UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Nguyen Thi Kim Quyen FACTORS AFFECTING LOYALTY OF INTERNET CUSTOMERS: EVIDENCE FROM VIETNAM MASTER OF BUSINESS (Honours) Ho Chi Minh City – Year 2012 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Nguyen Thi Kim Quyen FACTORS AFFECTING LOYALTY OF INTERNET CUSTOMERS: EVIDENCE FROM VIETNAM ID: 60340102 MASTER OF BUSINESS (Honours) SUPERVISOR: DR. DINH THAI HOANG Ho Chi Minh City – Year 2012 Loyalty of Internet customers in Vietnam ACKNOWLEDGEMENTS I would not have been able to complete my thesis without the advice, assistance, understanding and encouragement of a number of people. I would like to gratefully and sincerely acknowledge their assistance and support. First of all, the most important person I would like to thank is my supervisor, Dr. Dinh Thai Hoang. Thanks to his valuable advice and generous guidance throughout the process of completing this thesis. Secondly, I would like to express my gratefulness to Dr. Nguyen Dinh Tho for his kindness in supporting me to deal with analyzing data and other issues of the thesis. Furthermore, I would like to thank all of the staff at International School of Business – University of Economics Ho Chi Minh City who are always enthusiastic and give me a lot of administrative support, assistance and understanding. Finally, I would like to give my gratefulness to all classmates who have been sharing with me all their knowledge and experience as well as happiness and difficulties during MBA course. I would not complete my thesis without their encouragement and support. In brief, it has been a long journey and I have grown in so many ways. I would like to say “thank you” again for the involvement of everyone who has helped me to complete this thesis. Loyalty of Internet customers in Vietnam ABSTRACT For Internet service providers (ISP), it is essential for them to understand the critical factors that influence customer loyalty. These issues are critical to the long- term business success of any service provider. Based on the literature reviewed in the thesis, this study empirically investigates the impact of factors on customer loyalty. A quantitative method via questionnaire survey was used to obtain the views of approximately 300 Internet users in Ho Chi Minh city regarding their opinions and perceptions about their current ISP and their intention to stay with them. Multiple linear regression analysis was used to investigate the relationship between customer loyalty and influencing factors mentioned above. According to the findings of this research, in order to retain internet service customers, providers need to take into consideration with factors such as network quality, price perception, perceived value and trust. The results of this research are important for ISP to enhance and improve their competitiveness, in other words, to become successful and have more loyal customers, which will ultimately result in more profitability. Keywords: customer retention, customer loyalty. Loyalty of Internet customers in Vietnam - 1 - TABLE OF CONTENTS ACKNOWLEDGEMENTS 3 ABSTRACT 4 CHAPTER 1: INTRODUCTION 5 CHAPTER 1: INTRODUCTION 5 1.1 Introduction 5 1.2 Research background 5 1.3 The research objectives 7 1.4 The research questions 7 1.5 The research model 7 1.6 The research methodology 7 1.7 The research structure 8 1.8 Conclusion 8 CHAPTER 2: LITERATURE REVIEW 10 2.1 Introduction 10 2.2 Customer loyalty with internet service provider 10 2.2.1 Network quality and customer loyalty 11 2.2.2 Price perception and customer loyalty 11 2.2.3 Perceived value and customer loyalty 12 2.2.4 Trust and customer loyalty 13 2.3 Controlling factors 13 2.4 The research model 13 2.5 Conclusion 15 CHAPTER 3: RESEARCH METHODOLOGY 16 3.1 Introduction 16 3.2 The research approach 16 3.3 Measurement 16 3.4 Sample and Data collection 19 Loyalty of Internet customers in Vietnam - 2 - 3.5 Data analysis 20 3.6 Conclusion 22 CHAPTER 4: DATA ANALYSIS AND RESULT 23 4.1 Introduction 23 4.2 Preliminarily data analysis 23 4.2.1 Cleaning and screening data 23 4.2.2 Profile of respondents 23 4.3 Evaluating the measuring scales 25 4.4 Multiple Linear Regression analysis 32 4.4.1 Introduction 32 4.4.2 Computing variables 32 4.4.3 Assumption for Multiple Regression 32 4.4.4 Testing hypotheses 35 4.4.5 Controlling variables 37 4.5 Conclusion 39 CHAPTER 5: CONCLUSION AND IMPLICATIONS 40 1.1 Introduction 40 1.2 Conclusion 40 1.3 Implications of the study 41 1.4 Limitations and suggestions for further research 42 REFERENCES 43 APPENDIX A: QUESTIONAIRE 47 APPENDIX B: DATA ANALYSIS 53 Loyalty of Internet customers in Vietnam - 3 - LIST OF FIGURES Figure 1: The theoretical model 14 Figure 2: The Histogram 33 Figure 3: The Nomal P-P Plot of Regression Standardized Residual 34 Figure 4: Scatterplot 34 Loyalty of Internet customers in Vietnam - 4 - LIST OF TABLES Table 1: Research questions and hypotheses 15 Table 2: Measuring scale for variables 19 Table 3: The profile of respondents 25 Table 4: The reliability statistics 27 Table 5: KMO and Barlett’s test 29 Table 6a: The pattern matrix of EFA result 30 Table 7b: The pattern matrix of EFA result 31 Table 8: The Cronbach’s alpha result - retest 31 Table 9: Collinearity statistics 35 Table 10: Hypotheses testing 36 Table 11: Regression with controlling variable of gender 37 Table 12: Regression result with controlling variable of income level 38 Table 13: Regression result with controlling variable of using experience 38 Loyalty of Internet customers in Vietnam - 5 - CHAPTER 1: INTRODUCTION 1.1 Introduction This research examines the driving forces of internet users’ loyalty and their intention to stay with their current provider among existing Internet Service Providers (ISP) in the context of Vietnam telecommunication sector. This chapter will provide general information of research problem as well as research background, identify research objectives and research questions. This chapter also briefly outlines research structure. 1.2 Research background High-speed internet services are becoming more and more popular and the rapid development of information technologies affects every aspect of our lives. The importance of information and communication technology is undeniable as it has been applied in various fields for the purpose of service enhancement. Although basic Internet services had existed in Vietnam since the early nineties, until 1997, the first commercial Internet Service Provider (ISP) opened for business – Vietnam Data Communication Company (VDC) which belongs to Vietnam Posts & Telecommunication Groups (VNPT). Since then, Vietnam has been connected by two gateways: one in Hanoi connecting with Hong Kong and Australia, and the other in Ho Chi Minh City, which connects with the United States by Sprint. Internet usage remains low in comparison with that of other Asian nations, yet connectivity has increased rapidly over the past few years, thanks to an initiative by the Ministry of Post and Telecommunications. According to the internet statistic report of VNIC (Vietnam Internet Center), up to June 2012, the number of internet users in Vietnam is more than 31 million which is equivalent to the scale of 35.4 percent users per capita. Over more than fifteen years of formation and development, together with the development of internet services, the number of ISPs has also remarkably increased, which leads to severe competition among ISPs, especially in a developing country like Vietnam. Until now, there are more than ten ISPs operating in Vietnam including VDC/VNPT, Viettel, FPT, Netnam, SPT, Loyalty of Internet customers in Vietnam - 6 - Hanoi Telecom, VTC, G-Tel, Vishiped and CMC TI in which three of the leading companies: VDC/VNPT, Viettel, FPT have obtained more than 85 percent of total Internet service market share in Vietnam. As a result, ISPs must try their best to develop their marketing strategy and improve their business performance to increase their level of competitiveness. From the above statistics, we can understand that the competition of Internet services in Vietnam is a severe war among three big ISPs: VDC/VNPT, Viettel and FPT. Beside the diversification of services, enhancing the customer satisfaction and customer loyalty is considered to be the most effective way to compete in the market, especially in telecommunication industry which is on the verge of saturation point in some years’ time. Customer loyalty are believed to be the most effective weapons for providers to complete with other rivals because these factors are the primary variables that impact customers’ intention to stay with their current providers (Khatibi, Ismail & Thyagarajan, 2002). The providers which satisfy customers can expect higher market shares and greater profitability and, in turn, encourage their customers to become loyal (Khatibi, Ismail & Thyagarajan, 2002). Aaker (1991) has discussed the role of loyalty in the brand equity process and has specifically noted that brand loyalty leads to certain marketing advantages such as reduced marketing costs, more new customers and greater trade leverage. Expanding loyal customers can assist in generating a business’s profitability because the cost of retaining existing customers is less than that of acquiring new ones (Reichheld, Teal, 1996). Therefore, understanding how and why a sense of loyalty develops in customers remains one of the crucial management issues of our day. By assessing the Internet service users in Ho Chi Minh city, this research will give useful information of a range of factors impact on Vietnamese internet users’ perceptions of their current ISPs, from which factors effecting customer loyalty, especially in telecommunication sector, will be derived. In other words, this research provides ISPs the direction and valuable understandings of what factors should be taken into account to become successful [...]... aims to test the relationship between customer loyalty and its affecting factors in Vietnamese Internet service market Four factors are assumed to have positive effect on loyalty of Internet customers Data are collected by questionnaire and analyzed by SPSS software - Loyalty of Internet customers in Vietnam - 10 ... main attributes in internet service provisioning - customer loyalty in the context of Vietnam telecommunication market More specifically, the main objective of this research is to identify the factors influencing customer loyalty in Internet services in Vietnam We also examine the affecting level of each factor on Vietnamese internet users’ loyalty 1.4 The research questions Based on the research objectives,... create profit from their long-term relationship The - Loyalty of Internet customers in Vietnam - 11 longer loyal and profitable customers stay with a business, the more profit that the business can gain (Reichheld & Teal 1996) In general, a range of advantages arise when businesses have loyal customers. .. - Loyalty of Internet customers in Vietnam - 25 Less than 1 year 42 15% From 1 to 2 years 66 23% From 2 to 3 years 45 16% More than 3 years 133 47% Table 3: The profile of respondents In summary, gender of respondents was equal between male and female Most of respondents belonged to the age group from 25 to 35 years old and... then translated into Vietnamese because all of respondents are Vietnamese Random sampling was chosen to reduce bias in - Loyalty of Internet customers in Vietnam -8 the sample The data collected from the survey was coded, analyzed and interpreted by SPSS software More details of the research methodology... - Loyalty of Internet customers in Vietnam - 13 more perceived value to the service, customer loyalty can be increased We, therefore, hypothesize that: H3: Perceived value has a positive effect on customer loyalty 2.2.4 Trust and customer loyalty Trust can be viewed as an antecedent of customer loyalty (Dick & Basu, 1994) To create customer loyalty. .. theoretical model in the context of Vietnam telecommunication industry The model proposes that customer loyalty is positively affected by network quality, price perception, perceived value and trust In addition, we also examine the effect of demographic factors on customer loyalty - Loyalty of Internet customers in Vietnam - 16 ... number of variables and condense the data into smaller number of factors (Hair, 2006) In this research, there were five factors that were assumed to have impact on customer loyalty of Internet services Factor analysis was used to create factors for each of the five measuring scale related In addition, factor analysis helped the researcher to determine which factors were highly correlated to customer’s loyalty. .. review of the literature in the main areas of customer retention which concentrates on factors influencing customer loyalty for internet service providers, especially in the context of Vietnam telecommunication industry At first, from the tested relationship between customer loyalty and relating factors including network quality, price perception, perceived value and trust, four hypotheses derived from. .. customer loyalty 2.2 Customer loyalty with internet service provider Customer loyalty is an outcome of a customer’s purchase and use resulting from the comparison of the reward and the costs of the purchase in relation to the anticipated consequences (Churchill & Surprenant 1982) Jacoby (1975) advises that loyalty is a biased behavioral purchase process caused by the customer’s emotional processes Loyalty . UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business Nguyen Thi Kim Quyen FACTORS AFFECTING LOYALTY OF INTERNET CUSTOMERS: EVIDENCE FROM VIETNAM . FACTORS AFFECTING LOYALTY OF INTERNET CUSTOMERS: EVIDENCE FROM VIETNAM ID: 60340102 MASTER OF BUSINESS (Honours) SUPERVISOR: DR. DINH THAI HOANG Ho Chi Minh City – Year 2012 Loyalty. of this research is to identify the factors influencing customer loyalty in Internet services in Vietnam. We also examine the affecting level of each factor on Vietnamese internet users’ loyalty.