Call Center Services And Customer Loyalty - A Study In The Vietnamese Banking Industry.pdf

UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Le Hong Nhung

CALL CENTER SERVICES AND CUSTOMER LOYALTY
A study in the Vietnamese banking industry

MASTER OF BUSINESS (HONOURS)

Ho Chi Minh City – Year 2015


UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------

Le Hong Nhung

CALL CENTER SERVICES AND CUSTOMER LOYALTY
A study in the Vietnamese banking industry

ID: 22120061

MASTER OF BUSINESS (HONOURS)

SUPERVISORS: PROF. NGUYEN DONG PHONG
DR. NGUYEN PHONG NGUYEN

Ho Chi Minh City – Year 2015

TABLE OF CONTENTS
ABSTRACT ...........................................................................................................................................4
CHAPTER 1: INTRODUCTION ...........................................................................................................5
1.1

Research background ..............................................................................................................5

1.2

Research gap ...........................................................................................................................7

1.3

Research questions and objectives ...........................................................................................7

1.4

Research scope and methodology ............................................................................................8

1.5

Thesis Structure ......................................................................................................................9

CHAPTER 2: LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT............................... 11
2.1 Theoretical foundation ................................................................................................................ 11
2.1.1 Definition of a call center ...................................................................................................... 12
2.1.2 Customer Loyalty ................................................................................................................. 13
2.1.3 Perceived Customer Orientation........................................................................................... 14

2.1.4 Customer Satisfaction ........................................................................................................... 16
2.1.5 Perceived Service Quality ..................................................................................................... 17
2.2 Proposed research model and hypotheses ................................................................................... 20
Figure 1: Conceptual model .......................................................................................................... 21
CHAPTER 3 - RESEARCH METHODOLOGY .................................................................................. 23
Figure 2: Research process. .......................................................................................................... 24
3.1 Measurement of constructs ......................................................................................................... 24
3.1.1 Perceived service quality....................................................................................................... 25
3.1.2 Perceived customer orientation............................................................................................. 26
3.1.3 Customer satisfaction ........................................................................................................... 26
3.1.4 Customer loyalty .................................................................................................................. 27
3.2 Sample ........................................................................................................................................ 28
3.3 Data analysis method .................................................................................................................. 29

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CHAPTER 4: DATA ANALYSIS AND RESULTS .............................................................................. 32
4.1 Reliability Analysis ..................................................................................................................... 32
Table 1: Item Statistics.................................................................................................................. 33
4.2 Exploratory Factor Analysis (EFA)............................................................................................. 34
4.2.1 EFA for individual construct ................................................................................................ 34
4.2.2 Multidimensional constructs – Perceived service quality and Customer loyalty ................... 34
4.2.3 Customer orientation ............................................................................................................ 35
4.2.4 Customer satisfaction ........................................................................................................... 35
Table 2: KMO and Bartlett's Test ................................................................................................. 36
4.2.5 EFA for all variables............................................................................................................. 36
Table 3: KMO and Bartlett's Test ................................................................................................. 36
Table 4: RESULTS OF JOINT FACTOR ANALYSIS FOR ALL SCALES ................................. 37
4.3 Regression analysis ..................................................................................................................... 38

4.3.1 Simple regression analysis .................................................................................................... 38
Table 5: Model Summary of simple regression analysis ................................................................ 38
Table 6: ANOVA of simple regression analysis ............................................................................. 39
Table 7: Coefficients of simple regression analysis ........................................................................ 40
4.3.2 Multiple regression analysis: ................................................................................................ 40
Table 8: Model Summary of multiple regression analysis ............................................................. 41
Table 9: ANOVA of multiple regression analysis .......................................................................... 41
Table 10: Coefficients of multiple regression analysis ................................................................... 43
Table 11 ........................................................................................................................................ 46
Summary of hypotheses testing result ........................................................................................... 46
CHAPTER 5: DISCUSSION AND IMPLICATION ............................................................................ 47
5.1 Discussion ................................................................................................................................... 47
5.2 Implication .................................................................................................................................. 48
5.3 Limitations and directions for future research ............................................................................ 50
REFERENCES .................................................................................................................................... 52
APPENDICES...................................................................................................................................... 62
Appendix 1: Questionnaire: Call center service and customer loyalty in bank services. ................... 62
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APPENDIX 2: .................................................................................................................................. 65
EFA AND RELIABILITY TEST RESULTS - SCALES WITHOUT MODIFICATION.................. 65
APPENDIX 3: .................................................................................................................................. 67
RESULTS OF UNIDIMENSIONALITY AND RELIABILITY TEST - REFINED SCALES .......... 67

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ABSTRACT

This study aims to explore the impact of perceived service quality, customer
satisfaction, and customer orientation on customer loyalty towards banking call center
service.
A sample of 223 customers who used banking call center service in Ho Chi Minh
City, Viet Nam was surveyed to test the model.
Structural equation modeling was used to analyze the data. It found that customer
satisfaction and customer orientation had positive effects on customer loyalty. It also found
that perceived service quality had positive effects on customer satisfaction.
Limitation of this study shows that the sample is selected conveniently and just from
several districts in Ho Chi Minh City, so it is not representative of the population.
The finding suggests that banking managers should concentrate on service quality,
make their services different and prominent from other banks.
Keywords
Call center, customer loyalty, commercial bank, customer orientation.

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CHAPTER 1: INTRODUCTION

Banks play an important and active role in the financial and economic development of a
country. An effective banking system greatly influences the growth of a country in various
sectors of the economy. This study would like to explore the impact of perceived service
quality, customer satisfaction, and customer orientation on customer loyalty towards banking
call center service. The first chapter shows you research background, research gap in Viet
Nam situation, research questions and objectives, research scope and methodology, and
thesis structure of the study.
1.1 Research background
In recent years, the banking industry plays an important role in Vietnam’s economy. The
contribution of commercial banks to increasing economic development is great. The

commercial banks not only continue being a great capital flow channel but also contributing
to keep stable monetary purchasing power in economy. As the role of finance intermediary,
commercial banks fund surplus money from savers and transfer into loans for borrowers
who do not have enough money to carry out a desired activity. This helps enterprises and
economy running smoothly and be an effectively capital flow channel (Mof, 2012).The
commercial banks enforce monetary policy of the State Bank of Viet Nam (SBV). In 2013,
SBV decreased operation interest rate 2% a year, decrease VND short-term interest rate 3%
a year for priority sectors; decreases VND deposit interest rate ceiling 1% a year (Cafe F,
2014). Credit growth in 2013 reached 11%, higher nearly 8.91% than end of 2012. Raising
capital maintained high growth rate at end of 2013, reached 15.6% compared to end of 2012
(Security Investment, 2014). These evidences show that the commercial banks become

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important capital flow channel for economy and contribute to keep monetary purchasing in
stable. Prof. Dr. Tran DinhThien – Director of Viet Nam Institute of Economics mentioned
that control inflation rate around 6.04% was important contribution in operation of
Government, attempt of the Banking industry and Finance in 2013 (Deposit Insurance of
Vietnam, 2014).
Allowance foreign banks’ investment brings to commercial banks many opportunities
and challenges. Practitioners in the banking industry face a large number of complex
challenges in the global marketplace (Malhotra and Mukherjee, 2004). First of all,
competition in banking industry becomes fierce. According to the terms at joining in WTO
in 2006, the Vietnamese banking industry has opened for seven years. Foreign finance
institutes have been allowed to hold Vietnamese commercial joint stock banks, and foreign
bank appearance. In the Vietnamese banking industry, switching cost of new commercial
banks for attracting customers is not high, because current banks in Vietnam have not been
outstanding in banking products and services strategy. Competitive pressure of bank industry
increases when foreign banks join in Vietnam market. Foreign banks have a lot of

advantages in professional services and modern technology. Furthermore, foreign banks
have wide networks all over the world (The Saigon Times, 2009). Foreign banks with
professional products and services force Vietnamese commercial banks to have a change.
Customer service is still a big problem for Vietnamese commercial banks, and established
call centers as a solution for them. A competitiveness bank has a strong customer service,
especially, in after-sell service. The relationship of customer and bank should not end at the
bank door. Customers’ access after transaction adds value to the transaction (Feinberg et al,
2002). Bank call centers in Viet Nam have just established for less than ten years. The first
call center in Vietnamese commercial banks is Call center 247 of Asia Commercial Bank,
established in 2005. This call center hasbeen appreciated since established (Viet Stock,

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2005). Overall, banks in Viet Nam have less experience in this operation. Call center is still
a new service in Vietnam banking system.
1.2 Research gap
Call center allow bank to build, maintain, and manage customer relationships by
conducting transactions, giving information, answering questions, solving problems and
resolving complaints quickly, and less expensively than face to face contact. Indeed, it
appears that customers now expect and demand telephone and internet access to banks 24
hours a day seven days a week 365 days a year (Feinberg et al, 2002). In the literature, a
number of studies about banking call center services (Feinberg et al, 2002; Dean, 2004;
Keiningham et al, 2006; Jaiswal, 2008; Whiting &Donthu, 2009; Lau et al, 2013) have been
conducted up to now. There is little research developed for examining the determinants of
customer loyalty on banking call center services. In addition, very few scholars do the
research about this issue in Asia, especially, in Viet Nam. Therefore, this research aim is to
test the effects of factors such as service quality, customer orientation, customer satisfaction
on customer loyalty in Vietnamese bank call centers. The expectation result appreciates
customer loyalty in Vietnamese commercial bank through call center service. Based on this

result, bank managers can satisfy customer needs, enhance service quality, build, and
improve their call center service.
1.3 Research questions and objectives
The main purpose of this study is to identify adoption and development of Vietnamese
commercial bank call center services through call center factors influencing directly to
customer loyalty to the bank for a developing country case as well as how the call center
factors influencing customer loyalty to the bank in Vietnam. The study hopes to add to
limited knowledge of Vietnamese banking customers by clarifying which factors are
essential and critical for call center services. Factors influencing the customer loyalty to the
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bank may be the foundations of related organizations that can help them to develop services
more effective. This study aims to examine key call center factors influencing the customer
loyalty to the bank with these specific objectives identified as following.
To identify significant call center factors that influence customer loyalty to the bank. The
corresponding research question developed is:

RQ1: What are the main factors influencing customer loyalty to the bank in Vietnam?

To explore how the call center factors affect customer loyalty to the bank in Vietnam.
The corresponding research question developed is:
RQ2: How do the factors influence customer loyalty to the bank in Vietnam?

This study aims to research the customer loyalty to bank in Vietnam by examining
influencing factors such as service quality of the call center service, customer satisfaction
toward the call center and customer orientation of call center service. Call center services is
a broad field but according to the specific of the context of this study, questionnaires of this
study was only collected among people who have experience and tendency in using call
center services over years in Ho Chi Minh City of Vietnam for necessary analysis.

1.4 Research scope and methodology

The study was carried out in Ho Chi Minh City using a sample of adults in working age.
Adults in working age have experience with bank services, because, nowadays, most of
companies use salary payment service through ATM cards. Moreover, adults in working age

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have more chances and needs to access bank services. They can be potential informants of
this study.

Participants included male and female customers living in Ho Chi Minh City at some
banks and public places were conveniently selected to distribute the questionnaires by email.
The sample was selected using none-probability method – convenience sampling. The
sample size in this study is expected to collect enough questionnaires to run model testing
and give a significant result. A sample should provide usable data from the larger of either
100 cases or 5 times the number of observed variables (Hatcher and Stepanski, 1994).
Number of variables in this study is 43 variables, be shown in below. That means the sample
size equals 5 times variable (5*43=215 observations). Returned questionnaires was expected
at least 215 for running statistic testing.

1.5 Thesis Structure

This study is organized into five chapters.
It starts with the introduction which presents an outline of this research. This chapter
includes background of the research, motivation for doing research, and research
objectives. Besides, the significance that this study contributes to management practice as
well as scope of the research and methodology of data analysis are also mentioned in the

first chapter.
Chapter two reviews and synthesizes the theories in the literature of five concepts,
including call center, customer loyalty, customer orientation, customer satisfaction, and
perceived service quality. This chapter also describes the research model and proposed
hypotheses.
Chapter three introduces the research methods used to empirically test the research
model.

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Chapter four presents the results of data analysis.
The final chapter discusses summarily the study’s core findings, suggests some
recommendations for improving call center baking services based on findings, and finally
points out some limitations of the research.

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CHAPTER 2: LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT

This chapter mainly introduces the theories, which are proposed by many scholars in
academic fields, relate to each of factors in the model, and research model of the study. The
foundational theories, definition of a call center and the related theories of each construct,
including customer loyalty, customer orientation, customer satisfaction, and perceived
service quality are discussed respectively. Then, conceptual model is proposed,
simultaneously, its constructs and relationship hypothesized among these constructs are also
discussed.
2.1 Theoretical foundation

According to the survey of tax, auditing and finance consulting firm, Ernest and Young
in May 2014, Vietnamese customers are not loyal to retail banks, as 65-67 percent of
surveyed people were ready to close their banking accounts and change to another bank
(Viet Nam News, 2014).The most important antecedents of customer loyalty are customer
satisfaction, trust, corporation image, and service quality. Customer satisfaction must be
viewed as a key area of focus, capable of enhancing customer loyalty in the banking sector
(Tariq and Moussaoui, 2009). Previous research in the field of customer loyalty has typically
employed customer satisfaction, service quality and customer orientation as predictors
(Bloemer et al., 1999; Parasuraman et al., 1988; Dean, 2002; Yee et al., 2010). Both service
quality and perceived customer orientation of call centers affect customer loyalty to the
organization. Given that call centers are the major customer interface in many organizations;
their management is therefore worthy of significant investment. In particular, attention needs
to be directed to the elements of service quality: customers achieving a desired outcome,
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ensuring a prompt response and appropriate service time, and training and managing service
consultants so that they are knowledgeable, helpful and courteous (Dean, 2002). Loyalty is
the direct result of customer satisfaction, which is greatly influenced by the value of services
provided to customers (Lau et al., 2013).

2.1.1 Definition of a call center
The definition is adopted from Taylor and Bain (1999) and has three essential elements.
First, the call center is a dedicated operation with employees focused entirely on the
customer service function. Second, those employees are using telephone and computers
simultaneously and, third, the calls are processed and controlled by an automatic distribution
system.
Customer call centers have emerged as an important tool for providing higher customer
satisfaction (Anton, 1997). In call centers, human agents and / or automatic voice response
machines handle computer assisted telephonic communications with customers (Moon et al.,

2004). Companies use call centers for establishing direct communication with their
customers. The primary of objective of call center operations is customer care and
achievement of high levels of customer satisfaction (Jaiswal, 2008).
Over the past decade, many organizations have developed or extended their service
provision by using call centers, resulting in a rapidly expanding industry (Anton, 2000;
Feigberg et al., 2000; Martin and Smart, 1994). In providing call center services,
organizations are concerned with customization of their products to suit the increasing
expectations of consumers.At present, call centers are becoming more multidisciplinary in
nature. As opposed to just servicing customers, they are required to provide multiple
functionalities (Malisuwan et al., 2014).

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Banks and financial institutions depend on telephone call centers to meet the needs of a
changing and ever more demanding consumer access 24 hours a day seven days a week 365
days of the year (Feinberg et al., 2002).
In ensuring the modern call center is implemented successfully, knowledge management
is required to resolve issues such as reducing customer representative training time and
costs, improve call response and handling time, increase customer satisfaction, employees
are more able to provide accurate information to customers, more flexibility in
handling

customer

call

center

processes,

able

to

cooperate with other business

departments, and lastly ensure fewer calls are transferred to help desks (Malisuwan et al.,
2014).
2.1.2 Customer Loyalty
Oliver (1997, p.13) defined loyalty as “… a deeply held commitment to re-buy or repatronize a preferred product consistently in the future, despite situational influences and
marketing efforts having the potential to cause switching behavior”. The cost of serving a
loyal customer is five or six times less than a new customer (Pfeifer, 2005). This is the
important of customer loyalty. The loyalty of a consumer is determined by the strength of
the relationship between attitude and behavior so that true loyalty only ensues when levels of
both relative attitude and intention to purchase are high (Jones and Jillian, 2007). For
instance, customer loyalty is appreciated as customer’s first choice among alternatives, or
the service that initially comes to mind when forming a purchase decision (Pont and
McQuilken, 2005).
In general, loyalty development has been an objective traditionally aimed at by managers
(Andreassen, 1999) since it enables higher future purchase intention. To be precise, loyalty
may be defined as a customer's intention or predisposition to purchase from the same
organization again (Edvardsson et al., 2000). As a consequence, loyalty has been considered
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to be a key factor in order to achieve company success and sustainability over time (Flavián
et al., 2006; Keating et al., 2003).
Loyalty is an important issue because it has a positive impact on the company‘s bottom
line. This is because it is easier, more direct, and less expensive to sell to existing customers

(Barlow and Moller, 1996).
Service quality, customer satisfaction, and loyalty programs are the important factors that
can increase the loyalty of a customer towards its bank. When banks focus on customer
loyalty, account holders will not only keep their accounts with the bank, but they will also
feel comfortable referring to family and friends. Hence in order to be successful, banks
should focus on building customer loyalty by offering quality products and by treating
people how they want to be treated for better and greater customer satisfaction (Hafeez and
Muhammad, 2012).
2.1.3 Perceived Customer Orientation
Customer orientation has been used to describe a type of organizational orientation where
customer needs are the basis for planning and designing organizational strategy (Irene et al.,
2005).The importance of orienting a company's activities towards the customer has long
been known. In fact many marketing theoreticians cite Drucker (1954) as the precursor of
the idea, for suggesting that the whole organization, not only the marketing department as a
specialized function, should focus on the customer.
Deshpandé et al. (1993, p. 27) consider customer or market orientation as part of an
organizational culture and define it as "the set of beliefs which place the customer's interests
first, without excluding those of other publics such as owners, managers and employees with
the aim of making the organization profitable in the long term". Saxe and Weitz (1982)
defined customer orientation as the marketing concepts used by salespersons when they

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interact with potential customers. Naver and Slater (1990) also pointed out that customer
orientation is to understand the customers’ value chain, including current and future changes.
In conclusion, the central essence of customer beliefs is to emphasize customer first and a
long term relationship with customers.
Customer orientation is a major component of service climate. In terms of the practices
related to service climate, Schneider et al. (1998) suggested three areas: customer

orientation, managerial practices, and customer feedback. Customer orientation is the degree
to which an organization emphasizes meeting customer needs and expectations for service
quality (Dean, 2002).
Customer orientation of the company also appears to be linked to customer loyalty. A
market orientation results in a customer-driven company, which is rewarded with customer
loyalty and retention, and consequently superior performance (Naver and Slater, 1990).
Schneider et al. (1998) suggest that the common element, customer orientation, is likely to
be associated with both service quality and customer loyalty. Customer orientation of call
centers affects customer loyalty to the providing organization (Dean, 2002). Customer
orientation is directly related to customer loyalty, with some of the effect transmitted by
perceived service quality. This means that customers use the quality of call center service
interactions as an indicator of an organization's commitment to understanding and meeting
their needs (Dean, 2007).
In view of the literature above, the following hypothesis is formulated to guide the study:
H1: Perceived customer orientation of the call center is positively related to customer
loyalty to the commercial bank.

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2.1.4 Customer Satisfaction
Satisfaction has been analyzed in-depth in the marketing literature (Oliver, 1980, 1981;
Johnson and Fornell, 1991; Edvardsson et al., 2000; Gustafsson et al., 2005). Oliver (1981,
p. 29) firstly defined it in the consumption context as "the summary psychological state
resulting when the emotion surrounding disconfirmed expectations is coupled with the
customer's prior feelings about the consumption experience."
Anderson, Fornell and Lehman (1994) develop a more clear explanation for customer
satisfaction: the customer satisfaction was one kind of purchase behaviors and the use
experience of product, and it is the result which was generated by the buyer expected;
customer satisfaction would be evaluated between that people used product consistency and

the product performance and belief before purchase. If there is consistency, the customer
will satisfy; otherwise, they will generate unsatisfied result.
Focusing attention on services, satisfaction may be defined as an affective customer
condition that results from a global evaluation of all the aspects that make up the customer
relationship with the service provider (Severt, 2002). Satisfaction is understood as a global
evaluation or attitude that evolves over time resulting from the interactions produced by the
customer and the organization in the relationship (Eshghi et al., 2007).
Every time a customer contacts a call center, an opportunity exists to transform a
customer problem into a positive experience, resulting in a positive view of the organization
(Barlow and Moller, 1996). Call centers which fail to provide a level of service that satisfies
the customer are likely to face negative word of mouth publicity and loss of business to
competitors (Wade, 2007).
The precise nature of the interaction between customer satisfaction and loyalty is
notoriously elusive but satisfaction would appear to have a positive effect on service loyalty

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(Bloemer et al., 1999). Customer satisfaction is defined as the attitude resulting from what
customers believe should happen (expectations) compared to what they believe did happen
(performance perception) (Neal, 1999). Customers exhibit repeat purchase behavior from a
service provider when they possess a positive attitudinal disposition toward the provider and
consider using only one provider when a need for this service exists (Gremler& Brown,
1996). If a customer is satisfied with a firm, service or product, then a greater level of
customer loyalty can be achieved (Lau et al., 2013). Customer satisfaction and loyalty are
essential for banking service providers as the main source of customer acquisitions is wordof-mouth of the existing clientele. Moreover, the acquisition of new customers is a lengthy
and costly process. Thus, providers should ensure customer satisfaction and loyalty of its
existing clientele (Seiler et al., 2013).
Loyalty is vulnerable because even if the customers are satisfied with the services
rendered by the financial institutions, there is always an element of defect if they

think they can get better value for money in other institutions. Satisfaction is essential
but not enough to gauge loyalty among customers. In other words, we can have customer
satisfaction without loyalty but it is difficult to comprehend having loyalty without
satisfaction. Therefore, all organizations should try and satisfy their customers and to ensure
their loyalty (Anantha Raj, 2013).
The following hypothesis is offered:
H2: Customer satisfaction has a positive influence on customer loyalty.
2.1.5 Perceived Service Quality
Perceived service quality is defined as: “the consumer’s judgment about an entity’s
excellence or superiority … it is a form of attitude … and results from a comparison of
expectations with perceptions of performance” (Parasuraman et al, 1988, p.13).

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Service quality involves around the ideas that it is the result of comparisons which
customers make between their expectations about a service and their perceptions of the way
the service has been performed. Poor quality places a firm at a competitive
disadvantage.(Christopher et al., 2005). For example, if customers perceive unsatisfied
quality, they may change their business to elsewhere. Service quality is difficult to identify
and priorities performance improvements that are required, unless both perceptions and
expectation of service are measured (Wu et al., 2014).
Parasuraman, Berry, and Zeithaml(1991) refined into five dimensions to measure
customer’s perceived value of service quality, which is known as SERVQUAL.
SERVQUAL Dimensions in Relation to the Banking Sector
Five dimensions of SERVQUAL have been developed for the service sectors: tangibility,
reliability, assurance, responsiveness, and empathy.
Tangibility represents physical facilities, equipment, and appearance of personnel.
Examples of the tangible factor related to banks include comfortable store designs, up-todate equipment for customer use and sufficient staff to provide service. These aspects are
important for retail banks, because there are extensive face-to-face contacts between a

customer and an employee. Therefore, maintaining a professional and comfortable store
environment can increase customer satisfaction.
The next dimension is responsiveness, which represents the willingness to help
customers and provide prompt service. This service aims to enhance customer satisfaction.
Reliability means the ability to perform the promised service dependably and accurately.
The major reason for customers to choose banks for investment funds is because of the
dependability and reputation of banks. Banks always promise customers a high level of
security during transactions. Banking service can increase customers’ confidence and trust if

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