Luận văn thạc sĩ UEH factors influencing customer retention some emprical evidences from local and

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

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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

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TABLE OF CONTENTS

ABSTRACT

1. INTRODUCTION............................................................................................... 1

1.1. Research background.................................................................................... 1

1.2. Research questions and research objective................................................... 3

1.3. Research delimitation. .................................................................................. 3

1.4. Thesis Structure. ........................................................................................... 3

2. LITERATURE REVIEW ................................................................................. 5

2.1.Theoretical review......................................................................................... 5

2.1.1. Customers retention............................................................................ 5

2.1.2. Relationship quality............................................................................ 7

2.1.3. Switching barriers............................................................................... 9

2.1.3.1 Relational benefits.................................................................. 9

2.1.3.2 Switching costs..................................................................... 10

2.1.3.3 Availability and attractiveness of alternatives ..................... 10

2.2.Hypotheses Development............................................................................ 11

2.2.1. Customer satisfaction and customer retention.................................. 11

2.2.2. Trust and customer retention............................................................ 13

2.2.3. Commitment and customer retention ............................................... 14

2.2.4. Switching barriers and customer retention....................................... 16

2.3.Research Model........................................................................................... 18

3. METHODOLOGY .......................................................................................... 21

3.1.Research design........................................................................................... 21

3.2.Measurement scales..................................................................................... 22

3.3.Method of data collection............................................................................ 24

3.3.1. Sample size....................................................................................... 24

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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

4. DATA ANALYSIS AND RESULT ................................................................. 28

4.1Sample 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

4.3Hypothesis 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

4.4Comparing foreign banks and local banks.................................................... 43

5. IMPLICATION AND CONCLUSION ............................................................ 46

5.1 Summary ....................................................................................................... 46

5.2 Conclusion .................................................................................................... 47

5.3 Recommendation .......................................................................................... 49

5.4Limitation and further research directions..................................................... 51

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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

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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 9 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

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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.

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1

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

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