Determinants of customer satisfaction in the apartment industry - The cace for the apartment industry in Vietnam

This study examined the determinants of satisfaction and the effects of customer satisfaction on word of mouth of consumers in the apartment industry in Vietnam, as well as the influence

NGUYEN THI MONG VAN

DETERMINANTS OF CUSTOMER SATISFACTION

IN THE APARTMENT INDUSTRY

THE CASE FOR THE APARTMENT INDUSTRY IN VIETNAM

MASTER’S THESIS

In Business Administration Ology code: 60.34.01.02

Supervisor

Dr Tran Ha Minh Quan

Ho Chi Minh City, 2012 - -

I am also grateful to my classmates and my colleagues, especially Le Thi Bich Dao and Ngo van Quan for all of their friendship and encouragement

I also wish to thank my friends in Becamex subsidiaries for their great support, and to the respondents, without whom, my thesis could not have been accomplished

Finally, I am most grateful to my dear husband He is my whole life He is

my greatest inspiration and the source of encouragement to overcome all difficulties through out the duration of this study

Abstract

In market economy, quality of products or services is the most important tool

to succeed The nature of the quality of goods is intended to satisfy the needs of the highest enjoyment of goods or services Construction work in general and of apartment buildings in particular are a type of goods The criteria for the quality

of it also must be directed towards those values However, the criteria for the quality of goods or construction in general and apartment buildings in particular

is extremely diverse The business activities in the field of real estate are trying to improve the quality of products and services to satisfy the maximum demands of customers, especially in the apartment business This study examined the determinants of satisfaction and the effects of customer satisfaction on word of mouth of consumers in the apartment industry in Vietnam, as well as the influence

of background data on the relationship between satisfaction and word of mouth activity This research measures the factors influencing apartment satisfaction in quantitative research methods The scale was evaluated by the factor analysis method to explore EFA and reliability testing (Cronbach's alpha) then multiple regression analysis is used to test the research model

This study will help to improve the strategies of real estate companies in choosing the best measures to improve the quality of their company's product, while

As time was short, this study focused its review on the relationship between six factors influencing their apartment construction and intention to engage in word of mouth activity

Keyword: Customer satisfaction, word of mouth, Service quality, apartment

industry

Contents

Acknowledgement 1

Abstract 2

Contents 3

List of Tables 6

List of Figures 7

Chapter 1: INTRODUCTION 8

1.1 Overview 8

1.2 Research background 8

1.3 Problem statement 9

1.4 Purpose of the study 10

1.5 Objectives of the study 10

1.6 Research question 11

1.7 Significance of the study 11

1.8 Structure of thesis 11

Chapter 2: LITERATURE REVIEW 13

2.1 Overview 13

2.2 Overall customer satisfaction 13

2.2.1 Concept of customer satisfaction 13

2.2.2 Determinants of customer satisfaction 14

2.3 Hypotheses and model 16

2.3.1 Customer cost 16

2.3.2 Physical quality 17

2.3.3 Environmental quality 19

2.3.4 Project facilities 19

2.3.5 Regional facilities 20

2.3.6 Service quality 20

2.3.7 Relationship between customer satisfaction and word of mouth 22

2.4 Conclusion 24

Chapter 3: RESEARCH METHODOLOGY 25

3.1 Overview 25

3.2 Research purpose 25

3.3 Research design 26

3.4 Item generation 26

3.4.1 Overall customer satisfaction scale 26

3.4.2 Scale to measure service quality 28

3.4.3 Scale to measure customer satisfaction 29

3.4.4 Scale to measure word of mouth 34

3.5 Pilot test 34

3.6 Main study 35

3.6.1 Sampling 35

3.6.2 Sample size 36

3.6.3 Data analysis techniques 36

3.7 Conclusion 37

Chapter 4: DATA ANLYSIS AND FINDINGS 38

4.1 Overview 38

4.2 Respondents demographics 38

4.3 Scale assessment 39

4.3.1 Reliability testing (Cronbach’s Alpha) 40

4.3.2 Exploratory factor analysis 42

4.3.2.1 Exploratory factor analysis with determinants of customer satisfaction 42

4.3.2.2 Exploratory factor analysis with overall customer satisfaction and word of mouth 45

4.4 Testing research model and hypotheses 45

4.4.1 Testing correlations between all constructs 45

4.4.2 Testing research model and hypotheses 46

4.4.2.1 The relationship between determinants of customer satisfaction in the apartment industry and customer satisfaction 46

4.4.2.2 The relationship between overall customer satisfaction and word of mouth in the apartment industry 49

4.5 Conclusion 50

Chapter 5: CONCLUSIONS AND IMPLICATIONS 51

5.1 Overview 51

5.2 Conclusions of the study 51

5.3 Implications of the study 51

5.3.1 Theoretical implications 51

5.3.2 Practical implications 52

5.4 Limitations and recommendations for future research 52

List of References 54

Appendix 1- Questionnaire (Vietnamese version) 60

Appendix 2- Observed variables 63

Appendix 3 - Descriptive statistics of variables 65

Appendix 4 - Reliability analysis- Cronbach’s Alpha 66

Appendix 5 - Factor analysis 69

Appendix 6 - Regression result 71

List of Tables

Table 2.1 Service quality dimension definitions (modified from Zenithal et al.,

1990) 22

Table 3.1 Scale to measure service quality 29

Table 3.2 Scale to measure customer cost 32

Table 3.3 Scale to measure physical quality 32

Table 3.4 Scale to measure environmental quality 32

Table 3.5 Scale to measure project facilities 33

Table 3.6 Scale to measure region facilities 33

Table 3.7 Scale to measure customer satisfaction 33

Table 3.8 Scale to measure word of mouth 34

Table 4.1 Demographic profile of respondents 38

Table 4.2 Reliability of measurement items 41

Table 4.3 EFA result for construct measurement scales (2nd times) 43

Table 4.4 Total variance explained 44

Table 4.5 EFA result for construct measurement scales 45

Table 4.6 Correlation matrix 46

Table 4.7a Model summary 47

Table 4.7b ANOVAb 47

Table 4.7c Coefficients 48

Table 4.8 Summary of hypotheses testing results 49

Table 4.9a Model II summary 50

Table 4.9b Coefficients 50

List of Figures

Figure 1.1 Structure of Thesis 12

Figure 2.1 Research model of customer satisfaction 24

Figure 3.1 Research process 27

Figure 3.2 Response rate 36

Figure 4.1 Means of joining of respondents 39

Figure 4.2 Relationship between determinants of customer satisfaction in apartment industry and customer satisfaction 47

Figure 4.3 Relationship between overall customer satisfaction and word of mouth in apartment industry 49

Chapter 1: INTRODUCTION 1.1 Overview

This chapter presents an overview of the research, the Background to the study, Problem statement, purpose of the study, objectives of the study, research questions, significance of the study, and structure of thesis

1.2 Background to the study

Customer satisfaction is one of the key issues for companies in their efforts to improve quality in the market place Most businesses have their own targets for being profitable They have carefully planned and implemented strategies, but they all have something in common – a customer Business purposes are based on customers and if the company wants to be successful, it has to concentrate on them This means determining customers’ needs, responding to their requirements and maintaining customer satisfaction by assuring quality in company’s operations Besides, customer satisfaction is so important, because satisfied customers spread positive word of mouth which attracts more new customers, and then companies will sell more and gain high profits (Garson 1993, 5.)

The apartment industry in Vietnam recently formed and flourished in recent years The development of the apartment industry has contributed greatly to the urbanization of Vietnam Currently, however, the apartment market in Vietnam has fallen in the general downturn of the economy Project investors such as Hoang Anh Gia Lai are decreasing their prices in a number of new apartment projects as much

as 40% Other projects such as the Discovery Complex apartment project in Hanoi, Dai Thanh project, etc are experiencing a similar depreciation

Competition between investors is fierce among apartment products as well as other commodities in the market Therefore, when consumers decide to buy or invest property goods, customers will consider many factors that affect their decision to buy and satisfy their life needs Apartment investors must understand these factors

to build an effective business strategy

VNR survey data of property report (2009-2010) indicates that, the most important

factor for customer satisfaction is the location of the project (gaining an advantage position of 71.2%) Next is the project design factor In addition to these factors, the decision to buy is based on the flow of information relating to apartment options before buying This is where word of mouth has a large influence In order to increase sales, investors need to understand the factors affecting customer satisfaction and enhance positive communication activities to develop more new customers

1.3 Problem Statement

The Vietnamese economy is developing in accordance with Party economic policy The population’s incomes was increased dramatically, demand for housing along with a growing Current, source of housing supply from many Vietnam and foreign real estate companies are quite diverse

When Vietnam integrated into the world economy, conceptions about the apartment industry gradually changed along with the developing of the economy Today, owning an apartment is proud choice, especially for young people because interior decorations of apartments that are modern, luxurious and similar to 4 or 5 star hotels Each apartment is designed close to public services, such as supermarkets, Asian and European restaurants, swimming pool, multi gym, postal services, banking, kindergarten, office of the company, etc as a miniature city, so that people can use the utility on the spot without having to go far, etc

In order to meet this demand, many construction companies have invested in this sector Compared to just two years ago, this year the apartment industry has diversified profusely

Due to the increased competition experienced between firms, customer satisfaction has become more important Good product and quality differentiates between products, ensures consumer loyalty and may lead to increased market share

In Vietnam, empirical studies on the state of customer satisfaction in the apartment industry are very scant The increase competition in the apartment industry in Vietnam and the growth trend in real estate supply for the past decade, does not

provide empirical support for the claim that customer are satisfied with the quality delivered by firms in the industry It is necessary to increase understanding of the factors that drive customer satisfaction in this industry in order to provide management with empirical basis for developing effective marketing strategies

1.4 Purpose of the study

Currently, customers spend a large amount of money to buy an apartment but the build quality and services provided are very low In some apartment projects, after two years from purchase date, the walls are cracked, sanitary ware is rusted , etc despite, in the purchase apartments contract have recorded in detail of interior construction materials and structural apartment, when building investors have arbitrarily changed without notice to customers A series of accompanying utility services such as entertainment place, parking, etc that investors introduced to customers when signing purchase contracts that are not included in the utility of building

It is very necessary to research the service or product quality because of affecting customer satisfaction, creating belief in investing and residing in apartment

For the above identified research problem, the main purpose of this study is to analyze the factors related to overall customer satisfaction and intention to engage

in word of mouth activity in apartment industry in Vietnam

1.5 Objectives of the study

The following are the specific objectives of this study:

- To examine the determinants of customer satisfaction in the apartment industry in Vietnam

- To identify the relationship between customer satisfaction and word of mouth communication

communication in the apartment industry in Vietnam?

1.7 Significance of the study

This study is significant in evaluating customer satisfaction in the apartment industry:

First, it will provide the basis for making decisions about improvements in current housing stock as well as the design and development of future housing

Second, it will encourage housing managers, designers, and policy makers to be more accountable

Third, to policy makers the finds and results of this study will provide insights and guidance to help monitor the operations of the apartment industry in Vietnam

Forth, will show the impact on physical and psychological health of customers who reside in apartments

1.8 Structure of Thesis

The study is organized into five chapters (Figure 1.1)

Figure 1.1 Structure of Thesis

Chapter one is the introductory chapter It includes the background, problem statement, purpose of the study, objectives, research questions, significance, and structure of thesis

Chapter two reviews relevant literature, concepts and theoretical framework: overall customer satisfaction, factors influence on customer satisfaction, research model,

hypothesis and chapter summary

Chapter three provides the methodology of this section It focuses on the research perspectives, data collection It identifies the hypotheses and explains in detail the main constructs and concepts as well as their indicators and measurements

Chapter four presents the data analysis and resulting and findings

Chapter five presents the conclusions and implications

CHAPTER 2: LITERATURE REVIEW

2.1 Overview

The previous chapter introduces an overview of the study background, the research

of objective and the research questions This chapter provides a detail review of relevant literature This chapter covers brief concept and theoretical framework: overall customer satisfaction, determinants of customer satisfaction, research model, hypothesis and chapter summary

2.2 Overall customer satisfaction

2.2.1 Concept of customer satisfaction

Customer satisfaction is a key element in the business strategies and goals of all businesses in today’s competitive market (Gro’nroos, 1984; Lovelock & Wirtz, 2007; Anderson, Fornell, and Lehman, 1994) There are many concepts of customer satisfaction defined by many authors ‘‘Satisfaction is a person’s feeling of pleasure

or disappointment resulting from comparing a product’s performance (outcome) in relation to his or her expectation’’ (Kotler & Keller, 2006 p 144) Satisfaction is a

‘‘psychological concept that involves the feeling of well-being and pleasure that results from obtaining what one hopes for and expects from an appealing product and/or service’’ (WTO, 1985) Customer satisfaction is “as an attitude-like adjustment following a purchase act or a series of consumer product interactions” Youjae Yi (1990 cited in Lovelock & Wirtz 2007) Customer satisfaction is ‘‘a consumer’s post-purchase evaluation and affective response to the overall product

or service experience’’ (Oliver, 1992) ‘‘Satisfaction is merely the result of things not going wrong; satisfying the needs and desires of consumers.’’(Besterfield 1994); According to Gyasi and Azumah (2009) satisfaction is “The process of customer overall subjective evaluation of the product/service quality against his/her expectation or desires over a time period.”

Admittedly, satisfaction is more complicated to define to accurately fit every context and measure In the words of Oliver (1997), “everyone knows what

[satisfaction] is until asked to give a definition Then it seems, nobody knows” From marketing perspectives, customer satisfaction has multi-dimensionality The object of customer satisfaction may be varied and can be related to different dimensions of multiple experiences with product/service provider (Surenshchandar

et al 2002 cited in Satari, 2007) Besides, the product or service quality there can be

several dimensions (Gro¨nroos, 2000, 2001; Edvardsson, 2005), such as what the

product offers, product or service reliability, timeliness, friendliness of the service providers, and the like Therefore, depending on the purpose one wants to achieve, one can relate satisfaction to any object of interest

Hence, there are a lot of definitions of customer satisfaction as well as a lot of controversies about it Providing a precise definition of satisfaction is difficult However, we can understand customer satisfaction as follow: "This is the response

of consumers to meeting consumer’s needs" (Oliver 1997, 13) This definition implies that satisfaction is consumers’ satisfaction in the consumption of products

or services because that meet their expectations, including the level of satisfaction

on both the desired level, equal to the desired level and also less than the desired level Thus, in order to meet the research objectives, the definition of customer satisfaction in apartment industry is defined as follows:

- The expectations of customers resident in apartments compared with reality

of their experience

- Benefits received when living in that apartment

2.2.2 Determinants of customer satisfaction

Many factors drive customer satisfaction that need to be examined in order to reliably measure it Satisfaction is an overall customer attitude towards products, or

an emotional reaction to the difference between what customers anticipate and what they receive, regarding the fulfillment of some need, goal or desire (Hansemark and Albinsson, 2004) Satisfaction is a person’s feeling of pleasure or disappointment resulting from comparing his/her expectation of a given experience with the product

or service If performance fails to meet expectations, the customer will be

dissatisfied If the performance matches the expectations, the customer is satisfied

If the performance exceeds expectations, the customer is highly delighted (Kotler and Keller, 2006)

In the apartment industry, determinants of customer satisfaction have not to date been well researched Sale (2008) observed that building features, such as number

of bedrooms, size and location of kitchen, quality of housing units were strongly related to customer satisfaction Also satisfaction with neighborhood facilities such

as schools, health care, shopping and community social centre has been noted to be

(2000) assessed and compared residents’ satisfaction with their housing and environment in the three housing schemes in Yemen They gave variables in model

of housing satisfaction measurability are housing environment (the dwelling unit, neighborhood and community services) and housing quality (dwelling interior schedule, dwelling exterior schedule, and dwelling environment schedule) In the interview, residents showed that the level of satisfaction with their neighborhoods is the most important issue The most important factor combined with neighborhood satisfaction was privacy, a reflection of the cultural background in Yemeni society

Oh (2000) in her study on housing satisfaction in Bandar Bare Bang, Malaysia, revealed that while the residents were satisfied with the space and cost of house owned, they were dissatisfied with the size of the kitchen, plumbing, and public facilities such as recreational areas, playground, taxis and bus services in the area The research of Tsembelis et al (2003) indicated that housing satisfaction was influenced by the surrounding neighborhood, patterns of social interaction, satisfaction with the management practice of repair, tenant involvement, besides the quality of home itself

The study of Phillips et al (2005) examined the role of residential satisfaction (satisfaction with dwelling unit, estate, and district) in mediating the effects of dwelling conditions (interior environment and exterior environment) on

psychological well-being He provided dwelling conditions factors that affect on older residents satisfaction and psychological well-being

The study of Tu and Lin (2008) identified the internal evaluative structure with which Taipei City's residents assessed the quality of their residential environment in high-density and mixed-use settings In the study, The principal component analysis result reveals a multidimensional evaluative structure of residential environment quality perceived by Taipei City's residents, which consists of six evaluation scales (i.e urban planning and design, security and social relationship, transportation and commercial services, residential atmosphere, environmental health, and facility management) with eleven underlying factors

Amole (2009) investigated the characteristics of residence halls in Nigeria that correspond with high levels of residential satisfaction among students His study indicated that the variables which explained satisfaction were the social qualities of the residences (especially, the social densities) the kitchenette, bathroom, and storage facilities and some demographic characteristics of the students

In 2009 Nahmens and Ikuma surveyed customer satisfaction with service quality, and assessed the correlations between various factors on home buyer expectations and their perceptions of service quality

The study of Yau et al (2009) used the Building Quality Index (BQI) developed by The University of Hong Kong to indicate determinants of building performance Those are architecture, building services, operations and maintenance, external environment, and management approaches

Based on the above review of the literature, in this study will examine customers’ satisfaction through the following determinants are customer cost, physical quality, environmental quality, service quality, project facilities, and region facilities

2.3 Hypotheses and model

2.3.1 Customer cost

Customer cost refers to the price of a product and includes the purchase costs, use costs and post-use costs that customers must absorb to own the product In this

study, customer cost relates to the expense of initial purchase as well as the expense

of subsequent maintenance

Price is seen as consumer awareness of abandonment or sacrifice of something in order to own a product or a service (Zenithal, 1988) Price of the product or service can be greatly influenced by the perception of product quality, service, satisfaction and value Some Researchers have found that there is a significant relationship between price and satisfaction customers (Varki and Colgate, 2001) They showed that after buying a product, the perceived price positive impact on customer satisfaction

In the apartment industry, customer cost plays an important role in conveying customer satisfaction In which, price and support credit is one of the important factors Based on the above literature, the first hypothesis between feeling about customer cost and the level of customer satisfaction covariant relations, as specific:

H1: Customer cost has a significant positive direct effect on overall customer satisfaction

2.3.2 Physical quality

Quality of housing is a combination both of user requirements and user satisfaction The main source of many problems occurs as a result of health, safety and physical problems caused by the condition of the apartment The quality of the walls, quality the floors, windows, doors and paint are all indicators of the apartment (Ukoha and Beamish 1997, Salleh, et al 2011)

In apartments, the quality of the walls is important Major cracks result in major repairs The materials use for the walls also affect building temperature While, materials of floor in apartment are fully cemented, residents can use other materials based on their preference

Besides that, quality windows provide good ventilation and air circulation If windows are unable the temperature in apartment will rise, and residents will feel uncomfortable This also can affect mental health, especially for children and elders

Besides, in order to distinguish an apartment were in a good quality or not were based on the architecture from internal and external aspects and also the nearby area (Sale 2011) Internal architectural features include the dwelling size (Turkoglu1997, Chi and Ann 1979, Liu 1999), the size of the living room, bedroom, the kitchen, toilets and washing area (Sale et al 2011, Poke, Abdul-Mushin 2010), the number of bedroom (Ibex and Amole 2010, Nurhayatii Sebli, Bujang Ahmad Ariffian 2008 and Ilesanmi 2010), the location of the bedroom and the size of the dining room (Ukoha and Beamish (1997) laundry and washing area (Mohit et al 2010)

The combination of size of living room, bedroom, dining room, toilets and bathroom, kitchens are the main issues studied by various scholars since 1980s Number and location of bedroom, kitchen, commode, laundry, and washing area must be considered carefully to construct quality apartments

Lighting is also a basic need It was rated a priority concern for users after health and safety Lightings is really emphasized in new construction It influences mental health, while the lack of it will contribute to mental disorder (Ibem and Amole 2011) Lighting indicators consists of the following:

a) Natural lighting (Djebarni and Abed 1998, Liu 1999, Calvert 2009, Ibem and Amole 2011, Pacione 1984, Ilesanmi 2010, Savasdisara et al 1989, JianGe, Kazunori Hokao 2006)

b) Artificial lighting (Djebarni and Abed 1998, Chi and Ann 1979)

c) Quality of lighting (Kincaid 1994)

Natural lighting is adequacy of daylight distribution within the apartment Artificial lighting is powered by electrical energy such as the lamp Nowadays, artificial lightings is found everywhere in an apartments in the living room, bedrooms, toilets and in all public areas of the building Both natural lighting and artificial lighting affect the quality of lighting in the apartment It cause physical and mental (Jeong and Lee 2006)

Besides, the basic requirement in apartment such as water pressure, sewerage is a fundamental of the quality of apartment that can affect human psychology, social

and economic (Nurhayatii Sebli, Bujang Ahmad Ariffian 2008) Similarly, to drainage, it is important to avoid any health problem and cleanliness problem It will take care by the apartment management Therefore, the physical quality has a contribution on customer needs The second hypothesis is proposed as follows:

H2: Physical quality has a significant positive direct effect on overall customer satisfaction

The apartment is not only a place to live but also a place to rest, relax and communicate with the community So, environmental quality should be noted Consequently, the third hypothesis is proposed as follows:

H3: Environmental quality has a significant positive direct effect on overall customer satisfaction.

2.3.4 Project facilities

In general, project facilities are necessary to enhance resident's daily activities Moreover, most daily activities occur in the apartment building, so the basic utilities are the necessity in designing apartment Utilities and services elements are parking place, lobby, ladder, lift, etc

In apartment building, ladder and lift are necessary They are essential for access

Storage space in apartments is connected with apartment satisfaction Most of the apartments lack adequate storage space Parking is also a vital contribution to customer satisfaction From above problem, the forth hypothesis is proposed as follows:

H4: Project facilities have a significant positive direct effect on overall customer satisfaction

2.3.5 Region facilities

In the apartment industry, region facilities factor is related to location According to Nicola (2003) appropriate location and accessibility of to service delivery and infrastructure are the key attributes to make the house adequate and meet the inhabitants’ needs Convenience of location will give benefits to owners as well as users because it will be easy for them to do their daily activities conveniently It also will contribute to better living condition Mohit et al (2010), Kellekci & Berkoz (2009), Pushpa and Rosadah (2008) state that location choice near to the town centre genuinely influences user preference Turkoglu (1997) and Kellekci & Berkoz (2009) found that accessibility to educational institutions such as primary and secondary school, for instance, clinics and hospitals are crucial indicators that influences user preference Mohit et al (2010), Calvert (2009), Ibem and Amole (2011) assert that proximity to recreational parks is listed as quality in housing Users can spend their time relaxing and chatting with neighbors there

Mohit et al (2010), Salleh (2011) and Kellekci & Berkoz (2009) ascertained that users prefer strategic locations near shopping centers and markets or shops because they can go shopping easily by walking So, it is important to assess region facilities that influence the residents' preference as well as to enhance the quality of the apartment From above problem, the fifth hypothesis is proposed as follows:

H5: Region facilities have a significant positive direct effect on overall customer satisfaction

2.3.6 Service quality

Satisfaction also depends on product and service quality Kotler and Keller (2006)

stated that quality is the totality of features and characteristics of a product or service related to satisfying implied needs

For decades, many researchers have developed a service perspective (Zeithaml,

2009, Ramsaran and Fowdar, 2007) Chang (2008) notes that the concept of service quality should be generally approached from perspective of the customers because they may have different values, different ground of assessment, and different circumstances Parasuraman, Zeithaml and Berry (1990) says that service quality is

an extrinsically perceived attribution based on the customers’ experience of the service encounter Especially, Lu and Sock, 2008 showed that improved service quality will help companies ensure greater customer satisfaction If a company provides superior service, it will increase profitability and encourages positive word of mouth recommendations to potential customers (He stein and Gamier, 2006)

In this study, the service quality assessment base on the model of Zenithal et

al that model consists of five components with five characteristic (Table 2.1) as: Appearance, Reliability, Timeliness, Knowledge and Empathy Although, service quality and satisfaction are two different concepts, they are closely related to each other The previous study has shown that service quality is the cause of satisfaction (Cronin and Taylor, 1992) because quality relate to service delivery, satisfaction only to be assessed after using that service However, service quality are improved good but not based on customer needs, consumer has never been satisfied with that service Therefore, quality is must ultimately be evaluated from the customer’s perception The sixth hypothesis is proposed as follows:

H6: Service quality has a significant positive direct effect on overall customer satisfaction

Table 2.1 Service quality dimension definitions (modified from Zeithaml et al., 1990)

Visual impression of the home builder: nice brochures, Well decorated sales office, sales personnel, etc

dependability

Consistency of performance and dependability of the service before, during and after the home-buying process

before, during and after the Home buying process

and knowledge to perform the service Ability to inspire trust and confidence

Appropriate knowledge and skills required to perform the service before, during and after the home-buying process

friendliness of contact personnel Individualized attention – making the effort to know customers and their needs

Politeness, respect and friendliness of the sales personnel or any other builder’s employee that directly interacts with the home buyers

2.3.7 Relationship between customer satisfaction and word of mouth

Word of mouth has an important influence on the consumers’ behavior and sales growth because through word of mouth, the company can get more customers faster than by advertising and direct mail (Procter and Richards, 2002) Especially, information received through word of mouth is reliable because consumers have recognized product characteristic with previous purchasing experiences Consumers have been found to rely on word of mouth to reduce the level of perceived risk and the uncertainty that are often associated with service purchase decisions (Murray, 1991) Compared to purchasers of goods, Murray (1991) found that service purchasers have greater confidence in personal sources of information as well as a greater repurchase preference for personal information sources

In approach to satisfaction as a post-choice evaluative judgment regarding a specific purchase selection, satisfaction is understood by its transaction specific component (Oliver 1981) Another approach sees satisfaction as the customers’ evaluations of multiple experiences with the same product or service provider over time (Bolton and Drew 1991), given that this cumulative construct incorporates previous experiences and the cumulative satisfaction construct will contain an element of customer attitude (Westbrook and Oliver 1991) Subsequent studies, however, have demonstrated that, in addition to the cognitive view, customer satisfaction also contains emotional components (Oliver and Westbrook 1993) A recent study (Martin et al 2008) agrees with Zeelenberg and Pieters (2004) in suggesting that emotionally based satisfaction is a stronger predictor of future behavioral intentions than traditional cognitive measures The level of customer satisfaction has an effect

on two purchase behaviors, namely, repurchase intentions and word of mouth (Oliver 1980) The likelihood of customers distributing word of mouth will depend

on their satisfaction level for at least two reasons First, the extent to which the product or service performance exceeds the customer’s expectations might motivate him or her to tell others about his or her positive experience Secondly, to the extent that the customer’s expectations are not fulfilled, possibly creating a customer regret experience and this customer will engage in word of mouth behavior as a form of “venting” his or her negative emotions, such as anger and frustration,

studies supporting for the significant effect of satisfaction on word of mouth (Brown et al 2005, Swan and Oliver 1989) Thus, based on the above definitions and suggested relationships in the literature, the following hypothesis is formulated:

H7 Overall customer satisfaction has a significant positive direct effect on word of mouth

Basing on the above literature review and research question, to test the model of customer satisfaction and intention to engage in word of mouth activity This research uses customer satisfaction model developed by Zadkarim S and Emari H

(2011) because this model describes the basic components of customer satisfaction

in apartment industry ( Figure 2.3) The researcher also assumes that there should be some adjustments of the measurement scale in order to make the research model

more suitable for the apartment industry in Vietnam

The theoretical studies show that customer satisfaction in the apartment industry depends on customer cost, physical quality, environmental quality, project facilities, region facilities and service quality Service quality item is an important item proposed in the research model

2.4 Conclusion

This chapter has examine theoretical framework of customer satisfaction Six factors - customer cost, physical quality, environmental quality, project facilities, region facilities and service quality - are considered to influence customer satisfaction and intention to engage in word of mouth activity On that basis, a customer satisfaction model with seven research hypotheses has been proposed The next chapter will present the research methodology

Environmental

quality

Customer cost

Overall Customer Satisfaction

Project

Word of Mouth

Region Facilities

CHAPTER 3: RESEARCH METHODOLOGY 3.1 Overview

The previous chapter presents the theoretical framework for the research, proposed research model along with the research hypothesis This Chapter presents research methodology used to build and assess the measurement scales, the statistical techniques employed to analyze the data, and testing the research hypotheses and research model as well

3.2 Research purpose

The study purpose is a broad statement of what the research hopes to achieve According to purpose, study could be broadly divided into descriptive, exploratory

and explanatory (Saunders et al., 2003; Cooper and Schindler 2006)

Descriptive research: It portrays and accurate profile events or situation It involves present facts about a phenomenon as it is perceived or as it is in reality

Explanatory research: Explanatory research establishes causal relationship between variables It studies problems and situations with the main purpose of explaining relationships between variables (Saunders et al, 2003) They are also used when the purpose of the study is to answer ‘why’ in a given context

Exploratory study: This is conducted to explore and find out what is happening or to seek new insights about a phenomenon in a new light” (Robson, 2002) It is used when a researcher wants to know a deeper understanding of a problem, or where the area of study is so new It, therefore, involves the use of methods like searching for library materials, asking for experts’ opinions, and conducting focus group interviews

Since the purpose of the study involve both qualitative and quantitative results, the methodology has been proposed by many authors to be appropriate in some cases This study combines all three: explanatory, descriptive and exploratory purposes Firstly, the study is descriptive in that it seeks to describe in detail the determinants

of customer satisfaction in the apartment industry, thus giving an in-dept understanding of the reality of customer satisfaction with apartment quality in

Vietnam and to better understand relative importance of quality dimensions to the customer Secondly, the study is explanatory since it will seek to determine the impact of factors influencing overall satisfaction Thirdly, this study is exploratory

in that it is still unknown in apartment industry in Vietnam, whether customer are satisfied and what are their perception of the apartment industry in Vietnam

3.3 Research design

The research design of this study is shown in figure 3.1 The current study employs

a descriptive method Data for this study was collected using a survey technique This technique “provides a quick, efficient and accurate means of assessing information on a population, especially in the case of a lack of secondary data” (Zikmund, 1997- cited in Quan, 2006)

3.4 Item generation

Measurement scales used to measure the research constructs in this study were based on previous studies that were discussed in the literature review Eight constructs - physical quality, customer costs, environmental security, project situation, project facilities, word of mouth, service quality, and customer satisfaction - were operationally defined in order to test the research model

3.4.1 Overall customer satisfaction scale

In the last decade, number of national and international barometers have been introduced The development of national customer satisfaction barometers can be summarized as follows (Johnson et al., 2001):

1 The first attempt to develop and install a national measure for customer satisfaction was reported in Sweden in 1989 Professor Claes Fornell was the main architect of the Swedish National Customer Satisfaction Barometer

2 The national quality and satisfaction barometer of Germany (The German Customer Barometer––Quality and Satisfaction) focuses mainly on the micro-economical level of business organizations and it was established in 1992

Testing hypotheses

EFA: Explotary Factor Analysis

MLR: Multiple Linear Regression

Figure 3.2 Research process

Testing hypotheses

EFA: Exploratory Factor Analysis

MLR: Multiple Linear Regression

Figure 3.1 Research process

3 Professor Claes Fornell supervised the conduct of the preliminary analysis of the American Customer Satisfaction Index (ACSI) in 1993 This particular index constitutes an effort to adopt the Swedish satisfaction barometer in America, with Some improvements, revisions, and reconciliation The ACSI provides complete data since 1994

4 It should be noted that the European Union is interested in the development and installation of a comparative system of national satisfaction indices since 1998 The preliminary study in a limited number of industry sectors was conducted within

1999, while results for the European Customer Satisfaction Index (ECSI) were published in 2000

5 Other individual efforts of establishing national satisfaction indices in the European area concern Denmark, Austria, France, The Netherlands, Switzerland, and others

6 Both Taiwan and New Zealand measure and report the customer satisfaction of a limited number of companies since 1995 Also, the preliminary survey for the installation of a permanent satisfaction barometer in South Korea was conducted in

1998, while in Malaysia, a pilot survey is planned for the next year

In this study customer satisfaction was measured using a scale developed by Oliver and Swan (Burns and Neisner, 2006), because it was necessary to modify the items

to relate to apartment buying experience All items were measured using five-point scales ranging from one “Strongly disagree” to five “Strongly agree”

3.4.2 Scale to measure service quality

To measure service quality in the apartment industry and customer satisfaction, the researcher has used the five SERVQUAL dimensions modified to measure service quality (Table 2.1) The purpose of SERVQUAL is to measure current service quality with diagnostic abilities It is not predictive This assessment model was used in this study with some modifications to reflect the housing industry domain This model (Table 2.1) defines service quality as it relates to the discrepancy between apartment buyer’s service expectations and service experienced Apartment

buyer’s service expectations are influenced by past experiences, communication (builder’s advertisement, brochures, etc.) and personal needs Service experienced is the actual service apartment buyers received from their builders during the entire process from sale through to the of the warranty period

This model also identifies five dimensions that apartment buyers use to assess service quality and represent the evaluative criteria of the current study To quantify the five dimensions of service quality in the home building context, it was necessary

to tailor the original definitions and provide a simple, conceptually sound definition

of each dimension of service quality within the home-building process However, after discussion with group of customers, some complement and elimination have been done In this study, because service quality factor is research on overall, its scale consists of 5 items as follows: (table 3.1)

Table 3.1 Scale to measure service quality

Company ensure consistency of performance and dependability

of the service

SERQ1

Employees have necessary knowledge to answer my questions

before, during and after the buying apartment

SERQ2

3.4.3 Scale to measure customer satisfaction

Philips et al 2005 proposed that assessment of dwelling conditions include at least ten dwelling attributes (e.g lighting, levels of crowding and temperature) and ten neighborhood attributes (e.g lighting in corridor, lobby, public space, stairs, lift, escalator, air and noise pollution)

Djebarni and Al-Abed (2000) suggested a model to measure residents’ satisfaction

by two variables (housing environment and housing quality) Housing environment

items are dwelling unit, neighborhood and community services Housing quality items are interior schedule, dwelling exterior schedule and dwelling environment schedule

In the research of Tu and Lin (2008), environmental quality was measured by six variables These variables are citywide housing status (dwelling types), inhabitant density in typical residential zones (dwelling unit , avenue floor area per dwelling unit, avenue floor area per person), mixed use intensity, and spatial features in typical residential zones (typical block size, building height, side walk, street scope)

Assessment of service quality in the model of Nahmens and Ikuma (2009) identified five dimensions These dimensions are apparent (visual impression of the service organization: facilities, equipment and personnel), reliability (consistency of performance and dependability), timeliness (timeliness of service), knowledge (possession of the required skills and knowledge to perform the service, and ability

to inspire trust and confidence), and empathy (politeness, respect and friendliness of contact personnel, individualized attention, making the effort to know customers and their needs)

In the study of Yau et al (2009), a list of building factors that fit the institutional and cultural settings of apartment buildings in Hong Kong was identified for the development of the Building Quality Index (BQI) These factors are architecture (size, plan shape, headroom, windows, noise reduction, and open space), building services (water supply, drainage, refuse disposal, lift), external environment (density, adjacent use, air quality, aural quality, visual obstruction, thermal comfort), operations and maintenance (cleaning, pest control, refuse handling, drainage condition, unauthorized alteration, water quality), and management approaches (owners’ duties, documentation, emergency preparedness)

Residential satisfaction in the research of Amole (2009) conceptualized as influenced by objective and subjective measures of housing attributes and the demographic characteristics of the students Objective physical variables include the

morphological configuration of the hall, number of persons in the bedroom, and presence or absence of a reading room, common room, kitchenette and a balcony (terrace at the back of the bedroom) Subjective variables include attitudes about comfort, bedroom furnishings, number of persons in the bedroom, number of persons on the floor, privacy in bedroom, sanitary facilities, number of persons using the sanitary facilities, the kitchenette in general, design of the hall, number of persons in the hall, and the location of the hall

Opoku and Muhmin (2010) suggested numerous specific housing attributes and house purchase factors These are financial/economics, private living space, aesthetics, local environment, air quality, public living space, building design, proximity to relatives, outdoor space, and street location

Customer satisfaction in the model of Zadkarim S and Emari H, (2011) include six dimensions These dimensions are grouped under different questions These dimensions are: “customer cost” (includes the price and credit), “physical quality” (includes the cracks, kitchen, lighting [electronic lighting and window to outside], water[ plumbing facilities, water quality and water pressure], drainage, commode, internal architecture), “environmental quality” (includes the traffic, noise and regional security), “project facilities” (includes the parking, lobby, external staircase, lift, front and warehouse), “region facilities (includes the existence of park, primary school and at least 5 shop

In this study, the scales of customer satisfaction dimensions were generated via a series of focus groups Specifically, the focus group comprised teams of apartment customers in Vietnam Focus group participants were instructed to formulate questions by using the dimensions suggested by past research (Amole, 2008; Djebarni and Al-Abed, 1998; Zadkarim and Emari, 2011 and etc.) Some changes have been made to make the scale more relevant to the real estate service in Vietnam

Table 3.2 scale to measure Customer Cost

Service fees in apartment (security, electric, water, garbage,

parking, etc) are very reasonable

COST2

Company gives support to customer interest rate for buying

apartment

COST3

Table 3.3 scale to measure Physical quality

Apartment’s design ensure lighting ( electronic lighting and

window to outside)

PHYQ2

Apartment’s water (plumbing facilities, water quality and

water pressure) are good

PHYQ3

Table 3.4 scale to measure environmental quality

Apartment’s traffic is convenient and ensure firefighting or

rescue standard

ENVQ1

Table 3.5 scale to measure Project facilities

In Apartment, parking is adequate to resident demand and

security

PROF2

Table 3.6 scale to measure Region facilities

There are many recreational activities (play area, gym, etc.)

around the apartments to meet customers’ need

REFA1

There are many public services (supermarket, cafeteria,

primary schools, etc.) is really feeling for customers

REFA2

Apartment located close to shopping areas, business (at least 5

shops, public transportation within a 5 km radius of the center)

REFA3

Table 3.7 scale to measure Customer satisfaction

3.4.4 Scale to measure customer satisfaction

To measure word of mouth in the apartment industry, this study adapted the scale developed by Babin, Lee, Kim, and Griffin (Babin et al., 2005) Word of mouth intentions (WOM) were assessed using three items (Table 3.8) The items measured agreement using a 5-point Likert scale

Table 3.8 scale to measure word of mouth

Encourage friends and relatives to buy the apartment

from this project

WOM3

3.5 Pilot test

The purpose of the pilot test was to refine the questionnaire to help respondents to avoid problems in answering questions and to increase the quality of data obtained This phase was carried out through two steps In the first step, an exploratory study was made with the purpose of assessing the first draft of the measurement scale The first draft of questionnaire was made in Vietnamese Two mini group discussions were conducted In the first discussion five real estate experts from five real estate companies were invited The purpose of this step was examine the clarity

of the instrument and to be sure that it was sufficient to cover the study matter in reality, from the perspective of a property professional Some amendment were made as a result suggestions of the real estate managers

The other discussion was conducted with the participation of 15 customers The purpose of this step was the same as that of the first, but in this case from the customer’s perspective Some questions were adjusted on the recommendation of the participants, such as to make the terms in the questionnaire more concrete and

less negative

The final version of questionnaire was prepared in Vietnamese (Appendix 1) and

translated into English (Appendix 2 - Observed variables)

3.6 Main study

The main studies were done by the quantitative method through questionnaire interview This step was to evaluate the scale and determine the importance of these factors, measuring customer satisfaction as well as to test the hypotheses stated above Data collection was processed by SPSS11.5 software

3.6.1 Sampling

Some considerations for selecting the scope and methodology for sampling are cost, the accuracy of results, the speed of data collection and the availability of population elements (Donald & Pamela, 2003)

The first step in sampling is to ensure that the population is correctly defined A population is the total collection of elements from which we wish to draw some conclusion

Due to the tremendous limitations of time, budget, and knowledge, this study uses a convenient sampling technique, specifically which is a non-probabilistic sampling technique This is one of the least reliable sampling techniques, but it is the cheapest and easiest, and the most feasible for this study In this study the target population is limited to customers that bought apartment for residence or investment in Binh Duong province, Hochiminh city Apartment projects were chosen mainly in Ho Chi Minh City Binh Duong province, as this place has many apartment projects and customers have resided in apartment In Ho Chi Minh city, the apartment projects are (1) The Manor, (2) Sai Gon pearl (3) Hung Vuong Plaza, (4) The Everich; In Binh Duong province, apartment projects are (1) New Horizon, (2) Phu Cuong Apartment, (3) The Canary apartment, (4) The IJC Aroma apartment

Interviewers can interviewed any customer who agrees to take part in the interview

3.6.2 Sample size