The effects of switching barrier on the customer retention, a study of ceramic companies in vietnam

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS - HOCHIMINH CITY NGUYỄN THỊ MỸ TRANG THE EFFECTS OF SWITCHING BARRIER ON THE CUSTOMER RETENTION A STUDY OF CERAMIC COMPANIES IN VIETNAM MASTER’S THESIS MASTER IN BUSINESS ADMINISTRATION Ology Code: 60.34.05 Supervisor PhD TRẦN HÀ MINH QUÂN Ho Chi Minh City -2012 ABSTRACT Many previous researches proved that retaining customers plays an important role for business in service sector and end-user or consumers are their oriented-object However, there is a lack of research in the areas of evaluation of B2B customer retention in product sector in Vietnam Therefore, the purpose of this study is to determine critical factors of switching barrier that potential influence on customer retention in business-to-business (B2B) sector in Vietnam ceramic companies Based on previous studies on switching barrier, four major factors will be calculated as movein cost, benefit/loss cost, interpersonal relationship and the attractiveness of alternatives The overall purpose of this research is to develop a conceptual foundation of customer retention, with the use of the concepts of switching barrier and customer retention, and provide management significance of customer retention for marketers of Vietnam ceramic companies in developing strategies for retaining B2B customers i ACKNOWLEGEMENTS Although I have taken efforts in this research but it would not have been finished without the kind support and help of people Therefore, I would like to extend my sincere thanks to all of them First of all, I would like to express my sincere gratitude towards my direct supervisor PhD Tran Ha Minh Quan for his great guidance, support and encouragement in completing the research I am very thankful managers of My Duc Ceramics Limited Company for their share opinions, experiences and providing necessary information regarding to the research I would like to express my special gratitude to my family and my friends for the love, support and encouragement during the whole process of my project which helps me in starting the first difficult step and completion of my thesis Finally, my thanks and appreciations also go to my colleagues in developing the project and agents of MDC for their kind co-operation in answering the questionnaires I also thank to person who willingly helped me out with their abilities My heartfelt thanks to you all! Nguyen Thi My Trang Ho Chi Minh City, April 2012 ii STUDENT DECLARATION I affirm that the research titled ―The effects of switching barrier on the customer retention – A study of ceramic companies in Vietnam‖ is my own work The work is original except where indicated by special reference in the text The research has been conducted in studying by the academic knowledge and with the assistant of my supervisor and MDC‘s managers By this letter, I would like to undertake that it is my own research All data, resources, references using in this research are clearly identify SIGNED: DATE: iii TABLE OF CONTENT ABSTRACT ACKNOWLEDGMENTS STUDENT DECLARATION TABLE OF CONTENT LIST OF FIGURES LIST OF TABLES LIST OF ABBREVIATIONS CHAPTER 1: 1.1Rational of the study 1.2The statement of the problem 1.3Research objective 1.4Research questions 1.5Scope of the research 1.6Research methodology 1.7The structure of the research CHAPTER 2: 2.1Ceramic tile 2.2B2B customer 2.3Customer satisfaction 2.4The relationship between customer satisfaction and custom 2.5Customer‘s retention 2.5.1.Define of customer retention 2.5.2.Benefit of customer retention 2.5.3 2.5.3 2.5.3 2.5.3 2.6Research model and hypothesis 2.6.1.Proposal of research model 2.6.2 CHAPTER 3: 3.1Research design 3.1.1 3.1.2 iv 3.1.3 Research process 3.2 Official research 3.2.1 Measurement scale 3.2.2 The questionnaire design 3.2.3 Research sample and samp 3.2.4 Data collection methods CHAPTER 4: 4.1Characteristics of the samples 4.2Statistical Result 4.2.1 4.2.2 4.3Data Analysis 4.3.1 4.3.2 4.3.2 4.3.2 4.3.2 4.3.3 4.3.4 4.3.4 4.3.4 CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS 5.1 Conclusions 5.2 Recommendations 5.2.1 Benefit/lo 5.2.2 Interperso 5.2.3 Move-in c 5.3 Research limitations REFERENCES APPENDIX APPENDIX 1: Questionnaire APPENDIX 2: Cronbach's alpha analysis result and Factor analysis result v LIST OF FIGURES Figure 2.1: Kim et al (2004) 17 Figure 3.1: The suggested research model 21 Figure 3.2: Research process 24 Figure 4.1: Sample characteristics 30 Figure 4.2: Research model 42 vi LIST OF TABLES Table 2.1: Define of switching barrier variables 15 Table 3.1 :Summary of retention factors and measurement scale 27 Table 4.1: Descriptive statistics of switching barrier measurement 32 Table 4.2: Descriptive statistics of customer retention measurement 32 Table 4.3: Reliability test of switching barrier and customer retention 34 Table 4.4: Final Reliability test of switching barrier and customer retention 36 Table 4.5: Rotated Component Matrix a 38 Table 4.6: Rotated Component Matrix a 39 Table 4.7: KMO and Bartlett‘s Test 40 Table 4.8: Total Variance Explained 41 Table 4.9: Final EFA analysis result of customer retention 41 Table 4.10: Pearson correlation matrix 43 Table 4.11: Model Summary Table 4.12: ANOVA b 44 b 45 Table 4.13: Coefficients a 45 vii LIST OF ABBREVIATIONS B2B: Business to Business B2C: Business to Consumer DONG TAM: Dong Tam Group EFA: Exploratory Factor Analysis MDC: My Duc Ceramics Limited Company VND: Vietnam Dong WHITE HORSE: White Horse Ceramics Company viii CHAPTER 1: INTRODUCTION 1.1 Rational of the study Infrastructure construction is one of top interests in Vietnam as well as other countries in the world Moreover, with high growing rate of urbanization and increasing demand for housing of middle class in society pushing up the construction of public works and high-floor projects by Government and investors Based on that, the building material industry in Vietnam get opportunity to develop and ceramic industry is not an exception with the quite stable growth in the last ten years According to Vietnam building ceramic association, the building material market has grown by 10%/year in the last 2000-2005 period and 20%/year in years after Therefore, Vietnam ceramic tile is an attractive market drawing investors in both domestic and overseas as its potential profits and has had the participation of 20 companies up to now In order to compete and grow in this competitive markets, each ceramic company must strongly focus on retaining existing customer, special for business customers who tend to be fewer in a number and each is more valuable, and gaining new ones as the more customers company has, the more profits it get Business is in a constant race to increase profits Therefore, ceramic companies should invest on retaining customers, especial for difficult times But striving to maintain unprofitable customers is not a good business strategy Companies should identify 20% of potential customers who bring 80% of profits to business In ceramics industry, agents are company representatives who create 80% of revenues to companies So we need a research to find the critical factors adjusting to their retaining Its aims to help organizations build effective customer retention strategy in a way that both firms and the customer get the most out of exchange, providing both parties with long term benefits 1.2 The statement of the problem Many previous studies have identified the benefits of retention to an organization (Colgate et al., 2007; Reichheld and Sasser, 1990) but relatively little research on B2B customer retention And although many companies have realized the economical advantage of keeping existing customers against acquiring new ones, almost ceramic sponsor, etc) better than current providers New providers want to create more favorable Att20 advantage for your business Code Gen.21 Gen.22 Gen.23 The measure of customer retention Overall, you feel difficult in switching to other providers You will continue to business with current providers You are likely to recommend the current providers to others Thank you for your time and your support 63 Strongly With the current providers, please give us your idea with the question below: APPENDIX 2: CRONBACH’S ALPHA ANALYSIS RESULT I Reliability 1.1 Move-in cost Case Processing Summary Cases a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha N of Items 896 Item Statistics mov1 mov2 mov3 mov4 mov5 mov6 64 mov1 mov2 mov3 mov4 mov5 mov6 1.2 Benefit/loss-cost Case Processing Summary Cases a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha N of Items 843 65 ben7 ben8 ben9 ben10 ben11 ben12 Item-Total Statistics ben7 ben8 ben9 ben10 ben11 ben12 Must be deleted Ben8 because of not fulfill the requirement Here is the result after deliminating it 66 Reliability Statistics Item-Total Statistics ben7 ben9 ben10 ben11 ben12 1.3 Interpersonal relationship Cases a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha 859 67 int13 int14 int15 int13 int14 int15 1.4 Attractiveness of alternatives Case Processing Summary Cases a Listwise deletion based on all variables in the procedure 68 att16 att17 att18 att19 att20 1.5 Customer retention – General Valid Cases Excluded(a) Total a Listwise deletion based on all variables in the procedure 69 Item Statistics N gen21 121 gen22 121 gen23 121 gen21 gen22 gen23 AI Factor Analysis 2.1 Switching barrier KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity 70 Total Variance Explained Rotation Sums of Squared Loadings Component 10 11 12 13 14 15 16 17 18 19 Extraction Method: Principal Component Analysis Total 4.112 3.366 3.196 2.830 71 Rotated Component Matrix(a) mov2 mov3 mov1 mov4 mov6 mov5 att19 att16 att18 att17 att20 ben7 ben9 ben11 ben10 ben12 int13 int14 int15 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization a Rotation converged in iterations After dropped Ben 12, here is the result: KMO and Bartlett's Test Kaiser-M Bartlett' 72 df Sig Component 10 11 12 13 14 15 16 17 18 Extraction Method: Principal Component Analysis 73 Rotated Component Matrix(a) mov2 mov3 mov1 mov4 mov6 mov5 att19 att16 att17 att18 att20 ben7 ben9 ben11 ben10 int13 int14 int15 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization a Rotation converged in iterations 2.2 Customer retention Component Extraction Method: Principal Component Analysis 74 gen23 gen22 gen21 Extraction Method: Principal Component Analysis a components extracted Rotated Component Matrix(a) Dummy category a Only one component was extracted The solution cannot be rotated 75 ... developing new customers rather than maintaining old customers and invest on customer satisfaction more than retaining customers Their own decisions base on the traditional information about the profit... of Spain, Italia, and ceramic tile of England, Netherlands and Germany are all prominent landmarks in the history of ceramic tile Nowadays some countries in Asia such as Malaysia, Thailand, Indonesia,... valuable, and gaining new ones as the more customers company has, the more profits it get Business is in a constant race to increase profits Therefore, ceramic companies should invest on retaining