Investigate the antecedents of bank loyalty

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY EÂ1 o0o TRẦN GIAO PHƯỢNG HÀ INVESTIGATE THE ANTECEDENTS OF BANK LOYALTY MASTER’S THESIS In Business Administration Ology code: 60.34.05 Supervisor Dr Tran Ha Minh Quan HCMC- 04/2012 Acknowledgement This research project would not have been possible without the support of many people Firstly I wish to express my deep sincere gratitude to my supervisor, Dr Tran Ha Minh Quan for his invaluable advices and helps Without him, this thesis could not have been completed Special thanks to all instructors without whose knowledge and assistance this study would not have been successful I also wish to thank M.A Nguyen Thanh Trung for his great support My thanks would also go to all of my classmates, my colleagues I also wish to thank my friends in Vietcombank, VPBank, Eastern Asia Bank, ACB and Sacombank for their great support My thanks would also go to the respondents, without them, my thesis could not have been done Last but not least, the deepest and most sincere gratitude go to my beloved parents for not only the love they devote to me but also for the time I took from them which should have been my devotion to them in their aged time I, therefore, dedicate this work as a gift to them all   Abstract This study aims to investigate antecedents of customer loyalty to the bank, related to perceived quality, bank image and customer satisfaction Based on theoretical background, scales are developed in accordance with the context of banking sector in Vietnam A discussion group of 10 people is to develop and adjust the scale Next, a main survey is carried out with the sample of 238 individual consumers to test scales and the research hypotheses Research results show that the scales meet the reliability and validity value, support all hypotheses In details, bank image has the most influence on customer loyalty to the bank, followed by perceived quality and customer satisfaction We know that image is more deeply engraved, make customers have good impression on that bank, and customers often decide based on their perception Good image is an asset to banking because image affects customer perception of banks When customers have a positive image in their minds of the bank, small errors made by banks are pardonable by customers Especially, in the economic crisis, the information about bank with high achievements, diversified products / services and good board of management creates a tremendous confidence for the customers This competitive advantage is considered as an effective tool in building long term relationship with customers Research on bank loyalty enriches the theory of service loyalty Banking services as well as consumer goods are facing fierce competition This study helps bank managers capture the drivers of bank loyalty That creates additional incentives for managers to develop and implement more effective marketing programs, enhancing customer loyalty to the bank Keyword: banking, bank loyalty, perceived quality, image, customer satisfaction   Contents Acknowledgement Abstract Contents List of Tables List of Figures Chapter 1: INTRODUCTION 1.1 Introduction 1.2 Research background 1.3 Research question 1.4 Scope and methodology of the study 10 1.4.1 Scope of the study 10 1.4.2 Research method 11 1.5 Structure of the study 11 Chapter 2: LITERATURE REVIEW 13 2.1 Introduction 13 2.2 Customer loyalty 13 2.3 Relationship between perceived quality and loyalty 14 2.4 Relationship between image and loyalty 15 2.5 Relationship between customer satisfaction and loyalty 16 2.6 Research model and hypotheses 17 2.7 Conclusion 18 Chapter 3: METHODOLOGY 19 3.1 Introduction 19 3.2 Business research 19 3.3 Research design 20 3.4 Item generation 22 3.4.1 Scale to measure perceived quality 22 3.4.2 Scale to measure bank image 23   3.4.3 Scale to measure customer satisfaction 23 3.4.4 Scale to measure bank loyalty 24 3.5 Preliminary study 24 3.6 Main study 27 3.6.1 Research sample 27 3.6.2 Data analysis techniques 28 3.7 Conclusion 29 Chapter 4: DATA ANLYSIS AND FINDINGS 30 4.1 Introduction 30 4.2 Descriptions of sample 30 4.3 Scale assessment 32 4.3.1 Reliability testing 32 4.3.2 Exploratory factor analysis 35 4.4 Testing research model and hypotheses 37 4.4.1 Testing correlations between all constructs 37 4.4.2 Testing research model and hypotheses 38 4.5 Conclusion 41 Chapter 5: CONCLUSIONS AND IMPLICATIONS 42 5.1 Introduction 42 5.2 Conclusions of the study 42 5.3 Implications of the study 43 5.3.1 Theoretical implications 43 5.3.2 Practical implications 43 5.4 Limitations and recommendations for further research 45 List of References 47 Appendix 1- Questionnaire (Vietnamese version) 52 Appendix 2- Observed variables 55 Appendix 3- Sample characteristics 56 Appendix 4- Reliability Analysis- Cronbach alpha 59   Appendix 5- Exploratory Factor Analysis 64 Appendix 6- Regression Result 68   List of Tables 3.1 Measures of perceived quality 22 3.2 Measures of bank image 23 3.3 Measures of customer satisfaction 24 3.4 Measures of bank loyalty 24 3.5 The final questionnaire 26 3.6 Research sample 27 4.1 Sample characteristics 31 4.2a- Reliability of measurement items (1st time) 33 4.2b- Reliability of measurement items (2nd time) 34 4.3 EFA result for construct measurement scales 36 4.4 Total Variance Explained 36 4.5 EFA result for Bank loyalty 37 4.6 Correlation matrix 38 4.7a- Model summary 38 4.7b- Anovab 39 4.7c- Coefficientsa 39 4.7d- Collinearity Diagnostics 40 4.8 Summary of hypotheses testing results 41   List of Figures 1.1 Outline of chapter 1.2 Structure of the study 12 2.1 Outline of chapter 13 2.2 Proposed research model 17 3.1 Outline of chapter 19 3.2 Research process 21 4.1 Outline of chapter 30 5.1 Outline of chapter 42   Chapter 1: INTRODUCTION 1.1 Introduction This chapter portrays general introduction for the current study with which research problem, research objectives and research questions are provided as the rationale for this study An introduction to the methodology and the scope of the study are also addressed in this chapter At the end of the chapter, the structure of this study is provided The Outline of this chapter is shown in figure 1.1 Figure 1.1 Outline of chapter 1.1 Introduction 1.2 Research background 1.3 Research question 1.4 Scope and Methodology 1.5 Structure of the study 1.2 Research background During the past decade, the financial services sector has undergone drastic changes, resulting in a market place which is characterized by intense competition, little growth in primary demand and increased deregulation In the new market place, the occurrence of committed and often inherited relationships between a customer and his or her bank is becoming increasingly scarce (Levesque and McDougall, 1996) This loyalty leads increasing in his/her volume of business with the organization Several strategies have been   attempted to retain customers In order to increase customer loyalty, many banks have introduced innovative products and services (Meidan, 1996) However, as such innovations are frequently followed by similar charges; it has been argued that a more viable approach for banks is to focus on less tangible and less easyto-imitate determinants of customer loyalty such as customer evaluative judgements like service quality and satisfaction (Worcester, 1997; Yavas and Shemwell, 1996) Surprisingly, however, while there has been a large number of studies that focused on service quality and satisfaction issues (Lewis, 1993), research on the relationship between satisfaction, perceived quality and loyalty in banking sector has remained limited Yet, in the present environment of increased competition with rapid market entry of new service concepts and formats, the challenge of increasing loyalty also presents a challenge of a more in depth understanding of the complex relationship between aforementioned types of customer evaluative judgements and loyalty In addition, there is some evidence that loyalty may also be determined by image (Mazursky and Jacoby, 1986; Murphy, 1996; Osman, 1993) Again, it has remained unclear whether there is a direct relationship between image and loyalty, between perceived quality and loyalty or between customer satisfaction and loyalty In this article we address this issue We propose a model that describes the relationship between perceived quality, satisfaction and bank image with customer loyalty in banking sector Therefore, the objective of this study is to explore the relationship as well as the influence of determinants mentioned above to customer loyalty of some joint stock commercial banks representative in Hochiminh City The researcher also wants to develop measurable scales of these dimensions built up customer loyalty to the bank From that, bank’s managers can give out suitable strategies to make a sustainable development 1.3 Research question Recent years have seen a significant and rapid growth of the banking   Báo Tạp chí Ti vi/ Radio Đề xuất người thân/ bạn bè Khác 32 Mức thu nhập hàng tháng anh/chị là: 5 years Total Valid Percent Percent Percent 58 24.4 24.4 24.4 112 47.1 47.1 71.4 68 28.6 28.6 100.0 238 100.0 100.0 No of its bank Frequency Percent Valid Only one bank   Cumulative Percent Percent 45 18.9 18.9 18.9 More than one bank 193 81.1 81.1 100.0 Total 238 100.0 100.0   56   Valid Types of bought bank's products Responses Percent of N Types of bought bank’s products Percent Domestic payment cards Cases 192 50.7% 80.7% International payment cards 11 2.9% 4.6% Checking account 91 24.0% 38.2% Saving account 75 19.8% 31.5% Expense loan 2.4% 3.8% Others 3% 4% 379 100.0% 159.2% Total Means of joining its bank Responses Percent of N Means of joining Newspapers its bank Percent Cases 51 16.3% 21.4% Magazines 45 14.4% 18.9% TV / Radio 67 21.5% 28.2% 138 44.2% 58.0% 11 3.5% 4.6% 312 100.0% 131.1% Friens’ or relative’s recomendation Others Total Monthly Incomẹ (VND) Cumulative Frequency Valid