Luận văn thạc sĩ UEH key antecedents of customer loyalty, a study of small chartered commercial banks

Introduction

Background

Bank loyalty refers to the ongoing relationship customers maintain with their bank over time This loyalty can be measured by analyzing customer account activity across specific periods 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, committed relationships between customers and their banks are diminishing (Li-Ting Huang et al, 2007) To combat this trend and enhance customer loyalty, banks have implemented various strategies, including the introduction of innovative products and services (Alam and Khokhar, 2006).

To enhance customer loyalty, banks should prioritize intangible factors that are difficult for competitors to replicate, such as service quality and customer satisfaction, rather than solely focusing on easily imitated innovations.

Banking has traditionally operated in a relatively stable environment for decades

The Vietnamese banking industry is currently experiencing intense competition in a deregulated environment, with 33 commercial banks categorized into four groups based on chartered capital, as reported by KPMG (2014) The first group consists of four state-owned banks with over 20,000 billion dong in capital, while the second group includes 11 banks with capital ranging from 5,000 billion to 20,000 billion dong The third group has seven banks with capital between 3,500 billion and under 5,000 billion dong, and the fourth group comprises 11 banks with capital under 3,500 billion dong The recent stagnation in the real estate industry has intensified competition and complexity in the retail banking market, particularly affecting smaller chartered commercial banks in groups three and four, which have traditionally focused on retail services due to their limited capital.

Research problems

In today's competitive landscape, fostering customer loyalty is essential for business success According to Reis, Pena, and Lopes (2005), loyal customers are willing to pay premium prices for trusted suppliers, reducing the need for costly new customer acquisition Higher customer retention not only lowers acquisition costs but also leads to increased referrals at minimal expense Furthermore, established customers typically make more frequent purchases, reinforcing the importance of nurturing sustainable relationships.

Marketing experts emphasize that customer loss for a company directly translates to gains for competitors Kotler et al (1996) highlight that acquiring a new customer requires five times the investment compared to retaining an existing one In today's fiercely competitive global market, the effort to maintain customer loyalty is now equal to that of attracting new clients Consequently, fostering customer loyalty has become a critical challenge that every company must prioritize to succeed.

Small chartered banks traditionally serve individuals and small to medium enterprises; however, the real estate industry's challenges have shifted the focus of the banking sector toward the retail market Limited capital in commercial banks restricts their risk-taking capabilities, resulting in a low loan-to-value ratio and reduced lending to individual customers Additionally, small chartered commercial banks possess fewer tangible assets compared to larger banking institutions.

Increasing capital is not a viable solution to the current low competitiveness in the banking sector for several reasons The stock market has become an unappealing investment avenue, with bank stocks losing their previous allure Additionally, government regulations restrict state-owned corporations from investing in other industries, particularly in finance and banking Moreover, the banking industry is experiencing a surplus in deposits, while lending remains challenging and risky Consequently, rather than focusing on capital increases, banks should prioritize enhancing customer loyalty strategies 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, often considered a key to 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 focusing on customer retention can significantly boost their profits Specifically, a 5% increase in customer retention can lead to nearly a 30% rise in profits, underscoring the importance of cultivating customer loyalty for financial success.

Retaining existing customers is significantly more cost-effective than acquiring new ones, as loyal customers tend to make repeat purchases and increase their spending over time This research highlights the importance for managers to implement innovative strategies aimed at customer retention and to incentivize loyal customers to buy more (Rigby et al., 2003).

Customer loyalty refers to a customer's commitment to repeatedly purchasing products and services from the same brand over an extended period This loyalty develops when customers have sufficient trust and satisfaction with a particular company In the banking industry, strong customer satisfaction is crucial for fostering loyalty, as customers are more likely to continue using a bank's services even during occasional dissatisfaction, trusting that the overall experience will balance out positively in the long run.

Customer satisfaction is influenced by their knowledge of products and services, leading to a greater likelihood of repurchase and recommendations to others (Oliver, 1999) Research by Lin and Wang (2006) confirms that satisfaction is a strong predictor of repurchasing behavior, highlighting its importance in customer retention and loyalty.

According to a 2007 study, a loyal customer may initially overlook a single instance of dissatisfaction; however, if product quality does not improve, they are likely to seek information about alternative brands.

Trubik and Smith (2006) categorize loyal customers into two groups: satisfied and unsatisfied customers While satisfaction is not a mandatory condition for loyalty, there exists a correlation between the two Interestingly, some unsatisfied customers may remain loyal to their banks due to various barriers, such as commitment to the supplier In cases where these unsatisfied customers lack commitment, switching costs become a significant factor that prevents them from seeking alternative suppliers (Moutinho, L.).

Customer's perceived quality

Perceived quality is closely related to customer satisfaction and loyalty, though distinguishing between these concepts can be challenging According to Anderson and Sullivan (2007), customer satisfaction arises from prior consumption experiences and is influenced by cost, while perceived quality can exist independently of prior experience and often does not depend on price However, consumers sometimes struggle to gather product feedback, making quality evaluation difficult, which leads to price often being viewed as an indicator of quality Teck-Yong et al (1996) built on Oliver's conceptual model, revealing that service quality and customer satisfaction are distinct constructs with unique determinants, where service quality significantly impacts customer satisfaction Darrell et al (2003) define customer satisfaction as the outcome of comparing service expectations with perceived performance.

Perceived quality refers to the consumer's evaluation of utility in relation to both monetary and nonmonetary costs, where value is determined by what is received versus what is sacrificed (Ladebo, 2006) In the realm of e-commerce, particularly with digital products and services like online banking and stock trading, consumers often struggle to distinguish between product and service quality since these offerings are intangible Effective presale and after-sale services provided by e-vendors can enhance perceived value by adding benefits and minimizing nonmonetary costs such as time, effort, and mental stress (Bob Thompson, 2008) Research indicates that higher perceived value significantly influences customer loyalty (Parasuraman and Grewal, 2000; Laurn and Lin, 2003).

Service quality encompasses two key components: technical quality, which pertains to the actual delivery of services to customers, and functional quality, which reflects the outcomes of the service process as experienced by customers (Caruana, 2002) Additionally, service quality is influenced by psychological and behavioral aspects, including accessibility to service providers and the manner in which they execute their tasks Specifically, customers evaluate the safety of their savings deposits and the overall service delivery Three dimensions shape the customer's assessment of service quality: the interaction between customers and employees, the service environment, and the final service outcome, all contributing to the overall 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 consumer perception.

Services are characterized by their intangible nature, meaning they cannot be physically touched or owned Additionally, they are heterogeneous, leading to variations in performance depending on the service provider and the customer experience Furthermore, services cannot be stored or revisited in a fixed state, making it impossible to repeatedly test them in the same manner.

The production and consumption of services are inherently linked, making it essential to grasp the key attributes of service quality Unlike product quality, which is easier to assess, evaluating service quality involves understanding its unique characteristics This evaluation is often tied to both the service delivery process and the final output (Gustafson and Lundgren, 2005).

Besides, service quality gain customers' inclination It makes them buy more, become less price-sensitive and tell others about their experiences (Venetis and Ghauri, 2000)

Research by Bloemer et al (1998) highlights a strong correlation between service quality and key customer behaviors such as repurchase intention, recommendations, and resistance to superior alternatives, all of which contribute to customer loyalty Improved service quality not only enhances customer satisfaction but also positively influences a firm's overall performance and profitability Furthermore, Coyles and Gokey (2004) emphasize that perceived service often exceeds the service levels that customers expect.

Our research focused on the quality of systems, information, and products/services as the 'get' component, while considering the money and time invested as the 'give' component Previous studies have established that perceived performance and quality are key determinants of value, which in turn influences repurchase intention Cumulative findings indicate that perceived value plays a significant role in fostering customer loyalty (Hansemark and Albinsson, 2004) Additionally, Anderson et al (2007) noted that low perceived value can drive customers to switch to competitors, thereby diminishing loyalty It is essential to recognize that technology cannot replace the crucial human element in customer relations Therefore, your company's job descriptions, performance measures, compensation systems, and training programs should reinforce your customer strategy rather than undermine it (Jacob).

2005) The literature attaching to service management has stated that customer satisfaction is the result of a customer's entity of value received (Hasan et al., 1996)

Perceived value reflects the balance between benefits and sacrifices, similar to how disconfirmation addresses the gap between expectations and actual performance Essentially, perceived service quality and perceived value are closely related concepts that convey the same underlying meaning.

H1: There is a positive relationship between customer’s perceived quality and customer satisfaction.

Customer satisfaction

Customer satisfaction is a crucial factor in fostering loyalty among buyers towards service providers In the banking sector, customers evaluate the services they receive to determine if they meet their specific needs.

Customer repurchase decisions are influenced by their satisfaction with the bank's services According to Jamal and Kamal (2004), high customer satisfaction occurs when clients maximize their usage while minimizing costs If a customer stops using the bank's services, it often indicates significant dissatisfaction with service quality A satisfied customer feels that their needs are adequately met by the bank Egan (2004) emphasizes that company directors must not only ensure customer satisfaction but also consider additional offerings to reinforce the importance of the customer-business relationship.

When service prices exceed customer expectations, dissatisfaction arises In the banking sector, it's crucial for banks and customers to agree on fair interest rates for loans and reasonable fees for banking services to ensure mutual satisfaction If customers perceive their current bank's charges as excessive, they are likely to seek information about competing banks' offerings.

Customer satisfaction is achieved when banks actively address and implement reasonable feedback regarding their service pricing Ignoring customer suggestions can lead to increased defections and loss of clientele (Lin, 2003).

Initially, customers may seek to negotiate with their bank, but eventually, they may choose to switch due to the low costs associated with opening new accounts This ease of switching empowers customers to leave their current banks Customer satisfaction significantly impacts their loyalty; satisfied customers are more likely to remain with their providers for extended periods (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 are the obstacles that hinder 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 play a significant role in customer loyalty (Shergill and Bing, 2006).

Customer loyalty has become the attracting object in recent business researches

Numerous marketing researchers have explored the connections between customer loyalty and various factors, including customer satisfaction and switching costs (Boulding et al., 2003; Keaveney, 2005; Berne, 2007).

Switching costs refer to the various expenses and challenges customers encounter when changing from one seller to another According to Olsen (1992), these costs extend beyond mere financial implications; they also encompass the time and psychological factors that customers must consider during the transition (Jones, Beatty, Mothersbaugh, 2002).

The switching cost is the cost that the customer faces alone It is the cost that prevent customer from easily changing to the company’s competitions (Aydin and Ozer, 2005)

High switching costs significantly influence customer loyalty, as they lead consumers to weigh the risks associated with changing suppliers When the expenses associated with switching are substantial, customers are less likely to consider alternatives, thereby reinforcing their loyalty to their current provider.

Switching costs encompass economic, psychological, and physical expenses, as noted by Jackson (2004) Economic switching costs arise when customers change brands, leading to financial losses Examples include the costs associated with closing an account at one bank to open another, switching long-distance telephone services (Lauren and Lin, 2003), or changing GSM operators.

Procedural switching costs refer to the challenges customers face during their purchasing decision-making process and its implementation This process encompasses several key stages: recognizing a need, searching for information, evaluating alternatives, and ultimately making a purchase decision.

When considering a change in mobile service providers, consumers should evaluate various operators based on criteria such as coverage area, pricing, customer service, and value-added services After selecting a new provider and completing the purchase process for a new GSM line, it is essential to inform contacts of the new GSM number This process reflects typical post-purchase behavior in the consumer decision-making journey.

Customers often perceive high risks when considering a brand they have not previously used, particularly in the service industry This apprehension arises because the quality of services cannot be evaluated prior to purchase, leading customers to favor competing service providers.

Post-purchase cognitive dissonance occurs when customers seek information to alleviate anxiety about potentially poor purchasing decisions, drawing on their past experiences This involves comparing the new brand with the previous one, where superior performance of the new brand can heighten uncertainty about the alternative Consequently, customers often prefer familiar brands to minimize cognitive dissonance (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 represent additional retention strategies They include development of strong interpersonal relationships or imposition of switching costs

Implementing effective barriers is crucial for companies as they enhance customer retention These barriers enable businesses to navigate temporary declines in service quality, which could otherwise lead to customer attrition (Jones et al 2002).

Markets with switching costs often lead to consumer lock-in, where customers continue to buy the same brand despite cheaper alternatives from competitors This phenomenon allows firms to maintain higher prices above marginal costs, highlighting the significance of consumer loyalty in such markets (Aydin and Ozer, 2005).

Research by Srinivasan et al (2007) indicates that in markets with switching costs, customers tend to exhibit brand loyalty, consistently choosing the same brand among various options (Lee and Feick, 2001) Furthermore, when customers are highly attuned to a product's attributes, such as quality, their sensitivity to price diminishes, leading to more loyal purchasing behavior.

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)

It is important for those firms which have many potential customer bases to figure out why they stay and to what these companies can prevent their customers from leaving

Understanding the reasons customers hesitate to switch services is crucial for firms aiming to attract potential switchers, such as new market entrants By identifying these switching barriers, companies can devise effective strategies to overcome them and capture a larger market share (Colgate and Lang, 2009).

Switching barriers play a crucial role in customer retention by making it challenging or costly for customers to leave These barriers include interpersonal relationships, perceived switching costs, and the appeal of alternative options Strong social connections and the implementation of switching costs are effective retention strategies that not only enhance customer loyalty but also help businesses withstand temporary declines in service quality Additionally, limited consumer knowledge about alternatives can significantly impact their decision-making process, as customers often evaluate options without complete information.

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, rooted in confidence in their reliability and integrity (Moorman et al 1993; Morgan and Hunt 2004) Brand trust reflects a customer's confidence in a brand's ability to fulfill its promises (Chaudhuri and Holbrook, 2002) It fosters dedication by reducing negotiation costs and alleviating concerns about opportunistic behavior from service providers (Dawes and Swailes, 1999; Bendapudi and Berry, 1997) In social psychology, trust encompasses two key components: the partner's honesty and their benevolence (Trubik et al, 2006).

Honesty is the foundation of trust in a partnership, where one partner is committed to keeping their promises Benevolence reflects a partner's genuine concern for the customer's well-being, ensuring that their actions are always in the customer's best interest.

According to Morgan and Hunt (1994), brand trust is a crucial factor that fosters brand loyalty and commitment, as it establishes highly valued relationships This loyalty and commitment arise from the desire to maintain these trusted relationships (Gulati et al., 2005; Ganesan et al., 2006; Moorman et al., 2007) We propose that trust significantly influences both commitment and loyalty.

H4: There is a positive relationship between customer’s trust and customer commitment

Commitment is defined as the willingness to maintain a relationship and is characterized by a promise of continuity (Moorman, Deshpande, and Zaltman, 1993; Dwyer et al., 1987) It reflects a resistance to change (Pritchard, Havitz, and Howard, 1999) and can be categorized into three types: affective, continuance, and normative loyalty (Allen and Meyer, 1990) Affective loyalty, or emotional attachment, occurs when individuals identify with and take pleasure in being part of an organization, sharing and internalizing its values, which fosters a strong emotional connection (Morgan and Hunt, 2004).

Continuance commitment reflects a loyalty that encourages individuals to maintain a relationship to avoid the costs associated with its termination, as noted by Allen and Meyer This type of commitment often leads to a desire for prolonged engagement in the relationship.

Normative commitment refers to an individual's sense of responsibility towards an organization, leading them to act in ways they believe are ethically right While originally conceptualized within the employee-employer context, this concept is also relevant in customer-provider relationships, demonstrating its applicability in understanding consumption behaviors (Fullerton, 2003).

H5: There is a positive relationship between customer commitment and customer loyalty

Perceived quality, customer satisfaction, and switching costs are key factors influencing customer loyalty in the banking industry, as identified by Beerli, Martin, and Quintana (2004) Further research, including studies by Lin and Wang (2006) and Lauren and Lin (2003), explored additional variables relevant to banking Notably, trust and commitment emerged as significant factors from loyalty models in other industries Although the primary model did not address the selection criteria, this study aims to examine its relevance within the banking context.

In our research, we identified five key factors influencing consumer behavior in Vietnam: Perceived Quality, Satisfaction, Switching Cost, Commitment, and Trust This model is based on established studies by Beerli, Martin, and Quintana (2004) as well as Lin and Wang (2006) and Lauren and Lin (2003), reflecting the unique cultural and socio-economic context of the region.

H1: There is a positive relationship between customer’s perceived quality and customer satisfaction

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

Perceived quality, customer satisfaction, and switching costs are key factors influencing customer loyalty in the banking industry, as highlighted by Beerli, Martin, and Quintana (2004) A review of various models, including those from Lin and Wang (2006) and Lauren and Lin (2003), suggests that additional factors may also play a role in fostering loyalty within this sector Notably, trust and commitment emerged as significant elements from the literature that could enhance customer loyalty in banking While the primary models did not explicitly address the factor of choice, this aspect was also examined to understand its relationship with customer loyalty.

In our research, we have identified five key factors influencing consumer behavior in Vietnam: Perceived Quality, Satisfaction, Switching Cost, Commitment, and Trust This model is grounded in previous studies by Beerli, Martin, and Quintana (2004) as well as Lin and Wang (2006) and Lauren and Lin (2003), reflecting the cultural and socio-economic context of the region.

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 factors influencing customer loyalty and their associated products The measurement scales for customer loyalty and its antecedents are derived from established studies 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 study utilized a questionnaire and comprised 23 variables, including 22 independent and 3 dependent variables According to Hair et al (2010), a sample size of 100 or more is recommended, with a minimum ratio of 5 observations per variable, leading to the guideline 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 sample of 150 respondents was selected from businesses located in Ho Chi Minh City, comprising business owners, managers, and accountants who regularly interact with banks for various transactions.

The data collection for the survey was conducted using a questionnaire, achieving a response rate of 93.8% with 150 usable responses out of 169 returned from a total of 180 participants To be accepted, questionnaires could not have more than one missing value and could not select 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 The reliability and validity of the measurement scales were assessed using Cronbach’s alpha and exploratory factor analysis.

Then, multiple regression analysis is used to provide for interpreting the results of its application from a managerial and statistical viewpoint (Hair et al., 2010)

Cronbach’s alpha is a key metric for evaluating the reliability of instruments or scales, but it should not be the sole criterion for assessment As highlighted by Connely (2011), while Cronbach’s alpha indicates whether the items within a scale are consistent, it does not confirm that they accurately measure the intended attribute Therefore, it is essential to also consider content and construct validity when judging the effectiveness of scales.

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

According to Norris and Lecavalier (2010), Exploratory Factor Analysis (EFA) relies on a testable model that can be assessed for its compatibility with the proposed population model, utilizing fit indices for better model interpretation The primary aim of EFA is to uncover the latent constructs that underlie a collection of observable variables.

Hair et al (1998, cited in Lee and Hooley, 2005, p 376) claimed that with samples of

350 or more, a factor loading of the attribute higher than 0.3 is significant In addition, with samples of 200, a factor loading of 0.4 or greater will take to indicate

Researchers should meticulously evaluate the sample size when selecting significant factor loadings, focusing on factors with a total eigenvalue of 1 or higher, while disregarding those with an eigenvalue below 1 (Kim and Mueller, 1978, as 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

According to Hair et al (2010), a discrepancy exists between the actual and predicted values of a dependent variable, leading to random errors during sample data predictions 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 regression model A higher R² value indicates a stronger explanatory capability of the regression equation (Hair et al., 2010).

Data Analysis and results

General Information

The questionnaire began by collecting general information from respondents, revealing that the majority of their companies conduct transactions primarily with commercial joint stock banks (see Table 4.1).

Companies tend to have a transaction with more than 1 banks and the majority of respondents working in Commerce and Service

Table 4.1: General information about the respondents

The bank that your company have the transaction most belong to:

State-owned commercial bank Commercial joint-stock bank Foreign bank

The sector that your company works in:

Agriculture, rural Industry and Construction Commerce and Service

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 each construct exceed the alpha values if items were deleted The constructs of perceived quality, customer trust, switching cost, customer satisfaction, and customer commitment demonstrate 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 Mean if Item Deleted

Scale Variance if Item Deleted

Cronbach's Alpha if Item Deleted

A Principal Component Analysis was conducted on all 23 variables using the varimax rotation method, resulting in the extraction of six components that account for a total variance of 62.546% The analysis confirms the suitability of the extracted factors, with no cross-construct issues and each factor exceeding a value of 0.5, as detailed in Table 4.3 (see Appendix 2).

Consequently, the EFA results indicate well convergent and discriminate validity

The results from the Exploratory Factor Analysis (EFA) and Cronbach’s alpha confirmed that the measurement scale is both valid and reliable Subsequently, multiple regression analysis was employed to test the hypotheses The variables identified as factors in the model were 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

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

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 indicate that the independent variable significantly predicts the dependent variable, with an adjusted R Square of 0.252 and a p-value of 0.000 This suggests that the customer's perceived quality explains 25.2 percent of the variance in customer satisfaction (refer to Appendix 3).

The standardized coefficient Beta for customer perceived quality was 0.507, with a significance value of 000, indicating a strong positive relationship between perceived quality and customer satisfaction Therefore, the hypothesis H1, which states that customer perceived quality positively influences customer satisfaction, is supported.

4.3.2 Testing customer commitment sub-model

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

Among them, customer satisfaction has the higher beta coefficient with the value of 0.342 which reflects that it has more contribution to customer commitment (see Appendix 4)

The standardized coefficient Beta for customer satisfaction was found to be 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 positively influences customer commitment, is supported.

The standardized coefficient Beta for customer trust was 0.273, with a significance value of 000, indicating a strong positive relationship between customer trust and customer commitment Therefore, the hypothesis H4, stating that "Customer trust has a positive relationship with Customer commitment," is supported.

4.3.3 Testing customer loyalty sub-model

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 000, indicating that the independent variables significantly predict the dependent variable Specifically, customer satisfaction, switching cost, and customer commitment explain 20.8% of the variance in customer loyalty Notably, customer satisfaction exhibits the highest standardized beta coefficient of 0.246, highlighting its substantial contribution to enhancing customer loyalty.

The standardized coefficient Beta for customer satisfaction is 0.246, with a significance value of 003, indicating a statistically significant positive relationship between customer satisfaction and customer loyalty.

Thus, the hypothesis H2b: “Customer satisfaction has positive relationship with Customer loyalty” was supported

The standardized coefficient Beta for switching cost was 0.176, with a significance value of 0.028, indicating a statistically significant positive relationship between switching cost and customer loyalty Therefore, the hypothesis H3, which posits that switching cost has a positive relationship with customer loyalty, is supported.

The standardized coefficient Beta for customer commitment is 0.208, with a significance value of 015, indicating a statistically significant positive relationship between customer commitment and customer loyalty.

Thus, the hypothesis H5: “Customer commitment has positive relationship with 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 below.

Conclusions and Implications

Conclusions

This research aims to explore the attitudinal loyalty of enterprise customers in small chartered commercial banks by reviewing existing literature and identifying the key antecedents of customer loyalty The primary focus is to investigate the relationship between these factors and customer loyalty, addressing the question: "How do these elements influence customer loyalty?"

The study identifies 23 key variables that significantly influence customer loyalty, including perceived quality, customer satisfaction, switching costs, customer commitment, and customer trust The findings highlight the critical factors that contribute to building and maintaining customer loyalty in today's competitive market.

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 For managers aiming to enhance customer loyalty among enterprises, prioritizing customer satisfaction is essential.

Implications

This study highlights the significant impact of customer satisfaction, switching costs, and customer commitment on re-purchase intentions and emotional attachments to banks, ultimately fostering loyalty within the banking industry These insights offer four key implications for managers to enhance customer retention strategies.

In the Vietnamese banking industry, switching costs have minimal impact on customer loyalty, as businesses can easily switch banks unless they have poor payment histories or lack viable business plans Commercial banks are eager to acquire good debts from competitors, driven by official regulations and an abundance of deposits that compel them to offer more loans The market is currently saturated with promotional programs, leading smaller chartered banks to compete aggressively with state-owned banks on short-term loan interest rates This strategy targets enterprises that require short-term financing for their business activities, prompting smaller banks to not only retain their existing customers but also actively pursue high-quality clients from their competitors.

Customer satisfaction is crucial for fostering loyalty, particularly among small chartered commercial banks Despite facing competition from larger banks with greater capital and political connections, these smaller institutions can enhance their success by focusing on improving customer satisfaction.

Customer satisfaction is closely linked to the perceived quality of services, making it essential for small chartered commercial banks to retain their existing clientele To achieve this, banks should prioritize intangible factors, ensuring that customer complaints are handled with the utmost urgency Additionally, it is crucial for customer service representatives to possess in-depth knowledge to effectively assist clients.

Finally, the last component affects the customer loyalty is the customer commitment

Building customer trust is essential for enhancing customer commitment Managers should prioritize maintaining this trust by ensuring that advertised services are consistently available across all bank branches Additionally, it is crucial for managers to streamline operations to minimize customer wait times and improve overall efficiency, ensuring a positive experience for all clients.

Limitations

This research has several limitations, primarily focusing on enterprises in Ho Chi Minh City and utilizing a convenient sampling method for data collection While the study targeted enterprise customers from commercial banks with chartered capital under 5,000 billion dong, it may not accurately represent the broader banking issues, as many enterprise customers use multiple banks, and smaller banks may not serve as their primary financial institutions Additionally, the exclusion of individual customers means that opinions from all segments of the retail banking market were not considered, limiting the generalizability of the findings A broader study encompassing additional provinces and individual customers could enhance the research's applicability Furthermore, the study identified six factors through exploratory factor analysis (EFA), but these factors accounted for only 62.54% of the total variance.

Therefore, there may be some other factors influencing on the customer loyalty that can be involved in the further future researches

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APPENDIX 1: BẢNG CÂU HỎI KHẢO SÁT

Xin chào, tôi là Vũ Thanh Hoàn, hiện đang theo học chương trình cao học tại Viện Đào Tạo Quốc Tế (ISB) thuộc Trường Đại Học Kinh Tế Thành phố Hồ Chí Minh.

Hiện nay, tôi đang tiến hành nghiên cứu về các yếu tố ảnh hưởng đến lòng trung thành của khách hàng, đặc biệt trong bối cảnh các ngân hàng thương mại cổ phần có vốn điều lệ nhỏ Nghiên cứu này nhằm xác định những nhân tố quyết định sự trung thành của khách hàng đối với các ngân hàng này, từ đó đưa ra các giải pháp cải thiện dịch vụ và tăng cường sự gắn bó của khách hàng.

Chúng tôi rất mong anh/chị dành thời gian tham gia 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 vào 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 đã quảng cáo và hoàn toàn minh bạch.

Khi công ty sử dụng dịch vụ của ngân hàng, bạn có thể yên tâm vì ngân hàng sẽ không lừa dối và luôn bảo vệ lợi ích của công ty Sự tin tưởng vào ngân hàng giúp đảm bảo an toàn tài chính cho 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 utilizes the products and services of a trusted bank, you gain a sense of security, knowing that the bank is committed to supporting your business and maintaining integrity in all transactions.

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 ANALYSIS (EFA)

Initial Eigenvalues Extraction Sums of Squared

Extraction Method: Principal Component Analysis

Rotation Method: Varimax with Kaiser Normalization a Rotation converged in 7 iterations

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

APPENDIX 4: MULTIPLE LINEAR REGRESSION RESULTS (CMT)

1 486 a 236 226 49971 a Predictors: (Constant), T, S b Dependent Variable: CMT

Total 48.059 149 a Dependent Variable: CMT b Predictors: (Constant), T, S

APPENDIX 5: MULTIPLE LINEAR REGRESSION RESULTS (CL)

1 473 a 224 208 44576 a Predictors: (Constant), CMT, SW, S b Dependent Variable: CL

Total 37.384 149 a Dependent Variable: CL b Predictors: (Constant), CMT, SW, S

Standar dized Coeffici ents t Sig Correlations Collinearity

Results of Exploratory factor analysis