Determinants of customer satisfaction in the personal loan service

HOANG THI THANH THANHDETERMINANTS OF CUSTOMER SATISFACTION IN THE PERSONAL LOAN SERVICE: A STUDY OF PUBLIC AND PRIVATE BANKING SECTORS IN HO CHI MINH CITY MASTER’S THESIS In Business Adm

HOANG THI THANH THANH

DETERMINANTS OF CUSTOMER SATISFACTION

IN THE PERSONAL LOAN SERVICE:

A STUDY OF PUBLIC AND PRIVATE BANKING

SECTORS IN HO CHI MINH CITY

MASTER’S THESIS

In Business Administration Ology Code: 60.34.01.02

Supervisor Associate Professor NGUYEN DINH THO

Ho Chi Minh City, 2012

This research project would not have been possible without the support

of many people Firstly I would like to express my heartfelt gratitude anddeepest appreciation to my supervisor, Associate Professor Nguyen Dinh Thofor his precious guidance, share experience, ceaseless encouragement, andvaluable suggestions throughout the course of my research

My thanks would also go to all of my classmates, my colleagues,especially my “old pals”, Ms Nguyen Thi Phuong Thao and Ms Le Thi NhuHuyen for all of their friendship and encouragement

I also wish to thank my friends in Agribank, ACBank, Sacombank andEximbank for their great support My thanks would also go to the respondents,without them, my thesis could not have been done

Finally, I would like to express my deepest gratitude and honor to mydear parents for not only the love they devote to me but also for the time I tookfrom them which should have been my devotion to them in their aged time

This study investigates the main factors of the personal loan service affectingcustomer satisfaction between public and private banks in Ho Chi Minh city Dataanalysis over a few years reveals that bank‟s performance may be evaluated inrelation to a set of satisfaction dimensions to indicate the strong and the weak points

of a business According to the results, customer satisfaction is positively related tothe service An interesting finding is that five components of service quality(tangibility, reliability, responsiveness, assurance, and empathy) have a positive andsignificant impact on customer satisfaction, which consists of a previous study ofParasuraman (1991) On the other hand, brand image is an important determinant inrelation with customer satisfaction that is measured by Akviran (1994) Thedifferent weights of customer expectation, perceived quality, and perceived valuehave implications for bank managers to use them as a reference source for customersatisfaction strategy The research also provides a modified model of customersatisfaction to determine the critical personal loan service dimensions in public andprivate banks in Ho Chi Minh city

ACKNOWLEGEMENT 1

ABSTRACT 2

CONTENTS 3

LIST OF TABLES 6

LIST OF FIGURES 7

CHAPTER 1: INTRODUCTION 8

1.1 BACKGROUND OF THE STUDY 8

1.1.1 Vietnamese banking sector 8

1.1.2 The personal loan service 9

1.1.3 Customer satisfaction in Vietnam 11

1.2 RATIONALE OF THE RESEARCH 11

1.3 STATEMENT OF THE PROBLEM 12

1.4 RESEARCH OBJECTIVE 13

1.5 SCOPE OF THE RESEARCH 13

1.6 RESEARCH METHODOLOGY 14

1.6.1 Secondary data 14

1.6.2 Primary data 14

1.7 THE STRUCTURE OF THE RESEARCH 14

CHAPTER 2: LITERATURE REVIEW 16

2.1 INTRODUCTION 16

2.2 CUSTOMER SATISFACTION 16

2.3 DETERMINANTS OF CUSTOMER SATISFACTION 17

2.4 CUSTOMER SATISFACTION WITH THE PERSONAL LOAN SERVICE 18

2.5 HYPOTHESES AND MODEL 18

2.5.1 Brand image 18

2.5.2 Customer expectation 19

2.5.3 Perceived quality 20

2.5.4 Perceived value 21

2.6 CONCLUSION 23

CHAPTER 3: RESEARCH DESIGN 24

3.1 INTRODUCTION 24

3.2 RESEARCH DESIGN 24

3.3 MEASUREMENT SCALE 27

3.3.1 Introduction 27

3.3.2 Operation of measures 27

3.3.2.1 Scale to measure brand image 27

3.3.2.2 Scale to measure customer expectation 28

3.3.2.3 Scale to measure perceived quality 29

3.3.2.4 Scale to measure perceived value 30

3.4 PRILIMINARY RESEARCH 31

3.5 MAIN RESEARCH 32

3.5.1 Sample design 32

3.5.1.1 Brand selection 32

3.5.1.2 Sampling 33

3.5.1.3 Sample size 34

3.5.2 Survey method 35

3.6 CONCLUSION 35

CHAPTER 4: RESEARCH RESULTS 37

4.1 INTRODUCTION 37

4.2 SAMPLE CHARACTERISTICS 37

4.2.1 Final sample 37

4.2.2 Characteristics of sample 38

4.3 DATA ANALYSIS 42

4.3.1 Reliability evaluation through Cronbach‟s Alpha 43

4.3.2 Evaluation the measurement scale by using Exploratory Factor Analysis

(EFA) 46

4.3.2.1 Some rules in EFA test 46

4.3.2.2 EFA for determinants of customer satisfaction 46

4.3.2.3 EFA for customer satisfaction 48

4.3.3 Modeling Testing 48

4.3.3.1 Correlation coefficient analysis 48

4.3.3.2 Regression analysis 49

4.3.3.2.1 Multiple regression assumptions 49 4.3.3.2.2 Regression model 50 4.4 SUMMARY 56

CHAPTER 5: CONCLUSIONS AND IMPLICATIONS 57

5.1 INTRODUCTION 57

5.2 CONCLUSIONS FROM THE RESEARCH QUESTIONS 57

5.3 DICUSSIONS OF THE RESEARCH FINDINGS 59

5.4 CONTRIBUTIONS 61

5.4.1 Theoretical contribution 61

5.4.2 Methodological contribution 63

5.5 MANAGERIAL IMPLICATIONS OF THE RESEARCH 64

5.5.1 Managerial implications for public banks 64

5.5.2 Managerial implications for private banks 65

5.6 LIMITATIONS OF THE RESEARCH AND FUTURE RESEARCH 66

5.7 CONCLUSION 67

APPENDIX 1: GROUP DISCUSSION 74

APPENDIX 2: QUESTIONNAIRE 79

APPENDIX 3: CRONBACH‟S ALPHA ANALYSIS RESULT 83

APPENDIX 4: FACTOR ANALYSIS RESULT 87

APPENDIX 5: MUPTIPLE REGRESSION ASSUMPTIONS 90

LIST OF TABLES

Table 3.1 Measures of brand image 28

Table 3.2 Measures of customer expectation 28

Table 3.3 Measures of perceived quality 29

Table 3.4 Measures of perceived value 30

Table 3.5 Measures of customer satisfaction 30

Table 4.1 Sample characteristics of public banks 39

Table 4.2 Sample characteristics of private banks 41

Table 4.3 Reliability test of the personal loan service and customer satisfaction in public and private banks 43

Table 4.4 Final reliability test of the personal loan service and customer satisfaction in public and private banks 45

Table 4.5 EFA analysis result of determinants in public and private banks 47

Table 4.6 EFA analysis result of customer satisfaction in public and private banks 48

Table 4.7 Pearson correlation matrix in public and private banks 49

Table 4.8 Model Summary b in public and private banks 51

Table 4.9 Anova b in public and private banks 51

Table 4.10 Coefficients a in public and private banks 51

Table 4.11 Model Summary b in public banks 52

Table 4.12 Model Summary b in private banks 53

Table 4.13 Anova b in public banks 53

Table 4.14 Anova b in private banks 53

Table 4.15 Coefficients a in public banks 54

Table 4.16 Coefficients a in private banks 54

LIST OF FIGURES

Figure 2.1 Research model 22

Figure 3.1 Research process 26

CHAPTER 1: INTRODUCTION

1.1 BACKGROUND OF THE STUDY

1.1.1 Vietnamese banking sector

The

banking sector in Vietnam has a significant growth rate during past twodecades along with the economic development This banking system consists of fivecommercial state-owned banks, thirty seven commercial joint-stock banks, six joint-venture banks, thirteen 100% foreign banks, and fifty three representative branches

of foreign banks (Wikipedia, 2012) The development primarily concentrates oncommercial joint-stock and foreign banks showing the attractiveness and potentialdevelopment of Vietnam baking industry to inland investors as well as internationalfinancial institutions

The market changes create more challenges and difficulties for banks Thepublic banks face adoption of technology and issues like credit proposals andpersonal matters Processing bad debits, finding partners to increase financialability, dealing with difficult issues from the tight currency policy and the limitedcredit scale are carried out by the private banks Changing the attitude of personneland developing strategies are justified for the strong and weak banks All banksmust design a new plan to survive in the innovative period (Bui, 2011)

With the entry of new generation tech-savvy private banks and the expansion

of operations of foreign banks, the banking sector has become too competitive.Well-computerized foreign banks are beginning to compete seriously with thenationalized banks They aim at a profitable and wealthy part of the market and, incontrast to the nationalized banks; they do not recognize any social responsibilities

to small account holders Almost of the banks are still controlled by Public SectorBanks (PSBs) PSBs are still dominating the commercial banking system To deal

with the emerging situations, bankers have to shed a lot of old ideas, change inpractices, develop customer loyalty programs, and adopt a distinct approach to meetthe challenges ahead In a fiercely competitive market, non-price factors likecustomer service become more important Hence, it is desirable for banks todevelop a customer-centric approach for future survival and growth Efficient andspeedy customer service is implemented to attract the existing customers incontinuing and inducing new customers to try the services offered by a bank.Vietnamese banks have already taken lot of initiatives in this regard Further, it hasbeen realized that Vietnamese banks have miles to go to capture the recent trendsand to compare with the Western counterparts As a result, many banks haveintroduced new customer friendly measures like 24-hour banking, 7-day andanywhere banking, internet banking, extended business hours, ATM network, etc.

1.1.2 The personal loan service

With years, banks are adding services to their customers The Vietnamesebanking industry is passing through a phase of customers market The customershave more choices among the banks A competition has been established within thebanks‟ operating in Vietnam

The development of business activities, manufacturing and trading, more andmore individuals borrow a large of money from banks to manage their business Itcreates a large chance for banks extending personal loan service with different loanmethods such as partial loan, loan under credit limit, installment loan, etc Besides,the Pubic Sector Banks have signed the determinant to decrease the loan interestrate to 17 - 18%/year for individuals (Nguyen, 2012) The enlarged loan objects, theloosened loan conditions, and the improved liquidity make the commercial banksgive promotions In February, 2012 Oceanbank has the loan projects to buy houseswith the interest rate down to 19%/year It lends up maximum 80% of house valuewithin up to 120 months ABBank is implementing the program “Easy loans –

dream house ownership” and supporting the individual customers having incomefrom salary, wages to loan funds in order to repair or buy a home and a residentialland Customer can borrow up to 90% of the total capital needs and not exceed 70%

of collateral value At that time, it also loans to buy cars with the program

“Whistling on the desired car” with a maximum loan period being 60 months and aloan money being 75% of car value VPBank also has repayment home loanprograms up to 10 years ACBank loans to buy a house or a land up to 10 - 15 years.Loans for building and repairing a house are 7 years, the principal and interestmoney is amortized monthly with 18.5% - 19%/year of the loan interest rate, andthe loan level depends on the repayment capacity of customers

Although the policy of many banks in 2012 is focusing on promoting lendingproducts, particularly consumer credit form with preferential terms than before, loanlimits continue to increase, the caution in spending money of customers makes thebank's plans have not achieved as expected To explain the problem, there are thefollowing reasons

Firstly, banks apply the personal loan interest rate to buy a house inFebruary, 2012 is 19% that is much lower than in 2011 but this time, a number ofcustomers borrowing money are not much

Secondly, the consumer loan has potential risks So, the bank must apply theconstraint conditions and consider the interest rates that can offset the costs andlimit a part of the risk This is a reason why some customers have real loan needsbut they do not meet the conditions which banks offer

Finally, the other customer groups are eligible to borrow though theyconsider the direction of interest rates expected to fall in coming months Evensome customers purchasing cars are hesitant to wait for the policy from themanagement According to them, if forthcoming, the new fees as urban circulation

fees, road maintenance costs estimated at 20-50 million VND / vehicle / year isadopted, the plan to buy their cars must reconsider (Le and Huyen, 2012).

1.1.3 Customer satisfaction in Vietnam

Customer satisfaction for the personal loan service is at medium level to upand is lower than four of the five-point Likert scale Customers are less satisfied ordissatisfied with some elements such as the personal loan interest rate, network,empathy and responsiveness Specifically, the personal loan interest rate isconsidered as a big hindrance when customers borrow amount of money fromVietnamese banks In some cases, customers must sell mortgage properties to paythe loan interest and capital because the interest rate is higher with every passingday (Nguyen, 2011)

1.2 RATIONALE OF THE RESEARCH

In the current context, the personal consumption for purposes such as motorpurchase, house reparation, expensive material purchase, dream vacation, education,wedding, business enlargement, or simply cash use for a down payment on a newcar or anything is increasing quickly However, customers still have a dilly-dallyingattitude in choosing between public and private banks Public banks attractcustomers by good reputation and safety while customers like the low interest rateand quick process in private banks when they borrow amount of money

For the personal loan service, the interest rate in customer satisfactionmeasurement is appreciated high because it supposes effective measures inimproving service quality, fee, and process to bring the highest satisfaction forcustomers and the highest profit for banks Poor customer satisfaction places banks

at a competitive disadvantage If customers perceive service as unsatisfactory, they

may be quick to take their businesses else where Thus, it is clear that the highcustomer satisfaction offers a way of achieving success among competitive services,particularly in banks, where establishing service may be the only way ofdifferentiating oneself Such differentiation can yield a higher proportion ofconsumers‟ choices and, hence, mean the difference between financial success andfailure Satisfying customers is the priority target in order to create a competitiveadvantage and win in the financial market.

With the sharp competition, public and private banks need to pay attention tocustomers‟ evaluation to survive and expand business Customer satisfactionresearch is necessary work and must be implemented regularly and continuously tomeet needs timely, serve customers better, and make them satisfied when usingpersonal loan service

1.3 STATEMENT OF THE PROBLEM

Extensive work has been done on customer satisfaction in the bankingindustry Most of these studies, however, concentrate on general quality service.Only a few studies compare two or more banking sectors but none of them find outthe differences in the perception of customers about the personal loan service Forinstance, Singh and Arora (2011) examine the banking services and customersatisfaction by comparing public, private, and foreign banks Mirshra, Sahoo,Mishra, & Patra (2010) compare service quality assessment in public and privatesectors It is also evident that none of these studies segregate the banking sectorsinto the public and private sectors They only look at the general views of banks.Through a handful of studies that focus on one banking sector like Mihelis (2001),measure customer satisfaction in the private bank sector

Customer satisfaction is, however, influenced by many factors Lee and Kimidentify four key dimensions in the bank – attitude, problem solving ability, serviceenvironment, and auto banking service Parasuraman et al (1988) posit thatcustomer satisfaction dimensions include reliability, responsiveness, competence,access, courtesy, communication, credibility, security, understanding customers,and tangibles In Vietnam, Hoang (2008) claims that customers‟ satisfaction isdetermined by trust, feedback, skill, approach, information, and service quality.Nguyen (2011) accentuates that customer satisfaction of personal loan service isinfluenced by tangibles, trust of service supply process, promising customers, andassurance According to Ho (2012), bank service accepts determinants such asempathy, trust, price, tangibles, supply, and assurance This topic is implemented toinvestigate the influential factors of the personal loan service to customersatisfaction as well as customer satisfaction comparison between public and privatebanks in Ho Chi Minh city.

1.4 RESEARCH OBJECTIVE

The main objective of this study is to examine the impacts of key factors oncustomer satisfaction in the personal loan service provided by public and privatebanking sectors Specificially, it examines the effects of brand image, customerexpectation, perceived quality, and perceived value on customer satisfaction

1.5 SCOPE OF THE RESEARCH

This research focuses on customers using the personal loan service of

domestic banks in Ho Chi Minh city

Quantiative research: This step is researching by delivering questionnaire toindividual customers of eight public and private banks in Ho Chi Minh city directly

by face-to-face interview Statistical software SPSS version 16.0 is used to analyseand compare the level of customer satisfaction in using personal loan service amongbanks

1.7 THE STRUCTURE OF THE RESEARCH

The structure of the study consists of five parts:

Chapter 1: Introduction

This chapter presents research background, research problem, researchobjective, and the structure of the research

Chapter 2: Literature review

In this chapter, it contains the literature review of customer satisfaction,hypotheses and empirical model

Chapter 3: Research design

Basing on research objective and research scope, it concerns details of theresearch design, measurement scale, preliminary research, main research as well asthe questionnaire and the survey development

Chapter 4: Research results

Chapter 4 describes sampling and processing data, collected data analysis,and the findings of the research

Chapter 5: Conclusion and implications

From the results of the research, research hypotheses, this chapter discussesconclusions, contributions, implications, and limitations

CHAPTER 2: LITERATURE REVIEW

2.1 INTRODUCTION

This chapter reviews at the literature on customer satisfaction and itsdeterminants Specifically, it reviews the literature on customer satisfaction,customer satisfaction measurement, and the empirical studies in the banking sector

2.2 CUSTOMER SATISFACTION

According to Zeithaml, Berry, and Parasuraman (1993) say that customersatisfaction is a function of the customer assessment of service quality, productquality, and price Satisfaction is a function of product performance related tocustomer expectations (Oliva, Oliver, and Bearden, 1995) Customer satisfaction isthe customers‟ perception that a supplier has met or exceeded by their expectations(Hill, 1996) Jones and Sesser (1995) argue that customer satisfaction identifies fourfactors The factors are: (1) essential element of the product or service thatcustomers expected all rivals to deliver; (2) basic support services such as customerassistance; (3) a recovery process to make up for best experiences; and (4)

“customization” which are factors that meet customers‟ personal preferences,values, or needs

Gerson (1996) proposes that a customer is satisfied whenever his or herneeds, real or perceptions are met or exceeded He put it succinctly as “Customersatisfaction is simply whatever the customer says it is” (p.24) Kolter (2000) claimscustomer satisfaction is a response to a discrepancy between prior expectation andperceived performance after using a good or service Hansemark and Anbinsson(2004) state that “satisfaction is an overall customer attitude towards a service

provider, or an emotional reaction to the different between what customersanticipate and what they receive, regarding the fulfillment of some need, goal, ordesire”.

2.3 DETERMINANTS OF CUSTOMER SATISFACTION

The research of Ennew and Binks (1996) adopt tailor-made constructs ofservice quality and satisfaction that apply to the retail banking industry Akviran(1994) identifies four key dimensions in banking – staff conduct, credibility,communication, and access to teller services Four dimensions are also identified(physical features and facilities, reliability, conduct staff characteristics, andresponsiveness) in a survey conducted in 31 major British organizations in the fields

of banking, building societies, and retail

Banking-specific research by Laroshe, Rosenblatt, and Manning (1986)reveals speed service, convenient location, staff competence, and bank friendliness

as important determinants of customer satisfaction In a similar vein, LeBlanc, andNguyen (1988) propose a five-dimensional framework of customer satisfaction inthe Canada credit sector, including factors such as corporate image, internalorganization, physical environment, staff service, and customer personal interaction

In addition, Rust and Zahorik (1993) identify factors related to convenience,warmth, and easy checking as determinants of retail banking customer satisfaction

The contention of the Nordic School (Lehtinen and Lehtinen, 1994) about

“physical”, “interactive”, and “corporate” quality seems to be flexible enough toallow for the accommodation of different perceptions Corporate quality isconsidered to be the global measure of quality offered by the bank and the way that

is perceived by the customer At this point, this is important to distinguish between

controllable and uncontrollable components of service quality, bearing in mind theindication of expected quality prior to purchase.

Based on research results of the model and reality of the banking sector inVietnam, the specific factors to measure the variables are considered in the model asfollows: brand image, expectations, perceived quality, perceived value, price,complaint, and loyalty Each factor is composed of more specific items for aservice Customer satisfaction is defined as a comprehensive evaluation of the use

or after sales operation of the service (Le, 2012)

2.4 CUSTOMER SATISFACTION WITH THE PERSONAL

LOAN SERVICE

According to Axis Bank Limited (2012), customer satisfaction in personalloan service only reaches 4.42 (below average score out of 10.00) Features such asadherence to regulations, authenticity / transparency / ethics, customer friendliness /loyalty and promotion, ease of operation / user-friendliness, economy ofmaintenance, professionalism / qualification of staff, reliability are the same(approximately 4.00) Most of customers pay attention to the interest rate beforetaking personal loan There are also arrangement fees and penalties of repaymentthat they have to consider

2.5 HYPOTHESES AND MODEL

2.5.1 Brand image

Brand image is considered as reputation, prestige, and trust (Anderson and Weitz, 1989); it expresses the relationship between brand name and customer‟s

associations for brand name‟s attributes The operational construct of companyimage includes items measuring customer perceptions of the firm‟s stability, socialcontributions to society, and concern with customers, reliability of what the firmsays and does, and innovativeness Many practical researches affirm that the brandimage is an important factor that directly influences customer satisfaction (Kim &Kim 2004; LeBlanc and Nguyen 1988; and Akviran 1994) The base model alsoshows, as expected, a direct effect of Brand Image on satisfaction In other words,the more positive the brand image increases, the greater the satisfaction with thefirm‟s service is.

In the banking sector, the brand image plays an important role in determiningwhere the borrower or depositor is, thus the banks need to locate and build its brandimage on the basis of important attributes to set a good sense for most competitors,help customers easily identify the brand Customers must feel strong brand image inthe personal loan service so that they are satisfied for that bank The correlationbetween brand image and customer satisfaction is to issue the first hypothesis asfollows:

H1: Brand image has a positive impact on customer satisfaction in thepersonal loan service in public and private banks in Ho Chi Minh city

2.5.2 Customer expectation

Customer expectation reflects anticipated performance The satisfactionliterature suggests consumers may use different “types” of expectations whenforming opinions about a product‟s anticipated performance Miller (1977)identifies four types of expectations: ideal, expected, minimum tolerableexpectations, and desire Day (1977) distinguishes among expectations about thenature of the product or service, expectations about the costs, and efforts inobtaining benefits, and expectations of social benefits or costs

Customer expectation has long been viewed as playing an important role incustomer satisfaction (Johnson and Plott 1989; Oliver and Winer 1987; Meyer1981; and Cadotte et al 1987) The preceding analyzers suggest that customerexpectation about the goods and services also has a positive impact on customersatisfaction At the aggregate level of analysis here, expectations capture theaccumulated knowledge of concerning a given supplier‟s quality In addition,expectations contain information based on not only actual consumption experiencebut also accumulated information about quality form outside sources such asadvertising, word of mouth, and general media Like past experiences, positiveinformation about past quality affects customer satisfaction positively In bankingservices, customer satisfaction with the bank depends on anticipated quality offuture service as well as the ability of the service to provide for the future needs.This forecast component of expectations also argues for a positive impact ofexpectations on satisfaction In the same service, when customers‟ expectations arehigh, they have a tendency to use the personal loan service in that bank Thefollowing hypothesis is issued:

H2: Customer expectation is has a positive impact on customer satisfaction

in the personal loan service in public and private banks in Ho Chi Minh city

2.5.3 Perceived quality

Perceived quality can be defined as the customer‟s judgment about theproduct overall excellence or superiority Perceived quality is (1) difference fromobjective and actual quality, (2) a higher-level abstraction rather than a specificattribute of a product, (3) a global assessment that resembles attitude in some cases,and (4) a judgment usually making within a customer‟s evoked set Mostresearchers suggest that the high perceived quality results in the high customersatisfaction (Parasuramen, Zeithaml, and Berry 1985, 1988) Teas (1993) mentionsthe perceived quality is the accumulation of consumer satisfaction

Most researchers measure perceived quality and propose that the higherperceived quality creates more satisfaction to consumers Cronin and Taylor (1992)assert that perceived quality is the antecedent of consumer satisfaction whenexamining four service industries of banking, pest control, dry-cleaning, and fastfood to investigate the relation of perceived quality to consumer satisfaction Thesame conclusion also appears in other studies in this area (for example: Andersonand Sullivan 1993; Anderson, Fornell, and Lehmann,1994; Anthanassopoulos 2000;Cronin, Brady, and Hult, 2000; Fornell 1992; Oliver and Desarbo 1988) In thepublic and private banks, customers have high perceived quality so that they want touse the personal loan service to survey features, performance, and conformance.This study then proposes the impact of perceived quality on consumer satisfaction:

H3: Perceived quality has a positive impact on customer satisfaction in thepersonal loan service in public and private banks in Ho Chi Minh city

2.5.4 Perceived value

Customer satisfaction, in turn, is hypothesized to be influenced by perceivedvalue Perceived value, as it has been defined herein, is the ratio of benefits receivedfrom providers relative to the costs sacrificed by customers (Kotler 2000) For banks, it

is the total payment amount (interest loans and other borrowing costs (including formaland informal costs)), the cost of time, effort and other risk costs compared to servicevalues (tangible benefits), the value of psychology, faith and human values In essence,

it is a variable that reflects the net utility derived from a provider Customersatisfaction, meanwhile, is defined as an overall positive or negative feeling about thenet value of services received from a supplier Woodruff (1997) argues that perceivedvalue represents customer cognition of the nature of relational exchanges with theirsuppliers, and satisfaction reflects customers‟ overall feeling derived from theperceived value On the basis of the behavioral model (Fishbein & Ajzen, 1975), affect

is significantly influenced by cognition There is

also empirical evidence that customer-perceived value has a positive effect oncustomer satisfaction with a supplier (Anderson & Mittal, 2000) Higher levels ofperceived value increase customer satisfaction in public and private banks, as well

as produce needs to use the personal loan service Thus, it is proposed that:

H4: Perceived value has a positive impact on customer satisfaction in thepersonal loan service in public and private banks in Ho Chi Minh city

Based on Le (2012), the customer satisfaction model for the personal loanservice in public and private banks in Ho Chi Minh city is presented as follows:

Figure 2.1 Research model

Brand image

H1(+)Customer expectation H2(+)

2.6 CONCLUSION

This chapter provides theoretical framework for the research However, withthe reason regarding the perceived quality aspect as discussed above, a researchmodel without the perceived product quality component is suggested below becausethe personal loan service is an intangible product The researcher also assumes thatthere are some adjustments of the customer satisfaction measurement in order tomake the research model more suitable for the banking industry in Vietnam.Chapter 3 discusses the research design of this matter in more details

CHAPTER 3: RESEARCH DESIGN

3.1 INTRODUCTION

In previous chapters, the definition of customer satisfaction has beendiscussed and measurement methods have been suggested This chapter particularlypresents the research methodology, data, and the research design and researchprocess

3.2 RESEARCH DESIGN

The research design provides the answers to theories and hypotheses, whichleads to the next research steps Shank (2002) defines qualitative research as “aform of systematic empirical inquiry into meaning” By systematic research, hemeans “planned, ordered and public”, following rules agreed upon by members ofthe qualitative research community By empirical research, he means that this type

of inquiry is grounded in the world of experience Researchers try to understandhow others make sense of their experience Denzin and Lincoln (2000) claim thatqualitative research involves an interpretive and naturalistic approach, “this meansthat qualitative researchers study things in their natural settings, attempting to makesense of, or to interpret, phenomena in terms of the meanings people bring to them.”

According to Cohen (1980), quantitative research is defined as socialresearch that employs empirical methods and empirical statements He states that anempirical statement is defined as a descriptive statement about what “is” the case inthe “real world” rather than what “ought” to be the case Typically, empiricalstatements are expressed in numerical terms Another factor in quantitative research

is that empirical evaluations are applied Empirical evaluations are defined as a formthat seeks to determine the degree to which a specific program or policy

empirically fulfills or does not fulfill a particular standard or norm Creswell (1994)has given a very concise definition of quantitative research as a type of research that

is “explaining phenomena by collecting numerical data that are analyzed usingmathematically based methods (in particular statistics).”

In terms of research techniques, the preliminary qualitative method and themain quantitative method are chosen Preliminary qualitative method is used toexplore, adjust, and supplement the observed variables such as brand image,expectation, perceived quality, perceived value, and price This qualitative method

is conducted through technique of group discussions Quantitative method isconducted through direct interview forms with detailed questionnaires to assess thescale and test theoretical models which have been put Quantitative method resultsare continued to perform quantitative studies in order to confirm again the accuracy

of test results The research process is displayed as follows:

Figure 3.1 Research process

Item modifications

The final draft of questionnaire

Step 2: Qualitative Research

Interview

Cronbach’s Alpha

Exploratory Factor Analysis

Multiple Linear Regression

Step 3: Quantitative Research

3.3 MEASUREMENT SCALE

3.3.1 Introduction

The first step in the research design process involves measurement scale.This is achieved through a literature search which is used to specify how to measurethe constructs and to design the initial questionnaire The questionnaire is initiallydesigned in English and Vietnamese It is the first draft of the forty-three structurequestionnaire

3.3.2.1 Scale to measure brand image

To measure the first dimension, brand image eight items are employed All

of these items concerning brand image are measured on a five-point Likert scalewith 1 for “strongly disagree” and 5 for “strongly agree” Here, we presume thatbrand image includes bank image and the personal loan service and influencescustomer satisfaction compared with other competitors

Table 3.1 Measures of brand image

3.3.2.2 Scale to measure customer expectation

Customer expectation, the second component of customer satisfaction,displays the degree of quality that customers expect to get, the parametersmeasuring customer expectation associate with the parameters of the brand imageand perceived quality of the personal loan service In this study, for themeasurement of the expectation component, four scale items are employed asfollows:

Table 3.2 Measures of customer expectation

Bank [X] is the first choice when there is demand for personal

CE3loans

3.3.2.3 Scale to measure perceived quality

This study adapts the scale developed by Spiros et al (2003) to measureperceived quality in commercial banks Some complement and elimination havebeen done after discussion with the bank customers in group discussion Theperceived quality has the fifteen following items

Table 3.3 Measures of perceived quality

Bank [X] provides personal loan services at that time it promises

PQ5

to do

When personal loan rates change, bank [X] fully informs

PQ6customers

Bank [X]‟s employees capture fast and response well to

PQ10customer needs

When you have problems, bank [X] is sympathetic and

PQ12reassuring

Bank [X]‟s transaction locations are very comfortable and

PQ14

3.3.2.4 Scale to measure perceived value

Perceived value is the level of review or comments on the personal loanservice compared to fees to pay that customers use the service For the measurement

of perceived value, five scale items are made as follows:

Table 3.4 Measures of perceived value

Bank [X]‟s interest on personal loans shows corresponding

PV1values for loans

Bank [X]‟s charges of personal loan service express

PV2commensurate values for loans

Bank [X]‟s personal loan rate is commensurate with inflation

PV4rate

Bank [X]‟s traveling expenses to meet personal loan service is

PV5suitable values for loans

3.3.2.5 Scale to measure customer satisfaction

Overall items of customer satisfaction involved in public and private banks

of Ho Chi Minh City in general are suggested as follows:

Table 3.5 Measures of customer satisfaction

Overall, you are satisfied with bank [X]‟s the personal loan

GE1service

The whole scale consists of 35 variables to capture the five dimensions thatcomprise customer satisfaction.

3.4 PRILIMINARY RESEARCH

The preliminary research is the second step with the purpose being toeliminate possible coincidences, weaknesses and flaws in the first draftquestionnaire in order to create the final questionnaire for the main research It isconducted by a group discussion of eight officers in public and private banks in HoChi Minh City Contents of the interview are recorded, integrated and are the basisfor pretest of constructing measures to provide a preliminary evaluation andrefinement of the measurement scales

The group discussion is used as a process for gaining information forquestionnaire development Group discussion interviews are also used for testingwording (unable to understand, difficult to answer, etc.), or interpretingquestionnaire items A focus group is particularly useful for learning aboutparticular phenomena and the specialized language

Meeting Room of Business Administration Faculty, University ofEconomics, Ho Chi Minh City was chosen to organize the group discussion.Banking officers attended the group discussion were considered carefully Fourmales and four females with the age of 30-45 years old were decided asparticipants

3.5 MAIN RESEARCH

The main survey is conducted with public and private banks in Ho Chi Minhcity, Vietnam Firstly, the measures of each constructs are refined by Cronbach‟salpha coefficients The purpose of this test is to provide a preliminary evaluationand refinement of the measurement scales Cronbach‟s alpha analysis is first used toremove items with low item-total correlations (<0.3) Scales with a Cronbach alphacoefficient equal to or greater than 0.6 are acceptable in some cases ((Nunnally &Bernstein 1994, as cited in Nguyen, 2012) Items those passed the test then areanalyzed using an exploratory factor analysis (EFA) method to determine the actualdimensions of each construct In this step, items with factor loadings less than 0.4are deleted Finally, the retained measures are run with multiple linear regressions(MLR) and the results are used to test the research model and hypotheses

3.5.1 Sample design

3.5.1.1 Brand selection

The public and private banks in Ho Chi Minh city were taken as brands ofthe study The one public bank, Vietnam Bank for Agricultural & RuralDevelopment (Agribank), and the four private banks consisting of Asia CommercialBank (ACB), Vietnam Technological and Commercial Joint Stock Bank(Techcombank), Vietnam Export Import Commercial Joint Stock Bank (Eximbank),and Ho Chi Minh City Development Joint Stock Commercial Bank (HDBank) wereselected as the sample for the study The selected sample seemed representativelarge enough to generalize the total population

Generally, customers of commercial banks were depositors, borrowers, andothers who get banking services However, the present study covered personal loantype of customers

3.5.1.2 Sampling

Firstly, the population of the study needs to be chosen Population is defined

as „the complete set of units of analysis that are under investigation, while element

is the unit from which the necessary data is collected (Davis 2000, as cited in Tran,2006) This study focuses on customers to investigate the differences betweenpublic and private banks in comparison of the dimensions of customer satisfaction,

as well as the relationships between customer satisfaction and the other dimensions

of the personal loan service Therefore, the population of the study was customers,who were in Ho Chi Minh city, the major public and private banks of Vietnam.Eligible participants in the study used the personal loan service for at least one year

The second step in the sampling process is to choose the sampling frame,which is the list of elements from which a sample may be drawn In this study, thesampling frame was based on the list of customers in public and private banks in theage from 18 years old and above

The next step is to identify the sampling method to be used to select thesample for the study According to the methodology literature, there are two mainsampling methods, probability and non-probability sampling (Nguyen & Nguyen,2012) In this study, the non-probability method is chosen due to the elements in thepopulation do not have a known or predetermined chance of being selected assubjects This means that the findings from the study of the sample cannot beconfidently generalized to the population When time or other factors becomecritical, non-probability sampling is generally used There are four main types ofnon-probability sampling designs: convenience sampling, judge sampling,development sampling, and norm sampling Convenience sampling is the leastreliable of all sampling designs in terms of generalisability, but sometimes it may bethe only viable alternative when quick and timely information is needed, or forexploratory research purposes (Canava et al., 2001) The interviews were

implemented to customers in public and private banks based on conveniencesampling.

3.5.1.3 Sample size

According to Canava et al (2001), a reliable and valid sample should enable

us to generalize the findings from the sample to the population under investigation

In other words, the sample statistics should be good estimates and reflect thepopulation parameters as closely as possible within a narrow margin of error Thesample size is determined by the level of precision and confidence desired inestimating the population parameters, as well as the variability in the populationitself (Canava et al 2001) Nguyen and Nguyen (2008) suggest that the issue of

„how large‟ a sample size should be, has not been entirely resolved, but doesdepend on the statistical methods used (e.g Maximum likelihood, generalized leastsquares and asymptotically distribution free) However, some researchers suggestthat the minimum sample size should be from 100 to 150 responses if using theMaximum Likelihood (ML) method (Hair et al 1988, as cited in Nguyen &Nguyen, 2008) As Hoelter (1983) demonstrate, the minimum sample size must be

200 responses Some others suggest the minimum sample size should be at least fiveobservations per estimates parameter Based on the number of parameters to beestimated, the sample size targeted in this study was from 320 upwards (equal eighttimes of observed variables) To obtain the desired sample size, a total of 380 self-administered questionnaires were distributed to the respondents

The sampling rule based on the average number of customers to the banksfrom Tuesday to Thursday Each banking sector selected 190 customers.Specifically, Agribank – Sai Gon Branch had 60 customers, Agribank – Ly ThuongKiet Branch had 45 customers, Agribank – Phu Nhuan Branch and Agribank – NamSai Gon had 40 customers; ACBank had 55 customers, Eximbank had 40customers, HD Bank had 45 customers, and Sacombank had 50 customers As aresult, 349 questionnaires were returned; of which 322 were useable, making

effective response rate 84.74% Among 322 questionnaires contained 162 customers

of public banks and 160 customers of private banks The data was imported andcleaned through SPSS software version 16.0.

3.5.2 Survey method

The literature on research methodology has identified a number of surveymethods such as face-to-face interview, telephone interview, and mail survey.Among these three methods, the face-to-face survey yields higher response ratesand allows researchers to use physical stimuli to facilitate the interview (Zikmund,1997) It also allows interviewers to clarify the meanings of ambiguous or complexquestions

This study used face-to-face interviews in order to conduct the research Twosteps were used to conduct the research Firstly, six interviewers were recruited andtrained Then, they were assigned to the banks to interview

The interviews were conducted in June 2012 over five week period Prior tobeginning the questions, participants were advised that their participations werevoluntary and they were free to discontinue their participation any time during thecompletion of the survey In an attempt to encourage candidness and honesty intheir responses, participants were instructed that their responses remainedconfidential and were reported in aggregate form only

This chapter also describes the statistical methods employed for dataanalysis, including validity, dimensionality and reliability assessments The nextchapter reports research results.

CHAPTER 4: RESEARCH RESULTS

4.1 INTRODUCTION

The previous chapter has been discussed the research methodology includingthe operation of the five constructs of the theoretical model developed in Chapter 2,and the research design of both the preliminary study and the main study Thischapter presents the results of the main study The following section describes thecharacteristics of the sample and presents descriptive statistics of the main survey.Next, the study of 162 customers of public banks and 160 customers of privatebanks are analyzed using exploratory factor analysis to assess the reliability andvalidity of the construct measurement scale The findings from the survey led to thefinalization of the instrument for the main study The fourth section presents theassessment of the personal loan service construct using factor analysis The fifthsection reports the assessment of the hypotheses using linear regression analysis.The data analysis software SPSS 16.0 is used The final section supplies a summary

4.2 SAMPLE CHARACTERISTICS

4.2.1 Final sample

The main survey was conducted by face-to-face interview through 6 trainedinterviewers The list of banks was chosen carefully in Ho Chi Minh City asexplained in section 3.5.1.3 in chapter 3 The missing rate was 15.26 percent, withthe 31 interviewees who refused to return the answers and 27 interviewees whomissed some questions As a result, 322 questionnaires were useable The analysesreported in this chapter conducted on the final sample of 322 surveys