SERVICE QUALITY, PERCEIVED PRICE AND CUSTOMER SATISFACTION IN HIGHER EDUCATION A comparison between Public Universities and Non-public Universities in Vietnam

1 Page ABSTRACT This study empirically examines the effects of Perceived Tuition on University Service Quality and Student Satisfaction as well as the impact of University Service Quality on Student Satisfaction toward higher education service. The research also explores the moderating role of University Type variable on these relationships. Whereby, it provides a comparison of these impacts extent between two types of universities, Public universities and Non-public universities. Structural equation modeling was used to test these impacts, utilizing a sample of 612 students in two Public universities and two Non-public universities. The results indicate that both University Service Quality and Perceived Tuition play significant role in predicting Student Satisfaction. In addition, Perceived Tuition not only has a direct impact on Student Satisfaction, but also an indirect influence through University Service Quality. The findings of this research also provide evidence of the differences between Public sector and Non- public sector in the influence of Perceived Tuition on University Service Quality, Student Satisfaction, and University Service Quality on Student Satisfaction. Particularly, the effect of Perceived Tuition and University Service Quality on Student Satisfaction is much greater in Non-public universities compared to that in Public universities. Indeed, the current context of higher education in Vietnam reveals that Non-public universities setting a much higher tuition fee compared to Public- universities, but not have an assurance in service quality. Hence, an increase in University service quality or Perceived tuition leads to a higher increase in Student satisfaction extent in Non-public universities compared to Public sector. It implies that university managers have to pay attention to improve their service quality and consider the approach in pricing the service in other to satisfy their students. The students are persuaded by the fitness between service quality they receive and the tuition they have to pay for university compared to other similar tertiary institutions. The research findings also engage with some limitations in the strength of measurement scale, the sampling method as well as the fitness between the research model and data. It results in the valuable directions for further researches in future. 2 Page Chapter 1 INTRODUCTION 1.1. Higher education in Vietnam According to the Vietnamese Education Law in 2012, higher education covers undergraduate and postgraduate studies. Undergraduate studies can lead to diploma or bachelor degrees while postgraduate studies can lead to master degrees and doctorate degrees. In Vietnam higher education system, higher education institutions are structured including: Colleges can offer college programs and other lower level programs; Universities can offer college, undergraduate, master and doctorate programs as assigned by the Prime Minister; Research institutes can offer doctorate programs and in cooperating with universities can offer master programs subject to permission from the Prime Minister. In the tertiary education institutes system, Vietnam has two forms: public universities and colleges which are funded by the Government and non-public institutes which including semi- State, self-funded or private universities and colleges, regarding to Decision 9/2001/QD- BGD&DT of the Ministry of Education and Training dated 28 August, year 2001. There is a fundamental difference in managerial perspective of the Government between these two sectors. The public sector has to follow strictly the regulations of the Government in tuition policies and financial aspects, according to Decree 49/2010/ND-CP of the Government dated 14 May, year 2010, while the non-public sector has more self-control. Over the past 10 years, higher education in Vietnam has experienced many changes, consisting of expansion as well as establishment of new educational institutions with diversified types and improvement in quality (Kim D. Nguyen, Diane E. Oliver, Lynn E. Priddy, 2009). According to the statistics of Ministry of Education and Training, Vietnam have 386 universities and colleges in 2011 with 306 public institutes and 80 non-public universities and colleges. This number is increasing to 409 institutes at the beginning period of the year 2012 (Vietnam education system, 2012). Nevertheless, the opportunities for higher education in Vietnam are limited and the quality control is also an existing problem of the system (Nuffic Nesco Vietnam, 2009). The continuous increase in the number of not only public but also non-public universities and 3 Page colleges in Vietnam from 322 institutions in 2006 to 409 institutions in 2012, according to the statistics of Ministry of Education and Training from 1999 to 2012, is facing with many challenges in quality assurance. The reality shows that faculty qualifications are generally low and vary significantly across forms of tertiary education institutions (Nuffic Nesco Vietnam, 2009). The report No.760 of Ministry of Education and Training (2009) conceded that it is too difficult for the Ministry of Education and Training to control all the higher education institutions in whole country. Especially, in non-public sector, the managerial role of Ministry of Education and Training is very limited and not create effectiveness yet (Mai Lan, 2011). Although non-public tertiary education is one of the most significantly developing sector of the higher education system in 21 st century (Philip G. Altbach, 2002), the non-public higher education in Vietnam is in the crisis (Mai Lan, 2011). In an interview, the Vice Minister of Ministry of Education and Training - Bui Van Ga stated that non-public tertiary educators need to focus on improving the quality to create the prestige in society and attract more students (Vietnamese education, 2011). Quality in higher education is one of the aspects attracting more and more attentions of society and learners. There is a lack of uniform development in quality between public and non-public sectors in Vietnamese higher education system. In line with quality problems, other outstanding issue in higher education between public sector and non-public sector is the tuition - tuition is an amount of money which learners or learner„s families have to pay in order to ensure the expenditures for the educational operations – due to the non-public education institutions have more self-right to decide the level of tuition, regarding to Decree 49/2010/ND-CP of the Government dated 14 May, year 2010, tuition is taken into the dominant consideration of learners (Huy Lan, 2012). The Vice Minister of Ministry of Education and Training - Bui Van Ga required the non-public education organizations have to provide explicitly about their tuition rate to help the learners have right decision in registration and avoid later dissatisfaction. The students expect high service quality corresponding to tuition of the universities (Do Hop, 2012). The relationship between service quality in higher education and the price – tuition – which the students have to pay for service received needs to be considered adequately. 4 Page In the Fundamental and Comprehensive Renovation of Higher Education during 2006−2020 addressed in Resolution 14/2005/NQ-CP of the Government dated 2 November, year 2005, the objective emphasized in building and developing quality assurance system for higher education. However, Vietnamese educators and educational leaders are still confused about how to implement quality assurance and accreditation in the Vietnamese context (Kim D. Nguyen, Diane E. Oliver, Lynn E. Priddy, 2009). Associate with the growth of higher education in quality and quantity, students have more choices for their studying and using services. As the students pay for complete expenditure for their learning at tertiary institutes, they deserve the best education services to satisfy their requirements (N. Senthilkumar & A. Arulraj, 2010). Therefore, the education institutions are striving to attract customers by offering their best services and reasonable tuition rate. Given this situation, a study of relationships of service quality, price and customer satisfaction in higher education in Vietnam, especially, in the specific context of public sector and non-public sector, would be useful for practitioners and researchers. 1.2. Existing studies about Service quality, Perceived Price and Customer satisfaction in higher education The important role of service industries is increasing in line with the development of the economy in many countries (Pham Ngoc Thuy & Le Nguyen Hau, 2010). Service sector attracts more and more attentions of real business world and research fields. There is a variety of studies conducted to explore different service issues in order to support the real business activities as well as enrich the academic world. In which, the researches of service quality, and customer satisfaction have dominated the service theories (Cronin, Brady & Hult, 2000). The major attention is to identify the relationships among these concepts. Cronin and Taylor (1992) identified that service quality is an antecedent of customer satisfaction. Furthermore, the influence of service quality on customer satisfaction was more complicated because of the interaction between these concepts (Cronin et al., 2000). Moreover, customer satisfaction is not only influenced by service quality, but also the other aspects consisting product quality, price, situational factors, personal factors (Zeithaml et al., 2000, p. 107). Accordingly, price is a multidimensional concept, including objective price, perceived price, monetary and nonmonetary 5 Page service price (Zeithaml, 1988). A number of studies conducted popularly using perceived price, which is the perception of customer about what is sacrificed to obtain the service, instead of objective price due to the complex pricing environment of services (Chen et al, 1993). However, the price component has not been thoroughly investigated in previous empirical study (Bei & Chiao, 2001 as cited in David et al., 2007) especially in relationship with service quality and customer satisfaction. N. Senthilkumar and A. Arulraj (2010) stated that among the service sectors, higher education system has direct bearing on society for society and economic development. The higher education institutes paid more and more attention to service quality and customer satisfaction as tertiary education service industry moves to the era of commercialization (Brown & Clignet, 2000, as cited in Kathleen & Julie, 2001). In comparison with commercial sector, the research of service quality in higher education field is still new (Parves Sultan & Ho Yin Wong, 2010). Chua (2004) explored that most of quality models studied in the business world have been adapted and applied in the education sector. It may not have a single accurate definition of quality in higher education because this concept is complicated and multifaceted (Harvey & Green, 1993). It leads to the lack of best approach to define and measure service quality (Clewes, 2003). The majority of researches in last few decades concentrated on the dimensional approach of service quality (Parves Sultan & Ho Yin Wong, 2010). Parasuraman et al (1985, 1988) developed the measurement scale SERVQUAL based on the concept quality is the perception minus expectation. Cronin and Taylor (1992, 1994) explored the other instrument to measure service quality, namely, SERPERF – service performance – based on the perception component alone. Among these scales, SERVQUAL is mostly criticized and widely applied in many industries. (Ana Brochado & Rui Cunha Marques, 2009). However, SERVQUAL and SERPERF were designed as generic measures of service quality and applied in cross industries, not for any specific field. Although the use of these approaches have been tested with some degree of success in many industries, but it is important to require an instrument to fit the specific application situation, particularly, higher education (Firdaus, 2006). These problems led to the development of new measurement scale of service quality in higher education, namely, HEDPERF – Higher Education Performance, established by Firdaus in 2006. This instrument specifically designed for higher education sector using context-specific items in this industry. In 6 Page order to enhance the power of HEDPERF in measuring service quality in the context of tertiary education, Firdaus (2006) conducted a research to compare HEDPERF and SERPERF and the findings showed that HEDPERF was more reliable estimations, greater explanation, and consequently better fit than SERPERF. Nevertheless, existing studies about HEDPERF have just only conducted in several countries and just in one university scope, such as Malaysia (Firdaus, 2005, 2006) and Portugal (Ana Brochado & Rui Cunha Marques, 2009). This instrument needs to be applied in other countries and other tertiary institution (Firdaus, 2006). Measuring service quality and customer satisfaction in higher education context is one of the most considerations of tertiary educators. Although customer satisfaction in higher education is also not an easy task to attempt (Corneliu et al., 2010) and there is no generally measurement scale for customer satisfaction in higher education, the majority of recent studies consider service quality as an antecedent to customer satisfaction (Garcia, 2009). In Vietnam higher education context, despite service quality and customer satisfaction are the concepts attracting many researchers to investigate the relationships among them, very few studies pay attention to adapt the new instrument HEDPERF to identify and measure the dimensions of service quality affecting to customer satisfaction, almost resent findings focus on SERVQUAL or SERPERF as well as emphasize on particularly one tertiary institution, so that the generalization is limited. Base on aforementioned analysis about the current situation of higher education in Vietnam and existing findings about service quality, price and customer satisfaction in tertiary education area, in an attempt to explore the relationships among service quality, service price and customer satisfaction toward higher education services, this study employs the dimensions of service quality in higher education context through HEDPERF scale to explain the customer satisfaction and to compare these relationship between the two sectors: public and non-public higher education institutions. In addition, this research also puts perceived tuition as an independent variable about perceived monetary service price dimension affecting to service quality and customer satisfaction into the research model to test these relationships. All concepts will be explained and analyzed more detailed in the literature review section. 7 Page 1.3. Research objectives According to above discussion, this study is formulated to obtain following objectives: (1). To test the impact of university service quality on student satisfaction in higher education service (2). To test the impact of perceived tuition on student satisfaction in higher education service; (3). To test the impact of perceived tuition on university service quality in higher education service; (4). To explore the differences in above relationships of university service quality, perceived tuition and student satisfaction between two types of university (public universities and non-public universities). 1.4. Scope of the research The empirical setting in this particular research is the business higher education in the context of Ho Chi Minh City, Vietnam. Particularly, data collected from two public universities as well as two non-public universities in Ho Chi Minh City and put into analysis and comparison. The study employs the determinants of higher education service quality through the instrument scale HEDPERF and perceived price dimension – perceived tuition - to explain the impacts on customer satisfaction toward the tertiary education and ignore other antecedents of customer satisfaction. The last point needs to be mentioned is that the subject of study and observation is the under-graduate students only, not includes other customers or stakeholders of university. 1.5. Significance of the research According to the theoretical perspective, this study contributes to the application of the new measurement instrument HEDPERF into the context of higher education in Vietnam. It is a meaningful outcome for the researchers in this specific service industry as existing studies have focused on SERVQUAL and SERVPERF approaches repeatedly. Regard to the managerial implications, this finding will help higher education institutes understand obviously about the components of their service quality affecting to satisfaction of their customers as well as the link between perceived tuition and service quality, whereby they 8 Page can improve their performance to increase the level of satisfaction. In addition, the comparison between public sector and non-public sector aims to provide specific determinants to fit with each context. It brings more valuable practical implications. 1.6. Organization of the thesis This research is constructed in five parts. The first is the introduction of the study. The second is the literatures review and hypotheses. Following is the research method. The next part is the results and limitations of the findings. The conclusion comprises the final section of this research.  Chapter 1 – Introduction This chapter reflects the current situation of higher education in Vietnam, as well as discusses about the existing researches in relationships of service quality, perceived price and customer satisfaction in tertiary education. It leads to propose the research problem, research objectives and significance of this study also presented in this section.  Chapter 2 - Literatures review and hypotheses Chapter 2 presents the theoretical foundation of the research, including the definition of each concept, namely, service quality, perceived price, customer satisfaction in higher education context and their relationship in literature. From that, the hypotheses are derived and proposed for this research.  Chapter 3 - Research method Research method describes the way of establishment of the measures and conducting the survey. This part includes two steps, qualitative research to modify draft measurement scale and quantitative research design to test the hypotheses.  Chapter 4 – Research results Chapter 4 designed to present the findings of this research. The results are exhibited corresponding to each step of the data analysis. Accordingly, the research hypotheses are tested.  Chapter 5 – Discussions, Implications and Limitations The last chapter of this study discusses the research results by affirming the exploratory values as well as connecting to the realistic conditions to suggest the practical application. Lastly, the limitations are recognized to direct for further research in the future. 9 Page Chapter 2 LITERATURES REVIEW AND HYPOTHESES Abstract Chapter 2 reviews and discusses about the theories of service quality, perceived price, customer satisfaction and the relationships among these concepts in service industries, especially in higher education context. Accordingly, the existing researches employed various approaches to measure service quality perceived by customer. Among them, SERVQUAL and SERPERF are the popular instruments applied in many service fields. However, the higher education service industry experienced the development of new measurement scale for service quality – HEDPERF (Firdaus, 2006), which is specifically designed for this particular environment but has not tested in many countries yet. Hence, this research approaches six components of HEDPERF, namely, Non-academic aspects, Academic aspects, Reputation, Access, Understanding and Program issues to measure the construct university service quality. In regard to service price, this chapter also argues to take perceived monetary price interpreted in higher education is perceived tuition into the research model. Besides, customer satisfaction concept is approached by the standpoint of primary customer of higher education service that is student satisfaction. In addition, this chapter presents positive impact of perceived tuition on university service quality and student satisfaction as well as the positive effect of university service quality on student satisfaction based on present theoretical foundations. It also points out the moderating effect of university types on these above relationships between public universities and non-public universities. Following these arguments, a research model is set up with five hypotheses: H1: University Service Quality has a positive impact on Student Satisfaction H2: There is a positive impact of Perceived Tuition on Student Satisfaction H3: There is a positive impact of Perceived Tuition on University Service Quality perceived by student. H4: The impact of Perceived Tuition on Student Satisfaction and University Service Quality will be affected by University type (Public sector and Non-public sector) H5: The impact of University Service Quality on Student Satisfaction toward a higher education service will be affected by University type (Public and Non-public sector) 10 Page 2.1. Literatures review 2.1.1. Customers of higher education In higher education field, the definition of customer is identified by various groups of stakeholders. Weaver (1976) (as cited in Firdaus, 2006) indicated four parties of potential customers, including: the government, the administrators of Government, the teachers /academics and actual customers (learners, their families, employers, society as a whole). Among these groups of customer, students are generally assumed to be the principal customers because they are product of learning process and the internal customer (Sirvanci, 1996). Similarly, Galloway (1998) confirmed that the primary customer in education service is the student. Hence, it becomes important to identify determinants of service quality in higher education from the standpoint of students (Firdaus, 2006). In this empirical study, it aims to utilize the determinants of service quality through HEDPERF instrument to predict the customer satisfaction based on the standpoint of students as primary customer. Therefore, the concept of service quality and price are perceived by students and customer satisfaction implies to students satisfaction. 2.1.2. Service quality concept and measurement The customers-perceived service quality has been issues researched extensively (Corneliu Munteanu et al., 2010). Among the primary conceptualizations of service quality, Lewis and Booms (1983, p.100) defined service quality as a ―measure of how well the service level delivered matches the customer‟s expectations.‖ Later, Parasuraman et al. (1985) took dimensional approach to define that service quality is a function of the differences between expectation and performance along the quality dimensions. Base on gap analysis between expected service and perceived service, they developed a service quality model, including: [...]... generally accepted measurement scale for customer satisfaction in higher education (Garcia, 2009 as cited in Basherr & Ahmad, 2012) In this applied research, the measurement scale for student satisfaction adapted from the solely customer satisfaction scale of Taylor and Baker (1994) 2.1.7 Relationship between service quality and customer satisfaction in higher education The relationship between service. .. quality and customer satisfaction have received great deal of attention from scholars and practitioners (Eshghi et al., 2008 as cited in Chingang & Lukong, 2010) Many scholars investigated that service quality has a significant impact on customer satisfaction (Gronroos, 1984; Parasuraman et al 1988) However, the others argued that customer satisfaction is as an antecedent to service quality (e.g AI-alak,... price and customer satisfaction in higher education The marketing theories emphasized price as an important factor of customer satisfaction (David et al., 2007) It is enhanced by the findings of Zeithaml and Bitner (1996) that the extent of satisfaction was subject to factors of service quality, product quality, price, situational factors and personal factors However, the fact is that price has received... in structure and syllabus (Firdaus, 2006) 12 Page This instrument scale measures service quality in higher education through 41 items of six factors: non-academic aspects; academic aspects; reputation; access; programs issues; understanding and based on the standpoint of student as the primary customers in tertiary education industry In comparative research among measurement instruments in higher education. .. staff are never too busy to respond to my request for assistance Acadm4 When I have a problem, academic staff show a sincere interest in solving it Acadm5 Academic staff show positive attitude towards students Acadm6 Academic staff communicate well in the classroom Acadm7 Academic staff has a precise method to appraise my studying performance Acadm8 Academic staff are highly educated and experience in. .. little attention when analyzing customer satisfaction (David et al., 2007) In research of the relationship between price and customer satisfaction, the impact of price on customer satisfaction is not deniable (Zeithaml, 1988; David et al., 2007; Carmen et al., 2006) Sik et al (2011) also stated that customer perceived service quality and perceived price are two factors that have been proven empirically as... Nacdm6 Administrative staff show positive work attitude towards students Nacdm7 Administrative staff communicate well with students Nacdm8 I feel secure and confident in my dealings with this institution 24 Page Academic aspects scale Acadm1 Academic staff have the knowledge to answer my questions relating to the course Acadm2 Academic staff deal with me in a caring and courteous manner Acadm3 Academic... thoroughly investigated in previous empirical study (Bei and Chiao, 2001 as cited in David et al., 2007) This study attempts to analyze the customer satisfaction through the impacts of both service quality and price dimension in higher education context 2.1.6 Customer satisfaction in higher education Customer satisfaction translated into the higher education context is that satisfaction of the student – as... Reputation scale Reptt1 The institution has a professional appearance/image Reptt2 The hostel facilities and equipment are adequate and necessary Reptt3 Academic facilities are adequate and necessary Reptt4 Class sizes are kept to minimum to allow personal attention Reptt5 The institution‘s graduates are easily employable Reptt6 The institution has an ideal location with excellent campus layout and appearance... used in this research as the student perceived tuition 2.1.5 Customer satisfaction In research and practice field, customer satisfaction is still an abstract and rather ambiguous concept (Corneliu et al., 2010) Customer satisfaction towards a service is an emotional feeling after using the service which is transaction-specific evaluation (Cheng et al.; Spreng and Singh; Oliver, as cited in Pham Ngoc . aforementioned analysis about the current situation of higher education in Vietnam and existing findings about service quality, price and customer satisfaction in tertiary education area, in an attempt. quality as an antecedent to customer satisfaction (Garcia, 2009). In Vietnam higher education context, despite service quality and customer satisfaction are the concepts attracting many researchers. quality and price dimension in higher education context. 2.1.6. Customer satisfaction in higher education Customer satisfaction translated into the higher education context is that satisfaction