Determinants of customer satisfaction in the personal loan service

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY HOANG THI THANH THANH DETERMINANTS OF CUSTOMER SATISFACTION IN THE PERSONAL LOAN SERVICE: A STUDY OF PUBLIC AND PRIVATE BANKING SECTORS IN HO CHI MINH CITY MASTER’S THESIS In Business Administration Ology Code: 60.34.01.02 Supervisor Associate Professor NGUYEN DINH THO Ho Chi Minh City, 2012 ACKNOWLEGEMENT This research project would not have been possible without the support of many people Firstly I would like to express my heartfelt gratitude and deepest appreciation to my supervisor, Associate Professor Nguyen Dinh Tho for his precious guidance, share experience, ceaseless encouragement, and valuable suggestions throughout the course of my research My thanks would also go to all of my classmates, my colleagues, especially my “old pals”, Ms Nguyen Thi Phuong Thao and Ms Le Thi Nhu Huyen for all of their friendship and encouragement I also wish to thank my friends in Agribank, ACBank, Sacombank and Eximbank for their great support My thanks would also go to the respondents, without them, my thesis could not have been done Finally, I would like to express my deepest gratitude and honor to my dear 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 ABSTRACT This study investigates the main factors of the personal loan service affecting customer satisfaction between public and private banks in Ho Chi Minh city Data analysis over a few years reveals that bank‟s performance may be evaluated in relation to a set of satisfaction dimensions to indicate the strong and the weak points of a business According to the results, customer satisfaction is positively related to the service An interesting finding is that five components of service quality (tangibility, reliability, responsiveness, assurance, and empathy) have a positive and significant impact on customer satisfaction, which consists of a previous study of Parasuraman (1991) On the other hand, brand image is an important determinant in relation with customer satisfaction that is measured by Akviran (1994) The different weights of customer expectation, perceived quality, and perceived value have implications for bank managers to use them as a reference source for customer satisfaction strategy The research also provides a modified model of customer satisfaction to determine the critical personal loan service dimensions in public and private banks in Ho Chi Minh city CONTENTS ACKNOWLEGEMENT ABSTRACT CONTENTS LIST OF TABLES LIST OF FIGURES CHAPTER 1: INTRODUCTION 1.1 BACKGROUND OF THE STUDY 1.1.1 Vietnamese banking sector 1.1.2 The personal loan service 1.1.3 Customer satisfaction in Vietnam 1.2 RATIONALE OF THE RESEARCH 1.3 STATEMENT OF THE PROBLEM 1.4 RESEARCH OBJECTIVE 1.5 SCOPE OF THE RESEARCH 1.6 RESEARCH METHODOLOGY 1.6.1 Secondary data 1.6.2 Primary data 1.7 THE STRUCTURE OF THE RESEARCH CHAPTER 2: LITERATURE REVIEW 2.1 INTRODUCTION 2.2 CUSTOMER SATISFACTION 2.3 DETERMINANTS OF CUSTOMER SATISFACTION 2.4 CUSTOMER SATISFACTION WITH THE PERSONAL LOAN SERVICE 2.5 HYPOTHESES AND MODEL 2.5.1 Brand image 2.5.2 Customer expectation 2.5.3 Perceived quality 20 2.5.4 Perceived value 21 2.6 CONCLUSION 23 CHAPTER 3: RESEARCH DESIGN 24 3.1 INTRODUCTION 24 3.2 RESEARCH DESIGN 24 3.3 MEASUREMENT SCALE 27 3.3.1 Introduction 27 3.3.2 Operation of measures 27 3.3.2.1 Scale to measure brand image 27 3.3.2.2 Scale to measure customer expectation 28 3.3.2.3 Scale to measure perceived quality 29 3.3.2.4 Scale to measure perceived value 30 3.4 PRILIMINARY RESEARCH 31 3.5 MAIN RESEARCH 32 3.5.1 Sample design 32 3.5.1.1 Brand selection 32 3.5.1.2 Sampling 33 3.5.1.3 Sample size 34 3.5.2 Survey method 35 3.6 CONCLUSION 35 CHAPTER 4: RESEARCH RESULTS 37 4.1 INTRODUCTION 37 4.2 SAMPLE CHARACTERISTICS 37 4.2.1 Final sample 37 4.2.2 Characteristics of sample 38 4.3 DATA ANALYSIS 42 4.3.1 Reliability evaluation through Cronbach‟s Alpha 43 4.3.2 Evaluation the measurement scale by using Exploratory Factor Analysis (EFA) 46 4.3.2.1 Some rules in EFA test 46 4.3.2.2 EFA for determinants of customer satisfaction 46 4.3.2.3 EFA for customer satisfaction 48 4.3.3 Modeling Testing 48 4.3.3.1 Correlation coefficient analysis 48 4.3.3.2 Regression analysis 49 4.3.3.2.1 Multiple regression assumptions 49 4.3.3.2.2 Regression model 50 4.4 SUMMARY 56 CHAPTER 5: CONCLUSIONS AND IMPLICATIONS 57 5.1 INTRODUCTION 57 5.2 CONCLUSIONS FROM THE RESEARCH QUESTIONS .57 5.3 DICUSSIONS OF THE RESEARCH FINDINGS 59 5.4 CONTRIBUTIONS 61 5.4.1 Theoretical contribution 61 5.4.2 Methodological contribution 63 5.5 MANAGERIAL IMPLICATIONS OF THE RESEARCH 64 5.5.1 Managerial implications for public banks 64 5.5.2 Managerial implications for private banks 65 5.6 LIMITATIONS OF THE RESEARCH AND FUTURE RESEARCH 66 5.7 CONCLUSION 67 APPENDIX 1: GROUP DISCUSSION 74 APPENDIX 2: QUESTIONNAIRE 79 APPENDIX 3: CRONBACH‟S ALPHA ANALYSIS RESULT 83 APPENDIX 4: FACTOR ANALYSIS RESULT 87 APPENDIX 5: MUPTIPLE REGRESSION ASSUMPTIONS .90 LIST OF TABLES Table 3.1 Measures of brand image Table 3.2 Measures of customer expectation Table 3.3 Measures of perceived quality Table 3.4 Measures of perceived value Table 3.5 Measures of customer satisfaction Table 4.1 Sample characteristics of public banks Table 4.2 Sample characteristics of private banks Table 4.3 Reliability test of the personal loan service and customer satisfaction in public and private banks Table 4.4 Final reliability test of the personal loan service and customer satisfaction in public and private banks Table 4.5 EFA analysis result of determinants in public and private banks Table 4.6 EFA analysis result of customer satisfaction in public and private banks Table 4.7 Pearson correlation matrix in public and private banks Table 4.8 Model Summary b in public and private banks b Table 4.9 Anova in public and private banks a Table 4.10 Coefficients in public and private banks b Table 4.11 Model Summary in public banks b Table 4.12 Model Summary in private banks b Table 4.13 Anova in public banks b Table 4.14 Anova in private banks a Table 4.15 Coefficients in public banks a Table 4.16 Coefficients in private banks LIST OF FIGURES Figure 2.1 Research model 22 Figure 3.1 Research process 26 CHAPTER 1: INTRODUCTION 1.1 BACKGROUND OF THE STUDY 1.1.1 Vietnamese banking sector The banking sector in Vietnam has a significant growth rate during past two decades along with the economic development This banking system consists of five commercial state-owned banks, thirty seven commercial joint-stock banks, six jointventure banks, thirteen 100% foreign banks, and fifty three representative branches of foreign banks (Wikipedia, 2012) The development primarily concentrates on commercial joint-stock and foreign banks showing the attractiveness and potential development of Vietnam baking industry to inland investors as well as international financial institutions The market changes create more challenges and difficulties for banks The public banks face adoption of technology and issues like credit proposals and personal matters Processing bad debits, finding partners to increase financial ability, dealing with difficult issues from the tight currency policy and the limited credit scale are carried out by the private banks Changing the attitude of personnel and developing strategies are justified for the strong and weak banks All banks must design a new plan to survive in the innovative period (Bui, 2011) With the entry of new generation tech-savvy private banks and the expansion of operations of foreign banks, the banking sector has become too competitive Well-computerized foreign banks are beginning to compete seriously with the nationalized banks They aim at a profitable and wealthy part of the market and, in contrast to the nationalized banks; they not recognize any social responsibilities to small account holders Almost of the banks are still controlled by Public Sector Banks (PSBs) PSBs are still dominating the commercial banking system To deal with the emerging situations, bankers have to shed a lot of old ideas, change in practices, develop customer loyalty programs, and adopt a distinct approach to meet the challenges ahead In a fiercely competitive market, non-price factors like customer service become more important Hence, it is desirable for banks to develop a customer-centric approach for future survival and growth Efficient and speedy customer service is implemented to attract the existing customers in continuing and inducing new customers to try the services offered by a bank Vietnamese banks have already taken lot of initiatives in this regard Further, it has been realized that Vietnamese banks have miles to go to capture the recent trends and to compare with the Western counterparts As a result, many banks have introduced new customer friendly measures like 24-hour banking, 7-day and anywhere banking, internet banking, extended business hours, ATM network, etc 1.1.2 The personal loan service With years, banks are adding services to their customers The Vietnamese banking industry is passing through a phase of customers market The customers have more choices among the banks A competition has been established within the banks‟ operating in Vietnam The development of business activities, manufacturing and trading, more and more individuals borrow a large of money from banks to manage their business It creates a large chance for banks extending personal loan service with different loan methods such as partial loan, loan under credit limit, installment loan, etc Besides, the Pubic Sector Banks have signed the determinant to decrease the loan interest rate to 17 - 18%/year for individuals (Nguyen, 2012) The enlarged loan objects, the loosened loan conditions, and the improved liquidity make the commercial banks give promotions In February, 2012 Oceanbank has the loan projects to buy houses with the interest rate down to 19%/year It lends up maximum 80% of house value within up to 120 months ABBank is implementing the program “Easy loans – 81 commensurate values for loans 30 Bank [X]‟s personal loan time period is suitable values for loans 31 Bank [X]‟s personal loan rate is commensurate with inflation rate 32 Bank [X]‟s traveling expenses to meet personal loan service is suitable values for loans Customer satisfaction 33 Overall, you are satisfied with bank [X]‟s the personal loan service 34 Overall, you find bank [X] better than other banks 35 You are likely to recommend bank [X] to others 36 Please tell me your name: 37 Gender: 38 Age: 18–30 31–40 41–50 > 50 39 How long have you used personal loan service in bank [X]? year(s) 40 Type of personal loan services is you using in bank [X]? (can choose more than one): Home mortgage loan Home equity – renovation Home equity – overseas education Home equity – other purposes Car loan Personal installment loan Other loan (note clearly: 41 Your income level monthly is: < million VND – < 10 million VND 10 – < 20 million VND ≥ 20 million VND 82 42 Your education level: Under high school High school College / University Over university 43 Your career is: Officer or employee of State company Staff of foreign company Teacher Trade, small business Worker Student Retiree Owner of private enterprise Professional career (doctor, lawyer…) Housewife Other occupation (note clearly: 83 APPENDIX 3: CRONBACH’S ALPHA ANALYSIS RESULT 3.1 BRAND IMAGE Cronbach's Alpha 939 BI1 BI2 BI3 BI4 BI5 BI6 BI7 BI8 3.2 CUSTOMER EXPECTATION Cronbach's Alpha 910 CE1 CE2 CE3 CE4 84 3.3 PERCEIVED QUALITY 3.3.1 Step Reliability Statistics Cronbach's Alpha PQ1 PQ2 PQ3 PQ4 PQ5 PQ6 PQ7 PQ8 PQ9 PQ10 PQ11 PQ12 PQ13 PQ14 PQ15 Reliability Statistics Cronbach's Alpha .893 12 85 Item-Total Statistics PQ1 PQ4 PQ6 PQ7 PQ8 PQ9 PQ10 PQ11 PQ12 PQ13 PQ14 PQ15 Cronbach's Alpha PQ7 PQ8 PQ9 PQ10 PQ11 PQ12 PQ13 PQ14 PQ15 86 3.3.4 Step Reliability Statistics Cronbach's Alpha 949 PQ8 PQ9 PQ10 PQ11 PQ12 PQ13 PQ14 PQ15 3.4 PERCEIVED VALUE Reliability Statistics Cronbach's Alpha 913 PV1 PV2 PV3 PV4 PV5 87 APPENDIX 4: FACTOR ANALYSIS RESULT 4.1 DETERMINANTS OF CUSTOMER SATISFACTION KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity Total Variance Explained Component 10 11 12 13 14 15 16 17 18 19 20 21 22 23 88 24 25 Extraction Method: Principal Component Analysis BI1 BI2 BI3 BI4 BI5 BI6 BI7 BI8 CE1 CE2 CE3 CE4 PQ8 PQ9 PQ10 PQ11 PQ12 PQ13 PQ14 PQ15 PV1 PV2 PV3 PV4 PV5 4.2 CUSTOMER SATISFACTION KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity 89 Total Variance Explained Component TM1 TM2 TM3 Extraction Method: Principal Component Analysis a components extracted 90 APPENDIX 5: MUPTIPLE REGRESSION ASSUMPTIONS 5.1 LINEARITY AND HOMOSCEDASTICITY 5.2 NORMALITY 91 Tests of Normality Standardized Residual a Lilliefors Significance Correction * This is a lower bound of the true significance ... of the construct measurement scale The findings from the survey led to the finalization of the instrument for the main study The fourth section presents the assessment of the personal loan service. .. impact on customer satisfaction in the personal loan service in public and private banks in Ho Chi Minh city Based on Le (2012), the customer satisfaction model for the personal loan service in public... set of satisfaction dimensions to indicate the strong and the weak points of a business According to the results, customer satisfaction is positively related to the service An interesting finding