help customers and the readiness to respond to customer’s requests, making customer feel safe and secure in their transaction, giving caring and individual attention to bank customers by having customers best interest at heart

• Systematization of service delivery (non-human element): This element mentions to

a high standardized and simplified delivery process so that banking services are delivered within a minimum time without any hassles or excessive bureaucracy, enhancement of technological capacity to provide superior quality service to customer more effectively

• Servicecapes (the environment in which the services are delivered and where the firm and the customers interact): This element refers to the tangibles of services

ambient conditions, physical equipments, neat and professional appearance of bank’s staffs

Avkiran (1999) indentified the following four service quality factors in banking sector

• Staff conduct: responsiveness, civilized conduct and presentation of branch staff that will project a professional image to customers

• Credibility: maintaining customer trust to bank staff by rectifying mistakes and keeping customer informed

• Communication: fulfilling customer’s needs by successfully communicating financial advices and serving notices timely

• Access to teller services: The adequacy of number of branch staff serving customer throughout business hours and during peak hours

It is indicated that different authors have proposed diverse dimensions of services quality in banking industry All authors mentioned do not have the same opinion with every specific element of quality dimension but most of them were used in banking industry to measure services quality

of customer service policy is still necessary to retain customers otherwise that business will

not achieve long- term profitability That is why service quality has attracted researchers around the world for years

What is service and service quality? According to International Standardization Organization (ISO), service is a part of the total production process, the added value of the product and assessed on the market economy in which customer choices play a crucial role (Edvardsson, 1998) Each customer has a different perception and evaluation of service Their expectations and perceptions will affect to the outcome of the service showing whether they are satisfied or not (Edvardsson, 1998) While definition of service quality is that, it needs to correspond to and meet customer expectation in order to satisfy customer demand (Edvardsson, 1998) This definition is based on the customer perspective, but does not mean that service providers always meet the requirements and wishes of customers Ultimately, the decision maker of good or bad service is the customer but it does not mean their requirements are always right and reasonable

Other researchers give different definition of service quality Lehtinen and Lehtinen, (1982) gave that service quality must be judged on two aspects, (i) the service providing process and (ii) the results of the service Gronroos, (1983) described service quality in both technical and functional aspects, in which technical quality is what customers get and functional quality is how the service are provided In this case, the customer directly evaluates the company reputation Once it got a good reputation, minor mistakes made through servicing can be considered acceptable as temporary (Gronroos, 1983)

Townsend and Gebhart, (1986) gave two aspects of quality: quality in fact and quality in perception Quality in fact means that the specific requirements of the service are not met Meanwhile, quality in perception means that customer’s quality expectations are met Accordingly, if the quality in perception is not met, the quality in fact would not been achieved either

However, when mentioning quality service, we must mention the significant contribution of Parasuraman, Zeithaml, and Berry, (1988, 1991) They are among the best-known

researchers about the service quality They have conducted the research on customer service quality in four different service sectors: banks, stockbrokers, credit card companies and electrical appliance trading companies Parasuraman, Zeithaml, and Berry (1988, p 17) defined service quality as "the difference between expectation towards service customers received and their perception of the outcome of services” The authors initiated and used qualitative research and quantitative expertise to build and scale components of quality of service called SERVQUAL (Parasuraman, et al., 1988)

SERVQUAL is a service quality framework that has been studied and developed by many different authors Nyeck, et al (2002) showed that SERVQUAL as a measuring tool

“remains the most complete attempt to conceptualize and measure service quality” The primary benefit of SERVQUAL is to measure and evaluate various service industries such

as education, healthcare, tourism, banking and financial service (Nyeck, et al 2002)

SERVQUAL scale is adjusted and verified by many different types of services Originally,

it was measured and based on ten aspects of service quality: reliability, competence, responsiveness, access, courtesy, communication, credibility, security, knowing or understanding customer and tangibles Finally, SERVQUAL has been improved through including 22 variables to measure five components of service quality that is called acronym RATER: reliability, responsiveness, assurance, tangibles, and empathy (Parasuraman et al.,1998)

Parasuraman et al (1991) stated that SERVQUAL could be applied to all types of different services However, each service has specific characteristics Many other researchers have also tested this scale for many types of services as well as in many other countries In which, Gagliono and Hathcote (1994) tested and supported SERVQUAL by presenting a model with four corresponding factors: Personal Attention, Reliability, Tangibles and Convenience Bakakus and Mangold (cited in Brown et al, 1989) has found the independent factor as applied SERVQUAL into hospital sector

Many researchers have discussed Service quality and measurement methods Gronroos, (1982); Lehtinen and Lehtinen (1982); Lewis and Booms, (1983); Sasser, et al (1978) and encapsulated three important conclusions to measure the service quality:

• The measurement of service quality is often not as easy as assessing product quality because services are intangible products measured by special factors

• Customer expectations on service quality are often affected and influenced by the comparisons between their expectations towards the quality of provided service and what was actually experienced

• The assessment of service quality is based on two factors: the feedback after using the service and assessment of the services providing process from customers

The SERVQUAL instrument (Parasuraman, et., 1988) is one of the preeminent tools measuring the quality of service This instrument can be used to evaluate the relative importance of qualitative aspects, which affect the customer’s perception of service Its also measures the gap between customer’s expectations and experiences

However, there are some researchers who used the SERVQUAL instrument criticize the practicality of model, the use of different scores and negative phrased items (Carman, 1990) illustrated that the five dimensional -SERVQUAL framework is not comprehensive and fails to established economic, statistical and psychological theory However, up to now, the SERVQUAL framework is still a popular tool which is widely used to measure the service quality by many researchers around the world

that SERVQUAL is an instrument and this is to use to measure the gap between customers’ expectations or desires from the service suppliers against the organization’s quality performance From that, the conceptual model of service quality based on gap analysis is developed in order to find causes leading to the Gaps

• Gap 1: The knowledge Gap: The Company does not know what customer wants? This is the difference between what customer expects and what management thinks customer needs The reason is that the lack of marketing strategy, the lack of communication among departments in the company and the complex of various managements

• Gap 2: The Standard Gap: It is the poor standard of service quality In this gap, there

is a difference between management perceptions and service quality specifications The cause of this gap 2 is due to the lack of commitment to service quality, uncertainty about the feasibility, the inadequate standards of the tasks and unclear objectives

• Gap 3: The Delivery Gap: The difference between service quality specifications and actual service delivery - are standards consistently met Gap 3 comes from the unclear, contradicted roles division, unreasonable mandate, the lack of supervision from upper manager level and non-teamwork attitude

• Gap 4: The difference between service delivery and external communication Gap What is communicated externally and what are promises made consistently fulfilled Promises do not match actual delivery This Gap comes from the lack of communication between department as well as a propensity to overpromise

• Gap 5: The difference between customers expectation and customers receiving Gap The expectations are formed from experiences in the past, the spread through word

of mouth and real needs of customers

Figure 1: Gap model of Service Quality by Parasuraman et al., 1985

From the framework of Parasuraman, et al (1985), the five key service dimensions are tangibles, reliability, responsiveness, assurance and empathy These factors have the interactive relationship

• Tangibles: the availability of physical facilities, equipment and machines, personnel and information material to the service

• Reliability: The ability to keep the promise in providing services accurately and dependably This will be strengthened through the promise from the first transaction

• Responsiveness: The willingness of giving help and support to customers in providing the service

• Assurance: the combination of factors: knowledge and skills in solving problem of staffs, the polite attitude, friendliness, and respect to customers; the trustworthiness and honesty of staff; and confidentiality and safety of information

• Empathy: made from elements: effort in finding actual customer needs, listening and providing significantly and timely to customer

2

2.5555 P P PRICING DIMENSION RICING DIMENSION RICING DIMENSION

Many different price definitions are defined According to Voss, et al (1998), price is an expense that customers spend to exchange for goods or services and it brings revenue and profit to the seller or supplier Therefore, the price is part of the process of providing goods and services In the competitive environment nowadays, the price places an important role However, the price competition is not a long-term strategy for businesses because it reduces the profits of all competitors (Potter, 1980)

Price is part of the business expense Krajewski, et at (2007, p.62) stated that “low-cost operations is delivering a service or producing a product at the lowest possible cost to satisfy of the process’s external or internal customers” The discount can increase customer satisfaction, but lower profit margin brought to the business

To the banking sector, price is the bank charge, interest for lending and other service fee Normally, customers always compare pricing of this bank to others The increase or decrease of pricing will directly affect the satisfaction of customers Therefore, in this research, pricing is used to analyzing as the element that influence to customer satisfaction level of HSBC

2

2.6666 C C CUSTOMER SATISFACTION USTOMER SATISFACTION USTOMER SATISFACTION

Making customers satisfied is becoming an essential property of any enterprise putting effort in improving service quality, securing loyalty and enhancing its competitiveness ability (O’ Loughin and Coenders, 2004)

There are many definitions of satisfaction, like: limit of sensation status of a person based

2003) Satisfaction is the reaction of the consumer upon estimating the difference among previous needs, and the actual performance of the product, like the final acceptance after used (Tse and Wilton, 1988) Or, satisfaction is the reaction of the consumer upon need meet (Oliver, 1997)

Thus, given service quality and customer satisfaction are two different concepts but they are making a strong bond with each other in some research case studies (Parasuranman, et al., 1988) The previous studies show that service quality is the reason of making satisfaction (Cronin and Taylor, 1992) And just like that, customer satisfaction directly relates to customer loyalty “There are direct and strong relationships between profit growths, customer loyalty,satisfaction, and the value of goods delivered to customers” (Heskett, et al., 1997)

The reason is that quality relates to the providing service, and satisfaction is only evaluated after using it Loyalty appears after the customer got satisfied If quality is improved but not based on real needs of customers, the customers would not be satisfied with the service No one is faithful to the products or services with which they feel unsatisfied (Andreassen and Lindestad, 1998)

Customer satisfaction is the main factor to bring success Your business can be grown better once your customer got pleased with what they paid Finding the goodness about your business that your customer has it in their mind and making it improved will assure your business always meets customer expectations

For the financial sector, in particular case of HSBC, perceived quality is the quality of service experience With intangible characteristics, financial products reviewed in this case are transactional banking service, the lending conditions, the turn around time between departments, the style of customer relationship and middle managers, the behavior of back office staff and other banking services etc

The theoretical study shows that customer satisfaction depends on the perceived value of goods and services The value is the experience assessment for product quality against the price that customers pay to use the product Value for customers is the difference between the total value that customers receive and the total cost that customers pay for a product/service area

For banking industry, it is the total payable amount, such as interest expenses and other banking charges, the cost of time, efforts and other risk expense compared with values of service (tangible benefits), the psychological values, beliefs and human values The difference between value and costs is the perceived value that the bank provides to customers

After the application of SERVQUAL instrument (Parasuraman, et al., 1988, 1991) was presented, it has been become the most popular research model to measure and evaluate the customer satisfaction in services industry Dan Micuda, (2009) has applied the SERVQUAL model to test the dimensionality in the Romanian banking sector and the services quality by using five factors: Tangible, reliability, responsiveness, assurance and empathy The research model has purely applied SERVQUAL and did not include any factor such as pricing in the research model Therefore, the overview of customer satisfaction has not been addressed clearly given pricing is key factor in the relationship with customer satisfaction The research model of Dan Micuda, (2009) is described briefly

in the below chart

Figure 3:

Figure 3: Research model in Research model in Research model in tttthe Romanian banking sectorhe Romanian banking sectorhe Romanian banking sector

Source: Dan Micuda, (2009)

CHAPTER 3:

CHAPTER 3: RESEARCH METHODS RESEARCH METHODS RESEARCH METHODS

Chapter II has presented a theoretical concept of quality service in banking sector, SERVQUAL and GAP model, pricing and customer satisfaction The research model will

be designed in order to find out the dimension factors effect to customer satisfaction In this chapter, the study will focus on development of the research model through following steps (1) Research Model and hypotheses statement; (2) Research approach and (3) Research design

3.1 R

3.1 RESEARCH MODEL AND HYPOTHESESESEARCH MODEL AND HYPOTHESESESEARCH MODEL AND HYPOTHESES

This research gives us an insight into the parameters of customer satisfaction and their measurement The customer’s requirements must be translated and quantified into measurable targets as statement of Lord William Thomson Kelvin (1824-1907) “if you cannot measure it, you cannot improve it”

As mentioned the literature review, the research model for this study is for testing the relationship between services quality with customer satisfaction In addition, pricing is also very important factors so the author has put this independent variables factor into the relationship with customer satisfaction

is when using a service Meanwhile, service quality just focuses on specific factors of

Many researchers set up this relationship which shows the connection of service quality and customers satisfaction For example, Tho, et al (2003) with outdoor entertainment service, Cronin and Taylor (1992) with dry cleaning service As SERVQUAL model, the measurement of relationship between service quality and customer satisfaction bases on five factors: reliability, responsiveness, assurance, empathy, tangibles This researching shows the positive relationship between service quality and customer satisfaction

In previous researches of customer satisfaction, the impact of pricing factor just makes a little attention against other factors However, with the fiercer competition on the market and changes in targeting customer on product and service, the researchers identify that there is a deep relationship between price and customer satisfaction Hence, without including this factor, the research on customer satisfaction will be sort of accuracy

In the banking field, pricing is the bank’s charge, the interest rate of the loan and other service fee Once a customer wants to use bank service, the first thing he considers is the price The bank with a lower price will be more attractive to customers Price is the first feelings of the customers, which plays a major role in obtaining the customer satisfaction Therefore, the researchers give out the positive relationship between price and customer satisfaction (Voss, Parasuraman and Grewal, 1998) The customer will be satisfied with low price

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3 1111 3.3.3 R R RESEARCH MODEL ESEARCH MODEL ESEARCH MODEL

The research model of this thesis will be used the SERVQUAL model and pricing factor in relationship with customer satisfaction of SME customer when banking with HSBC Vietnam This research will address all aspects of customer perception in banking service providers and the pricing factor which is the key factor that impacting customer satisfaction

of customer The proposed research model has been built up in detail in following:

Figure 4: Proposed Research Model

Figure 4: Proposed Research Model

From the model, the initial hypotheses are addressed as follow:

• H1 There will be a positive relationship between Tangible and Customer Satisfaction of SME customers

During the services delivery process, clients are directly interacting with Bank’s staff, physical facilities and other elements such as communication materials Because services are intangible, customer evaluate the quality of services based on the tangible clues If customer perceives that the appearance of physical facilities, equipments, individual and communications materials are good, then clients

• H2 There will be a positive relationship between Reliability and Customer Satisfaction of SME customers

Reliability refers to the ability of the services provider to perform the promised services dependably and accurately If customers perceive that the providers services are as good as they were promised, clients feel satisfied as receiving the good quality

• H3: There will be a positive relationship between Responsiveness and Customer Satisfaction of SME customers

Responsiveness refers to the willingness of the services providers to help customers and provide prompt services, feed back From customer perspective, if they get helping willingness and prompt services from services providers, they are satisfied

as receiving the good quality

• H4: There will be a positive relationship between Assurance and Customer Satisfaction of SME customers

Assurance refers to the ability of the services providers to convey trust and confidence to the customers Customers frequently find difficult to evaluate the quality of services if they have not experienced It is believed that the level of the customers trust plays an important role in assessing the quality of the services The more customer trust the services provider, the better the customer perception on the service quality then the higher satisfaction customer get

• H5: There will be a positive relationship between Empathy and Customer Satisfaction of SME customers

If customers perceive that they are receiving concern, personal or individual attention from services provider, convenient opening time and location of bank, branches, ATM machines then their satisfaction will be positive affected

• H6: There will be a nagative relationship between Pricing and Customer Satisfaction of SME customers

Pricing refers to the banking charge, loan interest rate and other services fee If customer received the same services with reasonable or at lower fee customer will feel more satisfaction

3.2

3.2 R R RESEARCH DESIGN ESEARCH DESIGN ESEARCH DESIGN

3.2

3.2 1 P1 P1 PRIMARY AND SECONDARY DATA SOURCES RIMARY AND SECONDARY DATA SOURCES RIMARY AND SECONDARY DATA SOURCES

Data collection is an important stage of the research process However, it often takes time, effort and cost Therefore, researchers need to understand data collection methods in order

to achieve best results of this stage

• Primary data source:Primary data source:Primary data source: Primary data are the unprocessed data that is collected firstly, and collected directly from the units of overall research through surveys and statistics Primary data is satisfied but the collection is often complex and costly To overcome this weakness, it is not necessary to investigate the entire units, but only some units known as sample, including: the sample size methods, scale design method and questionnaire design method when collecting data

• Secondary data:Secondary data:Secondary data: Secondary data is often the available information that is officially published on sources such as newspapers, magazines, industries’ reports Secondary data is collected from different sources in order to explain the purpose, compare and evaluate the research results

In this study, both data sources are applied in order to solve the research’s objects Primary data source is collected from direct questionnaire Secondary data, not directly related to the purpose of research, is collected through the theoretical study, including books, article and reports

• Stage 1: Design questionnaire based on the information collected from the theoretical models and research on service quality-related to research purposes

• Stage 2: Filter and adjust the questionnaire based on opinions of experts Conduct trial interview with ten clients randomly to test the clarity of the questionnaire then record the original comments on the factors affecting HSBC’s services

• Stage 3: Modify and finalize the questionnaire, send the official questionnaire (Appendix 1)

3.2

3.2.2.2.2.2.2.2 S S SENDING QUESTIONNAIRE ENDING QUESTIONNAIRE ENDING QUESTIONNAIRE

There were 200 questionnaires sent to existing customers by email at the same day The customer list has been selected randomly from the existing portfolio and all of them are SME customers who have bank account at HSBC HCMC The object was to send questionnaires to the key decision marker such as key shareholders, directors, general manager or chief accountant The reminded calls have been conducted to follow up and assist customers for explaining any confusion occur

The number of responses received was 156, accounting for 78 percent, in which twenty five cases are eliminated by invalid Therefore, the number of remaining samples size to put into the analysis is 125 samples, which exceeds the calculated minimum requirements

Table 1: Summary of

Table 1: Summary of factors and factors and factors and codingcodingcoding

No

No DimensionsDimensions Factors Factors CodeCode

4

Tangible

8

Reliability

HSBC show a sincere interest in solving customers

11

Responsiveness

HSBC are always willing to help you promptly RS3

15

Assurance

HSBC staff have good knowledge to answer your

19

Empathy

HSBC extend extra-services to customer need EM4

Pricing

Regarding to the overall customer satisfaction involved in the services of HSBC Vietnam, the items are suggested as below:

Table 2: Overall customer satisfaction and scale

Table 2: Overall customer satisfaction and scale

1 Overall, you are satisfied with HSBC's services quality Sa1

3.4 R R RESEARCH SAMPLE SIZE AND SCALE ESEARCH SAMPLE SIZE AND SCALE ESEARCH SAMPLE SIZE AND SCALE

At present, according to many researchers, the issue of how enough for sample size has not been clearly defined yet Besides, sample size depends on the estimation methods used in specific research According to some studies, the representativeness of the selected sample size will be appropriate if the sample size is five for a critical question (Trong & Ngoc, 2008) Based on the SPSS statistic tool, a model surveyed in this research consists of six factors with 24 observed variables Therefore, the minimum number of samples required is

24 x 5 = 120 samples

One of the commonly used scales in quantitative research is Likert scale This scale consists of five common levels ranked from one to five to assess the evaluation level of respondent Therefore, the questionnaire is designed from level one “strongly disagree” to level five “strongly agree”

Table 3: Likert Scale

Strongly Disagree Disagree