The valuation of customer satisfaction and service quality in online purchasing in cambodia

MINISTRY OF EDUCATION AND TRAININGUNIVERSITY OF ECONOMICS HOCHIMINH CITY CHENG BUNKRY THE EVALUATION OF CUSTOMER SATISFACTION AND SERVICE QUALITY IN ONLINE PURCHASING IN CAMBODIA MASTER

MINISTRY OF EDUCATION AND TRAINING

UNIVERSITY OF ECONOMICS HOCHIMINH CITY

CHENG BUNKRY

THE EVALUATION OF CUSTOMER

SATISFACTION AND SERVICE QUALITY IN ONLINE PURCHASING IN CAMBODIA

MASTER OF BUSINESS ADMINISTRATION THESIS

Ho Chi Minh City – 2011

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS

HOCHIMINH CITY

CHENG BUNKRY

THE EVALUATION OF CUSTOMER SATISFACTION AND SERVICE QUALITY IN ONLINE PURCHASING

IN CAMBODIA

Major: Business Administration

Major Code: 60.34.05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr TRAN HA MINH QUAN

Ho Chi Minh City – 2011

The findings of this research are mostly useful to those (managers, webdesigners, etc.) who intend to penetrate the Cambodian market with least cost, timeand energy The results indicate the most important web quality factors throughCambodian online shoppers’ perspective In these recent years, a significant growthhas been noticed in the Internet- based services in the pure Internet businesses aswell as the traditional enterprises, which are developing their online services One

of the key challenges of online businesses is how they manage service quality,which holds a significant importance to customer satisfaction In addition of successstories, we should be aware of problems; in year 2000 nearly 900 US online firmswere shut down, 31% of them were online retailers (Minjoon Jun, 2004)

The purpose of this research is to rank the quality factors perceived to bemost important in relation to the use of online shops The questionnaire utilized wasbased on the SERVQUAL instrument that identifies five quality dimensions inservice environments

I

First of all I would like to express my sincere gratitude to my supervisors,

Dr.Tran Ha Minh Quanat University of Economics Ho Chi Minh City, Vietnam,

for his intelligent guidance and helpful advice during the whole process, and Mr.

Dang HuuPhucat University of Economics Ho Chi Minh City, Vietnam, for his

very helpful supports on processing data

I would like to thank all the participants who contributed to my work, not justfor their responses, but also for the good suggestions they made and their kind help

Special thanks to my family and friends for their consideration andsupportduring all the process

Cheng Bunkry

II

Table of Content

CHAPTER 1: INTRODUCTION AND BACKGROUND OF THE STUDY 1

1.1 Background of the study 1

1.1.1 E-commerce 1

1.1.2 Online Retailing 2

1.1.3 E-commerce in Cambodia 2

1.2 Problem Discussion 3

1.3 Research Question 5

1.4 Demarcation 5

1.5 Disposition of the thesis 5

CHAPTER 2: LITERATURE REVIEW 6

2.1 Customer Satisfaction 6

2.1.1 Definition of Customer Satisfaction 6

2.1.2 Techniques to measure customer satisfaction 7

2.2 E-service quality 8

2.2.1 Conceptualization of e-Services 8

2.2.2 E-service quality 8

2.3 SERVQUAL Gaps Model 10

2.4 Measuring e-Service Quality 11

2.5 Dimensions and determinants of Service Quality 11

CHAPTER 3: RESEARCH METHODOLOGY 14

3.1 Research Purpose 14

3.2 Research Approach 15

3.3 Research Strategy 15

3.4 Research Process 16

3.5 Research Model & Hypotheses 17

3.6 SERVQUAL dimensions in relation to online Purchasing 19

III

CHAPTER 4: RESEARCH RESULT 23

4.1 Sample and Response rate 23

4.2 Service quality measurement 24

4.2.1 Cronbach’s Apha Analysis 25

4.2.1.1 Measuring service quality 25

4.2.1.2 Measuring Customer Satisfaction 27

4.2.2 EFA Factor Analysis 28

4.2.2.1 Measuring service quality 28

4.2.2.2 Measuring Customer Satisfaction 32

4.3Examination research model 32

CHAPTER 5: DISCUSSION AND CONCLUSION 38

5.1 Introduction 38

5.2 Implications for Theory 39

5.3 Implications for Further Research 40

REFERRENCES 41

APPENDIX I: QUESTIONAIRE 43

APPENDIX II: TABLES 45

IV

List of Tables

Table 2.1: Definition of customer satisfaction 7

Table 3.1: Time of research process 16

Table 4.1: Number of respondents by gender 23

Table 4.2: Number of respondents by age 24

Table 4.3: Cronbach’s apha of scale factor: assurance 25

Table 4.4: Cronbach’s apha of scale factor: reliability 25

Table 4.5: Cronbach’s apha of scale factor: responsiveness 26

Table 4.6: Cronbach’s apha of scale factor: empathy 26

Table 4.7: Cronbach’s apha of scale factor: tangible 27

Table 4.8: Cronbach’s apha of scale factor: satisfaction 28

Table 4.9: EFA analysis result of factors affecting customer satisfaction 29

Table 4.10: KMO and bartlett’s test 30

Table 4.11: EFA analysis of the satisfaction scale 32

Table 4.12: Regression model summary 33

Table 4.13: ANOVA (b) 33

Table 4.14: Coefficients(a) 33

Table 4.15: Hypothesis and research results 36

List of Figures Figure 2.1: Service quality model , source: parasuraman et al (1985, p 44) 10

Figure 3.1: Research process flowchart 17

Figure 3.2: Service Quality and Customer Satisfaction based on servqual 18

Figure 4.1: Hypothesis and research results 36

V

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CHAPTER 1 INTRODUCTION AND BACKGROUND OF THE STUDY

1 Introduction

The first chapter in this thesis introduces the background of the selected area.This will be followed by a problem area discussion that will help reader tounderstand the insight of the research area The problem discussions end with aresearch problem and specific research question In the end of the first chapter wewill also present the disposition of the thesis

1.1 Background of the study

This section will provide the background of the research area This sectioncontains some idea of e-commerce and online retailing as one of the importantfactor in e-commerce Also, a brief introduction of e-commerce situation inCambodia is brought here This section also shows the importance of service qualityand its relationship with customer satisfaction

1.1.1 E-commerce

E-commerce has many definitions In business today electronic commerce isone of the common topics of discussion (Daniel, Wilson & Myers 2002) Is not veryfar from what TawfikJelassi& Albrecht Enders in 2005 believed is “Electroniccommerce deals with the facilitation of transactions and selling of products andservices online, i.e via the Internet or any other telecommunications network".Thiswas an academic definition for e-commerce, what practitioners believe is: "E-commerce is often referred to as e-business

In order to perform one or more of the business functions Internet based commerce systems use World Wide Web based application solutions Thesebusiness functions include information provision, communication, buying, selling,

e-Page 2

distribution, customer service, delivery and payment processing among producers,suppliers and their customers etc Using e-commerce systems organizations canmarket their products and services online and provide a range of services thatcustomers themselves can perform without direct human assistance Its allowscustomers to conduct a wide range of activities such as changing address, securing acredit card or loan, learning from other customers, personalizing a serviceagreement and purchases without human assistance (Molla and Licker 2001).Electronic commerce is a new way of conducting, managing and executing businesstransactions using computer (Kalakota and Whinston 1996)

1.1.2 Online Retailing

The rapid growth of the electronics retailers worldwide as we have knowntoday Although B2B plays a larger role in part of electronic commerce rather thanB2C, both of them go pass the bricks and mortar Even if online visitors, most ofthem just try to search more informationinstead of buying These sites are e-CRM(customer relationship management) necessary tools for retailers to survive in acompetitive market, value added services are necessary to keep the difference withtheir competitor After the emergence of many e-commerce companies start up thewebsite to the pioneers in this field, but in the mid-2000 many bubbles burst Thestory of the surviving company will lead us to a better understanding of thestrengths and powers.Customers are the lifeblood of an organization, so theirsatisfaction is the primary goal of the company

1.1.3 E-commerce in Cambodia

In Cambodia the Internet is mainly used in the universities for researchpurposes, the internet stations throughout the cities are used for limited activitiessuch as checkinge-mail and making long distance phone calls Thus the entryofelectronic commerce in Cambodia is in its early stages Clearly, E-commerce issomething new for this country, but it’s expected to grow steadily in the near future

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As the follower of this area, we should use the opportunities and avoid therisks By analyzing the success stories and looking for the key elements of theirsuccess, and also studying the trend of online retailers which have gone away, wewill be in a better position to establish policies and strategies of us Many studieshave been done in the field of online retailers worldwide, while many retailers starttheir website, it is time to guide them appropriately Academician who takes thelocalization of foreign results to help companyachieving the world standards inCambodia

Here is some of the Cambodian online retailers which is starting their firststep: www.bongthom.com, www.sombok.com.kh, etc

1.2 Problem Discussion

Though the internet channel is increasingly being used by many onlinestores, but many online retailers are closed In the needs of a competitive marketplace understanding customer’s needs become very important So the company hasmoved from a central product to a central location of the customer Customerretention is directly affected by customer satisfaction Retention is an essentialchallenge, particularly in Internet-based services, as customers can easily switchfrom one service provider to another at low cost (Khalifa and Liu, 2003) Is not veryfar from Van Riel, Lijander&Jurriensin 2001which believe that “Considering thehigh costs of acquiring new customers and the apparently high customer turnover ofmany online services, it is very important to study the determinants of customersatisfaction”

Customer satisfaction is the key factor determining how successful theorganization will be in customer relationships, so it is very important to measure it.Total quality management (TQM) is based on the idea of customer satisfaction - anapproach to management of an organization focused on quality, based on theparticipation of all members and towards its long-term success through customersatisfaction and benefits to all members of the organization and to society (ISO

TQM planning;

the workforce

There are many benefits of quality found through market research, especially

in measuring the satisfaction of existing customers, identify customer needs forproduct development, and analyzing customer retention and customer loyalty Tobetter manage customer satisfaction, companies spend millions on effective monitorthe methods to ensure that customer satisfaction, because the quantitativemeasurement of customer satisfaction is a great help to measure overall the impact

of product quality on consumer behavior

For keeping online retailers alive with logical profits; retaining customersmust be the foremost aim Customer satisfaction, as we discussed before, has themost important effect on customer stickiness and in order to narrowing down wefocus on service quality as one of the customer satisfaction’s factors

2 What are the orders of Service Quality factors that impact on online

purchasing through Cambodia perspective?

1.4 Demarcation

Since aspects of the problem areas are many choices, researchers have tried

to narrow down the focus The purpose of this study is to find the most importantservice quality dimensions that influence customer satisfaction online purchasing inCambodia

In the literature, we will introduce the theory related to service quality andsatisfaction to give a clear idea about the specific area to the readerand to explainthe appropriate context of the study

1.5 Disposition of the thesis

In this section we will outline how the thesis is structured:

Chapter 1: This chapter will present the background of the study

Chapter 2: This chapter will present theories related to the topic will be presentedChapter 3: This chapter will explain and justify our choices of methodology that

will beused in order to conduct our thesis

Chapter 4: This chapter presents the data which is gathered through

the questionnaire surveyChapter 5: This chapter will present the conclusions, implications and

recommendationsbased on our findings

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CHAPTER 2 LITERATURE REVIEW

2 Literature Review

This chapter will give an overview of literature and models that are related

to the research problem presented in the previous chapter This chapter will introduce the concepts of customer satisfaction, service quality, relation between customer satisfaction and service quality, traditional service quality dimensions, online service quality dimensions and service quality model of online retailing in order to give a clear idea about the research area.

2.1 Customer Satisfaction

Early concepts of satisfaction research have typically defined satisfaction as

a post choiceevaluative judgment concerning a specific purchase decision (Churchilland Sauprenant 1992) Most researchers agree that satisfaction is an attitude orevaluation that is formed by the customer comparing their pre-purchaseexpectations of what they would receive from the product to their subjectiveperceptions of the performance they actually did receive

2.1.1 Definition of Customer Satisfaction

Several authors have defined satisfaction in a different way Following tablewill present some definition of customer satisfaction that will give us clear ideaabout satisfaction concept

consumption experience with a product/service.

“Satisfaction is a person’s feelings of pleasure or

perceived performance (or outcome) in relation to his or

her expectations”

2.1.2 Techniques to measure customer satisfaction

Market research techniques to measure customer satisfaction which are:

There are some technical problems with measuring customer satisfaction asthe typical focus group, the survey methodologies of customer satisfaction software.They include:

so on;

commitment and actions of those involved in the process;

flows, management styles and corporate culture, i.e the context in which the process isconducted (Ingrid FecIikovaA, 2004)

2.2.2 E-service quality

Using online trading sites can be described as a complex process that can bedivided into sub-processes, such as retrieving or exchanging information andarticles, or ordering books Each of the four service components could be described

in terms of process and outcome, and could also be analyzed into sub-dimensionsand quality determinants For example, customers may be satisfied with theresponsiveness and user-friendliness of a search engine but dissatisfied with the

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reliability of the search outcome It is assumed that the un/successful process oroutcome of an interaction influences customers’ overall satisfaction with the Website However, most likely the customer will not evaluate each sub-process in detailduring a single visit to a Web site, but will perceive the service as an overall processand outcome, unless one of the service elements stands out as especially positive ornegative The same applies to a series of interactions within a customer e-servicerelationship In a study of critical incidents found that positive incidents were rareand that dissatisfying incidents were often caused by process failure, such as lostorders

The process and outcome dimensions of an e-service can thus be divided intomore specific service quality dimensions The best-known evaluation dimensionsare the five proposed in the SERVQUAL model (Parasuraman et al.,1988):tangibility, responsiveness, reliability, assurance and empathy

Parasuraman and Grewal (2000, p 171) suggest that research is needed onwhether ``the definitions and relative importance of the five service qualitydimensions change when customers interact with technology rather than withservice personnel’’ Since the dimensions were developed from, and for,interpersonal encounters, in our opinion the content description and scale itemswould have to be reformulated before they can be meaningfully used in an e-servicecontext For example, tangibility could be replaced with the user interface.Responsiveness could refer to the company’s responses to customers’ requests andthe speed of order confirmation Reliability could relate to the on time delivery ofordered goods, accurate supply of information and error freeness of links Assurancecould refer to the safety of on-line transactions and the policy for using personalinformation by the company Assurance refers to a general trustworthiness, whichhas been considered one of the most important drivers of e-service satisfaction.Finally,empathy could be interpreted as the degree of customization ofcommunications and the service provider’s awareness of customers’ personal needs.Page 2 3 SERVQUAL Gaps Model

G a p 4

Service Deliver y

Gap 3

Tra nsla tion of Per cept ions into Ser vice

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2.4 Measuring e-Service Quality

Customer satisfaction is a critical issue in the success of any business system,traditional or online In a turbulent e-commerce environment, in order to sustain thegrowth and market share, Internet companies need to understand how to satisfycustomers, since customer satisfaction is critical for establishing long-term clientrelationships It is evidenced by the fact that over the last five years, customersatisfaction surveys have become common in many financial institutions Thus, afundamental understanding of factors impacting Web-customer satisfaction is ofgreat importance to e-commerce Furthermore, the need for research in Web-customer satisfaction has been accentuated by the increasing demand for the long-term profitability of dotcom companies and traditional companies that are “Net-enhanced” (Pather, Erwin &Remenyi, 2002)

To understand satisfaction in the e-commerce context, we need to have aclear understanding of what is meant by customer satisfaction Customersatisfaction is defined as a result of a cognitive and affective evaluation, wheresome comparison standard is compared to the actually perceived performance If theperceived performance is less than expected, customers will be dissatisfied On theother hand, if the perceived performance exceeds expectations, customer will besatisfied

2.5 Dimensions and determinants of Service Quality

Parasuraman et al (1985; 1988) addressed the issue as to how the customermakes an assessment of service quality They came up with ten determinants thatcan be used to measure service:

the service);

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the customer’s needs)

Credibility is an evaluation that can be made before using this service thathas the same bearing in e-commerce In general, a client will only make an e-commerce transaction after some type of introduction from an outside source,whether through advertising, or by word of mouth Security is very importancewhen conducting transactions online Typically, these sites would indicate that it is

a secure site for customers to provide, for example, credit card details, withouthaving to worry about other people access to this information Other determinantssuch as understanding the customer and also access to relevant e-commerce market

A site must be available at all times and no opening and closing like a high streetbank or shop normally To understand the client, a Web site has smart cookies filesthat recognize repeat customers and do this by asking for a new customer to registercertain types of users as an e -mail each time which they enter on the visiting site.This way, customers can be sent information by e-mail or offers to purchase on theweb depends on what they had bought The goal is to meet customer’s needs andprovide the type of individual that a regular customer will receive from personnelcontacts in a BAM environment Communication on the Internet is difficult becausethe interaction between Web sites and the customer is often one way; the websiteprovides information to customers It is only when a web site provides a phonenumber or e-mail address where customers communicates with the companydirectly, and in many cases, the queries received from e-mail cannot responddirectly to queries In a similar manner, courtesy and competence can hardly be said

to non-existent in the website experience The customer will generally navigate awebsite if it is easy to use but he or she will not be able to judge what the personnel

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are like behind this interface, or if they have the skills necessary to perform aservice It is only through customer service options that can be evaluated and eventhen, answer e-mail messages are not automatically in human characteristics

Tangibles are for the most part unrelated to measuring service quality in commerce as customers interact with the site Therefore, customers cannot comment

e-on the physical properties are used to deliver a service Most e-commerce company

or have their own warehouses to fulfill orders for products to be sent, or to ensuresuppliers do this directly The activities may take place away from where thecustomers sit and so is not applicable Responsiveness and reliability, however,applicable because they relate to what the company promises There can be judgedreliability, for example, by getting the correct product exactly by the customerwithin 48 hours This is important for any business and related to the interactionbetween the interface and the back-end process is complete Responsiveness isslightly more indiscernible, especially when directly interact with the Website If thecustomer has a problem, the customer service option of telephone or e-mail is how

to report and it is here the ability to respond well and at a reasonable speed ofcompany being assessed This is also relevant if it is completed as part of customerservice and send back an item or it is late arriving

Parasuraman et al (1988, 1988) subsequently reduced these ten determinants

to five, the following first three being the original ones and the other seven originalones categorized into (4) and (5): (1) Tangibles; (2) Reliability; and (3)Responsiveness; (4) Assurance (knowledge and courtesy of employees); and (5)Empathy (caring, individualized attention the firm provides its customers)

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CHAPTER 3 RESEARCH METHODOLOGY

3.1 Research Design

Early in any research study, one faces the task of selecting the specific design

to use A number of different design approaches exist but, unfortunately, no simpleclassification system defines all the various that must be considered (Cooper &Schindler, 2003)

Research can be classified in terms of their purpose Accordingly, Saunders,Lewis &Thornhil (2003) mentioned that they are most often classified exploratory,descriptive or explanatory while Cooper and Schindler (2003) categorized indescriptive and causal This way the essential difference between descriptive andcausal studies lies in their objectives If the research is concerned with finding outwho, what, where, when, or how much, then the study is descriptive In a causalstudy, we try to explain relationships among variables

The purpose of the research is descriptive The data has been collectedthrough questionnaire, is aimed to understand the most important factors of servicequality

Qualitative research is multi method in focus, involving an interpretive,naturalistic approach to its subject matter This means that qualitative researchersstudy things in their natural settings, attempting to make sense of, or interpret,phenomena in terms of the meanings people bring to them.

Since the purpose is to understand the most important dimensions of servicequality from the Cambodian customers’ perspective, quantitative research is found

to be more appropriate for this study

3.3 Research Strategy

Research strategy will be a general plan of how researcher will go aboutanswering the research questions that has been set by researcher It will containclear objectives, derived from research questions specify the sources from whichresearcher intend to collect data and consider the constraints that researcher willinevitably have such as access to data, time, location and money, ethical issues(Thornhill et al., 2003)

Based on the conditions 1) form of research question 2) requires control overbehavioral events and 3) focus on contemporary events five research strategies wereidentified in social science These are – experiments, surveys, archival analysis,histories and case studies

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Since question in this study is based on “what” question and this what

question is actually form a “how many” and investigator has no control over the

actual behavioral events, Survey is found to be a more appropriate approach in order

to gain a better understanding of the research area Survey is more appropriate for

quantitative study

Purpose of this research is to classify the service quality dimensions in online

shopping from the Cambodia shoppers For the study sample has been selected from

people who works and live in Phnom Penh Capital, Cambodia; because this group

has more experience of e-commerce and online shopping than the rest of people in

other provinces or city, Cambodia Sample was selected by using judgment because

some criteria were followed during the sample selection:

The questionnaire was divided into two parts in order to let responders more

time to concentrate on each question

3.4 Research Process

Research process is presented in Figure 3.1 and the time of data collection is

presented in Table 3.1

Table 3.1: Time of Research Process

Correlation coefficients.

Squared Loadings

equation

3.5Research Model & Hypotheses

Based on the narrow down scope of literature review above, the relationshipbetween service quality and customer satisfaction can be shown in figure 1 The fiveService quality dimensions have been selected from the SERVQUAL In theSERVQUAL instrument, 28 statements measure the performance across these fivedimensions For each statement, the expectation and the experience of a customerare determined There is some criticism on the long-term stability of the results of

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the SERVQUAL scale and on the general applicability of the five dimensions.Although alternative models have been proposed for the measurement of servicequality, the SERVQUAL scale has been widely used by academics and practitioners

to measure service quality

Therefore, this model has been used as a point of reference in this thesis

Figure 3.2: Relationship between service quality and customer satisfaction based on

SERVQUAL

Based on the above research model, we propose the hypothesis of the study

as below:

H1: Customer perception about the tangible of this service is increased or decreased,

their level of satisfaction with services also increase or decrease with

H2: Customer perception about the reliability of this service is increased or decreased,

their level of satisfaction with services also increase or decrease with

H3: Customer perception about the responsiveness of this service is increased or

decreased, their level of satisfaction with services also increase or decrease with

H4: Customer perception about the assurance of this service is increased or decreased,

their level of satisfaction with services also increase or decrease with

H5: Customer perception about the empathy of this service is increased or decreased,

their level of satisfaction with services also increase or decrease with

The visual aspects of Web sites are also judged differently by the people ofdifferent age While young people may be attracted by flashy graphics, sounds and ahigh-speed interface, older people do not want blinking texts that are hard to read oranimations that distract from the use of the Web site Although a number of Websites offer users the opportunity to customize the Web site to their needs, thiscustomization process is mostly aimed at the content of the Web site andnot at thegraphics, animations and sounds.

of convenience considerations If customers cannot trust an organization to do whatthey ask, those customers will be dissatisfied Price line, for example, ran into bigproblems by the end of 2000 because of its focus on the lowest prices People couldbuy a plane ticket at a very low price, but because of possible inconvenient flying

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Assurance

One of the aspects in the assurance factor is “knowledge to answerquestions” Customers expect to find everything they want on a Web site In abricks and mortar store, people feel comfortable with a limited inventory On theInternet, people are notsatisfied if they cannot find everything they want Web shopsneed to have great depth of inventory and rich and relevant product information.Two other aspects in the assurance factor are “employees can be trusted” and “feelsafe in your transactions with employees” First, there is the risk for users to sharepersonal information with an organization they do not know Research on this topicshows that at least 50 percent of users are very concerned about: misuse of creditcard information given over the Internet; selling or sharing of personal information

by Web site owners; and cookies that track customers’ Internet activity Second, thesame research shows that two-thirds of active Web users typically abandon a sitethat requests personal information and one in five has entered false information togain access to a Web site Aspects in the assurance factor that could be veryimportant in e-business are:

The first aspect in this list is also acknowledged by the InternationalOrganization for Standardization in Geneva The Code of Practice for InformationSecurity Management provides a basis for establishing and maintaining the means

of handling sensitive data Certifications and guarantees of assurance are alsoimportant in e-business More and more organizations are trying to obtaincertification by an objective, consensus-based standard, just as they did earlier withquality management standards These organizations are becoming aware of the

on your screen is supposed to make customers feel more comfortable With the use

of artificial intelligence, the virtual assistant can suggest products or services thatmight be of interest to a customer based on previous purchases and on reactions tothe questions of the virtual assistant The latter possibility of asking users of a Website questions via a virtual assistant will enable companies to tailor their offerings tothe wishes of the user to prevent customer dissatisfaction The only purpose of allthese technological gadgets is to add one of the Web’s key missing ingredients:warmth