Determinants of customer satisfaction in retail banking sector Luận văn thạc sĩ

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS- HOCHIMINH CITY NGUYN TH PHNG KHÁNH MASTER’S THESIS In Finance- Banking Ology Code: 60.31.12 Supervisor Associate Professor. Ph.D. NGUYN MINH KIU Ho Chi Minh City -2010 TABLE OF CONTENT LIST OF FIGURES i LIST OF TABLES ii LIST OF ABBREVIATION iii ABSTRACT iv CHAPTER 1 : INTRODUCTION 1 1.1 Rational of the study 1 1.2 Statement of the problem 2 1.3 Research Objective 3 1.4 Research question 3 1.5 Scope and limit of the research 3 1.6 Research methodology 4 1.7 The structure of the research 4 CHAPTER 2 : LITERATURE REVIEW 6 2.1 Vietnam retail banking sector 6 2.2 Customer satisfaction 9 2.2.1 Expectation of customer 9 2.2.2 Definition of customer satisfaction 9 2.2.3 The importance and benefits of customer satisfaction 10 2.3 Customer Service quality 11 2.3.1 Customer service 11 2.3.2 Service characteristics 12 2.3.3 Service quality definition 12 2.3.4 Gap model of service quality 13 2.3.5 Measuring service quality 14 2.4 Customer satisfaction and service quality in banking sector 16 2.4.1 Customer satisfaction in banking sector 16 2.4.2 Service quality dimensions in banking sector 16 CHAPTER 3 : RESEARCH DESIGN 20 3.1 Research model 20 3.1.1 Proposal of research model 20 3.1.2 Initial hypotheses 20 3.2 Research design 22 3.2.1 Research purpose 22 3.2.2 Research approach 22 3.2.3 Research process 23 3.3 Official research 24 3.3.1 Measurement scale 24 3.3.2 The questionaire design 26 3.3.3 Research sample 26 3.3.4 Sampling 27 3.3.5 Size of sample 27 CHAPTER 4 : DATA ANALYSIS AND FINDINGS 28 4.1 Sample Characteristics 28 4.2 Statistical Results 30 4.2.1 Variables for measuring service quality 30 4.2.2 Variables for customer satisfaction 31 4.3 Data Analysis 32 4.3.1 Reliability evaluation through Cronbach’s Alpha 32 4.3.2 Evaluation the measurement scale by using Exploratory Factor Analysis 34 4.3.2.1 Some rules in EFA test 34 4.3.2.2 EFA for service quality 34 4.3.2.3 EFA for customer satisfaction 38 4.3.3 The adjusted research model 38 4.3.4 Modeling Testing 39 4.3.4.1 Correlation coefficient analysis 39 4.3.4.2 Regression Analysis 40 CHAPTER 5 : CONCLUSIONS AND RECOMMENDATIONS 44 5.1 Conclusions 44 5.2 Recommendations 45 5.3 Research limitation 47 REFERENCE 48 APPENDIX 51 APPENDIX 1: Interview Customers 51 APPENDIX 1: Questionaire 52 APPENDIX 2: Vietnamese questionaire 56 APPENDIX 3: Cronbach's alpha analysis result 60 APPENDIX 4: Factor analysis result 62 i LIST OF FIGURES Figure 2.1 : The Benefits of customer satisfaction 11 Figure 2.2 : Model of service quality gaps (Parasuraman at el., 1985) 14 Figure 3.1 : Suggested research model 20 Figure 3.2 : Research process 23 Figure 4.1 : Adjusted research model 38 ii LIST OF TABLES Table 2.1 : Quantity of banks from 1991 to 2009 6 Table 2.2 : Six dimensions of service quality 19 Table 3.1 : Summary of service quality factors and measurement scale 24 Table 3.2 : Overall customer satisfaction and measurement scale 26 Table 4.1 : Sample characteristics 29 Table 4.2 : Descriptive statistics of service quality measurement 30 Table 4.3 : Descriptive statistics of customer satisfaction measurement 31 Table 4.4 : Reliability test of service quality and customer satisfaction 33 Table 4.5 : First EFA analysis result of service quality 35 Table 4.6 : Final EFA analysis result of service quality 37 Table 4.7 : Final EFA analysis result of customer satisfaction 38 Table 4.8 : Pearson correlation matrix 40 Table 4.9 : Model Summary b 41 Table 4.10 : ANOVA b 41 Table 4.11 : Coefficients a 42 1 CHAPTER 1 : INTRODUCTION 1.1 Rational of the study Financial institutions, particularly banking plays an important role in economic development of almost countries in the world and Vietnam is not an exception. Vietnam banking industry has gained a significant growth in recent years a long with the socioeconomic development. Many banks have been established or extended their range of activity by setting branches in nationwide and offered new services toward customer’s need. Retail banking in Vietnam is one of the sectors getting more attractive from domestic banks or even foreign banks with the potential market has not been exploited full enough so far. A lot of people among 86 million Vietnamese people have demands for retail banking services which are going up following the increasing income and the growth of the country in recent years especially after Vietnam became a member of WTO. This is the chance as well as the challenge period for bankers in Vietnam to attract the new customers and retain the existing one. The more customers banks have, the more profits they get. Satisfying customers is the priority target in order to get the success of a firm. Customer satisfaction is one of the key factors in today’s highly competitive business world and is the most important factor for bankers to keep their current customers as well as appeal the new one. In addition, retail banking industry is facing a stressful competition among domestic banks and foreign banks as the globalization and world integration. Therefore, banks should pay more attention to customer satisfaction to survive and grow. 2 1.2 Statement of the problem Domestic banks have recognized the important to develop retail banking services for some time now. They have invested in core banking software, applied new technology, established more branches, provided new services to get more customers. In modern competitive environment, however, the increasing of distribution channels set up from all banks, the products in this market are slightly different and the new services provided are matched very quickly by competitors make banks in difficulty to create the differentiation. Customer satisfaction is one of the main tools for banks to make and get competitive advantage. In general, when customer is satisfied with provided services, the probability to use this service again is increased and will lead to the positive advertising through mouth advertising from this customer to others. And vice versa, the unsatisfied customer usually switches to use another brand and give out the negative mouth advertising. There are many factors impact on customer satisfaction. Customer satisfaction is influenced by main factors such as price, product quality, service quality, personal factor, situational factor, diversification and the unique of products. According to Lewis (1993), service quality is one of the effective means in building a competitive position in service industry. Service quality is an imperative element impact on customer satisfaction in banking industry. Thus, bank management tends to differentiate their products from competitors through service quality. This study examines determinants on customer satisfaction with focus on service quality dimensions of retail banking services in Vietnam commercial banks in Ho Chi Minh City where is the center of developing economy, society and education in South Vietnam with a large number of population, almost banks and their branches. 3 1.3 Research Objective The aims of this study as following: - To identify main factors of customer’s perception on customer service quality in Vietnam retail banking sector. - To measure the effects of these key factors on the overall customer satisfaction in Vietnam retail banking sector. - To recommend some solutions to increase customer satisfaction. 1.4 Research question The study is set to answer following questions: - What are the key factors of customer’s perception on service quality of retail banking services in Vietnam commercial banks? - How can these factors influence on customer satisfaction? - What the recommendations should be needed to improve customer satisfaction in Vietnam commercial banks? 1.5 Scope and limit of the research Due to the limited time, this research is conducted to the individual customers who are now living in Ho Chi Minh City and using retail banking services of seven Vietnam commercial banks in Ho Chi Minh City only. The conclusions will be derived from this research are limited to Vietnam commercial banks and will be based on the information of this result. 4 1.6 Research methodology Secondary data Data was collected from annual Vietnam commercial banks reports, from internet, involved books and previous related research. Primary data Qualitative research: This step is researching by in-depth interviews with customers in order to discover and adjust the service quality dimensions. Thirty (30) customers are using retail banking services at commercial banks were interviewed directly through questions relating to which factors influence on their satisfaction when they use retail banking services at banks and which factors made them feel dissatisfaction. Almost their opinions concentrate on factors including: tangibles, service quality (showing through employee’s attitude, employee’s willing to help customers), reliability (showing through employee’s ability to serve customers, provide exactly information and services as set time), empathy, technology, waiting time, interest rate and transaction cost. The result of this research is used for designing the questionnaire used for official study. Quantitative research: This step is researching by delivering questionnaire to individual customers of seven commercial banks in Ho Chi Minh City directly, via email and internet. The collected data is used for analyzing the level of customer satisfaction through statistical software SPSS version 16.0. 1.7 The structure of the research This research includes five chapters: Chapter 1: Introduction This introduction gives an overall view of the research includes the rational of the research, statement of the problem, research objectives, research questions, scope and limit of the research and research methodology. 5 Chapter 2: Literature review This chapter gives a brief introduction about Vietnam retail banking industry and general view of theories related to customer satisfaction, five gaps of service quality, service quality and some results of previous studies about dimensions of service quality in banking sector. Chapter 3: Research Design This chapter develops the research model and hypotheses. In addition to, we focus on research process and methodology for data analysis. Chapter 4: Data analysis and findings This chapter illustrates the process of data analysis and shows the result of this research from that we can explore the result and discussion. Chapter 5: Conclusions and recommendations This chapter summarizes the most important findings, provides recommendations on how to improve customer satisfaction on retail banking services of Vietnam commercial banks. Lastly, we show the limit of this research and suggest for the further research. [...]... inland investors as well as international financial institutions, in which retail banking sector is considered as promising land appeals all bankers According to Wikipedia, retail banking refers to banking in which banking institutions execute transactions directly with consumers rather than corporations or other banks Retail banking is usually made available by commercial banks who are financial institutions... exchange rate, interest rate,… In the open economy, retail banking services play an important role in bringing stable source of revenue, enhancing competitive capacity, reducing risk and expanding market share to commercial banks In the economic aspect, retail banking sector still bring benefits in reducing transaction cost; changing to non-cash using economy; boosting business activities and enhancing people’s... because of the difficulty in distinguishing services offered among bankers and the promptness in matching a new offering by competitors Rust and Zahorik (1993) applied a mathematical framework enables manager to determine the greatest influencing factor to customer satisfaction in banking industry Athanassopoulos (2000) conducted a complete survey on customer satisfaction in retail banking in Greece... satisfaction is an outstanding research topic of different areas and banking industry is not an exception Banking is one of numerous services in which customer satisfaction has had an ever-increasing importance as they are becoming more and more competitive Retail banking sector are especially pursuing this strategy toward increasing customer satisfaction and loyalty through improving service quality It... finding out the main factors of service quality impact on customer satisfaction then validates the proposed model in retail banking sector in Vietnam commercial banks locate in Ho Chi Minh City area The six determinants of service quality in the suggested model which are mentioned in the literature review are overall customer satisfaction They are then evaluated the effects themselves to customer satisfaction. .. presentation of branch staff that will project a professional image to customers 17 - Credibility: maintaining customer trust to bank staff by rectifying mistakes and keeping customer informed - Communication: fulfilling customers’ needs by successfully communicating financial advice and serving notices timely - Access to Teller services: the adequacy of number of branch staff serving customers throughout business... Dependability in handling customers’ service problem Reliability Performing service right first time Providing service at the promised time Maintaining error-free records Keeping customer informed as to when services will be performed Responsiveness Prompt service to customers Willingness to help customers Readiness to respond to customers’ requests Employees who instill confidence in customers Making customers... Responsiveness: Willingness to help and respond to customer needs - Assurance: knowledge and courtesy of employees and their ability to convey the trust and confidence the firm provides to its customers 15 - Empathy: Caring, individualized attention the firm provides its customers 2.4 Customer satisfaction and service quality in banking sector 2.4.1 Customer satisfaction in banking sector Customer satisfaction. .. primarily toward individual consumers through a wide range of personal banking services include: deposit accounts in the form of savings and checking accounts and certificates of deposit of varying maturities; loans in the form of mortgages as well as personal loans; debit cards, credit cards and so forth Today much of retail banking is streamlined electronically via Automated Teller 6 Machines (ATMs);... through virtual retail banking known as internet banking which allows customers to do financial transactions via internet, home banking allows customers do almost transferring transactions (money transfer, funds transfer, bill payment, …) at any where without coming to the bank, and phone banking allows customers do transactions every where at any time through telephone such as checking account information, . quality 14 2.4 Customer satisfaction and service quality in banking sector 16 2.4.1 Customer satisfaction in banking sector 16 2.4.2 Service quality dimensions in banking sector 16 CHAPTER. Vietnam retail banking sector 6 2.2 Customer satisfaction 9 2.2.1 Expectation of customer 9 2.2.2 Definition of customer satisfaction 9 2.2.3 The importance and benefits of customer satisfaction. benefits of customer satisfaction In the beginning of the 1960s, customers have been considered as a focal point of all marketing activities when marketing shifted to customer orientation instead of