UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ************* PHAM THI MAI PHUONG PERCEIVED JUSTICE IN SERVICE RECOVERY AND RECOVERY SATISFACTION AND CUSTOMER LOYALTY: A STUDY OF EDUCATION SERVICES IN VIET NAM MASTER OF BUSINESS (by Honour) Ho Chi Minh City-Year 2013 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ************* PHAM THI MAI PHUONG PERCEIVED JUSTICE IN SERVICE RECOVERY AND RECOVERY SATISFACTION AND CUSTOMER LOYALTY: A STUDY OF EDUCATION SERVICES IN VIET NAM ID: 22110047 MASTER OF BUSINESS (by Honour) SUPERVISOR Dr NGUYEN DONG PHONG Ho Chi Minh City-Year 2013 ACKNOWLEDGEMENTS I would like to express my deeply sincere gratitude to my Supervisor, Dr.Nguyen Dong Phong, for his valuable, enthusiastic guidance and advice on effective method He helps me to understand the research method thoroughly His value experience and professional knowledge give me opportunities to recognize issues deeply His inspiration to me played an important role in finishing my research Furthermore, I would like to express my gratitude to Dr Nguyen Thai Hoang; his excited lectures encouraged me to explore more how to apply research method to a research Besides, I would like to thanks to respondents who have supported me a lot in answering questionnaire and interview, which really help me to complement my research Another source of motivation I would like to thank is my classmates ISB Mbus 2011 for a mutual support by sharing, discussing ideas, knowledge and experiences in the term of research And an honorable mention I want to send my gratitude to my family, friends for their understanding and helping to collect data for completing my thesis Ho Chi Minh City, Viet Nam 05thJan, 2014 Pham Thi Mai Phuong i ABSTRACT The purpose of this research is to empirically investigate the relationships of Service Recovery (Interactional Justice, Procedure Justice, and Distributive Justice) and Customer Satisfaction, between Customer Satisfaction and customer Loyalty The empirical setting is implemented in the English teaching Service in a developing economy of Viet Nam, particularly in Ho Chi Minh City The findings of this study reveal that Vietnamese Customers who perceive Interactional Justice, Procedure Justice, and Distributive Justice feel satisfied after complaining Customers consider perception of Distributive is the most important to response their behavior and attitude towards English teaching service after encountering a service failure They appreciate resolving of complaints by outcomes which they received compared to what they required Besides, Consumers also observe treatment and response of employees when they complaint to Centers Customers expect courteous and respectful communication from employees when they response with customer’s problem A good attitude with caring and concerning about what customers experienced and uncomfortable is good criteria for customers to evaluate Service Recovery of Center Study also found that procedure of Service Recovery is more efficient when Center train employees how to communicate with customers to make them tell their problems Because, it is very difficult to know how customers value service if they not discuss anything about this The research affirm that Satisfaction of Customer after handling complaints impacting on customer Loyalty significantly Thus, this result contributes to the literature review of studies in English teaching Service that Service Recovery is always an important factor to improve the customer satisfaction and customer Loyalty Key words: service recovery, perceived justice, recovery satisfaction, customer loyalty ii TABLE OF CONTENTS ACKNOWLEDGEMENT ABSTRACT TABLE OF CONTENTS LIST OF FIGURES LIST OF TABLES CHAPTER 1: INTRODUCTION 1.1 RESEARCH BACKGROUND 1.2 PROBLEM IDENTIFICATION 1.3 RESEARCH OBJECTIVES AND QUESTION 1.4 SIGNIFICANCE OF THE RESEARCH 1.5 RESEARCH SCOPE 1.6 RESEARCH METHODOLOGY 1.7 LIMITATION 1.8 THESIS STRUCTURE CHAPTER 2: LITERATURE REVIEW AND CONCEPTUAL MODEL 2.1 SERVICE RECOVERY 2.1.1 Interactional Justice 11 2.1.2 Procedural Justice 11 2.1.3 Distributive Justice 12 2.2 CUSTOMER SATISFACTION AND CUSTOMER LOYALTY 13 2.2.1 Customer Satisfaction 13 2.2.2 Customer Loyalty 14 2.3 CONCEPTUAL MODEL 16 CHAPTER 3: RESEARCH METHODOLOGY 17 iii 3.1 QUANLITATIVE RESEARCH ………………………………………………………… 3.2 CONSTRUCTION OF MEASUREMENT 17 3.2.1 Measurement Scale of Interactional Justice 18 3.2.2 Measurement Scale of Procedural Justice 19 3.2.3 Measurement Scale of Distributive Justice 20 3.2.4 The measurement of customer satisfaction after handling complaint 21 3.2.5 The measurement of Customer Loyalty 21 3.3 DATA COLLECTION 22 3.3.1 Source of data 22 3.3.2 Questionnaire 22 3.4 SAMPLE 24 3.5 DATA COLLECTION PROCEDURE 25 3.6 DATA ANALYSIS 26 CHAPTER 4: RESULTS OF DATA ANALYSIS AND DISCUSSION 28 4.1 SAMPLE DISCRIPTION 28 4.1.1 Name of English center respondents used to experienced 29 4.1.2 Cost of English center respondent used 29 4.1.3 The profession, gender and age of respondents 30 4.2 RELIABILITY ANALYSIS OF MEASUREMENT SCALES 31 4.2.1 Reliability analysis result of measurement scale of Interactional Justice 31 4.2.2 Reliability result of measurement scale of Procedural Justice 32 4.2.3 Reliability analysis result of measurement scale of Distributive Justice 33 4.2.4 Reliability analysis result of measurement scale of Recovery Satisfaction 34 4.2.5 Reliability analysis result of measurement scale of Loyalty 35 4.3 EXPLORATORY FACTOR ANALYSIS 36 4.3.1 EFA for group of predictors 36 4.3.2 EFA for group of items of Customer Satisfaction and Loyalty measurement Scale 38 iv 4.4 MULTIPLE REGRESSION ANALYSIS 40 4.4.1 Revised Conceptual Model 40 4.4.2 Multiple Regression Testing Assumptions 40 4.4.3 Multiple Regression Analysis 45 4.5 DISCUSSION 50 CHAPTER 5: CONCLUSION AND MANAGERIAL IMPLICATION 52 5.1 CONCLUSION 52 5.2 MANAGERIAL IMPLICATION 53 5.3 LIMITATION 55 REFERENCES 56 APPENDICES 59 APPENDIX 1: SURVEY FORM 59 APPENDIX 2: RESULTS F CRONBACH’S ANPHA 63 APPENDIX 3: RESULTS OF EFA 79 APPENDIX 4- RESULTS OF MULTIPLE REGRESSION 91 v LIST OF FIGURES Figure 1: Conceptual Model 14 Figure 2: The process of research 15 Figure 3: Name of English center respondents used to experienced 27 Figure 4: Tuition fees of English course respondents used to experienced 28 Figure 5: Gender and age of respondents 29 Figure 6: Profession of respondents 30 Figure 7: Revised Conceptual Model 38 vi LIST OF TABLES Table 1: List of Interviewers 17 Table 2: Measurement Scale of Interactional Justice 18 Table 3: Measurement Scale of ProcedureJustice 19 Table 4: Measurement Scale of DistributiveJustice 19 Table 5: Measurement Scale of customer satisfaction after handling complaint 20 Table 6: Measurement Scale of Customer Loyalty 21 Table 7: The result of delivery questionnaires 24 Table 8: Cronbach’s Alpha of scale of Interactional Justice 31 Table 9: Cronbach’s Alpha of scale of ProceduralJustice 32 Table 10: Cronbach’s Alpha of Scale of Distributive Justice 33 Table 11: Cronbach’s Alpha of Scale of Satisfaction 34 Table 12: Cronbach’s Alpha of Scale of Loyalty 35 Table 13: EFA result of Predictors 36 Table 14: EFA result of Satisfaction and Loyalty 37 Table 15: Results of Multiple Regression Analysis 40 Table 16: Result of Simple Regression Analysis 43 vii Chapter 1: Introduction CHAPTER 1: INTRODUCTION 1.1 RESEARCH BACKGROUND Today, the number of language center increase significantly every year, accounting for 40% of kind of culture center in Viet Nam while the number of student studying in the language center stand for 70% compare to others This proved that second language was and is getting become more important in our life Since Viet Nam has joined WTO, there were many foreign companies invested in Viet Nam This leads to local company need more human resources have ability to use English Ho Chi Minh City is the biggest city in Viet Nam, which is united culture center, developed economic, and education Therefore, there are a lot of English centers opened to meet demand of English studying for millions of students and employees Besides local English centers, many international group built and developed a chain of English center such as Ila, AMA…They are big competitors to VUS, Outer-space language, VAS, and others Due to developed society, expectation of customer about service becomes higher They demand more strict requirements Therefore, the possibility which the service producers deliver services in failure is bigger Service failure is defined as those situations when the service fails to live up to the customer‟s expectations (Michel, 2001) It is clear that service failure is inevitable When customers dissatisfy with service received then they will respond by reaction such as emotional reaction (anger, disappointment, regret) or behavior reaction (complaining, negative mouth to mouth or switching of these providers to others) The bad case is that they will negative mouth to mouth of services It is coined that mouth to mouth advertising is very effective and quick Thus, the important is providers have to handle complaints and resolve problems to maintain customers and avoid negative word of mouth Recently there have been many studies about this problem, they found out remedy for service failure which helps company change lose to win The one of effective therapies to ease customer dissatisfaction is service recovery When firms handle complaint and failures effectively this can have a great effect on customer retention rates, defect the spread of damaging word of mouth and improve bottom-line performance (Morrisson and Huppertz, 2010) However, the degree of success might depend on the type of service Appendices Summary Item Statistics N of Items Inter-Item Correlations Item-Total Statistics Scale Scale Corrected Squared Cronbach's Mean if Variance Item-Total Multiple Alpha if Item if Item Correlation Correlation Item Deleted Deleted Deleted INTER2 13.72 7.771 553 321 815 INTER3 13.85 7.309 666 460 785 INTER4 14.00 7.039 670 469 783 INTER5 13.92 7.188 649 424 789 INTER6 13.87 6.983 604 372 804 Appendices APPENDIX 3: RESULTS OF EFA KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy .772 Approx Chi- 726.5 Bartlett's Test of Square 60 Sphericity df 78 Sig .000 Communalities Initial Extraction INTER2 1.000 456 INTER3 1.000 638 INTER4 1.000 655 INTER5 1.000 625 INTER6 1.000 584 PRO7 1.000 602 PRO8 1.000 548 PRO9 1.000 678 PRO10 1.000 521 PRO11 1.000 684 PRO12 1.000 556 DIS13 1.000 927 DIS14 1.000 916 Appendices Extraction Method: Principal Component Analysis Total Variance Explained Compo Initial Eigenvalues Extraction Sums of Squared nent Loadings Total % of Cumulati Variance ve % Total % of Cumulati Variance ve % 3.615 27.805 27.805 3.615 27.805 27.805 2.953 22.712 50.517 2.953 22.712 50.517 1.823 14.024 64.541 1.823 14.024 64.541 774 5.953 70.494 723 5.562 76.057 539 4.147 80.204 501 3.850 84.055 465 3.577 87.632 451 3.466 91.097 10 389 2.994 94.092 11 367 2.826 96.918 12 290 2.229 99.146 13 111 854 100.000 Appendices Total Variance Explained Component Rotation Sums of Squared Loadings Total % of Cumulative Variance % 3.446 26.510 26.510 2.980 22.926 49.436 1.964 15.105 64.541 10 11 12 13 Extraction Method: Principal Component Analysis Component Matrixa Component INTER2 661 132 -.049 INTER3 757 196 -.162 INTER4 729 318 -.151 INTER5 679 361 -.183 INTER6 717 260 044 PRO7 -.282 626 362 PRO8 -.280 682 062 PRO9 -.349 746 -.026 Appendices PRO10 -.257 670 076 PRO11 -.311 740 200 PRO12 635 374 -.115 DIS13 349 -.190 877 DIS14 362 -.112 879 Extraction Method: Principal Component Analysis.a a components extracted Rotated Component Matrixa Component INTER2 655 -.122 108 INTER3 789 -.123 017 INTER4 809 000 005 INTER5 788 050 -.045 INTER6 739 -.005 195 PRO7 -.077 748 192 PRO8 005 733 -.101 PRO9 -.016 796 -.211 PRO10 018 717 -.080 PRO11 -.028 826 015 PRO12 740 092 007 DIS13 070 -.104 955 DIS14 113 -.037 950 Appendices Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization.a a Rotation converged in iterations Component Transformation Matrix Compo 899 -.351 261 393 911 -.129 -.192 218 957 nent Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy .864 Approx Chi- 351.3 Bartlett's Test of Square 70 Sphericity df 10 Sig .000 Communalities Initial Extraction SAT17 1.000 747 SAT18 1.000 783 SAT19 1.000 790 LOY21 1.000 829 LOY22 1.000 885 Appendices Extraction Method: Principal Component Analysis Total Variance Explained Compo Initial Eigenvalues Extraction Sums of Squared nent Loadings Total % of Cumulati Variance ve % Total % of Cumulati Variance ve % 3.491 69.822 69.822 3.491 69.822 69.822 542 10.831 80.653 542 10.831 80.653 371 7.419 88.071 314 6.283 94.355 282 5.645 100.000 Total Variance Explained Component Rotation Sums of Squared Loadings Total % of Variance Cumulative % 2.250 45.006 45.006 1.782 35.647 80.653 Appendices Extraction Method: Principal Component Analysis Component Matrixa Component SAT17 828 -.248 SAT18 849 -.249 SAT19 839 -.294 LOY21 849 328 LOY22 813 473 Extraction Method: Principal Component Analysis.a a components extracted Rotated Component Matrixa Component SAT17 791 348 SAT18 808 361 SAT19 829 320 LOY21 434 801 LOY22 312 887 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization.a Appendices a Rotation converged in iterations Component Transformation Matrix Compon 761 649 -.649 761 ent Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization Appendices APPENDIX 4- RESULTS OF MULTIPLE REGRESSION ANOVAa Model Sum of df Squares Mean F Sig 160.299 000b Square Regression 468.132 156.044 Residual 121.682 125 973 Total 589.814 128 a Dependent Variable: SAT b Predictors: (Constant), DIS, INTER, PRO Coefficientsa Model Unstandardized Standardized Coefficients Coefficients B Std t Sig Beta Correlations Zero-order Error - (Constant) 210 557 -.378 706 INTER 154 044 248 3.455 001 803 PRO 088 042 155 2.094 038 788 DIS 409 062 543 6.621 000 870 Coefficientsa Model Correlations Collinearity Statistics Partial Part Tolerance VIF INTER 295 140 321 3.116 PRO 184 085 300 3.330 DIS 510 269 246 4.071 (Constant) Appendices Collinearity Diagnosticsa Mo Dimens Eigenv Condition del ion alue Index Variance Proportions (Const INTE ant) R PRO DIS 3.965 1.000 00 00 00 00 022 13.348 76 00 02 10 007 23.979 01 55 72 02 006 26.618 23 44 26 88 a Dependent Variable: SAT a Dependent Variable: SAT Residuals Statisticsa Minimum Maximum Mean Std N Deviation Predicted Value 5.2860 13.8007 10.5581 1.91240 129 Std Predicted Value -2.757 1.696 000 1.000 129 088 344 166 053 129 5.3148 13.9198 10.5609 1.91232 129 Residual -2.53620 2.40576 00000 97501 129 Std Residual -2.571 2.438 000 988 129 Stud Residual -2.594 2.492 -.001 1.004 129 Deleted Residual -2.58176 2.51270 -.00272 1.00753 129 Stud Deleted Residual -2.656 2.546 -.001 1.012 129 Mahal Distance 028 14.541 2.977 2.590 129 Cook's Distance 000 082 008 014 129 000 114 023 020 129 Standard Error of Predicted Value Adjusted Predicted Value Centered Leverage Value Appendices a Dependent Variable: SAT Variables Entered/Removeda M Variables Variables od Entered Removed SATb Method el Enter a Dependent Variable: LOY b All requested variables entered Model Summaryb M R R Adjusted Std Error od Squar R Square of the el e 847a 718 Estimate 716 2.98083 a Predictors: (Constant), SAT b Dependent Variable: LOY ANOVAa Model Sum of df Squares Mean 2803.879 2803.879 Residual 1101.780 124 8.885 Total 3905.659 125 b Predictors: (Constant), SAT Sig 315.563 000b Square Regression a Dependent Variable: LOY F Appendices Coefficientsa Model Unstandardized Standardize Coefficients d t Sig Correlations Coefficients B Std Beta Zero-order Error (Constant 1.32 869 ) 656 51 2.18 SAT 123 847 17.76 00 847 Coefficientsa Model Correlations Collinearity Statistics Partial Part Tolerance VIF 847 847 1.000 1.000 (Constant) SAT a Dependent Variable: LOY Collinearity Diagnosticsa Mo Dimens Eigenv Condition Variance del ion alue Index Proportions (Const SAT ant) 1.980 1.000 01 01 020 9.865 99 99 Appendices a Dependent Variable: LOY Residuals Statisticsa Minimum Maximum Mean Std Deviation N Predicted Value 11.7767 31.4113 23.8968 4.73614 126 Residual -8.68481 7.22334 00000 2.96888 126 Std Predicted Value -2.559 1.587 000 1.000 126 Std Residual -2.914 2.423 000 996 126 Dependent Variable: LOY Appendices ... commonly as consumer‟s behavioral loyalty and attitudinal loyalty (Parasuraman et al., 2005) Behavioral loyalty is expressed as repeated transactions, or called percentage of total transactions in category)... that interactional justice can be divided into two dimension in analyzing comprised Interactional treatment and informational justice (Colquitt, 2001; Mattila and Cranage, 2005) Informational justice. .. effect of Service recovery has meaningful in maintaining customers If service recovery is ineffective or poor that triggers to disappointment of customer again (failure in recovery) This may lead to