i MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY NGUYEN THI XUAN HANG FACTORS INFLUENCING CUSTOMER LOYALTY A CASE STUDY OF INTERNET USERS IN HO CHI MINH CITY Major : Business Administration Major Code : 60.34.05 ECONOMICS MASTER THESIS Supervisor: Dr Tran Ha Minh Quan HCM CITY - 2012 ii ACKNOWLEDGEMENTS During working on this thesis, I have learned a lot and tried my best I would like to sincerely thank all the people who helped me to complete this thesis I would like to express my gratitude towards my supervisor Dr Tran Ha Minh Quan for his patience, helpful guidance, support and contribution And there is a special thank to my husband who always supports me in every situation We also appreciate all the respondents who participated in my survey, without your kind responses to the questionnaire I definitely could not complete this study Thank all of you for your kind assistances and your valuable time iii ABSTRACT The purpose of this study to examine whether customer satisfaction, switching cost, price perception, and corporate image are antecedents of customer loyalty in the context of the internet service market in Ho Chi Minh city We explore the key antecedent of customer loyalty, and the difference in Customer Loyalty among the three career groups The findings show that all of those factors positively influence customer loyalty In addition, Customer satisfaction is a key antecedent of Customer Loyalty Furthermore, there is the different level of Customer Loyalty among different three career groups The studying people group has less loyalty level than the working /working and studying people group Besides, the implication based on the result of the study as well as further research of the study were also represented in this paper Keywords: Customer Loyalty; Customer Satisfaction; Switching cost; Corporate Image; Price Perception; ISP (Internet Service Provider) iv CONTENTS CHAPTER 1: INTRODUCTION 1.1 Research background 1.2 Problem statement 1.3 Research questions and objectives 1.4 Research limitation 1.5 Thesis structure CHAPTER 2: LITERATURE REVIEW 2.1 Customer loyalty 2.1.1 Customer and loyalty customer 2.1.2 Definition of customer loyalty 2.1.3 Customer loyalty phases 2.1.4 Classifications of customer loyalty 2.1.5 Importance of customer loyalty 2.1.6 Loyalty programs and its benefits 10 2.2 Antecedents of customer loyalty 14 2.2.1 Customer satisfaction 14 2.2.2 Switching cost 16 2.2.3 Corporate image 17 2.2.4 Price perception 18 2.3 Research model 20 CHAPTER 3: RESEARCH METHODOLOGY 3.1 Research design 22 3.1.1 Research method 22 v 3.1.2 Exploratory study 23 3.1.3 Main survey 24 3.1.3.1 Sample size 24 3.1.3.2 Data collection procedure 24 3.1.3.3 Research process 25 3.2 Measurement 26 3.2.1 Measure of Customer satisfaction 26 3.2.2 Measure of Switching Cost 27 3.2.3 Measure of Corporate Image 28 3.2.4 Measure of Price Perception 28 3.2.5 Measure of Customer Loyalty 29 3.3 Data analysis method 30 3.4 Summary 30 CHAPTER 4: DATA ANALYSIS AND RESULTS 4.1 Descriptive data analysis 31 4.2 Testing factors of research model 33 4.2.1 EFA results of independent variables 33 4.2.2 Exploring Factor Analysis (EFA) 35 4.2.2.1 EFA results of independent variables 35 4.2.2.2 EFA results of dependent variable 37 4.3 Hypotheses testing 37 4.3.1 Testing Assumptions of Multiple Regression 37 4.3.2 Testing hypotheses between Independent Variables and Customer Loyalty 38 4.4 Testing the relationship among qualitative factors and quantitative variables 41 vi 4.4.1 Testing the relationship between gender and Customer Loyalty 41 4.4.2 Testing the different influence levels of career on Customer Loyalty 43 4.5 Customer’s evaluation on Customer Loyalty following using ISP 45 4.6 Summary 46 CHAPTER 5: CONCLUSIONS 5.1 Conclusion 47 5.2 Managerial Implication 47 5.3 Implication for theory and future research 49 References 51 Appendices 59 Appendix 1: Questionnaire in Vietnamese 59 Appendix 1: Questionnaire in English 62 Appendix 2: Reliability results of measurement scales – Pilot test 66 Appendix 3: EFA results of independent variables – Main survey 69 Appendix 4: EFA results of dependent variable – Main survey 71 Appendix 5: Testing assumptions of multiple regression 72 Appendix 6: Histogram, Normal P – P plot and Scatter plot 73 Appendix 7: Multiple Regression Line results 76 vii LIST OF FIGURES Figure 3.1 Fundamental differences between quantitative and qualitative research strategies 22 Figure 3.2 Research process 26 Figure 4.5 Mean of each used ISP name on Customer Loyalty 46 Figure 4.4 Histogram, Normal P – P plot and Scatter plot of Dependent Variable – CL 73 viii LIST OF TABLES Table 3.1Scale of Customer Satisfaction 27 Table 3.2: Scale of Switching Cost 27 Table 3.3: Scale of Corporate Image 28 Table 3.4: Scale of Price Perception 29 Table 3.5: Scale of Customer Loyalty 29 Table 4.1 – Sample characteristics 31 Table 4.2 Cronbach Alpha of observed variables 33 Table 4.3: EFA for independent variables 36 Table 4.4: Multiple regression between independent variables and dependent variable 39 Table 4.5: Anova between independent variables and dependent variable 39 Table 4.6: Coefficients between independent variables and dependent variable 40 Table 4.7 - Independent samples t-test results of gender factor and CL 42 Table 4.8 The analysis results of the different influence levels of career factor on Customer Loyalty 43 Table 4.9 - Mean of each using ISP on Customer Loyalty 45 ix ABBREVIATIONS ISP: Internet Service Provider EFA: Exploring Factor Analysis MRL: Multiple Regression Model Chapter 1: Introduction The introduction chapter identifies the research background, present the problem statement, the research questions, and introduce the research methodology, the objectives as well as limitation of the study In addition, the significance of the research problem and the organization of the thesis are also outlined 1.1 Research background The internet service market is growing very fast in many countries over the world And Vietnam is not an exception case Up to July 2011, Vietnam has 29.5 million of people using Internet, equal to 33.99% of population, and forecast increasing to 40% in 2012 (Ha Nam Khanh Giao & Tran Huu Ai, 2011) Internet is one of the most common means of communication nowadays In Vietnam, internet contributes 42% of daily communication means (http://www.thongkeinternet.vn/jsp/tintuc/tintuc.jsp) Internet service market is growing very fast in over the world Asia region has biggest internet user number Vietnam is one of the countries which has highest increasing percentage of internet users in Asia region There are many service providers in Vietnam such as VNPT, FPT, Viettel, SPT, SCTV… Therefore, studying about this service has inspired many researchers to devote more of their research attention to this area It has been figured out by previous researchers that as markets become more competitive, firms are more likely to try maintaining their market share by focusing on retaining current customers It’s also obvious that when competition and the costs of acquiring new customers increase, companies will be more concentrated their strategic efforts on customer retention, therefore to maintain customer long-term relationships becomes as a critical mission for business The significance of customer loyalty cannot be overemphasized 63  SCTV  SPT 6) Your Career  Studying at school or University  Working  Working and Studying Part II: Following is your evaluation to the internet ISP which you are using at your home Please give your appropriate evaluation by giving point from to Strongly disagree Disagree Neutral Statements Agree Strongly agree Please select one option Strongly disagree Disagree Neutral Agree Strongly agree 5 5 5 Price Perception (PP) 1.The prices charged by my ISP are reasonable 2.My ISP’s services are value-formoney 3.I f the price is cheaper, that is an important reason to stay with the service Customer Sastisfaction (CS) I am satisfied with the ISP The ISP meets all the requirements that I see reasonable The ISP satisfies my need 64 I believe that I did the right thing 5 5 5 5 5 when I chose this ISP Corporate Image (CI) I have always had a good impression of my ISP In my opinion, my ISP has a good image in the minds of customers 10 I believe that my ISP has a better image than its competitors Switching Cost (SC) 11 It takes me a great deal of time and effort to search for and to get used to a new ISP 12 It costs me too much to switch to another ISP 13 In general it would be a hassle switching to another ISP Customer Loyalty (CL) 14 I consider the ISP as my first choice for internet service 15 I will patronize the ISP more in the next 12 months 16 I have said positive things about the ISP to other Colleagues 17 I have recommended the ISP to colleagues who seek my advice 65 18 I have encouraged others to patronize the ISP Thank you for your assistance to this survey! 66 Appendix 2: Reliability results of measurement scales – Pilot test Case Processing Summary N Cases Valid a Excluded Total % 20 100.0 0 20 100.0 a Listwise deletion based on all variables in the procedure Reliability Statistics Cronbach's Alpha N of Items 613 Item-Total Statistics Scale Mean if Item Scale Variance if Deleted Item Deleted Corrected Item- Cronbach's Alpha Total Correlation if Item Deleted PP1 6.4459 1.762 472 441 PP2 6.5855 1.761 436 491 PP3 6.1994 1.872 359 602 Reliability Statistics Cronbach's Alpha 818 N of Items 67 Item-Total Statistics Scale Mean if Item Scale Variance if Deleted Item Deleted Corrected Item- Cronbach's Alpha Total Correlation if Item Deleted CS1 6.1752 2.678 646 777 CS2 6.3960 2.354 654 772 CS3 6.4003 2.340 721 698 CS4 6.2101 2.543 621 735 Reliability Statistics Cronbach's Alpha N of Items 747 Item-Total Statistics Scale Mean if Item Scale Variance if Deleted Item Deleted Corrected Item- Cronbach's Alpha Total Correlation if Item Deleted CI1 6.3191 1.656 572 621 CI2 6.2051 1.701 632 554 CI3 6.1795 1.854 465 731 Reliability Statistics Cronbach's Alpha N of Items 758 Item-Total Statistics Scale Mean if Item Scale Variance if Deleted Item Deleted Corrected Item- Cronbach's Alpha Total Correlation if Item Deleted SC1 6.7151 2.566 536 735 SC2 6.7023 2.523 588 676 SC3 6.4972 2.379 642 613 68 Reliability Statistics Cronbach's Alpha N of Items 888 Item-Total Statistics Scale Mean if Item Scale Variance if Deleted Item Deleted Corrected Item- Cronbach's Alpha Total Correlation if Item Deleted CL1 12.8989 9.583 661 879 CL2 12.7764 9.027 658 884 CL3 13.0726 9.794 752 861 CL4 13.0171 8.884 827 840 CL5 13.1353 9.267 775 853 69 Appendix 3: EFA results of independent variables – Main survey KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity 763 Approx Chi-Square 742.080 df 78.000 Sig .000 Component Total Variance Explained Extraction Sums of Squared Rotation Sums of Squared Loadings Loadings Initial Eigenvalues % of Cumulative % of Cumulative Total Variance % 3.725 28.654 1.794 % of Cumulativ Total Variance % Total Variance e% 28.654 3.725 28.654 28.654 2.187 16.821 16.821 13.804 42.458 1.794 13.804 42.458 2.019 15.528 32.349 1.435 11.036 53.494 1.435 11.036 53.494 2.005 15.427 47.776 1.236 9.505 62.999 1.236 9.505 62.999 1.979 15.223 62.999 770 5.921 68.920 699 5.378 74.298 656 5.043 79.341 558 4.290 83.631 545 4.189 87.820 10 529 4.072 91.892 11 403 3.098 94.990 12 371 2.856 97.847 13 280 2.153 100.000 Extraction Method: Principal Component Analysis 70 Rotated Component Matrix a Component PP2 872 PP3 845 PP1 654 SC2 820 SC3 801 SC1 775 CS3 773 CS4 702 CS1 673 CS2 563 CI2 812 CI1 759 CI3 634 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization a Rotation converged in iterations 71 Appendix 4: EFA results of dependent variable – Main survey KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity 842 Approx Chi-Square 626.194 df 10.000 Sig .000 Total Variance Explained Initial Eigenvalues Extraction Sums of Squared Loadings Compo nent % of Total % of Variance Cumulative % 3.455 69.107 69.107 665 13.298 82.404 399 7.989 90.394 285 5.707 96.101 Total 3.455 195 3.899 100.000 Extraction Method: Principal Component Analysis Component Matrix a Component CL4 901 CL5 886 CL3 806 CL1 786 CL2 769 Extraction Method: Principal Component Analysis a components extracted Variance 69.107 Cumulative % 69.107 72 Appendix 5: Testing Assumptions of Multiple Regression Table 4.3: Correlations between CS, PP, CI, SC and CL CS CS Pearson Correlation PP 1.000 376 Sig (2-tailed) N PP CI SC CL Pearson Correlation 376 Sig (2-tailed) 000 N 214 ** Pearson Correlation 263 ** SC 263 ** CL 164 * 338 ** 000 000 016 000 214 214 214 214 1.000 ** * 214.000 ** CI 366 171 289 ** 000 012 000 214.000 214 214 214 ** 1.000 099 366 Sig (2-tailed) 000 000 N 214 214 * * ** 148 000 214.000 214 214 099 1.000 164 Sig (2-tailed) 016 012 148 N 214 214 214 214.000 214 ** ** ** ** 1.000 338 289 253 000 192 Sig (2-tailed) 000 000 000 000 N 214 214 214 214 ** Correlation is significant at the 0.01 level (2-tailed) * Correlation is significant at the 0.05 level (2-tailed) .192 ** Pearson Correlation Pearson Correlation 171 253 214.000 73 Appendix Figure 4.4 Histogram, Normal P – P plot and Scatter plot of Dependent Variable - CL 74 Normal P-P Plot of Regression Standardized Residual 75 76 Appendix 7: Multiple Regression Results Variables Entered/Removed Model Variables Entered b Variables Removed a SC, CI, CS, PP Method Enter a All requested variables entered b Dependent Variable: CL b Model Summary Model R R Square 721 a Adjusted R Square 520 Std Error of the Estimate 511 50170 a Predictors: (Constant), SC, CI, CS, PP b Dependent Variable: CL b ANOVA Sum of Model Squares Mean df Square Regression 56.945 14.236 Residual 52.605 209 252 109.550 213 Total a Predictors: (Constant), SC, CI, CS, PP b Dependent Variable: CL F 56.561 Sig .000 a 77 Coefficients Unstandardized Standardized Coefficients Coefficients a Model t B (Constant) Collinearity Statistics Std Error -.683 278 PP 310 059 CI 310 CS SC Sig Beta Tolerance VIF -2.458 015 289 5.299 000 773 1.293 064 253 4.854 000 848 1.180 429 067 338 6.426 000 831 1.203 191 049 192 3.922 000 959 1.043 a Dependent Variable: CL ... study are as follows: Question 1: What are the key determinants affect on customer loyalty in internet market in Hoc Chi Minh city in Vietnam? By evaluating the influence level of the factors on customer. .. University of Social Sciences and Humanities, Ho Chi Minh City University of Technology, Banking University of Ho Chi Minh City) and working people in Ho Chi Minh city 3.1.3.1 Sampling size A good sample... winning market share and developing a sustainable competitive advantage Anderson et al (2004) argued a loyal and contented customer base helps to increase the organizations’ 10 relative bargaining