Antecedents of brand loyality in Vietnam banking sector.The case of Vietnam credit card users

TRNG I HC M 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 15 th , 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-always- hurrying 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. 1 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 1.1 Background 1 1.2 Problem Statement 3 1.3 Research Objectives 4 1.4 Scope of the Study 5 1.5 Research Methodology 5 CHAPTER 2: LITERATURE REVIEW 6 2.1 Introduction 6 2.2 Brand Loyalty and its benefit 6 2.2.1 Brand loyalty 6 2.2.2 Brand loyalty benefit 7 2.3 Customer Segmentation on Loyalty 8 2.4 Factors affecting Brand Loyalty 9 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 9 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 1 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-high- fees.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, 2 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 do 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 do 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 [...]... purchase and physical shopping through POS during the past six months Three of them had used their credit card in overseas The focus group discussion was conducted in Ho Chi Minh City in September, 2012 24 3.3.1 Preliminary scales The building scale for the concepts in research model of antecedents of brand loyalty in Vietnam banking sector: The case of Vietnam credit card users is adopted and adjusted... direction in promoting their customer loyalty programs This research attempts to examine antecedents of brand loyalty for credit card users in Vietnam banking sector This study aim to answer for below questions: Question 1: What are factors affecting loyalty of credit card user? Question 2: How are factors affecting loyalty importance? Question 3: How to increase credit card holder loyalty in perspective of. .. (2012) Credibility loyalty in banking industry Switching Barrier - The effect of switching Fredy-Roberto Valen-zuela Value congruency barriers types on customer (2012) loyalty in banking industry 27 Switching barrier- The effect of switching Fredy-Roberto Valen-zuela Switching Costs barriers types on customer (2012) loyalty in banking industry Switching barrier- The effect of switching Fredy-Roberto Valen-zuela... credit Nguyen Thi Tuyet Phuong card usage (2012) The effect of switching Anber Abraheem Shlash barriers types on customer Brand trust Key determinants to credit card usage Privacy risk (2012) card usage Time risk Nguyen Thi Tuyet Phuong card usage Performance risk Key determinants to credit Mohammad (2012) loyalty in banking industry Switching Barrier- The effect of switching Fredy-Roberto Valen-zuela... switching barriers? 1.4 Scope of the Study By reviewing recent researches to point out findings of antecedent of loyalty and banking loyalty and discussion with experts to find the suitable factor for Vietnam market Due to resources constraints, the author narrow down to the most influence factor to the proposed research model 1.5 Research Methodology This research just focuses on card users who are living...3 dollars in the first quarter of the year and 1.5 million dollars in the second quarter, which is 3-5 times higher than the same period of the last year and the last quarters of 2010 The ratio of fraud cases on transaction value has also increased by 2-3 times (Saigon Times, 2011) The proportion of card criminals tends to increase Criminals illegally use credit card for online shopping, especially... part of spend value within a specific period from purchase time (Vietcombank) or lucky draw Banks compete together to expand their number of card holder They also target to person who are holding credit card of other banks 1.2 Problem Statement Vietnamese is known as low loyalty customer to brand Surveys by Taylor Nelson Sofres Vietnam in 1999 and 2004 reveal that, in 1999, 54 percent of 80 percent in. .. period of time by some decision-making unit with respect to one bank out of a set of banks, which was a psychological function Recent researches on loyalty in banking sector were listed in Table A.2 stated in Appendix A section, at the end of this writing In summary, previous studies suggested that bank loyalty is affected by factors described in Table 2 Frequency of each factor was listed in Table... such as invasion of privacy Featherman and Pavlow (2003) also stated that privacy risk may also be identified as a common concern that prevents the adoption of internet banking Furthermore, some researches on credit card fraud have been studies recently (Barker et al., 2008; Prabowo, 2011; Yu Feng, 2005) As discussion in Chapter 1, In Vietnam context, fraud in credit card is the high rate in the region,... on card users who are living in Vietnam Preliminary study is qualitative through group discussion in order to explore, adjust and supplement scale for factors affecting brand loyalty Official study is quantitative with sample size of: Number of variable x 5 6 CHAPTER 2: LITERATURE REVIEW 2.1 Introduction Chapter 1 pointed out the current Vietnam credit card situation and card holder loyalty problem . 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. 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 . 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