Tài liệu The impact of loyalty program's service quality and store reputation on customer satisfaction and loyalty

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Dang Bich Phuong THE IMPACT OF LOYALTY PROGRAM’S SERVICE QUALITY AND STORE REPUTATION ON CUSTOMER SATISFACTION AND LOYALTY MASTER OF BUSINESS (Honours) Ho Chi Minh City – Year 2016 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Dang Bich Phuong THE IMPACT OF LOYALTY PROGRAM’S SERVICE QUALITY AND STORE REPUTATION ON CUSTOMER SATISFACTION AND LOYALTY I D: 22130056 MASTER OF BUSINESS (Honours) SUPERVISOR: Dr.PHAM NGOC THUY Ho Chi Minh City – Year 2016 ACKNOWLEDGEMENTS The completion of this thesis is a remarkable achieve in my life. It has been several months and required a great effort for the research. I would like to express my gratitude to all ISB staffs that supported necessary materials and helped summit my papers. I also wish to express my deeply thank you for the support, patience and encouragement from my family, my colleagues and my classmates helped me to completing this thesis. Especially, I would like to give my special thanks to Doctor Pham Ngoc Thuy for supporting and guiding me with this research. i STATEMENT OF AUTHENTICATION (Candidate Certificate) I certify that the work in the thesis entitled “The impact of loyalty program’s service quality and store reputation on customer satisfaction and customer loyalty” is the result of my own research and has not been submitted for a higher degree to any university or institution other than International School of Business (ISB) I also certify that the thesis has been written by me. Any help and assistance that I have received in my thesis have been appropriately acknowledged. Ho Chi Minh City, 20 December 2015 Dang Bich Phuong ii TABLE OF CONTENTS ACKNOWLEDGEMENT ............................................................................................ i STATEMENT OF AUTHENTICATION .................................................................. ii TABLE OF CONTENTS ............................................................................................iii LIST OF FIGURES ...................................................................................................... v LIST OF TABLES ....................................................................................................... vi ABSTRACT ................................................................................................................ vii Chapter 1: Introduction ............................................................................................... 1 1.1 Research background ............................................................................................ 1 1.2 Research problems ................................................................................................ 2 1.3 Research objectives .............................................................................................. 4 1.4 Research methodology and scopes ....................................................................... 4 1.5 Significance of the study ...................................................................................... 5 1.6 The structure of the study ..................................................................................... 5 Chapter 2: Literature review and hypotheses ........................................................... 7 2.1 Customer Loyalty Program .................................................................................. 7 2.2 Customer Loyalty Programs of big retailers in Ho Chi Minh City ...................... 8 2.3 Conceptualization of Loyalty program service quality ...................................... 10 2.4 Store reputation................................................................................................... 15 2.5 Customer Satisfaction ......................................................................................... 17 2.6 Customer Loyalty ............................................................................................... 18 2.7 The conceptual model ......................................................................................... 19 Chapter 3: Research methodology .............................................................................. 23 3.1 Research design .................................................................................................. 23 iii 3.2 Measures of the constructs ................................................................................. 24 3.3 Research process................................................................................................. 26 3.4 Data analysis method .......................................................................................... 28 Chapter 4: Data analysis and findings...................................................................... 31 4.1 Sample characteristics ........................................................................................ 31 4.2 The Cronbach’s alpha test .................................................................................. 32 4.3 Exploratory factor analysis (EFA)...................................................................... 35 4.4 Multiple regression analysis .............................................................................. 37 4.5 Revised conceptual model .................................................................................. 40 4.6 Explanation for the findings results of the hypotheses ....................................... 42 Chapter 5: Conclusions, inplications and limitations ............................................. 46 5.1 Conclusions ........................................................................................................ 46 5.2 Managerial implication ....................................................................................... 47 5.3 Limitations and future research .......................................................................... 59 References.................................................................................................................... 51 Apendix ........................................................................................................................ 58 Appendix A: Guideline for quanlitative in-depth interview ........................................ 58 Appendix B: Quentionnaire in English ........................................................................ 62 Appendix C: Questionnaire in Vietnamese .................................................................. 66 Appendix D: Histogram, Normal Regression & Scatter plot of Dependent ................ 71 iv LIST OF TABLES Table 2.1: The comparison between the Customer Loyalty Program of three main brand names of supermarket in Ho Chi Minh City: Co.opmart, Big C and Lotte Mart............9 Table 2.2: Hypotheses of the research ............................................................................21 Table 3.1: Measurement Scales from previous research basements................................24 Table 3.2: Measurement Scales for customer satisfaction...............................................25 Table 3.3: Measurement of the variables of customer satisfaction and customer loyalty..............................................................................................................................25 Table 3.4: Measurement of the variables of store reputation..........................................25 Table 4.1 : Descriptive Statistics for the Sample (N = 209)............................................31 Table 4.2: The results of Cronbach’ alpha test................................................................33 Table 4.3: KMO and Bartlett's Test for all variables.......................................................35 Table 4.4 : Total Variance Explained for all variables....................................................36 Table 4.5: Rotated Component Matrix for all variables..................................................37 Table 4.6: Correlations or all variables............................................................................38 Table 4.7: Model Summary..............................................................................................38 Table 4.8: ANOVA alpha................................................................................................39 Table 4.9: Coefficients alpha...........................................................................................39 Table 4.10: Finalized hypotheses of the research............................................................41 Table 4.11: Summary of hypotheses testing results.........................................................42 Table 4.12: Statistics of frequency of factors that affect customer choosing to shop at a supermarket...................................................................................................44 Table 4.13: The number of supermarket brand that customers participate in the customer loyalty program................................................................................................................45 v LIST OF FIGURES Figure 2.1: The proposed conceptual model for the thesis..............................................21 Figure 3.1: The process of thesis research.......................................................................23 Figure 4.1: The revised and finalized research model.....................................................40 vi ABSTRACT This study empirically examines the impact of loyalty program’ service quality and store reputation on customer satisfaction and customer loyalty, which is carried on at some biggest chains of supermarket at Ho Chi Minh city such as Big C, Co.opmart, Lotte Mart, Metro, Vinmart,...The research also explores some of the factors that influence the most towards customer satisfaction in retail industry. In the situation that the facilities and the prices of all supermarket brand names are similar, the loyalty program’s service quality and how good of this program plays an important role in attract and retain customers. Structural equation modeling is used to test these impacts, utilizing a sample of 250 supermarket customers in Ho Chi Minh City. All the customers who are interviewed must have the member card of one or more supermarket that they usually shop at. The results indicate that the three elements of loyalty program’s service quality which are Regulation (included Rewards and Policy), Serving (included Staff and Communication) and Personalization play significant role in increasing the customer satisfaction as well as customer loyalty. In addition, the findings of this research also provide evidence of the similarity between customer satisfaction and customer loyalty in the mindset of supermarket retailer customer. Particularly, the effect of store reputation is negligible and the customers do not pay attention to this element in judging their satisfaction as well as their loyalty for a supermarket brand name. The customers are persuaded by the Regulation, Serving and Personalization of the loyalty program of one specific supermarket compared to other supermarkets. The research findings also engage with some limitations in the strength of measurement scale, the sampling method as well as the fitness between the research model and data. It results in the valuable directions for further researches in future. vii CHAPTER 1 INTRODUCTION This chapter introduces the background of the Vietnamese supermarket industry as well as the status of customer satisfaction and customer loyalty. The research questions and objective are proposed to explore the influence of loyalty program’s service quality and store reputation towards customer satisfaction and customer loyalty. Based on this, the proposed delimitation of research and thesis structure is presented. 1.1 Research background After nearly nine years of joining the World Trade Organization (WTO), and more than six years commitment for the establishment of retail businesses with 100% foreign capital (from the date 01/01/2009), Vietnam has made a drastic change in the distribution and retail sector by the opening of hundreds of stores and supermarkets. Vietnam's retail market has always been rated as promising, attractive for business, investors in and out of Vietnam territory. Many international retailers have operated in Vietnam besides the local companies, and there are still many other international groups interested in entering the market. And under report of A.T.Keraney (2014), Vietnam retail market is in the top 30 world best new retail markets in the period from 2007 to 2011. Moreover, basing on the 2014 report of Deloitte Southeast Asia Ltd, Vietnam’s retail market is also characterized as being one of the most dynamic markets in the region with high annual growth rates. Hanoi and Ho Chi Minh City have been ranked among the top 10 Asian cities for retail expansion in 2014. Over the last few years, Vietnam’s retail sector has also witnessed healthy growth rates, with retail sales growing by 60% from 2009-2013, and forecasted to reach US$109 billion in 2017. The retail market in the country today is not only competition between domestic enterprises but also with large foreign retailers. Huge system such as Co.opmart supermarket chain is leading the market but the big retail groups of foreign countries include Big C, Lotte, Metro Cash & Carry, also occupied a considerable market share. In the near future, Vietnam is currently undergoing negotiation to participate in the Trans-Pacific Partnership Agreement (TPP), Free Trade Agreement Vietnam - EU (EVFTA). For these negotiations, it will be great for Vietnam’s economy and for its people, and may also provide investors with attractive opportunities. Should Vietnam participate, competition between domestic and foreign retailers will likely take place on a more equal footing. In addition, Vietnam is expected to experience an influx of retailers from Japan, South Korea and Thailand. Large developers, such as AEON Mall, Central Group, and CJ Group, have expressed great interest, gradually expanding their presence and announcing long-term plans for the market. For example, Japan-based biggest retail group, AEON, is planning to build at least seven shopping centers in Vietnam. Other international group have long-term plans to build up massive number of supermarket locations in Vietnam, especially in Ho Chi Minh City. In this context, in order to survive and develop, retail enterprises must have the specific strategy in order to enhance their competitiveness. In particular, developing and maintaining a loyal customer base and raising the store reputation as background basis for the development of enterprises is a crucial requirement. 1.2 Research problems Currently, most large retailers in Vietnam has started building customer loyalty program for their own, for example: "Customer Loyalty Program" of Co.opmart or "Big Coin Programs" of Big C. The purpose of these loyalty strategies is cultivating strong relationships with their customers , who are expected to regularly return for additional purchase (Dowling and Uncles, 1997). The researcher learn about the loyalty program service quality in the retail market of Vietnam's neighboring Malaysia through the study of Omar and Musa (2011), Omar et al (2013). Research by Omar and Musa (2011) also proposed the model of loyalty program service quality. The study also points out the relationship between loyalty program’s service quality with the level of satisfaction and loyalty customer success. Relationship between loyalty program’s service quality with the degree of satisfaction and customer loyalty are reaffirmed through research Zakaria et al (2014). In addition, the positive impact of 2 satisfaction on loyalty customer success is proven by studies of Zeithaml et al (2002). Besides the considerable investment on customer loyalty program’s service quality, retailer nowadays pay more attention on the store reputation since previous researches show that customers are affected by the store attributes and consider them to assess perceived benefits and attitudes (Wang, 2009). Thus, there is very little research has been done in Vietnam to verify the effectiveness of loyalty program’s service quality in the retail sector. This leads to the controversy about the contribution of these programs in the development process. In addition, the elements that contribute to the loyalty program’s service quality of Vietnam retailers have not been explored yet. This requires that we should have a study to learn more about the factors affecting the loyalty program’s service quality as well as the effect that the program offers. During the past decades, both marketing academics and practitioners have been intrigued by the relationship between satisfaction and loyalty (Dick and Basu, 1994; Oliver, 1996). Most of these studies, however, have concentrated on products (brands) and to a somewhat lesser extent on services or channel intermediaries. Surprisingly, research on the relationship between store satisfaction and store loyalty has remained limited, both in actual number as well as in scope. Yet, in the present environment of increased competition with rapid market entry of new store concepts and formats, the managerial challenge of increasing store loyalty also presents the research challenge of a more in-depth understanding and an empirical estimation of this important type of consumer behavior. There is some evidence that store loyalty may be (positively) related to store reputation. However, it has remained unclear what the exact relationship between satisfaction, store reputation and loyalty in a retail setting is. For instance, one question that has been left unanswered concerns the issue whether there is a direct relationship between store reputation and store loyalty or whether there is an indirect relationship via store satisfaction. In this article we attempt to answer this question. To help clarify the issues outlined above, the author decided topic: "The impact of loyalty program’s service quality and store reputation on customer satisfaction and 3 loyalty". Research will bring a deeper understanding of the factors that contribute to the loyalty program’s service quality in the retail area, the elements affects store reputation, the relationship between this service quality, store reputation and the satisfaction as well as customer loyalty. Since then, the author will make recommendations that the retailer managers who are in charge of the store reputation and customer loyalty program of retail enterprises can use to adjust to gain greater efficiency. Research will be done based on survey of members of loyalty of the three biggest chains of supermarket in Ho Chi Minh City: Co.opmart, Big C, Lotte Mart. The three brands of supermarket target to the same main customer who are women from 20-50 years old with the main product is daily consumption products. 1.3 Research objectives The primary aim of this study is to investigate the relationship between loyalty program’s service quality with the satisfaction and loyalty of customers. Specifically, it can be stated as followed:  Identify and measure the influence level of the impact of loyalty program’s service quality and store reputation on customer satisfaction.  Measure the influence of customer satisfaction on customer loyalty. 1.4 Research methodology and scopes The research was conducted on members who buy goods and join in the loyalty program’s service quality of Co.opmart, Big C and Lotte Mart in the area of Ho Chi Minh City which is a big city in Vietnam. The author approach and interview directly the customers when they go to the bike park to find their moto bike after shopping at the supermarket. The author applied data analysis tool (Microsoft Excel and SPSS) to handle the collected data and to perform the research. And then, using SPSS to test the scale reliability (Cronbach’ s Alpha), Factor analysis to determine which of a fairly large set of items were answered most similarly by the respondents, using Multiple 4 Regression to check the relationship between independent variables and dependent variables. 1.5 Significance of the study The results of this study is hopefully enable retailer owners to develop the suitable strategies for the loyalty program service quality as well as raising the store reputation to attract more customers and gain more closed relationship with their clients. Moreover, it will raise the competitive edge of retailers. 1.6 The structure of the study This thesis is organized into five chapters: Chapter 1: Introduction This chapter presents the research background of the study, research statements/ research problems, research objectives, research scopes and methodology, the significance of the study, and the research structure. Chapter 2: Literature review and hypotheses In this chapter, the author presents the fundamental theories and definition of each mentioned concept and theoretical modeling with the proposed hypotheses. In this chapter, the conceptual model of the study is also presented. Chapter 3: Research Methodology This chapter mentions about the research design, research methodology and illustrate the process of conducting the research. Chapter 4: Data analysis and data results For this chapter, the author summaries the characteristics of collected samples and presents the result of the research after analyzing collected data. From that result, the author draws the conclusions for the research hypotheses proposed in Chapter 2. 5 Chapter 5: Conclusions, implications and limitations The final chapter addresses the main results of the research, the contribution of the study in management theory and practice. Summary of the study, limitations and suggestions for future researches are also made. 6 CHAPTER 2 LITERATURE REVIEW AND HYPOTHESES This chapter is an overview of customer loyalty program, customer loyalty program’s service quality, store reputation, customer satisfaction as well as customer loyalty and their antecedents which have been conducted by previous researchers. Based on these studies, a conceptual model is proposed. 2.1 Customer Loyalty Program Customer loyalty programs are widely defined as combined system of marketing behaviors that aim to make customers more loyal by building up personalized relationship with them (Meyer Waarden, 2008). These programs can be utilized as value-sharing tools to help increasing customer’s perception of the retailers (Bolton et al, 2000; Yi and Jeon, 2003). The very first loyalty program was made by Texas International Airline in 1979 through the rewarding to the passengers based on the length of their journey. Despite the rapidly growing trend of these programs, many researchers question whether loyalty program actually create customer loyalty or whether loyalty arises from some other factor (Hoffman and Lowitt, 2008). In the first step, the customer will have to accumulate points when shopping. Although this is no real value until it is sufficient to exchange the reward, recent studies have shown that the accumulation of points that have very important implications in terms of psychology (Yi and Jeon, 2003). Psychological benefits will increase customer satisfaction when making transactions and thereby also increasing the value perceived by customers when they purchase goods of the business. Because of accumulated points can be converted into rewards in the future it will also create customers expect a nice event for the future. The point to gift exchange system will help increase the ability to maintain customer relationships and business. The second step is the conversion step from accumulate points into gifts. In this step, the customer receives the value of psychological and physical value from loyalty programs. The reward that customers receive after conversion charge will have the 7 function of increasing customers shopping behavior (Hoffman and Lowitt, 2008). The respectful feelings will help increase satisfaction of customers and deepen their relationships with enterprises. All the psychological benefits and material benefits are transformed into attraction for customers, or in other words to increase customer loyalty. In addition, loyalty program also targets many other goals as: to collect and track data related to customers who are shopping for products and services of enterprises, support the public relations... In most loyalty program, benefits play the most compelling role to attract customers; however, the most significant parts of loyalty program are the design or structure and customer service. Although there are many researches related to this topic, there is no tested scale for the retailers using to measure loyalty program service quality as well as appraising the success level of the program’s factors. Zeithaml et al. (2002, p. 370) state that “knowledge about customer expectations is the key in the developing of quality services”. However, there is often a gap between customers’ expectations of loyalty program and the retailer’s estimation of those expectations. Consequently, the service quality of most loyalty program includes unimportant elements or neglects important ones (Vesel and Zabkar, 2009). In addition, some loyalty programs of retailers that are running have the similarity that brings a lack of distinctiveness for the customer to choose among many programs. As the program’s rewards are then no longer appealing or different, consumers will move from one program to another in response to specific promotional campaigns (Mauri, 2003). 2.2 Customer Loyalty Programs of big retailers in Ho Chi Minh City Retail loyalty programs have grown significantly in Viet Nam in recent years both in terms of availability and popularity, and these programs are now playing a strong role in influencing consumers’ choice of store. Below are the three most powerful and famous customer loyalty program of Co.opmart, Big C and Lotte Mart conducted in the area of Ho Chi Minh city. The author collects information from the website of each supermarket, then goes shopping in reality to have the real picture of loyalty programs of retailers. The most similarity characteristics among these loyalty 8 programs are the allowing retailers to gather data on customer behavior in order to decipher trends, appropriately reward loyalty, and influence shopping behavior. Table 2.1: The comparison between the Customer Loyalty Program of three main brand names of supermarket in Ho Chi Minh City: Co.opmart, Big C and Lotte Mart Factors Program Identity System Registration form Registration procedures Member Card level and requiring to upgrade Regulation of accmulating marks/buying revenue Co.opmart Big C Lotte Mart - Entrance, way to the - Posters, billboards - Information board at shopping area outside the store the service area - Information board in - Cash area - Posters, billboards the car park, service - Service area outside the store area, cash area, - Via the sound of Big - Along the corridor in lockers,.. C Radio the shopping area - Banner, billboard in - Using shelftalker to the store remark the products - Via the sound of that saving Big Coin Co.opmart Radio - Register directly at the - Register directly at - Register directly at the store the store store - Register via website - Present Identity Card - Present Identity Card - Present Identity Card - Fill in the register - Fill in the register - Fill in the register form form form - Receive The main - Receive The main - Receive The main member card and the member card and the member card and the keychain card keychain card keychain card - Open new member - Open new member - Open new member card with no fee card with no fee card with no fee - Standard/ Gold/ - No devided level - No devided level Premium - Standard + 600 marks => Gold - Gold + 1600 marks => VIP - 10,000 VND = 1 mark - 200 VND = 1 Big - 100 VND = 1 Mark - The accumulating Coin - After sa zving up to marks are saving - Saving more Big 50,000 Marks, within each year and Coin when buying customer can used used to considered the special products that this accumulating level of member card Big C cooperate to marks as cash. and benefits in that pruduce - At the end of the year. The - Big Coin that year, customer will accumualting process customer saves can be rewarded based on will start again in the be used as cash (ex: the buying rvenue: new year. 2000 Big Coins = + Less than 30 million - Relating to the remain 2000 VND) VND : 1% accumulating marks - After 30 June every + From 30 to less than which have not been year, all remaining 40 million VND : 2% transfered into Big Coin in the card + From 40 to less than 9 Benefits - - - - - Discount rate Card reissue fee - Card locking regulation - voucher, the program will automatically transfer to next year saving and the the using expiry date to 31 Dec Standard member: 150 Marks = Voucher 30,000 VND Gold and Premium Member : 500 marks = Voucher 100,000 VND Gold and premium member will receive more accumulating points in the promotion Birthday gift: Voucher discount 10% (Standard) and 15% (Gold & Premium) Special Tet gift Participate in special promotion for Gold and Premium member 2-3% Main card : 20,000 VND Keychain : 10,000 VND 2 years without buying revenue will be erase - Refund the parking fee, bus ticket fee into Big Coin account for each bill that more than 100,000 VND - Receive discount when using service of cooperate partners : Phở 24 Highland Coffee,… - Participate in special promotion for Big C member only. - From 0.5 -1% - 10,000 VND for the set card - No locking 50 million VND : 3% + More than 50 million VND : 1% - The amount of saving will be counted until 31 Dec - Participate in special promotion for Lotte member only: buying products with special price,… - From 1-3% - 15,000 VND each reissue time - No Locking 2.3 Conceptualization of Loyalty program’s service quality It is true that customer loyalty programs are attracting more and more attention from customers since these programs bring up lots of extra values for customers shopping at supermarkets. To have a look at the impact of this program to customer satisfaction and customer loyalty, the author chose the level of quality of loyalty program for researching. Loyalty program service quality as an emerging issue in relationship marketing will remain underdeveloped until its key dimensions have been identified and operationalized. The definition of service quality was further developed as “the overall evaluation of a specific service firm that results from comparing that 10 firm’s performance with the customer’s general expectations of how firms in that industry should perform (Parasuraman et al., 1988). In a loyalty program setting, service quality refers to the overall experience of customers in applying, renewing, updating, accumulating, redeeming and using the program. The loyalty program service quality depends on other factors that are important to customers, such as the ability of the customer to learn the complex rules of the program (Frisou and Yildiz, 2011), the structure of the program (Liu, 2007), the idiosyncratic fit of the program and information and communication availability (Nobel and Phillips, 2004). Some retailers have attempted to achieve loyalty by giving personalized service and special treatment to customers. A considerable number of studies have suggested that the customer's value, or derived benefit, plays a significant role in determining his or her long-term relationship with, or loyalty to, the firm. A customer loyalty program is a marketing tactic employed by retailers to entice consumers, through rewards, into loyal buying behavior and the provision of their purchasing preferences in order to increase profits. The collection and analysis of this information, by assigning a unique identifier, such as a numerical ID or membership card to each program member. Research reveals that customers are less likely to switch firms if they can understand the actual economics, time and energy-saving value of staying in a relationship (Gwinner et al., 1998). In fact, Gwinner et al (1998) highlighted that if the consumer does not perceive value in building relationships within a firm, then they might only engage in a relationship because a better option is not available elsewhere. From above discussion, we have the hypothesis. H1: There is a positive impact of loyalty program service quality on the customer satisfaction. Among general instruments, the most popular model used for evaluation of service quality is SERVQUAL, a well-known scale developed by Parasuraman et al. (1985, 1988). The attributes of (Parasuraman et al., 1985), were: tangibles, reliability, 11