Effects of negative and positive switching barriers to customer satisfaction and customer retention a study of mobile service users in vietnam

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY -oOo - PHAM THANH LONG EFFECTS OF NEGATIVE AND POSITIVE SWITCHING BARRIERS TO CUSTOMER SATISFACTION AND CUSTOMER RETENTION A STUDY OF MOBILE SERVICE USERS IN VIETNAM MASTER OF BUSINESS ADMINISTRATION THESIS Ho Chi Minh City – 2011 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY -oOo - PHAM THANH LONG EFFECTS OF NEGATIVE AND POSITIVE SWITCHING BARRIERS TO CUSTOMER SATISFACTION AND CUSTOMER RETENTION A STUDY OF MOBILE SERVICE USERS IN VIETNAM Major: Major Code: Business Administration 60.34.05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisor: DR TRAN HA MINH QUAN Ho Chi Minh City – 2011 ACKNOWLEDGEMENT This thesis is the result after several months of work in which I have been accompanied and supported by many people It is fantastic that I now have the opportunity to express my gratitude and sincere thanks all of them The first person I would like to thank is my direct supervisor Dr Tran Ha Minh Quan During these years I have known him to be a sympathetic and principlecentered person I owe him a lot of gratitude for having shown me this way of research I would like to express my sincere gratitude to all of my teachers at Faculty of Business Administration and Post-graduate Faculty, University of Economics Ho Chi Minh City for their teaching and guidance during my MBA course I would like to specially express my thanks to all of my classmates, my friends from for their support and encouragement I am deeply and forever indebted to my parents and my wife, Hong Thao, for their continuous love, support and encouragement dedicating to me For their neverending support and the sense of security they have given when I wanted it most I dedicate this thesis to them i ABSTRACT Customer retention is a concept getting more and more attention in business nowadays as loyal customers are considered as vital components to organizational success Companies today strive to identify and manage effective methods to retain their customers as many as possible Even though some research papers have been published globally on service sectors, including mobile telecommunication services, very limited studies have been conducted on this subject inside Vietnam Many studies show that customer satisfaction is related to customer retention However, customer satisfaction is not enough to provide explanation to customer retention because in a lot of cases, customers are not freely to choose or switch between suppliers There are different types of constraints identified as switching barriers have effect to customer satisfaction and customer retention Some previous studies investigated the impact of switching barriers as a uni-dimensional concept and it has mediating effect to the linkage between customer satisfaction and customer retention Just a very few studies went further to divide switching barriers into ‘positive elements’ and ‘negative elements’ and tested both in the same model separately In this study, our first objective is to prove the role of switching barriers that influence customer retention in mobile telecommunication service and classify them into positive and negative category Secondly, we will use a path analysis of the empirical data in Vietnam to examine the impact of these different categories into customer satisfaction and customer retention Keywords: Customer retention, purchase retention, customer satisfaction, switching barrier, customer loyalty, mobile service ii CONTENTS Acknowledgement …………………………………………………………… i Abstract ………………………………………………………………………… ii Contents ……………………………………………………………………… iii Lists of Tables ………………………………………………………………… v Lists of Figures ………………………………………………………………… vi CHAPTER 1: INTRODUCTION …………………………………………… 1.1 Background …………………………………………………………… 1.2 Problem definition and research questions …………………………… 1.3 Research purpose ……………………………………………………… 1.4 Research limitation …………………………………………………… 1.5 Organization of the thesis ……………………………………………… CHAPTER 2: LITERATURE REVIEW …………………………………… 2.1 Customer satisfaction ………………………………………………… 2.1.1 Defining customers and customer purchasing process …………… 2.1.2 Concept of customer satisfaction ………………………………… 2.1.3 Determinants of Customer satisfaction …………………………… 2.1.4 Customer satisfaction measurement model ……………………… 11 2.2 Customer retention …………………………………………………… 14 2.3 Switching barriers ……………………………………………………… 18 2.4 Positive and negative switching barriers ……………………………… 23 2.5 Proposed research model and hypotheses ……………………………… 25 CHAPTER 3: RESEARCH METHODOLOGY …………………………… 27 3.1 Research purpose ……………………………………………………… 27 3.2 Research Approach …………………………………………………… 28 3.3 Sampling ……………………………………………………………… 28 3.3.1 Sampling technique ……………………………………………… 28 iii 3.3.2 Sampling size …………………………………………………… 29 3.4 Data collection procedure ……………………………………………… 29 3.5 Measurement …………………………………………………………… 30 3.6 Pilot testing …………………………………………………………… 31 3.7 Data analysis method …………………………………………………… 33 CHAPTER 4: DATA ANALYSIS AND FINDINGS ……………………… 36 4.1 The questionnaire ……………………………………………………… 36 4.2 Descriptive result ……………………………………………………… 36 4.3 Accessing reliability and validity of collected data …………………… 39 4.4 Accessing model fit …………………………………………………… 42 4.5 Testing hypotheses and answering research questions ………………… 44 CHAPTER 5: RESEARCH IMPLICATIONS …………………………… 47 5.1 Conclusion …………………………………………………………… 47 5.2 Implications for management ………………………………………… 47 5.3 Implications for theory and future research …………………………… 48 REFERENCE APPENDIX 1: QUESTIONNAIRE (ENGLISH AND VIETNAMESE) APPENDIX 2: STATISTICAL RESULT, PILOT STAGE APPENDIX 3: STATISTICAL RESULT, MAIN RESEARCH iv LISTS OF TABLES Table 3.1 Cronbach’s alpha result – Pilot stage ………………………………… 32 Table 4.1 Age statistics of respondents ………………………………………… 36 Table 4.2 Education Background statistics of respondents …………………… 37 Table 4.3 Occupation statistics of respondents ………………………………… 37 Table 4.4 Monthly income statistics of respondents …………………………… 38 Table 4.5 Living city/town Statistics of respondents …………………………… 38 Table 4.6 Mobile network statistics of respondents …………………………… 39 Table 4.7 Cronbach’s alpha value – Main research stage ……………………… 39 Table 4.8 Table KMO and Bartlett's Test ……………………………………… 40 Table 4.9 Total Variance Explained by EFA …………………………………… 41 Table 4.10 Rotated Component Matrixa by EFA ……………………………… 42 Table 4.11 CMIN value calculated by AMOS …………………………………… 43 Table 4.12 RMSEA value calculated by AMOS ………………………………… 44 Table 4.13 Standardized Regression Weights of path model calculated by AMOS 45 Table 4.14 Non-standardized Regression Weights of path model ……………… 46 v LISTS OF FIGURES Figure 1.1 Research organization ……………………………………………… Figure 2.1 Components of ACSI Model ………………………………………… 12 Figure 2.2 Components of ECSI Model ………………………………………… 13 Figure 2.3 Affecting role of switching barriers, both mediating and direct to customer retention …………………………………………………… 19 Mediating role of switching cost to both customer value – customer loyalty and perceived satisfaction – customer loyalty linkage ……… 20 Research model used in this thesis to investigate relationship among switching barriers, customer satisfaction and customer retention …… 25 Path diagram with regression weights calculated by AMOS ………… 43 Figure 2.4 Figure 2.5 Figure 4.1 vi CHAPTER INTRODUCTION 1.1 Background The increasing economic importance of telecommunication service sector has inspired many researchers to devote more of their research attention to this area Since 1990s, the telecommunications industry and services have become a dynamic key factor for the economic development of many countries This is the result of enormous development in technology as well as of the increased number of network operators and intense competition among them It has been figured out by previous researchers that as markets become more competitive, firms are more likely to try maintaining their market share by focusing on retaining current customers It’s also obvious that when competition and the costs of acquiring new customers increase, companies will be more concentrated their strategic efforts on customer retention, therefore to maintain customer long-term relationships becomes as a critical mission for business Especially in the field of telecommunications services, it has been pointed out that once customers have been acquired and connected to the telecommunications network of a particular operator, their long-term links with the focal operator are of greater importance to the success of the company By having this in mind, customer retention is critical in the mobile service since operators lose about 30 percent or more of their subscribers every year and have large customer acquisition expenditures It is very important to stress that mobile operators need to develop well-designed programs to increase customer retention (Lee, 2001) As a result, many studies were conducted in this critical issue They developed and estimated different dynamic models to explain and measure the determinants, different factors and influencers of customer retention 1.2 Problem definition and research questions Nowadays the Telecommunications industry, like many of other ones, faces both the difficulties of increasing national and international competition, slower growth rate and saturated market As a result, fewer new customers are being pursued by an increasing number of service providers Under this circumstance, a large scale of firm’s resources must be definitely devoted to the present customers in order to make them more satisfied and retain them One important point of customer retention is its close relationship to the company’s continued survival, and to strong and stable future growth Therefore, for a company to maintain a stable profit level and the subscription level has reached the saturation point, a defensive strategy which strives to retain existing customers is more important than an aggressive one, which expands the size of the overall market by inducing potential customers Many studies show that customer satisfaction is related to customer retention, but only customer satisfaction is not enough to explain customer retention in all circumstances since customer rarely has the chance to freely choose suppliers Actually, there are different types of constraints, together with customer satisfaction, determine customers choice of supplier (Fornell, 1992) In this study, such constraints are termed switching barriers Only a few empirical studies investigate how various types of switching barriers affect satisfaction with suppliers, customer retention and the relationship between variables It has been pointed out, that customers remain loyal to a supplier either because they want to or they have to (Ping, 1993) High switching barriers mean that customer have to stay (or perceive that they have to) with suppliers, regardless of the satisfaction created in the relationship CR2 920 Extraction Method: Principal Component Analysis a components extracted Factor Analysis Communalities Initial Extraction NSB1 1.000 913 NSB2 1.000 778 NSB3 1.000 702 NSB4 1.000 722 Extraction Method: Principal Component Analysis Total Variance Explained Initial Eigenvalues Compone nt Total % of Variance Extraction Sums of Squared Loadings Cumulative % 3.115 77.863 77.863 476 11.901 89.764 295 7.376 97.140 114 2.860 100.000 Extraction Method: Principal Component Analysis Component Matrixa Component NSB1 956 Total % of Variance 3.115 77.863 Cumulative % 77.863 NSB2 882 NSB3 838 NSB4 850 Extraction Method: Principal Component Analysis a components extracted Factor Analysis Communalities Initial Extraction PSB1 1.000 898 PSB2 1.000 898 Extraction Method: Principal Component Analysis Total Variance Explained Initial Eigenvalues Compone nt Total % of Variance Extraction Sums of Squared Loadings Cumulative % 1.796 89.776 89.776 204 10.224 100.000 Extraction Method: Principal Component Analysis Component Matrixa Component PSB1 948 PSB2 948 Extraction Method: Principal Component Analysis a components extracted Total % of Variance 1.796 89.776 Cumulative % 89.776 APPENDIX STATISTICAL RESULTS – MAIN RESEARCH STAGE A CRONBACH ALPHA AND FACTOR ANALYSIS Reliability Scale: ALL VARIABLES Case Processing Summary N Cases Valid Excludeda Total % 181 100.0 0 181 100.0 a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha N of Items 934 Item Statistics Mean Std Deviation N CS1 3.04 492 181 CS2 3.10 522 181 CS3 3.12 530 181 Item-Total Statistics Scale Mean if Item Scale Variance if Corrected Item-Total Cronbach's Alpha if Deleted Item Deleted Correlation Item Deleted CS1 6.22 962 934 850 CS2 6.16 980 828 932 Item-Total Statistics Scale Mean if Item Scale Variance if Corrected Item-Total Cronbach's Alpha if Deleted Item Deleted Correlation Item Deleted CS1 6.22 962 934 850 CS2 6.16 980 828 932 CS3 6.15 961 833 929 Scale Statistics Mean Variance 9.27 Std Deviation 2.107 N of Items 1.452 Reliability Scale: ALL VARIABLES Case Processing Summary N Cases Valid Excludeda Total % 181 100.0 0 181 100.0 a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha N of Items 894 Item Statistics Mean Std Deviation N CR1 4.60 491 181 CR2 4.57 496 181 Item-Total Statistics Scale Mean if Item Scale Variance if Corrected Item-Total Cronbach's Alpha if Deleted Item Deleted Correlation Item Deleted CR1 4.57 246 808 a CR2 4.60 241 808 a a The value is negative due to a negative average covariance among items This violates reliability model assumptions You may want to check item codings Scale Statistics Mean Variance 9.18 Std Deviation 880 N of Items 938 Reliability Scale: ALL VARIABLES Case Processing Summary N Cases Valid Excludeda Total % 181 100.0 0 181 100.0 a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha N of Items 961 Item Statistics Mean Std Deviation N NSB1 3.76 886 181 NSB2 3.82 857 181 NSB3 3.86 815 181 NSB4 3.81 881 181 Item-Total Statistics Scale Mean if Item Scale Variance if Corrected Item-Total Cronbach's Alpha if Deleted Item Deleted Correlation Item Deleted NSB1 11.50 5.751 954 933 NSB2 11.43 6.069 896 950 NSB3 11.39 6.373 864 960 NSB4 11.44 5.948 900 949 Scale Statistics Mean Variance 15.25 Std Deviation 10.591 N of Items 3.254 Reliability Scale: ALL VARIABLES Case Processing Summary N Cases Valid Excludeda Total % 181 100.0 0 181 100.0 a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha N of Items 961 Item Statistics Mean Std Deviation N PSB1 3.75 894 181 PSB2 3.81 849 181 Item-Total Statistics Scale Mean if Item Scale Variance if Corrected Item-Total Cronbach's Alpha if Deleted Item Deleted Correlation Item Deleted PSB1 3.81 720 927 a PSB2 3.75 799 927 a a The value is negative due to a negative average covariance among items This violates reliability model assumptions You may want to check item codings Scale Statistics Mean Variance 7.56 Std Deviation 2.925 N of Items 1.710 Factor Analysis KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity Approx Chi-Square df Sig .804 2182.671 55.000 000 Anti-image Matrices CS1 Anti-image Covariance CS3 CR1 CR2 NSB1 NSB2 NSB3 NSB4 PSB1 PSB2 CS1 101 -.097 -.093 -.021 -.019 014 -.012 006 000 -.025 014 CS2 -.097 238 021 -.005 -.006 008 011 -.009 -.018 016 -.010 CS3 -.093 021 216 -.036 032 -.011 032 -.021 013 020 -.022 CR1 -.021 -.005 -.036 250 -.177 -.009 -.030 -.002 -.007 -.003 002 CR2 -.019 -.006 032 -.177 324 -.031 010 018 030 -.006 -.003 NSB1 014 008 -.011 -.009 -.031 073 -.040 -.054 -.065 001 -.003 NSB2 -.012 011 032 -.030 010 -.040 180 -.045 -.018 -.002 000 NSB3 006 -.009 -.021 -.002 018 -.054 -.045 229 008 -.005 006 NSB4 000 -.018 013 -.007 030 -.065 -.018 008 138 -.007 005 PSB1 -.025 016 020 -.003 -.006 001 -.002 -.005 -.007 127 -.119 PSB2 014 -.010 -.022 002 -.003 -.003 000 006 005 -.119 137 CS1 a 755 -.624 -.626 -.129 -.103 165 -.085 041 001 -.216 117 CS2 -.624 838a 090 -.021 -.020 064 052 -.039 -.099 090 -.055 a CS3 -.626 090 818 -.156 120 -.084 164 -.094 078 123 -.129 CR1 -.129 -.021 -.156 820a -.623 -.067 -.141 -.010 -.037 -.014 012 a CR2 Anti-image Correlation CS2 -.103 -.020 120 -.623 784 -.199 040 067 140 -.029 -.013 NSB1 165 064 -.084 -.067 -.199 794a -.345 -.415 -.644 012 -.027 NSB2 -.085 052 164 -.141 040 -.345 919a -.224 -.116 -.011 003 a 047 -.029 033 047 853a -.052 034 a NSB3 041 -.039 -.094 -.010 067 -.415 -.224 NSB4 001 -.099 078 -.037 140 -.644 -.116 912 PSB1 -.216 090 123 -.014 -.029 012 -.011 -.029 -.052 668 -.901 PSB2 117 -.055 -.129 012 -.013 -.027 003 033 034 -.901 662a a Measures of Sampling Adequacy(MSA) Communalities Initial Extraction CS1 1.000 946 CS2 1.000 857 CS3 1.000 858 CR1 1.000 894 CR2 1.000 937 NSB1 1.000 952 NSB2 1.000 885 NSB3 1.000 864 NSB4 1.000 891 PSB1 1.000 963 PSB2 1.000 965 Extraction Method: Principal Component Analysis Total Variance Explained Extraction Sums of Squared Component Initial Eigenvalues Loadings % of Cumulative % of Cumulative Variance % Variance % Total Total Rotation Sums of Squared Loadings Total % of Cumulative Variance % 4.393 39.940 39.940 4.393 39.940 39.940 3.693 33.575 33.575 3.952 35.931 75.870 3.952 35.931 75.870 2.695 24.501 58.075 1.116 10.143 86.013 1.116 10.143 86.013 1.975 17.955 76.030 550 5.001 91.014 550 5.001 91.014 1.648 14.984 91.014 273 2.478 93.492 200 1.817 95.308 169 1.538 96.846 147 1.340 98.186 087 788 98.974 10 061 554 99.528 11 052 472 100.000 Extraction Method: Principal Component Analysis Component Matrixa Component CS1 -.777 523 192 179 CS2 -.709 467 257 264 CS3 -.719 488 205 246 CR1 -.014 860 308 -.246 CR2 -.010 800 273 -.472 NSB1 844 479 035 094 NSB2 797 486 041 112 NSB3 766 471 056 230 NSB4 816 443 014 169 PSB1 -.289 710 -.612 -.021 PSB2 -.297 675 -.648 -.024 Extraction Method: Principal Component Analysis a components extracted Rotated Component Matrixa Component CS1 -.262 870 254 236 CS2 -.198 876 154 165 CS3 -.206 861 210 171 CR1 342 385 192 770 CR2 225 219 201 893 NSB1 930 -.221 034 193 NSB2 904 -.178 041 186 NSB3 919 -.096 021 096 NSB4 918 -.188 035 110 PSB1 066 246 931 176 PSB2 039 219 946 146 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization a Rotation converged in iterations Component Transformation Matrix Compone nt 777 -.595 -.206 -.014 491 453 504 547 081 387 -.837 379 386 539 -.051 -.747 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization B AMOS TEXT OUTPUT Result (Default model) Minimum was achieved Chi-square = 40.702 Degrees of freedom = 40 Probability level = 439 Regression Weights: (Group number - Default model) Satisfaction Satisfaction Retention Retention NSB1 NSB2 NSB3 NSB4 PSB1 PSB2 CS3 CS2 CS1 CR2 CR1 < < < < < < < < < < < < < < < - Neg_bar Pos_bar Neg_bar Satisfaction Neg_bar Neg_bar Neg_bar Neg_bar Pos_bar Pos_bar Satisfaction Satisfaction Satisfaction Retention Retention Estimate -.221 259 323 666 1.000 884 814 934 1.000 867 1.000 978 1.070 1.000 1.132 S.E .032 034 032 067 C.R -6.911 7.627 10.021 9.875 P *** *** *** *** 033 035 030 26.576 23.157 30.925 *** *** *** 048 18.011 *** 058 047 16.954 22.963 *** *** 077 14.726 *** Standardized Regression Weights: (Group number - Default model) Satisfaction Satisfaction Retention Retention NSB1 NSB2 NSB3 NSB4 PSB1 PSB2 CS3 CS2 CS1 CR2 CR1 < < < < < < < < < < < < < < < - Neg_bar Pos_bar Neg_bar Satisfaction Neg_bar Neg_bar Neg_bar Neg_bar Pos_bar Pos_bar Satisfaction Satisfaction Satisfaction Retention Retention Estimate -.414 498 688 758 991 905 877 931 1.007 920 875 869 1.003 838 960 Variances: (Group number - Default model) Neg_bar Pos_bar er12 er13 er1 er2 er3 er4 Estimate 766 806 127 065 014 132 153 103 S.E .083 092 017 010 007 015 017 013 C.R 9.278 8.794 7.395 6.286 1.904 8.570 8.872 8.002 P *** *** *** *** 057 *** *** *** Label Label er5 er6 er9 er8 er7 er11 er10 Estimate -.012 110 067 068 -.002 072 018 S.E .037 030 008 008 004 011 010 C.R -.314 3.618 8.661 8.738 -.437 6.724 1.874 P 753 *** *** *** 662 *** 061 Label Factor Score Weights (Group number - Default model) Pos_bar Neg_bar Satisfaction Retention CR1 000 034 -.009 622 CR2 000 008 -.002 141 CS1 -.026 -.049 995 101 CS2 001 001 -.022 -.002 CS3 001 001 -.023 -.002 PSB2 -.103 -.001 000 000 PSB1 1.113 006 -.003 000 CMIN Model Default model Saturated model Independence model NPAR 26 66 11 CMIN 40.702 000 2238.636 DF 40 55 P 439 CMIN/DF 1.018 000 40.702 RMR, GFI Model Default model Saturated model Independence model RMR 022 000 243 GFI 963 1.000 300 AGFI 939 PGFI 584 160 250 NFI Delta1 982 1.000 000 RFI rho1 975 IFI Delta2 1.000 1.000 000 TLI rho2 1.000 Baseline Comparisons Model Default model Saturated model Independence model 000 000 Parsimony-Adjusted Measures Model Default model Saturated model Independence model PRATIO 727 000 1.000 PNFI 714 000 000 PCFI 727 000 000 NCP 702 000 2183.636 LO 90 000 000 2032.562 HI 90 19.987 000 2342.052 NCP 702 000 2183.636 LO 90 000 000 2032.562 HI 90 19.987 000 2342.052 NCP Model Default model Saturated model Independence model NCP Model Default model Saturated model Independence model CFI 1.000 1.000 000 NSB4 -.001 099 001 005 NSB3 000 058 000 003 NSB2 000 073 001 004 NSB1 -.005 763 005 039 FMIN Model Default model Saturated model Independence model FMIN 226 000 12.437 F0 004 000 12.131 LO 90 000 000 11.292 HI 90 111 000 13.011 RMSEA Model Default model Independence model RMSEA 010 470 LO 90 000 453 HI 90 053 486 PCLOSE 932 000 AIC Model Default model Saturated model Independence model AIC 92.702 132.000 2260.636 BCC 96.416 141.429 2262.208 BIC 175.863 343.101 2295.820 CAIC 201.863 409.101 2306.820 ECVI Model Default model Saturated model Independence model ECVI 515 733 12.559 LO 90 511 733 11.720 HI 90 622 733 13.439 HOELTER Model Default model Independence model HOELTER 05 247 HOELTER 01 282 MECVI 536 786 12.568 ... and how they are classified into positive and negative factor, a review of impact of switching barriers into customer satisfaction and customer retention In this Chapter, the proposed model and. .. relevant to customer satisfaction, customer retention and the common understanding about customer satisfaction and customer retention relationship, a review of different variables of switching barriers. .. have impact to customer satisfaction and customer retention in mobile telecommunication service in Vietnam? Question 3: How negative switching barriers have impact to customer satisfaction and