Antecedents and outcome of customer satissfaction a study of vietnamese customers in the mobile telecom industry

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

VAN THI YEN NHI

ANTECEDENTS AND OUTCOME
OF CUSTOMER SATISFACTION:
A STUDY OF VIETNAMESE
CUSTOMERS IN THE MOBILE
TELECOM INDUSTRY
MASTER OF BUSINESS (Honours)

Ho Chi Minh City – Year 2012


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

VAN THI YEN NHI

ANTECEDENTS AND OUTCOME
OF CUSTOMER SATISFACTION:
A STUDY OF VIETNAMESE
CUSTOMERS IN THE MOBILE
TELECOM INDUSTRY
ID: 60340102

MASTER OF BUSINESS (Honours)

SUPERVISOR: Dr. NGUYEN THI MAI TRANG

Ho Chi Minh City – Year 2012


1

ABSTRACT
Customer retention is a concept gaining more and more attention in today’s business
when loyal customers are considered as essential components to organizational
success. Therefore, corporations, strive to identify and manage effective methods to
retain their customers more and more. Customer retention will lead the company of
having more loyal customers and as a result more profit and market share.
The effect of switching barrier, customer satisfaction, environmental dynamism, etc on
customer retention has been shown in numerous studies. However, the effect of
components, factors of switching barrier on customer satisfaction and customer
retention that have been subject to much less attention from researchers. Especially, not
enough studies have been conducted on subject of the mobile telecommunication
services industry in Vietnam.
The present research studied switching cost, investment in the relationship,
attractiveness alternative and interpersonal relationship of switching barriers and theirs
relationships with customer satisfaction and retention in the Vietnam mobile
telecommunication market. Besides, to identify variables that influence customer
satisfaction and retention based on literature and will to carry out an empirical analysis,
according to the collected questionnaires, to evaluate and apply the proposed model in
the Vietnam mobile market.
Keywords: Switching barriers, switching cost, investment relationship, attractiveness
alternative, interpersonal relationship, customer satisfaction, customer retention.

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ACKNOWLEDGEMENT
It is a pleasure to thank the many people who made this thesis possible.
This thesis is a result of months of work in which I have been accompanied and
supported by many people. It is fantastic that I now have the opportunity to express my
gratitude and sincere thanks to them all.
The first person I would like to thank is my direct supervisor, Dr. Nguyen Thi Mai
Trang. Her enthusiastic and integral view on research has made a deep impression on
me. I owe her a lot of gratitude for having shown me this way of research and her great
efforts to explain things clearly and simply.
I would also like to thank the faculty of ISB International Institute – University of
Economic Ho Chi Minh City. And especially, I am deeply grateful Professor Nguyen
Dinh Tho PHD., who have shown me this way of research and been great efforts to
explain things clearly and simply, through the Research Design for Master Thesis
subject and Data analysis by SPSS.
I feel deep sense of gratitude for the leaderships of VNPT Dong Nai Company and
especially Director Nguyen Minh Tam who have supported and got opportunities on
my work and thesis.
I wish to thank my entire extended family and especially to my husband for their
providing a loving environment, support and encouragement throughout my entire life.
I dedicate this thesis to them.

Van Thi Yen Nhi
Dong Nai, November 2012


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TABLE OF CONTENTS

ABSTRACT ............................................................................................................................. 1
ACKNOWLEDGEMENT ....................................................................................................... 2
TABLE OF CONTENTS ......................................................................................................... 3
LIST OF TABLE ..................................................................................................................... 6
LIST OF FIGURES ................................................................................................................. 7
CHAPTER I ............................................................................................................................. 8
1 INTRODUCTION.............................................................................................................. 8
1.1 BACKGROUND............................................................................................................. 8
1.2 PROBLEM DIFINITION AND RESEARCH QUESTIONS......................................... 10
1.3 RESEARCH OBJECTIVES ........................................................................................... 12
1.4 DELIMITATION ............................................................................................................ 13
1.5 OUTLINE OF THE STUDY .......................................................................................... 14
CHAPTER II ............................................................................................................................ 16
2 LITERATURE REVIEW................................................................................................... 16
2.1 MOBILE TELECOMMUNICATION IN THE WORLD .............................................. 16
2.2 MOBILE TELECOMMUNICATION IN VIETNAM ................................................... 18
2.3 CUSTOMER RETENTION............................................................................................ 21
2.4 CUSTOMER SATISFACTION...................................................................................... 23
2.5 SWITCHING BARRIERS .............................................................................................. 24
2.6 SWITCHING COST ....................................................................................................... 26
2.7 INVESTMENT IN RELATIONSHIP ............................................................................ 27
2.8 ATTRACTIVENESS ALTERNATIVES ....................................................................... 27
2.9 INTERPERSONAL RELATIONSHIP ........................................................................... 28
2.10 RESEARCH MODEL AND HYPOTHESES .............................................................. 29
CHAPTER III........................................................................................................................... 34
3 METHODOLOGY ............................................................................................................. 34
3.1 RESEARCH PURPOSE ................................................................................................. 34


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3.1.1 Exploratory Research ................................................................................................ 34
3.1.2 Descriptive Research ................................................................................................. 35
3.1.3 Explanatory Research................................................................................................ 35
3.2 RESEARCH APPROACH.............................................................................................. 36
3.3 RESEARCH PROCESS.................................................................................................. 37
3.4 MEASUREMENT SCALES .......................................................................................... 41
3.5 SAMPLING METHOD .................................................................................................. 45
3.5.1 Target Population and Sampling method .................................................................. 45
3.5.2 Sample Size ............................................................................................................... 45
3.6 MAIN SURVEY AND DATA COLLECTION ............................................................. 46
3.7 DATA ANALYSIS METHODS..................................................................................... 46
3.7.1 Exploratory Factor Analysis (EFA) ......................................................................... 46
3.7.2 Reliability Analysis ................................................................................................... 47
3.7.3 Multiple Regression Analysis ................................................................................... 47
CHAPTER IV .......................................................................................................................... 49
4 DATA ANALYSIS AND FINDING ................................................................................. 49
4.1 SAMPLE DESCRIPTION .............................................................................................. 49
4.2 ASSESSMENT AND REFINEMENT OF MEASUREMENT SCALES ...................... 52
4.2.1 Cronbach Alpha Reliability Analysis........................................................................ 52
4.2.2 Exploratory Factor Analysis (EFA) .......................................................................... 54
4.2.3 The revised conceptual model .................................................................................. 57
4.3 HYPOTHESES TESTING.............................................................................................. 59
4.3.1 Testing Assumptions of Multiple Regression ........................................................... 59
4.3.2 Testing Hypotheses the impact Switching Barrier on Customer Satisfaction .......... 60
4.3.3 Testing Hypotheses the impact Customer Satisfaction on Customer Retention ...... 61
4.3.4 Summary of the Hypotheses Testing Results............................................................ 62
4.4 ANOVA ANALYSIS- MLR WITH DEMOGRAPHIC INDEPENDENT VARIABLES .........................65
4.5 DISCUSSIONS OF THE FINDINGS ............................................................................ 66
4.5.1 The Unexpected insignificance of the Negative Switching Barriers’ role ................ 67

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4.5.2 The impact of the Positive Switching Barrier on Customer Satisfaction.................. 68
CHAPTER V ........................................................................................................................... 68
5 CONCLUSIONS AND IMPLICATIONS ......................................................................... 68
5.1 CONCLUSIONS ............................................................................................................. 68
5.2 MANAGERIAL IMPLICATIONS ................................................................................. 69
5.3 IMPLICATIONS FOR FURTHER RESEARCH ........................................................... 71
REFERENCES ......................................................................................................................... 72
APPENDIX 1: A CONSOLIDATED DRAFT QUESTIONNAIRE ....................................... 77
APPENDIX 2: QUESTIONNAIRE ......................................................................................... 82
APPENDIX 3: TESTING THE ASSUMPTIONS OF MULTIPLE REGRESSION .............. 85


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LIST OF TABLES

Table 3.1: Measurement scales .................................................................................... 42
Table 4.1: Sample Characteristics ................................................................................ 51
Table 4.2: Reliability Test Results................................................................................ 53
Table 4.3: EFA Results ................................................................................................. 56
Table 4.5: Coefficients – Switching Barrier and Customer Satisfaction...................... 59
Table 4.8: Coefficients- Customer Satisfaction and Customer Retention .................... 62
Table 4.9: Summary of Hypotheses Testing Results .................................................... 63


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LIST OF FIGURES
Figure 2.1: The Research model .................................................................................. 32
Figure 3.1: Research Process ....................................................................................... 38
Figure 4.1: Revised conceptual Research Model ......................................................... 58
Figure 4.4: The Correlations of the Research Model ................................................... 64


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CHAPTER 1: INTRODUCTION
In the introductory chapter a background regarding the concept of customer
satisfaction and retention as well as the reasons why these concepts are highlighted
today and their importance in mobile telecommunication market is presented.
Furthermore, the problems that telecommunication companies face within this area will
be discussed. And finally, the importance of the design, implementation and evaluation
of customer satisfaction and retention programs will be explained followed by the
research purpose and research questions, and also an overview of the whole thesis.
1.1 Background
The increasing economic importance of telecommunications companies inspired
many researchers, marketers and management scholars to devoted more teaching and
research attention to this sector.
Since the 1990s, the telecommunications industry and services have become a
dynamic key area for the economic development of industrialized nations. This is the
result of enormous technical progress as well as of the increased number of network
operators and the intense competition that has developed.
It has been figured out by previous researches that as markets become more
competitive, companies are more likely to attempt to maintain their market share by
focusing on satisfaction and retaining current customers. It’s also obvious that when
the competition and the cost of attracting new customer increase; companies

increasingly concentrate their strategic efforts on customer retention, therefore
maintaining customer long-term relationships becomes as an important mission for
business.
Moreover, technology of mobile telecom evolving to meet high demand from
customer, the paradigm of mobile telecommunication services is now shifting from


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voice-centered communication to a combination of high-speed data communication
and multimedia. Furthermore, factors such as the growth of the wireless internet
contribute to emphasize the appearance of a transition period in the mobile
telecommunication service market. Mohan et al. (2012) suggest that the world has 6
billion mobile subscribers by ICTnews - The number of mobile subscribers in the
world was almost equal to the number of people living on Earth. And it is necessary to
develop the argument (n.d.) the United Nations telecom agency says there were about 6
billion subscriptions by the end of 2011 - roughly one for 86 of every 100 people.
So, the change of paradigm and the symptoms of a market in transition are driving
the industry’s restructuring efforts and intensifying competition between companies.
Mobile suppliers are coming to a full realization of the importance of a customeroriented business strategy as a condition for sustaining their competitive edge and
maintaining a stable profit level, and indeed, for their very survival. When the number
of subscribers has reached its saturation point, creating and securing new customers is
not only difficult but also costly in terms of marketing. Thus, it is becoming an
industry-wide belief that the best core marketing strategy for the future is to try to
retain existing customers by heightening customer loyalty and customer value.
Especially, the switching barrier in this market effects to customer satisfaction and
retention, because, the customer intends to switch or exit mobile service suppliers, they
are very interested in the conditions of the barriers to the most benefit for themselves.
The telecommunications market in Vietnam is no longer a monopoly market.
International economic integration has created an impact on the telecommunication

market fierce competition, so to sustainable development and market share growth, the
telecommunication companies have been orient around the customer. In Vietnam,
according to statistics of the Ministry of Communications and Information, in Jun
2012, total subscribers estimated 120.7 million mobile subscribers, average people
using 1.5 subscribers mobile. Therefore, the attraction and development of new mobile


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customers is very difficult, besides, the mobile telecommunication services suppliers
constantly compete to increase market share subscribers in Vietnam. And customers
using mobile services with the characteristic of "infidelity," they are ready to leave the
supplier to a new supplier if its benefits. So customer retention that is the goal of urgent
in the mobile phone suppliers in Vietnam, will lead the company of having more loyal
customers and as a result more profit and market share.
Several studies show that customer satisfaction is related to retain customer or
repurchase intentions (Cronin & Taylor, 1992; Fornell, 1992; Anderson & Sullivan,
1990; Boulding, Kalra, Staeling & Zeithaml, 1993; Taylor & Baker 1994; de Ruyter,
Wetzels & Bloemer, 1996; Zeithamel, Berry, & Parasuraman, 1996). However,
customer satisfaction never explains all of the variations in retention, since customers
seldom are completely free to choose suppliers. In fact, different types of constraints,
together with customer satisfaction, determine customer choice of suppliers
(Bendapudi & Berry, 1997). And only a few empirical studies investigate how various
types of switching barriers affect satisfaction with suppliers, retention and the
relationships between these variables (Jones, Mothersbaugh, & Beatty, 2000). Thus, in
term of the Mobile telecom service in Vietnam, the research for potential antecedents
that have high power to explain customer satisfaction and retention forward switching
barriers: switching cost, investment in the relationship, attractiveness of others
alternatives and interpersonal relationship.
1.2 Problem definition and Research Questions

As mentioned earlier, today the telecom industry like many other ones faces the
combined difficulties of increasing national and international competition, slower
growth rates and mature markets. As the result, fewer new customers are being pursued
by an increasing number of service suppliers. Under these circumstances, a large share


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of company’s resources must be devoted to the present customer base in order to make
them satisfied and retain them.
One significant of customer retention is its close relationship to the company’s
continued survival and to strong future growth. Hence, for a company to maintain a
stable profit level when the subscription level has reached the saturation point, the
market is mature, competition is fierce, a defensive strategy which strives to retain
leaving customers is more important than an aggressive one, which expands the size of
the overall market by inducing potential customers (Fornell, 1992; Ahmad & Buttle,
2002). High switching barriers mean that customers have to stay with suppliers,
irrespective of the satisfaction created in the relationship. Such constrained freedom of
choice could, according to reactance theory, create lower satisfaction, retention than a
more unconstrained situation (Ringold, 1988), and customer satisfaction and loyalty
needs to incorporate switching barriers (Bendapudi & Berry, 1997).
And now, the telecommunication monopoly almost all around the world is being
become to be an open and competitive market. So Telecommunications market in
Vietnam has not been except that is no longer a monopoly market. International
economic integration has created an impact on the telecommunications market fierce
competition, so to sustainable development and market share growth, the
telecommunication companies have been orient around the customer. Companies
increasingly concentrate their strategic efforts on customer retention, Therefore, the
attraction and development of new customers is very difficult, besides, the service
suppliers constantly compete to increase market share subscribers in Vietnam. And

customers using mobile services with the characteristic of “infidelity,” they are ready
to leave the network to a new network if its benefits. So customer retention that is the
goal of urgent in the mobile phone suppliers in Vietnam, will lead the company of
having more loyal customers and as a result more profit and market share.


12

However, not enough studies have been conducted on the subject of the mobile
telecommunication services industry inside Vietnamese. This is partly due to the
relatively short history of the telecommunication industry in Vietnam.
Due to the above mentioned facts and based on the reviewed literature, a model will
be developed for studying the factors of switching cost influencing customer
satisfaction and since then research about impact to customer retention.
The issue that is going to be discussed in this thesis first was formed and started by
studying about the market more precisely and collecting the information about it as
much as possible. The most mind boggling criteria that this thesis is going to work on
it, is the way that the mobile suppliers are going to retain their customers in the new
competitive market that they are going to face with very soon.
The research questions that are discussed in this thesis are as below:
What are the main factors of switching barriers affect on customer
satisfaction in the mobile telecom industry in Vietnam?
How can these factors and determinants be developed and evaluated in
Vietnam?
How can customer satisfaction affect on customer retention in the mobile
telecom industry?
1.3 Research Objectives
From a managerial point of view and given that long-term customer relationships
are very important, suppliers should not only manage customer satisfaction, but also
switching barriers. Creating too high switching barriers may result in negative word of

mouth and dissatisfaction, and low switching barriers may it too easy for customer to
defect. Thus, this research has drawn very little research from factors in switching
barriers, satisfaction and retention in academicians.


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The research objectives that are discussed in this thesis are as below:
Identify the factors of switching barriers that affect the customer satisfaction
in mobile telecom industry in Vietnam.
Subsequently, to examine the impact of customer satisfaction on customer
retention in mobile telecom industry in Vietnam.
Determine the degree of the impact of each factor to customer satisfaction.

In this thesis, a model for determining customer satisfaction and retention in
Vietnam mobile telecommunication services is going to be developed and then applied
on order to recognize their influencers and hopefully increase customer satisfaction and
retention. From the actual market assessment data combined with the theory,
construction and strategic business solutions in switching barrier factors affecting
customer satisfaction and customer retention of the current mobile telecommunication
suppliers.
The primary purpose of this study is to examine the impact of switching barriers on
customer satisfaction and subsequently, to examine the impact of customer satisfaction
on customer retention. Then, investigate the strategies in the Vietnam mobile telecom
services to increase customer retention and define factors of switching barriers, and
empirically test hypotheses regarding the role of factors in switching barriers in context
of satisfaction and retention.
1.4 Delimitation
First, in terms of the constructs showing in this research, only four basic
components (switching cost, investment relationship, attractiveness alternative and

interpersonal relationship) are focused and used to measure switching barriers that
influence customer satisfaction and retention. So, other switching barriers
measurements are beyond this study.


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Second, this study only focus on Vietnam mobile industry and market, the other
sectors in other countries are not involved.
Third, this study will be examined only from customer’s point of view that are used
to mobile telecommunication service. So, the service firm’s perspective about this
subject are not be researched.
1.5 Outline of the Study
This research includes five chapters that the first chapter is already presented.
Chapter one: Introduction.
This chapter presents research background of the study, as well as, research
problems, research objectives and delimitation.
Chapter two: Literature Review.
This chapter provides the reader with sufficient theory to assimilate the continuing
part of this study. It will begin briefly by a background of the mobile
telecommunication market, especially be the Vietnam mobile telecommunication
market and customer satisfaction and retention, then discusses why customer
satisfaction and retention are important and finally proposes a model for determining
customer satisfaction and retention from the factors in switching barriers, which are
going to be evaluated in following chapters.
Chapter three: Research Methodology.
Research methodology concerned in chapter one, literature review and empirical
model presented in chapter two, this chapter particularly presents the research design,
research methodology and reports the processes of doing the research.

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Chapter four: Data analysis and finding.
This chapter presents data that has been collected through questionnaires and
interviews. It also presents the analysis, which has been done on data, the proposed
hypotheses and the result of hypothesis.
Chapter five: Conclusions and implications.
Chapter 5 presents main conclusions and implications based on the results of the
previous chapters, as well as the limitations of this study.


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CHAPTER 2: LITERATURE REVIEW
This chapter provides the reader with sufficient theory to assimilate the
continuing part of this study. It will begin briefly by a background of the mobile
telecommunication market, especially be the Vietnam mobile telecommunication
market and customer satisfaction and retention, then discusses why customer
satisfaction and retention are important and finally proposes a model for determining
customer satisfaction and retention from the factors in switching barriers, which are
going to be evaluated in following chapters.
2.1 Mobile Telecommunications in the world
When the radio broadcasting industry by developing the idea of radio telephone
equipment and was also a precursor to the mobile communication network. In 1946,
the first radio telephone network under test experience in St. Louis, Missouri in the
United States. After 50 years, the invention of the semiconductor also influences the
field of mobile telecommunication. Application of semiconductors in mobile
telecommunication has improved a number of disadvantages that have not done.
May 12-1971 given cellular system similar technique, FM, in technology the

850Mhz.Dua the band until 1983, mobile phone networks AMPS (Advanced Mobile
Phone Service) The first commercial service in Chicago, United States. Then a series
of standard information released as: Nordic Mobile Telephone (NTM), Total Access
Communication System (TACS). This stage is called cell system similar to the first
generation (1G), with a narrow strip floor, all 1G systems using FM frequency
modulation for voice, frequency shift key modulation FSK (Frequency Shift Key) to
access technical signals and used as FDMA (Frequency Division Multiple Access).
2nd generation (2G) was popular during the 90s. The development of mobile
communication technology with the second generation of the utility it did the explosion
of mobile subscribers worldwide. This is the transition from analog to digital


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technologies. This phase of mobile telecommunication systems such as: GSM-900MHz
(Global System for Mobile), DCS-1800MHz (Digital Cordless System), PDC 1900MHz (Personal Digital Cellular), IS-54 and IS-95 ( Interior Standard). GSM is the
precursor of the two systems DCS, PDC. Technical systems use TDMA (Time
Division Multiple Access) with the exception of IS-95 uses CDMA technology (Code
Division Multiple Access). 2G generation capable of providing diverse services,
utilities support for information technology, which allows subscribers to make
international roaming process makes it possible to keep in touch in a wide area as they
move from country to country.
The third generation (3G), 1992 World Congress communications media for a
number of frequency bands for 3G mobile systems: 230MHz wide spectrum in the 2
GHz band, which 60MHz for satellite telecommunications. Then Telecommunications
International Union (UIT) advocates a global international mobile systems to IMT2000 project used in the bands 1885-2025MHz and 2110-2200MHz. 3G generation
techniques include: W-CDMA (Wide band CDMA) type FDD and TD-CDMA (Time
Division CDMA) TDD style. The goal of IMT-2000 is to enable subscribers to
communicate with each other and use multimedia services on a world scale, with a
flow of bits from 144Kbit / s in the wide areas and up to 2Mbps in the region method.

Services started in 2001 - 2002.
Now, 4G (also known as LTE - Short or Long Term Evolution), the next step is
to develop 3G technology. If the current 3G technology can meet a maximum
download speed of 14.4 Mbps, LTE can meet up to 100 Mbps (equivalent to optical
technology current FTTx). In terms of technology, 4G mobile network is a natural for
the transmission of data rather than voice service features. Currently in the world there
are about 17 networks deploy 4G service business but just at the exploitation of the
features of data transfer.


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The world has 6 billion mobile subscribers by ICTnews - The number of mobile
subscribers in the world was almost equal to the number of people living on Earth.
Telecommunications Authority of the United Nations said there were about 6 billion
mobile subscribers by the end of 2011, for every 100 people, with 86 people registered
subscribers.
So, the change of paradigm and the symptoms of a market in transition are
driving the industry’s restructuring efforts and intensifying competition between
companies. Mobile suppliers are coming to a full realization of the importance of a
customer-oriented business strategy as a condition for sustaining their competitive edge
and maintaining a stable profit level, and indeed, for their very survival. When the
number of subscribers has reached its saturation point, creating and securing new
customers is not only difficult but also costly in terms of marketing. Thus, it is
becoming an industry-wide belief that the best core marketing strategy for the future is
to try to retain existing customers by heightening customer loyalty and customer value.
Especially, the switching barrier in this market effects to customer satisfaction and
retention, because, the customer intends to switch or exit mobile service suppliers, they
are very interested in the conditions of the barriers to the most benefit for themselves.
2.2 Mobile Telecommunications in Vietnam

Secretary General of the ITU World Telecommunication Union praised the
development of Vietnam Telecommunications. According to the ITU ranking, Vietnam
has been ranked the eight mobile subscriber density in the world, rapid progress in the
development of broadband and is rated as a highlight of the telecommunications world
(Developing an argument, n.d.).
In Vietnam, the first mobile communication network was established in 1992
with about 5,000 subscribers. They provide large mobile information services as
Mobifone (VMS) was born in 1993 - a joint venture between telecommunications


19

companies VN (VNPT) and Comvik group (Sweden) and Vinaphone of
telecommunications services center (GPC) VNPT born in 1996. As of 2002, Korea's
corporate S- Fone Telecom and Viettell the Army Telecommunications Company and
entered in 2004. In May 2009, Vietnamobile, business cooperation between Hanoi
Telecom Joint Stock Company (Hanoi Telecom) and Hutchison Telecom (Hong Kong)
was born. After 2 months, July 2009, the global telecommunications company
Gtelmobile, business cooperation between Ministry of Public Security and Vinpelcom
companies (Russian) also joined the network to provide mobile services in Vietnam.
Now, the race of the operators for reduced charges and more diverse services. Thus,
Mobile telecom market in Vietnam is one of the most competitive with a number of
suppliers, such as: Vinaphone, MobilFone, Vitteltellecom, VietnamMobile, S-Fone,
GtelMobile. In Vietnam, according to statistics of the Ministry of Communications and
Information, in Jun 2012, total subscribers estimated 120.7 million mobile subscribers,
average people using 1.5 subscribers mobile (Developing an argument, n.d.).
Therefore, the attraction and development of new mobile customers is very difficult,
besides, the mobile telecommunication services suppliers constantly compete to
increase market share subscribers in Vietnam. And customers using mobile services
with the characteristic of "infidelity," they are ready to leave the supplier to a new

supplier if its benefits. So customer retention that is the goal of urgent in the mobile
phone suppliers in Vietnam, will lead the company of having more loyal customers and
as a result more profit and market share.
Mobile market in Vietnam as well as the development trend of the world's
mobile market, the service provider does not cease to apply advanced technology,
modern development of 1G, 2G, 3G and 4G, to improve service quality in order to
meet high demand from customers to bring customer satisfaction, customer loyalty,
customer retention and thereby raising the market share of mobile service providers.


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According to the Ministry of Information and Communication mobile market
mainly focuses on three major mobile telecommunication suppliers with overwhelming
levels when accounting for 95%. Viettel mobile network is subscriber market share at
36.72%, VinaPhone and 28.71% and MobiFone is 29.11%. Meanwhile, the remaining
3 mobile network is Vietnamobile, S-Fone, Gtelmobile. In addition, the development
of mobile subscribers in Vietnam, in the first six months of 2012, the mobile telecom
suppliers faced with the number of subscribers leaving and switching the network.
Viettel was increased 4%, Mobifone downed 11.21%, Vinaphone increased 1.3% from
the previous year. Thus the number of mobile subscribes switched to use the new
mobile suppliers such as, Gtelmobile increased 3%, Vietnamobile increased 5% and
Sfone downed 1.4%.
According to the mobile networks, capable of explosive subscriber growth at the
stage near the end and prepare to saturation. The ability to surge on subscription almost
is impossible. Therefore, the objective of the mobile suppliers turned to keep
subscribers and seek to increase average revenue per subscriber (APRU). There,
MobiFone is the largest APRU then VinaPhone. Although mobile network Viettel is
the biggest market share, but mobile network ranked third in APRU.
Adopt, competition in the mobile market in Vietnam will add many new shades.

It is not difficult to see that the mobile telecommunications market in Vietnam has
become a "red ocean", the mobile networks have to compete aggressively to win
market share. So, ability to gain market share analysis of new mobile network, a
telecommunications expert, will encounter difficulties when entering the capital market
only very small gaps that are whether the number of subscribers nearly saturated but
too large virtual subscribers and characteristics of young subscribers Vietnam as
"unfaithful", they are ready to leave the network are used to a new network if they get
benefits. So, main factors of switching barrier in mobile telecommunication, such as:
switching cost, investment relationship, attractiveness alternative, and interpersonal


21

relationship are very important to intend and decide switch, exist the mobile supplier.
Vietnam mobile suppliers will come to a full realization of the importance of a
customer-oriented business strategy as a condition for sustaining their competitive edge
and maintaining a stable profit level and indeed, for their very survival. When the
number of subscribes reaches its saturation point, creating and securing new customers
is not only difficult but also costly in terms of marketing. Hence, it is becoming an
industry-wide belief that the best core marketing strategy for the future is to try to
retain switching, existing customers.
As recently, the mobile telecom market is characterized by an intensive
competition. This industry is facing the aggressive competition. As new players drawn
into the telecom industry, especially in its most important sub industry which is mobile
telecommunications, companies involved in this race are under a continuous pressure
to have customer satisfaction, customer retention and as a result profitability programs.
Nevertheless, there is a dearth of empirical research into the extent of customer
retention, especially from switching barriers or the supply side retention drivers in
particular telecommunication markets. Further, the full-scale launch of new
competitors in the industry is likely to increase customer churn, making customer

retention more crucial than ever. Hence, this thesis is going to focus on customer
satisfaction and retention through the factors of switching barrier in the competitive
mobile telecommunication market in Vietnam.
2.3 Customer Retention
The pressure to reduce customer churn along with the high cost of new customer
acquisition have forced mobile service providers to take a hard look at their customer
strategies.
Customer retention is a well-known and heavily researched topic in the field of
marketing. Throughout the years, the main stream of retention and loyalty research has


22

focused on the willingness of customers to enter and to stay in a relationship with the
provider of a product or service base on their satisfaction (Hirschman, 1970; Day,
1977; Oliver, 1980; Anderson, 1998; Homburg & Giering, 2001). Reichheld and Sasser
(1990) and Reichheld (1996) have studied customer lifetime value and the value of
building customer retention by listening to their complaints, anticipating their
defection, and understanding why customers move to competitors. Remain customer
loyalty because of the value they receive from the supplier. And customer retention
means continuing an active relationship with a customer.
Zeithaml (1996) both parties in the customer/firm relationship can benefit from
customer retention. That is, not only in the best interest the organization to build and
maintain a loyal customer base, but customers themselves also benefit from long-term
associations.
The tangible effects of companies’ commitment to retaining customers were first
published Reichheld (1990) who claim that higher retention rate leads to higher net
present value of customers.
Oliver (1997, p. 392) defines customer loyalty and retention 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 marketing efforts having the potential to cause switching
behavior”. Also customer retention is concerned with maintaining the business
relationship established between a supplier and a customer (Herrmann & Johnson,
1999).
The attraction of customer retention management continued to be prominently
advanced in subsequent related papers and books (Reichheld and Sasser, 1990;
Reichheld and Kenny, 1990). They proved that customer retention leads to higher
profitability and companies must conduct related programs to proactively retain their
customers.


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2.4 Customer Satisfaction
Customer satisfaction constitutes a cardinal indicator for assessing the success of
an enterprise. Satisfied customers are assets that ensure a regular cash flow for the
business in the future. Customer satisfaction is an important factor for the customer
retention but not a sufficient one (Jones, et al. 2000). Satisfaction is higher or lower
with respect to the extent to which what was actually provided exceeds or falls short of
what was expected. So customer satisfaction is as one important factor in determining
customer retention.
Customer satisfaction means that the customer’s needs are met, product and
services are satisfactory, and customers’ experience is positive (Friday and Cotts, 1995;
Gitomer, 1998). So, customer is satisfied when only minimum has been done for the
customer. If as customer is said to be satisfied or happy about a purchase, the
customer’s overall feeling and experiences must be neutral or positive. Customer
satisfaction itself is not an indication that there will be customer retention. There are
some other factors related to customer retention. A loyal customer is a customer whose
expectations are met or exceeded and they proactively refer the supplier. Kotler (2000)

“satisfaction is a person’s feeling of pleasure or disappointment resulting from
comparing a product’s perceived performance in relation to his or her expectations”.
And Yi (1990) “Customer satisfaction is a collective outcome of perception, evaluation
and psychological reactions to the consumption experience with a product/service”.
Satisfaction is also of great interest to practitioners because of its important effect
on customer retention. It is also found that satisfaction is a feeling that generates a
higher rate of customer retention and wider spread positive word-of-mouth.
Satisfaction has a strong positive effect on customer loyalty intentions across a wide
range of product and service categories, including telecommunications services
(Fornell 1992; Everitt et al., 1996). As an overall evaluation that it built up over time,
satisfaction typically mediates the effects of product quality, service quality, and price