Researching service switching behavior of personal customers in commercial banks in Vietnam

g, banks should encourage their customers to share with their family and friends good feedback on the services they had been using. Forthly, banks should operate in the best manner so that their customers would appreciate this unique value which would never be found anywhere. Minchal Clemes et. al, (2010) researched bank switching behavior of customers in China. This study was carried out in Jiaozuo, Henan, China with convinient sample. It stated that there were 7 important factors having influence on bank switching behavior of Chinese customers. This study applied factor analysis and logistic regression to analyze the data. The findings showed that price, reputation, service quality, effective advertising, involuntary switch, distance and cost would affect switching behavior. At the same time, the young customers with high income were listed as those easily changing bank service. Zhang (2009) worked on factors affecting bank switch of commerical banks in China. The data was gathered by convinient sample from 421 customers having switched bank service. The influencing factors were comprised of price, reputation, service quality, effective advertising, involuntary switch, distance, switching cost and demographic features. Factor analysis and Logistic regression were used to analyze 5 data, identify and rank influencing factors on customers’ switching behavior. The research results demonstrated that price, reputation, service quality, effective advertising, involuntary switch, distance, switching cost put an impact on the switching behavior of customers. Lees (2007) studied bank switching in New Zealand through survey questionnaire with the sample of 732. The results revealed that there were three main influencing factors on bank switch, which were facility maximization, dissatisfied expectations and other factors. Among these, the first one holed the larget proportion of impact (32%), which was followed by dissatsified expectations (31%). Colgate & Hedge(2001), in their study entitled “An investigation into the switching process in retail banking services” demonstrated that losing customers might have negative effects on the market share and profit of the banks. The author used experimental evidences with 694 survey samples from customers of banks in Australia and New Zealand. Major reasons for for bank switch were categorized into three areas: service incident, price-related problem and rejected service. Research results showed that the key reasons for bank switch covered price-related problem, service errors, as well as poor knowledge and attitude about the service. Among these issues, problem related to price was the most seriously influential one. In particular, unreasonable cost and fee were the key components. This was followed by saving interest and debt interest, which should also be taken into consideration. The second influencing factor was linked with poor knowledge and attitude in serving customers. Especially, rude and inflexible staff made up the most concerning problem. The third influential was errors in service quality, which also caused bank switch. Gerrard, P and Cunningham, J,B (2000) explored reasons for bank switch in Singapore based on the study by Keaveney (1995). The findings showed that there were six factors affecting bank switch, including inconvinience, errors in service quality, price, poor knowledge and attitude, objectivity and impact from conpetitors. Among these, inconviniencem poor attitude and price were the most influencing factors on the switch. Steward (1998) stated that influencing factors on the decision of bank switch might be various and complex. His study introduced four reasons for the bank service 6 switch, namely switch fee and administrative procedure, facilities, information system and security as well as customer service. Levesque McDougall (1996) investigated bank switch and identified that problems of price and geographical inconvenience were two important factors in making customers change the bank service. Zeithaml et. al, (1996), in the study on behavioral effects of service quality, demonstrated a model on the impacts of service quality on customers’ switching behaviors. Their experimental results showed strong evidences for the test on how customers were affected by the service quality. Keaveney, (1995) in the study on “Customer switching behavior in online services: An exploratory study of the role of selected attitudinal, behavioral, and demographic factors”, reported research results in two previous field researches carried out with online service users who had been randomly chosen. The author aimed at investigating the rate of behavior selection (information customers used to decide to use online service and banks’ service), attitude (risk taking with the trend) and demographical elements (income and education). He worked on these factors to find out whether they would be effective in differentiating switchers and non- switchers of the service. Keaveney developed the general model on the investigation into influencing factors on switching behavior of customers. This model covered eight reasons related to problems with the service and service elements discouraging customers to change the suppliers. Key domestic studies Nguyễn Minh Loan ( 2018) worked on the factors affecting loyalty of customers in retailing area. The five components of the service quality stated in this research included First, tangible measures: slogan, image, materials, facilities and equipment to carry out the service, and appearance, costumes of the staff; Second, reliability: serving capability and punctuality from the first meeting; Third, responsiveness: willingness to timely serve the customers; Forth, serving competency: specialized knowedge, politeness, happiness, readiness, especially quick responses of the staff in dealing with customers’ claim and inquiries; Fifth, sympathy: careness and encouragement for each customer. Service quality was an important factor affecting 7 customers’ loyalty. Among components of quality and capability of the banks in carrying out their promised service in an accurate and friendly way, the staff’s readiness and timely supply of the service, politeness and presentation skills to build up trust for customers were regarded as the most significant factors affecting customers’ loyalty. Lê Chí Công (2014) studied and built up toursist’ loyalty in sea toursim in Vietnam. His research was based on the theory of consumer behavior and tourists’ loyalty in toursim area. It focused on clarifying the background knowledge of tourists’ loyalty and influencing factors in order to give 03 new models to be tested, in particular, they covered the followings. Firstly, determining the significance of accessing the quality of sea toursim destination from different components as well as their various influencing levels on tourists’ satisfaction and loyalty in sea tourism destinations. Secondly, it was stated that factors belonging to attitude strengths (knowledge about the destination, careness about sea toursim, adventure of new destination) had moderating impact (i.e causing variant increase or decrease in the relationship between tourists’ satisfaction and loyalty in sea toursim destinations). Thirdly, other factors related to demographic features (age and income) put moderating impact (i.e causing variant increase or decrease in the relationship between tourists’ satisfaction and loyalty in sea toursim destinations). In regard of research methods, the study applied both qualitative and quantitative methods (multivariable model with intermeidate and moderating variables), and processed data by AMOS in sea toursim study in Vietnam. However, this research selected random sample in three cities with domestic tourists rather than foreigners. Also, although this study chose certain factors related to toursim but still lack of other factors. Hồ Chí Dũng (2013) studied brand loyalty of comsumers in Vietnam in regard of fast moving consumer goods. His thesis built up and tested influencing factors on brand loyalty in fast moving comsumer goods among Vietnamese consumers. There was one excluded factor belonging to behavior (repeat purchase behavior). This exception was based on the investigation into the appropriateness with particular context in Vietnam. The proposed model included brand commitment, trust in the brand, functional value, emotional value, social value, price worthy value, satisfaction 8 and careness. This study measured level of loyalty in brand of consumers in Vietnam with two typical products in the fast moving cosumer goods: shampoo and bottled water. The brand loyalty of Vietnamese comsumers was rather high in shampoo iterm and quite low in bottled water. The strongest influencing factors were brand commitment, trust in the brand, satsifaction and functional value. Also, this study identified differences in level of influencing on brand loyalty between those two items: shampoo and bottled water. The fundamental difference was related to social role of these two products. Then, businesses could control the influencing factors based on the influencing level and products’ significance when they they make marketing plan to establish and enhance brand loyalty of Vietnamese consumers. Huỳnh Phương Linh and Lưu Tiến Thuận (2012) researched influencing factors on consumers’ loyalty towards soft drink PEPSI in Cần Thơ. The results showed that the perceived quality made up satisfaction of customers and the price put no impact on this satisfaction. Customers’ loyalty was positively affected by 2 factors namely satisfaction and the firm’s image with the weights of 0,580 and 0,281 respectively, the factor namely habit put little impact on the loyalty. Bùi Thanh Tráng (2013), worked on influencing factors on purchasing tendency of consumers in modern retailing channels in Hồ Chí Minh city. He identified 6 influentials on purchasing trend here, including category and quality of the goods; price; location of the modern retailing channels; exhibition; promotion campaigns and serving attitude of the staff. Among these, the factor with the highest influencing level was location; which was followed by the price of goods; category and quality; attitude; promotions. The author also encouraged future studies to use structural equation modeling SEM to test the hypotheses and identify the causal relationship between research concepts. Hoàng Lệ Chi, Nguyễn Đình Thọ (2013) researched switching barrier and customers’ loyalty. Their works investigated the intermediate role of the commitment in the relationship between switching barrier and loyalty of industrial customers (B2B customers) in the market of telecommunication in Vietnam. The results from data with 278 corporate customers revealed that switching barrier had a positive impact on the commitment and the latter also had a positive impact on the 9 former. The significant administrative implication is this case was that in order to obtain loyalty of corporate customers, the suppliers of telecommunication service should achieve commitment of relationship with their partners in establishing positive switching barriers like perfect quality of the information network and a sustainable relation. Quách Ngọc Châu (2011) concentrated on influencing factors on the decision of switching banks among personal customers in Hồ Chí Minh city. This experimental study was carried out with three approaches: (1) sending questionnaire through email, (2) releasing questionnnaire and (3) directly interviewing. This work identified 4 influentials on the decision of switching bank service: poor knowledge and serving attitude, errors in service quality, inconvinience, impact from competirors. Then, this study suggested suitable strategies for managers to sustain their marketshare and improve banks’ competitiveness. Chu Nguyễn Mộng Ngọc (2010): researched the identification of loyal customers in commercial banks in Hồ Chí Minh city: this study revealed 4 contributors namely the brand asset of the banks; percieved quality; brand image and customers’ loyalty; among these, the loyalty wa the strongest influential. Phạm Thùy Giang (2012) compared the quality of retail banks between those with 100% foreign investment and Vietnam’s ones. The utilized tools were model on service quality SERVQUAL and Gronross model to measure the quality of service in retail banks so that the author could find out influencing factors on loyalty, recommendation and satisfaction of customers with the service provided. 1.7. New contributions of the thesis This thesis is expected to provide both theoretical and practical contributions through the best application of its objectives. Firstly, this study helps in theoretical aspect, particulary, customers’ switching behavior in retail banking. The research results would contribute to the knowledge about how factors namely price, reputation, service quality, effective advertising, volutary switching, distance and switching fee can put impacts on customers in retail banking in Vietnam. Secondly, this study can help managers of commercial banks in Vietnam to understand the most important factors leading to bank switch or retain. This might 10 assist them in building up a long-term and sustaniable relationship between their banks and customers. Moreover, these managers can use this information as background for solutions to mitigate bank switch. This study also proposes specific recommendations for bank mamagers so that they can attract new customers through the establishment of strategies to overcome switching barriers of their competitors, then, they can increase their market share. 1.8. Thesis organization The thesis is organized in 5 chapters Chapter1 Literature review This chapter provides an overview of the current ; introduces the research sample, research methods ; points out the research gap and summarizes the research findings Chapter 2 Theoretical background This chapter analyzes previous studies related to switching behavior and considering influencing factors on this behavior in the banking area. Chapter 3 Research methods. This chapter discusses selection of variables, construction of the research model and statistical methods to test the hypotheses. Chapter 4 Research findings This chapter presents qualitative results and identifies influencing factors on switching behavior of personal customers Chapter 5 Recommendations and solutions This chapter draws the conclusion of the thesis, discusses its limitations and implications for the banks as well as orientation for future studies. 11 CHAPTER 2 THEORETICAL BACKGROUND AND RESEARCH MODEL 2.1. Theoretical background 2.1.1. An overview of personal customer service in commerical banks 2.1.2. Typical characters of personal customer service in commerical banks - Large number of customers - Small size of transaction - Diversified services for personal customers - Development of personal customer service based on modern information technology - Personal customer service with high Marketing cost - Wide network of branches and distributing channels 2.1.3 Classification of personal customer service in commercial banks 2.2. Theory on switching behavior 2.2.1 Switching behavior Definition Switching behavior should be regarded as customers’ refusal to use services (Stewart, 1994; Hirschman, 1970) Impacts of switching behavior Keaveney & Parthasarathy, 2001 and Reichheld, 1996 found out that switching behavior of customers resulted in a decrease in total revenue and profit of enterprises because they had to invest in initial costs (eg. Consultancy, advertising) and other expenditures to obtain a new customer (Colgate, Steward Fornell & Wernerfelt & Kinsella,1996; Reichheld & Sasser, 1990 and 1987). The study in 1990 by Reichheld & Sasser stated that customers’ refusal to use services put more direct and strong impacts on revenue than the firms’ size, market share and other aspects. Zeithaml et. al, 1996 identified that customers tended to change bank services of their effecificiency decreased. Also, when customers left a bank, they could share bad reputation and rumors about that bank (Diane, 2003). The harsh competitiveness in 12 banking area has resulted in various effects of switching behavior in terms of reducing the banks’ market share and profit (Ennew & Binks, 1996; Garland, 2002; Trubik & Smith, 2000 and Rust & Zahorik, 1993) also researched the impacts of finance on possibility of keeping customers and figured out that there was a strong relationship between customers‘ loyalty and profit in the retail banking. The study by Colgate, 1999 investigated the annual rate of switching in New Zeland (4%) and more than 15% of personal customers of retail banks intended to change the banks. 2.3. Research model and hypotheses H1: There was a positive correlation between the price and switching behavior of customers. H2: There was a positive correlation between the reputation and switching behavior of customers. H3: There was a negative correlation between the service quality and switching behavior of customers. H4: There was a negative correlation between the advertising competitiveness and switching behavior of customers. H5: There was a positive correlation between the involuntary switch and switching behavior of customers. H6: There was a negative correlation between the convenient distance and switching behavior of customers. H7: There was a negative correlation between the switching fee and switching behavior of customers. H8: There was a negative correlation between the age and switching behavior of customers. H9: There was a negative ationship between the income and switching behavior of customers. H10: There was a negative correlation between the academic background and switching behavior of customers.. H11: Customers as unskilled labor held higher possibility of switching banks than those were not. H12: There were differences in the awareness of switching elements between different demographical groups. 13 Based on those 12 hypotheses, the following model was introduced: Diagram 2.1 Research model Price Effective advertising competitiveness Service quality Reputation Demographic features Switching fee Distance Switching behavior Involuntary switching Binary variable 1 = Bank switching 0 = Nonswitching 14 CHAPTER 3 RESEARCH METHODS 3.1. Sampling method The data collection was carried out based on the survey questionnaire. The sample was extracted from customers of commercial banks in Vietnam. The data was gathered from stratified sampling in commercial banks in Hanoi.There were 400 questionnaire randomly released to customers in shopping malls from 9 am to 5 pm during 3 months. The responses were collected right after they were completed. 3.2. Sample size This research worked on 363 observations. 3.3. Questionnaire design The questionnaire was developed based on results of previous studies and feedbacks from discussion of focus groups CHAPTER 4: RESEARCH FINDINGS 4.1 Sample and rate of responses In total, there were 363 questionnaires responded out of 400 randomly and conveniently released. 27 questionnaires were excluded because they were incomplete. 4.2 Descriptive statistics Data in table 4.1 shows the descriptive statistics on the number of participants switching and non-switching banks. 15 Table 4.1 Statistics of switching participants Bank switching participants Number Percentage Categories Non-switching in recent 3 years 230 63,4% Switching in recent 3 years 133 36,6% Total 363 100.0 Source: Author’s self- collection Table 4.2 Statistics of demographic features towards the rate of bank switching Customers’ features Total number Percentage (%) Having switched banks (people) Number Percentage (%) Gender Male(1) 144 39,7 54 37,50 Female(0) 219 60,3 79 36,07 Age 18-23(0) 142 39,1 53 37,32 23-60(1) 221 60,9 80 36,20 Occupations Civil servants 36 9,9 7 19,44 Unskilled labor 36 9,9 15 41,67 Officers 36 9,9 16 44,44 Students 38 10,5 16 42,11 Self-employed 108 29,8 38 35,19 Others 109 30,0 41 37,61 Income Less than 9 millions (0) 125 65,6 12 9,60 More than 9 millions (1) 238 34,4 121 50,84 Qualifications Without bachelor degree (1) 111 30,6 10 9,01 With bachelor degree (0) 252 69,4 123 48,81 16 Source: Author’s self- collection 4.3 Research results 4.3.1 Reliability test Cronbach’s Alpha 4.3.2. Exploratory factor analysis EFA Exploratiry factor analysis with independent variables After assessing reliability of scales of 29 independent variables, the author excluded 2 variables having correlation <3.0 which were CLDV5 (0.288) and CTQC4 (0.176), then the author carried out exploratory factor analysis with 27 independent variables. Following is the result
Logistic regression analysis Table 4.11: Logistic regression analysis into influencing factors Variables in the Equation B S.E. Wald df Sig. Exp(B) Tuoi -.014 .316 .002 1 .965 .986 Trinhdo -.897 .465 3.715 1 .054* .408 Thunhap -1.801 .493 13.334 1 .000*** .165 CBCC -.157 .631 .062 1 .803 .855 NLD 1.388 .644 4.643 1 .031** 4.008 NVVP .235 .532 .195 1 .659 1.265 SV .317 .585 .294 1 .588 1.373 TKD .093 .390 .057 1 .812 1.098 Nam .356 .332 1.150 1 .284 1.428 Chi phí chuyển đổi -1.311 .204 41.273 1 .000*** .269 Giá .007 .152 .002 1 .962 1.007 Khoảng cách -.609 .164 13.749 1 .000*** .544 Chất lượng dịch vụ -1.059 .173 37.334 1 .000*** .347 Cạnh tranh quảng cáo -.430 .162 7.031 1 .008*** .650 Chuyển đổi không tự nguyện -.131 .149 .779 1 .377 .877 17 Danh tiếng .013 .152 .008 1 .931 1.013 Constant -.691 .371 3.466 1 .063 .501 a. Variable(s) entered on step 1: Tuoi, Trinhdo, Thunhap, CBCC, NLD, NVVP, SV, TKD, Nam, X1, X2, X3, X4, X5, X6, X7. Source: Author’s self- collection ***, **, *: mean 1%,5%,10% respectively
Model hypothesis test • Test of accuracy prediction Classification Tablea Observed Predicted Switching % dự báo chính xác Nonswitching Having swiched Step 1 Switching Nonswitching i 203 27 88.3 Having swiched 32 101 75.9 Overall Percentage 83.7 a. The cut value is .500 Source: Author’s self- collection This table shows that out of 230 non-switching bank, the model accurately predicted the number of 203 people, equals to 88.3%. Out of 128 people having switched, the model provided accuracy rate with 101, equals to 75.9% • Test of model appropriateness Omnibus Tests of Model Coefficients Chi-square Df Sig. Step 1 Step 209.520 16 .000 Block 209.520 16 .000 Model 209.520 16 .000 Source: Author’s self- collection Omnibus test shows that all values of Sig were smaller than 1%, which means that independent variables had linear relationship with dependent variables, in other words, the model was appropriate 18 • Model explainatory Model Summary Step -2 Log likelihood Cox & Snell R Square Nagelkerke R Square 1 267.467a .439 .600 a. Estimation terminated at iteration number 6 because parameter estimates changed by less than .001. Source: Author’s self- collection This shows that Nagelkerke R Square=0.6 which means 60% of dependent variables’ changes could be explained by the independent ones in the model
Results related to the first research objective (hypotheses from 1 to 7) Based on the regression results in table 4.11, it can be seen that factors namely switching fee, distance, service quality and advertising competitiveness put impacts on bank switching (all received Sig < 0.01). Then, hypotheses from 1 to 7 can be summarized in the following table Table 4.12: Results of hypotheses from 1 to 7 Results of Logistic regression identified important factors and the least important ones having influence on switching behavior of customers. The marginal effect analysis was used to meet the requirements of the second and the third objectives of the research. Four influential inferred from the exploratory factor analysis and logistic regression model are presented in the following table. Table 4.13: Marginal effect of customers’ switching bheavior Factor B Exp(B) Probability of switching bank when independent variable changes 1 unit and the