Introduction
Background
Bank loyalty refers to the ongoing relationship a customer maintains with their bank over time This loyalty can be measured by analyzing customer account activity across specific time frames and observing the consistency of their patronage (Yi and Jeon, 2003).
Over the last ten years, the financial services industry has experienced significant transformations, leading to a highly competitive marketplace marked by stagnant primary demand and heightened deregulation.
In today's competitive banking landscape, traditional and inherited customer-bank relationships are diminishing (Li-Ting Huang et al., 2007) To combat this trend and enhance customer loyalty, banks are implementing various strategies, including the introduction of innovative products and services (Alam and Khokhar, 2006).
To enhance customer loyalty, banks should prioritize less tangible factors that are difficult to replicate, such as service quality and customer satisfaction, rather than solely focusing on innovations that may be easily imitated.
The banking industry, once characterized by stability, is now navigating fierce competition in a deregulated environment According to KPMG (2014), Vietnam's banking sector consists of 33 commercial banks categorized into four groups based on chartered capital The first group features four state-owned banks with capital exceeding 20,000 billion dong, while the second group includes 11 banks with capital between 5,000 billion and 20,000 billion dong The third group has seven banks with capital ranging from 3,500 billion to under 5,000 billion dong, and the fourth group comprises 11 banks with capital below 3,500 billion dong The recent stagnation in the real estate sector has intensified competition and complexity within the retail banking market, particularly impacting smaller chartered banks in groups three and four, which have traditionally focused on retail due to their limited capital.
Research problems
In today's highly competitive market, fostering customer loyalty is essential for business success Reis, Pena, and Lopes (2005) highlight several key reasons for prioritizing customer retention: loyal customers are willing to pay premium prices for trusted suppliers, reducing the substantial costs associated with acquiring new customers Higher retention rates lead to lower acquisition costs, as fewer new customers are needed Additionally, satisfied customers often refer new clients at little to no expense, and they typically purchase more over time Therefore, building sustainable relationships with customers is crucial for long-term profitability.
Marketing experts emphasize that customer loss for a company translates directly into gains for competitors Kotler et al (1996) highlight that acquiring a new customer requires five times more investment than retaining an existing one In today's fiercely competitive global market, the effort to maintain customer loyalty is equally significant as the pursuit of new clientele Consequently, fostering customer loyalty has become a critical challenge that every company must prioritize and master.
Small chartered banks traditionally serve individuals and small to medium enterprises, but the real estate industry's challenges have shifted the focus of the banking sector towards the retail market Limited capital in commercial banks restricts their risk-taking capabilities, resulting in lower loan-to-value ratios and reduced lending to individual customers Additionally, small chartered commercial banks possess fewer tangible assets compared to larger banking groups.
Increasing capital is not a viable solution to enhance competitiveness in the current market due to several factors The stock market has lost its appeal as an investment avenue, particularly in bank stocks, which are receiving less attention than before Additionally, government regulations restrict state-owned corporations from investing in other industries, especially in finance and banking Furthermore, the banking sector is experiencing a surplus in deposits, while lending remains challenging and risky Consequently, rather than focusing on capital increases, banks should prioritize customer loyalty initiatives to gain competitive advantages over other commercial banks with higher capital.
The overall objective is to analyze the factors which influence the customer loyalty in the banking industry of Vietnam The research objectives are as follows:
- To analyze the influence of satisfaction, commitment and switching cost on customer loyalty
- To analyze the influence of perceived quality on satisfaction
- To analyze the influence of satisfaction and trust on commitment.
Research Scope
This study focuses on enterprise customers of small chartered commercial banks in
Ho Chi Minh City, who have more frequently banking activities and more continuous account transaction than the individual customers Therefore, this sample cannot represent for Vietnam nationwide.
Thesis structure
The thesis is organized as follows:
- Chapter 1 introduced the background of the study, research problems, research objectives, and research scope
- Chapter 2 presents the literature review and conceptual foundation
- Chapter 3 presents the methodology and methods of the study
- Chapter 4 reports the analysis of data and findings of the study
- Chapter 5 discusses the recommendations of the study and suggestions for future research are made.
Literature Review
Customer loyalty
Customer loyalty is a crucial topic in business management discussions and is considered a key factor for success across various industries, especially in the banking sector Research by Bain & Company (2001) highlights a strong correlation between customer loyalty and business profitability, revealing that companies that prioritize building customer loyalty can significantly enhance their profits Specifically, their findings indicate that a mere five percent increase in customer retention can lead to nearly a thirty percent boost in profits.
Acquiring new customers is significantly more costly for companies compared to retaining existing ones, as loyal customers are more likely to make repeat purchases and increase their spending over time This insight drives managers to seek innovative strategies aimed at enhancing customer retention and encouraging repeat business from their loyal clientele (Rigby et al, 2003).
Customer loyalty refers to the ongoing commitment of a customer to repeatedly purchase products and services from the same brand over an extended period This loyalty is established when customers develop sufficient trust and commitment to a specific company In the banking industry, customer loyalty hinges on long-term satisfaction with the bank's services When customers are loyal to a bank, they continue to utilize its services, even if they experience occasional dissatisfaction, as they trust that the overall experience will balance out positively in the long run.
Customer satisfaction is significantly influenced by their knowledge of products and services, leading to a higher likelihood of repurchase and recommendations to others (Oliver, 1999) Research by Lin and Wang (2006) supports the notion that satisfaction is a strong predictor of repurchasing behavior, highlighting its importance in customer retention strategies.
According to a 2007 study, a loyal customer who experiences dissatisfaction may initially consider staying with the brand However, if product quality does not improve, the customer is likely to seek information about alternative brands.
Trubik and Smith (2006) categorize loyal customers into two groups: satisfied and unsatisfied While satisfaction is not a necessary condition for loyalty, there is a correlation between the two Interestingly, some unsatisfied customers remain loyal to their banks due to barriers such as commitment to the supplier and switching costs These factors can deter them from seeking alternatives, even when they are not fully satisfied with the service.
Customer's perceived quality
Perceived quality is closely related to customer satisfaction and loyalty, though distinguishing between these concepts can be challenging Anderson and Sullivan (2007) highlight that satisfaction arises from prior consumption experiences and is influenced by cost, while perceived quality does not necessitate previous experience and may not correlate with price In some cases, consumers struggle to gather feedback on products or services, complicating quality assessments Teck-Yong et al (1996) build on Oliver's conceptual model of service quality and satisfaction, revealing that these constructs have distinct determinants, with customer satisfaction significantly influenced by service quality Darrell et al (2003) define customer satisfaction as the result of comparing service expectations with perceived performance.
Perceived quality refers to the perceived utility in relation to both monetary and nonmonetary costs, with consumers assessing value based on what they receive versus what they give up (Ladebo, 2006) The quality of service plays a pivotal role in shaping perceived value, especially for e-vendors offering digitized products such as online banking and content services, where tangible products are absent This makes it challenging for consumers to distinguish between product and service quality Even when physical products are sold, exemplary presale and after-sale services enhance perceived benefits and reduce nonmonetary costs like time and effort (Bob Thompson, 2008) Research indicates that customer perceived value significantly influences customer loyalty (Parasuraman and Grewal, 2000; Laurn and Lin, 2003).
Service quality encompasses two key components: technical quality, which refers to the actual service delivered to the customer, and functional quality, which pertains to the process and results experienced by the customer (Caruana, 2002) Additionally, it comprises psychological and behavioral aspects, including the accessibility of the service provider and the execution of their tasks Key considerations include the safety of the customer's savings deposit and the overall service experience Customers evaluate service quality based on three dimensions: the interaction with employees, the service environment, and the final service outcome, ultimately shaping their perception of service quality.
Carman et al (2009) highlight the lack of consensus in defining and measuring service quality, while Aydin and Ozer (2005) describe it as "the consumer's judgment about the overall excellence or superiority of a service" (Zeithaml, 1988) Service quality encompasses various attributes that contribute to this overall assessment.
Services are characterized by their intangible and heterogeneous nature, leading to variations in performance based on the provider and customer interactions Unlike physical products, services cannot be repeatedly tested or stored for later evaluation Additionally, the production and consumption of services are often inseparable, making it essential to understand these attributes for a comprehensive assessment of service quality Evaluating service quality is generally more complex than assessing product quality, as it is closely tied to the service delivery process and its outcomes (Gustafson and Lundgren, 2005).
Service quality significantly influences customer behavior, leading to increased purchases, reduced price sensitivity, and positive word-of-mouth (Venetis and Ghauri, 2000) Research by Bloemer et al (1998) confirms a strong link between service quality and customer loyalty, including repurchase intentions and resistance to alternatives High service quality not only enhances a firm's bottom-line performance but also exceeds customer expectations (Coyles and Gokey, 2004) Our study emphasizes the importance of system, information, and product/service quality as the 'get' component, while considering the money and time spent as the 'give' component Prior research indicates that perceived performance directly influences value, which in turn drives repurchase intentions and contributes to customer loyalty (Hansemark and Albinsson, 2004) Anderson et al (2007) warn that low perceived value may prompt customers to switch to competitors, thereby decreasing loyalty Ultimately, while technology plays a role, the human element remains irreplaceable; companies must ensure that their job descriptions, performance metrics, compensation, and training align with their customer strategy (Jacob).
Customer satisfaction is fundamentally linked to the perceived value received by the customer, as highlighted in service management literature (Hasan et al., 1996) Perceived value reflects the balance of benefits versus sacrifices, similar to how disconfirmation addresses the gap between expectations and actual performance Essentially, perceived service quality and perceived value are closely related concepts, both playing a crucial role in shaping customer experiences.
H1: There is a positive relationship between customer’s perceived quality and customer satisfaction.
Customer satisfaction
Customer satisfaction plays a crucial role in fostering loyalty among buyers towards their service providers, particularly in the banking sector Customers evaluate the services they receive to determine if they meet their needs, influencing their decision to repurchase According to Jamal and Kamal (2004), customer satisfaction peaks when clients maximize their benefits while minimizing costs If a customer stops using a bank's services, it often indicates significant dissatisfaction with service quality A satisfied customer feels that their needs are effectively addressed by the bank's offerings Egan (2004) emphasizes that company leaders must not only ensure customer satisfaction but also consider additional offerings to reinforce the importance of the customer-business relationship.
High service prices that exceed customer expectations lead to dissatisfaction In the banking sector, it is crucial for banks and customers to agree on fair interest rates for loans and fees for services to ensure mutual satisfaction When customers feel they are being overcharged, they often seek information about competing banks' offerings Customer satisfaction is achieved when banks actively respond to feedback and implement reasonable pricing adjustments Failure to consider customer suggestions can trigger a process of customer defections (Lin, 2003).
In the initial stages, customers often seek to negotiate with their bank; however, they may ultimately choose to switch due to the low costs associated with opening a new account This ease of switching empowers customers to leave their current bank if their needs are not met Customer satisfaction significantly impacts the overall loyalty to a banking provider, as satisfied customers are more likely to remain with their current bank for an extended period (Gerrard and Cunningham, 2003).
H2a: There is a positive relationship between customer satisfaction and customer commitment
H2b: There is a positive relationship between customer satisfaction and customer loyalty.
Switching Cost
Switching costs represent the obstacles that deter customers from changing service providers, even when they perceive greater benefits elsewhere (Jones et al., 2002) These costs encompass various challenges, including technical and financial difficulties, which contribute to customer loyalty (Shergill and Bing, 2006).
Customer loyalty has emerged as a focal point in contemporary business research, prompting marketing experts to explore its connections with various factors, including customer satisfaction and switching costs (Boulding et al., 2003; Keaveney, 2005; Berne, 2007).
Switching costs refer to the barriers customers encounter when considering a transition to a different seller, encompassing not only measurable financial expenses but also time and psychological factors (Olsen, 1992; Jones et al., 2002) These costs are borne solely by the customer and serve to deter them from easily shifting to competitors (Aydin and Ozer, 2005) High switching costs compel customers to evaluate their loyalty, as the perceived risks associated with switching diminish the attractiveness of alternative suppliers (Selnes, 1993; Ruyter et al.).
Switching costs encompass economic, psychological, and physical expenses, as noted by Jackson (2004) Economic switching costs arise when customers transition from one brand to another, resulting in financial losses Examples include the fees associated with closing a bank account and opening a new one, changing long-distance telephone services (Lauren and Lin, 2003), or switching GSM operators.
Procedural switching costs refer to the challenges customers face during their purchasing decision-making process and the execution of that decision This process encompasses several stages: recognizing a need, searching for information, evaluating alternatives, and ultimately making a purchase decision.
When considering a switch to a new GSM provider, consumers should evaluate various operators based on criteria such as coverage area, pricing, customer service, and value-added services This process culminates in the purchase of a new GSM line, followed by notifying contacts of the new number, reflecting the post-purchase behavior However, customers often perceive a significant risk when opting for a brand they have not previously used, particularly in the service sector, where the quality cannot be assessed prior to purchase.
Post-purchase cognitive dissonance occurs when customers seek information to alleviate their anxiety about potentially making a wrong purchasing decision, drawing on their previous experiences During this process, they compare the performance of a new brand against their former brand If the new brand performs better, it heightens their uncertainty about the alternative Consequently, to reduce cognitive dissonance, customers tend to favor brands they have previously used (Ostrom and Iacobucci, 1999).
Switching barriers make customer desertion difficult or expensive They include social relationships, perceived switching costs, and the attractiveness of alternatives (Jones et al, 2002)
Barriers to customer defection, such as cultivating strong interpersonal relationships and implementing switching costs, serve as effective retention strategies These barriers are crucial for companies as they enhance customer loyalty and help mitigate the impact of temporary declines in service quality, which could otherwise lead to customer loss (Jones et al 2002).
Markets with switching costs often lead to consumer lock-in, where customers continue to purchase the same brand despite the availability of cheaper alternatives This phenomenon allows firms to charge prices above marginal costs, highlighting the significance of consumer loyalty in such markets Research indicates that when customers face switching costs, they exhibit brand loyalty, consistently choosing the same brand among similar options Furthermore, if customers are particularly sensitive to product attributes like quality, their price sensitivity diminishes, reinforcing their loyalty to the brand.
Switching cost is a positive influence on customers' sensitivity to price level It has a positive influence on customer loyalty (Aydin and Ozer, 2005) referred to (Jones et al.,
2002; Bloemer et al., 1998; Burnham, 2003; Lee and Feick, 2001)
Firms with diverse potential customer bases must understand the reasons behind customer retention and identify strategies to prevent churn Gaining insights into why customers choose not to switch is crucial for service firms aiming to attract prospective switchers, such as new market entrants This understanding allows companies to devise effective strategies to overcome switching barriers and enhance their market share (Colgate and Lang, 2009).
Switching barriers play a crucial role in making customer desertion challenging and costly These barriers include interpersonal relationships, perceived switching costs, and the appeal of alternative options (Jones et al 2002) By fostering strong social connections and imposing switching costs, companies can enhance customer retention strategies Such barriers not only contribute to higher retention rates but also help businesses endure temporary declines in service quality that could lead to customer defection (Jones et al 2002) Additionally, limited knowledge about alternatives can significantly impact consumer evaluations, as customers often make decisions based on incomplete information (Kivetz and Simonson).
2004) The situation where consumers are missing information about a single attribute has been examined
H3: There is a positive relationship between switching cost and customer loyalty.
Customer Trust
Trust is defined as the willingness to rely on an exchange partner in whom one has confidence, encompassing beliefs in their reliability and integrity (Moorman et al 1993; Morgan and Hunt 2004) Brand trust specifically refers to a customer's confidence in a brand's ability to deliver on its promises (Chaudhuri and Holbrook, 2002) This trust fosters commitment by lowering negotiation costs and alleviating fears of opportunistic behavior from service providers (Dawes and Swailes, 1999; Bendapudi and Berry, 1997) In social psychology, trust comprises two key elements: honesty, which reflects the belief that a partner will keep their word, and benevolence, which indicates that the partner genuinely cares for the customer's welfare and will avoid actions that could harm them (Trubik et al, 2006).
Morgan and Hunt (1994) emphasize that brand trust is a key driver of brand loyalty and commitment, as it fosters highly valued relationships This indicates that loyalty and commitment are essential for sustaining relationships built on trust (Gulati et al., 2005; Ganesan et al., 2006; Moorman et al., 2007) Therefore, we propose that trust significantly enhances both commitment and loyalty in marketing.
H4: There is a positive relationship between customer’s trust and customer commitment
Commitment is defined as the willingness to maintain a relationship, characterized by a promise of continuity and resistance to change (Moorman et al., 1993; Dwyer et al., 1987; Pritchard et al., 1999) Allen and Meyer (1990) identified three types of loyalty: affective, continuance, and normative, with affective loyalty reflecting an emotional attachment to an organization This emotional state arises when individuals identify with and embrace the values of their organization, fostering a deep sense of belonging and commitment (Morgan and Hunt, 2004).
Continuance commitment refers to the tendency of individuals to remain in a relationship to avoid the costs associated with ending it, which can foster a sense of loyalty and a desire to maintain the connection.
Normative commitment occurs when individuals feel a sense of responsibility towards their organization, leading them to act in ways they believe are morally right Although originally conceptualized within the context of employee-employer relationships, this commitment is also relevant in customer-provider interactions, as evidenced by its application in understanding consumption relationships (Fullerton, 2003).
H5: There is a positive relationship between customer commitment and customer loyalty
In the banking industry, customer loyalty is influenced by several key factors, including perceived quality, satisfaction, switching costs, commitment, and trust, as identified by Beerli, Martin, and Quintana (2004) A review of existing literature, including studies by Lin and Wang (2006) and Lauren and Lin (2003), revealed additional elements that could impact loyalty Notably, trust and commitment were recognized as critical components in the loyalty model applicable to banking Our research, which analyzes the cultural and socio-economic context of Vietnam, integrates these five factors derived from previous studies to propose a comprehensive loyalty model for the banking sector.
H1: There is a positive relationship between customer’s perceived quality and customer satisfaction
H2a: There is a positive relationship between customer satisfaction and customer commitment
H2b: There is a positive relationship between customer satisfaction and customer loyalty
H3: There is a positive relationship between switching cost and customer loyalty
H4: There is a positive relationship between customer trust and customer commitment H5: There is a positive relationship between customer commitment and customer loyalty.
Research model and Hypothesis
In the banking industry, customer loyalty is influenced by perceived quality, satisfaction, and switching costs, as identified by Beerli, Martin, and Quintana (2004) A review of various models revealed additional factors, prompting the inclusion of trust and commitment, as noted by Lauren and Lin (2003) and Lin and Wang (2006) Our research, which considers the cultural and socio-economic context of Vietnam, proposes a loyalty model incorporating five key factors: Perceived Quality, Satisfaction, Switching Costs, Commitment, and Trust, drawn from established literature.
H1: There is a positive relationship between customer’s perceived quality and customer satisfaction
H2a: There is a positive relationship between customer satisfaction and customer commitment
H2b: There is a positive relationship between customer satisfaction and customer loyalty
H3: There is a positive relationship between switching cost and customer loyalty
H4: There is a positive relationship between customer trust and customer commitment H5: There is a positive relationship between customer commitment and customer loyalty.
Research Methodology
Research Process
This study is conducted as given in Figure 3.1 below:
Assessment of measurement (Cronbach alpha, EFA)
Testing of hypotheses (Linear regression)
Measurement scales
This part includes measurement scales of customer loyalty and its antecedents adapted from Wang et al (2007), Chaudhuri and Holbrook (2002), Gefen et al
(2005), Lee and Feick (2001), Pritchard et al (2004), and Abdollahi et al (2008)
Scale items of perceived quality were adapted from Abdollahi et al (2008, p 192) and presented in Table 3.1
Table 3.1: Scale of Customer’s Perceived Quality
1 PQ1 You agree this bank's facilities are attractive and modern (Such as ATM Machines, telephone banking, internet )
2 PQ2 You agree this bank’s employees are tidy in appearance
3 PQ3 You agree that customer representatives are knowledgeable
4 PQ4 You agree that employees of this bank pay special attention to you
Customer Trust was measured base on Gefen et al (2005, p 109) and presented in Table 3.2
Table 3.2: Scale of Customer Trust
1 T5 You agree this bank informed your company of its side services from the beginning
2 T6 You agree employees of this bank solve your problems when they promise to do so
3 T7 You agree this bank delivers what it promises in its advertisements and it is honest
4 T8 You feel secure when using products and services of this bank
Four scale items of Lee and Feick (2001, p 45) were used to measured switching cost (see Table 3.3)
Table 3.3: Scale of switching cost
1 SW9 Change to another bank involves investing time in searching for information about other banks
2 SW10 Change to another bank involves a risk and uncertainty in choosing which might turn out not to satisfy your company
3 SW11 It would cost your company a lot of money to switch from your bank to another bank
4 SW12 It would cost your company a lot of time to switch from your bank to another bank
Scale items of customer satisfaction were adapted from Wang et al (2007, p 202) (see Table 3.4)
Table 3.4: Scale of customer satisfaction
1 S13 You agree this bank meets your company’s needs
2 S14 Your company’s satisfied with the way complaints are handled
3 S15 Your company’s satisfied with the online services and their promptness
4 S16 Your company’s satisfied with the pricing issues (Margins on loans, charges on ATM and other online services)
The items of customer commitment were suggested by Pritchard et al (2004, p 185) (see Table 3.5)
Table 3.5: Scale of customer commitment
1 CMT17 Your company would always use this bank’s services
2 CMT18 Your company’s intention to use the services of this bank would not be changed
3 CMT19 Even if close partners recommended another bank, your company would not change your preference for this bank
4 CMT20 To change your preference from this bank would require major rethinking
Three scale items of Chaudhuri and Holbrook (2002, p 195) were used to measured customer loyalty (see Table 3.6)
Table 3.6: Scale of customer loyalty
1 CL21 You would recommend your company’s bank to your partners
2 CL22 Your company is a loyal customer to this bank
3 CL23 Your company intends to keep purchasing products and services from this bank
All the above items were measured by seven-point Likert-type scales, anchored on "1
= to a very little extent" through "7 = to a very great extent".
Qualitative research
Qualitative research aims to investigate the various factors influencing customer loyalty and their associated products The measurement scales for customer loyalty and its antecedents are derived from established studies, including those by Wang et al (2007), Chaudhuri and Holbrook (2002), Lee and Feick (2001), Gefen et al (2005), Pritchard et al (2004), and Abdollahi (2008).
Sampling method
The qualitative research concluded with a questionnaire-based survey that examined 23 variables, comprising 22 independent and 3 dependent variables Following the guidelines established by Hair, Black, Babin, and Anderson (2010), a sample size of over 100 is recommended, with a minimum ratio of 5 observations for each variable, resulting in a requirement of n > 100 and n = 5k, where k represents the number of variables.
Therefore, the minimum sample size is n = 5* 23 = 115
For standard multiple regression analysis, Tabachnick and Fidell (1991) proposed that the desired level is: n > 50 + 8m (where m = number of independent variables)
There were three models of regression in the proposed model and the largest number of independent variables was three
Hence, the required sample is: n > 50 + 8*3 = 74
Thus, the minimum sample size is 115
A total of 150 respondents were surveyed from businesses located in Ho Chi Minh City, specifically targeting individuals in key roles such as business owners, managers, and accountants who regularly interact with banks for various transactions.
The data collection for the survey was conducted using a questionnaire, with 180 respondents approached and 169 returning the questionnaire, resulting in a high response rate of 93.8 percent Out of the returned questionnaires, 150 were deemed usable, adhering to the criteria of having no more than one missing value and not selecting all “1” or all “7” for more than two factors The data collection period spanned from November 15, 2013, to January 15, 2014.
Data analysis methods
All completed questionnaires were thoroughly reviewed, coded, and the raw data was entered into IBM SPSS Statistics version 20 To assess the reliability and validity of the measurement scales, we utilized Cronbach’s alpha and exploratory factor analysis Subsequently, multiple regression analysis was conducted to interpret the results from both managerial and statistical perspectives (Hair et al., 2010).
Cronbach's alpha serves as a singular criterion for evaluating instruments or scales, as noted by Connely (2011, p 45) While it indicates whether the items are cohesive, it does not confirm that they accurately measure the intended attribute Consequently, it is essential to assess scales based on both their content and construct validity to ensure comprehensive evaluation.
George and Malley (2003, cited in Matkar, 2012, p 94) provide the following techniques (see Table 3.7)
Table 3.7: Cronbach’s Alpha Reliability Coefficient
Excellent Good Acceptable Questionable Poor Unacceptable
Norris and Lecavalier (2010) proposed that Exploratory Factor Analysis (EFA) relies on a testable model that can be assessed for its alignment with the hypothesized population model, utilizing fit indices for better interpretation The primary aim of EFA is to uncover latent constructs that exist beneath a collection of observable variables.
Hair et al (1998, cited in Lee and Hooley, 2005, p 376) claimed that with samples of
When conducting research, it is crucial to consider sample size in relation to significant factor loadings For sample sizes of 350 or more, a factor loading greater than 0.3 is considered significant, while for samples of 200, a loading of 0.4 or higher is necessary Additionally, only factors with an eigenvalue of 1 or greater should be included in the analysis, as those with an eigenvalue below 1 are deemed insignificant (Kim and Mueller, 1978, cited in Lee and Hooley, 2005).
Based on these studies, any factors with eigenvalue greater than 1 will be retained In addition, any factor loadings of 0.3 or higher on a factor are counted
Hair et al (2010) highlighted the discrepancy between actual and predicted values of a dependent variable, indicating that random errors can arise when forecasting sample data This discrepancy is referred to as the residual (ε or e).
Based on these studies, the multiple regression formula will be
Y = a + β1X1 + β2X2 + … + βnXn + ε Where in: Y: is the dependent variable a: is constant β: is called beta weight, standardized regression coefficient, or beta coefficient
X: is the predictor entered into the equation in a single step ε: is the residual
Meyers, Gamst, and Guarino (2006) emphasized the significance of R² in determining the proportion of variance in the dependent variable explained by the full regression model A higher R² value indicates a stronger explanatory power of the regression equation (Hair et al., 2010).
Data Analysis and results
General Information
The initial section of the questionnaire gathered general information from respondents, revealing that most companies primarily engage in transactions with commercial joint-stock banks Additionally, it was noted that companies typically conduct transactions with multiple banks, with a significant number of respondents employed in the commerce and service sectors.
Table 4.1: General information about the respondents
The bank that your company have the transaction most belong to:
The sector that your company works in:
The general information also shows that the majority of the customers 92% have the number of labors under 200 members Therefore, the majority of the respondents are Small and Medium Enterprises.
Measurement assessment
Table 4.2 presents the Cronbach’s alpha results for each scale, indicating that the overall alpha values for the constructs exceed the alpha values if any individual item were deleted The constructs of perceived quality, customer trust, switching cost, customer satisfaction, and customer commitment exhibit strong reliability, with alpha values ranging from 0.702 to 0.825 Although the Cronbach’s alpha for customer loyalty is lower at 0.61, it remains within an acceptable range.
Moreover, the corrected item – total correlation of each scale are over the requirement (0.30) That means the data is quite good for conducting exploratory factor analysis
Scale Variance if Item Deleted
Cronbach's Alpha if Item Deleted
A Principal Component Analysis was conducted on 23 variables using the varimax rotation method, revealing six components that collectively account for 62.546% of the total variance The results, as shown in Table 4.3, indicate that each of the six factors emerged without cross-construct issues and exceeded a threshold of 0.5 These findings demonstrate strong convergent and discriminant validity in the exploratory factor analysis.
The results from the Exploratory Factor Analysis (EFA) and Cronbach’s alpha confirmed that the measurement scale is both valid and reliable Following this, multiple regression analysis will be employed to test the hypotheses The variables measured for the model's factors will be averaged to facilitate regression analysis.
From the proposed model in Chapter 2, the regression process is separated into three regression sub-models They are presented in Figure 4.1, Figure 4.2 and Figure 4.3
Figure 4.1: Customer satisfaction sub-model
H1: There is a positive relationship between customer’s perceived quality and customer satisfaction
Figure 4.2: Customer Commitment sub-model
H2a: There is a positive relationship between Customer Satisfaction and Customer
H4: There is a positive relationship between Customer Trust and Customer
Figure 4.3: Customer Loyalty sub-model
H2b: There is a positive relationship between customer satisfaction and customer loyalty
H3: There is a positive relationship between switching cost and customer loyalty
H5: There is a positive relationship between customer commitment and customer loyalty
4.3.1 Testing Customer Satisfaction sub-model
Our data set with 150 valid was larger than the required minimum samples size of
58 The VIF value of independent variable that was below the cut–off value of 2 (Customer’s Perceived Quality: 1.000), which proved that there was no violation found on multicollinearity The shape of scatter plot excluded the homoskedasticity (see Appendix 3)
The results of the standard simple regression analysis indicate that the independent variable, customer’s perceived quality, significantly predicts the dependent variable, customer satisfaction, with an adjusted R Square of 0.252 and a p-value of 0.000 This suggests that customer’s perceived quality accounts for 25.2 percent of the variance in customer satisfaction Additionally, the standardized coefficient Beta for customer’s perceived quality is 0.507, with a significance value of 0.000, providing statistical evidence of a positive relationship between customer’s perceived quality and customer satisfaction Therefore, the hypothesis H1, stating that customer’s perceived quality has a positive relationship with customer satisfaction, is supported.
4.3.2 Testing customer commitment sub-model
Our data set with 150 valid was larger than the required minimum samples size of
66 The VIF values of all independent variables that was below the cut –off value of 2 (Customer Satisfaction: 1.059; Customer Trust : 1.059), which proved that there were no violations found on multicollinearity The shape of scatter plot excluded the homoskedasticity (see Appendix 4)
After running standard multiple regression, the adjusted R Square is 0.226 and p-
Hypothesis testing
The standardized coefficient Beta for customer satisfaction was 0.342, with a significance value of 000, indicating a statistically significant positive relationship between customer satisfaction and customer commitment Therefore, the hypothesis H2a, which posits that "Customer satisfaction has a positive relationship with Customer commitment," is supported.
The standardized coefficient Beta for customer trust was found to be 0.273, with a significance value of 000, indicating a statistically significant positive relationship between customer trust and customer commitment Therefore, the hypothesis H4, which states that "Customer trust has a positive relationship with Customer commitment," is supported.
4.3.3 Testing customer loyalty sub-model
Our data set with 150 valid was larger than the required minimum samples size of
74 The VIF values of all independent variables that was below the cut –off value of 2 (Customer Satisfaction: 1.208; Customer Commitment: 1.338; Switching Cost: 1.1.78), which proved that there were no violations found on multicollinearity The shape of scatter plot excluded the homoskedasticity (see
The results of the standard multiple regression analysis reveal an adjusted R Square of 0.208 and a p-value of 0.000, indicating that the independent variables significantly predict customer loyalty Specifically, customer satisfaction, switching cost, and customer commitment collectively account for 20.8% of the variance in customer loyalty Notably, customer satisfaction exhibits the highest standardized beta coefficient at 0.246, demonstrating its strongest contribution to enhancing customer loyalty.
The standardized coefficient Beta for customer satisfaction was 0.246, with a significance value of 003, indicating a statistically significant positive relationship between customer satisfaction and customer loyalty Therefore, the hypothesis H2b, which posits that customer satisfaction positively influences customer loyalty, is supported.
The standardized coefficient Beta for switching cost was 0.176, with a significance value of 028, indicating a positive relationship between switching cost and customer loyalty (refer to Appendix 5) Therefore, the hypothesis H3, which posits that switching cost positively influences customer loyalty, is supported.
The standardized coefficient Beta for customer commitment is 0.208, with a significance value of 0.015, indicating a positive relationship between customer commitment and customer loyalty This supports hypothesis H5, which asserts that customer commitment positively influences customer loyalty, as evidenced by multiple significant p-values (p = 000, p = 000, p = 000, p = 028, p = 003, p = 015).
The research confirms a model comprising five key factors: Customer Perceived Quality, Customer Satisfaction, Customer Commitment, Switching Cost, and Customer Trust The standardized coefficients (Betas) and p-values for these factors are illustrated in Figure 4.4.
Conclusions and Implications
Conclusions
This research aims to explore the attitudinal loyalty of enterprise customers at small chartered commercial banks by analyzing existing literature and identifying key factors influencing customer loyalty The primary question addressed is the relationship between these factors and customer loyalty, specifically which factors have the most significant impact The study utilizes a scale comprising 23 variables, including customer loyalty, perceived quality, customer satisfaction, switching costs, customer commitment, and customer trust The findings provide valuable insights into the determinants of customer loyalty in this context.
Firstly, the study contributes to our understanding of customer loyalty and its antecedent by examining their variables and their relationships
Secondly, the relationship between customer loyalty and its antecedents are tested
And it gives opportunity to managers to choose an appropriate strategy for their commercial banks
Thirdly, the present study relies on the sample of actual enterprises who comes from different industries
The study highlights that customer satisfaction is the key driver of customer loyalty in small chartered commercial banks Managers must prioritize this factor to effectively cultivate loyalty among their enterprise clients.
Implications
This study indicates that customer satisfaction, switching costs, and customer commitment significantly influence re-purchase intentions and emotional attachments to banks, ultimately driving loyalty in the banking industry These findings present four key implications for managers.
In the Vietnamese banking industry, switching costs have minimal impact on customer loyalty, allowing clients to easily change banks unless hindered by poor payment histories or unviable business plans Commercial banks actively seek to acquire good debts from competitors, supported by official regulations, as they face a surplus of deposits and the need to increase loan offerings The market is currently saturated with promotional programs, prompting small chartered banks to compete aggressively with state-owned banks on short-term loan interest rates This strategy targets enterprises that require short-term loans for operational capital, compelling smaller banks to retain existing customers while aggressively courting profitable clients from rival institutions.
Customer satisfaction is a crucial factor in fostering loyalty, particularly for small chartered commercial banks Despite facing competition from larger banks with greater capital and political connections, these smaller institutions can enhance their competitive edge by prioritizing and improving customer satisfaction.
Customer satisfaction is positively linked to the perceived quality of services, making it crucial for small chartered commercial banks to retain their existing clientele To achieve this, banks should prioritize intangible factors, ensuring that customer complaints are addressed promptly and effectively Additionally, customer service representatives must possess in-depth knowledge to enhance the overall customer experience.
Customer commitment is a crucial factor influencing customer loyalty To foster trust and enhance commitment, managers must ensure that the services advertised are consistently available across all bank branches Additionally, operational efficiency is essential; by minimizing wait times and streamlining processes, managers can significantly improve the customer experience and build lasting loyalty.
Limitations
This research acknowledges several limitations, primarily its focus on enterprises in Ho Chi Minh City using a convenient sampling method Although the study targeted enterprise customers from commercial banks with chartered capital under 5,000 billion dong, it may not accurately represent the broader issue, as many enterprises utilize multiple banks, and smaller banks are often not their primary institutions Additionally, the exclusion of individual customers means that the opinions of all retail banking market segments were not captured Expanding the study to include a wider geographic range and individual customers could enhance the generalizability of the results Furthermore, while the study identified six factors through exploratory factor analysis (EFA), it only accounted for 62.54% of the total variance, suggesting that other influencing factors on customer loyalty may be explored in future research.
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APPENDIX 1: BẢNG CÂU HỎI KHẢO SÁT
Xin chào các Anh/Chị,
Tôi tên là Vũ Thanh Hoàn – hiện là học viên cao học của Viện Đào Tạo Quốc Tế (ISB) – Trường Đại Học Kinh Tế Thành phố Hồ Chí Minh
Hiện tại, tôi đang tiến hành nghiên cứu về các yếu tố ảnh hưởng đến lòng trung thành của khách hàng, với trọng tâm là các ngân hàng thương mại cổ phần có vốn điều lệ nhỏ Nghiên cứu này nhằm xác định những nhân tố chính quyết định sự trung thành của khách hàng trong bối cảnh cạnh tranh ngày càng gia tăng trong ngành ngân hàng.
Chúng tôi rất mong anh/chị dành chút thời gian để hoàn thành bản khảo sát dưới đây Xin cam kết rằng mọi thông tin anh/chị cung cấp sẽ được bảo mật và chỉ được sử dụng cho mục đích nghiên cứu.
Nếu có những đóng góp, ý kiến hoặc quan tâm đến kết quả khảo sát, anh/chị vui lòng thông tin qua địa chỉ email thanhhoanvu@gmail.com
Part I: Xin vui lòng đánh chéo (X) vào ô anh/ chị chọn: a Ngân hàng mà công ty bạn giao dịch thường xuyên nhất thuộc loại hình nào sau đây?
NH TM Nhà nước NH TM Cổ Phần NH 100% vốn nước ngoài
Chi nhánh NH nước ngoài NH Liên Doanh b Các loại hình dịch vụ ngân hàng mà công ty bạn đang sử dụng (một hay nhiều lựa chọn)
Giao dịch tài khoản Tiền gửi Thanh toán quốc tế
Vay vốn Bảo lãnh c Công ty bạn đang giao dịch với bao nhiêu ngân hàng?
1 ngân hàng 2 ngân hàng Từ 3 ngân hàng trở lên d Công ty bạn biết ngân hàng của mình bằng cách nào:
Truyền thông, báo chí Ngân hàng tiếp thị Đối tác giới thiệu
Part II: Đối với những câu phần này, anh/chị vui lòng đánh dấu chéo (X) để lựa chọn mức độ đánh giá của anh/chị Xin vui lòng chỉ chọn 1 câu trả lời theo quy ước:
7 Hoàn toàn đồng ý - 1 Hoàn toàn không đồng ý
Các chỉ tiêu đánh giá Mức độ đánh giá
1 Hệ thống thiết bị hỗ trợ giao dịch của ngân hàng hiện đại (máy ATM, POS, internet banking, phone banking …)
2 Trang phục của nhân viên ngân hàng gọn gàng và thiện cảm
3 Các chuyên viên quan hệ khách hàng am hiểu sản phẩm dịch vụ ngân hàng
4 Các nhân viên ngân hàng dành sự quan tâm đặc biệt đến công ty
5 Ngân hàng thông tin cho công ty bạn các dịch vụ tiện ích gia tăng ngay từ đầu
6 Nhân viên ngân hàng giải quyết vấn đề của khách hàng khi họ hứa sẽ làm vậy
Dựa trên kinh nghiệm giao dịch của công ty và ngân hàng trước đây, bạn có thể tin tưởng rằng ngân hàng cung cấp dịch vụ đúng như quảng cáo và hoàn toàn đáng tin cậy.
Bạn có thể yên tâm khi công ty sử dụng dịch vụ của ngân hàng, vì ngân hàng luôn đảm bảo tính minh bạch và không lừa dối, bảo vệ lợi ích của doanh nghiệp.
9 Việc thay đổi ngân hàng tốn nhiều thời gian tìm hiểu thông tin về các ngân hàng
10 Thay đổi giao dịch sang ngân hàng khác không chắc chắn công ty bạn sẽ hài lòng với ngân hàng đó
11 Tốn nhiều chi phí của công ty bạn để thay đổi sang ngân hàng khác
12 Tốn nhiều thời gian của công ty bạn để thay đổi sang ngân hàng khác
13 Ngân hàng đang giao dịch đáp ứng được nhu cầu của công ty bạn
14 Công ty ạn hài lòng với các giải quyết của ngân hàng đối với các phàn nàn của công ty
15 Công ty bạn hài lòng với dịch vụ ngân hàng trực tuyến và sự nhanh chóng tiện lợi của nó
16 Công ty bạn hài lòng với lãi suất và phí dịch vụ 7 6 5 4 3 2 1 ngân hàng
17 Công ty sẽ luôn sử dụng dịch vụ của ngân hàng 7 6 5 4 3 2 1
18 Dự định của công ty về việc sử dụng dịch vụ của ngân hàng sẽ không thay đổi
19 Công ty bạn sẽ không thay đổi ngân hàng, dù cho các đối tác tin cậy có giới thiệu ngân hàng khác
20 Để thay đổi sự đánh giá của công ty với ngân hàng cần suy nghĩ rất nhiều
21 Công ty bạn sẽ giới thiệu ngân hàng cho các đối tác của mình
22 Công ty bạn là khách hàng trung thành của ngân hàng hiện tại
23 Công ty bạn sẽ tiếp tục sử dụng dịch vụ của ngân hàng hiện tại
Part III: Thông tin về công ty của Anh/chị: a Số năm hoạt động của công ty:
Mới thành lập từ 1 đến 3 năm từ 3 năm trở lên b Lĩnh vực hoạt động của công ty:
Nông, lâm nghiệp, thủy sản Công nghiệp và xây dựng Thương mại dịch vụ c Số lượng lao động của công ty:
< 100 lao động 100 – 200 lao động > 200 lao động
Xin chân thành cảm ơn sự hợp tác của quý anh/chị
My name is Vu Thanh Hoan – a student of Master program from International School of Business (ISB) – University of Economics Ho Chi Minh City
I am studying the study on “Key antecedents of customer loyalty: A study of small chartered commercial banks”
I would appreciate for your support if you spend a few minutes for filling this questionnaire
For more information, please contact email address thanhhoanvu@gmail.com
Part I: Please tick (X) on your chosen answers: a Which kind of ownership is your most frequently transacted bank?
State owned banks Commercial banks 100% Foreign invested banks
Foreign bank’ branches Joint venture banks b The types of banking services your company is using (one or more options)
Account transaction Deposit Foreign trade
Loans Guarantee c How many banks is your company has transactions with?
Only 1 bank 2 banks More than 2 banks d How your company approach your bank:
Magazines, papers Bank marketing Partners’ recommendations
Part II: For this part of the questionnaire, would you please mark cross (X) in order to assess the level your selection Please select one answer only by this convention:
No Assessment criteria The level of assessment
1 You agree this bank’s facilities are attractive and modern (such as ATM machines, telephone banking, internet…)
2 You agree this bank’s employees are tidy in 7 6 5 4 3 2 1 appearance
3 You agree that customer representatives knowledgeable
4 You agree that employees of the bank pay special attention to your company
5 You agree this bank informed your company of its side services from the beginning
6 You agree employees of this bank solve your company’s problems when they promise to do so
7 Based on your company’s experience with this bank in the past, you know it delivers what it promises in its advertisements and it is honest
When your company relies on the bank's products and services, you gain a sense of security, knowing that the bank is committed to supporting your business and maintaining integrity.
9 Change to another bank involves investing time in searching for information about other banks
10 Change to another bank involves a risk and uncertainty in choosing which might turn out not to satisfy your company
11 It would cost your company a lot of money to switch from your bank to another bank
12 It would cost your company a lot of time to switch from your bank to another bank
13 You agree this bank meets your company’s needs 7 6 5 4 3 2 1
14 Your company satisfied with the way complaints are handled
15 Your company satisfied with the online services and their promptness
16 Your company satisfied with the pricing issues 7 6 5 4 3 2 1
17 Your company would always use this bank’s services
18 Your company’s intention to use the services of this bank would not be changed
19 Even if close partners recommended another bank, your company would not change your preference for this bank
20 To change your company’s preference from this bank would require major rethinking
21 You would recommend your company’s bank to the others
22 Your company is a loyal customer to this bank 7 6 5 4 3 2 1
23 Your company intends to keep purchasing products/services from this bank
Part III: Information about your company: a The number of years your company’s operation:
Newly established 1 to 3 years more than 3 years b The sector that your company works in:
Agriculture, rural Industry and Construction Commerce and Service c The number of labours:
APPENDIX 2: RESULTS OF EXPLORATORY FACTOR
Initial Eigenvalues Extraction Sums of Squared
Extraction Method: Principal Component Analysis
Rotation Method: Varimax with Kaiser Normalization a Rotation converged in 7 iterations
Extraction Method: Principal Component Analysis
APPENDIX 3: SIMPLE LINEAR REGRESSION RESULTS (S)
Std Error of the Estimate
1 507 a 257 252 45686 a Predictors: (Constant), PQ b Dependent Variable: S
Model Sum of Squares Df Mean Square F Sig
Total 41.552 149 a Dependent Variable: S b Predictors: (Constant), PQ
B Std Error Beta Tolerance VIF
Std Error of the Estimate
1 486 a 236 226 49971 a Predictors: (Constant), T, S b Dependent Variable: CMT
Model Sum of Squares Df Mean Square F Sig
Total 48.059 149 a Dependent Variable: CMT b Predictors: (Constant), T, S
Std Error of the Estimate
1 473 a 224 208 44576 a Predictors: (Constant), CMT, SW, S b Dependent Variable: CL
Model Sum of Squares Df Mean Square F Sig
Total 37.384 149 a Dependent Variable: CL b Predictors: (Constant), CMT, SW, S
Standar dized Coeffici ents t Sig Correlations Collinearity