Factors influencing customer retention some emprical evidences from local and foreign banks in ho chi minh city

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Nguyen Quang Minh Factors Influencing Customer Retention Some Empirical Evidences from Local and Foreign Banks in Ho Chi Minh City MASTER OF BUSINESS (Honours) Ho Chi Minh City – Year 2015 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Nguyen Quang Minh Factors Influencing Customer Retention Some Empirical Evidences from Local and Foreign Banks in Ho Chi Minh City ID: 22130039 MASTER OF BUSINESS (Honours) SUPERVISOR: DR LE NGUYEN HAU Ho Chi Minh City – Year 2015 TABLE OF CONTENTS ABSTRACT INTRODUCTION 1.1 Research background 1.2 Research questions and research objective 1.3 Research delimitation 1.4 Thesis Structure LITERATURE REVIEW 2.1 Theoretical review 2.1.1 Customers retention 2.1.2 Relationship quality 2.1.3 Switching barriers 2.1.3.1 Relational benefits 2.1.3.2 Switching costs 2.1.3.3 Availability and attractiveness of 2.2 Hypotheses Development 2.2.1 Customer satisfaction and custome 2.2.2 Trust and customer retention 2.2.3 Commitment and customer retentio 2.2.4 Switching barriers and customer re 2.3 Research Model METHODOLOGY 3.1 Research design 3.2 Measurement scales 3.3 Method of data collection 3.3.1 Sample size 3.3.2 Method of data collection 25 3.4 Data analysis method 26 3.4.1 Assessment of measurement of scale 26 3.4.2 Multiple Regressions 27 DATA ANALYSIS AND RESULT 28 4.1 Sample characteristics 28 4.2 Assessment of measurement scales 29 4.2.1 Cronbach Alpha 29 4.2.2 Exploratory factor analysis 32 4.2.2.1 EFA for independent factors 32 4.2.2.2 EFA for dependent factors 34 4.3 Hypothesis testing 35 4.3.1 Testing relationship of independent factors & dependent factor 35 4.3.2 Testing Assumption of multiple Regressions 37 4.3.3 Evaluate and test the relevance of the model 41 4.4 Comparing foreign banks and local banks 43 IMPLICATION AND CONCLUSION 46 5.1 Summary 46 5.2 Conclusion 47 5.3 Recommendation 49 5.4Limitation and further research directions 51 APPENDIX 1: EFA RESULT FOR FIRST TIME RUNNING 73 APPENDIX 2: EFA RESULT FOR SECOND TIME RUNNING 74 APPENDIX 3: KMO & BARTLETT‟S TEST FOR THIRD TIME RUNNING 75 APPENDIX 4: EFA FOR INDEPENDENT FACTOR 76 APPENDIX 5: MULTIPLE REGRESSION 77 LIST OF FIGURES Figure 1: Research model 19 Figure 2: Research process 21 Figure 3: Revised research model 37 LIST OF TABLES Table 3.1: Summary of scales for constructs in the model 23 Table 4.1: Sample characteristic 28 Table 4.2: Reliability Analysis 30 Table 4.3: Revised Reliability Analysis 32 Table 4.4: EFA result for independent factors 33 Table 4.5: EFA result for dependent factor 35 Table 4.6: Result of Pearson Correlation 35 Table 4.7: Hypothesis testing result 38 Table 4.8: Multiple Regressions results of Customer retention to independent 41 Table 4.9: Conclusion 42 Table 4.10: Comparing factors between local banks and foreign banks .44 Table 4.11: Relationship between Respondents‟ Likelihood of Staying and Bank 45 ABSTRACT Customer retention is an important element of any banking strategy in today‟s increasingly competitive environment To achieve the customer retention strategy, some elements are examined Among of them are relationship quality and switching barriers Relationship quality is often seen as the key factor for business building a successful and long-term relationship In the context of high competitive market place nowadays, relationship quality is often viewed as a central determinant of customer retention However, the few empirical investigations in this area indicate that relationship quality is only a necessary condition, not enough to keep customer stay with the business One more factor is given to discuss in this study is switching barriers Together with relationship quality, we explore how switching barriers help the services suppliers keep their existing customers from changing to another competitor This research examined these factors in the context of banking industry in Vietnam, a developing country with penetration of many foreign banks through the process of integrate WTO Customers nowadays have many options to choose which bank they want to cooperate Therefore, both foreign banks and local banks have to develop their strategies to retain their customers and increase their advantages CHAPTER 1: INTRODUCTION This chapter provides a background of information on the present study and its objectives and purposes It is divided into four sections The first section presents background of the research, the second part presents the problem statement and its objectives, and the third part presents the scope of study and the final part present the thesis structure 1.1 Research Background In today‟s highly competitive environment, losing customer is very costly Researcher concluded that it can be ten times more expensive to attract a customer than to retain an existing one, and the cost of bringing new customer to the level of profitability as the lost one is up to 16 times more (Lindgreen et al., 2000) Understanding thoroughly these difficulties, companies are more focusing their strategic effort on customer retention (Berry, 1983; Fornell, 1992) Many studies have been conducted for this issue, and many opinions have been explored for which factors influencing customer retention Obviously, a key component in any customer retention program is relationship quality (Oliver, 1997) Relationship quality can be defined as customers‟ perception of how well the relationship responds to his/her expectations, aims and demands (Jarvelin & Lehtinen, 1996) From that, they would consider about continuing or terminating with current suppliers There are many factors that constitute relationship quality After reviewing the empirical and theoretical literatures, we identified three elements which are commonly claimed to represent as significant components of perceived relationship quality: customer satisfaction (Hendrick, 1988), trust (Rempel, Holmes & Zanna, 1985) and commitment (Adams & Jones, 1997; Lund, 1985) However, for the purpose of keeping customer staying with business longer, the management need to consider other factors helping them to achieve that objective In recent studies, switching barriers is a significant element should be mentioned Follow Jones et al (2000) switching barriers is any factor that makes it difficult or costly for customers to change supplier Thus, if company desires to develop long-lasting relationships with their customers, it is important for them to understand why dissatisfied customers may or may not switch to other suppliers and how the presence of switching barriers can affect the evaluation of service recovery effort (Yanamandram & White, 2006) In case, businesses know which dimensions are important to customer‟s decision about switching to competitors they can tailor their products to respond more specifically to customer needs Responding appropriately to customer needs mean that company is likely to retain more customers and build brand loyalty amongst existing customers Therefore, in an effort to preclude switching and harden long-term working relationships, business suppliers nowadays find many methods to make customers feel satisfied, reinforce their trust and commitment in customers‟ perception and strengthen exit barriers to effectively retain buyers This research is to identify the interaction effects of relationship quality and switching barriers to customers‟ awareness and decision We test our model in a continuous purchasing setting, the banking sector Banking industry is a modern services industry Especially, becoming a membership of World Trade Organization (WTO) requests Vietnam opening out to foreign investors as their liberalization requirements (Nguyen, 2008) Therefore, the number of foreign-owned financial institutions has been steadily increased Until now, foreign banks have been growth to 49 branches, which mostly concentrated in Ho Chi Minh city and Hanoi This is an impression number compared with 2007, the year Vietnam joined WTO, were foreign owned banks In this highly competitive banking market, foreign banks, however, are at an advantage in comparison with their Vietnamese counterparts They have better organizational structures, offer more professional services, and enjoy the network across many countries On the other hand, local banks also have their own specific strength such as widespread braches, familiar with Vietnamese, and support from State Bank With more and more diversified customer‟s demand nowadays, banks have to renew themselves and find more effective solutions to attract new customers as well as retain the current ones That makes the competition between the local banks and foreign banks become more fierce and intensive to stand firm in competitive marker-place Researching about above factors and how they affect to customer retention greatly contributes to bank‟s strategy 1.2 Research question and research objective The objective of this study isto identify the effect of relationship quality and switching barriers on customer retention Particularly: - How many factors constituting relationship quality? How does each of them affect customer retention? - How many factors constituting switching barriers? How does each of them affect customer retention? - Which factor will influence customer retention most? 1.3 Research delimitation This study focuses on retail customers at local banks and foreign banks in Ho Chi Minh City The candidates for this research usually use banking services on routine life Young people under 18 years old who not have much income and can not make individual financial decisions are not chosen to be respondent Hence, this sample can not represent for Vietnam nationwide Furthermore, there are four factors including satisfaction, trust, commitment, and switching barriers being explored 1.4 Thesis structure This thesis is organized as follows: 66 ☐ Joint venture bank ☐ Other: From now on, we will call this bank is Bank X PART 2: CUSTOMER’S FEEDBACK There are some statements about bank X Depend on your evaluation, please choose the answer from totally disagree to totally agree by sticking (√) in the appropriated blank Your evaluation with banking services: Overall, I am happy with bank X Bank X meets my expectations I think I did the right thing when I joined bank X Your evaluation with banking reliability I have great confidence in bank X‟s services Promises made by bank X are reliable 10 11 Bank X is capable in providing banking service to me Bank X treats me in an honest way in every transaction Your feeling about bank X I take pleasure in being a customer of bank X Bank X is the operator that takes the best care of their customers There is a presence of reciprocity in my relationship with bank X I have feelings of trust toward bank X Totally disagree 67 12 13 14 15 16 It would be too costly for me to leave Bank X, therefore One of the major reasons I continue to bank with Bank leaving would require considerable personal sacrifice I stay with Bank X because the costs of changing excee benefits Your obligation/ commitment with bank X Our attachment to bank X is mainly based on the simila values The reason I refer bank X to others is because of what i for, its value 17 What bank X stands for is important to me 18 I feel an obligation to remain with bank X 19 I owe a great deal to bank X The benefits bank X gave to you 20 Staying allows me to get discounts and special deals 21 Staying saves me money 22 Staying allows me to get extra service benefits 23 Your consideration about changing banking services In general it would be a hassle changing banks 24 It would take a lot of time and effort changing banks 25 26 For me, the costs in time, money, and effort to switching are high If I switch to another bank, I am concerned about negat financial outcomes 27 Your acknowledge about the alternatives All banks are the same 28 I am not sure if other banks offer better services 29 Other banks not offer better services 30 I know other banks offer better services but I prefer to s bank X 68 31 How likely is that you continue your relationship with bank X? Within the next six months? 32 Within the next one year? 33 Within the next two years? Thank you for your feedback 69 PHIẾU KHẢO SÁT DỊCH VỤ NGÂN HÀNG Chào Anh/Chi, Tôi tên Nguyễn Quang Minh, học viên cao học ngành Quản Trị Kinh Doanh viện Đào Tạo Quốc Tế - trường Đại học Kinh Tế Tp HCM Hiện làm luận văn thạc sĩ có liên quan đến chất lượng dịch vụ ngành ngân hàng Những ý kiến bạn thơng tin hữu ích giúp tơi hồn thành luận văn tốt Rất mong Bạn dành thời gian để trả lời Phiếu khảo sát Xin chân thành cám ơn chúc Bạn sức khỏe, thành công hạnh phúc! Lưu ý khơng có câu trả lời hay sai, tất ý kiến phản hồi có giá trị cho nghiên cứu PHẦN 1: THƠNG TIN TỔNG QT Giới tính bạn: ☐ Nam Độ tuổi: ☐18-22 ☐23-29 ☐30-39 ☐40-49 ☐>50 Trình độ học vấn: ☐Trung học ☐Phổ thơng ☐Cao đẳng – Đại học ☐Sau đại học ☐Nữ 70 Số lượng ngân hàng bạn sử dụng/ giao dịch: ☐1 ☐2 ☐3 ☐>=4 Ngân hàng bạn thường xuyên sử dụng/ giao dịch:………………… ☐Ngân hàng TMCP nước ☐Chi nhánh Ngân hàng nước ☐Ngân hàng Liên Doanh ☐Khác (Từ trở đi, gọi Ngân hàng X) Bạn, xin đánh dấu (√) vào ô tương ứng từ hoàn toàn không đồng ý đến hoàn toàn đồng ý: Đối với dịch vụ ngân hàng X bạn sử dụng: Nhìn chung, tơi hài lòng với ngân hàng X Ngân hàng X đáp ứng mong đợi Tôi cho đắn lựa chọn ngân hàng X Độ tin cậy bạn với ngân hàng X Tôi tin tưởng vào dịch vụ ngân hàng X Những cam kết thực ngân hàng X đáng tin cậy xác thực Hoàn toàn không Sau phát biểu ngân hàng X Tùy vào mức độ tán thành đồng ý PHẦN 2: ĐÁNH GIÁ CỦA KHÁCH HÀNG 71 Ngân hàng X giỏi việc cung cấp dịch vụ cho khách hàng Ngân hàng X đối đãi với cách trung thực giao dịch Cảm nhận bạn ngân hàng X Tôi cảm thấy vui trở thành khách hàng ngân hàng X Ngân hàng X ln chăm sóc tốt cho khách hàng 10 Tơi ln ưu tiên đặt ngân hàng X lên đầu lựa chọn giao dịch 11 Tơi cảm thấy tin cậy ngân hàng X 12 Sẽ tốn cho việc chuyển giao dịch sang ngân hàng khác 13 Nhiều lợi ích cá nhân chuyển giao dịch sang ngân hàng khác, lý quan trọng khiến tơi lại Chi phí chuyển đổi lớn lợi ích thu được, tơi tiếp tục giao dịch với ngân hàng X 14 15 Nghĩa vụ bạn với ngân hàng X Ngun nhân khiến tơi thích ngân hàng X ngân hàng khác giá trị mà mang lại 16 Các giá trị mà ngân hàng X mang lại tương thích với kỳ vọng 17 Các giá trị mà ngân hàng X mang lại quan trọng 18 Tơi tiếp tục giao dịch với ngân hàng X nghĩa vụ ký 19 Tơi cịn nợ ngân hàng X khoản lớn 20 21 22 23 Những ưu đãi có bạn tiếp tục giao dịch với ngân hàng X Tiếp tục trì giao dịch với ngân hàng giúp tơi có nhiều miễn giảm ưu tiên Tiếp tục trì giao dịch với ngân hàng giúp tiết kiệm chi phí Tiếp tục trì giao dịch với ngân hàng giúp tơi có nhiều khuyến dịch vụ đặc biệt Suy nghĩ bạn việc đổi dịch vụ ngân hàng Tóm lại, việc thay đổi ngân hàng điều rắc rối 72 24 Thay đổi ngân hàng tốn nhiều thời gian công sức 25 Thời gian, chi phí cơng sức cho việc thay đổi dịch vụ ngân hàng cao 26 Nếu chuyển sang ngân hàng khác, lo lắng tổn thất tài có Nhận xét bạn ngân hàng khác thị trường 27 Dịch vụ ngân hàng giống giống 28 Tơi khơng ngân hàng khác có ưu đãi nhiều dịch vụ tốt hay không 29 Các ngân hàng khác khơng có nhiều dịch vụ tốt 30 Tôi biết ngân hàng khác ưu đãi nhiều dịch vụ tốt hơn, tơi thích giao dịch với ngân hàng X Bạn dự định tiếp tục trì dịch vụ ngân hàng vòng: 31 tháng 32 năm 33 năm Xin chân thành cám ơn chúc Bạn sức khỏe, thành công hạnh phúc! 73 APPENDIX 1: EFA RESULT FOR FIRST TIME RUNNING Rotated Component Matrix Cus1 Cus2 Cus3 Emc8 Emc9 Noc15 Noc16 Noc17 Emc10 Swc23 Swc24 Swc25 Reb20 Reb22 Reb21 Aaa28 Aaa29 Aaa27 Cam12 Cam14 Cam13 Trt4 Trt5 Trt6 a 74 Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity APPENDIX 2: EFA RESULT FOR SECOND TIME RUNNING Rotated Component Matrix Swc24 Swc23 Swc25 Cam12 Cam14 Aaa28 Aaa29 Aaa27 Cam13 Noc16 Noc15 Noc17 Reb22 Reb20 Reb21 Cus3 Cus2 Cus1 Trt5 a 75 Trt4 Trt6 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization APPENDIX 3: KMO & BARTLETT’S TEST FOR THIRD TIME RUNNING Compone nt Total 6.095 2.137 1.719 1.368 1.087 1.009 76 Appendix 4: EFA FOR INDEPENDENT FACTOR KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity Total Variance Explained Compon ent Extraction Method: Principal Component Analysis 77 APPENDIX 5: MULTIPLE REGRESSION Model Summary Model a Predictors: (Constant), TR, SW, AA, RE, CM, CS Model Regression Residual Total a Predictors: (Constant), TR, SW, AA, RE, CM, CS b Dependent Variable: RT Model (Constant) CS CM SW RE AA TR ... ECONOMICS HO CHI MINH CITY International School of Business Nguyen Quang Minh Factors Influencing Customer Retention Some Empirical Evidences from Local and Foreign Banks in Ho Chi Minh. .. smart and profitable customer retention strategy to keep their existing customers and making more profit from them (Weinstein, 2002) The main factors influencing customer? ??s selection of a bank include... on retail customers at local banks and foreign banks in Ho Chi Minh City The candidates for this research usually use banking services on routine life Young people under 18 years old who not have