ANTECEDENTS OF BRAND LOYALTY | IN VIETNAM BANKING SECTOR: | THE CASE OF VIETNAM CREDIT CARD USERS |

TR NG IH CM TP HCM UNIVERSITÉ LIBRE DE BRUXELLES HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS SCHOOL MBAVB2 NGUYEN TIEN CHUNG ANTECEDENTS OF BRAND LOYALTY IN VIETNAM BANKING SECTOR: THE CASE OF VIETNAM CREDIT CARD USERS MASTER PROJECT MASTER IN BUSINESS ADMINISTRATION (PART-TIME) Tutor’s Name: PhD Le Nguyen Hau Ho Chi Minh City (2012) DECLARATION I, Nguyen Tien Chung, hereby declare that this master thesis is my own original work and efforts Other sources of information used have been acknowledged The conclusion and managerial implication with recommendation are personal standpoints Signature: NGUYEN TIEN CHUNG Date: November 15th, 2012 ACKNOWLEDGEMENTS This master thesis was written in part fulfillment of the Master of Business Administration course at Solvay Brussels School of Economics and Management - Ho Chi Minh City Open University Campus First of all, I would like to express my deep thanks to the tutor - PhD Le Nguyen Hau for his profound guidance, helpful advice throughout my thesis, especially his devotion and patience to each of students he has worked with, including an-alwayshurrying person like me I would extend my gratitude to my family and relatives, specifically my wife and two little naughty sons, who will always try to keep me tranquillized to fulfill my lofty mission My unforgettable thanks also go to Nguyen Ngoc Son and Mindmap team, classmates of MBAVB2 for continuous encouragement during the process of my study Finally, but not least, I would like to thank Solvay Business School Alumni in Vietnam to support me in completing questionnaires and HSBC Vietnam GPU team for taking my tasks during the time I took leave for the writing As a supplementation, I would want to show my sincere thanks in advance to the Board of Professors, who will give me a chance to defend my thesis after a long time pending SUPERVISOR’S COMMENTS ON THE FINAL PROJECT Student name: NGUYEN TIEN CHUNG Program: MBAVB2 Title: ANTECEDENTS OF BRAND LOYALTY IN VIETNAM BANKING SECTOR: CASE OF VIETNAM CREDIT CARD USER Comments: Credit card in Vietnam has been developing rapidly in terms of the number of card and transaction value since the first ever credit card of Vietnam was issued by Vietcombank in 1996 However, the market currently has a sluggish growth due to various reasons, such as high interest rate of late payment and/or perceived risk of fraud Moreover, Vietnamese customers are still not used to using cards for their shopping, and prefer to use cash instead Many shopping centers are yet to install POS machines to accept credit card payments One of the emerging questions is how to retain existing customers and to attract new ones This study aims to quantitatively investigate the antecedents of brand loyalty for credit card users in Vietnam banking sector In addressing this research objective, the author has spent time to review the relevant literature, based on which a model was proposed The model introduces six antecedents of customer loyalty Empirical tests were conducted with a sample data of 250 credit cards users in Vietnam Results indicate that Customer Satisfaction, Brand Trust and Switching barrier are antecedents of loyalty Customer Satisfaction is then driven by Perceived Functional Value, Perceived Emotional Value Perceived Social value was proposed as a driver for customer satisfaction but it is not supported in this study The student has demonstrated his ability to conduct an applied research which meets the scientific requirements of a master thesis This work achieves the quality standard of the program I strongly recommend it to be presented to the examination board Supervisor: Assoc Prof Le Nguyen Hau Date: November 15th, 2012 i TABLE OF CONTENTS CHAPTER 1: INTRODUCTION 1.1 Background 1.2 Problem Statement 1.3 Research Objectives 1.4 Scope of the Study 1.5 Research Methodology CHAPTER 2: LITERATURE REVIEW 2.1 Introduction 2.2 Brand Loyalty and its benefit 2.2.1 Brand loyalty 2.2.2 Brand loyalty benefit 2.3 Customer Segmentation on Loyalty 2.4 Factors affecting Brand Loyalty 2.5 Loyalty in Banking Sector 10 2.6 Research Model 11 2.6.1 Customer Satisfaction 12 2.6.1.1 Perceived Value 13 2.6.1.2 Perceived Risk and relationship with Satisfaction 15 2.6.1.3 Brand Trust 18 2.6.1.4 Switching Barrier 19 2.6.1.5 Demographic Factors 21 CHAPTER 3: DATA AND METHOD 23 3.1 Introduction 23 3.2 Methodology and Research Process 23 3.3 Qualitative 23 3.3.1 Preliminary scales 24 3.3.2 Scale adjustment .31 3.4 Quantitative research 35 3.4.1 Questionnaire in quantitative research .35 3.4.2 Sampling design .35 3.4.3 Data collection 35 3.4.4 Data analysis 36 ii 3.4.4.1 Reliability of scales assessment 36 3.4.4.2 Exploratory factor analysis 37 3.4.4.3 Regression analysis 37 CHAPTER 4: DATA ANALYSIS AND RESULT EXPLANATION 39 4.1 Introduction 39 4.2 Sample description 39 4.3 Reliability of the scale assessment 39 4.4 Exploratory Factor Analysis 44 4.4.1 EFA analysis for Functional value (FV), Emotional value (EV), Perceived risk (PR): 44 4.4.2 EFA analysis for Brand Trust (BT), Switching barrier (SB): 45 4.4.3 EFA analysis for Satisfaction (SA): 46 4.4.4 EFA analysis for Loyalty (LO): .47 4.5 Testing the research model and hypotheses 48 4.5.1 Correlations analysis 48 4.5.2 Regression analysis 49 4.5.3 Hypothesis conclusion .53 4.6 Summary 56 CHAPTER 5: CONCLUSION .57 5.1 Overview .57 5.2 Summary of findings 57 5.3 Managerial Implication and Recommendation 58 5.4 Limitations 59 REFERENCES 60 APPENDIX A 67 APPENDIX C 86 iii LIST OF TABLES Table 1: Most common factors identified affecting loyalty Table 2: The most factors affecting bank loyalty and its frequency appeared in recent researches .10 Table 3: Description and definition of perceived risks dimension 17 Table 4: Switching barrier dimension description 20 Table 5: Preliminary concept and its references .25 Table 6: Preliminary concept scales details 27 Table 7: Final scales and variables 33 Table 8: Information of data collection process 35 Table 4-1: Return ratio 39 Table 4-2: Cronbach’s Alpha of “Perceived Functional value” .40 Table 4-3 Cronbach’s Alpha value of “Perceived value – Emotional” 40 Table 4-4: Cronbach’s Alpha value of “Perceived Social value” .41 Table 4-5: Cronbach’s Alpha value of “Perceived Risk” 41 Table 4-6: Cronbach’s Alpha of “Customer Satisfaction” 41 Table 4-7: Cronbach’s Alpha value of “Brand Trust” scale .42 Table 4-8: Cronbach’s Alpha value of “Switching Barrier” Scale 42 Table 4-9: Cronbach’s Alpha value of “Customer Loyalty” scale Item-Total Statistics 43 Table 4-10: Cronbach’s Alpha value of the scales 43 Table 4-11: Summary analysis of FV, EV, PR independent variables KMO and Bartlett's Test .44 Table 4-12: Summary analysis of the BT, SB’s independent variables KMO and Bartlett's Test .45 Table 4-13: Summary analysis of the SA’s independent variables KMO and Bartlett's Test .46 Table 4-14: Summary analysis of LO’s independent variables KMO and Bartlett's Test 47 Table 4-15: Regression analysis value 50 Table 4-16: Regression value 51 Table 4-17: Hypothesis testing results 53 Table A.1: Factors Identified Affecting Loyalty 67 iv Table A.2: Most common Factors identified affecting Bank Loyalty 70 Table A.3: Conceptual and Operational Definitions in Consumer Satisfaction Literature 73 Table A.4: Satisfaction constructs 80 Table A.5: Definitions of Perceived Value .81 Table A.6: Perceived Value Dimensions 83 LIST OF FIGURES Figure 1: Research model and hypotheses 22 Figure 2: Research process 24 Figure 3: Regression analysis result 53 CHAPTER 1: INTRODUCTION 1.1 Background Credit card in Vietnam has been developing rapidly in terms of the number of card and transaction value since the first ever credit card of Vietnam was issued by Vietcombank in 1996 By the end of 2011, there are 1,025,566 international credit cards issued by the members of Vietnam bank card association and 300,000 ones issued by the non-member of the association (Oberthur Technology Company report, 2012) The market is far away from its potentiality in terms of number of card and its transaction value (Kimihisa Imada, 2011; Nguyen Thu Ha, 2012) Vietnamese adopt quickly usage of credit cards, which pointed to almost 9.5 million people who could become customers of card issuers (Visa Inc, 2008) It is supported by both the macro-economic and banking perspective, the domestic card market is considered very strong given the rising incomes among the country's 82-million people, rapid economic growth and improving legal system (Nguyen Thu Ha, 2012) All major credit card service providers have a presence in Vietnam, including MasterCard, American Express, Visa, JCB and Diners Club (http://www.vir.com.vn/news/business/locals-still-shun-credit-cards-due-to-highfees.html, April 24, 2011) There are two types of credit cards in term of technique One is magnet stripe and the other is chip type The second one is the latest technology and it is better than the first one in security Many merchants in US and Europe reject payment if it is magnet credit card because they are afraid of fraud (Oberthur Technology Company, 2012) Vietnam credit cards are accepted across the territory for making direct or online payment There are now has about 10,000 places that accept card payments, concentrated in big cities like Hanoi and Ho Chi Minh City and other major tourism sites This number is targeted by the Government to be 250,000 by 2015 (The State Bank of Vietnam, 2011) However, the market currently has a sluggish growth due to high interest rate of late payment, 1.5%-1.9% for one month Customers perceive it risky to use the card because of fraud It is not safe to presume Moreover, Vietnamese customers are still not used to using cards for their shopping, and prefer to use cash instead Many shopping centers are yet to install POS machines to accept credit card payments (Business time, 2011) Parties involved in a transactions process are card holder, card issuing agency, the merchant, the acquiring bank, an association of card issuing Besides, the transaction network is also involved It means that the card holder’ information is exposed to many parties It creates security risk Customer perceived more risk if the payment is online Many benefits for credit card holders Beside the function of cash replacement for purchase, it could facilitate car holder a big amount to spend when car holder not have real amount without time constraint due to overdraft limit granted to card holder It is interest free spending which holder could not find if credit purchase in merchant A squeaky clean credit card history can get high credit score from credit agency In turn, it is a criterion for loan disbursement or interest rate offered by the bank to the card holder Credit card statement contains data of spending, so it could help card holder budget Credit card holders are preferential treatment at shopping malls, restaurants, hotels…(The economic times, 17 January 2011) Vietnam is the most risky for credit card The credit card fraud rises to highest within region It was nearly five times the world rate, and 17 times compared with the regions (Le Thanh Ha, 2011) The frauds in the international card payment increase rapidly in 2011 The total value of fraud transactions reached one million 82 Urbany & Bearden Perceived acquisition value is the buyers net gain (or trade-off) from acquiring the product or (1989) service Lichtenstein, Perceived transaction value is the perception of psychological satisfaction or pleasure obtained from Netemeyer, & taking advantage of the financial terms of the price deal Burton (1990) Dodds et al (1991) Perceived customer value is the ratio of perceived benefits relative to perceived sacrifice Anderson, Jain, & Value in business markets is the perceived worth in monetary units of the set of economic, technical, Chintagupta (1993) service and social benefits received by a customer firm in exchange for the price paid for a product, taking into consideration the available suppliers offerings and prices Gale (1994) Customer value is market perceived quality which is adjusted for the relative price of the products It is your customer s opinion of your products/services as compared to that of your competitors Holbrook (1996) Value is “an interactive relativistic preference experience” Value is interactive because it involves an interaction between some subject and some object It is relativistic because it is comparative (among objects), personal (across consumers), and situational (specific to the context in which the evaluative judgment occurs) It is concerned with the consumption experience resulting from the use of an object or the appreciation of an object 'Ravald and Value is considered to be an important constituent of relationship marketing and the ability of a Gronroos (1996) company to provide superior value to its customers is regarded as one of the most successful 83 strategies for the 1990s This ability has become a means of differentiation and a key to the riddle of how to find a sustainable competitive advantage Source: Jyoti Sikka Kainth & Harsh V Verma, (2011) Table A.6: Perceived Value Dimensions Components Source/year Combination of all factors qualitative and Schechter (1984) cited in Zeithaml (1988); quantitative; objective and subjective to form a consumer's buying experience Interaction between some subject and some Holbrook (1996) object Situational Holbrook (1996) Woodruff (1997) Trade off between what is received (benefit) and Zeithaml (1988) what is given (sacrifice) Day (1990) Monroe (1990) Urbany and Bearden (1989) 84 Dodds et al (1991) Anderson, Jain, & Chintagupta (1993) Gale (1994) Cronin, Brady, Brand, Hightower and Shemwell (1997) Woodruff (1997) Patterson and Spreng (1997) Cognition Zeithaml (1988) Woodruff (1997) Patterson and Spreng (1997) Emotional/psychological/pleasure Lichtenstein, Netemeyer, & Burton (1990) Business markets Anderson, Jain, & Chintagupta (1993) Competition Anderson, Jain, & Chintagupta (1993) Gale (1994) Ravald and Gronroos (1996) Relationship marketing Ravald and Gronroos (1996) Butz & Goodstein (1996) Sirdeshmukh, D., Singh, J and Sabol, B (2002) 85 Goals and purposes Woodruff (1997) Functional (process) and technical (outcome) (Source: Jyoti Sikka Kainth & Harsh V Verma ,2011) 86 APPENDIX C RESULTS OF DATA ANALYSIS C.2 SCALES’ RELIABILITY ANALYSIS C.2.1 Independent variables’s Cronbach’s Alpha C2.1.1 Perceived Functional value Before eliminating varible Reliability Statistics Cronbach's Alpha 779 FV1 FV2 FV3 FV4 FV5 N of Items Item-Total Statistics Scale Mean Scale Variance if Corrected Item- Cronbach's Alpha if Item Item Deleted Total Correlation if Item Deleted Deleted 13.876 8.928 650 704 14.120 8.741 576 731 14.052 9.543 530 745 13.684 10.121 579 734 14.044 10.267 449 770 C2.1.2 Perceived Emotional value Reliability Statistics Cronbach's N of Items Alpha 904 EV1 EV2 EV3 Item-Total Statistics Scale Mean Scale Variance if Corrected Item- Cronbach's Alpha if Item Item Deleted Total Correlation if Item Deleted Deleted 7.23 2.741 826 849 7.38 2.653 781 888 7.26 2.725 823 851 C2.1.3 Perceived value - Social value 87 Reliability Statistics Cronbach's N of Items Alpha 537 SV1 SV2 Item-Total Statistics Scale Mean Scale Variance if Corrected Item- Cronbach's Alpha if Item Item Deleted Total Correlation if Item Deleted Deleted 3.14 1.112 373 3.85 780 373 C2.1.4 Perceived Risk Reliability Statistics Cronbach's Alpha N of Items 759 PR1 PR2 PR3 Item-Total Statistics Scale Mean Scale Variance if Corrected Item- Cronbach's Alpha if Item Item Deleted Total Correlation if Item Deleted Deleted 6.32 4.315 625 642 6.31 3.965 670 585 6.66 4.362 488 798 C2.1.5 Customer Satisfaction Reliability Statistics Cronbach's Alpha N of Items 898 SA1 SA2 SA3 Item-Total Statistics Scale Mean Scale Variance if Corrected Item- Cronbach's Alpha if Item Item Deleted Total Correlation if Item Deleted Deleted 7.08 2.612 832 826 7.31 2.697 763 883 7.26 2.448 803 851 88 C2.1.6 Brand Trust Reliability Statistics Cronbach's Alpha N of Items 886 BT1 BT2 BT3 Item-Total Statistics Scale Mean Scale Variance if Corrected Item- Cronbach's Alpha if Item Item Deleted Total Correlation if Item Deleted Deleted 7.24 2.755 781 838 7.40 2.538 802 817 7.48 2.612 755 860 C2.1.7 Switching Barier Reliability Statistics Cronbach's Alpha N of Items 558 SB1 SB2 SB3 SB4 Item-Total Statistics Scale Mean Scale Variance if Corrected Item- Cronbach's Alpha if Item Item Deleted Total Correlation if Item Deleted Deleted 8.66 6.039 225 596 8.97 5.770 384 452 9.13 5.767 421 424 9.26 6.081 365 470 After eliminating SB1 Reliability Statistics Cronbach's Alpha N of Items 596 Item-Total Statistics Scale Mean Scale Variance if Corrected Item- Cronbach's Alpha if Item Item Deleted Total Correlation if Item Deleted Deleted SB2 5.63 3.584 269 692 SB3 5.78 2.933 513 330 SB4 5.92 3.162 452 427 89 After eliminating SB2 Reliability Statistics Cronbach's Alpha N of Items 692 SB3 SB4 Item-Total Statistics Scale Mean Scale Variance if Corrected Item- Cronbach's Alpha if Item Item Deleted Total Correlation if Item Deleted Deleted 2.75 1.153 529 2.88 1.190 529 C.2.2 Cronbach’s Alpha value of the depedent variable, Customer Loyalty Reliability Statistics Cronbach's Alpha N of Items 896 LO1 LO2 LO3 LO4 Item-Total Statistics Scale Mean Scale Variance if Corrected Item- Cronbach's Alpha if Item Item Deleted Total Correlation if Item Deleted Deleted 10.43 5.949 753 871 10.50 5.713 790 858 10.50 5.400 839 838 10.28 6.106 696 892 C.3 EXPLORATORY FACTOR ANALYSIS  Factor analysis for scales: FV, EV, PR KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Approx Chi-Square Bartlett's Test of Df Sphericity Sig Com pone 850 1302.907 55 000 Total Variance Explained Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings 90 nt Total % of Cumulati Total % of Cumulativ Varianc ve % Varianc e% e e 4.530 41.185 41.185 4.530 41.185 41.185 2.059 18.717 59.902 2.059 18.717 59.902 1.071 9.736 69.639 1.071 9.736 69.639 691 6.282 75.920 598 5.434 81.355 506 4.602 85.957 415 3.772 89.729 365 3.321 93.050 322 2.925 95.975 10 259 2.354 98.328 11 184 1.672 100.000 Extraction Method: Principal Component Analysis Rotated Component Matrixa Component 856 825 820 773 747 842 807 663 EV1 EV2 EV3 FV5 FV4 FV2 FV1 FV3 PR2 876 PR1 852 PR3 741 Extraction Method: Principal Component Analysis Rotation Method: VARIMAX with Kaiser Normalization a Rotation converged in iterations  Factor analysis for scales: BT, SB KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Approx Chi-Square Bartlett's Test of Df Sphericity Sig .715 516.320 10 000 Total % of Cumulat Varianc ive % e 3.454 31.399 31.399 2.157 19.613 51.013 2.049 18.626 69.639 91 Total Variance Explained Com Initial Eigenvalues Extraction Sums of Rotation Sums of pone Squared Loadings Squared Loadings nt Total % of Cumulativ Total % of Cumulat Total % of Cumul Variance e% Varianc ive % Varianc ative % e e 2.609 52.174 52.174 2.609 52.174 52.174 2.436 48.711 48.711 1.376 27.515 79.689 1.376 27.515 79.689 1.549 30.979 79.689 472 9.431 89.120 307 6.141 95.261 237 4.739 100.000 Extraction Method: Principal Component Analysis Rotated Component Matrixa Component BT2 902 BT1 897 BT3 894 SB3 872 SB4 866 Extraction Method: Principal Component Analysis Rotation Method: VARIMAX with Kaiser Normalization a Rotation converged in iterations  Factor analysis for scale: SA KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Approx Chi-Square Bartlett's Test of Df Sphericity Sig Com pone nt 742 464.361 000 Total Variance Explained Initial Eigenvalues Extraction Sums of Squared Loadings Total % of Cumulative Total % of Cumulativ Variance % Varianc e% e 2.49 2.494 83.145 83.145 83.145 83.145 92 304 10.150 93.295 201 6.705 100.000 Extraction Method: Principal Component Analysis Component Matrixa Component SA1 929 SA3 914 SA2 892 Extraction Method: Principal Component Analysis a Components extracted  Factor analysis for scale: SA KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Approx Chi-Square Bartlett's Test of Df Sphericity Sig .805 635.315 000 Total Variance Explained Component Initial Eigenvalues Extraction Sums of Squared Loadings Total % of Cumulative Total % of Cumulative % Varian % Variance ce 3.048 76.209 76.209 3.048 76.209 76.209 452 11.290 87.499 334 8.361 95.860 166 4.140 100.000 Extraction Method: Principal Component Analysis Component Matrixa Component LO3 918 LO2 888 LO1 862 LO4 821 93 Extraction Method: Principal Component Analysis a components extracted C.4 CORRELATION ANALYSIS Correlations EV PR SA FV FV EV PR SA BT SB LO Pearson Correlation Sig (2tailed) N Pearson Correlation Sig (2tailed) N Pearson Correlation Sig (2tailed) N Pearson Correlation Sig (2tailed) N Pearson Correlation Sig (2tailed) N Pearson Correlation Sig (2tailed) N Pearson Correlation Sig (2tailed) N BT LO 268** 491** 574** 026 000 678 000 000 000 000 250 250 250 250 250 250 250 574** -.029 836** 640** 230** 693** 000 530** 447** SB 647 000 000 000 000 250 250 250 250 009 -.141* 160* -.097 250 250 250 026 -.029 678 647 250 250 250 530** 836** 000 887 026 011 128 250 250 250 250 009 660** 265** 690** 000 887 000 000 000 250 250 250 250 250 250 250 447** 640** -.141* 660** 214** 696** 000 000 026 000 001 000 250 250 250 250 250 250 250 268** 230** 160* 265** 214** 326** 000 000 011 000 001 250 250 250 250 250 250 250 491** 693** -.097 690** 696** 326** 000 000 128 000 000 000 250 250 250 250 250 250 000 250 94 ** Correlation is significant at the 0.01 level (2-tailed) * Correlation is significant at the 0.05 level (2-tailed) C.5 REGRESSION ANALYSIS Regression equation: SA = + 1*FV + 2*EV Model Summaryb Mod R R Adjusted Std Error Change Statistics el Square R Square of the R Square F df1 df2 Sig F Estimate Change Change Change 24 838a 703 700 42922 703 292.129 000 a Predictors: (Constant), EV, FV b Dependent Variable: SA Model (Constant ) Coefficientsa Unstandardized Standardize t Coefficients d Coefficient s B Std Beta Error Sig Toleranc VIF e 397 138 2.871 004 FV 066 037 075 1.776 003 EV 825 044 793 18.723 000 a Dependent Variable: SA Collinearity Statistics 1.49 1.49 671 671 95 Regression equation: LO = 0+ 1*SA + 2*BT + 3*SB Model Summaryb Mod R R Adjusted Std Error Change Statistics el Square R Square of the R Square F df1 df2 Sig F Estimate Change Change Change 24 772a 596 591 50430 596 120.965 000 a Predictors: (Constant), SB, BT, SA b Dependent Variable: LO Coefficientsa Model Unstandardize Standardize t Sig Collinearity d Coefficients d Statistics Coefficient s B Std Beta Toleran VIF Error ce (Constant) 247 174 1.413 159 1.82 SA 380 055 378 6.910 000 548 96 BT 417 054 418 7.731 000 SB 113 035 136 3.232 001 a Dependent Variable: LO 1.77 1.07 927 563