Antecedents and outcome of customer satissfaction: A study of Vietnamese customers in the mobile telecom industry

The present research studied switching cost, investment in the relationship, attractiveness alternative and interpersonal relationship of switching barriers and theirs relationships with

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

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VAN THI YEN NHI

ANTECEDENTS AND OUTCOME

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VAN THI YEN NHI

ANTECEDENTS AND OUTCOME

Ho Chi Minh City – Year 2012

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ABSTRACT

Customer retention is a concept gaining more and more attention in today’s business when loyal customers are considered as essential components to organizational success Therefore, corporations, strive to identify and manage effective methods to retain their customers more and more Customer retention will lead the company of having more loyal customers and as a result more profit and market share

The effect of switching barrier, customer satisfaction, environmental dynamism, etc on customer retention has been shown in numerous studies However, the effect of components, factors of switching barrier on customer satisfaction and customer retention that have been subject to much less attention from researchers Especially, not enough studies have been conducted on subject of the mobile telecommunication services industry in Vietnam

The present research studied switching cost, investment in the relationship, attractiveness alternative and interpersonal relationship of switching barriers and theirs relationships with customer satisfaction and retention in the Vietnam mobile telecommunication market Besides, to identify variables that influence customer satisfaction and retention based on literature and will to carry out an empirical analysis, according to the collected questionnaires, to evaluate and apply the proposed model in the Vietnam mobile market

Keywords: Switching barriers, switching cost, investment relationship, attractiveness

alternative, interpersonal relationship, customer satisfaction, customer retention

ACKNOWLEDGEMENT

It is a pleasure to thank the many people who made this thesis possible

This thesis is a result of months of work in which I have been accompanied and supported by many people It is fantastic that I now have the opportunity to express my gratitude and sincere thanks to them all

The first person I would like to thank is my direct supervisor, Dr Nguyen Thi Mai Trang Her enthusiastic and integral view on research has made a deep impression on

me I owe her a lot of gratitude for having shown me this way of research and her great efforts to explain things clearly and simply

I would also like to thank the faculty of ISB International Institute – University of Economic Ho Chi Minh City And especially, I am deeply grateful Professor Nguyen Dinh Tho PHD., who have shown me this way of research and been great efforts to explain things clearly and simply, through the Research Design for Master Thesis subject and Data analysis by SPSS

I feel deep sense of gratitude for the leaderships of VNPT Dong Nai Company and especially Director Nguyen Minh Tam who have supported and got opportunities on

my work and thesis

I wish to thank my entire extended family and especially to my husband for their providing a loving environment, support and encouragement throughout my entire life

I dedicate this thesis to them

Dong Nai, November 2012

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TABLE OF CONTENTS

ABSTRACT 1

ACKNOWLEDGEMENT 2

TABLE OF CONTENTS 3

LIST OF TABLE 6

LIST OF FIGURES 7

CHAPTER I 8

1 INTRODUCTION 8

1.1 BACKGROUND 8

1.2 PROBLEM DIFINITION AND RESEARCH QUESTIONS 10

1.3 RESEARCH OBJECTIVES 12

1.4 DELIMITATION 13

1.5 OUTLINE OF THE STUDY 14

CHAPTER II 16

2 LITERATURE REVIEW 16

2.1 MOBILE TELECOMMUNICATION IN THE WORLD 16

2.2 MOBILE TELECOMMUNICATION IN VIETNAM 18

2.3 CUSTOMER RETENTION 21

2.4 CUSTOMER SATISFACTION 23

2.5 SWITCHING BARRIERS 24

2.6 SWITCHING COST 26

2.7 INVESTMENT IN RELATIONSHIP 27

2.8 ATTRACTIVENESS ALTERNATIVES 27

2.9 INTERPERSONAL RELATIONSHIP 28

2.10 RESEARCH MODEL AND HYPOTHESES 29

CHAPTER III 34

3 METHODOLOGY 34

3.1 RESEARCH PURPOSE 34

3.1.1 Exploratory Research 34

3.1.2 Descriptive Research 35

3.1.3 Explanatory Research 35

3.2 RESEARCH APPROACH 36

3.3 RESEARCH PROCESS 37

3.4 MEASUREMENT SCALES 41

3.5 SAMPLING METHOD 45

3.5.1 Target Population and Sampling method 45

3.5.2 Sample Size 45

3.6 MAIN SURVEY AND DATA COLLECTION 46

3.7 DATA ANALYSIS METHODS 46

3.7.1 Exploratory Factor Analysis (EFA) 46

3.7.2 Reliability Analysis 47

3.7.3 Multiple Regression Analysis 47

CHAPTER IV 49

4 DATA ANALYSIS AND FINDING 49

4.1 SAMPLE DESCRIPTION 49

4.2 ASSESSMENT AND REFINEMENT OF MEASUREMENT SCALES 52

4.2.1 Cronbach Alpha Reliability Analysis 52

4.2.2 Exploratory Factor Analysis (EFA) 54

4.2.3 The revised conceptual model 57

4.3 HYPOTHESES TESTING 59

4.3.1 Testing Assumptions of Multiple Regression 59

4.3.2 Testing Hypotheses the impact Switching Barrier on Customer Satisfaction 60

4.3.3 Testing Hypotheses the impact Customer Satisfaction on Customer Retention 61

4.3.4 Summary of the Hypotheses Testing Results 62

4.4 ANOVA ANALYSIS- MLR WITH DEMOGRAPHIC INDEPENDENT VARIABLES 65

4.5 DISCUSSIONS OF THE FINDINGS 66

4.5.1 The Unexpected insignificance of the Negative Switching Barriers’ role 67

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4.5.2 The impact of the Positive Switching Barrier on Customer Satisfaction 68

CHAPTER V 68

5 CONCLUSIONS AND IMPLICATIONS 68

5.1 CONCLUSIONS 68

5.2 MANAGERIAL IMPLICATIONS 69

5.3 IMPLICATIONS FOR FURTHER RESEARCH 71

REFERENCES 72

APPENDIX 1: A CONSOLIDATED DRAFT QUESTIONNAIRE 77

APPENDIX 2: QUESTIONNAIRE 82

APPENDIX 3: TESTING THE ASSUMPTIONS OF MULTIPLE REGRESSION 85

LIST OF TABLES

Table 3.1: Measurement scales 42

Table 4.1: Sample Characteristics 51

Table 4.2: Reliability Test Results 53

Table 4.3: EFA Results 56

Table 4.5: Coefficients – Switching Barrier and Customer Satisfaction 59

Table 4.8: Coefficients- Customer Satisfaction and Customer Retention 62

Table 4.9: Summary of Hypotheses Testing Results 63

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LIST OF FIGURES Figure 2.1: The Research model 32

Figure 3.1: Research Process 38

Figure 4.1: Revised conceptual Research Model 58

Figure 4.4: The Correlations of the Research Model 64

CHAPTER 1: INTRODUCTION

In the introductory chapter a background regarding the concept of customer satisfaction and retention as well as the reasons why these concepts are highlighted today and their importance in mobile telecommunication market is presented Furthermore, the problems that telecommunication companies face within this area will

be discussed And finally, the importance of the design, implementation and evaluation

of customer satisfaction and retention programs will be explained followed by the research purpose and research questions, and also an overview of the whole thesis

1.1 Background

The increasing economic importance of telecommunications companies inspired many researchers, marketers and management scholars to devoted more teaching and research attention to this sector

Since the 1990s, the telecommunications industry and services have become a dynamic key area for the economic development of industrialized nations This is the result of enormous technical progress as well as of the increased number of network operators and the intense competition that has developed

It has been figured out by previous researches that as markets become more competitive, companies are more likely to attempt to maintain their market share by focusing on satisfaction and retaining current customers It’s also obvious that when the competition and the cost of attracting new customer increase; companies increasingly concentrate their strategic efforts on customer retention, therefore maintaining customer long-term relationships becomes as an important mission for business

Moreover, technology of mobile telecom evolving to meet high demand from customer, the paradigm of mobile telecommunication services is now shifting from

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voice-centered communication to a combination of high-speed data communication and multimedia Furthermore, factors such as the growth of the wireless internet contribute to emphasize the appearance of a transition period in the mobile telecommunication service market Mohan et al (2012) suggest that the world has 6 billion mobile subscribers by ICTnews - The number of mobile subscribers in the world was almost equal to the number of people living on Earth And it is necessary to develop the argument (n.d.) the United Nations telecom agency says there were about 6 billion subscriptions by the end of 2011 - roughly one for 86 of every 100 people

So, the change of paradigm and the symptoms of a market in transition are driving the industry’s restructuring efforts and intensifying competition between companies Mobile suppliers are coming to a full realization of the importance of a customer-oriented business strategy as a condition for sustaining their competitive edge and maintaining a stable profit level, and indeed, for their very survival When the number

of subscribers has reached its saturation point, creating and securing new customers is not only difficult but also costly in terms of marketing Thus, it is becoming an industry-wide belief that the best core marketing strategy for the future is to try to retain existing customers by heightening customer loyalty and customer value Especially, the switching barrier in this market effects to customer satisfaction and retention, because, the customer intends to switch or exit mobile service suppliers, they are very interested in the conditions of the barriers to the most benefit for themselves The telecommunications market in Vietnam is no longer a monopoly market International economic integration has created an impact on the telecommunication market fierce competition, so to sustainable development and market share growth, the telecommunication companies have been orient around the customer In Vietnam, according to statistics of the Ministry of Communications and Information, in Jun

2012, total subscribers estimated 120.7 million mobile subscribers, average people using 1.5 subscribers mobile Therefore, the attraction and development of new mobile

customers is very difficult, besides, the mobile telecommunication services suppliers constantly compete to increase market share subscribers in Vietnam And customers using mobile services with the characteristic of "infidelity," they are ready to leave the supplier to a new supplier if its benefits So customer retention that is the goal of urgent

in the mobile phone suppliers in Vietnam, will lead the company of having more loyal customers and as a result more profit and market share

Several studies show that customer satisfaction is related to retain customer or repurchase intentions (Cronin & Taylor, 1992; Fornell, 1992; Anderson & Sullivan, 1990; Boulding, Kalra, Staeling & Zeithaml, 1993; Taylor & Baker 1994; de Ruyter, Wetzels & Bloemer, 1996; Zeithamel, Berry, & Parasuraman, 1996) However, customer satisfaction never explains all of the variations in retention, since customers seldom are completely free to choose suppliers In fact, different types of constraints, together with customer satisfaction, determine customer choice of suppliers (Bendapudi & Berry, 1997) And only a few empirical studies investigate how various types of switching barriers affect satisfaction with suppliers, retention and the relationships between these variables (Jones, Mothersbaugh, & Beatty, 2000) Thus, in term of the Mobile telecom service in Vietnam, the research for potential antecedents that have high power to explain customer satisfaction and retention forward switching barriers: switching cost, investment in the relationship, attractiveness of others alternatives and interpersonal relationship

1.2 Problem definition and Research Questions

As mentioned earlier, today the telecom industry like many other ones faces the combined difficulties of increasing national and international competition, slower growth rates and mature markets As the result, fewer new customers are being pursued

by an increasing number of service suppliers Under these circumstances, a large share

And now, the telecommunication monopoly almost all around the world is being become to be an open and competitive market So Telecommunications market in Vietnam has not been except that is no longer a monopoly market International economic integration has created an impact on the telecommunications market fierce competition, so to sustainable development and market share growth, the telecommunication companies have been orient around the customer Companies increasingly concentrate their strategic efforts on customer retention, Therefore, the attraction and development of new customers is very difficult, besides, the service suppliers constantly compete to increase market share subscribers in Vietnam And customers using mobile services with the characteristic of “infidelity,” they are ready

to leave the network to a new network if its benefits So customer retention that is the goal of urgent in the mobile phone suppliers in Vietnam, will lead the company of having more loyal customers and as a result more profit and market share

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However, not enough studies have been conducted on the subject of the mobile telecommunication services industry inside Vietnamese This is partly due to the relatively short history of the telecommunication industry in Vietnam

Due to the above mentioned facts and based on the reviewed literature, a model will

be developed for studying the factors of switching cost influencing customer satisfaction and since then research about impact to customer retention

The issue that is going to be discussed in this thesis first was formed and started by studying about the market more precisely and collecting the information about it as much as possible The most mind boggling criteria that this thesis is going to work on

it, is the way that the mobile suppliers are going to retain their customers in the new competitive market that they are going to face with very soon

The research questions that are discussed in this thesis are as below:

What are the main factors of switching barriers affect on customer satisfaction in the mobile telecom industry in Vietnam?

How can these factors and determinants be developed and evaluated in Vietnam?

How can customer satisfaction affect on customer retention in the mobile telecom industry?

1.3 Research Objectives

From a managerial point of view and given that long-term customer relationships are very important, suppliers should not only manage customer satisfaction, but also switching barriers Creating too high switching barriers may result in negative word of mouth and dissatisfaction, and low switching barriers may it too easy for customer to defect Thus, this research has drawn very little research from factors in switching barriers, satisfaction and retention in academicians

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The research objectives that are discussed in this thesis are as below:

Identify the factors of switching barriers that affect the customer satisfaction

in mobile telecom industry in Vietnam

Subsequently, to examine the impact of customer satisfaction on customer retention in mobile telecom industry in Vietnam

Determine the degree of the impact of each factor to customer satisfaction

In this thesis, a model for determining customer satisfaction and retention in Vietnam mobile telecommunication services is going to be developed and then applied

on order to recognize their influencers and hopefully increase customer satisfaction and retention From the actual market assessment data combined with the theory, construction and strategic business solutions in switching barrier factors affecting customer satisfaction and customer retention of the current mobile telecommunication suppliers

The primary purpose of this study is to examine the impact of switching barriers on customer satisfaction and subsequently, to examine the impact of customer satisfaction

on customer retention Then, investigate the strategies in the Vietnam mobile telecom services to increase customer retention and define factors of switching barriers, and empirically test hypotheses regarding the role of factors in switching barriers in context

of satisfaction and retention

1.4 Delimitation

First, in terms of the constructs showing in this research, only four basic components (switching cost, investment relationship, attractiveness alternative and interpersonal relationship) are focused and used to measure switching barriers that influence customer satisfaction and retention So, other switching barriers measurements are beyond this study

Second, this study only focus on Vietnam mobile industry and market, the other sectors in other countries are not involved

Third, this study will be examined only from customer’s point of view that are used

to mobile telecommunication service So, the service firm’s perspective about this subject are not be researched

1.5 Outline of the Study

This research includes five chapters that the first chapter is already presented

Chapter one: Introduction

This chapter presents research background of the study, as well as, research problems, research objectives and delimitation

Chapter two: Literature Review

This chapter provides the reader with sufficient theory to assimilate the continuing part of this study It will begin briefly by a background of the mobile telecommunication market, especially be the Vietnam mobile telecommunication market and customer satisfaction and retention, then discusses why customer satisfaction and retention are important and finally proposes a model for determining customer satisfaction and retention from the factors in switching barriers, which are going to be evaluated in following chapters

Chapter three: Research Methodology

Research methodology concerned in chapter one, literature review and empirical model presented in chapter two, this chapter particularly presents the research design, research methodology and reports the processes of doing the research

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Chapter four: Data analysis and finding

This chapter presents data that has been collected through questionnaires and interviews It also presents the analysis, which has been done on data, the proposed hypotheses and the result of hypothesis

Chapter five: Conclusions and implications

Chapter 5 presents main conclusions and implications based on the results of the previous chapters, as well as the limitations of this study

CHAPTER 2: LITERATURE REVIEW

This chapter provides the reader with sufficient theory to assimilate the continuing part of this study It will begin briefly by a background of the mobile telecommunication market, especially be the Vietnam mobile telecommunication market and customer satisfaction and retention, then discusses why customer satisfaction and retention are important and finally proposes a model for determining customer satisfaction and retention from the factors in switching barriers, which are going to be evaluated in following chapters

2.1 Mobile Telecommunications in the world

When the radio broadcasting industry by developing the idea of radio telephone equipment and was also a precursor to the mobile communication network In 1946, the first radio telephone network under test experience in St Louis, Missouri in the United States After 50 years, the invention of the semiconductor also influences the field of mobile telecommunication Application of semiconductors in mobile telecommunication has improved a number of disadvantages that have not done

May 12-1971 given cellular system similar technique, FM, in technology the 850Mhz.Dua the band until 1983, mobile phone networks AMPS (Advanced Mobile Phone Service) The first commercial service in Chicago, United States Then a series

of standard information released as: Nordic Mobile Telephone (NTM), Total Access Communication System (TACS) This stage is called cell system similar to the first generation (1G), with a narrow strip floor, all 1G systems using FM frequency modulation for voice, frequency shift key modulation FSK (Frequency Shift Key) to access technical signals and used as FDMA (Frequency Division Multiple Access)

2nd generation (2G) was popular during the 90s The development of mobile communication technology with the second generation of the utility it did the explosion

of mobile subscribers worldwide This is the transition from analog to digital

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technologies This phase of mobile telecommunication systems such as: GSM-900MHz (Global System for Mobile), DCS-1800MHz (Digital Cordless System), PDC - 1900MHz (Personal Digital Cellular), IS-54 and IS-95 ( Interior Standard) GSM is the precursor of the two systems DCS, PDC Technical systems use TDMA (Time Division Multiple Access) with the exception of IS-95 uses CDMA technology (Code Division Multiple Access) 2G generation capable of providing diverse services, utilities support for information technology, which allows subscribers to make international roaming process makes it possible to keep in touch in a wide area as they move from country to country

The third generation (3G), 1992 World Congress communications media for a number of frequency bands for 3G mobile systems: 230MHz wide spectrum in the 2 GHz band, which 60MHz for satellite telecommunications Then Telecommunications International Union (UIT) advocates a global international mobile systems to IMT-

2000 project used in the bands 1885-2025MHz and 2110-2200MHz 3G generation techniques include: W-CDMA (Wide band CDMA) type FDD and TD-CDMA (Time Division CDMA) TDD style The goal of IMT-2000 is to enable subscribers to communicate with each other and use multimedia services on a world scale, with a flow of bits from 144Kbit / s in the wide areas and up to 2Mbps in the region method Services started in 2001 - 2002

Now, 4G (also known as LTE - Short or Long Term Evolution), the next step is

to develop 3G technology If the current 3G technology can meet a maximum download speed of 14.4 Mbps, LTE can meet up to 100 Mbps (equivalent to optical technology current FTTx) In terms of technology, 4G mobile network is a natural for the transmission of data rather than voice service features Currently in the world there are about 17 networks deploy 4G service business but just at the exploitation of the features of data transfer

The world has 6 billion mobile subscribers by ICTnews - The number of mobile subscribers in the world was almost equal to the number of people living on Earth Telecommunications Authority of the United Nations said there were about 6 billion mobile subscribers by the end of 2011, for every 100 people, with 86 people registered subscribers

So, the change of paradigm and the symptoms of a market in transition are driving the industry’s restructuring efforts and intensifying competition between companies Mobile suppliers are coming to a full realization of the importance of a customer-oriented business strategy as a condition for sustaining their competitive edge and maintaining a stable profit level, and indeed, for their very survival When the number of subscribers has reached its saturation point, creating and securing new customers is not only difficult but also costly in terms of marketing Thus, it is becoming an industry-wide belief that the best core marketing strategy for the future is

to try to retain existing customers by heightening customer loyalty and customer value Especially, the switching barrier in this market effects to customer satisfaction and retention, because, the customer intends to switch or exit mobile service suppliers, they are very interested in the conditions of the barriers to the most benefit for themselves

2.2 Mobile Telecommunications in Vietnam

Secretary General of the ITU World Telecommunication Union praised the development of Vietnam Telecommunications According to the ITU ranking, Vietnam has been ranked the eight mobile subscriber density in the world, rapid progress in the development of broadband and is rated as a highlight of the telecommunications world (Developing an argument, n.d.)

In Vietnam, the first mobile communication network was established in 1992 with about 5,000 subscribers They provide large mobile information services as Mobifone (VMS) was born in 1993 - a joint venture between telecommunications

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companies VN (VNPT) and Comvik group (Sweden) and Vinaphone of telecommunications services center (GPC) VNPT born in 1996 As of 2002, Korea's corporate S- Fone Telecom and Viettell the Army Telecommunications Company and entered in 2004 In May 2009, Vietnamobile, business cooperation between Hanoi Telecom Joint Stock Company (Hanoi Telecom) and Hutchison Telecom (Hong Kong) was born After 2 months, July 2009, the global telecommunications company Gtelmobile, business cooperation between Ministry of Public Security and Vinpelcom companies (Russian) also joined the network to provide mobile services in Vietnam Now, the race of the operators for reduced charges and more diverse services Thus, Mobile telecom market in Vietnam is one of the most competitive with a number of suppliers, such as: Vinaphone, MobilFone, Vitteltellecom, VietnamMobile, S-Fone, GtelMobile In Vietnam, according to statistics of the Ministry of Communications and Information, in Jun 2012, total subscribers estimated 120.7 million mobile subscribers, average people using 1.5 subscribers mobile (Developing an argument, n.d.) Therefore, the attraction and development of new mobile customers is very difficult, besides, the mobile telecommunication services suppliers constantly compete to increase market share subscribers in Vietnam And customers using mobile services with the characteristic of "infidelity," they are ready to leave the supplier to a new supplier if its benefits So customer retention that is the goal of urgent in the mobile phone suppliers in Vietnam, will lead the company of having more loyal customers and

as a result more profit and market share

Mobile market in Vietnam as well as the development trend of the world's mobile market, the service provider does not cease to apply advanced technology, modern development of 1G, 2G, 3G and 4G, to improve service quality in order to meet high demand from customers to bring customer satisfaction, customer loyalty, customer retention and thereby raising the market share of mobile service providers

According to the Ministry of Information and Communication mobile market mainly focuses on three major mobile telecommunication suppliers with overwhelming levels when accounting for 95% Viettel mobile network is subscriber market share at 36.72%, VinaPhone and 28.71% and MobiFone is 29.11% Meanwhile, the remaining

3 mobile network is Vietnamobile, S-Fone, Gtelmobile In addition, the development

of mobile subscribers in Vietnam, in the first six months of 2012, the mobile telecom suppliers faced with the number of subscribers leaving and switching the network Viettel was increased 4%, Mobifone downed 11.21%, Vinaphone increased 1.3% from the previous year Thus the number of mobile subscribes switched to use the new mobile suppliers such as, Gtelmobile increased 3%, Vietnamobile increased 5% and Sfone downed 1.4%

According to the mobile networks, capable of explosive subscriber growth at the stage near the end and prepare to saturation The ability to surge on subscription almost

is impossible Therefore, the objective of the mobile suppliers turned to keep subscribers and seek to increase average revenue per subscriber (APRU) There, MobiFone is the largest APRU then VinaPhone Although mobile network Viettel is the biggest market share, but mobile network ranked third in APRU

Adopt, competition in the mobile market in Vietnam will add many new shades

It is not difficult to see that the mobile telecommunications market in Vietnam has become a "red ocean", the mobile networks have to compete aggressively to win market share So, ability to gain market share analysis of new mobile network, a telecommunications expert, will encounter difficulties when entering the capital market only very small gaps that are whether the number of subscribers nearly saturated but too large virtual subscribers and characteristics of young subscribers Vietnam as

"unfaithful", they are ready to leave the network are used to a new network if they get benefits So, main factors of switching barrier in mobile telecommunication, such as: switching cost, investment relationship, attractiveness alternative, and interpersonal

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relationship are very important to intend and decide switch, exist the mobile supplier Vietnam mobile suppliers will come to a full realization of the importance of a customer-oriented business strategy as a condition for sustaining their competitive edge and maintaining a stable profit level and indeed, for their very survival When the number of subscribes reaches its saturation point, creating and securing new customers

is not only difficult but also costly in terms of marketing Hence, it is becoming an industry-wide belief that the best core marketing strategy for the future is to try to retain switching, existing customers

As recently, the mobile telecom market is characterized by an intensive competition This industry is facing the aggressive competition As new players drawn into the telecom industry, especially in its most important sub industry which is mobile telecommunications, companies involved in this race are under a continuous pressure

to have customer satisfaction, customer retention and as a result profitability programs

Nevertheless, there is a dearth of empirical research into the extent of customer retention, especially from switching barriers or the supply side retention drivers in particular telecommunication markets Further, the full-scale launch of new competitors in the industry is likely to increase customer churn, making customer retention more crucial than ever Hence, this thesis is going to focus on customer satisfaction and retention through the factors of switching barrier in the competitive

mobile telecommunication market in Vietnam

2.3 Customer Retention

The pressure to reduce customer churn along with the high cost of new customer acquisition have forced mobile service providers to take a hard look at their customer strategies

Customer retention is a well-known and heavily researched topic in the field of marketing Throughout the years, the main stream of retention and loyalty research has

focused on the willingness of customers to enter and to stay in a relationship with the provider of a product or service base on their satisfaction (Hirschman, 1970; Day, 1977; Oliver, 1980; Anderson, 1998; Homburg & Giering, 2001) Reichheld and Sasser (1990) and Reichheld (1996) have studied customer lifetime value and the value of building customer retention by listening to their complaints, anticipating their defection, and understanding why customers move to competitors Remain customer loyalty because of the value they receive from the supplier And customer retention means continuing an active relationship with a customer

Zeithaml (1996) both parties in the customer/firm relationship can benefit from customer retention That is, not only in the best interest the organization to build and maintain a loyal customer base, but customers themselves also benefit from long-term associations

The tangible effects of companies’ commitment to retaining customers were first published Reichheld (1990) who claim that higher retention rate leads to higher net present value of customers

Oliver (1997, p 392) defines customer loyalty and retention as: “a deeply held

commitment to re buy or re patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior” Also customer retention is concerned with maintaining the business

relationship established between a supplier and a customer (Herrmann & Johnson, 1999)

The attraction of customer retention management continued to be prominently advanced in subsequent related papers and books (Reichheld and Sasser, 1990; Reichheld and Kenny, 1990) They proved that customer retention leads to higher profitability and companies must conduct related programs to proactively retain their customers

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2.4 Customer Satisfaction

Customer satisfaction constitutes a cardinal indicator for assessing the success of

an enterprise Satisfied customers are assets that ensure a regular cash flow for the business in the future Customer satisfaction is an important factor for the customer retention but not a sufficient one (Jones, et al 2000) Satisfaction is higher or lower with respect to the extent to which what was actually provided exceeds or falls short of what was expected So customer satisfaction is as one important factor in determining customer retention

Customer satisfaction means that the customer’s needs are met, product and services are satisfactory, and customers’ experience is positive (Friday and Cotts, 1995; Gitomer, 1998) So, customer is satisfied when only minimum has been done for the customer If as customer is said to be satisfied or happy about a purchase, the customer’s overall feeling and experiences must be neutral or positive Customer satisfaction itself is not an indication that there will be customer retention There are some other factors related to customer retention A loyal customer is a customer whose expectations are met or exceeded and they proactively refer the supplier Kotler (2000)

“satisfaction is a person’s feeling of pleasure or disappointment resulting from

comparing a product’s perceived performance in relation to his or her expectations”

And Yi (1990) “Customer satisfaction is a collective outcome of perception, evaluation

and psychological reactions to the consumption experience with a product/service”

Satisfaction is also of great interest to practitioners because of its important effect

on customer retention It is also found that satisfaction is a feeling that generates a higher rate of customer retention and wider spread positive word-of-mouth Satisfaction has a strong positive effect on customer loyalty intentions across a wide range of product and service categories, including telecommunications services (Fornell 1992; Everitt et al., 1996) As an overall evaluation that it built up over time, satisfaction typically mediates the effects of product quality, service quality, and price

or payment equity on customer retention (Bolton and Lemon 1999; Fornell et al., 1996) According to the Satisfaction-Profit Chain principle (Anderson & Mittal, 2000), improving product and service attributes causes increased customer satisfaction, increased customer satisfaction leads to greater customer retention and improving customer retention greater profitability

Therefore, the fifth hypothesis that the author proposes:

H5: Customer satisfaction has positively associated with Customer Retention

2.5 Switching Barriers

Jones et al (2000) define a switching barrier as any factors which make it difficult

or costly for consumer to change providers And the switching barrier refers to the difficulty of switching to another provider that is encountered by a customer who is dissatisfaction with the exiting service or to the financial, social and psychological burden felt by a customer when switching to a new carrier (Fornell, 1992)

For those firms which have many prospective switchers as part of their customer base it is important to understand why these customers stay and to what extent such firms can further discourage such customer from leaving (in both positive and negative ways) And, for those services firms which are looking to attract these prospective switchers and understanding of why customers do not switch is important, as it will enable them to develop strategies to overcome these switching barriers and gain market share (Colgate and Lang 2001) Ping (1993, 1997, 1999), following Johnson’s (1982) concept structural constraints, uses the term structural commitment as a measure of the extent to which as the customer has to remain in a relationship and Ping argues that structural commitment includes alternative attractiveness, investment in a relationship and switching cost

Barriers to customer defection, such as development of strong interpersonal relationships or imposition of switching cost, represent additional retention strategies

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Such barriers are important because they may generally foster greater retention and because they may help companies weather short-term fluctuation in service quality that might otherwise result in defection (A Jones, L Mothersbaugh et al 2000)

According to previous studies, the switching barrier is made up of switching cost, investment in a relationship, attractive of alternative and interpersonal relationships

Positive and negative switching barriers:

Hirschman (1970) makes the distinction between “having to be” or “wanting to be”

in a relationship Having can be seen as a negative reason to stay in a relationship or to remain a customer, while wanting to be in e relationship as a positive reason to stay Jones et al (2000) mentioned that some switching barriers can be seen as more positive

in their nature and others as more negative

With negative switching barriers regarding switching barriers coming from marketing or economics mention switching costs as an important switching barrier High switching costs tend to lock customers to suppliers and thus classify switching costs as negative switching barriers Moreover, investment in the supplier by the customer (generally how much time, money, effort invested in the relationship) is also considered a negative switching barrier, since it tends to lock the customer to the supplier, and if the customer has made physical investments in equipment Since, investment locks the customer to the supplier, high investment in the relationship by customer as negative switching barriers

As a positive switching barrier, classify attractiveness of other alternatives If the chosen supplier is better than the other available alternatives the customer, stays with

or is clocked to the supplier, because the supplier is perceived to be better than other potential suppliers Moreover, positive interpersonal in relationship are also viewed as positive switching barriers It can be expected that customer stay with suppliers Thus,

if one perceives high risks in a change of supplier this is here classified as a positive switching barrier

2.6 Switching Cost

Switching cost means the cost incurred when switching, including time, money and psychological cost (Dick & Basu, 1994), and is defined as perceived risk, insofar as there are potential losses perceived by customer when switching carriers, such as losses

of a financial, performance-related, social, psychological and safety-related nature (Murray, 1991)

In term of classification, Burnham, Frels and Mahajan (2003), classified switching cost as procedural switching costs, financial switching cost and relational switching costs These costs were found to be negatively correlated to consumer’s intention to switch the providers Klemperer (1995) developed three types of switching cost: artificial cost, learning cost and transaction cost However, the most appropriate cost is the transaction cost

The effect of customers’ defection or switching could be significant on revenues and service continuity Therefore, to reduce the level of customers switching to other service providers in a dynamic competitive environment, service providers develop strategies to respond to consumers’ switching cost (Farrell and Shapiro, 1988; Zauberman, 2003) More importantly, time is found to be a critical factor that influence consumers’ switching costs and lock-in (Zauberman, 2003) Empirical evidence, showed that reducing customer defections by five percent increased profit by seventy five percent and that defections have a stronger impact on profitability than market share, unit cost and many other factors usually associated with competitive advantages (Reichheld and Sasser, 1990)

In the telecommunication field, there are a lot of critical cost that must be considered when switching These includes the costs of informing others of change (friends, colleagues and business associates), the cost of acquiring new lines, new numbers, cost associated with breaking long standing relationships with a service provider, cost of learning any new procedures in dealing with the new service provider

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and cost of finding new service provider with comparable or higher value than the existing firm Apart from these is time and psychological effort of facing uncertainty with the new service provider (Dick and Basu, 1994; Guiltina, 1989)

Therefore, the first hypothesis that the author proposes:

H1: Switching cost is negatively related to Customer satisfaction

2.7 Investment in Relationship

Investment in relationship that means how much time, energy and money invested

in the relationship, uniqueness of investment in this wholesaler (Ping, 1993), spending time with partner, investing financially to providers (Lund, 1985), and time, energy, self-disclosures, shared experiences (Rusbult, 1986) Rusbult’s theory of investment regarding interpersonal and romantic relationships consists of two main variables: satisfaction with the relationship (defined as the positivity of affect or attraction to ones relationship) and commitment (the tendency to maintain a relationship and feel psychologically attached to it) The investment model asserts that satisfaction is a function of the rewards from the relationship (in a business context the utility created

by the suppliers products and services), and the cost of the relationship (possibly in a business context what one has to pay for the products and service) So, the second hypothesis that the author proposes:

H2: Investment in the relationship is negatively related to Customer satisfaction

2.8 Attractiveness of Alternatives

Attractiveness of alternatives means the reputation, image and service quality of the replacing carrier, which are expected to be superior or more suitable than those of the existing carrier Attractiveness of alternative carriers is intimately linked to service differentiation and industrial organization If a company offers differentiated services that are difficult for a competitor to match or to provide with equivalents, or it few

alternative competitors exist in the market, customers tend to remain with the existing company (Bedapudi & Berry, 1997)

It refers to customer perceptions regarding the extent to which viable competing alternative are available in the market place (Jones et al., 2000) And several researches have shown that when viable alternatives are lacking, the probability of terminating an existing relationship decreases Alternatively, when customer perceive the existence of several attractiveness of alternative is more likely that they will switch (Jones et al., 2000) In a channel context, Ping (1993) used the term “attractiveness of alternatives” consistent with social psychology research and found retailers were more likely to change suppliers when the attractiveness of alternative was high In a strategy context, the notion of the attractiveness of alternatives is linked to the idea of service differentiation (Jones, 1998; Kim, Park & Jeong, 2004) Thus, customer using a firm that is differentiated will tend to perceive that there are few attractive alternatives And

if a company offers differentiated services that are difficult for a competitor to match

or to provide with equivalents, customers tend to remain with the existing company (Bendapudi & Berry, 1997)

Alternative attractiveness that means how much better or worse in various dimensions an alternative wholesaler would be (Ping, 1993), how other suppliers would be in comparison with current supplier (Jones, 2000) and how appealing are the alternatives (Rusbult, 1986) So, the third hypothesis that the author proposes:

H3: Attractiveness of alternatives is positively related to Customer satisfaction

2.9 Interpersonal Relationship

Interpersonal relationship means a psychological and social relationship that manifests itself as care, trust, intimacy and communication (Gremler, 1995) Interpersonal relationships refer to positive personal relationships between a customer and an employee or employees of a service provider And they built through recurrent

These relationship offer a lot of benefits to customers, such as social benefits (fellowship, personal recognition), psychological benefits (reducing anxiety), economic benefits (discount, time saving), and customization (customer management) (Berry, 1995; Kim et al., 2004; Peterson, 1995) And Gwinner et al., (1998) mentioned that customer commit themselves to establishing, developing relationships with a supplier that provide superior value benefits

And, the fourth hypothesis that the author proposes:

H4: Interpersonal Relationship is positively related to Customer satisfaction

2.10 Research Model and Hypotheses

What is a good, acceptable or appropriate level of satisfaction, retention or loyal So, the need having a model which determines the customer satisfaction, retention influences in order to evaluate them is essential to be success in the competitive markets And mentioned that a model will be developed based on the previous researches for valuating different factors which influence customer satisfaction, and then satisfaction effects customer retention and this model will be applied for the mobile telecommunication market of Vietnam

Earlier studies of factors affecting customer retention usually set the focus on customer satisfaction and the switching barrier (e.g.Dick &Basu, 1994; Gerpott, Rams

& Schindler, 2001; Lee & Cunningham, 2001; Kim, 2003) The Customer experiencing

a high level of satisfaction is likely to remain with their exiting providers and maintain their subscription Hence, these researchers suggest that it is necessary, to analyze other potentially influential factors that the concepts of components in switching barrier were proposed (Jones, Mothersbaugh, & Betty, 2002)

Further, it has been demonstrated that the switching barrier plays the role of an adjustment variable in the interrelationship between customer satisfaction and retention In other words, when the level of customer satisfaction is identical, the level

of customer retention can vary depending on the magnitude of the switching barrier (e.g., Colgate & Lang, 2001; Jones et al., 2002; Lee & Cunningham, 2001)

And in fact, different types of constraints, together with customer satisfaction, determine customer choice of supplier (Berry, 1997) A few empirical studies investigate how various types of switching barriers (switching cost, investment relationship, attractiveness alternative, interpersonal relationship) affect satisfaction with suppliers, repurchase intention, attitudinal loyalty and the relationships between these variables (Jones, Beatty, 2000)

So, many studies have been conducted on the subject of customer retention and loyalty and also about these issues in the mobile telecommunication services industry They developed in order to developed models in order determine different factor influencing customer satisfaction, customer loyalty and customer retention And others studies have been interested to investigate how switching barriers affect satisfaction, repurchase intentions and attitudinal loyalty The theoretical framework built up around customer satisfaction and loyalty needs to incorporate switching barriers and how the different types of switching barriers effects on customer satisfaction, customer loyalty and repurchase intention

The mobile telecommunication suppliers must maximize customer satisfaction from the switching barriers in order to enhance customer retention In particular, mobile carriers must focus on the factors of switching barrier, including switching cost,

by early detection and prevention of factors in switching barriers

CUSTOMER SATISFACTION

CUSTOMER RETENTIONS SWITCHING COST

ATTRACTIVENESS ALTERNATIVES

INVESTMENT IN RELATIONSHIP

INTERPERSONAL RELATIONSHIP

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Overall customer satisfaction is what we are going to evaluate for this model through determine each factor of switching barriers will be calculated by testing the hypotheses

H1: Switching cost is negatively related to Customer satisfaction

H2: Investment in the relationship is negatively related to Customer satisfaction

H3: Attractiveness of alternatives is positively related to Customer satisfaction

H4: Interpersonal relationship is positively related to Customer satisfaction

H5: Customer satisfaction has positively associated with Customer retention

be explained and justified Then it will followed by data collection, sample collection and instrument used to collect the data, including methods implemented

to maintain validity and reliability of the instrument are described

3.1.1 Exploratory Research

Exploratory research is a valuable mean of finding out “what is happening; to seek new insights; to ask questions and to assess phenomena in a new light” (Robson 1993) This kind of research is a particularly useful approach when the aim with research is clarify and define the nature of a problem and an understanding of

it (Saunders, et al., 2000)

Exploratory research is characterized by flexibility regarding the methods applied Instead following formal procedures, the researcher has to be open to new ideas and insights which may redirect the exploration in a new direction A study

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with an exploratory purpose is intended to investigate a phenomenon that is little understood, to identify categories of explanations and to generate hypotheses and research questions for further research

3.1.2 Descriptive Research

A descriptive research approach is appropriate when the problem is well structured, when the researcher knows what knowledge it aims to collect and where there is no intend to look for the cause and effect relationships

The objective with this kind of research is to describe something, such as a population or a phenomenon It seeks to answer who, what, where and how questions Consequently, it does not give the answer to why questions, in other words it does not give the explanation of the cause of findings However, when solving business problems is often enough with the information obtained from describing a situation, it is not required to know why things are the way they are (Zikmund, 2000) This research is base on already exiting theories and hypotheses (Yin, 1994)

3.1.3 Explanatory Research

It is a study that establishes causal relationships between variables The emphasis here is on studying a situation or a problem in order to explain the relationships between variables Explanatory studies are designed to test whether one event causes another, the objective with this kind of research is to analyze cause-effect relationship, explaining what causes produces what effects

The purpose of this thesis that is finding out the main determinants of switching barrier on customer satisfaction and retention then evaluate and validate the proposed model in Vietnam’s mobile telecom market Base on this description and the mentioned types of research purpose this can be figured out that the purpose if this research is descriptive

3.2 Research Approach

There are several different ways of approaching a phenomenon, but also for a researcher to draw conclusions, understand and explain Research approach includes both a theoretical and methodological approach is qualitative or quantitative

In this study a deductive approach was chosen This is since the research starts with a literature overview which later is compares with the empirical findings and the main idea is drawn from already exiting theories within the research area

The purpose of qualitative research is to gain a deeper understanding and describe a problem Qualitative research implies soft data and is often presented as words and observations When conducting a qualitative research approach the aim

is to interpret and understand the phenomena by asking questions such as whom, how and why The questions are normally open-ended in qualitative interviews and data gatherings and no numerical finding exist Quantitative research implies hard data, is often presented as numbers that will determine the quantity or extent of some phenomena In quantitative research approach a large number of objects are selected and studied in order to increase the ability to draw general conclusions In most of exploratory researches the data collected is qualitative and other hand in descriptive researches the data is quantitative

In this study, a lot of data has been collected during the interviews and mostly

by distributing questionnaires All of this data has been collected during the interviews and as the result the methodological research approach in this thesis is quantitative

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3.3 Research Process

After the research problem, the research questions and research scope were defined The literature review was conducted to review all relevant theories and customer satisfaction, retention and loyalty models so as to find a suitable conceptual model for the factors of switching barrier effect customer satisfaction retention in Vietnam mobile telecommunication market and thereby develop its hypotheses The draft questionnaire was developed from the consolidation of various questionnaires used in some previous studies the extant literature Then research got a stage of research design where the research in this study was designed in two phases: a pilot study and a main survey

A pilot study was conducted with two rounds:

- The first round: a qualitative study by means in-depth interviews with some key customers in order to design the questionnaire based on the consolidated draft questionnaire developed from literature review and to determine the sampling population

- The second round: a quantitative study by conducting a survey with a sample of 30 customers by face-to-face interviews to preliminarily test the measures before launching a main survey

A main survey was conducted by means of online survey invitations to

be sent by emails and survey by direct interviews (face-to-face) through hard copies of questionnaires Data with the main survey was collected in four weeks

Data was processed and analyzed by using Exploratory Factor Analysis and Cronbach alpha reliability analysis to validate the questionnaire and ensure the reliability of the measurement scale Standard multiple linear regression (MLR)

was used to test hypotheses Then the main findings were drawn reported

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Research Problems Research Questions Research Scope

Refine measures & measurement scales

Research Model &

Refine the questionnaire

MAIN SURVEY Data collection (n=183)

Questionnaire Development

LITERATURE REVIEW

PILOT STUDY

RESEARCH DESIGN

DATA ANALYSIS & INTERPRETATION (EFA, Cronbach alpha, Regression) REPORT OF FINDINGS

Figure 3.1: Research Process