Effects of negative and positive switching barriers to customer satisfaction and customer retention a study of mobile service users in vietnam

MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HOCHIMINH CITY
-----oOo-----

PHAM THANH LONG

EFFECTS OF NEGATIVE AND POSITIVE SWITCHING
BARRIERS TO CUSTOMER SATISFACTION AND
CUSTOMER RETENTION
A STUDY OF MOBILE SERVICE USERS IN VIETNAM

MASTER OF BUSINESS ADMINISTRATION THESIS

Ho Chi Minh City – 2011


MINISTRY OF EDUCATION AND TRAINING
UNIVERSITY OF ECONOMICS HOCHIMINH CITY
-----oOo-----

PHAM THANH LONG

EFFECTS OF NEGATIVE AND POSITIVE SWITCHING
BARRIERS TO CUSTOMER SATISFACTION AND
CUSTOMER RETENTION
A STUDY OF MOBILE SERVICE USERS IN VIETNAM

Major:
Major Code:

Business Administration

60.34.05

MASTER OF BUSINESS ADMINISTRATION THESIS
Supervisor: DR. TRAN HA MINH QUAN

Ho Chi Minh City – 2011


ACKNOWLEDGEMENT
This thesis is the result after several 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 all of them.
The first person I would like to thank is my direct supervisor Dr Tran Ha Minh
Quan. During these years I have known him to be a sympathetic and principlecentered person. I owe him a lot of gratitude for having shown me this way of
research.
I would like to express my sincere gratitude to all of my teachers at Faculty of
Business Administration and Post-graduate Faculty, University of Economics Ho
Chi Minh City for their teaching and guidance during my MBA course.
I would like to specially express my thanks to all of my classmates, my friends from
for their support and encouragement.
I am deeply and forever indebted to my parents and my wife, Hong Thao, for their
continuous love, support and encouragement dedicating to me. For their neverending support and the sense of security they have given when I wanted it most. I
dedicate this thesis to them.

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ABSTRACT
Customer retention is a concept getting more and more attention in business nowadays
as loyal customers are considered as vital components to organizational success.

Companies today strive to identify and manage effective methods to retain their
customers as many as possible. Even though some research papers have been published
globally on service sectors, including mobile telecommunication services, very limited
studies have been conducted on this subject inside Vietnam.
Many studies show that customer satisfaction is related to customer retention. However,
customer satisfaction is not enough to provide explanation to customer retention
because in a lot of cases, customers are not freely to choose or switch between suppliers.
There are different types of constraints identified as switching barriers have effect to
customer satisfaction and customer retention. Some previous studies investigated the
impact of switching barriers as a uni-dimensional concept and it has mediating effect to
the linkage between customer satisfaction and customer retention. Just a very few
studies went further to divide switching barriers into ‘positive elements’ and ‘negative
elements’ and tested both in the same model separately. In this study, our first objective
is to prove the role of switching barriers that influence customer retention in mobile
telecommunication service and classify them into positive and negative category.
Secondly, we will use a path analysis of the empirical data in Vietnam to examine the
impact of these 2 different categories into customer satisfaction and customer retention.
Keywords: Customer retention, purchase retention, customer satisfaction, switching
barrier, customer loyalty, mobile service

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CONTENTS
Acknowledgement ……………………………………………………………...

i

Abstract …………………………………………………………………………

ii

Contents ………………………………………………………………………...

iii

Lists of Tables …………………………………………………………………..

v

Lists of Figures …………………………………………………………………

vi

CHAPTER 1: INTRODUCTION …………………………………………….

1

1.1 Background ……………………………………………………………..

1

1.2 Problem definition and research questions ……………………………...

2

1.3 Research purpose ………………………………………………………..

3

1.4 Research limitation ……………………………………………………...

3

1.5 Organization of the thesis ……………………………………………….

4

CHAPTER 2: LITERATURE REVIEW …………………………………….

5

2.1 Customer satisfaction …………………………………………………...

5

2.1.1 Defining customers and customer purchasing process ……………

5

2.1.2 Concept of customer satisfaction ………………………………….

6

2.1.3 Determinants of Customer satisfaction ……………………………

9

2.1.4 Customer satisfaction measurement model ……………………….

11

2.2 Customer retention ……………………………………………………...

14

2.3 Switching barriers ……………………………………………………….

18

2.4 Positive and negative switching barriers ………………………………..

23

2.5 Proposed research model and hypotheses ………………………………

25

CHAPTER 3: RESEARCH METHODOLOGY ……………………………

27

3.1 Research purpose ………………………………………………………..

27

3.2 Research Approach ……………………………………………………...

28

3.3 Sampling ………………………………………………………………...

28

3.3.1 Sampling technique ………………………………………………..

28

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3.3.2 Sampling size ……………………………………………………...

29

3.4 Data collection procedure ……………………………………………….

29

3.5 Measurement ……………………………………………………………

30

3.6 Pilot testing ……………………………………………………………...

31

3.7 Data analysis method ……………………………………………………

33

CHAPTER 4: DATA ANALYSIS AND FINDINGS ………………………..

36

4.1 The questionnaire ……………………………………………………….

36

4.2 Descriptive result ………………………………………………………..

36

4.3 Accessing reliability and validity of collected data ……………………..

39

4.4 Accessing model fit ……………………………………………………..

42

4.5 Testing hypotheses and answering research questions ………………….

44

CHAPTER 5: RESEARCH IMPLICATIONS ……………………………...

47

5.1 Conclusion ……………………………………………………………...

47

5.2 Implications for management …………………………………………...

47

5.3 Implications for theory and future research …………………………….

48

REFERENCE
APPENDIX 1: QUESTIONNAIRE (ENGLISH AND VIETNAMESE)
APPENDIX 2: STATISTICAL RESULT, PILOT STAGE
APPENDIX 3: STATISTICAL RESULT, MAIN RESEARCH

iv


LISTS OF TABLES
Table 3.1

Cronbach’s alpha result – Pilot stage …………………………………

32

Table 4.1

Age statistics of respondents ………………………………………….

36

Table 4.2

Education Background statistics of respondents ……………………...

37

Table 4.3

Occupation statistics of respondents ………………………………….

37

Table 4.4

Monthly income statistics of respondents …………………………….

38

Table 4.5

Living city/town Statistics of respondents ……………………………

38

Table 4.6

Mobile network statistics of respondents ……………………………..

39

Table 4.7

Cronbach’s alpha value – Main research stage ……………………….

39

Table 4.8

Table KMO and Bartlett's Test ……………………………………….

40

Table 4.9

Total Variance Explained by EFA ……………………………………

41

Table 4.10

Rotated Component Matrixa by EFA ………………………………...

42

Table 4.11

CMIN value calculated by AMOS ……………………………………

43

Table 4.12

RMSEA value calculated by AMOS ………………………………….

44

Table 4.13

Standardized Regression Weights of path model calculated by AMOS

45

Table 4.14

Non-standardized Regression Weights of path model ………………..

46

v


LISTS OF FIGURES
Figure 1.1

Research organization ………………………………………………...

4

Figure 2.1

Components of ACSI Model ………………………………………….

12

Figure 2.2

Components of ECSI Model ………………………………………….

13

Figure 2.3

Affecting role of switching barriers, both mediating and direct to
customer retention …………………………………………………….

19

Mediating role of switching cost to both customer value – customer
loyalty and perceived satisfaction – customer loyalty linkage ………..

20

Research model used in this thesis to investigate relationship among
switching barriers, customer satisfaction and customer retention ……

25

Path diagram with regression weights calculated by AMOS …………

43

Figure 2.4
Figure 2.5
Figure 4.1

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CHAPTER 1
INTRODUCTION

1.1 Background
The increasing economic importance of telecommunication service sector has
inspired many researchers to devote more of their research attention to this area.
Since 1990s, the telecommunications industry and services have become a dynamic
key factor for the economic development of many countries. This is the result of
enormous development in technology as well as of the increased number of network
operators and intense competition among them.
It has been figured out by previous researchers that as markets become more
competitive, firms are more likely to try maintaining their market share by focusing
on retaining current customers. It’s also obvious that when competition and the costs
of acquiring new customers increase, companies will be more concentrated their
strategic efforts on customer retention, therefore to maintain customer long-term
relationships becomes as a critical mission for business. Especially in the field of
telecommunications services, it has been pointed out that once customers have been
acquired and connected to the telecommunications network of a particular operator,
their long-term links with the focal operator are of greater importance to the success
of the company.

By having this in mind, customer retention is critical in the mobile service since
operators lose about 30 percent or more of their subscribers every year and have
large customer acquisition expenditures. It is very important to stress that mobile
operators need to develop well-designed programs to increase customer retention
(Lee, 2001).
As a result, many studies were conducted in this critical issue. They developed and

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estimated different dynamic models to explain and measure the determinants,
different factors and influencers of customer retention.
1.2 Problem definition and research questions
Nowadays the Telecommunications industry, like many of other ones, faces both the
difficulties of increasing national and international competition, slower growth rate
and saturated market. As a result, fewer new customers are being pursued by an
increasing number of service providers. Under this circumstance, a large scale of
firm’s resources must be definitely devoted to the present customers in order to
make them more satisfied and retain them.
One important point of customer retention is its close relationship to the company’s
continued survival, and to strong and stable future growth. Therefore, for a company
to maintain a stable profit level and the subscription level has reached the saturation
point, a defensive strategy which strives to retain existing customers is more
important than an aggressive one, which expands the size of the overall market by
inducing potential customers.
Many studies show that customer satisfaction is related to customer retention, but
only customer satisfaction is not enough to explain customer retention in all
circumstances since customer rarely has the chance to freely choose suppliers.
Actually, there are different types of constraints, together with customer satisfaction,
determine customers choice of supplier (Fornell, 1992). In this study, such

constraints are termed switching barriers. Only a few empirical studies investigate
how various types of switching barriers affect satisfaction with suppliers, customer
retention and the relationship between variables. It has been pointed out, that
customers remain loyal to a supplier either because they want to or they have to
(Ping, 1993). High switching barriers mean that customer have to stay (or perceive
that they have to) with suppliers, regardless of the satisfaction created in the
relationship.

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The research questions that are discussed in this thesis are as below:
Question 1: Can switching barriers be separated into negative and positive factors?
Question 2: How do positive switching barriers have impact to customer
satisfaction and customer retention in mobile telecommunication service in
Vietnam?
Question 3: How do negative switching barriers have impact to customer
satisfaction and customer retention in mobile telecommunication service in
Vietnam?
1.3 Research purpose
In this thesis, a model of determining customer retention in Vietnam mobile service
market will be developed and then applied in order to recognize its influencers and
hopefully can help service providers to increase their customer retention rate.
The research model defines customer satisfaction, positive switching barrier and
negative switching barrier as main determinant of customer retention. Switching
barrier will not be tested as a uni-dimensional factor that has impact to either the
customer satisfaction or customer retention or act as a mediating role in the linkage
between customer satisfaction and customer retention. In this thesis, both positive
and negative effects of switching barriers are tested in the same model and we will
investigate their impact to customer satisfaction and customer retention separately.

1.4 Research limitation
This thesis would be an opening base to further researches in related area in other
service sectors, but in other hand it may have some limitations. There are other
factors that can influence customer retention, apart from factors suggested in this
thesis such as: demographic characteristics of customer, customer’s usage pattern of
mobile service, etc are not studied in this research.

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1.4 Organization of the thesis
This thesis includes 5 chapters. The first chapter provided a brief overview of the
importance of this area of research and introduced research questions. Chapter Two
provides a review of the literature relevant to customer satisfaction, customer
retention and the common understanding about customer satisfaction and customer
retention relationship, a review of different variables of switching barriers and how
they are classified into positive and negative factor, a review of impact of switching
barriers into customer satisfaction and customer retention. In this Chapter, the
proposed model and hypotheses are introduced. Next, Chapter Three will present all
aspects of the research method, including pilot testing phase, that was applied in this
thesis. Chapter Four discusses characteristics of the sample, the measurement of key
constructs and the result of path analysis of the proposed model. Finally, the
implication of this study that may be applied for management, theory and future
research are discussed in Chapter Five.

Chapter 1: Introduction

Chapter 2: Literature review

Chapter 3: Research Methodology

Chapter 4: Data analysis and findings

Chapter 5: Research implications

Figure 1.1 Research organization

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CHAPTER 2
LITERATURE REVIEW

2.1 Customer satisfaction
2.1.1 Defining customers and customer purchasing process
The term “customer” is commonly used to refer to end-users of a product or is a
generic term referring to anyone who receives a service or product from some other
person or group of people. More broadly, there are internal and external customers,
where internal customers refer to the staff or employees and external customers refer
to stakeholders of an organization. Within the external customer group, there are
many types such as: clients, consumers and constituents. It is important to identify
the types of customer who are surveyed when studying customer satisfaction results.
In this study, the concerned customers are the individual consumers/users who
subscribe mobile services of any operator in Vietnam.
Researchers suggest that customers go through a five-stage decision-making process
in most purchasing situations: need recognition and problem awareness, information
search, evaluation of alternatives, purchase and post-purchase evaluation (Kotler
and Keller, 2006). In service sector, Lovelock and Wirtz (2007) provided a threestage model of service consumption including: pre-purchase service, encounter
stage and post-enter stage.
• Pre-purchase: This stage includes three main components. First is need

awareness, information search where needs are clarified. Second is solutions
explored and suppliers and alternative service products are identified by
customers. And finally, last stage is an evaluation of alternative solutions and
suppliers for a decision on service purchase. This stage is affected by the

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consumer’s search for certain service attributes and the perceived risk and
expectation of consumer.
• Service-encounter: This stage involves a request from chosen supplier of
which payment will be billed latter. It also includes service delivery by
personnel or self-service. It is the moment of truth as the service has already
been experienced by customers.
• Post-encounter: This stage involves an evaluation of the performance of the
service and its effect on future intentions. It is this stage that satisfaction and
dissatisfaction happen and whether to remain loyal or not is taken by
customers.
In the mobile telecom market, when a customer buys a SIM card and activates it,
he/she immediately becomes a subscriber to the service operator. The decision to
purchase and the decision making process are very significant to consider since they
have significant effect on customer satisfaction, re-purchasing, and ability to
recommend service to others and switching intentions. This value exchange process
continues when customers continue to receive or consume services from the mobile
network and even participate in the services production and delivery process. In the
process, customers’ decision to remain loyal to the organization or move to other
networks takes place depending on many factors, in which one of the most
important factors is their satisfaction level of the services quality delivered to them.
2.1.2 Concept of customer satisfaction
Customer satisfaction is the term receiving a lot of attention and interest among

scholars and practitioners since it is the key element of business strategy, and goal
for all business activities especially in today’s competitive market (Anderson et al,
1994). It is therefore important to understand this terminology in detail as
conceptualized in this study. Some of the definitions given by scholars for customer
satisfaction are as follows:

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• Customer satisfaction is a ‘‘psychological concept that involves the feeling of
wellbeing and pleasure that results from obtaining what one hopes for and
expects from an appealing product and/or service’’ (WTO, 1985);
• Customer satisfaction is “as an attitude-like judgment followed by a purchase
act or a series of consumer product interactions.” Youjae Yi, (1990 cited in
Lovelock & Wirtz 2007);
• Customer satisfaction is ‘‘a consumer’s post-purchase evaluation and
affective response to the overall product or service experience.’’ (cited from
Oliver, 1992);
• Satisfaction is “merely the result of things not going wrong; satisfying the
needs and desires of consumers.’’(cited from Besterfield 1994);
• Customer satisfaction is ‘‘an experience-based assessment made by the
customer of how far his own expectations about the individual characteristics
or the overall functionality of the services obtained from the provider have
been fulfilled.’’ (cited from Bruhn, 2003);
• ‘‘Satisfaction is a person’s feeling of pleasure or disappointment resulting
from comparing a product’s performance (outcome) in relation to his or her
expectation.’’ (cited from Kotler P. & Kevin L. K., 2006 p. 144).
Customer satisfaction as a Process and an Outcome:
One issue that has received lots of debate in customer satisfaction literature is
whether customer satisfaction should be defined as an outcome or a process. Many

early definitions conceptualized satisfaction as a process which is currently the
dominant view held by most scholars (Oliver, 1980, Parasuraman et al., 1991). The
process perspective supposes that customer satisfaction is a feeling of satisfaction
that comes from the process of comparing perceived performance and one or more
predictive standards, such as expectations or desires (Khalifa & Liu 2002). This
perspective is grounded in the expectancy disconfirmation theory proposed by

7


Richard Oliver (Oliver, 1980). The customer is satisfied if the performance of
product or service is equal to her expectations (positive disconfirmation). On the
other hand, she is dissatisfied if the product or service performance is perceived to
be under her expectation (negative disconfirmation). If expectation exceeds
perceived performance, the customer is highly satisfied. By taking satisfaction as a
process these definitions do not focus on satisfaction itself but what cause
satisfaction, the antecedents to satisfaction, which occur primarily during the service
delivery process (Vavra 1997).
More recent studies consider satisfaction as an outcome or end result during the
process of the service consumption; it is viewed as a post-purchase experience
(Vavra 1997). This view has its roots in motivation theories that their behavior is
directed at the achievement of relevant goals (Vroom, 1964). In this way satisfaction
is perceived as a goal to be achieved.
In the context of this study, we consider customer satisfaction as process perspective
because we believe that in Vietnam mobile telecom market, customers’ evaluation
of mobile telecom services takes place primarily during the service delivery process
and continues, but not just an outcome that customers want to achieve.
Customer satisfaction as Cognitive and Affective responses:
Another controversial aspect in customer satisfaction literature is whether it is
cognitive or affective. Although according to most scholars who view satisfaction as

a process, the nature of satisfaction process remains unclear. While some authors
maintain that satisfaction is a cognitive assessment involving a comparison of
product or service offerings from a provider against expectations, other scholars
disagree that the feeling of satisfaction represent an emotional state of mind that is
formed through the process of service delivery where customers encounter service
experiences that affect their emotions. More recent research have found that
satisfaction is both cognitive and affective (Oliver, R.L., 1993a; Gronroos, C.,
2001). They argue that “. . . satisfaction is naturally tied to cognitive judgments and

8


to affective reactions elicited in consumption” (Mano and Oliver, 1993, p. 451).
This study conceptualizes customer satisfaction as both cognitive and affective
since we believe customers express their satisfaction with the service quality they
consumed in both cognitive and emotional way.
Customer satisfaction as Transactional or Cumulative:
Another commonly debating problem to many scholars is whether customer
satisfaction should be conceptualized as cumulative or transactional. On the one
hand from a transactional perspective, customer satisfaction is based on a one time,
specific post-purchase evaluative judgment of a service encounter (Hunt, 1977).
However on the other hand, in the cumulative customer satisfaction perspective,
customer satisfaction is defined as a total customer evaluation of a product or
service based on purchase and consumption experiences over a time period (Fornell,
1992; Johnson and Fornell, 1991). In terms of the diagnostic and predictive value of
customer satisfaction measurement, cumulative satisfaction is more useful and
reliable than transaction-specific in that it is based on series of purchase and
consumption occasions rather than just one occasion of transaction. Therefore, our
conceptual framework for this study treats customer satisfaction as cumulative.
2.1.3 Determinants of customer satisfaction

Many factors that affect customer satisfaction need to be examined. According to
many scholars and practitioners, customer satisfaction is found to be driven by the
service quality and the customer service experiences (Oliver, R.L., 1980; 1993a;
Parasuraman, A., et al., 1991, Kotler P. & Keller K.L., 2006). It is generally
accepted by most researchers that service quality basically relates to what the
customer perceives of the product/service performance. Recent empirical studies
have proved that customer satisfaction is not only driven by cognitive dimensions of
customer perceptions of service quality but also by affective dimensions which have
positive impact on post-purchase behaviors, such as repeated purchase, customers

9


loyalty, switching intention, and likelihood to recommend (Erevelles S., 1998;
Oliver R. L., 1980; Oliver, R.L. 1993a). Perceived service quality is an important
determinant of customer satisfaction that has both cognitive and affective
dimensions beyond just cognitive assessment of customers of the offering of service
providers. Perceived quality is created by customers during their consuming
interactions with product/service providers.
Another important determinant of customer satisfaction is customer expectations. It
has been found out that expectation plays an important role in determining
satisfaction. This view was supported by the majority of famous expectancy
disconfirmation theory (Oliver 1980; 1993; Parasuraman, A., et al., 1988,).
According to this theory, the customer is satisfied if the performance of
product/service is equal to his/her expectations and he/she isn’t satisfied when the
product/service performance is perceived to be below his/her expectation (negative
disconfirmation).
Customer satisfaction is also driven by perceived value. Though the concept of
value is relative and has several dimensions to it, Zeithaml (1988) considers
customers value as the overall assessment of the utility of a product based on

comparison of what he is received and what he is given. Dodds et al (1991), argued
that customers perceptions of value represent a trade-off between the quality or
benefit they receive in the product relative to the sacrifice they perceived by paying
the price.
Conceptually, since what the customer gets for what he/she gives is based on the
performance of the product/service, what he/she gives become a standard for
comparison.
In conclusion, it is established by may empirical studies that customers overall
cognitive or affective evaluation is based on basically the service quality, but the
customer’s perception of the performance of the service quality encountered is
compared with some cognitive or affective standard like his/her expected quality,

10


perceived quality or value quality.
The implications of the antecedents of customer satisfaction is that managers must
plan and conduct effective strategies to manage customer perceived quality,
customer expectations, customer perceived value in order to get the full benefits of
customer satisfaction measurement (Gronroos, C., 1990; Kauppinen-Raisanen H. et
al., (2007)).
2.1.4 Customer satisfaction measurement model
Many measurement models have been developed and applied to measure customer
satisfaction, even though not all of them were validated by empirical research. Oh
and Parks, (1997) listed out nine methods for measuring customer satisfaction:
expectancy disconfirmation, assimilation or cognitive dissonance, contrast,
assimilation-contrast, equity, attribution, comparison-level, generalized negativity
and value-precept. Among all these nine methods, disconfirmation theory and
customer satisfaction index are two method that are most commonly used.
Customer Satisfaction Indices

The increasing importance of customer satisfaction in determining profit and
customer behavior which in turn determine industry and national productivity has
called for development of tools that can be used to measure and analyses its impact
across firms, industries, sectors and nations. (Fornell et al., 1996). This has resulted
in the development and use of customer satisfaction indices in many countries like
Sweden, the USA, Germany, Norway, Russia, Switzerland, Taiwan and Turkey. A
national customer satisfaction index is a market oriented performance measure. Its
main purpose is to “gain a deeper insight understanding into the interaction
between the customer and the supplier, in order to provide enough customer
satisfaction information as reference data in planning better policy decision
making.” Te-King Chien et al., (2003). It is used to complement traditional
performance measures, such as return on investment, profits and market shares or

11


Kaplan and Norton’s balanced score card approach. The Swedish Customer
Satisfaction Barometer (SCSB) was the first national customer satisfaction index
that was developed and applied for customer satisfaction and evaluation method of
the quality of products and services. The result was calculated based on annual
survey data from customers of about 100 leading companies in some 30 industries
(Fornell, 1992, p. 6).
The National Quality Research Center in the USA (NQRC) adapted the Swedish
index in 1994 and developed the American Customer Satisfaction Index (ACSI))
The American Customer Satisfaction Index (Figure 2.1) uses customer interviews as
input to a multi-equation econometric model. It is a cause-and-effect model with
indices for antecedents of satisfaction, satisfaction, and outcomes of satisfaction
(www.wikipedia.org, Fornell et al., 1996). It uses many multivariable components
measured by several questions having different industrial weights and reported on a
0 to 100 scale.

Perceived
Quality

Customer
Complaint

Customer
Satisfaction
(ACSI)

Perceived
Value

Customer
Expectations

Customer
Loyalty

Figure 2.1 Components of ACSI Model
(Source: )

The European Customer Satisfaction Index (Figure 2.2) was developed by the

12


European Organization for Quality (EQO), European Foundation for Quality
Management (EFQM), European Academic Network for Customer-Oriented

Quality Analysis and the European Commission developed

Corporate
Image

Customer
Expectation

Customer
Loyalty

Customer
Satisfaction
(ECSI)

Perceived
Value

Perceived
Quality

Customer
Complaint

Figure 2.2 Components of ECSI Model
(Source: adapted from Serkan Aydin and Go¨khan O ¨zer (2005).

Disconfirmation Models
Disconfirmation models are models that suggest that customer satisfaction or
dissatisfaction is the disparity that exist between the performance of a product or

service and some cognitive or emotional standards of the consumer. Oliver (1980)
was the first to propose and developed the expectancy disconfirmation theory. After
that, the theory was tested and confirmed in many other studies (Oliver and
DeSarbo, 1988; Satari, 2007).
According to expectation disconfirmation theory, customers after consuming a
product or service, compare their perception of product or service performance

13


against their expectations before they consume the service. When outcome or
perceived performance is equal to expectations, confirmation occurs. Negative
disconfirmation happens when perceived performance of product or service is less
than expected. Positive disconfirmation occurs when product of service performance
is better than expected. Customer satisfaction happens by confirmation or positive
disconfirmation of consumer expectations, and dissatisfaction is caused by negative
disconfirmation of consumer expectations.
Within the disconfirmation school of thought, more recent researches argue that
‘desire’ instead of ‘expectation’ in comparison with perceived performance should
be used in determining customer satisfaction (Suh et al. 1994 & Spreng et al.1996 in
Satari 2007). Expectation disconfirmation model has been challenged as unsuitable
since an expectation of a service can be rated as better than expected though it might
not necessarily meet consumers desired set of services. Therefore desire
disconfirmation has been suggested as a better substitute. Desire and expectations
are both cognitive standards and it is not clear which one provides a better
explanation of customer satisfaction. Khalifa and Liu (2002) proposed, in their
empirical research, a contingency theory that includes both expectation and desire
disconfirmations. They concluded that both desire and expectation simultaneously
affect overall satisfaction significantly. This implies that desire could be used in
addition to expectation and not instead of it.

2.2 Customer retention:
As mentioned earlier competition in the mobile telecom markets in Vietnam is
intensive. As these markets have reached saturated point since long ago, the focus of
competition is starting to shift from customer acquisition to customer retention.
The pressure to reduce customer churn, together with the high cost of acquiring new
customer, have forced mobile service providers to take a hard look at their customer
retention strategies.

14


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 studies
have focused on the willingness of customers to enter and to stay in a relationship
with the provider of a product or service based on their level of satisfaction.
Retention, rather than satisfaction, is becoming the number one strategic goal in
today’s competitive business environment (Oliver, 1999).
Companies spend millions trying to understand and influence customers. But to
increase the customers’ loyalty and retention, there’re more things for companies to
do rather than track today’s typical metrics: satisfaction and defection. Especially in
telecommunications services, it is frequently pointed out that once customers have
been acquired and connected to the telecommunications network of a specific
operator; their stay-in with the operator in long term are far beyond important to the
success of the company in competitive markets than they are in other industry
sectors (Gerpott et al., 2001, p. 249).
In addition, customer retention is concerned with maintaining the business
relationship set up between a supplier (service provider) and a customer. This can be
achieved in two ways. Firstly, it is achieved by subsequent purchases, or by
extending the customer's contract with the supplier over a specified period of time.
Secondly, it is achieved by the intention of the customer to make future purchases

from the provider, or to refrain from quitting the contract.
On the one hand, a business relationship may be maintained involuntarily because of
a mobility barriers, in which level is based from each specific customer’s perception
and condition, from changing suppliers or dispensing with a category of service
(Bliemel & Eggert, 1998). On other hand, a customer may continue subsequent
transactions because he has a favorable attitude towards the provider and the
services he supplies, and because he therefore wants to keep the business
relationship going to their mutual benefit. Customer loyalty is the term used when
business relationships are continued in the latter way because of a mutual benefit

15


perceived by customer, otherwise it is just the stay-in status of the customer with the
supplier and it’s termed customer retention (Homburg & Bruhn, 1998). From this
distinction it follows that, although customer loyalty and customer retention may be
strongly related in terms of cause and effect.
Acquiring new customers is both costly and hard in terms of marketing for mobile
service operators when the number of subscribers has reached its peak level.
Hence, 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 (Kim et al., 2004, p. 146).
Sustained business relationships result in massive savings in costs, including costs
of advertising to get attraction of new customers; costs of personal selling pitch to
new prospects; costs of setting up new accounts; costs of explaining business
procedures to new customers; costs of inefficient dealing during the customers’
learning process, etc. (Peppers and Rogers, 1995 and Reichheld, 2003).
Retention of customers, therefore, has a two-way advantage stream, both keeping
revenue and reducing cost, for a business – revenues increase through higher off
takes and costs decline through a various types of savings said above. Thus,

nowadays customer retention has been becoming an important source of long-term
business success (Rust and Zahorik, 1993).
Although business enterprises realize the value of retaining customers, a schematic
approach to enhance customer loyalty is still obscure. Enterprises measure customer
satisfaction, and hope that if the satisfaction scores are good, the customers will stay
with them. But even in some cases, satisfied customers still move due to a
competitors’ offer (Berry and Bendapudi, 2003; Curasi and Kennedy).
The ability to make customers loyal to a specific company and repeatedly purchase
product or service from this company, also known as customer retention, is a matter
of growing importance. Kotler (2000) said that one major reason for this is the fact
that it is five times more costly to attract new customers, than to keep the current.

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An important aspect for the continued success of a company is its capability to
retain its current customers and make them loyal to its brands (Dekimpe et al., 1997,
p. 405). Loyal customers build businesses by buying more, paying premium prices,
and providing good referral when being asked by other through positive word of
mouth over time (Ganesh et al., 2000, p. 65). In fact, companies in
telecommunications are losing 2-4 percent of their customers monthly; disloyal
customers can amount to millions of lost revenue and profit.
Reichheld and Sasser (1990) and Reichheld (1996) have studied customer lifetime
value and the value of building customer retention by listening to their complaints,
preventing their defection, and understanding why customers move to competitors.
Customers remain loyal because of the value they receive from the supplier.
Customer retention means continuing an active relationship with a customer
(Cannie, 1994).
Knowing and understanding that some customers have left the company is really
important. This is because more and more customers leave, the greater loss of the

revenue will happen. It's difficult to encourage customers to stay, especially in the
toughly competitive markets as nowadays, but it must be done with an assumption
that, keeping an existing customer is far more effective than acquiring a new one.
Both parties in the customer/supplier relationship can get benefit from retention. It is
not only the supplier who can get the best interest to build and maintain a loyal
customer base, but customers themselves also benefit from long-term associations
(Zeithaml et al, 1996, p. 173).
Studies have shown that by increasing the customer retention rate by 5%, profits
could increase up to 85%. Profits from reduced operating costs come from the fact
that when there is a closer relationship between a customer and a supplier, the
customer will be more receptive to the firm's marketing efforts and therefore it
becomes easier to sell new services to customer. Furthermore, as the customer
becomes accustomed to the firm and firm’s employees facing to customers, and the

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