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

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

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS- HOCHIMINH CITY

PHUNG NGUYEN THUC KHUE

DETERMINANTS OF CUSTOMER SATISFACTION

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS- HOCHIMINH CITY

Phung Nguyen Thuc Khue

DETERMINANTS OF CUSTOMER SATISFACTION

ON MORTGAGE SERVICE:

A CASE STUDY OF ANZ BANK VIETNAM LIMITED

MASTER THESIS

In Finance- Banking Ology Code: 60.31.12

Supervisor

Assoc Prof Dr Nguy n Minh Ki u

Ho Chi Minh City- 2010

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

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

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

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

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

Ho Chi Minh City, December 2010

Phung Nguyen Thuc Khue

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

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

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

Managerial implications for management board of ANZ Bank Vietnam Limited were provided

Subsequently, limitations of the research were discussed for future studies in related field

TABLE OF CONTENTS

ACKNOWLEDGEMENTS

ABSTRACT

TABLE OF CONTENTS

LIST OF FIGURES

LIST OF TABLES

LIST OF ABBREVIATIONS

CHAPTER 1: INTRODUCTION 1

1.1 BACKGROUND 1

1.2 PROBLEM STATEMENT 2

1.3 RESEARCH QUESTIONS AND OBJECTIVES 4

1.4 RESEARCH METHODOLOGY 4

1.5 SCOPE AND LIMITATION 5

1.6 THE STRUCTURE OF THE STUDY 5

CHAPTER 2: LITERATURE REVIEW 7

2.1 OVERALL ON CUSTOMER SATISFACTION 7

2.2 OVERALL ON CUSTOMER SATISFACTION IN MORTGAGE LENDING 8

2.3 DETERMINANTS OF CUSTOMER SATISFACTION IN MORTGAGE LENDING 9

2.3.1 Service quality10 2.3.2 Service price 12 2.3.3 Customer expertise 12 2.4 RESEARCH MODELS AND RESEARCH HYPOTHESES OF CUSTOMER SATISFACTION IN MORTGAGE LENDING 13

2.5 CHAPTER SUMMARY 15

CHAPTER 3: RESEARCH METHODOLOGY 16

3.1 QUALITATIVE RESEARCH STAGE 18

3.1.1 General result of the survey 19 3.1.2 Result on Core Dimension determinant 19 3.1.3 Result on Relational Dimension determinant 20

3.1.4 Result on Tangible determinant 21 3.1.5 Result on Competitive price determinant 21 3.1.6 Result on Customer Expertise determinant 22

3.2 QUANTITATIVE RESEARCH STAGE 22

3.2.1 Target population and sampling method 22 3.2.2 Data collection 23 3.2.3 The questionnaire design 23 3.2.4 Data analysis method 24 3.2.4.1 Descriptive statistic 24 3.2.4.2 Reliability testing 24 3.2.4.3 Assessment of Unidimensionality, Convergent validity and Discriminant validity 25 3.2.4.4 Multiple regression analysis 25 3.3 CHAPTER SUMMARY 25

CHAPTER 4: DATA ANALYSIS AND FINDINGS 26

4.1 SAMPLE CHARACTERISTICS 26

4.2 DATA ANALYSIS 28

4.2.3 Evaluation the measurement scale by using exploratory

factor analysis 32 4.2.4 Assessment of convergent validity and of discriminate

validity 33 4.2.5 Factor analysis of dependant factor 34

4.2.6 The adjusted research model 35

4.3 TESTING OF HYPOTHESES 35

4.4 MULTIPLE REGRESSIONS 37

4.4.1 Multiple regression formula 38 4.4.2 Multiple regression result 38 4.5 DISCUSSION 40

4.5.1 Application of theoretical conceptual framework 40 4.5.1.1 The relationship between service quality and customer satisfaction 40 4.5.1.2 The relationship between price and customer satisfaction 40 4.5.1.3 The relationship between customer expertise and customer satisfaction 40

4.5.2 The result of measuring ANZ mortgage customer satisfaction 41

4.5.2.1 Service quality 41

4.5.2.2 Price 41

4.5.2.3 Customer satisfaction 42

4.5.3 Outcomes of hypothesis test 42

4.6 CHAPTER SUMMARY 42

CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 43

5.1 CONCLUSIONS 44

5.2 RECOMMENDATIONS 44

5.3 LIMITATION AND DIRECTION FOR FURTHER STUDIES 46

REFERENCE

APPENDICES

LIST OF FIGURES

Figure 1.1: Research procedure 5

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

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

Figure 2.3 The conceptual framework proposed by Nguyen Dinh Tung 16

Figure 3.1: The proposed research model 17

Figure 4.1: The adjusted research model 35

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

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

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

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

Table 3.5: General result of agreement on Price factor 21

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

Table 4.1: Age of customer 26

Table 4.2: Monthly income of customers 27

Table 4.3: Customer’s employment 27

Table 4.4: Descriptive statistic 29

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

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

Table 4.7: The final result of Unidimensionality testing 32

Table 4.8: The analysis result of Convergent validity 33

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

Table 4.10: Correlation matrix 36

Table 4.11: Model summary 38

Table 4.12: ANOVA 38

Table 4.13: COEFFICIENTS 39

Table 4.14: ANZ mortgage customer perception 41

LIST OF ABBREVIATIONS

ANZ: ANZ Bank Vietnam Ltd

CLM: Customer Lending Manager

COR: Core dimension

EFA: Exploratory Factor Analysis

EXP: Customer expertise

REL: Relational dimension

SAF: Customer satisfaction

SPSS: Statistical package of social scienceStd Deviation: Standard Deviation

TAN: Tangible dimension

VIF: Variance Inflation Factor

CHAPTER 1: INTRODUCTION

1.1 BACKGROUND

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

Ho Chi Minh City and Ha Noi City is an obvious evidence for the occupation demand of urbanpeople As statistics, in 2009, the average urban living area in Vietnam is 12.5 m2 per head, HaNoi City is 8 m2 and Ho Chi Minh City is 13.6 m2 This is a very low rate in comparison withthe world’s average rate, in which Ha Noi City has the smallest living area per head in thecountry The Construction Ministry has planned to increase the average living area in Ha NoiCity up to 12 m2 per head and 14 m2 for Ho Chi Minh City and therefore, 30-32 million m2living area need to be constructed each year With the above reasons, mortgage loan in Vietnam

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

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

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

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

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

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

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

1.2 PROBLEM STATEMENT

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

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

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

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

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

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

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

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

1.3 RESEARCH QUESTIONS AND OBJECTIVES

Research questions

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

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

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

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

mortgage loan?

Research objectives

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

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

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

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

on mortgage product of ANZ

o Relevant articles, newspapers, books and websites

1.5 SCOPE AND LIMITATION

As limited on time and resource, the study focuses in individual customers having mortgage

transactions with ANZ in Ho Chi Minh City and Ha Noi City

1.6 THE STRUCTURE OF THE STUDY

Figure 1.1: Research procedure

This chapter includes the research rationale, the problem statement, research questions, research

objectives and research methodology

Chapter 2: Literature review

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

hypotheses was developed

Chapter 3: Research methodology

This chapter describes the operational process of this research in order to approach target

respondents and find out the required data

Chapter 4: Data analysis and findings

The chapter presents outcomes throughout data processing and analysis Finally, model and

hypotheses tests were conducted to confirm whether they can be applied to predict the behavior

intention as this research expected

Chapter 5: Conclusion and recommendations

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

CHAPTER 2: LITERATURE REVIEW

2.1 OVERVIEW OF CUSTOMER SATISFACTION

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

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

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

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

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

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

2.2 OVERVIEW OF CUSTOMER SATISFACTION IN MORTGAGE LENDING

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

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

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

2.3 DETERMINANTS OF CUSTOMER SATISFACTION IN MORTGAGE LENDING

The working of the customer©s mind is a mystery which is difficult to solve and understanding thenuances of what customer satisfaction is therefore, a challenging task There have been manyresearches on determinants of customer satisfaction Work done by Berry, Brodeur between 1990and 1998 defined ten “Quality values” which influence satisfaction behavior, further expanded byBerry in 2002 and known as the ten domains of satisfaction include: Quality, Value, Timeliness,Efficiency, Ease of Access, Environment, Inter-departmental Teamwork, Front line ServiceBehaviors, Commitment to the Customers and Innovation These factors are emphasized forcontinuous improvement and organizational change measurement and are most often utilized todevelop the architecture for satisfaction measurement as an integrated model

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

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

2.3.1 Service quality

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

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

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

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

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

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

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

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

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

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

2.3.2 Service price

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

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

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

2.3.3 Customer expertise

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

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

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

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

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

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

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

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

Service quality Core

Customer satisfaction Relational

Tangible

Price

Source: Mc Dougall and Levesque (1996)

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

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

Service quality Core

Customer satisfaction Relational

Tangible

Customer expertise

Source: Jamal and Naser (2002)

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

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

satisfaction Tangible

Competitive Price

2.5 CHAPTER SUMMARY

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

CHAPTER 3: RESEARCH METHODOLOGY

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

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

customer satisfaction " If you cannot measure it, you cannot improve it." - Lord William Thomson Kelvin (1824-1907).

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

Figure 3.1: The proposed research model

Service quality Core Relational

Tangible

Customer satisfaction Competitive price

Customer expertise

Research hypotheses statements

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

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

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

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

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

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

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

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

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

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

H5: Customer expertise has a negative impact on customer satisfaction

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

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

3.1 QUALITATIVE RESEARCH STAGE

Basing on the previous study such as Naser and Jamal (2002), Levesque and McDougall (1996)

… the initial items of determinants in the model were set out Before applying these items intoresearch, a questionnaire was set up to get the banking expert consultancy In this questionnaire,the tentative questions are combined with open-ended questions in order to not only identify themost important factors expressing the author’s point of view but also allow interviewees tofreely suggest their ideas

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

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

3.1.1 General result of the survey

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

Table 3.1: General result of agreement on selected factors

1 Core Dimension 15 100% Yes

2 Relational Dimension 15 100% Yes

5 Customer expertise 10 66.7% Yes

With all agreement percentage more than 50%, all selected five factors were taken into

investigation In which, customer expertise got less agreement than the other ones

3.1.2 Result on Core Dimension determinant

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

Table 3.2: General result of agreement on Core dimension factor

No of

Percentage agreement

1 The bank provides mortgage lending products as

15 100%announced

2 The bank provides mortgage lending products within

15 100%the committed time

No Items

No of

Percentage agreement

3 The bank should show sincere interest in handling

15 100%customer’s issues

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

15 100%first time

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

15 100%clearly to customer about mortgage lending products

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

3.1.3 Result on Relational Dimension determinant

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

Table 3.3 General result of agreement on Relational dimension factor

No of

Percentage agreement

1 Time of the bank transaction is convenient for

15 100%customer

2 Required documents from the bank and the lending

process are not so wordy and complicated, hence

15 100%customer don’t have to come to the bank many times

during the loan process

3 The bank shows its care to each customer Bankers

know clearly about customer’s need and ready to 15 100%consult customer the most suitable product

4 The bank gives additional service (insurance for the

mortgaged property, consult about the to-be- 15 100%purchased property)

5 The bank brings the safe, trust and comfortable

15 100%feeling to customers

Banking experts all think that all the five items of Relational dimension factor are worth to betaken into research That is shown by 100% of agreement, so all the items are taken into thesurvey.

3.1.4 Result on Tangible determinant

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

Table 3.4 General result of agreement on Tangible dimension factor

No of

Percentage agreement

1 Branches of the bank have convenient locations 15 100%

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

3 Parking place is convenient 15 100%

4 The bank provides easy understood documents 15 100%

5 The bank has internet/mobile banking facilities so

that customer could easily get information about 13 87.7%their loan

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

3.1.5 Result on Competitive price determinant

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

Table 3.5 General result of agreement on Price factor

agreement

INT1 Mortgage lending interest rate of ANZ is lower

15 100%

than which of other banks

INT2 Fees that customer must pay within mortgage

lending process at ANZ (security valuation fee,

15 100%

security management fee, early repayment fee…)

are lower than which of other banks

INT3 Lending interest rate and fee are stipulated clearly

12 80%

and reasonably

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

3.1.6 Result on Customer Expertise determinant

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

Table 3.6 General result of agreement on Customer expertise factor

No Items No of Percentage

agreement

EXP1 Knowledge about banking transaction 12 80%EXP2 Experience in mortgage lending 15 100%EXP3 Information about mortgage lending product 9 60%

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

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

3.2 QUANTITATIVE RESEARCH STAGE

3.2.1 Target population and sampling method

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

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

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

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

· According to Roscoe (1975), the sample size larger than 30 and less than 500 is

appropriate for the research

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

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

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

3.2.2 Data collection

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

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

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

to 4 for occupation

3.2.3 The questionnaire design

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

be easily understood by interviewees

3.2.4 Data analysis method

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

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

3.2.4.1 Descriptive statistic

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

3.2.4.2 Reliability testing

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

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

3.2.4.3 Assessment of Unidimensionality, Convergent validity and Discriminant validity

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