Determining factors affect customer loyalty in business to business context of vietnamese information technology companies in ho chi minh

DETERMINING FACTORS AFFECT CUSTOMER LOYALTY IN BUSINESSTO-BUSINESS CONTEXT OF VIETNAMESE INFORMATION
TECHNOLOGY COMPANIES IN HO CHI MINH CITY

In Partial Fulfillment of the Requirements of the Degree of

MASTER OF BUSINESS ADMINISTRATION
In Marketing

By

Ms. Duong Thi Hoang Trang
ID: MBA06037

International University – Vietnam National University HCMC

August 2014

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DETERMINING FACTORS AFFECT CUSTOMER LOYALTY IN
BUSINESS-TO-BUSINESS CONTEXT OF VIETNAMESE
INFORMATION TECHNOLOGY COMPANIES IN HO CHI MINH CITY
In Partial Fulfillment of the Requirements of the Degree of
MASTER OF BUSINESS ADMINISTRATION
In Marketing
by
Ms Duong Thi Hoang Trang
ID: MBA06037
International University - Vietnam National University HCMC
August 2014

Under the guidance and approval of the committee, and approved by all its members,
this thesis has been accepted in partial fulfillment of the requirements for the degree.
Approved:
----------------------------------------------

-------------------------------------------

-Chairperson

Supervisor

----------------------------------------------

-------------------------------------------

-Committee member

Committee member

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ACKNOWLEGEMENT
This thesis is done with great deal of supporting from the wonderful people, who
showed significant concern towards me during the time of working on this dissertation. I
would like to take this opportunity to express my sincere gratitude to them.
I wish to express my deepest gratitude to Dr. Le Thanh Long for his great
supervision and continuous support as well as providing critical insights during the
course of my research.
I would like to extend my thanks to all people who spend their valuable time for

completing all questionnaires, especially for their assistance, coordination and support
during the research survey process.
Last but not least, I want to say thankful to my family, who always beside me and
give me power to complete my dissertation.
With many thanks,

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PLAGIARISM STATEMENTS
I would like to declare that, apart from the acknowledged references, this thesis
either does not use language, ideas, or other original material from anyone; or has not
been previously submitted to any other educational and research programs or
institutions. I fully understand that any writings in this thesis contradicted to the above
statement will automatically lead to the rejection from the MBA program at the
International University – Vietnam National University Ho Chi Minh City.

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COPYRIGHT STATEMENT
This copy of the thesis has been supplied on condition that anyone who consults it
is understood to recognize that its copyright rests with its author and that no quotation
from the thesis and no information derived from it may be published without the
author’s prior consent.
©Duong Thi Hoang Trang/MBA06037/2014

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Table of Contents
Chapter 1: INTRODUCTION .......................................................................................... 1
1.1.

Research background:........................................................................................ 1

1.2.

Rationales and Problem statement:.................................................................... 3

1.3.

Research question: ............................................................................................. 4

1.4.

Research objectives: .......................................................................................... 4

1.5.

Scope of research: .............................................................................................. 5

1.6.

Significance of research: ................................................................................... 5

1.7.

Research structure: ............................................................................................ 5

Chapter 2: LITERATURE REVIEW AND RESEARCH MODEL ................................ 7
2.1.

General concept: ................................................................................................ 7

2.1.1.

Business-to-business (B2B): ............................................................................ 7

2.1.2.

Information technology (IT): ........................................................................... 8

2.2.

Customer Loyalty: ............................................................................................. 8

2.2.1.

Definition: ........................................................................................................ 8

2.2.2.

Importance of customer loyalty: .................................................................... 10

2.3.

Antecedents of customer loyalty: .................................................................... 11

2.3.1.

Customer satisfaction: ................................................................................... 12

2.3.2.

Trust:.............................................................................................................. 13

2.3.3.

Commitment: .................................................................................................. 14

2.3.4.

Switching Cost: .............................................................................................. 15

2.4.

Research model and hypothesis:...................................................................... 16

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Chapter 3: RESEARCH METHODOLOGY ................................................................. 18
3.1.

Research design: .............................................................................................. 18

3.2.

Research process: ............................................................................................ 20

3.3.

Measurement design: ....................................................................................... 21

3.3.1.

Customer loyalty measurement: .................................................................... 21

3.3.2.

Customer satisfaction measurement: ............................................................. 21

3.3.3.

Trust measurement: ....................................................................................... 22

3.3.4.

Commitment measurement: ........................................................................... 23

3.3.5.

Switching cost measurement:......................................................................... 24

3.4.

Questionnaire design: ...................................................................................... 25

3.4.1.

Preliminary research: .................................................................................... 25

3.4.1.1 First draft of questionnaire: ......................................................................... 25
3.4.1.2 Interview: ..................................................................................................... 26
3.4.2.

Pilot test: ........................................................................................................ 27

3.4.3.

Final format of questionnaire: ....................................................................... 28

3.5.

Data collection method: ................................................................................... 32

3.6.

Population and Data Sampling: ....................................................................... 33

3.7.

Data analysis method: ...................................................................................... 35

3.7.1.

Coding data: .................................................................................................. 35

3.7.2.

Descriptive statistics: ..................................................................................... 37

3.7.3.

Reliability and Validity test: .......................................................................... 38

3.7.3.1 Reliability test: ............................................................................................. 38
3.7.3.2 Factor analysis: ........................................................................................... 38
3.7.4.

Regression analysis: ...................................................................................... 39

Chapter 4: DISCUSSION AND FINDINGS.................................................................. 41
4.1.

Response rate: .................................................................................................. 41
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4.2.

Demographic data: ........................................................................................... 41

4.3.

Descriptive Statistics: ...................................................................................... 42

4.3.1.

Customer loyalty: ........................................................................................... 42

4.3.2.

Customer satisfaction: ................................................................................... 43

4.3.3.

Trust:.............................................................................................................. 44

4.3.4.

Commitment:.................................................................................................. 45

4.3.5.

Switching Cost: .............................................................................................. 46

4.4.

Results of Reliability test:................................................................................ 48

4.4.1.

Cronbach’s Alpha for independent variables:............................................... 49

4.4.1.1. Customer Satisfaction: ................................................................................ 49
4.4.1.2. Trust: ........................................................................................................... 49
4.4.1.3. Commitment: ............................................................................................... 50
4.4.1.4. Switching Cost: ........................................................................................... 51

4.4.2.
4.5.

Cronbach’s Alpha for dependent variables: Customer Loyalty: ................... 52
Results of Validity test: ................................................................................... 53

4.5.1.

The components scale: ................................................................................... 53

4.5.2.

Customer Loyalty scale: ................................................................................ 64

4.6.

Official Research Model:................................................................................. 66

4.7.

Regression analysis: ........................................................................................ 67

4.7.1.

Correlation analysis: ..................................................................................... 67

4.7.2.

Regression analysis: ...................................................................................... 69

Chapter 5: CONCLUSION AND RECOMMENDATION............................................ 77
5.1.

Conclusion ....................................................................................................... 77

5.2.

Recommendation ............................................................................................. 77

5.3.

Limitation and future research ......................................................................... 83

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REFERENCES ............................................................................................................... 84
APPENDIX .................................................................................................................... 92
Appendix 1: Structured interview ................................................................................ 92
Appendix 2: Survey Questionnaire (English Version): ............................................... 95
Appendix 3: Survey questionnaire (Vietnamese version) .......................................... 100
Appendix 4: Descriptive Statistics ............................................................................. 105
Appendix 5: Result of reliability test ......................................................................... 107
Appendix 6: Result of exploratory factor analysis ..................................................... 111

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LIST OF TABLES
Table 1.1: ICT Development Investment (IDI) ranks of Viet Nam and the Southeast

Asian countries from 2002-2012 ....................................................................... 2
Table 3.1: Fundamental differences between qualitative and quantitative research
strategies .......................................................................................................... 19
Table 3.2: Customer Loyalty Measurement ................................................................... 21
Table 3.3: Customer Satisfaction Measurement ............................................................. 22
Table 3.4: Trust Measurement ........................................................................................ 23
Table 3.5: Commitment Measurement ........................................................................... 24
Table 3.6: Switching Cost Measurement ........................................................................ 25
Table 3.7: Final format of questionnaire ........................................................................ 32
Table 3.8: Summary Information of the Survey Sampling Method ............................... 35
Table 3.9: Subscales coding ........................................................................................... 37
Table 4.1: Summary of Demographic Data .................................................................... 41
Table 4.2: Customer loyalty descriptive statistics .......................................................... 42
Table 4.3: Customer satisfaction descriptive statistics ................................................... 44
Table 4.4: Trust descriptive statistics ............................................................................. 45
Table 4.5: Commitment descriptive statistics................................................................. 46
Table 4.6: Switching cost descriptive statistics .............................................................. 47
Table 4.7: Reliability test’s result – Cronbach’s Alpha.................................................. 48

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Table 4.8: Reliability coefficient of customer satisfaction measurement scale.............. 49
Table 4.9: Reliability coefficient of trust measurement scale ........................................ 50
Table 4.10: Reliability coefficient of commitment measurement scale ......................... 51
Table 4.11: Reliability coefficient of switching cost measurement scale ...................... 51
Table 4.12: Reliability coefficient of customer loyalty measurement scale ................... 52
Table 4.13: The KMO and Bartlett's component measurement coefficient of factors
affect the Customer Loyalty ............................................................................ 53
Table 4.14: Extraction Sums of Squared Loadings round 1st ........................................ 55

Table 4.15: Exploratory Factor Analysis round 1st ........................................................ 57
Table 4.16: Extraction Sums of Squared Loadings round 2nd ....................................... 59
Table 4.17: Exploratory Factor Analysis round 2nd ....................................................... 61
Table 4.18: Extraction Sums of Squared Loadings round 3rd ........................................ 62
Table 4.19: Exploratory Factor Analysis round 3rd ....................................................... 64
Table 4.20: Customer Loyalty scale KMO and Bartlett's coefficient............................. 65
Table 4.21: Extraction Sums of Squared Loadings ........................................................ 65
Table 4.22: The Results of factor analysis of Customer Loyalty scale .......................... 66
Table 4.23: Correlation matrix between the variables .................................................... 68
Table 4.24: Regression analysis round 1st ..................................................................... 70
Table 4.25: Summary result of hypotheses test round 1st .............................................. 71
Table 4.26: Regression analysis round 2nd .................................................................... 72

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Table 4.27: Summary result of hypotheses test round 2nd ............................................. 73
Table 5.1: The trust creation process .............................................................................. 80

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LIST OF FIGURES

Figure 1.1: Vietnam IT Industry Revenue from 2011-1013 ............................................. 3
Figure 2.1: Conceptual Framework ................................................................................ 17
Figure 3.1: Research process .......................................................................................... 20
Figure 4.1: The research model studying factors affecting Customer Loyalty .............. 66

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ABSTRACT
Customers are key asset of organization and customer loyalty plays important role
in business survival. Especially, in Information Technology (IT) industry, business
customers seem to be easy to switch many suppliers because of intensive competition.
Therefore, this research aims to determine factors which affect loyalty of business
customer in Information Technology Industry in Ho Chi Minh City (HCMC)
Conceptual model was proposed after an extensive review of the literature and
practical situation of IT industry in HCMC. Data was collected from 220 IT business
customers who made purchasing decision. Descriptive statistics, reliability test, factor
analysis, correlation testing, regression analysis, T- test, One-way ANOVA were applied
to analyze and test hypothesis of conceptual model. Results of the study show that
customer satisfaction, trust, and commitment positively and significantly influence
customer loyalty. In addition, customer satisfaction and trust are primary antecedent of
customer loyalty. In contrast, switching costs does not influence customer loyalty.

Keywords: customer loyalty, customer satisfaction, trust, commitment, switching cost,
IT industry.

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Chapter 1: INTRODUCTION
The first aim of this dissertation is to determine factors affect customer loyalty
towards information technology (IT) business-to-business (B2B) context in Ho Chi
Minh City. In this chapter, researcher would like to introduce an overview of the IT

industry in Vietnam. Then the research problem, the research question and the research
objectives, scope and limitation, the significance of this study and the structure of this
thesis are presented.

1.1. Research background:
Overview of the Information Technology (IT) industry in Vietnam:
According to the ranking of the report on Measuring of Information Society by the
International

Telecommunication

Union

(ITU),

the

ICT

(Information

and

Communication Technology) Development Index of Viet Nam continued to rise 5
places from 86th to 81st, ranked 4th in the Southeast Asia and ranked 12th among 27
countries in the Asia- Pacific region. In the past 10 years (2002-2012), Viet Nam had a
spectacular breakthrough from position 107 to position 81 with a jump of 26 steps. The
IDI ranking is based on 3 main sub-indexes such as ICT assess, ICT use, and ICT skills
where Viet Nam was highly rated by ITU in terms of IT applications with a rank of 76th
among 161 countries worldwide in 2012 (White Book, 2013, p.17)

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Table 1.1: ICT Development Investment (IDI) ranks of Viet Nam and the
Southeast Asian countries from 2002-2012

(Source: White Book, 2013, p.17)
In spite of facing difficulties and challenges caused by the economic crisis, the IT
industry kept being a high growth rate economic sector. This sector simultaneously has
asserted a diffuse impact on boosting other sectors and fields of the economy and
society and create more jobs and improve laborers’ income. The total revenue of IT
industry in 2012 reached about 25.5 billion USD, and increase of 86.3% compared to
the same period of 2011 (White book, 2013, p.13). Vietnam IT industry is more and
more development with total revenue was amounted over 39 billion USD, increasing by
55% compared with recent year of 2012. Although Vietnam’s ranking seems to be
stable in worldwide evaluation in the period time from 2013 to 2014, the striking point
of Vietnam that IT industry was considered and recognized by international organization
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through Vietnam belonging to top 10 among Asia-Pacific countries which lead in
software outsourcing (White book, 2014).
Figure 1.1: Vietnam IT Industry Revenue from 2011-1013

( Source: White Book, 2013; White Book, 2014)

1.2. Rationales and Problem statement:
Over the last decade, in Vietnam, information technology had become the industry
which had high growth rate, contributed nearly 7% GDP (VCCI, 2013), and had many

opportunities to develop in the future. In order to maximize profitability in long-term,
firms know that customers are key asset of organization and customer loyalty has a
significant role in business survival. Unfortunately, it is undoubtable that customers
nowadays tend to consider other potential competitive alternatives even they are
satisfied with their suppliers, especially with development of internet, the world
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becomes flatter with plain information thoroughly. Companies need a competitive
advantage to stand out from the competition. Hence, it is necessary to determine factors
affecting customer loyalty in business-to-business context. To survive and develop in
intensively competitive environment nowadays, especially in the information
technology industry, suppliers must know the way to attract more and more customers
and build a long-term relationship with them as well as step by step obtain customer’s
loyalty through many factors.
From the above reasons, author would like to study business customer loyalty and
choose the topic as follows:
Determining factors affect customer loyalty in business-to-business context of
Vietnamese information technology companies in Ho Chi Minh City

1.3. Research question:
From problem statement, the study will investigate the following research questions:
Which factors affect customer loyalty in business-to-business context of Vietnamese
Information Technology Companies in Ho Chi Minh City?

1.4. Research objectives:
This research is aimed to:
-

To determine which factor has most impact on customer loyalty in business-tobusiness context of Vietnamese information technology companies in Ho Chi

Minh City.

-

To make the recommendations in order to improve customer loyalty for
companies in information technology industry.

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1.5. Scope of research:
The present study has certain limitations, and caution is therefore advised with
respect to the generalizability of the results. The simplicity of the examining of loyalty
ignores both the existence of different phases of loyalty in a relationship continuum and
the complexity of service/product offerings. In addition, due to limitation of time and
cost constraints, the sample size for the research is only confined to those customers
responded within three month. Moreover, the data is gathered at one point of time.
This dissertation will concentrate on Vietnamese information technology
companies in Ho Chi Minh City which have primary business involving trading and
distribution in IT hardware product such as computers (laptop, PC,LCD, accessories),
servers, etc…and software (Microsoft, Oracle, etc…)

1.6. Significance of research:
This dissertation contributes to determine factors which impact customer loyalty in
business-to-business context of Vietnamese information technology companies.
Researchers expect that the findings of this study will help managers to understand the
way to manage long-term relationship with their customer through many factors
affecting customer loyalty.
In addition, author also hopes these findings will be valuable and can be extended
more in other industries in future study.

1.7. Research structure:
This dissertation comprises 5 chapters as below:
-

Chapter 1: Introduction

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This chapter gives a brief introduction about research background; problem solving of
customer loyalty in the information technology companies and objectives of research.
-

Chapter 2: Literature review and research model

This chapter introduces conceptual framework about some related concepts and theories
of the study, then hypotheses are built based on these basic concepts.
-

Chapter 3: Research Methodology

This chapter states the method used in research which includes data collection and
sampling and also the way how to analyze data in order to test the measurement and
conceptual framework.
-

Chapter 4: Discussion and Findings

This chapter presents and discusses the results of the correlation analysis of the research

hypothesis and the assessment of the reliability of the research data. After presenting the
results of the research in the previous chapter, the implications of these results are now
discussed in the light of the literature review.
-

Chapter 5: Conclusion and Recommendation

Draw out the conclusion and research limitations are identified and recommendations of
the research are also discussed in this chapter.

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Chapter 2: LITERATURE REVIEW AND RESEARCH MODEL
In this chapter, researcher aims to list some literatures relevant to this dissertation.
Firstly, it would be started with the information technology business-to-business
concept. Next, definition and importance of customer loyalty, and then followed by the
most important and popular factors which affect customer loyalty are presented. These
factors are customer satisfaction, trust, commitment, and switching cost.

2.1. General concept:
2.1.1. Business-to-business (B2B):
Frauendorf et al. (2007, p.9) defined “the field of business-to-business as one
which, in brief, describes transactional relations between business partners, including
business enterprises organization, and governmental institutions”. The customers in a
B2B market would hereby be referred to as industrial customers, which was common in
the B2B literature (e.g. Homburg and Rudolph, 2001), while the organization of the
industrial customer would be referred to as the customer organization.Kotler &Proeftsch
(2006) stated that business to business (B2B) is a business that runs in industrial markets
that have products or other services for sales, rent, and supplied to other business. This

reloading subdealer business also runs in business to business (B2B) manner and
focuses on the customers.
Compared to consumer markets the industrial markets usually involves “greater
levels of decision-making input and high transaction costs” (Russell-Bennett et al., 2007,
p. 1253) and the buying process is more rationalized and involves long-term relationship
(Cooper and Jackson, 1988). Products are more technically complex, more money,

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people and procedure are involved and products are often specialized to the customer
organization (Cooper and Jackson, 1988)

2.1.2. Information technology (IT):
Information

technology

(IT)

is

the

application

of

computers

and

telecommunications equipment to store, retrieve, transmit and manipulate date, often in
the context of a business or other enterprise. The term is commonly used as a synonym
for computers and computer networks, but it also encompasses other information
distribution technologies such as television and telephones (Wikipedia.org)
To summarize, in this dissertation, information technology companies are defined
as companies whose primary businesses activities are associated with technology
industry which includes computer hardware, software, and computer services as well as
concentrates on distribution or trading area.

2.2. Customer Loyalty:
2.2.1. Definition:
The concept of customer loyalty has been supported much consideration and
attention from both academics and practical in many industries. According to Stank,
Goldby& Vickery (1998) customer loyalty is defined as long-term commitment to
repurchase involving both a favorable cognitive attitude towards the selling firm and
repeated patronage. Oliver (1999) defined it as “a deeply held 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

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marketing efforts have the potential to cause switching behavior”. Dwayne Ball (2004)
defined loyalty in a more specific way in both attitude and behavioral intentions
(repurchase or purchase frequency), and attitudinal component. Behavioral loyalty
was repeated transactions (or percentage of total transactions in the category) and
attitudinal loyalty was often defined

as

both

positive affect

toward the

relationship’s continuance, and the desire to continue to remain in the relationship,
and was sometimes defined equivalently with relationship commitment (Morgan and
Hunt, 1994).
There were two factors in loyalty items, active loyalty (word-of-mouth and
intention to use) and passive loyalty (not switching even under less positive conditions).
Although there are so many different definitions about customer loyalty, there seem to
be two basic approaches. One is the behavioral approach and another is the attitudinal
approach.
On the one hand, in behavioral approach, Reichheld (2003) defined customer
loyalty as: “… to make an investment or personal sacrifice in order to strengthen
a relationship with a supplier who treats him well and gives him good value in
the long term even if the supplier does not offer the best price in a particular
transaction. In additional, Rauyruen& Miller (2007, p.23) supposed that customer
loyalty is the willingness of average business customers to repurchase the service and
the product of the service provider and to maintain a relationship with the service
provider/ supplier. Furthermore, Homburg, Giering,& Menon (2003) mentioned that it is
the degree of a firm’s intention to continue the relationship with the supplier and to

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expand the quantity and volume of this relationship consequently, customer loyalty is

about much more than to repeat purchases.”
On the other hand, attitudinal approach, Rauyruen& Miller (2007, p.23) defined
customer loyalty is the level of customer’s psychological attachments and attitudinal
advocacy towards the service provider/ supplier. Moreover, Briggs et al. (2007, p.1146)
also cited that customer attitudinal loyalty is a buyer’s overall attachment or deep
commitment to a product, service, brand, or organization.
To sum up, customer loyalty in this dissertation is defined not only the behavioral
loyalty which is to make frequent repurchases consistent in the future and attitudinal
approach which is to make an effort and investment in order to remain a long-term
relationship with a company

2.2.2. Importance of customer loyalty:
After the 1990s, customer loyalty became an important research question in
marketing research. There was an observable worldwide shift toward loyalty marketing
in most of the sectors across various industries (Alok Kumar Rai, Srivastava Medha,
2013). Ming XU (2013) pointed out that some empirical studies had proved that the
chance for selling products to current customers was 50%, and the chance for selling
products to a new customer was 15%. If customer loyalty decreased by 5%, business
profit would go down by 25%. If customer retention rate increased by 5%, business
profit would grow by 85%; 60% of new customers were due to current customer’s
recommendations. Depending on the industry, an improvement of 5% in customer
retention lead to an increasing of 25% to 85% in profits (Kerin, Hartley, &Rudelius,
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