Factors influencing customer loyalty, a case study of internet users in ho chi minh city

The purpose of this study to examine whether customer satisfaction,switching cost, price perception, and corporate image are antecedents ofcustomer loyalty in the context of the internet

MINISTRY OF EDUCATION AND TRAINING

UNIVERSITY OF ECONOMICS HOCHIMINH CITY

NGUYEN THI XUAN HANG

FACTORS INFLUENCING CUSTOMER LOYALTY A CASE STUDY OF INTERNET

USERS IN HO CHI MINH CITY

Major

Major Code

: :

Business Administration60.34.05

ECONOMICS MASTER THESIS

Supervisor: Dr Tran Ha Minh Quan

HCM CITY - 2012

We also appreciate all the respondents who participated in my survey,without your kind responses to the questionnaire I definitely could notcomplete this study.

Thank all of you for your kind assistances and your valuable time

The purpose of this study to examine whether customer satisfaction,switching cost, price perception, and corporate image are antecedents ofcustomer loyalty in the context of the internet service market in Ho ChiMinh city We explore the key antecedent of customer loyalty, and thedifference in Customer Loyalty among the three career groups

The findings show that all of those 4 factors positively influence customerloyalty In addition, Customer satisfaction is a key antecedent of CustomerLoyalty Furthermore, there is the different level of Customer Loyaltyamong different three career groups The studying people group has lessloyalty level than the working /working and studying people group Besides,the implication based on the result of the study as well as further research ofthe study were also represented in this paper

Keywords: Customer Loyalty; Customer Satisfaction; Switching cost;Corporate Image; Price Perception; ISP (Internet Service Provider)

CHAPTER 1: INTRODUCTION

1.1 Research background 1

1.2 Problem statement 2

1.3 Research questions and objectives 3

1.4 Research limitation 4

1.5 Thesis structure 4

CHAPTER 2: LITERATURE REVIEW 2.1 Customer loyalty 6

2.1.1 Customer and loyalty customer 6

2.1.2 Definition of customer loyalty 7

2.1.3 Customer loyalty phases 8

2.1.4 Classifications of customer loyalty 8

2.1.5 Importance of customer loyalty 9

2.1.6 Loyalty programs and its benefits 10

2.2 Antecedents of customer loyalty 14

2.2.1 Customer satisfaction 14

2.2.2 Switching cost 16

2.2.3 Corporate image 17

2.2.4 Price perception 18

2.3 Research model 20

CHAPTER 3: RESEARCH METHODOLOGY 3.1 Research design 22

3.1.1 Research method 22

3.1.2 Exploratory study 23

3.1.3 Main survey 24

3.1.3.1 Sample size 24

3.1.3.2 Data collection procedure 24

3.1.3.3 Research process 25

3.2 Measurement 26

3.2.1 Measure of Customer satisfaction 26

3.2.2 Measure of Switching Cost 27

3.2.3 Measure of Corporate Image 28

3.2.4 Measure of Price Perception 28

3.2.5 Measure of Customer Loyalty 29

3.3 Data analysis method 30

3.4 Summary 30

CHAPTER 4: DATA ANALYSIS AND RESULTS 4.1 Descriptive data analysis 31

4.2 Testing factors of research model 33

4.2.1 EFA results of independent variables 33

4.2.2 Exploring Factor Analysis (EFA) 35

4.2.2.1 EFA results of independent variables 35

4.2.2.2 EFA results of dependent variable 37

4.3 Hypotheses testing 37

4.3.1 Testing Assumptions of Multiple Regression 37

4.3.2 Testing hypotheses between Independent Variables and Customer Loyalty 38

4.4 Testing the relationship among qualitative factors and quantitative variables 41

4.4.1 Testing the relationship between gender and Customer Loyalty 41

4.4.2 Testing the different influence levels of career on Customer Loyalty 43 4.5 Customer’s evaluation on Customer Loyalty following using ISP 45

4.6 Summary 46

CHAPTER 5: CONCLUSIONS 5.1 Conclusion 47

5.2 Managerial Implication 47

5.3 Implication for theory and future research 49

References 51

Appendices 59

Appendix 1: Questionnaire in Vietnamese 59

Appendix 1: Questionnaire in English 62

Appendix 2: Reliability results of measurement scales – Pilot test 66

Appendix 3: EFA results of independent variables – Main survey 69

Appendix 4: EFA results of dependent variable – Main survey 71

Appendix 5: Testing assumptions of multiple regression 72

Appendix 6: Histogram, Normal P – P plot and Scatter plot 73

Appendix 7: Multiple Regression Line results 76

Variable – CL 73

LIST OF TABLES

Table 3.1Scale of Customer Satisfaction 27

Table 3.2: Scale of Switching Cost 27

Table 3.3: Scale of Corporate Image 28

Table 3.4: Scale of Price Perception 29

Table 3.5: Scale of Customer Loyalty 29

Table 4.1 – Sample characteristics 31

Table 4.2 Cronbach Alpha of observed variables 33

Table 4.3: EFA for independent variables 36

Table 4.4: Multiple regression between independent variables and dependent variable 39

Table 4.5: Anova between independent variables and dependent variable 39

Table 4.6: Coefficients between independent variables and dependent variable 40

Table 4.7 - Independent samples t-test results of gender factor and CL 42

Table 4.8 The analysis results of the different influence levels of career factor on Customer Loyalty 43

Table 4.9 - Mean of each using ISP on Customer Loyalty 45

ISP: Internet Service Provider

EFA: Exploring Factor Analysis

MRL: Multiple Regression Model

Chapter 1: Introduction

The introduction chapter identifies the research background, present theproblem statement, the research questions, and introduce the researchmethodology, the objectives as well as limitation of the study In addition, thesignificance of the research problem and the organization of the thesis are alsooutlined

1.1 Research background

The internet service market is growing very fast in many countries over theworld And Vietnam is not an exception case Up to July 2011, Vietnam has29.5 million of people using Internet, equal to 33.99% of population, andforecast increasing to 40% in 2012 (Ha Nam Khanh Giao & Tran Huu Ai,2011) Internet is one of the most common means of communicationnowadays In Vietnam, internet contributes 42% of daily communication means(http://www.thongkeinternet.vn/jsp/tintuc/tintuc.jsp) Internet service market isgrowing very fast in over the world Asia region has biggest internet usernumber Vietnam is one of the countries which has highest increasingpercentage of internet users in Asia region There are many service providers inVietnam such as VNPT, FPT, Viettel, SPT, SCTV… Therefore, studying aboutthis service has inspired many researchers to devote more of their researchattention to this area

It has been figured out by previous researchers that as markets become morecompetitive, firms are more likely to try maintaining their market share byfocusing on retaining current customers It’s also obvious that whencompetition and the costs of acquiring new customers increase, companies will

be more concentrated their strategic efforts on customer retention, therefore tomaintain customer long-term relationships becomes as a critical mission forbusiness The significance of customer loyalty cannot be overemphasized

because it relates closely to the continued survival, as well as the future growth,

of companies For a company to maintain a stable profit level when the marketreaches the saturation point, a defensive strategy aiming at retaining existingcustomers is more important than an offensive one, which targets at expandingthe size of the overall market by inducing potential customers to subscribe to itsservices (Ahmad & Buttle, 2002; Fornell, 1992)

As a result, many studies were conducted in this critical issue Theydeveloped an estimated different dynamic models to exam the relationships andimpact of the different antecedents on customer loyalty

1.2 Problem statement

Nowadays the internet industry, like many of other ones, faces very stresscompetition so a large scale of internet service provider’s resources must bedefinitely devoted to the present customers to make them more satisfied inorder to retain them

One important point of customer retention is its close relationship to thecompany’s continued survival, and to strong and stable future growth.Therefore, for a company to maintain a stable profit level and the subscriptionlevel has reached the saturation point, a defensive strategy which strives toretain existing customers is more important than an aggressive one, whichexpands the size of the overall market by inducing potential customers

In internet service, many studies prove that customer satisfaction andquality service are the drivers of customer loyalty while customer perceivedvalue, trust, corporate image, price perception quality, and customer switchingcosts have significant effects on customer loyalty (Lee, 2010; Cheng et al.,2008; Yang & Peterson, 2004; Lam et al., 2004; Aydin & Ozer, 2005; Kim etal., 2004; Julander & Soderlund, 2003; Nguyen & Leblanc, 2001; Jones et al.,2000; Zeithaml et al., 1996)

Only customer satisfaction is not enough to explain customer loyalty in allcircumstances since customer still has a chance to freely choose suppliersbecause of many reasons such as switching cost, corporate image, priceperception…

This study empirically analyzes whether customer satisfaction, switchingcost, price perception, and corporate image are antecedents of customer loyalty

in the context of the internet service market in Ho Chi Minh city We examinethe key antecedents of customer loyalty

1.3 Research questions and objectives

The research questions that are discussed in this study are as follows:

Question 1: What are the key determinants affect on customer loyalty in

internet market in Hoc Chi Minh city in Vietnam? By evaluating the influence level of the factors on customer loyalty, the importance of increasing loyal customer shall be highlighted to eventually help the managers identify the right direction of their investment and keep their customers under a tough competitive environment.

Question 2: Is there a significant difference in customer loyalty among

studying and working people, working people, and studying people? This is a minor research question.

Based on the above research question, the objectives of this study areoutlined to examine key antecedents of customer loyalty and impact career oncustomer loyalty, it explores:

1 The impact of Customer Satisfaction, Switching Cost, PricePerception, and Corporate Image on Customer Loyalty in internetservice in Ho Chi Minh city

2 The difference in Customer Loyalty among the three career groups – This is a minor research objective.

1.4 Research limitation

This thesis would be an opening base to further researches in related area inother service sectors, but in other hand it may have some limitations There areother factors that can influence Customer Loyalty, apart from factors suggested

in this thesis such as: service quality, demographic characteristics of customer,customer’s usage pattern of internet service, etc are not studied in this research

1.5 Thesis structure

This research is organized in five chapters

Chapter 1: the introduction chapter It includes a brief overview of the

research background, problems and objectives The limitations and researchmethodology, the implications of research, and structure are also presented

Chapter 2: the literature review and conceptual model This chapter

provides a deeply review of previous research on antecedents of customerloyalty Based on that, a conceptual model is proposed

Chapter 3: the research methodology An attention is concentrated on the

research design, then interprets and illustrates the way that primary andsecondary data is collected The measurement scales apply for the researchfactors will be determined clearly and suitably

Chapter 4: Data analysis and results It analyzes the collected data and

presents the findings from the survey in terms of the effective levels of thesefactors (customer satisfaction, switching cost, corporate image and priceperception) on customer loyalty Besides, comparison among the survey groups

is discussed as well

Chapter 5: Conclusion and implication The chapter is final part of this

dissertation The researcher will mention several recommendations formanagers of internet service provider in Ho Chi Minh City Market in terms ofthe theoretical and managerial significance In addition, this chapter also made

a brief summary about the main content of the dissertation and further research

Chapter 2: Literature review & theoretical model

In this chapter, we present a theory background about customer loyalty, theantecedents of customer loyalty and the relationships between each of theantecedents and customer loyalty Then, the hypotheses and the conceptualframework are proposed

2.1 Customer loyalty

2.1.1 Customer and loyalty customer

The term “customer” is commonly used to refer to end-users of a product or

is a generic term referring to anyone who receives a service or product fromsome other person or group of people Customer can be defined in differentways by some researchers as below:

A customer is the most important person ever in this office … in person or

by mail

A customer is not dependent on us… we are depend on him

A customer is not an interruption of our work … he is the purpose of it Weare not doing a favor by serving him … he is doing us a favor by giving us theopportunity to do so

A customer is not someone to argue or match wits with Nobody ever won

an argument with a customer

Loyal customer is one who (1) frequently uses a service provider, (2) reallylikes the provider and appreciate it, and (3) does not want to looking for usinganother service provider for this service On contrast, an extremely “non-loyal”person is one who (1) will never use the provider again, (2) has negativefeelings/thought about the provider, and (3) welcomes suggestions about otherproviders and is willing to try any other provider This three-dimensional

definition is consistent with Zeithaml et al., (1996) operationalization of the

“loyalty to company” factor in their behavioral-intentions battery The fiveitems they use to measure loyalty include (1) saying positive things about thecompany,(2) recommending the company to someone who seeks advice, (3)encouraging friends and relatives to do business with the company, (4)considering the company the first choice to buy services, and (5) doing morebusiness with the company in the next few years

2.1.2 Definition of customer loyalty

We have many definitions supposed of customer loyalty by the scholars.According to Griffin, (1996), customer loyalty is a purchase behavior, which,unlike customer satisfaction, is an attitude Customer loyalty is related to thelikelihood of a customer returning, making business referrals, providing strongword of mouth, as well as offering references and publicity (Bowen &Shoemaker, 1998) Customer loyalty is a key component for a brand’s long-term viability (Krishnamurthi and Raj, 1991) Oliver (1999) defines it as “adeeply held commitment to re-buy or re-patronize a preferred product/serviceconsistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having thepotential to cause switching behavior” Customer loyalty manifests itself in avariety of behaviors, the more common ones being recommending a serviceprovider to other customers and repeatedly patronizing the provider (Dwyer,Schurr, and Oh 1987; Fornell 1992; cited in Lam et al., 2004)

In generally, customer loyalty can be defined as occurring when customersregularly purchase goods or services, have word of mouth, and make advices toother customers

2.1.3 Customer loyalty phases

Oliver (1999) proposes that customer loyalty has four phases

The first phase is cognitive loyalty Customers become loyal to a brandbased on what they know about that brand For example, they are loyal withthat product brand/service because they get information of that product/servicequality is good and meets with their expectations

The second phase is affective loyalty It refers to customer liking or positiveattitudes toward a brand

The third stage is conative loyalty that consumers have a behavioralintention – committed deeply to buy The intention leads to the fourth stage ofaction

The fourth phase is action loyalty At this last stage customers turnintentions into actions Customers have the desire to overcome barriers whichmight prevent the act to achieve the actual purchase behavior

2.1.4 Classifications of customer loyalty

There are three kinds of customer loyalty approached as these conceptualperspectives: behavioral loyalty/perspective, attitudinal loyalty/perspective, andcomposite loyalty/perspective (Bowen & Chen, 2001; Zins, 2001)

Behavioral loyalty means consumers’ repurchase behavioral or intension ofspecific brand (Russell-Bennett et al 2007) Attitudinal loyalty meansconsumers’ sense of specific products or service (Kumar and Reinartz, 2006).Behavioral loyalty makes customer loyalty be converted into actual purchasebehaviors while attitudinal loyalty does not ensure that customers will purchasemerchandise themselves, but through word-of-mouth, they will help to create apositive image of a business to others This may not directly bring profit, butindirectly create a positive result to company The composite

loyalty/perspective combines attitudinal and behavioral perspective It might beconsidered as an alternative to affective loyalty since using both attitude andbehavior in a loyalty definition arguably increases the predictive power ofloyalty (Pritchard & Howard, 1997)

Jacoby and Kyner (1973) express customer loyalty by a set of six necessaryand collectively sufficient conditions by integrating both behavioral loyalty andattitudinal loyalty: These conditions express that brand loyalty is (1) the biased(i.e., random), (2) behavioral response (i.e., purchase), (3) expressed over time,(4) by some decision-making unit, (5) with respect to one or more alternativebrands out of a set of such brands, and (6) is a function of psychological(decision making, evaluative) process

According to the study by Lam et al (2004) loyalty is manifested in twoother ways: repeat patronage and recommendation Zeithaml, Berry, andParasuraman (1996) propose a comprehensive multi-dimensional framework tomeasure customer loyalty which includes both attitudinal loyalty andbehavioral loyalty

In this research, customer loyalty includes both recommending andpatronizing actions In the other words, it is composite loyalty

2.1.5 Importance of customer loyalty

The more loyalists the organization has, the greater market share and higherrates of return on investment they get Asker (1991) discusses the role ofloyalty in the brand equity process and specially noted that brand loyalty leads

to certain advantages, such as reduced marketing costs, more new customers,and greater trade leverage In increasingly competitive markets, being able tobuild consumer loyalty is seen as the key factor in winning market share anddeveloping a sustainable competitive advantage Anderson et al (2004) argued

a loyal and contented customer base helps to increase the organizations’

relative bargaining power regarding suppliers, partners and channels That’swhy customer loyalty should affect shareholder value in a positive manner byreducing instability and associated risk with expected future cash flows Dickand Basu (1994) propose that customer loyalty creates positive WOMcommunication (word of mouth) and competitive strategies are resisted byloyal customers Based on many findings, strategists and marketers arerecommended to build and hold strong customer loyalty Oliver (1999) agreeswith Dick and Basu that customer loyalty is engaged in affirmative word ofmouth communication “Based on a 20-80 principle, the top 20% of thecustomers may create 80% of profit for a company” (Kotler and Keller, 2005).

So, a favorable connection between a company and its customers is veryimportant for the business Furthermore, in the financial services industry, thestudy shows that increasing customer retention (or customer loyalty) by 5percent could lead to 25-75 percent profit growth (Chan et al., 2001).Therefore, customer loyalty becomes an ultimate target of most firms in thehighly competitive economy nowadays

In conclusion, it is very necessary for a firm to focus on building loyalcustomer as its long term strategy

2.1.6 Loyalty programs and its benefits

Customer loyalty program have developed remarkably in the era ofcustomer retention in recent years This is due to recent advances ininformation technology They have been considered by many organization andmany of them have adapted customer loyalty programs According to Yi andJeon (2003) loyalty programs are introduced to build customer loyalty.Customer loyalty programs have also been willingly embraced by customers;this is due to he benefits associated with it (O’Malley, 1998) The importance

of benefits of enticing customer loyalty programs is to create a high level of

customer retention Gilbert referred to O’Malley (1998) states that the basicidea of a loyalty scheme is to reward customers’ repeat purchasing andencourage loyalty by providing targets at which various benefits can beachieved The longer customer stays with an organization the more profit thecustomer generates (Reichheld and Sasser, 1990) This is an outcome of anumber of factors relating to the time the customer spends with theorganization, and includes: the effects of the higher initial costs of introducing

at attracting a new customer; increase in the value of purchases; increase in thenumber of purchases; the customer’s better understanding of the organizationand vice versa; and the last one positive word-of mouth It was recognized byColgate et al (1996) that reduction in defection can contribute to increases inprofits more than increasing the market share The profits of organization canincrease by 100 percent through retaining 5 percents more of their customer(Reichchel and Sasser, 1990,; O’Malley, 1998)

Moreover, from a customer perspective, loyalty scheme can be a way todecrease price sensitivity, increase brand loyalty, reduce the willingness toconsider alternative brands, encourage word of mouth support andendorsement, attract a larger group of customer and increase the amountproduct bought (Uncle et at,., 2003)

Customer loyalty programs are assumed to create value for the customerand it is due to this value that customer loyalty programs promote loyalty Onthe other hand, the degree to which customer loyalty programs offer value tocustomers is uncertain, mostly because customers are not equal an dvalue willrepresent different things to different people and will also be different indifferent context (O’Malley, 1998) In order to make the value of customerloyalty programs work properly and succeed, an organization needs tounderstand the needs and desires of their customers The value an organizationdelivers to its customer needs to be competitive in five dimensions Seen from

customer perspective, the dimensions are: cash value (as a percentage of theproportion spends)., aspiration value (how much this reward motivates acustomer), relevance (the extent to which the rewards is achieved), andconvenience (ease of participation of the scheme), choice (the variety ofrewards offered) (O’Brien and Jones, 1995).

Even though a small number of schemes today offer all dimensions ofvalue, it is obvious that companies which want to play the rewards game should

be sure that their value measures up to customers’ alternatives (O’Brien andJones, 1995) This is most significant when customer loyalty programs aremainly used as differentiation

Due to the popularity and benefits derived from customer loyalty programsmany corporations have adapted these schemes Customer loyalty programs canand do build customer loyalty and corporation now realize how importantloyalty is for their profitability One of the main reasons of creating loyaltyprograms is to increase revenues, which can be done by either increasingpurchase and usage levels and also by increasing the range of products bought.However, there are other reasons for increasing loyalty programs including: togenerate information, to reward loyal customers, to manipulate consumerbehavior and as defensive measure towards competitors (O’Malley, 1998).Getting information about customers, who they are and their purchasingbehavior is a very important input for an organization This information willcontribute to a better understand of the customer and corporation can use thisknowledge to improve targeting, creating offers and shift merchandise.Furthermore, this knowledge can also be employed to reward customers to trynew products, manipulate consumer behavior

A part from the benefits that longevity of customers brings, researchfindings also suggest that the costs of customer retention activities are less than

the costs of acquiring new customer Rust and Zahorik (1995) identify thefinancial implications of customer retention, citing US office of consumerAffairs research that estimates that attracting new customer maybe five times ascostly as keeping exiting customers.

Some of the most important benefits are as below:

Benefits for company:

• Less costly to retain customers than to attract new customers

• Generating profits

• Decrease in marketing costs

• Positive word of mouth, this is contribute to reputation of company

• Benefits for customers:

Now after reviewing the literature, the loyalty of the customer, its programsand benefits, it is time to have a look at the different factors which affect thisconcept.

2.2 Antecedents of customer loyalty

In internet service and mobile phone service, many studies prove thatcustomer satisfaction and quality service are the drivers of customer loyaltywhile customer perceived value, trust, corporate image, price perceptionquality, and customer switching costs have significant effects on customerloyalty (Cheng et al., 2008; Yang and Peterson, 2004; Lam et al., 2004; Aydin

& Özer, 2005; Kim et al., 2004; Julander and Soderlund, 2003; Nguyen and Leblanc, 2001; Jones et al., 2000; Zeithaml et al., 1996)

Even though we have many antecedent factors affecting customer loyalty,but we cannot exam and find out the effects of all factors in the same study atthe same time Therefore, in this research we use four antecedents such ascustomer satisfaction, price perception, corporate image, and switching cost totest their effects on customer loyalty of the internet service users in Ho ChiMinh city in VietNam

• Tse and Wilton (1988) defines satisfaction as “the consumer’sresponse to the evaluation of the perceived discrepancy between priorexpectations (or some other norm of performance) and the actualperformance of the product as perceived after its consumption”

• Oliver (1997, 1999) proposes satisfaction as a fulfillment response orjudgment on a product or service, which is evaluated for one-time orongoing consumption

• Fornell (1992) suggests satisfaction as an overall evaluation based onthe total purchase and consumption experience of the target product, orservice performance compared with prepurchase expectations over time

• “Satisfaction is a person’s feeling of pleasure or disappointmentresulting from comparing a product’s performance (outcome) in relation tohis or her expectation.‟ (Kotler & Keller, 2006)

In this study we use definition of customer satisfaction from Oliver (1997,1999) There are many benefits for a company from a high customersatisfaction level Anderson et al (1994) suggest that overall customersatisfaction is based primarily on the experience and satisfaction whilepurchasing merchandise or services: it is both an emotional evaluation and aprocess of comparison between a “pre-consumption expectation” and the “post-consumption perceived performance” Reichheld and Saser (1990) argue thatimproved customer satisfaction will affect the likelihood of repeat purchases.Taylor and Baker (1994) based their studies on four service industries in theirexamination of the relationships between service quality, customer satisfaction,and customer purchase intention They determined that customer satisfaction ispositively correlated to purchase intention Fornell et al (1996) also maintainthat after a customer purchases a product or service, an attitude will be formed,which is satisfaction If satisfaction is high, the likelihood of repeat patronage isgreat This will create an attitudinal loyalty whereby the customer will

recommend the product or service through word of mouth In internet servicesindustry, many recent studies prove that customer satisfaction positivelyaffected customer loyalty (Cheng et al., 2008; Yang & Peterson, 2004; Chiou,2003) Thus, the first research hypothesis is:

H1: There is a positive relationship between customer satisfaction and customer loyalty

2.2.2 Switching cost

Switching cost is defined as one-time costs incurred by the customer/buyerfor changing from an existing service/product to another (Porter, 1998) Inaddition to objectively measurable monetary costs, switching costs may alsopertain to the time and psychological effort involved in facing the uncertainty

of dealing with a new service provider (Bloemer et al., 1998, Klemperer, 1987,cited in Aydin & Özer, 2005) Switching cost is the sum of economic,psychological and physical costs (Jackson, 1985) There are three types ofswitching costs such as transaction costs, learning costs, and artificial switchingcosts (Klemperer,1987) Dick and Basu (1994) defines switching cost includestime, money and psychological cost

In this study, we use definition of switching cost from is a sum of economic,psychological cost and learning cost It is in line with the definition ofswitching cost defined by Jones et al., (2000) switching costs are consumerperceptions of the time, money, and effort associated with changing serviceproviders

The first one is the economic or financial switching cost is assumed as asunk cost which appears when the customer changes his/her brand The second

is psychological cost is perceived as the cost stemming from social bonds (e.g.staff-customer relations, etc.) that appear over the course of time and theuncertainty/risk of the unused brand The customer perceives high risk

regarding a brand he/she has never used (Sharma and Patterson, 2000, cited inAydin & Özer, 2005) Especially in services, where customers prefer a rivalservice provider, risk exists because service quality cannot be evaluated beforepurchasing (Sharma et al., 1997, cited in Aydin & Özer, 2005).

In the internet services industry, when switching cost is high, customerstend to continue using their existing provider’s internet service The reason isthat switching incurs risk (Anton Martin, Garrido Samaniego, & RodriguezEscudero, 1998; Klemperer, 1995; Ruyter, Wetzels, & Bloemer, 1996;Selnes,1993; Wernerfelt, 1991, cited in Cheng et al., 2008)

The third one is learning costs Example, if the new stock-broker uses otherroutines or other contractual rules, to catch up with the new supplier you have

to learn these new rules, which can be seen as a part of switching cost

In internet market in Hong Kong, switching cost has a significant influence

on customer loyalty (Cheng et al., 2008) Therefore, we have the secondhypothesis:

H2: There is a positive relationship between switching cost and customer loyalty

2.2.3 Corporate image

Corporate image is defined as the overall impression about a firm formed onthe minds of the people (Barich and Kotler, 1991: cited in Nguyen and Leblanc,2001) It relates to the variety of the physical and behavioral attributes of thecompany, such as business name, architecture, logo, various products/services,culture, and to the impression of quality communicated by a customer withclients of the company (Nguyen and Leblanc, 2001) In additional, according toKennedy (1977), corporate image contains the functional component andemotional component The functional component

refers to tangible characteristics, whereas the emotional component isconnected with psychological dimensions In the other words, the emotionalcomponent includes feelings and attitudes of customers towards a company.Corporate image is the result of a process (MacInnis and Price, 1987) Yuilleand Catchpole (1977) suggest that corporate image is the result of an aggregateprocess in that customers incorporate their own previous experiences andinformation obtained through many sources (advertising, word of mouth, publicrelations) to make a perception or mental images of the firm According to thestudy from Normann (1991) that corporate image of a company in the mind of

a customer is influenced by many factors such as advertising, public relations,physical image, word of mouth, and customer’s actual experience with theproducts/ services As a result, corporate image as an attitude must affectbehavioral intentions such as customer loyalty (Johnson et al., 2001) Nguyenand Leblanc (2001) demonstrate that corporate image has a positive impact oncustomer loyalty in three sectors namely, telecommunication, retailing andeducation Thus, the third research hypothesis is:

H3: There is a positive relationship between corporate image and customer loyalty

2.2.4 Price perception

According to Zeithaml (1988), price perception is defined “from theconsumer's perspective, price is what is given up or sacrificed to obtain aproduct” From many previous research, many researchers define price “as asacrifice is consistent with con-ceptualizations by other pricing researchers”(Chapman 1986; Mazumdar 1986; Monroe and Krishnan 1985, cited inZeithaml , 1988) Jacoby and Olson (1977) distinguish between objective price(the actual price of a product) and perceived price (the price as encoded by thecon-sumer) (cited in Zeithaml , 1988)

Companies are recommended to adjust their strategies to retain customers

in order to achieve superior customer value delivery as customer valueincorporates both the costs and benefits of staying with a company by manyresearchers and consultants (Slater, 1997; Gale, 1994) Researchers in this areahave further elaborated on the linkages between price factors and perceivedvalue (e.g., Grewal, Monroe, & Krishnan, 1998), as well as between price andcustomer loyalty (e.g., Voss, Parasuraman, & Grewal, 1998) In addition, themarketing literature supports the general notion that pricing factors affect theprice perceptions of customers, which in turn contribute to customer loyalty(Reichheld, 1996) The equity concept refers to customer evaluation of what isfair, right, or deserved for the perceived cost of the offering (Bolton & Lemon,1999) As such, customers’ perceived value is considered as a strong driver ofcustomer retention Limited research has been undertaken to investigate thelinkage between price perception and customer loyalty (Ranaweera & Neely,2003; Varki & Colgate 2001) Ranaweera and Neely (2003) showed that priceperception has a direct linear relationship with customer loyalty in thetelecommunications sector Keaveney (1995) reported finding that more thanhalf the customers she surveyed had switched among services because of poorprice perceptions Her qualitative study suggests that unfavorable priceperceptions may have a direct effect on customer intention to switch Inaddition, across 45 service industries, 30% of the respondents switched because

of pricing issues e.g high price or unfair/deceptive pricing practices(Keaveney, 1995) Consequently, price plays an important role in influencingcustomers’ decisions in choosing and developing loyalty with a particularproduct or service A customer’s perception of the value received from aservice provider could motivate the customer to patronize the provider again.Therefore, customer-perceived value is positively related to customer loyalty(Yang & Peterson, 2004) In internet market in Hong Kong, price perception

has a significant influence on customer loyalty (Cheng et al., 2008) HongKong has many same characteristics with Ho Chi Minh city Both of them arevery commercial cities, belongs a developing countries and have youngpopulation So, we should exam relationship between perception price andcustomer loyalty Therefore, we have the fourth hypothesis:

H4: There is a positive relationship between price perception and customer loyalty

2.3 Research model

Based on the mentioned literature, a research model is proposed, in thepurpose of testing and verifying the elements affect on Customer loyalty ofinternet service users in Ho chi Minh city market

Research Model

Customer satisfaction H1

H2Switching cost

Customer loyaltyH3

Corporate image

H4Price perception

CHAPTER 3: RESEARCH METHODOLOGY

This chapter includes two main parts: (1) research design, (2) measurementscales Besides, tools for testing the research questions and hypotheses are alsoexplained in this chapter of dissertation

3.1 Research design

The research was performed through two phases: (1) an exploratory study,(2) a main survey The purpose of the exploratory study is for exploring andrefining the relevant items and building a questionnaire Besides, the mainsurvey was also discussed in data collection, analysis of collected data as well

as model measurement

3.1.1 Research method

There are two helpful research methodologies: quantitative and qualitative.Bryman and Bell (2003) pointed out that the connection between theory andresearch, epistemological considerations and ontological considerations,quantitative and qualitative research can be considered as two distinctiveclusters of research strategy

Figure 3.1 Fundamental differences between quantitative and

qualitative research strategies

Fundamental differences between quantitative and qualitative research

strategies

Principal orientation to the Deductive; testing of Inductive:

Epistemological orientation Natural science model, in Interpretivism

Particular positivism

Source: Bryman and Bell (2003)

So quantitative method is used for an exploratory study, while quantitativemethod is used for a main survey which is executed for data collection to test theproposed hypothesizes in this research

3.1.2 Exploratory study

In the exploratory study, we used first questionnaires designed mostly based

on the previous studies for the in-depth interviews which were conducted with

15 people (including 5 full time students of Ho Chi Minh City University ofTechnology, 5 people who are studying and working, and 5 people who areworking in the companies in Ho Chi Minh) to get their answer and their input,and feedback Based on the result of this study, the conceptual model andhypotheses were confirmed Besides, some of questions were adjusted andadded in terms of translation from English to Vietnamese of the questions sothat the interviewees could understand clearly and easily Furthermore, to re-confirm a revised questionnaire was understood correctly and to checkreliability of measurement scales before moving forward to main survey, a pilottest was conducted with a sample of 20 people (including 5 full time students of

Ho Chi Minh City University of Technology, 5 people who are studying andworking, and 10 people who are working in the companies in Ho Chi Minh) in

Ho Chi Minh by distributing hard copies of the questionnaires to therespondents to get their answer One question to ask the respondents if theycould make decision to choose or to change the ISP they are using was used for

filter Only “yes” anwer for this question from the repondents would be usedfor data analysis.

3.1.3 Main survey

The main survey was conducted in Ho Chi Minh city with convenientsampling; and the final questionnaires were sent to both part time, full timestudents of the universities (Ho Chi Minh City University of Social Sciencesand Humanities, Ho Chi Minh City University of Technology, BankingUniversity of Ho Chi Minh City) and working people in Ho Chi Minh city

N>=8M+50

N: sample size

M: the number of independent variable of model

Therefore to meet the sampling size requirement, we should have valid datafrom at least 194 respondents

3.1.3.2 Data collection procedure:

According to many scholars, in the use of survey strategy, the maininstruments used are self-administered/interviewer administered or

structured/unstructured interviews and questionnaire or a combination of both(Saunders et al 2000; Cooper and Schindler 2006) They further agree thatgenerally the questionnaire can be used for descriptive or explanatory study,and must have a good layout, unambiguous questions, complete items, non-offensive but relevant items, logical arrangements of items, and the ability toelicit willingness to answer in respondents As a result, questionnaire was used.

In this study, self-administered, structured questionnaire was used to collectdata from respondents (Appendix1) The completed questionnaire wasdeveloped and sent to all people in direct and indirect relationship to the author

at most ranges of age under the hard copies With distributing of thequestionnaire hard copies, data collection was conducted very fast, just within 2continuous weeks in Mar of 2012 There were 250 questionnaires distributedand we received 225 feedbacks from respondents, among of them 11 were thenidentified as invalid So in total, we had 214 valid returned questionnaireswhich contributed a valid response rate of 85.6%, which was considered atgood level for consequent analysis This quantity also met the criterioncalculated for a minimum sampling size (194) above

3.1.3.3 Research process

The research process was demonstrated in figure 3.2 as below:

Figure 3.2 Research process

3.2 Measurement

Five constructs including Customer loyalty, Customer satisfaction, Switchingcost, Corporate image, and Price perception were examined based on the scalesdeveloped from the previous reliable researches with little modification Allvariables in our hypotheses were assessed with multi-item scales and based on

a five point, Likert-type scale, anchored at 1 = strongly disagree to 5 = stronglyagree (Appendix 1)

3.2.1 Measure of Customer satisfaction

Customer satisfaction was measured based on Julander and Söderlund (2003)with a little modification The first 3-item scale designed to capture the overall

satisfaction The fourth question was added to evaluate respondents’ belief ofmaking a right decision with their Internet service providers based on the inputand feedback of respondents during the in-depth interview.

Table 3.1: Scale of Customer Satisfaction

The ISP meets all the requirements that I see reasonable CS2

I believe that I did the right thing when I chose this ISP CS4

ISP shorted for Internet Service Provider

3.2.2 Measure of Switching Cost

Switching cost included 5 variable items based on the combination ofmeasurement from the research (Jones, Mothersbaugh,& Beatty, 2000; Julanderand Söderlund , 2003) The items reflects search cost, transaction cost, learningcost, hassle to change, time and effort, and perception of being locked to thesupplier All items, except for the last one, are indirect measures of switchingcosts The exception is the “locked to” item, which mainly measures a feeling

of the impossibility to change supplier (Julander and Söderlund , 2003)

Table 3.2: Scale of Switching Cost

It takes me a great deal of time and effort to search for and SC1

to get used to a new ISP

In general it would be a hassle switching to another ISP SC3

3.2.3 Measure of Corporate Image

Measurement scales for Corporate Image factor were based on Nguyen andLeBlanc’s scale (2001) We measured this talent construct by good impression,good image in the minds of customer, and better image than competitors

Table 3.3: Scale of Corporate Image

In my opinion, my ISP has a good image in the minds of CI2

customers

competitors

3.2.4 Measure of Price Perception

Price perception was measured based on the study of Cheng et al., (2008) Onequestion refers to the “reasonableness of price” which was used in Ranaweeraand Neely’s (2003) study The other one reflects the relative standing of one’sservice provider in terms of price on Varki and Colgate’s (2001) study It wasadopted with little modification in this study by adding one more questions tomake this measurement scale stronger and more reliable The added question isrelated to rate of price and price strategy to keep customer to stay with current

ISP by cheaper price comparing with other ISPs The scales and their meaning

in terms of translation were finalized after the pilot test

Table 3.4: Scale of Price Perception

I f the price is cheaper, that is an important reason to stay PP3

with the service

3.2.5 Measure of Customer Loyalty

Customer Loyalty was measured by five observed variables, developed byZeithaml et al (1996) The five items they use to measure loyalty include (1)considering the ISP the first choice to buy services, (2) doing more businesswith the ISP in the next few years, (3) saying positive things about the ISP, (4)recommending the ISP to someone who seeks advice, (5) encouraging friendsand relatives to do business with the ISP Especially, we changed “next fewyears” into “next twelve months” for the second item based on our respondents’feedback in the in-depth interview so that they can answer the question in terms

of setting time for their plan “Next few years” is a so long for them to guesswhat will happen

Table 3.5: Scale of Customer Loyalty

I consider the ISP as my first choice for internet service CL1

I will patronize the ISP more in the next 12 months CL2

I have said positive things about the ISP to other colleagues CL3

advice

3.3 Data analysis method

The measurement models were validated using Cronbach alpha ReliablityAnalysis and exploratory factor analysis (EFA)

Standard multiple regression by SPSS software was adopted to test theconceptual model and hypotheses

CHAPTER 4: RESEARCH RESULTS

The purpose of this chapter was to present findings which were collectedfrom the actual questionnaire survey Besides, the researcher made an officialassessment of measures and also made analysis to give the accurate answers forthe research questions, hypotheses testing in the chapter two

4.1 Descriptive data analysis

There were 250 questionnaires distributed and we received 225 feedbacksfrom respondents, among of them 11 were then identified as invalid So in total,

we had 214 valid returned questionnaires which contributed a valid responserate of 85.6%

The rest of 214 respondents were analyzed, and the characteristics of thesurvey sample were presented as below

Table 4.1 – Sample characteristics