Luận văn Testing a Model of CUSTOMER-BASED BRAND EQUITY In The Vietnamese Banking Service

ilding step is developing customer brand relationships or bonding, and that an important element in this connection is loyalty (Martensen and Grønholdt, 2004). Aaker (1991) views brand loyalty as a dimension of brand equity. In the CBBE pyramid developed by Keller (2001), brand loyalty is at the top of the building blocks and is characterized in term of intensive relationship. Despite its apparent benefits to any firm, loyalty is viewed quite differently from different perspectives. This might result from the variety of the customer’s perceptions about the value that a brand delivers. Jacoby & Chestnut (1978) define brand loyalty as a result of two components: “1) A favorable attitude toward the brand, and 2) Repurchase of the brand over time.” (Cited in Martensen and Grønholdt, 2004) One of the broadest definitions of loyalty is of Oliver (1999) which describes loyalty as “a deeply help commitment to re-buy or re-patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior”. According to Oliver (1999), customers become loyal in four phases. At the shallowest level, called cognitive loyalty, loyalty might result from the belief of the customer in the brand. The brand information is either retrieved from vicarious 23 knowledge about the brand (from communication, word of mouth…) or current experience-based information. At this stage, if the satisfaction does not involve then the depth of loyalty is merely the brand performance. Loyalty shifts to the next phase if satisfaction steps in. At this phase, attitudes toward the brand are formed basing on satisfaction, or pleasure accumulated through the consumption of the brand. Commitment at this episode is referred as affective loyalty. Though loyalty in this stage is at deeper level than cognitive loyalty is and not as easily dislodged, it’s still venerable to switching. It is desirable if loyalty moves to a deeper level, the conative loyalty (behavioral intention). The development of loyalty at this phase is based on repetitive positive experience with the brand. It reflects the customer favorable intention toward the brand such as deeply commitment to buy. However, Oliver argues that this desire is rather the repurchase intention and motivation, and may be “anticipated but unrealized”. The ultimate phase of loyalty proposed by Oliver is action loyalty (other authors refer to as behavioral loyalty – Dick and Basu, 1994; Keller, 2001). At this phase, not only the intention to re-buy is shifted to the action of re-buying (and “repeat purchases”, Keller 2001) but also that desire engages in “overcoming obstacles” Martensen and Grønholdt (2004) adapt a more operational point of view: ”Customer loyalty has two sides to it, which on the one hand results in an effective continuation and extension of the business partnership, and on the other hand in a recommendation of the supplier, the brand, the product or the services for other potential customers.” According to them, customer loyalty takes place when the customer keeps on maintaining the relation with the company in terms of repurchases and purchase intention which can predict future behavior, and on the other hand, the loyalty will result in re-patronizing the company to purchase other products. However, Martensen and Grønholdt (2004) also agree that loyalty is also portrayed 24 as certain attitudinal loyalty (this is characterized as affective loyalty by Oliver) where the customer thinks that the company is distinctive and particularly attractive compared to its rivals. This is also in line with Oliver (1997) that the customer’s experiences with the company and its products are accumulated in a positive way as mentioned above (conative loyalty). In the banking industry, research by Colgate and Norris (2000) into the reasons that the customers switch or stay with their bank after a service failure shows that a majority of customers “who felt a strong sense of loyalty to their bank” decide to stay. According Colgate, this loyalty might result from the customer’s confidence with the relationship they have shaped with the service provider. 2.4 Generation of hypotheses Basing on the above literature review and the research questions, to test the model of CBBE in banking industry, some hypotheses are suggested below: Brand evaluations As mentioned previously, rational and emotional evaluations are made basing on the customer’s perception about rational and emotional brand associations that they have with the brand. Therefore, the following hypotheses are produced: H1: Rational evaluation is positively related to perceived service quality H2: Rational evaluation is positively related to price competitiveness H3: Rational evaluation is positively related to brand promise H4: Rational evaluation is positively related to brand differentiation H5: Rational evaluation is positively related to brand trust and credibility H6: Emotional evaluation is positively related to perceived service quality H7: Emotional evaluation is positively related to price competitiveness H8: Emotional evaluation is positively related to brand promise H9: Emotional evaluation is positively related to brand differentiation H10: Emotional evaluation is positively related to brand trust and credibility Martensen & Grønholdt (2004) argue that emotional evaluation has positive 25 relationship. i.e when the customers have a high liking for a brand, they tend to be more satisfied with the brand. H11: Rational evaluation is positively related to emotional evaluation Customer- brand relationships According to this model, customer-brand relationships do not directly relate to brand associations but through the customer’s evaluations. Therefore, another set of hypotheses are proposed: H12: Customer- brand relationships is positively related to rational evaluation H13: Customer- brand relationships is positively related to emotional evaluation 2.5 Conclusion This chapter provides theoretical framework for the research. However, with the reason regarding the product quality aspect as discussed above, a research model without the product quality component is suggested below (Figure 2.4). The researcher also assumes that there should be some adjustments of the measurement scale in order to make the research model more suitable for the banking industry in Vietnam. Chapter 3 will discuss this matter in more details. 26 Figure 2.4. Research Model of Customer-Based Brand Equity Rational associations Brand Evaluations Customer-Brand Relationship Service quality Price Promise Trust and Credibility Rational Evaluation Emotional Evaluation Differentiation H1 H2 H3 H4 H5 H6 H7 H8 H9 H10 H11 H12 H13 Rational and emotional associations Source: Adapted from Martensen & Grønholdt (2004) 27 Chapter 3: METHODOLOGY 3.1. Introduction The previous chapter provides theoretical framework for the research. This chapter provides an overview of business research and introduces research methodology used to build and assess the measurement scales, the statistical techniques employed to analyze the data, and testing the research hypotheses and research model as well. The chapter outline is shown in figure 3.1 Figure 3.1. Outline of chapter 3 3.2. Business research Business research is defined “as a systematic inquiry whose objective is to provide information to solve a managerial problem” (Donald R.C & Pamela S.S., 2003). There are some ways to classify business research. It can be classified based on characteristics of the data, source of the data, the purpose of research or the frequency of study. 3.1 Introduction 3.3 Research design 3.4 Item generation 3.5 Pilot test 3.6 Main study 3.7 Conclusion 3.2 Business research 28 Based on the purpose of research, researchers often use one of the following three types. Exploratory study: This is the basic level of research. Researchers use this type when there is a need to clarify the understanding of a problem, or when the researcher is uncertain about which theory is relevant or can be applied to explain the nature of phenomena. Descriptive study: The objective of descriptive studies is “to portray an accurate profile of persons, events or situations” (Robson, 1993). This may be an extension of an exploratory research. It is necessary to have a clear picture of the characteristics of which the data will be collected prior to the collection of the data. Causal study: In this type of research, the emphasis is on studying a specific situation or a problem in order to explain the relationships between variables. Basing on the characteristics of data needed and research purpose, researchers can choose either qualitative or quantitative approach or a combination of these two types. Data can be acquired via a variety of strategies such as experiment, survey, case study, grounded theory or action research. 3.3. Research design The first step in business research is to determine what objectives the researcher wants to achieve. Research design then enables the researcher to select appropriate methods in order to meet the research objectives in the most efficient way. To measure the customer-based brand equity constructs, the current study employs a descriptive method. This method was chosen because it allows the researcher to describe the customer’s attitude towards the marketing elements for a brand, describe the relationships among variables…(Tho & Trang, 2007) Data for this study was collected using a survey technique. This technique 29 “provides a quick, efficient and accurate means of assessing information on a population, especially in the case of a lack of secondary data” (Zikmund, 1997- cited in Quan, 2006). The research process of this study is shown in figure 3.2 3.4. Item generation Measurement scales used to measure the research concept (constructs) in this study were generated based on previous studies that were discussed in the literature review. Eight constructs contained in the research model include: 1) service quality, 2) price, 3) brand promise, 4) trust and credibility, 5) differentiation and 6) customer-brand relationship. The relationships among these constructs are measured through two mediating latent variables: 7) rational evaluation and 8) emotional evaluation. After carefully considering the theories, a pool of 38 candidate scale items to reflect the dimensions of CBBE ware selected to operationalize the research concepts. A five-point Likert scale, which ranges from 1-strongly disagree to 5-strongly agree, was used in this study. 3.4.1 Scale to measure rational associations Scale to measure service quality. As discussed in chapter two, banking is a service-dominant industry and a high contact service (except electronic banking). The SERQUAL scale is intentionally used to measure service quality in this study. However, according to Trang & Tho (2003), the number and content of service quality components, as well as how to measure them, differ among different types of services and markets. Therefore, to do research in a specific market, some amendment and complement might be needed. 30 Figure 3.2. Research process Literature review The first draft of questionnaire Group discussions The final draft of questionnaire Item modifications Reliability test EFA MLR Testing research model Testing hypotheses DROP Item(s) with item-total correlation < .3 DROP Item(s) with factor loading < .4 Interview EFA: Exploratory Factor Analysis MLR: Multiple Linear Regression 31 To measure service quality in the banking service, this study adapted the scale developed by Spiros et al (2003) with which they measured the service quality in banking service in Greece. Some complement and elimination have been done after discussion with the bank customers in group discussion. The service quality scale consists of 14 items as follows SQ_1: Bank [X] has up to date equipments SQ_2: Bank [X]’s physical facilities are visually appealing. SQ_3: Bank [X]’s employees are well dressed and appear neat. SQ_4: I find it very convenient with the location of bank [X] SQ_5: Bank [X] provides its services at the time it promises to do so SQ_6: When I have problems, bank [X] is sympathetic and reassuring SQ_7: I receive prompt service from bank [X]’s employees SQ_8: Bank [X]’s employees are always willing to help me. SQ_9: I feel safe in my transaction with bank [X] SQ_10: Bank [X]’s employees are polite SQ_11: Bank [X]’s employees know the bank’s product and service very well SQ_12: Bank [X]’s employees have necessary knowledge to answer my questions SQ_13: Bank [X]’s employees know what my needs are and how the bank’s products can satisfy them SQ_14: Bank [X]’s employees give me personal attention Scale to measure price. Price is one of the marketing mix elements. Many studies have measured the contri- bution of price to brand equity in terms of price premium. In the banking industry, price is a sensitive factor and strongly influences the customer’s decision to deal with a bank. Price in banking services can be measured in terms of deposit and loan interest rates, other service charges, fees and commissions. To capture a general sense of price in the banking industry, this study does not break down these rates (deposit interest rate and loan interest rate). The word ‘interest rate’ means both kinds of interest. However, the connotation of the term “price” used in this study indicates the price competitive- ness as an association of the brand, not a monetary or financial perspective. 32 Four observed variables measuring price are: PC_1: Interest rates of bank [X] are very competitive PC_2: Service fees of bank [X] are very competitive PC_3: Bank [X] offers me price deals PC_4: Bank [X] offers me very reasonable price 3.4.2 Scale to measure rational and emotional associations This study adapts the scale developed by Martensen and Grønholdt (2004) to measure the rational and emotional associations. Some changes have been made to make the scale more relevant to the banking services. Scale to measure brand promise. PR_1: Bank [X] creates meaningful promises for me PR_2: Bank [X] lives up to its promises PR_3: Bank [X] creates positive associations and image Scale to measure brand differentiation DF_1: Bank [X] differs from other banks in a positive way DF_2: Bank [X] is unique compared to other banks DF_3: Bank [X] offers advantages that other banks can not Scale to measure brand trust TR_1: Bank [X] communicates openly and honestly TR_2: Bank [X] is trustworthy and credible TR_3: I have great faith in bank [X] 3.4.3 Scale to measure brand evaluations Brand evaluations consist of two constructs: rational evaluation and emotional evaluation. These two latent variables, on the one hand, act as dependent variables that are influenced by the brand associations. On the other hand, they simultaneously play the roles of independent variables as predictors for customer-brand relationships. This study adapted the scales developed by Martensen and Grønholdt (2004). Some items were not used as they seem not to be appropriate for banking services. For example, 33 Brand X is a lifestyle more than a product or I really identify with people who use brand X. Rational evaluation scale RE_1: Bank [X] provides good value for money RE_2: Bank [X] greatly meets expectations RE_3: Overall, I am very satisfied with bank [X] Emotional evaluation scale EE_1: When thinking of bank [X], I get a positive and warm feeling EE_2: Bank [X] means a lot to me EE_3: I am proud to be a customer of bank [X] 3.4.4 Scale to measure customer- brand relationship Five variables suggested by Martensen and Grønholdt (2004) are used in this study. RL_1: The next time I am going to transact with a bank, I am going to bank [X] again. RL_2: I will recommend bank [X] to others RL_3: Overall, I find bank [X] better than other banks RL_4: I am very interested in bank [X] RL_5: It is important for me to maintain the relationship with bank [X] in the future. 3.5. Pilot test The purpose of pilot test was to refine the questionnaire to help respondents to avoid problems in answering questions and to increase the quality of data recorded for the main survey. This phase was carried out by two steps. In the first step, an exploratory study was made with the purpose of assessing the first draft of measurement scale. The first draft of questionnaire was developed in English. It was then translated into Vietnamese. During the translation, some references to previous researches of brand equity and service quality in Vietnam market have been made to improve the reliability and consensus of the items. For example Tho & Trang (2007)’s and Trang & Tho (2008)’s. 34 Two mini group discussions were conducted. In the first discussion, four bank experts including two branch directors and two managers (all were male) from different banks were invited. The purpose of this step is to examine the clarity the instrument and to be sure that all survey questions were clear in meaning and sufficient to cover the research matter in reality, from the perspective of a banking professional. Some amendments were made after suggestions from bank managers. The other discussion was conducted with the participation of 5 bank customers, four male and one female (six were invited but one was absent). The purpose of this step was the same as that of the first discussion, but in this case from the customer’s perspective. Some questions were adjusted on the recommendation of the participants, for example, to make the terms in the questionnaire more concrete and less negative. The final version of questionnaire was made in Vietnamese (Appendix 1) and then was translated back into English (Observed variables). 3.6. Main survey The main survey was conducted with commercial joint stock banks in Can Tho city, Vietnam. Firstly, the measures of each constructs were refined by Cronbach alpha coefficients. The purpose of this test was to provide a preliminary evaluation and refinement of the measurement scales. Reliability analysis was first used to remove items with low item-total correlations (<0.3) (Nunnally 1978 - cited in Quan, 2004). Scales with a Cronbach alpha coefficient equal to or greater than 0.6 are acceptable in some cases (Nunnally, 1978; Peterson, 1994 – quoted in Trong & Ngoc, 2005). Items those passed the test then were analyzed using an exploratory factor analysis (EFA) method to determine the actual dimensions of each construct. In this step, items with factor loadings less than 0.4 were deleted. Finally, the measures retained were run with multiple linear regressions (MLR) and the results were used to test the research model and hypotheses. 35 3.6.1 Brand selection Two brands were selected for this study, Vietcombank3 and VPbank4. Vietcombank is one of the largest and most well-known banks in Vietnam. This bank was previously owned by the Government and was equitized in 2007 and now, the Government still owns the largest proportion of its shares. VPbank is a private commercial bank and is a less well-known brand compared to Vietcombank but it is one of the earliest private commercial banks set up in the banking system of Vietnam. 3.6.2 Sampling The basic idea of sampling is that by selecting some of the elements in a population we may draw conclusions about the entire population. Some considerations for selecting the scope and methodology for sampling are cost, the accuracy of results, the speed of data collection and the availability of population elements (Donald & Pamela, 2003). The first step in sampling is that the population should be correctly defined. A population is the total collection of elements from which we wish to draw some conclusion. After identifying the population, researchers will choose an appropriate sampling method basing on either requirements of the project, their objective or budget available. Two most common sampling techniques are probability sampling and non- probability sampling. The population for this study is limited to individual customers of Vietnamese joint stock commercial banks. However, it is impossible to identify all the customers that make up the whole population, or to establish a sampling frame that includes a large proportion of the population. Due to the tremendous limitations of time, budget 3 Joint Stock Commercial Bank for Foreign Trade of Vietnam 4 Vietnam Joint Stock Commercial Bank for Private Enterprises 36 and knowledge; this study uses a non-probability sampling technique, specifically, convenience sampling. This is one of the least reliable sampling techniques, but it is the cheapest and easiest, and is the most feasible for this study. Interviewers can interview any individual customer who agrees to take part in the interview. For both Vietcombank and VPbank, samples were selected from the branch office and other two transaction points. 3.6.3 Sample size According to Donald & Pamela (2003), a good sample should satisfy both accuracy and precision. On the one hand, it should bring little or no systematic bias in variance, and on the other, the sampling error should fall within acceptable limits for the study’s purpose. There is no consensus in the literature on how large the sample size should be to represent a population. A host of formulas to calculate the sample size are provided, but they are not easy to apply. The sample size is determined by the level of precision and confidence desired in estimating the population parameters, as well as the variability in the population itself (Canava et al., 2001). The sample size for this study was intended to be 320 (equal 8 times of observed variables). This number was decided after considering some previous researches. For example, see Tho & Trang (2008, p.35) or Trong & Ngoc (2005, p263). To obtain the desired sample size, a total of 625 self-administered questionnaires were distributed to the respondents by bank employees. Of these, 388 questionnaires were returned; of which 295 were useable, making effective response rate 47.2%. 3.7. Conclusion This chapter provides details of the research methodology and research design used in 37 this study. The focus of this chapter was on the development of the questionnaire and the analytical methods employed for assessment of the measurement scales and for data analysis as well. The next chapter will provide the research results and the findings of the study. 38 Chapter 4: DATA ANALYSIS AND FINDINGS 4.1 Introduction The previous chapter provides the methodology that this study employs and the parameterization of the nine research concepts contained in the CBBE model. This chapter presents the analysis of results from the main study. Critical tasks of this chapter are testing the scales, reliability testing and exploratory factor analysis. The final qualified variables of each construct will be then be analyzed with MLR to test the research hypotheses. The structure of Chapter 4 is shown in figure 4.1. Figure 4.1. Outline of chapter 3 4.2. Descriptions of sample As mentioned in the previous chapter, 625 self-administered surveys were distributed to the respondents who are the customers of Vietcombank and VPbank in Can Tho 4.5 Findings and Conclusion 4.1 Introduction 4.2 Descriptions of sample 4.3 Assessment of scales 4.4 Testing hypotheses 39 city. Of these, 388 surveys were returned but 93 questionnaires were discarded because there were many questions unanswered or scored with the same mark. The final sample consisted of 295 questionnaires, 185 surveys from Vietcombank (62,7%) and the rest 110 surveys from VPBank (37.3%). The sample details are provided in table 4.1 Table 4.1 – Sample characteristics Gender Male Female Total Count Percent Count Percent Count Percent Descriptions of sample 151 51.19% 144 48.81% 295 100% Under 30 68 23.05% 55 18.64% 123 41.69% 31 to 45 62 21.02% 60 20.34% 122 41.36% 46 to 60 17 5.76% 25 8.47% 42 14.24% Age groups Over 60 4 1.36% 4 1.36% 8 2.71%