FACTORS AFFECTING CUSTOMER LOYALTYIN THE VIETNAMESE TELECOMMUNICATION MARKET

ACKNOWLEDGEMENT I would like to show my great gratitude to following people who made this thesis possible. I consider it an honor to work with Dr Nguyen Thi Nguyet Que whose encouragement, guidance and support from the initial to the final level enabled me to develop an understanding of the subject. It is a pleasure to thank my colleagues who brought sincere help during the completion of the study. I owe my deepest gratitude to my family and friends who inspired me my final effort to accomplish this dissertation. PLAGIARISM STATEMENTS I would like to declare that, apart from the acknowledged references, this thesis either does not use language, ideas, or other original material from anyone; or has not been previously submitted to any other educational and research programs or institutions. I fully understand that any writings in this thesis contradicted to the above statement will automatically lead to the rejection from the MBA program at International School of Business University of Economics, HCMC COPYRIGHT STATEMENT This copy of the thesis has been supplied on condition that anyone who consults it is understood to recognize that its copyright rests with its author and that no quotation from the thesis and no information derived from it may be published without the author’s prior consent. © Luong Dang Khoa / ISB-MBUS/2010-2012 ABSTRACT Purpose: This study shows us factors that contribute to customer loyalty from customers of Telecommunication service organizations in Viet Nam beside factors in original ACSI/ECSI model as: image, expectation, perceived value, satisfaction, complaint….Moreover author also considers the direct relationship between perceived service quality and customer loyalty instead of through customer satisfaction as the original ACSI and ECSI Finding: This study finds out that beside factors in original ACSI-ECSI models, service customization and communication also have positive affection to customer loyalty. Beside that a direct and significant relationship between Perceived Service Quality and Customer loyalty is also recognized. Design: This research has based on ACSI/ECSI model and ECSI extended models to measure Perceived Service Quality, Customization, Communication and Customer loyalty. 200 questionnaires will be issued to collect data. Limitations and implication: this study has its limitations in terms its scope which focused only Telecommunication organizations in Viet Nam. Beside that many factors that can affect customer loyalty such as: switching cost, economic cost, transaction cost, call center, in-different services, price perception and inertia…. are not mentioned in this study. For business owner or directors of organizations, this study can help how to create Customer loyalty in their organizations. This study is also helpful for researchers to extend its scope to other business field and other geographic areas outside VietNam. Keywords: Customer loyalty, Perceived Service Quality, Service Customization, Communication Table of Contents ABSTRACT 4 Table of Contents 5 Chapter 1: INRODUCTION 1 1.1Research background 1 1.2Research objectives 3 1.3Scope of this research 3 1.4Research method 4 1.5Research structure 4 Chapter 2: LITERATURE REVIEW 6 2.1Introduction 6 2.2Literature review 6 2.2.1Customer loyalty 6 2.2.2Perceived service quality 7 2.2.3Service customization 9 2.2.4Communication 11 2.3Model and Hypotheses 12 2.4 Summary 12 Chapter 3: RESEARCH METHODOLOGY 13 3.1Introduction: 13 3.2Research process 13 3.3Operationalization of measurement scales 14 3.4Questionnaire Design 16 3.5Pilot study 17 3.6Main survey 22 3.6.1Target population 22 3.6.2Sample size 22 3.6.3Sampling method 23 3.6.4Questionnaire administration 23 3.7Methodology of data analysis 24 3.8Summary 24 Chapter 4: DATA ANALYSIS 25 4.1Introduction 25 4.2Data cleaning 25 4.3Sample description 26 4.4Reliability test 27 4.4.1Customization 27 4.4.2Perceived Service quality: 28 4.4.3Communication 29 4.4.4Customer loyalty 31 4.5Factor analysis 32 4.6Correlation and Regression 38 4.6.1Correlation 38 4.6.2Regression assumption testing 39 4.6.3Regression analysis 39 4.7Summary 43 Chapter 5: CONCLUSIONS AND IMPLICATIONS 45 5.1Introduction 45 5.2Findings and contributions 45 5.3Limitations and recommendations for future research 47 LIST OF TABLES Table 1: List of indicators Table 2: Results of Cronbach’s alpha for dimension Customization (pilot test): Table 3: Results of Cronbach’s alpha for dimension Perceived Service Quality (pilot test): Table 4: Results of Cronbach’s alpha for dimension Communication (pilot test): Table 5: Results of Cronbach’s alpha for dimension Loyalty (pilot test): Table 6: Characteristics Of Respondents Table 7: Results of Cronbach’s alpha for dimension Customization (main survey): Table 8: Results of Cronbach’s alpha for dimension Perceived Service Quality (main survey): : Table 9: Results of Cronbach’s alpha for dimension Communication (main survey): Table 10: Results of Cronbach’s alpha for dimension Customer loyalty (main survey): Table 11: Results of EFA testing (1 st ) Table 12: Results of EFA testing (2 nd ) Table 13: New Factors Table 14: Results of Cronbach’s alpha for new dimension Communication: Table 15: Results of Cronbach’s alpha for new dimension LOYALTY: Table 16: Model summary (MLR) Table 17: Coefficients (MLR) Table 18: Model Summary (SLR) Table 19: Coefficient (SLR) Table 20: The confirmation of hypothesis 1 Chapter 1: INRODUCTION 1.1 Research background As many researchers have conducted, customer loyalty is one of the most important thing in business nowadays, and that it is more profitable to retain customers than to acquire new ones (John, Katherine & Libai, 2003; Liz Lee- Kelley, Gilbert & Mannicom, 2003), so how to retain customers is one of the key of success of organizations, and especially in telecommunication business in Viet Nam where the market almost nearly saturated (P.V, 2012) so customer loyalty is becoming competitive advantages for organizations to compete, develop and survive on this market. On over the world many models are used to measure customer loyalty such as: Servqual, Servperf, ACSI, ECSI… Telecommunication market in VietNam is now ready for matured with 3 biggest suppliers: Viettel, MobilePhone, Vinaphone that got more than 95% market share (P.V., 2012) and other smaller suppliers: S-Phone, VietNam Mobile, Beeline (now is called G-mobile). Telecommunication market is now becoming the game play of big 3 Viettel, Mobifone and Vinaphone. There are few differences in Vietnamese telecommunication market between now and 3-5 years ago. In the past how to attract new customers is the most important thing to service providers, service providers are always try to attract new customers as much as possible, but at this time this strategy is not the most important one, and in long-term how to retain customers is much more important than attracting new customers. So beside of attracting new customers, how to make customers retain to service providers are considered carefully and become the critical factors for service providers to survive and develop in this market, so research on customer loyalty and its antecedents such as perceived service quality and other factors can be a very importance for service providers (Santouridis & Trivellas, 2010, p.332). Few researchers have also researched for customer satisfaction and perceived service quality in VietNamese Telecommunication market and most of them based on 2 original models such as: Servqual (Parasuraman, Zeithaml & Berry, 1988), Servperf (Cronin & Taylor, 1992&1994), and non of them explain directly customer loyalty. On the world there are many models can explain directly customer loyalty such as ACSI (American Customer Satisfaction Index)/ ECSI (European Customer Satisfaction Index) and they are adapted by telecommunication industry in many countries. The ACSI/ECSI model is considered well-established tool (Gronholdt, Kristensen, & Martensen, 2000; Cassel & Jan, 2001; Vilares &Pedro, 2003), many researchers on the world are based on ACSI/ECSI to measure customer satisfaction and customer loyalty, and ACSI/ECSI is really an effective instrument to measure them. This tool is adapted by American and almost European countries and in many industries (insurance, telecommunication phones, fixed phones, carbonated soft drinks, public transportation, retail banking, cable TV, supermarkets, postal services, food products, and public service) Pedro, Jörg Henseler (2012). Moreover it is also adapted by many countries and many industries in Asia such as Iran (Kaveh, Seyed & Ghaedi,2012), Singapore (Yew-Wing & Bellman,2008), Korea –KCSI (Chun-Seon, Soung-Hie, & Joon-Young,2006). ACSI/ECSI indeed is an effective tool but nowadays there are much more factors than the original model can affect customer loyalty. These factors exist in many researches such as service customization (Pedro, Jörg Henseler,2012) and communication (Ball, Pedro & Machas,2003). These factors have a significant affect to customer loyalty in many industries on over the world. This research focuses on customer loyalty of telecommunication service business in Viet Nam, and is also based on ACSI (American Customer Satisfaction Index)/ ECSI (European Customer Satisfaction Index) model and partly from modified or extension ECSI model from Pedro & Jörg Henseler (2012) and Ball, Pedro & Machas (2012). In Viet Nam where businesses are still affected by relationship and empathy, these new factors (service customization and communication) can [...]... Research introducing will give the overview information of the research Chapter 2: Literature review and hypotheses: Literature review will review the theoretical of customer loyalty, service customization, communication and perceived service quality and review the theoretical relationship between them Moreover this chapter will show information about the model and hypothesis will be tested in this... impact on customer loyalty so they should be checked empirically in Vietnamese telecommunication market and managers of these telecommunication organizations can use this result as a reference for strategies to increase customer loyalty More than that in Viet Nam where perceived service quality from telecommunication organizations is still a problem and perceived service quality is one of the most important... years Caruana (2002) Customer loyalty can be described as repurchasing service, cognition about service and attitude about service, that mean customers will repurchase services from providers if they need their services, moreover with attitude about services, they will use “word of mouth” to recommend these services to other customers, and with cognition about these services, customers will have a... experience of these customers One another definition about customer loyalty is the intentions of customers re-use services from their current service provider based on past experiences in using services and their expectations about future services Lee & Cunningham (2001, p.116) 7 2.2.2 Perceived service quality According to ACSI, ECSI model, perceived service quality is the evaluation between served market. .. research This research focuses on customers that are using telecommunication services in Viet Nam, respondents are customers who are using telecommunication service providers from operators such as: Mobifone, Vinaphone, Viettel 4 1.4 Research method The sampling procedure used by the author was convenience sampling through survey, the participants restrict to those who used the telecommunication services... research are: - Identify the impact of newly developed factors that did not exist in original ACSI/ECSI model such as : service customization and communication on customer loyalty - Identify the directly impact of perceived service quality on customer loyalty based on ACSI/ECSI model - To recommend strategies for VietNamese telecommunication organizations in increasing their customer loyalty 1.3 Scope... ECSI model, there is no relationship between perceived service quality and customer loyalty, this exists a mediator role of customer satisfaction But In this study, after checking with many customers about perceived service quality and customer satisfaction in VietNamese Telecommunication context, author realized that there are some confuses in meaning between perceived service quality and customer satisfaction... competitive advantage” The core idea of differentiation is to identify profitable market segments and to design products and services to optimally satisfy the needs of the target segments and as a more extreme form of differentiation, the concept of customization –that means the degree to which the firm’s offering is tailored to meet heterogeneous customers’ needs (Eugene, Fornell & Roland, 1997) The goals of... to relationship (Pedro & Jörg Henseler 2012, p.335) Customers have to invest their effort to explain what their needs and requirements, suppliers will put their effort to examine these needs and requirements to satisfy their customers There is existence a renunciation of economic scale in customization (Pedro & Jörg Henseler 2012, p.335) Moreover in the essence, when an attractiveness of current offers... according to customers perception and one is belong to service featured like: after sale services, guarantees, documentation, … sometimes these 2 parts are called “hardware quality” and “software” quality (Marie-Paule, Anne de la Foye, Carole & Michel,2000, p.362) Another definition , perceived service quality is the result from the comparison of customers between perception about the services they have . p.362) Another definition , perceived service quality is the result from the comparison of customers between perception about the services they have used and their expectations of customer about these. p.335). Customers have to invest their effort to explain what their needs and requirements, suppliers will put their effort to examine these needs and requirements to satisfy their customers. There. empathy, these new factors (service customization and communication) can 3 have a significant impact on customer loyalty so they should be checked empirically in Vietnamese telecommunication market