Determinants of customer satisfaction on mortgate service, a case study of anz bank vietnam limited

The result addressed that the key satisfactions of mortgage customers at ANZ Bank Vietnam Limited were Core Dimension, Relational Dimension, Price, Tangible Dimension and Customer Expert

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS- HOCHIMINH CITY

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS- HOCHIMINH CITY

Phung Nguyen Thuc Khue

Supervisor

Assoc Prof Dr Nguy n Minh Ki u

Ho Chi Minh City- 2010

ACKNOWLEDGEMENT

First of all, I would like to express my deepest gratitude and sincerest thanks to Dr Nguyen Minh Kieu,

my thesis tutor, for his valuable and patient guidance, advice and support during my research

Second, I would like to thanks all professors, tutors and my classmates who gave me the academic knowledge, support, encouragement and sharing experience to help me complete this research successfully

I also express my sincere thanks to my old colleagues at ANZ Bank Vietnam Limited and all the respondents who helped me to build the qualitative research and complete the survey

Personally, I am deeply indebted my parents who always expect and encourage me much during the last three years I could not make it without them

Ho Chi Minh City, December 2010

Phung Nguyen Thuc Khue

ABSTRACT

Recently banking industry has become severely competitive environment than ever before When the banking products are easy to imitate, then the service quality becomes important and significant for banks to increase their competitive capacity This research, therefore, focused on measuring customer satisfaction on mortgage lending service which occupies a large portion in retail lending market ANZ Bank Vietnam Limit was chosen for a case study in consideration of their strong foothold in retail lending market after seventeen years of officially operating in Vietnam This research attempted to figure out the most important factor influenced mortgage customer satisfaction Based on that, the research findings provided meaningful recommendations and managerial implications for ANZ Bank Vietnam Limited’s management board

Sample of 150 respondents was selected, it was executed mostly in email and telephone interview Collected data was analyzed by using SPSS 16.0 Main analyses were exploratory factor analysis, correlation, reliability with Cronbach’s Alpha, multiple linear regression

The result addressed that the key satisfactions of mortgage customers at ANZ Bank Vietnam Limited were Core Dimension, Relational Dimension, Price, Tangible Dimension and Customer Expertise respectively

Managerial implications for management board of ANZ Bank Vietnam Limited were provided Subsequently, limitations of the research were discussed for future studies in related field

TABLE OF CONTENTS

ACKNOWLEDGEMENTS

ABSTRACT

TABLE OF CONTENTS

LIST OF FIGURES

LIST OF TABLES

LIST OF ABBREVIATIONS

CHAPTER 1: INTRODUCTION 1

1.1 BACKGROUND 1

1.2 PROBLEM STATEMENT 2

1.3 RESEARCH QUESTIONS AND OBJECTIVES 4

1.4 RESEARCH METHODOLOGY 4

1.5 SCOPE AND LIMITATION 5

1.6 THE STRUCTURE OF THE STUDY 5

CHAPTER 2: LITERATURE REVIEW 7

2.1 OVERALL ON CUSTOMER SATISFACTION 7

2.2 OVERALL ON CUSTOMER SATISFACTION IN MORTGAGE LENDING 8

2.3 DETERMINANTS OF CUSTOMER SATISFACTION IN MORTGAGE LENDING 9

2.3.1 Service quality 10

2.3.2 Service price 12

2.3.3 Customer expertise 12

2.4 RESEARCH MODELS AND RESEARCH HYPOTHESES OF CUSTOMER SATISFACTION IN MORTGAGE LENDING 13

2.5 CHAPTER SUMMARY 15

CHAPTER 3: RESEARCH METHODOLOGY 16

3.1 QUALITATIVE RESEARCH STAGE 18

3.1.1 General result of the survey 19

3.1.2 Result on Core Dimension determinant 19

3.1.3 Result on Relational Dimension determinant 20

3.1.4 Result on Tangible determinant 21

3.1.5 Result on Competitive price determinant 21

3.1.6 Result on Customer Expertise determinant 22

3.2 QUANTITATIVE RESEARCH STAGE 22

3.2.1 Target population and sampling method 22

3.2.2 Data collection 23

3.2.3 The questionnaire design 23

3.2.4 Data analysis method 24

3.2.4.1 Descriptive statistic 24

3.2.4.2 Reliability testing 24

3.2.4.3 Assessment of Unidimensionality, Convergent validity and Discriminant validity 25

3.2.4.4 Multiple regression analysis 25

3.3 CHAPTER SUMMARY 25

CHAPTER 4: DATA ANALYSIS AND FINDINGS 26

4.1 SAMPLE CHARACTERISTICS 26

4.2 DATA ANALYSIS 28

4.2.1 Descriptive statistics 28

4.2.2 Reliability assessment 30

4.2.3 Evaluation the measurement scale by using exploratory factor analysis 32

4.2.4 Assessment of convergent validity and of discriminate validity 33

4.2.5 Factor analysis of dependant factor 34

4.2.6 The adjusted research model 35

4.3 TESTING OF HYPOTHESES 35

4.4 MULTIPLE REGRESSIONS 37

4.4.1 Multiple regression formula 38

4.4.2 Multiple regression result 38

4.5 DISCUSSION 40

4.5.1 Application of theoretical conceptual framework 40

4.5.1.1 The relationship between service quality and customer satisfaction 40

4.5.1.2 The relationship between price and customer satisfaction 40

4.5.1.3 The relationship between customer expertise and customer satisfaction 40

4.5.2 The result of measuring ANZ mortgage customer satisfaction 41

4.5.2.1 Service quality 41

4.5.2.2 Price 41

4.5.2.3 Customer satisfaction 42

4.5.3 Outcomes of hypothesis test 42

4.6 CHAPTER SUMMARY 42

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 43

5.1 CONCLUSIONS 44

5.2 RECOMMENDATIONS 44

5.3 LIMITATION AND DIRECTION FOR FURTHER STUDIES 46

REFERENCE

APPENDICES

LIST OF FIGURES

Figure 1.1: Research procedure 5

Figure 2.1: Conceptual framework proposed by Mc Dougall and Levesque 14

Figure 2.2: The conceptual framework proposed by Naser and Jamal 15

Figure 2.3 The conceptual framework proposed by Nguyen Dinh Tung 16

Figure 3.1: The proposed research model 17

Figure 4.1: The adjusted research model 35

LIST OF TABLES Table 3.1: General result of agreement on selected factors 19

Table 3.2: General result of agreement on Core dimension factor 20

Table 3.3: General result of agreement on Relational dimension factor 20

Table 3.4: General result of agreement on Tangible dimension factor 21

Table 3.5: General result of agreement on Price factor 21

Table 3.6: General result of agreement on Customer expertise factor 22

Table 4.1: Age of customer 26

Table 4.2: Monthly income of customers 27

Table 4.3: Customer’s employment 27

Table 4.4: Descriptive statistic 29

Table 4.5: Final result of Reliability testing of the whole mod 30

Table 4.6: Final result of Reliability testing of each factor 31

Table 4.7: The final result of Unidimensionality testing 32

Table 4.8: The analysis result of Convergent validity 33

Table 4.9: The result of factor analysis for Customer satisfaction 34

Table 4.10: Correlation matrix 36

Table 4.11: Model summary 38

Table 4.12: ANOVA 38

Table 4.13: COEFFICIENTS 39

Table 4.14: ANZ mortgage customer perception 41

LIST OF ABBREVIATIONS

ANZ: ANZ Bank Vietnam Ltd

CLM: Customer Lending Manager

COR: Core dimension

EFA: Exploratory Factor Analysis

EXP: Customer expertise

REL: Relational dimension

SAF: Customer satisfaction

SPSS: Statistical package of social science Std Deviation: Standard Deviation

TAN: Tangible dimension

VIF: Variance Inflation Factor

CHAPTER 1: INTRODUCTION

1.1 BACKGROUND

With the characteristic of young population and high urbanization, Vietnam has high demand in accommodation, especially in big cities such as Ho Chi Minh City and Ha Noi City Each year, thousands of immigrants from other provinces come to Ho Chi Minh City and Ha Noi City for working and studying while just a small part of them come back to the hometown Some recent studies have predicted that in 2020, urban population will come up to 70 million Besides that, the young occupies bigger portion in the existing population of Ho Chi Minh City and Ha Noi City which also push the occupation demand higher Yearly increasing construction projects in

Ho Chi Minh City and Ha Noi City is an obvious evidence for the occupation demand of urban people As statistics, in 2009, the average urban living area in Vietnam is 12.5 m2 per head, Ha Noi City is 8 m2 and Ho Chi Minh City is 13.6 m2 This is a very low rate in comparison with the world’s average rate, in which Ha Noi City has the smallest living area per head in the country The Construction Ministry has planned to increase the average living area in Ha Noi City up to 12 m2 per head and 14 m2 for Ho Chi Minh City and therefore, 30-32 million m2 living area need to be constructed each year With the above reasons, mortgage loan in Vietnam

in general and big cities such as Ha Noi City and Ho Chi Minh City in particular is very potential In truth, not many people can purchase a home whether it is a house, flat, apartment or penthouse without taking a mortgage loan

A mortgage loan is a loan secured by real property through the use of a document which evidences the existence of the loan and the encumbrance of that realty through the granting of a mortgage which secures the loan However, the word mortgage alone, in everyday usage, is

most often used to mean mortgage loan (source: Wikipedia) Mortgage is one of long standing

products in Vietnam banking, however, for above reasons, it has never been unessential Mortgage has grown rapidly for recent years in Ho Chi Minh City and Ha Noi City As per Dr

Le Xuan Nghia, Vice President of National Finance Supervisor Committee, in 2009, banking capital invested in real estate market is around VND 200,000 billion, equivalent to USD 10.1

billion which occupies 14.5% total outstanding loan of banking and 11.76% which of the economy, in which, Ho Chi Minh City holds 51% and Ha Noi City holds 14.5% For recent years, competition in mortgage lending among banking become more fiercely than ever before Banks traditionally have relied on differentiation in product category and service to attract and retain customers However, it’s not easy as it’s quickly replicated by competitors and often fails

to directly address customer needs The most critical solution for banks in the violent competitive and rapidly changing environment of mortgage lending is the deep understanding of customer and gaining their trust Customer satisfaction now becomes the determining factor in mortgage competition among banks in Vietnam and Ho Chi Minh City in particular

1.2 PROBLEM STATEMENT

The fast growing-up progress of banking industry in Vietnam has accompanied with the economic development since renovation and reform for 20 years ago The most prominent aspect during this progress is the loosening of market entry restrictions After two decades since

“Banks and banking, cooperative – Law and legislation – Vietnam” (1991), now Vietnam banking sector comprises five state-owned commercial banks, thirty-nine joint stock commercial banks, forty foreign bank braches, five 100% foreign owned banks, five joint venture banks and two development and policy banks established The establishment and operation of many foreign banks has also brought a new face to Vietnam banking industry, especially when foreign banks not only concentrate in wholesales banking, but introduce many retail products such as HSBC, ANZ, Standard Chartered Bank, Commonwealth Bank of Australia… In which mortgage is one of their most important target products to occupy retail market which is considered very potential in Vietnam

ANZ was one of the first foreign banks setting up business in Vietnam with the first branch in

Ha Noi City in 1993 At that time, it was “the first English-speaking bank in Vietnam” In 1996, the second branch in Ho Chi Minh City went into operations and in 2004 business was expanded

to Can Tho Province with a representative office due to the limitation on permitted branches number After 15 years in Vietnam, in October 09th, 2008, ANZ was granted the license of the

bank with 100% foreign capital which brings much advantage to its long-term development in Vietnam Beginning with 28 staff only, now it has more than 400 employees and five branches and transaction offices in Ho Chi Minh City, six branches and transaction offices in Ha Noi City Targeted to be the best foreign bank in Vietnam, ANZ is trying its best to build up the bank’s image as well as a sufficient product portfolio Instead of focusing in wholesale banking products and corporate customers as in the past, now ANZ has built up a new strategy for occupying retail lending market Their retail lending product portfolio is diversified with many products such as auto finance, mortgage, credit card… In which, mortgage is considered the most important product in the portfolio It was firstly introduced in the end of 2007 with four sub-products: Home loan, Investment loan, Equity loan and Line of Credit Since then, mortgage has grown fast and reached more than 2,300 customers in 20 December 2010.

Although being granted many awards such as “The Best Retail Bank in Vietnam”, “The Most Favorite Bank” or “The Best Customer Oriented Bank” by popular magazines like Vietnam Economics Times, The Asian Banker and Finance Asia, ANZ has no official research on customer’s satisfaction on its services, what is the key factor mostly effect customer’s satisfaction and what to improve to increase the mortgage service quality Meanwhile, as above mention, increasing competition in mortgage lending has made the bank’s knowledge on customer’s need and demand the most importance and challenge Managing customer satisfaction is therefore indispensable for management of the banks, to see if they are doing the right things and if they are doing things right

For the above reasons, the study on “Determinants of customer satisfaction on mortgage credit service: A case study of ANZ” has conducted to understands the factors and the key factor having effects to customer’s satisfaction and recommend for the better customer’s satisfaction management to the bank as well

1.3 RESEARCH QUESTIONS AND OBJECTIVES

Research questions

- How satisfied are customers who are using mortgage lending service of ANZ?

- What determinants effecting customer’s satisfaction on ANZ’s mortgage lending service?

- How can these determinants be evaluated and influenced to customer’s satisfaction?

- What solution and recommendation to ANZ to improve customer’s satisfaction on mortgage loan?

Research objectives

- To study about the importance of customer satisfaction on mortgage product

- To analyze satisfaction level of customer on mortgage product of ANZ

- To study the effect of main determinants on customer’s satisfaction on mortgage lending service at ANZ

- To give out appropriate comments and recommendation to improve customer satisfaction

on mortgage product of ANZ

- Secondary data:

o Statistic reports on the social, economic data and figures from the General Bureau

of Statistic

o Annual reports of The State Bank of Vietnam and ANZ

o Statistic report of ANZ on mortgage lending status

o Relevant articles, newspapers, books and websites

1.5 SCOPE AND LIMITATION

As limited on time and resource, the study focuses in individual customers having mortgage transactions with ANZ in Ho Chi Minh City and Ha Noi City

1.6 THE STRUCTURE OF THE STUDY

Figure 1.1: Research procedure

Chapter 1: Introduction

This chapter includes the research rationale, the problem statement, research questions, research objectives and research methodology

Chapter 2: Literature review

This chapter gives an overview on relevant theories Based on that, the final research model and hypotheses was developed

Chapter 3: Research methodology

This chapter describes the operational process of this research in order to approach target respondents and find out the required data

Chapter 4: Data analysis and findings

The chapter presents outcomes throughout data processing and analysis Finally, model and hypotheses tests were conducted to confirm whether they can be applied to predict the behavior intention as this research expected

Chapter 5: Conclusion and recommendations

This chapter summarized not only the main findings and implications but also the possible limitations and further research suggestions

CHAPTER 2: LITERATURE REVIEW

2.1 OVERVIEW OF CUSTOMER SATISFACTION

What constitute satisfaction? The word "satisfied" itself had a number of different meanings for respondents, which can be split into the broad themes of contentment/happiness, relief, achieving aims, achieving aims and happy with outcome and the fact that they did not encounter any hassle

There are also many approaches to the customer satisfaction explanation It is generally described as the overall attitude of customer towards a service provider (McDougall and Levesque, 1996, p.14) or an emotional reaction to the difference between what customers anticipate and what they receive (Zineldin, 2000) regarding the fulfillment of some need, goal or desire (Oliver, 1999) A similar definition is provided by Gerpott (2001) who proposed that satisfaction is based on customer’s estimated experience of the extent to which a provider’s services fulfill his or her expectations Specifically, customer satisfaction is the feeling or attitude of a customer towards a product or service after it has been used (Oliver, 1980) Customers purchase goods and services with pre-purchase expectations about anticipated performance Once the purchased goods and services have been used, the outcomes are compared with the expectations Customers are satisfied when the perceived service meets or exceeds their expectations They are dissatisfied when they feel the service falls below their expectations (Levy and Weitz, 2005)

Customer satisfaction is an important theoretical as well as practical issue for most marketers and consumer researchers (Churchill and Suprenant, 1982; Moutinho and Goode, 1995; Naser et al., 1999; Piercy, 1994) It is a major outcome of marketing activity whereby it serves as a link with various stages of consumer buying behavior Customer satisfaction is widely recognized as

a key influence in the formation of consumers’ future purchase intensions (Taylor and Baker, 1994) For instance, if customers are satisfied with a particular service offering after its use, then they are likely to engage in repeat purchase and try line extensions (East, 1997) Satisfied customers are also likely to tell others of their favorable experiences and thus engage in positive

word of mouth advertising (File and Prince, 1992; Richens, 1983) This positive word of mouth advertising is particularly useful in collectivist Asian cultures where social life is structured in a way to improve social relationships with others in the society (Hofstede, 1980; Hall and Hall, 1987) Dissatisfied customers, on the other hand, are likely to switch brands and engage in negative word of mouth advertising

Customer satisfaction can be considered as the key point of success in the highly competitive business world today Customer satisfaction is increasingly becoming a corporate goal as more and more companies strive for quality in their products and services (Bitner and Hubbert, 1994) Ensuring customers experience satisfaction during their interactions with our business is an essential part of building a sustainable business of many firms They continually try to investigate how to serve the customers better, to implement initiatives to improve the customer’s experience and to increase customer satisfaction more and more

2.2 OVERVIEW OF CUSTOMER SATISFACTION IN MORTGAGE LENDING

Banking is a service industry where customer satisfaction has been the research focus (Holliday, 1996) This is mainly because of the fact that the banking industry is increasingly experiencing a high level of competition, not only competing among each other, but also with non-banks and other financial institutions (Kaynak and Kucukemiroglu, 1992; Hull, 2002) Banks used to rely

on the product category to increase the competition However, as Ioanna (2002) has further proposed, product differentiation is impossible in a competitive environment like the banking industry Most bank product developments are so easy to duplicate that now banks everywhere are delivering the same products For example, there is usually only minimal variation in interest rates charged or the range of products available to customers When banks provide nearly identical services for nearly the same price, they can only distinguish themselves on the basic of price and quality Therefore, banks today have moved away from a transactional-based marketing approach to a relationship based approach that has at its core the recognition of the lifetime value of the customer Bank management tends to differentiate their business with others through service quality Customer satisfaction becomes an effective tool that banks can use to gain a strategic advantage and survive in today’s ever-increasing banking competitive

environment The trend is clearly observed in retail banking service, especially in lending section which is usually thought to be so intimidated to customer The research is conducted in mortgage lending which is a big section of retail banking in Vietnam

2.3 DETERMINANTS OF CUSTOMER SATISFACTION IN MORTGAGE LENDING

The working of the customer's mind is a mystery which is difficult to solve and understanding the nuances of what customer satisfaction is therefore, a challenging task There have been many researches on determinants of customer satisfaction Work done by Berry, Brodeur between

1990 and 1998 defined ten “Quality values” which influence satisfaction behavior, further expanded by Berry in 2002 and known as the ten domains of satisfaction include: Quality, Value, Timeliness, Efficiency, Ease of Access, Environment, Inter-departmental Teamwork, Front line Service Behaviors, Commitment to the Customers and Innovation These factors are emphasized for continuous improvement and organizational change measurement and are most often utilized to develop the architecture for satisfaction measurement as an integrated model

In 1996, Mc Dougall and Levesque conducted a research about customer satisfaction in retail banking and found out that there are some determinants driving customer satisfaction in retail banking, including service quality (core, tangible and relational) and service price These factors, in turns, are affected by customer’s expertise in banking and socio-demographic factors like age, gender, education, occupation The affection of socio-demographic and expertise factors to satisfaction are also suggested in a research by Bettman and Park in 1980

This study, with the research scale of investigate customer satisfaction in mortgage lending which is an important part of retail banking, will conduct with conceptual framework basing on the suggested models of customer satisfaction in retail banking

2.3.1 Service quality

There is a great deal of discussion and disagreement in the literature about the distinction between service quality and satisfaction The service quality school view satisfaction as an antecedent of service quality, which means satisfaction with a number of individual transactions

"decay" into an overall attitude towards service quality The satisfaction school holds the opposite view that assessments of service quality lead to an overall attitude towards the service

that they call satisfaction Obviously, there is a strong link between customer satisfaction and service quality For this reason, research on customer satisfaction is often closely associated with the measurement of quality (East, 1997)

A study conducted by Leeds in 1992 showed that increased service quality or sales and professional behaviors (such as formal greetings) improved customer satisfaction and reduce customer attrition Service quality is an imperative element impacting customers’ satisfaction level in the banking industry In banking, quality is a multi-variable concept, which includes differing types of convenience, reliability, service portfolio, and critically the staff delivering the service

Core of the service and the relational of process aspects are two dimensions of service quality which are suggested by most of empirical evidence and theoretical arguments (Grönroos, 1985;

Mc Dougall and Levesque, 1996; Morgan and Piercy, 1992; Parasuraman et al (1991b) While the number of underlying dimensions has been shown to vary with the service setting, it appears reasonable to suggest that the service core and relational dimensions will emerge in nearly all cases as they form the basis of the service (Mc Dougall and Levesque, 1996) The first one refers to the core aspects of the service (e.g reliability) and the second one refers to the relational or process aspects of the service (e.g tangibles, responsiveness, assurance and empathy (Parasuraman et al., 1991a)) This is due to the fact that reliability is mainly concerned with the outcome of service, whereas tangibles, responsiveness, assurance and empathy are concerned with the service delivery process (Parasuraman et al., 1991a)

Due to the intangible nature of services, it is often difficult for customers to understand services (Leggand Baker, 1996) Customers thus make inferences about the service quality on the basis

of tangibles (the buildings, the physical layout etc.) that surround the service environment (Bitner, 1990) Brand reputation is important as a potential competitive advantage Many financial services are looking at branding techniques to differentiate themselves Harwood (2002) argued that branding, as a tool to build image, is critical in the banking industry where all firms offer about the same kinds of products Hence, it is critical that banks have a comprehensive knowledge of customer’s values, attitudes, needs and perceptions of various services the bank offers and the image which customers have of the bank itself (Kaynak, 1986a,

1986b) Accordingly, banks must be able to build and manage their bank’s image in order to clearly define the differences between their bank and its competitors As today customers have more choices for their financial needs than ever before, technology, globalization, increased competition and increased consumer mobility have dramatically changed the way people bank (Harwood, 2002)

Alvarez (2001) proposed that logic is no longer enough to sell the benefits of an intangible products or service, especially with commodity products and skeptical consumers This situation calls for emotion or image to change the perception of the audience in any real or profound way (Alvarez, 2001) Furthermore, both Marthur (1988) and Gronroos (1984) proposed image as an alternative to differentiate products Findings suggest that convenient location is a critical factor influencing the formation of performance expectations by customers A convenient bank location means customers can easily do business with their banks on a regular basis (Levesque and McDougall, 1996) Accessibility is also a related factor, which, while acting together with convenience, enables customers to deal with their banks more easily (Levesque and McDougall, 1996) For the purpose of current study, convenience and accessibility are treated as part of the tangible dimension of service quality

2.3.2 Service price

As per Abratt and Russell, 1999, the key factors influencing customer’s selection of a bank include the range of services, rates, fees and prices charged It’s apparent that only superior service is not sufficient to satisfy customers Prices are essential, if not more important than service quality (David, Christopher, Hua Hwa and Esther, 2006)

Today’s bank customers are more informed on market products due to the loan of circulating information, making them capable of directly comparing the various competitive products Customers communicate with other customers, study brochures and receive information from television and the internet Therefore, customers are more influenced than in the past by bank pricing policies and seek low borrowing interest rates and low costs for the provision of services Today’s customers turn easily towards the service of another bank than in the past, especially when they only find little and insignificant differences among the various products and services

In mortgage lending, service price are lending interest rate and other relevant fees Although the bank price are now highly affected by market, a little difference in price between bank and its competitors will be recognized and appreciated by customers and it’s likely to bring them more satisfaction

2.3.3 Customer expertise

A review of the literature indicated that formation of performance expectation during product or service evaluation can be moderated by customer’s expertise (Bettman, 1970; Fishbein, 1963; Fishbein and Ajzen, 1975; Rosenberg, 1950) In a landmark article on customer expertise, Alba and Hutchinson (1987) identified two major and distinctive components of customer expertise: expertise and familiarity They defined expertise as “the ability to perform product related task successfully”, whereas familiarity was defined as “the number of product related experiences that have been accumulated by the consumer” (Alba and Hutchinson, 1987, p.411) Expertise is more clearly stated that: “The understanding of the attributes in a product or service class, and knowledge about how various alternatives stack up on these alternatives” (Sheth et al, 1999) They are also likely to have superior ability to encode new information and to discriminate between relevant and irrelevant information (Alba and Hutchinson, 1987; Johnson and Russo, 1984) In short, some customers may be more expert than others and their satisfaction is judged

at a cognitive level In the context of complex services such as banking, insurance, pension, mortgage etc, anecdotal evidence identifies a general trend in the marketplace whereby an increasing number of customers are making their financial positions on their own A number of researchers have indicated that experts have superior ability about learning new information about an offering, as compared to novice customers (Johnson and Russo, 1984; Brucks, 1985; Alba and Hutchinson, 1987) Also, expert customers are likely to have developed skills indistinguishing between important and unimportant information, as well as between relevant and irrelevant information (Alba and Hutchinson, 1987) Generally, expert customers are likely

to have a superior knowledge of existing alternatives; they are also likely to have a superior ability to encode new information and to discriminate between relevant and irrelevant information (Johnson and Russo, 1984; Alba and Hutchinson, 1987) Due to their knowledge and abilities, one could argue that expert customers in comparison with novice customers are

very likely to have high expectations from service providers Hence, as per the disconfirmation paradigm, the differences between pre-purchase expectations and post-purchase perceptions are likely to be at a highest level for expert customers

2.4 RESEARCH MODELS AND RESEARCH HYPOTHESES OF CUSTOMER SATISFACTION IN MORTGAGE LENDING

Customer satisfaction is a quite complex issue and there is a lot of debate and confusion about what exactly is required and how to go about it This exercise in the context of the mortgage lending industry will give an insight into the parameters of customer satisfaction and their measurement In many researches about customer satisfaction on retail banking service, the SERVQUAL model and the simple RATER model (developed by Zeithaml, Parasuraman & Berry Parasuraman, 1985, 1988, 1991) are simple and useful models for qualitatively exploring and assessing customer satisfaction and have been used widely by service delivery organizations

To build up an efficient model in identifying determinants of customer satisfaction in retail banking, in 1996, Mc Dougall and Levesque used some factors like service price and service quality including core, tangible and relational which had been identified in prior SERVQUAL research The model is described briefly in the below charter

Figure 2.1 Conceptual framework proposed by Mc Dougall and Levesque (1996)

Service quality Core Relational Tangible

Price

Customer satisfaction

Source: Mc Dougall and Levesque (1996)

Another study of Jamal and Naser in 2002 has also confirmed that core, relational and tangible are dimensions of service quality and are likely to be antecedents of customer satisfaction Moreover, they also pointed out that customer’s expertise is an important antecedent which has negative relation to customer satisfaction It had also been mentioned before in the research of Bettman and Park (1980) and Oliver (1980), the effect of evaluated criteria in forming performance expectations can be moderated by consumer individual differences

Figure 2.2 The conceptual framework proposed by Naser and Jamal (2002)

Source: Jamal and Naser (2002)

In Vietnam, there is a recent study about the same dependent variable of customer satisfaction It was executed by Nguyen Dinh Tung in 2009 with the topic of “Determinants of individual customer satisfaction at Maritime Bank” His research area was individual customers who had current and saving accounts at Maritime Bank After investigating, the research model was given out with four independent variables having effect on individual customer satisfaction: Core Dimension, Relational Dimension, Tangible Dimension and Competitive Price Besides that, he also explored the influence of socio-demographic and customer expertise on these determinants His research model is described as follows

Service quality Core Relational Tangible

Customer expertise

Customer satisfaction

Figure 2.3 The conceptual framework proposed by Nguyen Dinh Tung (2009)

2.5 CHAPTER SUMMARY

In this chapter, knowledge about overall customer satisfaction and particularly in banking industry is mentioned Some determinants affecting customer satisfaction in mortgage lending including service quality: core dimension, relational dimension, tangible dimension; price and customer expertise are investigated and described Previous studies and research models on this issue have been mentioned like researches of Mc Dougall and Levesque; Jamal and Naser and Nguyen Dinh Tung Basing on the literature review, the research model of determinants affecting customer satisfaction in mortgage lending is set up and tested with specific research methodology in the next chapter

Service quality Core Relational Tangible

Competitive Price

Individual customer‘s satisfaction

CHAPTER 3: RESEARCH METHODOLOGY

This research gives us an insight into the parameters of customer satisfaction and their measurement The customer's requirements must be translated and quantified into measurable targets This information will help the bank to build satisfaction amongst the customers and customer loyalty in the long run which is an integral part of any business This provides an easy way to monitor improvements, and deciding upon the attributes that need to be concentrated on

in order to improve customer satisfaction We can recognize where we need to make changes to create improvements and determine if these changes, after implemented, have led to increased

customer satisfaction "If you cannot measure it, you cannot improve it." - Lord William

Thomson Kelvin (1824-1907)

With the aimed research target of mortgage lending customers who are mainly individual, this study is conducted based on the combination of the proposed models of Mc Dougall and Levesque (1996) and Naser and Jamal (2002) which has been presented in the previous chapter From the literature review, research model on determinants of customer satisfaction on mortgage lending service of ANZ was formed out with independent variables of core dimension, relational dimension and tangible dimension of service quality, service price and customer expertise affecting customer satisfaction as follows

Figure 3.1: The proposed research model

Research hypotheses statements

H1: Core dimension of service quality has a positive impact on customer satisfaction

The significance of the core dimension of service quality means that the bank management has

to make sure that things are done right at the first time and they have to ensure that the promises are kept in terms of service delivery It is specifically described through some items such as: the bank provide mortgage lending products as announced; the bank provides mortgage lending products within the committed time; the bank should show sincere interest in handling customer’s issues; the bank’s staff perform the service properly at the first time; the bank staff has knowledge and skill to explain clearly to customer about mortgage lending products (Mc Dougall and Levesque, 1996)

H2: Relational dimension of service quality has a positive impact on customer satisfaction

Relational dimension refers to additional services and experience which the bank brings customer besides the core service including some items such as: the bank give customer individual attention, the bank have operation hours convenient to their customers, bank staff

Service quality Core Relational Tangible

Competitive price

Customer satisfaction

Customer expertise

understand customer’s need and are always willing to help customers, customer feel safe in the transaction with the bank, the bank gives additional service (Mc Dougall and Levesque, 1996)

H3: Tangible dimension of service quality has a positive impact on customer satisfaction

Tangible dimension includes following items: the bank location is convenient for customer to reach, the parking is easy to approach, the bank personnel are in neat appearance, the bank has comfortable office environment, theand the bank provides easily understood statement (Mc Dougall and Levesque, 1996)

H4: Competitive price of service quality has a positive impact on customer satisfaction

Price of lending activity includes: the bank offer attractive interest rate, the bank’s fee is reasonable at the minimum, the bank’s interest rate and fee are stipulated clearly and reasonably (Mc Dougall and Levesque, 1996)

H5: Customer expertise has a negative impact on customer satisfaction

In the research of Jamal and Naser (2002), customer expertise is negatively related to satisfaction Specifically, customer expertise includes customer’s knowledge about banking, customer’s experience in banking transaction; customers are fully informed about banking products (Mc Dougall and Levesque, 1996), so they are more demanding and less satisfied than novice customers

The methods to examine the theory model including data collection by questionnaires and analysis the result by supporting program are described as in this chapter

3.1 QUALITATIVE RESEARCH STAGE

Basing on the previous study such as Naser and Jamal (2002), Levesque and McDougall (1996)… the initial items of determinants in the model were set out Before applying these items into research, a questionnaire was set up to get the banking expert consultancy In this questionnaire, the tentative questions are combined with open-ended questions in order to not only identify the most important factors expressing the author’s point of view but also allow interviewees to freely suggest their ideas

The interview was conducted with experts who have had at least five years of experience in banking industry Moreover, they specialize in customer service such as Customer Lending

Manager, Business Development Manager, Customer Lending Assistant … and therefore, they daily handle customer’s satisfaction There are 15 people interviewed in the survey Besides the questionnaire, face to face discussions also helped to describe clearly about the research model and criterion to experts From the interaction, the questionnaire has been amended to be clearer and some improvements in the arrangement rule have been made

3.1.1 General result of the survey

Firstly, experts’ ideas on the general framework are collected There are 5 main determinants divided into 21 items Each item was measured by a two-point scale: Agree and Disagree The simple way of selection that determinants and items with over 50% of agreement will be selected for investigation The overall result is described as follows

Table 3.1: General result of agreement on selected factors

No Determinants Number of

agreement Percentage

Investigated

or Not

With all agreement percentage more than 50%, all selected five factors were taken into investigation In which, customer expertise got less agreement than the other ones

3.1.2 Result on Core Dimension determinant

There are five suggested items of Core dimension to get experts’ idea and the result is as follows

Table 3.2: General result of agreement on Core dimension factor

1 The bank provides mortgage lending products as

2 The bank provides mortgage lending products within

No Items agreement No of Percentage

3 The bank should show sincere interest in handling

4 The bank’s staff perform the service properly at the

5 The bank’s staff has knowledge and skill to explain

clearly to customer about mortgage lending products 15 100%

Banking experts all think that all the five items of Core dimension factor are necessary for research From the above result, all of them are taken into further investigation

3.1.3 Result on Relational Dimension determinant

Five items are taken into the election and result is displayed as below

Table 3.3 General result of agreement on Relational dimension factor

1 Time of the bank transaction is convenient for

2 Required documents from the bank and the lending

process are not so wordy and complicated, hence

customer don’t have to come to the bank many times

during the loan process

3 The bank shows its care to each customer Bankers

know clearly about customer’s need and ready to

consult customer the most suitable product

4 The bank gives additional service (insurance for the

mortgaged property, consult about the

3.1.4 Result on Tangible determinant

Five items are taken into the election and result is displayed as below

Table 3.4 General result of agreement on Tangible dimension factor

1 Branches of the bank have convenient locations 15 100%

2 The bank’s equipments are modern and professional 15 100%

4 The bank provides easy understood documents 15 100%

5 The bank has internet/mobile banking facilities so

that customer could easily get information about

their loan

Agreement percentages of all the items are more than 50%, so all of them are taken into further investigation

3.1.5 Result on Competitive price determinant

Three items are taken into consideration and the result of election is as follows

Table 3.5 General result of agreement on Price factor

INT1 Mortgage lending interest rate of ANZ is lower

INT2 Fees that customer must pay within mortgage

lending process at ANZ (security valuation fee,

security management fee, early repayment fee…)

are lower than which of other banks

INT3 Lending interest rate and fee are stipulated clearly

Three items of Price factor are highly agreed to be taken into research by banking experts

3.1.6 Result on Customer Expertise determinant

There are three items measuring the expertise of customer in banking transaction

Table 3.6 General result of agreement on Customer expertise factor

No Items No of

agreement Percentage

EXP3 Information about mortgage lending product 9 60%

EXP3 (Information about mortgage lending product) got least support from banking experts, however the agreement percentage is still over 50% From the above result, all these items are worth to be taken into investigation

After checking the reliability of the determinants using in the models, the questionnaire to survey customer’s satisfaction was formed out Five-point Likert scale was used to measure all items in the questionnaire: (1) Strongly disagree, (2) Disagree, (3) Neither agree nor disagree, (4) Agree, (5) Strongly agree

3.2 QUANTITATIVE RESEARCH STAGE

3.2.1 Target population and sampling method

Starting business in Vietnam since 1993, now ANZ has five branches and transaction offices in

Ho Chi Minh City, six branches and transaction offices in Ha Noi City and one representative office in Can Tho City After a long time of operation, ANZ has set up a full product portfolio and built up a successful brand name in Vietnam banking market In the product portfolio, retail banking in general and mortgage loan in particular is specially focused by the bank We can easily see their advertising on many online real estate websites such as “muaban.net”,

“batdongsan.com.vn”… with many attractive promotions or attached presents Now they have more than 2,300 personal mortgage customers in Ha Noi City and Ho Chi Minh City That’s the research area of this study

Customer Lending Managers (CLMs) of the bank were asked for help in contacting customers and delivering the questionnaires The interview was conducted mostly in email and telephone interview which are considered the most convenient way in limited time and cost

The sample size is prescribed as follows:

• According to Roscoe (1975), the sample size larger than 30 and less than 500 is appropriate for the research

• According to Hair (1998), the sample size should be at least 5 times and preferable 10 times or more as large as the number of variables in the study

The second rule is applied as common in many recent researches 168 questionnaires which are

8 times of the number of variables are delivered There were 162 results collected, in which there were 12 results rejected due to lacked information and 150 qualified were taken into analysis

3.2.2 Data collection

Questionnaires were sent out to many CLMs of the bank who have experience in communicating and persuading customer for response Duration of the survey was nearly two months from the beginning of April 2010 to the end of May 2010 Customers are individuals in

Ha Noi City and Ho Chi Minh City who have or had a mortgage loan at ANZ The interviews are taken via email and phone call for reminding and explaining or via direct telephone interview

The questionnaire is designed with 5-point Likert scaling for all items of the research: Strongly disagree (1), Disagree (2), Indifference (3), Agree (4), Strongly agree (5) For socio-demographic measures, the items are ordinal scaled from 1 to 6 for age, 1 to 7 for income and 1

to 4 for occupation

3.2.3 The questionnaire design

The questionnaire is composed in two languages English and Vietnamese; including five sections and twenty five questions as detailed in Appendix The first section explore customer’s personal information like age, income, occupation The next sections in turn investigate about customer expertise, customer’s comment about the bank’s mortgage lending service quality, the bank price The last section is their overall assessment about the bank’s mortgage lending product The questionnaire was designed with selected wording which has been amended to be clearer as commented by banking experts so that professional words could

be easily understood by interviewees

3.2.4 Data analysis method

Qualified questionnaires are inputted into an Excel worksheet before importing into SPSS version 16.0 To have an overall view on customer characteristics, descriptive analysis was used for their age, monthly income and occupation Then, the Frequency and Descriptive statistic was executed to describe the main features of data collected Reliability with Cronbach’s Alpha was used to check internal consistency of the items Due to exploratory nature of the research, Cronbach’s Alpha was aimed at 0.6 as standard value After checking the reliability of each variable in each dimension, all dimensions will be assessed by Unidimensionality, Convergent Validity and Discriminate Validity

The statistical analysis of multiple linear regressions and bivariate correlation were used to calculate the effect of independent variables to the dependent variable and investigate the relationship among variables respectively

3.2.4.1 Descriptive statistic

The descriptive is the list of summary statistic of many variables Descriptive statistic helps to give us overview about the collected data via minimum, maximum, mean and standard deviation, skewness and kurtosis calculation

3.2.4.2 Reliability testing

As the investigated scale is interrelated assembly of items, it is required to investigate whether the items would elicit the same responses if the same questions are recast to the same respondents High reliability dimensions are those with high inter-correlated, indicating that they are measuring the same latent dimension As the reliability decreases, the indicators become less consistent and thus are poorer indicators for the latent dimension (Hair et al., 1998)

Cronbach’s Alpha measures how well a set of items measures a single unidimensional latent construct The value level of Conbach’s Alpha is 0.6 as a criterion of testing reliability Any variables result higher Cronbach’s Alpha once being deleted will be eliminated to improve reliability

3.2.4.3 Assessment of Unidimensionality, Convergent validity and Discriminant validity

To assess the unidimensionality of each dimension, the data set will be tested with the method of Principal component in Extraction, Varimax in Rotation The factor is regarded as qualified

when KMO (Kaisor-Mayer-Olkin) ranges from 0.5 to 1.0 and eigenvalue is equal or over 1 (Norusis, 1993) as well as factor loading over 0.5 (Hair et al., 1998)

To evaluate the Convergent Validity, the data set will be checked with the method of Principal components in Extraction, Varimax in Rotation Similarly, the factors also pass the criteria of KMO and eigenvalue as Unidimesionality as well as factor loading over 0.4 to converge properly with the latent construct designed to measure

3.2.4.4 Multiple regression analysis

Multiple regression analysis is considered the general statistic technique which can be used to investigate the relationship between a single dependent variable and a set of independent variables This technique also helps us in identifying which factor is important in affecting customer satisfaction with a specified significant level

CHAPTER 4: DATA ANALYSIS AND FINDINGS

4.1 SAMPLE CHARACTERISTICS

For collecting data, there were 168 questionnaires were sent out and 162 results collected After checking carefully, 12 results were rejected due to lacked information and 150 were taken into the data analysis

The below tables help us to have an overall view about the sample’s characteristic like the age, monthly income and occupation of the interviewees:

Table 4.1: Age of customer

Age Frequency Percentage Accumulated

From the above table, it’s seen that 31 – 40 year-old-customers occupy the largest part of 38%

It can be easily understood as at this age, people get married and have need of a house, besides that, most of them have stable job as well as some savings after time of working and look for a mortgage loan to support them in settling down The smaller part of 28.67% was for 21 – 30 year-old-customers These customers are young and talented people who often have quite high income than customers in other parts So they could afford the loan repayment burden earlier Customer at 41 – 50 years old occupy 22% total investigated customers At this age, they often purchase the second or third property for investment purpose The left part belongs to customers