A study on customer behaviors in chain coffee shops in vietnam

VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY -*** NGUYEN HUU CUONG A STUDY ON CUSTOMER BEHAVIORS IN CHAIN COFFEE SHOPS IN VIETNAM MASTER'S THESIS Hanoi, 2020 VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY -*** NGUYEN HUU CUONG A STUDY ON CUSTOMER BEHAVIORS IN CHAIN COFFEE SHOPS IN VIETNAM MAJOR: BUSINESS ADMINISTRATION CODE: 8340101.01 RESEARCH SUPERVISORS: Prof Dr PEIJUN GUO Associate Prof Dr NGUYEN VIET KHOI Ha Noi, 2020 ABSTRACT This research aims to investigate and understand the relationship between price, customer-based brand equity, customer satisfaction, and brand loyalty in the Vietnam’s chain coffee shops The chain coffee shops are earning big money and growing fast in Vietnam so that it is necessary to appreciate the importance of customer behaviors to manage this type of business To that, we set brand loyalty and customer satisfaction as dependent variables and set price, congruence, and quality as independent variables then describe the difference of those relationships in two empirical cases in Hanoi and Ho Chi Minh City We use the quantitative approach on a sample of 427 respondents in Highlands Coffee and The Coffee House, which are two major Vietnamese coffee shop brands We utilize the structural equation modeling (SEM) method by SPSS software Descriptive analyses and path analyses of the multivariate regression model support the validity of the proposed model The findings in this study are that significant positive effects from price, quality, and congruence on customer satisfaction and satisfaction on brand loyalty in Hanoi and Ho Chi Minh City chain coffee shops The analyses also indicate that among three antecedents of customer satisfaction, quality has the most substantial influence, follow by congruence and price Moreover, the analyses tell that in Ho Chi Minh City, customer satisfaction has much higher impact on brand loyalty than in Hanoi Several implications might be withdrawn to coffee shop brands as a consequence of these results Keywords: Price; Food and Service Quality; Customer Satisfaction; Brand Loyalty; Martketing; Branding; Chain Coffee Shop; Vietnam ACKNOWLEDGMENT After two years of studying and researching at Vietnam Japan University, it is my privilege to be able to write this dissertation From the first interview session for university entrance, I have been keeping the research orientation on the subject, which I am interested in, customer behavior in the coffee shops industry The study included not only academic but also practical aspects with implications for understanding the customer The subjects and knowledge I gained through coursework sessions also play an essential role in supporting my research activities I hope that my research can contribute to researches on the customer behavior in the coffee shop industry First of all, I would like express my gratitude to my advisors, Professor Peijun Guo and Professor Nguyen Viet Khoi, for their guidance and comments Especially the time when I was in Yokohama, Japan, my advisors gave me valuable advice about how I should proceed with the researching process Without their prompt and patient instructions, I cannot finish the thesis I want to say thanks to all of my friends, respondents of the questionnaires for their support and encouragement Finally, thanks to my family for emotional and financial support that motivate me for making effort to complete the research Remarkably, thanks to my mother, despite her leg injury recovering period, she has always encouraged and supported me so that I can focus on the study TABLE OF CONTENTS ABSTRACT ACKNOWLEDGMENT LIST OF ABBREVIATIONS LIST OF TABLES LIST OF FIGURES CHAPTER 1: INTRODUCTION 1.1 Background of the research 1.2 Problem statement 1.3 Research objectives 1.4 Scope of the research .6 1.5 Significance of the research 1.6 Thesis structure CHAPTER 2: LITERATURE REVIEW 2.1 Brand equity .8 2.2 Customer satisfaction 10 2.3 Brand loyalty 10 2.4 Price .11 2.5 Relationship between brand equity, price, customer satisfaction and brand loyalty 12 2.5.1 Brand equity and customer satisfaction 12 2.5.2 Price and customer satisfaction .14 2.5.3 Customer satisfaction and brand loyalty 15 2.6 Research model 17 CHAPTER 3: METHODOLOGY 19 3.1 Research design 19 3.2 Data collection instruments 20 3.3 Data analysis 22 CHAPTER 4: FINDINGS 23 4.1 General results .23 4.1.1 Demographic information 23 4.1.2 Demographic customer behavior .23 4.2 Descriptive analysis .25 4.3 Analytical results 27 4.3.1 Statistical results in Hanoi .27 4.3.2 Statistical results in Ho Chi Minh City 31 CHAPTER 5: DISCUSSION AND CONCLUSION 38 5.1 Discussion .38 5.2 Practical implications 39 5.3 Limitations and future research recommendations 41 REFERENCES 43 APPENDIX 50 LIST OF ABBREVIATIONS ASV Average Shared Variance” AVE “Average Variance Extracted CBBE Customer-Based Brand Equity CFA Confirmatory Factor Analysis” CFI “Comparative Fit Index CR Composite Reliability DF Degrees of Freedom EFA Exploratory Factor Analysis GFI Goodness of Fit Index HCM Ho Chi Minh KMO Kaiser-Meyer-Olkin MSV Maximum Shared Variance RMSEA Root Mean Square Error of Approximation” SEM “Strutural Equation Modeling TCH The Coffee House TLI Tucker-Lewis Index LIST OF TABLES Table 1.1 Leading coffee shops brand in Vietnam in 2019 Table 3.1 Questionnaire scale and construct 21 Table 4.1 Profile of respondents………………………………………………… 23 Table 4.2 Demographic customer behavior 24 Table 4.3 Descriptive analysis 26 Table 4.4 Reliability test in Hanoi 27 Table 4.5 KMO and Bartlett's Test in Hanoi 28 Table 4.6 Pattern Matrix in Hanoi 28 Table 4.7 Results of GOF tests of CFA factor analysis in Hanoi 29 Table 4.8 Convergent and discriminant validity in Hanoi 30 Table 4.9 Results of SEM analysis in Hanoi 31 Table 4.10 Reliability test in HCM City 31 Table 4.11 Pattern Matrix in HCM City 32 Table 4.12 KMO and Bartlett's Test in HCM City 33 Table 4.13 Results of GOF tests of CFA factor analysis in HCM City 33 Table 4.14 Convergent and discriminant validity in HCM City .34 Table 4.15 Results of SEM analysis in HCM City 36 LIST OF FIGURES Figure 1.1 Total domestic coffee consumption in Vietnam from 2010 to 2018 .2 Figure 2.1 Research model………………………………………………… …….17 Figure 4.1 CFA path analysis in Hanoi 29 Figure 4.2 SEM path analysis in Hanoi 30 Figure 4.3 CFA path analysis in HCM City 34 Figure 4.4 SEM path analysis in HCM City 35 CHAPTER 1: INTRODUCTION 1.1 Background of the research As a developing country, Vietnam has a massive capacity of agricultural land accounts for 39% in the total area with the contribution to GDP at 15% in 2017 (Statista, 2020) The report by Statista also indicated that the primary labor force of Vietnam is in the agriculture sector, with 40% of employment amounted to approximately 20 million people in 2018 In this sector, the coffee industry is vital for both domestic and foreign markets as Vietnam has been maintaining the position as the world’s second-largest coffee exporter in consecutive years In the early twentieth century, coffee was first introduced into Vietnam in the time of colonization by France, coffee production then increased rapidly and became one of the most crucial agricultural products The first instant coffee plant with a manufacturing capacity of 80 tons per year, was established in Dong Nai Province, in 1969 The two main kinds of coffee beans in Vietnam are Robusta and Arabica, containing 1.6 to 2.7% caffeine and to 1.5% caffeine, respectively, making the taste of coffee here bitter and healthier than the coffee drinks in the world According to Tran (2019), in the marketing year of 2018/2019, domestic consumption of coffee is at million bags, and the experts forecast this number will drastically increase due to the fierce competition of both international and local coffee brands in Vietnam The domestic consumption of coffee casts for approximately 10% of total coffee production, much lower than the exported amount of coffee, which means the local coffee shops still can grow From Table 1.1, we know the upward trend in consuming coffee of Vietnamese consumers from 2010 to 2018, and this upward trend signifies the continuing increase in domestic coffee consumption in the future 3,000 2,500 2,000 1,500 1,000 500 2010 2011 2012 2013 2014 2015 2016 2017 2018 Figure 1.1 Total domestic coffee consumption in Vietnam from 2010 to 2018 (Unit: 1000 sixty-kg bags) (Source: statista.com) There are many newly-built coffee chains in recent years in Vietnam According to Le (2018), coffee chains have competitive advantages in quickly detecting target customers and creating a standardized management system Also, coffee chains have more competency in attracting consumers when they become professional brands Additionally, it is difficult to have a precise number of coffee shops in Vietnam for the fact that the independent coffee shops locate sparsely and have a short life cycle However, the coffee chains have been the trend for business in coffee shops in Vietnam, along with the evolution of e-commerce and delivery service There are leading brands in the coffee chain market in Vietnam that prevails in the number of stores and revenue, namely Highland Coffee, Starbucks, The Coffee House, and Trung Nguyen Coffee American giant coffee shops brand Starbucks, which entered Vietnam in 2013, now runs 60 shops, mostly in Hanoi and HCM City However, Starbucks offers a higher price than local chains like The Coffee House or Highland though they are in the same premium segment Domestic coffee chains in Vietnam manage a wide variety of products, from drinks to foods as well as secure Wi-Fi connection and tranquil space, especially sensitive in market trends and taste of the customer Nowadays, fast-pace economic development in Vietnam encourages competition in various business and service sectors Many big firms try to invest substantial financial sources to gain market share and revenue despite losing profit, especially in creating chain businesses Other than the growth of convenient store From these results, the study confirms that price, quality, and congruence have positive impacts on customer satisfaction, and satisfaction has a positive impact on brand loyalty in chain coffee shops in Vietnam These relationships are significant, and the model is valid when adding price as the new factor to the research model However, the correlation of satisfaction to loyalty in Hanoi is low in comparison to previous studies, as well as to the case of HCM City This result explains why coffee chain brands are conservative in expansion in the market of Hanoi; the phenomenon of store number is valid for the study 5.2 Practical implications The findings in this research bring implications to the service industry or the chain coffee shop managers, especially in Vietnam Firstly, as this paper confirms the model by Nam et al (2011), the companies in the service industry should concentrate on the enhancement of food and service quality, the congruence with the customer to improve satisfaction as well as loyalty Primarily, coffee shops in Vietnam should employ critical approaches to assess the factor affecting satisfaction and loyalty, frequently obtain the update on the market trend, as well as the feedback from the customer Along with the congruence in lifestyle and ideal-self of the customer with the brand, coffee shops must improve the customer experience and service quality The questionnaire results in this paper showed that the majority of customers visiting the coffee shops on the purposes of friends gathering and business meetings A community around the brand or promoting lifestyle or identity for the customer of the brand should also be a good strategy than just focusing on functional usage Moreover, there is concern from the customer in terms of environment-friendly products; the coffee shops should take action to contribute to decreasing the greenhouse effect by reducing the use of plastic cups This strategy is useful to promote a brand image or lifestyle-congruence to the customer Secondly, as the price has a positive impact on customer satisfaction, the coffee shops in Vietnam should understand the attitude of customers toward the pricing policy of the brand While the market is still growing, and the demand is increasing, many players can compete with others by price, the customer has freedom of choices If the customer considers the price unreasonable, they are unsatisfactory then have more tendency to switch to other brands, this issue is detrimental to the 39 loyalty of the customer to the firms Enhancing the fairness of price as well as include added-value like promotions or price-cut to the regular customer should also be strategic measures As specified in the first chapter, the objects in this paper are two major brands in Vietnam, focusing on the premium segment of the coffee shop market The purpose of using this service is flexible recently In this study, the effect of the price should be compatible with the result of congruence, where customers nowadays consider coffee shops as a place to show their lifestyle and class They are willing to pay high or even excessive amounts of money to choose the brand with an attractive location, nice view, or appealing store design to take pictures, impress people or partners, and share social media experience Moreover, it is even more persuasive with the case of young students who have low or no salary but still frequently pay to keep using the service of fancy coffee shops From the success of two Vietnamese brands in this study, Highlands Coffee and The Coffee House, it is useful to take good care of the customer in perspectives of price, food and service quality, and the congruence of the customer These brands are among the few Vietnamese coffee brands able to compete with foreign competitors, franchised shops, and milk tea stores The failures of The Kafe, Gloria Jeans, and even Starbucks Coffee in Vietnam proved that this market is unique, and understanding customers and fast adaption to new trends are the keys to success This coffee chain service in Vietnam has potential and a high growth rate, customer behavior also changes frequently Without adequate market understandings and a well-targeted segmentation strategy, it is difficult to achieve a sustainable business Also, as elaborated in the detailed results, tea drinks the majority of the customer choosing favorite products at coffee shops these days The coffee shops in Vietnam should build a brand image, not just focus on conventional coffee shops It is useful for Vietnamese coffee shops to diversify the menu and combo to satisfy customer tastes As the two brands in this study, Highlands Coffee and The Coffee House, they have good feedback and impression from the customer on coffee drinks, but they still maintain adequate awareness on their signature juice or tea drinks Besides, this study confirms the difference in customer behavior in Hanoi and HCM City verified the motives of chain coffee shops in Vietnam to focus more on 40 Southern Vietnam Many people believed that because HCM City is more modern than Hanoi, there are more stores of coffee shops brand in HCM City However, this study indicated another aspect of customer behavior Customers in Hanoi are ordinary and similar to HCM City in terms of price, quality, congruence, and satisfaction towards coffee shop brands However, the relationship between satisfaction and loyalty in Hanoi is weaker than that in HCM City This problem of satisfactionloyalty from the geographical area incurs the need for coffee shops brand to cope with expanding in the Hanoi market The study suggests the coffee shops continue what they are doing best in terms of price, food and service quality, community, and marketing activities to enhance customer satisfaction Notably, coffee chains should promote the perks of being a loyal customer or the connection of the brand to the customer in the media Also, it is the right strategy of coffee chains to grow slowly in Hanoi while the customer still reluctant to be loyal to a brand The significant uniqueness of the Hanoi market is the demand of customers for a better space and atmosphere in coffee shops In future, the customer in Hanoi will also share the same idea on satisfaction and loyalty with the customer in HCM City, which also makes a change to their standard and behavior On the other hand, the milk tea shops or independent coffee shops are still prevalent in Hanoi, which poses threats to the coffee chains This study appreciates the potential of the Hanoi market and considers enhancing service quality as an optimal solution for coffee chain brands 5.3 Limitations and future research recommendations Though the research design and results of this research are compelling, there are still limitations to better research orientation in the future First, under time and resource constraints, especially the spread of coronavirus, we employed the convenience method to collect online questionnaires, and the majority of respondents are young customers who might have lower loyalty behavior than other groups In this study, we ran the data separately in two cases of Hanoi and HCM City Typically, we tested this comparison between two cases that are tested by multigroup function in AMOS, but there are no significant differences In this research, all the hypotheses are positive; therefore, it is a complicated technique to employ AMOS and compare between two cases As to match with the research objectives and goals, it is optimal to run the model twice and separately for Hanoi and HCM City 41 Also, there are limitations to the questionnaires of this research, possibly common method variance However, we try to reduce that potential by adopting scale items for variables from highly cited sources, using one source for one construct, as explained in chapter three Moreover, we follow the rule for the survey items, which require maintaining the adjective and adverb from the adopted scale Thus, the results from this research is valid in the framework and context from the designed surveys There are possibly other factors that also are compatible with the model and contribute to complete it like brand trust or brand awareness, which also have effects on satisfaction or loyalty Therefore, this paper recommends future researches to add factors that are suitable for the model to study the coffee chain industry Also, this paper only examined the direct relationship between variables Future research, which might concern the indirect influence of factors affecting brand loyalty, also can employ the same approach to investigate this relationship—especially investigating the role of mediation factors like customer satisfaction Besides, since this study concentrates more on the behavioral aspects of brand loyalty than the attitudinal dimensions, further studies on this 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( ) Hanoi ( ) HCM City ( ) Others 1.2 What is your gender? ( ) Male ( ) Female 1.3 What is your age? ( ) Less than 22 years old ( ) From 22 to 32 years old ( ) Over 32 years old 1.4 Which of the following brand you most frequenly visit or prefer when choosing a coffee shop? ( ) Highlands Coffee ( ) The Coffee House 1.5 What is your frequency of visiting or buying products from coffee shops in the “ last three months? ( ) Less than times ( ) times ( ) times 50 ( ) times ( ) More than times” 1.6 In which way you purchase a product from coffee shops? (Multiple answers) ( ) Coffee drinks ( ) Tea drinks ( ) Juices ( ) Cakes and snacks 1.7 What is your purpose of visiting coffee shops? (Multiple answers) ( ) Demand for drinks ( ) Meeting friends, acquaintances ( ) Business meetings ( ) Routine in free time Part 2: Main questions “In this section, a 5-point Likert scale with anchors ranging from strongly disagree (1) to strongly agree (5) is used Please answer about the brand which you have chosen in question 1.4.” Agreement level Question Contents Strongly disagree Price 2.1 2.2 The price of this brand is higher than other brands The price of this brand is lower than other brands The price of this brand is 2.3 more affordable than other brands The price of this brand is 2.4 more expensive than other brands 51 Disagree Neutral Agree Strongly Agree Food and Service Quality The drinks and foods served 2.5 by this coffee-shop brand suit my taste Employees of this coffee 2.6 chain are helpful (e.g introducing menu to customer) This coffee shop brand 2.7 provides comfortable seats and tables 2.8 Employees of this coffee chain listens to me This coffee shop brand gives 2.9 me a visually attractive space 2.10 Employees of this coffee chain are friendly to me Ideal-self and Lifestyle Congruence The image of this brand is 2.11 consistent with how I’d like to see myself Staying with this coffee 2.12 shop brand supports my lifestyle The image of this brand is 2.13 consistent with how I would like others to see me This coffee shop brand is 2.14 totally in line with my lifestyle The typical guest of this 2.15 coffee shop brand has an image similar to how I’d like to see myself 2.16 This coffee chain reflects my personal lifestyle 52 Customer Satisfaction I am satisfied by the food 2.17 and drinks served by this coffee shop brand The service provided by 2.18 employees of this coffee shop brand meets my expectations 2.19 I have good experience enjoying this coffee chain It was right selection to be a 2.20 customer of this coffee chain Brand Loyalty I will share positive 2.21 comments about this coffee shop brand Next time I will keep buying 2.22 products of this coffee shop brand This coffeehouse brand 2.23 would be my preferred choice I will recommend this brand to someone seeking my 2.24 advice for selection of coffee shop 53 ... brand equity, customer satisfaction, and brand loyalty in the Vietnam? ??s chain coffee shops The chain coffee shops are earning big money and growing fast in Vietnam so that it is necessary to appreciate... congruence on customer satisfaction and satisfaction on brand loyalty in Hanoi and Ho Chi Minh City chain coffee shops The analyses also indicate that among three antecedents of customer satisfaction,.. .VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY -*** NGUYEN HUU CUONG A STUDY ON CUSTOMER BEHAVIORS IN CHAIN COFFEE SHOPS IN VIETNAM MAJOR: BUSINESS ADMINISTRATION CODE: