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

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

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

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 not complete this study

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

ABSTRACT

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

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

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

CONTENTS

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

LIST OF FIGURES

Figure 3.1 Fundamental differences between quantitative and qualitative research strategies 22 Figure 3.2 Research process 26 Figure 4.5 Mean of each used ISP name on Customer Loyalty 46 Figure 4.4 Histogram, Normal P – P plot and Scatter plot of Dependent 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

ABBREVIATIONS

ISP: Internet Service Provider

EFA: Exploring Factor Analysis

MRL: Multiple Regression Model

Chapter 1: Introduction

The introduction chapter identifies the research background, present the problem statement, the research questions, and introduce the research methodology, the objectives as well as limitation of the study In addition, the significance of the research problem and the organization of the thesis are also outlined

1.1 Research background

The internet service market is growing very fast in many countries over the world And Vietnam is not an exception case Up to July 2011, Vietnam has 29.5 million of people using Internet, equal to 33.99% of population, and forecast increasing to 40% in 2012 (Ha Nam Khanh Giao & Tran Huu Ai, 2011) Internet is one of the most common means of communication nowadays In Vietnam, internet contributes 42% of daily communication means (http://www.thongkeinternet.vn/jsp/tintuc/tintuc.jsp) Internet service market is growing very fast in over the world Asia region has biggest internet user number Vietnam is one of the countries which has highest increasing percentage of internet users in Asia region There are many service providers in Vietnam such as VNPT, FPT, Viettel, SPT, SCTV… Therefore, studying about this service has inspired many researchers to devote more of their research attention to this area

It has been figured out by previous researchers that as markets become more competitive, firms are more likely to try maintaining their market share

by focusing on retaining current customers It’s also obvious that when competition and the costs of acquiring new customers increase, companies will

be more concentrated their strategic efforts on customer retention, therefore to maintain customer long-term relationships becomes as a critical mission for business 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 market reaches the saturation point, a defensive strategy aiming at retaining existing customers is more important than an offensive one, which targets at expanding the size of the overall market by inducing potential customers to subscribe to its services (Ahmad & Buttle, 2002; Fornell, 1992)

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

1.2 Problem statement

Nowadays the internet industry, like many of other ones, faces very stress competition so a large scale of internet service provider’s resources must be definitely devoted to the present customers to make them more satisfied in order to retain them

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

In internet service, many studies prove that customer satisfaction and quality service are the drivers of customer loyalty while customer perceived value, trust, corporate image, price perception quality, and customer switching costs have significant effects on customer loyalty (Lee, 2010; Cheng et al., 2008; Yang & Peterson, 2004; Lam et al., 2004; Aydin & Ozer, 2005; Kim et al., 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 all circumstances since customer still has a chance to freely choose suppliers because of many reasons such as switching cost, corporate image, price perception…

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

in the context of the internet service market in Ho Chi Minh city We examine the 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 are outlined to examine key antecedents of customer loyalty and impact career on customer loyalty, it explores:

1 The impact of Customer Satisfaction, Switching Cost, Price Perception, and Corporate Image on Customer Loyalty in internet service 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 in other service sectors, but in other hand it may have some limitations There are other 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 research methodology, 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 customer loyalty 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 and secondary data is collected The measurement scales apply for the research factors 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 these factors (customer satisfaction, switching cost, corporate image and price perception) 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 for managers of internet service provider in Ho Chi Minh City Market in terms of the 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, the antecedents of customer loyalty and the relationships between each of the antecedents and customer loyalty Then, the hypotheses and the conceptual framework 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 from some other person or group of people Customer can be defined in different ways 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 We are not doing a favor by serving him … he is doing us a favor by giving us the opportunity 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) really likes the provider and appreciate it, and (3) does not want to looking for using another service provider for this service On contrast, an extremely “non-loyal” person is one who (1) will never use the provider again, (2) has negative feelings/thought about the provider, and (3) welcomes suggestions about other providers 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 five items they use to measure loyalty include (1) saying positive things about the company,(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 more business 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 the likelihood of a customer returning, making business referrals, providing strong word 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 “a deeply held commitment to re-buy or re-patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior” Customer loyalty manifests itself in a variety of behaviors, the more common ones being recommending a service provider 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 customers regularly purchase goods or services, have word of mouth, and make advices to other 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 brand based on what they know about that brand For example, they are loyal with that product brand/service because they get information of that product/service quality is good and meets with their expectations

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

The third stage is conative loyalty that consumers have a behavioral intention – committed deeply to buy The intention leads to the fourth stage of action

The fourth phase is action loyalty At this last stage customers turn intentions into actions Customers have the desire to overcome barriers which might 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 conceptual perspectives: behavioral loyalty/perspective, attitudinal loyalty/perspective, and composite loyalty/perspective (Bowen & Chen, 2001; Zins, 2001)

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

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

Jacoby and Kyner (1973) express customer loyalty by a set of six necessary and collectively sufficient conditions by integrating both behavioral loyalty and attitudinal 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 alternative brands 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 two other ways: repeat patronage and recommendation Zeithaml, Berry, and Parasuraman (1996) propose a comprehensive multi-dimensional framework to measure customer loyalty which includes both attitudinal loyalty and behavioral loyalty

In this research, customer loyalty includes both recommending and patronizing 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 higher rates of return on investment they get Asker (1991) discusses the role of loyalty 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 to build consumer loyalty is seen as the key factor in winning market share and developing 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’s why customer loyalty should affect shareholder value in a positive manner by reducing instability and associated risk with expected future cash flows Dick and Basu (1994) propose that customer loyalty creates positive WOM communication (word of mouth) and competitive strategies are resisted by loyal customers Based on many findings, strategists and marketers are recommended to build and hold strong customer loyalty Oliver (1999) agrees with Dick and Basu that customer loyalty is engaged in affirmative word of mouth communication “Based on a 20-80 principle, the top 20% of the customers may create 80% of profit for a company” (Kotler and Keller, 2005)

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

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

2.1.6 Loyalty programs and its benefits

Customer loyalty program have developed remarkably in the era of customer retention in recent years This is due to recent advances in information technology They have been considered by many organization and many of them have adapted customer loyalty programs According to Yi and Jeon (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 basic idea of a loyalty scheme is to reward customers’ repeat purchasing and encourage loyalty by providing targets at which various benefits can be achieved The longer customer stays with an organization the more profit the customer generates (Reichheld and Sasser, 1990) This is an outcome of a number of factors relating to the time the customer spends with the organization, and includes: the effects of the higher initial costs of introducing

at attracting a new customer; increase in the value of purchases; increase in the number of purchases; the customer’s better understanding of the organization and vice versa; and the last one positive word-of mouth It was recognized by Colgate et al (1996) that reduction in defection can contribute to increases in profits more than increasing the market share The profits of organization can increase 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 to decrease price sensitivity, increase brand loyalty, reduce the willingness to consider alternative brands, encourage word of mouth support and endorsement, attract a larger group of customer and increase the amount product bought (Uncle et at,., 2003)

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

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

Even though a small number of schemes today offer all dimensions of value, 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 and Jones, 1995) This is most significant when customer loyalty programs are mainly used as differentiation

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

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

the costs of acquiring new customer Rust and Zahorik (1995) identify the financial implications of customer retention, citing US office of consumer Affairs research that estimates that attracting new customer maybe five times

as costly 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 programs and benefits, it is time to have a look at the different factors which affect this concept

2.2 Antecedents of customer loyalty

In internet service and mobile phone service, many studies prove that customer satisfaction and quality service are the drivers of customer loyalty while customer perceived value, trust, corporate image, price perception quality, and customer switching costs have significant effects on customer loyalty (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 at the same time Therefore, in this research we use four antecedents such as customer satisfaction, price perception, corporate image, and switching cost to test their effects on customer loyalty of the internet service users in Ho Chi Minh city in VietNam

• Tse and Wilton (1988) defines satisfaction as “the consumer’s response to the evaluation of the perceived discrepancy between prior expectations (or some other norm of performance) and the actual performance of the product as perceived after its consumption”

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

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

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

In this study we use definition of customer satisfaction from Oliver (1997, 1999) There are many benefits for a company from a high customer satisfaction level Anderson et al (1994) suggest that overall customer satisfaction is based primarily on the experience and satisfaction while purchasing merchandise or services: it is both an emotional evaluation and a process of comparison between a “pre-consumption expectation” and the “post-consumption perceived performance” Reichheld and Saser (1990) argue that improved customer satisfaction will affect the likelihood of repeat purchases Taylor and Baker (1994) based their studies on four service industries in their examination of the relationships between service quality, customer satisfaction, and customer purchase intention They determined that customer satisfaction is positively correlated to purchase intention Fornell et al (1996) also maintain that 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

is great This will create an attitudinal loyalty whereby the customer will

recommend the product or service through word of mouth In internet services industry, many recent studies prove that customer satisfaction positively affected 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/buyer for changing from an existing service/product to another (Porter, 1998) In addition to objectively measurable monetary costs, switching costs may also pertain 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 of switching costs such as transaction costs, learning costs, and artificial switching costs (Klemperer,1987) Dick and Basu (1994) defines switching cost includes time, 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

of switching cost defined by Jones et al., (2000) switching costs are consumer perceptions of the time, money, and effort associated with changing service providers

The first one is the economic or financial switching cost is assumed as a sunk 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 the uncertainty/risk of the unused brand The customer perceives high risk

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

In the internet services industry, when switching cost is high, customers tend to continue using their existing provider’s internet service The reason is that switching incurs risk (Anton Martin, Garrido Samaniego, & Rodriguez Escudero, 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 other routines 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 second hypothesis:

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

on the 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 the company, such as business name, architecture, logo, various products/services, culture, and to the impression of quality communicated by a customer with clients of the company (Nguyen and Leblanc, 2001) In additional, according to Kennedy (1977), corporate image contains the functional component and emotional component The functional component

refers to tangible characteristics, whereas the emotional component is connected with psychological dimensions In the other words, the emotional component includes feelings and attitudes of customers towards a company Corporate image is the result of a process (MacInnis and Price, 1987) Yuille and Catchpole (1977) suggest that corporate image is the result of an aggregate process in that customers incorporate their own previous experiences and information obtained through many sources (advertising, word of mouth, public relations) to make a perception or mental images of the firm According

to the study 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 the products/ services As a result, corporate image as an attitude must affect behavioral intentions such as customer loyalty (Johnson et al., 2001) Nguyen and Leblanc (2001) demonstrate that corporate image has a positive impact on customer loyalty in three sectors namely, telecommunication, retailing and education 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 the consumer's perspective, price is what is given up or sacrificed to obtain a product” From many previous research, many researchers define price “as a sacrifice is consistent with con-ceptualizations by other pricing researchers” (Chapman 1986; Mazumdar 1986; Monroe and Krishnan 1985, cited in Zeithaml , 1988) Jacoby and Olson (1977) distinguish between objective price (the actual price of a product) and perceived price (the price as encoded by the con-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 value incorporates both the costs and benefits of staying with a company by many researchers and consultants (Slater, 1997; Gale, 1994) Researchers in this area have further elaborated on the linkages between price factors and perceived value (e.g., Grewal, Monroe, & Krishnan, 1998), as well as between price and customer loyalty (e.g., Voss, Parasuraman, & Grewal, 1998) In addition, the marketing literature supports the general notion that pricing factors affect the price perceptions of customers, which in turn contribute to customer loyalty (Reichheld, 1996) The equity concept refers to customer evaluation of what is fair, right, or deserved for the perceived cost of the offering (Bolton & Lemon, 1999) As such, customers’ perceived value is considered as a strong driver of customer retention Limited research has been undertaken to investigate the linkage between price perception and customer loyalty (Ranaweera & Neely, 2003; Varki & Colgate 2001) Ranaweera and Neely (2003) showed that price perception has a direct linear relationship with customer loyalty in the telecommunications sector Keaveney (1995) reported finding that more than half the customers she surveyed had switched among services because of poor price perceptions Her qualitative study suggests that unfavorable price perceptions may have a direct effect on customer intention to switch In addition, 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 influencing customers’ decisions in choosing and developing loyalty with a particular product or service A customer’s perception of the value received from a service 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) Hong Kong has many same characteristics with Ho Chi Minh city Both of them are very commercial cities, belongs a developing countries and have young population So, we should exam relationship between perception price and customer 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 the purpose of testing and verifying the elements affect on Customer loyalty of internet service users in Ho chi Minh city market

CHAPTER 3: RESEARCH METHODOLOGY

This chapter includes two main parts: (1) research design, (2) measurement scales Besides, tools for testing the research questions and hypotheses are also explained 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 and refining the relevant items and building a questionnaire Besides, the main survey 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 and research, epistemological considerations and ontological considerations, quantitative and qualitative research can be considered as two distinctive clusters of research strategy

Figure 3.1 Fundamental differences between quantitative and qualitative

research strategies

Fundamental differences between quantitative and qualitative research strategies

Quantitative Qualitative

Principal orientation to the

role of theory in relation to

research

Deductive; testing of theory

Inductive:

generation of theory

Epistemological orientation Natural science model, in

Particular positivism

Interpretivism

Onto togical Orientation Objectivism Constructionism

Source: Bryman and Bell (2003)

So quantitative method is used for an exploratory study, while quantitative method is used for a main survey which is executed for data collection to test the proposed 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 of Technology, 5 people who are studying and working, and 5 people who are working 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 and hypotheses were confirmed Besides, some of questions were adjusted and added in terms of translation from English to Vietnamese of the questions so that the interviewees could understand clearly and easily Furthermore, to re-confirm a revised questionnaire was understood correctly and to check reliability of measurement scales before moving forward to main survey, a pilot test 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 and working, 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 the respondents to get their answer One question to ask the respondents if they could 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 used for data analysis

3.1.3 Main survey

The main survey was conducted in Ho Chi Minh city with convenient sampling; and the final questionnaires were sent to both part time, full time students of the universities (Ho Chi Minh City University of Social Sciences and Humanities, Ho Chi Minh City University of Technology, Banking University of Ho Chi Minh City) and working people in Ho Chi Minh city

3.1.3.1 Sampling size

A good sample size should satisfy both accuracy and precision or it should bring no systematic bias in variance with the sampling error acceptable (Donald & Pamela, 2003) Additional, Hair & et al (1998) argued that we needed to collect at least five samples for a observed variance in Exploring Factor Analysis And, a good sample size in Multipe Linear Regression Analysis, we should ensure a sample size following the below formula (Tabachnick & Fidell, 1996)

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 data from at least 194 respondents

3.1.3.2 Data collection procedure:

According to many scholars, in the use of survey strategy, the main instruments 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 that generally 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 to elicit willingness to answer in respondents As a result, questionnaire was used

In this study, self-administered, structured questionnaire was used to collect data from respondents (Appendix1) The completed questionnaire was developed 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 the questionnaire hard copies, data collection was conducted very fast, just within

2 continuous weeks in Mar of 2012 There were 250 questionnaires distributed and we received 225 feedbacks from respondents, among of them 11 were then identified as invalid So in total, we had 214 valid returned questionnaires which contributed a valid response rate of 85.6%, which was considered at good level for consequent analysis This quantity also met the criterion calculated 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, Switching cost, Corporate image, and Price perception were examined based on the scales developed from the previous reliable researches with little modification All variables 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 = strongly agree (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 of making a right decision with their Internet service providers based on the input and 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 of measurement from the research (Jones, Mothersbaugh,& Beatty, 2000; Julander and Söderlund , 2003) The items reflects search cost, transaction cost, learning cost, hassle to change, time and effort, and perception of being locked to the supplier All items, except for the last one, are indirect measures

of switching costs 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

It costs me too much to switch to another ISP SC2

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 and LeBlanc’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

I have always had a good impression of my ISP CI1

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

3.2.4 Measure of Price Perception

Price perception was measured based on the study of Cheng et al., (2008) One question refers to the “reasonableness of price” which was used in Ranaweera and Neely’s (2003) study The other one reflects the relative standing of one’s service provider in terms of price on Varki and Colgate’s (2001) study It was adopted with little modification in this study by adding one more questions to make this measurement scale stronger and more reliable The added question is related 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

The prices charged by my ISP are reasonable PP1

My ISP’s services are value-for-money PP2

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

with the service

PP3

3.2.5 Measure of Customer Loyalty

Customer Loyalty was measured by five observed variables, developed by Zeithaml 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 business with 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 friends and relatives to do business with the ISP Especially, we changed “next few years” 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 guess what 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

I have recommended the ISP to colleagues who seek my

advice

CL4

I have encouraged others to patronize the ISP CL5

3.3 Data analysis method

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

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

CHAPTER 4: RESEARCH RESULTS

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

4.1 Descriptive data analysis

There were 250 questionnaires distributed and we received 225 feedbacks from respondents, among of them 11 were then identified as invalid So in total, we had 214 valid returned questionnaires which contributed a valid response rate of 85.6%

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

Table 4.1 – Sample characteristics