VIETNAM NATIONAL UNIVERSITY – HOCHIMINH CITY INTERNATIONAL UNIVERSITY SCHOOL OF BUSINESS THE EFFECTS OF SERVICE QUALITY ON CUSTOMER SATISFACTION AND CUSTOMER LOYALTY A STUDY OF ADSL SERVICE IN HO CHI MINH CITY In Partial Fulfillment of the Requirements of the Degree of BACHELOR OF ARTS in BUSINESS ADMINISTRATION Student’s name: NGUYEN THI THANH THANH (BAIU09087) Advisor: Dr MAI NGOC KHUONG Ho Chi Minh city, Vietnam 2013 THE EFFECTS OF SERVICE QUALITY ON CUSTOMER SATISFACTION AND CUSTOMER LOYALTY A STUDY OF ADSL SERVICE IN HO CHI MINH CITY APPROVED BY: Advisor APPROVED BY: Committee Mai Ngọc Khương, Ph.D _ Hồ Nhựt Quang, Ph.D., Chair _ Võ Tường Huân, LLM., Secretary _ Mai Ngọc Khương, PhD _ Nguyễn Văn Phương, Ph.D ACKNOWLEDGMENTS I could never complete this research without the support and suggestion of a lot of people First of all, I would like to express sincere gratitude to my thesis advisor Mr Mai Ngoc Khuong, PhD for his tireless assistance, encouragement, and sincere comments He is person who supported to let me more confidence, provided valuable advices and encouraged when I faced to problem in research process Thank you for treating me well in the time doing this thesis Moreover, he also helped me to use SPSS in order to analyze data, especially, interpreting data analysis You really are a wonderful advisor If I have any chance to other research in the future, I always choose you to become my advisor Thank you very much Secondly, my special gratitude conveys to responders who help me answer the questionnaires This research could not be completed if it did not have data which they gave Moreover, I would like to express my grateful thanks and appreciation to my close friends They have always been there for me whenever I need them They helped me in data collection process to get data For that all, I thank you Lastly, but most importantly, I would like to dedicate most sincere thanks to my family members, especially parents who provide the mental and financial support Thank you TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES ABSTRACT …………………………………………………………………………… CHAPTER I: INTRODUCTION……………………………………………………….2 1.1 Background…………………………….………………………………………… 1.2 The Problem Statement…………………………………………………………… 1.3 Objectives…….…………………………………………………………………….6 1.4 Research Questions and Hypothesis……………………………………………….6 1.5 Scopes and limitations…………………………………………………………… CHAPTER II: LITERATURE REVIEW…………………………………………… 2.1 Asymmetric Digital Subscriber Line (ADSL)…….……………………………….9 2.1.1 Definition……… …………………………………………………………………9 2.1.2 Benefit of ADSL………………………………………………………………… 10 2.2 Customer Satisfaction….………………………………………………………….10 2.2.1 Definition………………………………………………………………………….10 2.2.2 Importance of Customer Satisfaction…………………………………………… 11 2.3 Customer Loyalty…………………………………………………………………12 2.3.1 Definition………………………………………………………………………….12 2.3.2 Importance of Customer Loyalty…………………………………………….… 13 2.4 The factors affect to Customer Satisfaction.……………………… …………….13 2.5 Relationship between Customer Satisfaction and Customer Loyalty………….….17 2.6 Conceptual framework……………………………………………………….……17 CHAPTER III: METHODOLOGY………………………………………………… 19 3.1 Research Design………………………………………………………………… 19 3.2 Target Population and Sample Size………………………………………………20 3.3 Survey Instrument……………………………………………………………… 20 3.4 Operational Definitions and Measurements………………………………………21 3.4.1 Customer satisfaction measurement………………………………………………22 3.4.2 Customer loyalty measurement…………………………………………… ……22 3.4.3 Empathy measurement…………………………………………………………….23 3.4.4 Reliability measurement………………………………………………………… 24 3.4.5 Responsiveness measurement…………………………………………………… 24 3.4.6 Assurance measurement………………………………………………………… 25 3.4.7 Transmission of speed measurement…………………………………………… 26 3.4.8 Price measurement……………………………………………………………… 26 3.5 Data Collection … …………………………………………………………… 26 3.6 Data Analysis…… ………… ………………………………………………… 27 3.7 Factor Analysis ……………………………………………………………… 28 3.7.1 Factor Analysis for Dependent Variables…………………………………………28 3.7.2 Factor Analysis of Independent Variables……………………………………… 30 CHAPTER 4: RESEARCH FINDINGS………………………………………………34 4.1 Characteristics of Employees and Univarate Descriptive Statistics of Independent and Dependent Variables…………………………………………………… … 34 4.1.1 Characteristics of ADSL user…………………………………………………… 34 4.1.2 Univarate Descriptive Statistics of Independent Variables……………………….39 4.1.3 Univarate Descriptive Statistics of Dependent Variables…………………………40 4.2 Multiple Regression Analysis……………………………………….…………….40 4.2.1 Factors affect to Customer Satisfaction………………………………………… 41 4.2.2 Factors affect to Customer Loyalty……………………………………………… 43 4.3 Simple Linear Regression.……………………………………………………… 45 4.4 Direct and Indirect Effects of Customer Loyalty ……………… ………………46 4.4.1 Direct effects of Customer Loyalty……………………………………………… 47 4.4.2 Indirect effects of Customer Loyalty…………………………………………… 47 4.4.2.1 Indirect Effect between RESPONCE and CUSLOYAL……………………… 47 4.4.2.2 Indirect Effect between ASSURANCE and CUSLOYAL…………………… 47 4.5 Path Diagram of Customer Loyalty.………………………………………………49 CHAPTER 5: DISCUSSION AND RECOMMENDATION……………………… 51 5.1 Discussion of Findings……………………………………………………………51 5.1.1 Relationship and Impact of the six independent factors on Customer Satisfaction…………………………………………………………………….….51 5.1.2 Relationship between Customer Satisfaction and Customer Loyalty…………… 53 5.1.3 Relationship and Impact of the seven factors (including Customer Satisfaction) on Customer Loyalty… …………………………………………………………… 53 Conclusions and Recommendations…………… …………………… …….… 56 5.2.1 Conclusions……………………………………………………………………… 56 5.2.2 Recommendation for further study……………………………………………… 57 BIBLIOGROPHY………………………………………………………………………59 APPENDIX…………………………………………………………………………… 64 LIST OF TABLES Table 1: Dependent variable of Customer Satisfaction………………………………….22 Table 2: Dependent variable of Customer Loyalty………………………………………22 Table 3: Independent variable of Empathy………………………………………………23 Table 4: Independent variable of Reliability…………………………………………….24 Table 5: Independent variable of Responsiveness……………………………………….24 Table 6: Independent variable of Assurance…………………………………………… 25 Table 7: Independent variable of Transmission of speed……………………………… 26 Table 8: Independent variable of Price………………………………………………… 26 Table 9: Interpreting Strength of Path Coefficients…………………………………… 27 Table 10: KMO and Bartlett's Test of Dependent Variables…………………………….28 Table 11: Total Variances Explained Dependent Variables…………………………… 28 Table 12: Factor Loadings and Reliability of Dependent Variables…………………… 29 Table 13: KMO and Bartlett's Test of Independent Variables………………………… 30 Table 14: Total Variances Explained Independent Variables……………………………30 Table 15: Factor Loadings and Reliability of Independent Variables………………… 31 Table 16: Summary of General & Demographical Characteristics of Respondents (N=292)………………………………………… …………………………… 34 Table 17: Univarate Descriptive Statistics of Independent Variables………………… 39 Table 18: Univarate Descriptive Statistics of Dependent Variables…………………… 40 Table 19: Correlation Coefficients between Independent Variables…………………….40 Table 20: Descriptive Statistics and Variables’ Correlations of the CUSATIS Model…………………………………………………………………………….41 Table 21: Coefficients between IVs and CUSATIS…………………………………… 42 Table 22: Descriptive Statistics and Variables’ Correlations of the CUSLOYAL Model…………………………………………………………………………….43 Table 23: Coefficients between IVs and CUSLOYAL……………………………… 44 Table 24: Correlation Coefficients between Dependent Variables………………………45 Table 25: Coefficients between CUSATIS and CUSLOYAL………………………… 45 Table 26: Direct, Indirect and Total Causal Effects…………………………………… 50 LIST OF FIGURES Figure 1: Vietnam Inflation changing from 2004 to 2012 (compare with December previous year)…………… ………… ………………………………………… Figure 2: Market share of ADSL services in Viet Nam (until 11/2012)………………….4 Figure 3: Conceptual Model for customer satisfaction and customer loyalty on in ADSL services………………………………………………………………………… 18 Figure 4: Name of Telecommunications Company…………………………………… 35 Figure 5: Gender…………………………………………………………………………36 Figure 6: Marital Status………………………………………………………………….36 Figure 7: Age…………………………………………………………………………….37 Figure 8: Academic Standard…………………………………………………………….38 Figure 9: Income…………………………………………………………………………38 Figure 10: Path Coefficients of the Structural Equation for Hypothesis Testing……… 49 ABSTRACT The main objective of this study examines the factors that impact to the service quality to customer satisfaction and customer loyalty by empirical research through customer who use ADSL service in Ho Chi Minh City This study revised SERQUAL scale of Parasuraman to measure the quality of ADSL services with some modifications was used to assess satisfaction and customer loyalty Besides the traditional four dimensions: Empathy, Reliability, Responsiveness and Assurance of SERVQUAL, we added two more dimensions: Transmission of speed and price Sample included 292 customers using ADSL services, divided by the market share of ADSL services provider in Ho Chi Minh City Based on the results of the deep analysis exploring the direct and indirect effects of six independent and one dependent variables on customer loyalty, these factor is prioritizedly ordered: customer satisfaction, assurance, transmission of speed, responsiveness, price This study shows that customer satisfaction is the biggest factor impact to customer loyalty Moreover, in order to achieve high customer loyalty, ADSL Service Company should have better of assurance, transmission of speed, responsiveness and price Besides, the most effect on satisfaction of customer is responsiveness and assurance and this research has not yet found any evidences can prove the rest factors have a correlation with this variables In contrast, this research also highlighted that customer does not care more about empathy and reliability, that is reason why empathy and reliability does not affect to customer satisfaction and their loyalty when use ADSL service The findings help ADSL service provider understand better about the components of ADSL’s service quality, the relationship between service quality, price, transmission of speed, satisfaction and loyalty of customers about ADSL services, and the level of customer’s evaluation for those factor Therefore, this research may have implication for the ADSL service provider in enhancing their strategies to improve service quality, customer satisfaction and loyalty Agree 133 45,5 45,5 92,5 Strongly agree 22 7,5 7,5 100,0 Total 292 100,0 100,0 A3 Qualifications of staff are high Frequency Percent Valid Percent Cumulative Percent Strongly disagree 3,1 3,1 3,1 Disagree 27 9,2 9,2 12,3 Uncertain 120 41,1 41,1 53,4 Agree 113 38,7 38,7 92,1 Strongly agree 23 7,9 7,9 100,0 Total 292 100,0 100,0 Valid A4 Employees of the company creates trust for customer Frequency Percent Valid Percent Cumulative Percent Strongly disagree 10 3,4 3,4 3,4 Disagree 30 10,3 10,3 13,7 Uncertain 95 32,5 32,5 46,2 Agree 136 46,6 46,6 92,8 Strongly agree 21 7,2 7,2 100,0 Total 292 100,0 100,0 Valid 90 A5 Employees in company are very experienced in solving or diagnosing the customers problem Frequency Percent Valid Percent Cumulative Percent Strongly disagree 11 3,8 3,8 3,8 Disagree 26 8,9 8,9 12,7 Uncertain 94 32,2 32,2 44,9 Agree 134 45,9 45,9 90,8 Strongly agree 27 9,2 9,2 100,0 Total 292 100,0 100,0 Valid A6 Privacy of customers information is maintained Frequency Percent Valid Percent Cumulative Percent Strongly disagree 12 4,1 4,1 4,1 Disagree 23 7,9 7,9 12,0 Uncertain 94 32,2 32,2 44,2 Agree 127 43,5 43,5 87,7 Strongly agree 36 12,3 12,3 100,0 Total 292 100,0 100,0 Valid A7 Company is widely known 91 Frequency Percent Valid Percent Cumulative Percent Strongly disagree 11 3,8 3,8 3,8 Disagree 15 5,1 5,1 8,9 Uncertain 59 20,2 20,2 29,1 Agree 137 46,9 46,9 76,0 Strongly agree 70 24,0 24,0 100,0 Total 292 100,0 100,0 Valid A8 I feel safe and satisfy when using this ADSL service Frequency Percent Valid Percent Cumulative Percent Strongly disagree 10 3,4 3,4 3,4 Disagree 27 9,2 9,2 12,7 Uncertain 85 29,1 29,1 41,8 Agree 127 43,5 43,5 85,3 Strongly agree 43 14,7 14,7 100,0 Total 292 100,0 100,0 Valid TS1 The download/ upload service is good Frequency Percent Valid Strongly disagree 22 7,5 Valid Percent Cumulative Percent 7,5 92 7,5 Disagree 42 14,4 14,4 21,9 Uncertain 90 30,8 30,8 52,7 Agree 117 40,1 40,1 92,8 Strongly agree 21 7,2 7,2 100,0 Total 292 100,0 100,0 TS2 The quality of cable net is good Frequency Percent Valid Percent Cumulative Percent Strongly disagree 18 6,2 6,2 6,2 Disagree 42 14,4 14,4 20,5 Uncertain 96 32,9 32,9 53,4 Agree 107 36,6 36,6 90,1 Strongly agree 29 9,9 9,9 100,0 Total 292 100,0 100,0 Valid TS3 The quality of transmission speed is stable overtime Frequency Percent Valid Percent Cumulative Percent Strongly disagree 15 5,1 5,1 5,1 Disagree 63 21,6 21,6 26,7 Uncertain 82 28,1 28,1 54,8 Agree 104 35,6 35,6 90,4 Valid 93 Strongly agree 28 9,6 9,6 Total 292 100,0 100,0 100,0 TS4 The sign of ADSL service is strong Frequency Percent Valid Percent Cumulative Percent Strongly disagree 19 6,5 6,5 6,5 Disagree 58 19,9 19,9 26,4 Uncertain 86 29,5 29,5 55,8 Agree 101 34,6 34,6 90,4 Strongly agree 28 9,6 9,6 100,0 Total 292 100,0 100,0 Valid TS5 Rarely dropouts Frequency Percent Valid Percent Cumulative Percent Strongly disagree 30 10,3 10,3 10,3 Disagree 63 21,6 21,6 31,8 Uncertain 76 26,0 26,0 57,9 Agree 98 33,6 33,6 91,4 Strongly agree 25 8,6 8,6 100,0 Total 292 100,0 100,0 Valid 94 P1 Initial installation charges of company is cheap (connection fee) Frequency Percent Valid Percent Cumulative Percent Strongly disagree 11 3,8 3,8 3,8 Disagree 47 16,1 16,1 19,9 Uncertain 85 29,1 29,1 49,0 Agree 131 44,9 44,9 93,8 Strongly agree 18 6,2 6,2 100,0 Total 292 100,0 100,0 Valid P2 The monthly subscription is not high Frequency Percent Valid Percent Cumulative Percent Strongly disagree 13 4,5 4,5 4,5 Disagree 38 13,0 13,0 17,5 Uncertain 92 31,5 31,5 49,0 Agree 133 45,5 45,5 94,5 Strongly agree 16 5,5 5,5 100,0 Total 292 100,0 100,0 Valid P3 The flow rates is reasonable Frequency Percent 95 Valid Percent Cumulative Percent Strongly disagree 14 4,8 4,8 4,8 Disagree 24 8,2 8,2 13,0 Uncertain 96 32,9 32,9 45,9 Agree 133 45,5 45,5 91,4 Strongly agree 25 8,6 8,6 100,0 Total 292 100,0 100,0 Valid P4 Company is having competitive pricing compared to others Frequency Percent Valid Percent Cumulative Percent Strongly disagree 16 5,5 5,5 5,5 Disagree 21 7,2 7,2 12,7 Uncertain 91 31,2 31,2 43,8 Agree 131 44,9 44,9 88,7 Strongly agree 33 11,3 11,3 100,0 Total 292 100,0 100,0 Valid G What is your gender? Frequency Percent Valid Percent Cumulative Percent Male 132 45,2 45,2 45,2 Female 160 54,8 54,8 100,0 Valid 96 Total 292 100,0 100,0 S What is your marital status? Frequency Percent Valid Percent Cumulative Percent 259 88,7 88,7 88,7 Valid Married 33 11,3 11,3 100,0 Total 100,0 100,0 Single 292 AGE How old are you? Frequency Percent Valid Percent Cumulative Percent From 18-25 239 81,8 81,8 81,8 From 26-35 33 11,3 11,3 93,2 From 36-45 16 5,5 5,5 98,6 From 46-55 1,0 1,0 99,7 Over 56 ,3 ,3 100,0 Total 292 100,0 100,0 Valid ACE What is your academic standard? Frequency Percent Valid High school 23 7,9 Valid Percent Cumulative Percent 7,9 97 7,9 Intermediate 2,4 2,4 10,3 College 42 14,4 14,4 24,7 University 208 71,2 71,2 95,9 Master 12 4,1 4,1 100,0 Total 292 100,0 100,0 INCOM How much of your income? Frequency Percent Valid Percent Cumulative Percent Less than million 209 71,6 71,6 71,6 From 6-10 milion 30 10,3 10,3 81,8 From 11-15 milion 26 8,9 8,9 90,8 From 16-20 milion 2,4 2,4 93,2 Over 20 million 20 6,8 6,8 100,0 Total 292 100,0 100,0 Valid  Descriptive Descriptive Statistics N E1 Employees of the company listens and 292 understands the needs of clients Minimum Maximum Mean Std Deviation ,940 98 3,27 E2 Customer care of the ADSL company I joined 292 are good 3,32 ,966 E3 The company is always interested customers anytime, anywhere 292 3,25 ,971 E4 Company respects the rights of clients 292 3,37 ,974 E5 When there is a problem, Company overcome immediately when required 292 3,32 1,037 E6 The company are ready to support 292 technical for customers 24/24 3,17 1,029 E7 Staff calls customers by name, very intimate 292 listening 3,19 1,077 E8 The company have rich service, options 292 appropriate to the needs of customers 3,42 ,962 E9 Company satisfy the 292 need to use of me 3,37 ,949 Valid N (listwise) REL1 Easy to register the service 292 N Minimum Maximum Mean Std Deviation 292 ,901 99 3,55 REL2 Service charges are always right as contract 292 3,52 ,986 REL3 After installation, the first time use the 292 ADSL service perfectly good 3,71 ,935 REL4 From installation to now, operating system 292 of company’s ADSL services is always stable 3,19 1,085 REL5 Data transmission speeds are true as the 292 company's commitment 3,28 1,051 REL6 Staff is committed to fulfill promises in timely manner 292 3,38 ,921 REL7 The company willing to meet all requirements about ADSL service 292 3,36 ,899 REL8 The company always cares about consumer’s ideas 292 3,32 ,899 Valid N (listwise) 292 N RES1 The procedure of installing is quick and 292 convenient Minimum Maximum Mean Std Deviation ,943 100 3,52 RES2 The company’s staff willing to serve everywhere, everytime 292 3,32 ,977 RES3 The company’s staff always have quick 292 respond customer’s question 3,38 1,006 RES4 Employees in company are willing to meet requirements of customers 292 3,33 ,989 RES5 The company’s staff support remote technical is very good 292 3,35 1,015 RES6 Employees give their customers shorter waiting time or fast service turnaround 292 3,34 ,958 RES7 Service is stable 292 when using 3,26 1,056 Valid N (listwise) 292 N Minimum Maximum Mean Std Deviation 292 3,40 ,901 A2 I am pleased with the attitude and spirit of 292 service of employees in Company 3,44 ,893 A1 Employees in company have knowledge and ethic 101 A3 Qualifications of staff are high 292 3,39 ,876 A4 Employees of the company creates trust for customer 292 3,44 ,897 A5 Employees in company are very experienced in solving or diagnosing the customers problem 292 3,48 ,917 A6 Privacy of customers information is 292 maintained 3,52 ,950 A7 Company is widely 292 known 3,82 ,979 A8 I feel safe and satisfy when using this ADSL service 292 3,57 ,966 Valid N (listwise) 292 N Minimum Maximum Mean Std Deviation TS1 The download/ upload service is good 292 3,25 1,037 TS2 The quality of cable net is good 292 3,30 1,034 TS3 The quality of transmission speed is stable overtime 292 3,23 1,055 TS4 The sign of ADSL 292 service is strong 3,21 1,072 102 TS5 Rarely dropouts 292 Valid N (listwise) 292 3,09 1,141 N Minimum Maximum Mean Std Deviation 292 3,34 ,947 P2 The monthly 292 subscription is not high 3,35 ,931 P3 The flow rates is reasonable 292 3,45 ,935 P4 Company is having competitive pricing 292 compared to others 3,49 ,976 P1 Initial installation charges of company is cheap (connection fee) Valid N (listwise) 292 103 104 ... satisfaction and loyalty of customer about ADSL service? ?? of Tran Huu Ai (2012), Ho Minh Sanh (2009), on other hand, I changed and added some factors and items in 20 order to create suitable and accurate... components of ADSL? ??s service quality, the relationship between service quality, price, transmission of speed, satisfaction and loyalty of customers about ADSL services, and the level of customer? ??s evaluation... main research questions: Main Research Question: To what extent are customer satisfaction and their loyalty affected by service quality and other factors? Main Research Hypothesis: Customer satisfaction