FACTORS INFLUENCING CUSTOMER LOYALTY TOWARDS INTERNET SERVICE PROVIDERS IN HO CHI MINH CITY

Transcription

1 VIETNAM NATIONAL UNIVERSITY HOCHIMINH CITY INTERNATIONAL UNIVERSITY SCHOOL OF BUSINESS FACTORS INFLUENCING CUSTOMER LOYALTY TOWARDS INTERNET SERVICE PROVIDERS IN HO CHI MINH CITY In Partial Fulfillment of the Requirements of the Degree of BACHELOR OF ARTS in BUSINESS ADMINISTRATION Student s name: PHAM THI TUYET NHUNG (BAIU08253) Advisor: NGUYEN VAN PHUONG, Ph.D. Ho Chi Minh City, Vietnam December, 2013

2 FACTORS INFLUENCING CUSTOMER LOYALTY TOWARDS INTERNET SERVICE PROVIDERS IN HO CHI MINH CITY APPROVED BY: Advisor APPROVED BY: Committee, Nguyen Van Phuong, Ph.D Nguyen Van Phuong Ph.D., Chair Nguyen Nhu Tung, MBA, Secretary Nguyen Quynh Mai, Ph.D Ta Diu Thuong, LLM THESIS COMMITTEE ii

3 ACKNOWLEDGEMENT First and foremost, I would like to express my heartfelt gratitude to my advisor - Ph.D Nguyen Van Phuong for his valuable advices and suggestions from the early stage of my thesis, which helped me to choose a practical and qualified topic to follow. New knowledge and ideas gained from my advisor play a crucial role in my thesis. Especially in the final stage, his tutorials and recommendations helped me to get through the difficulties of statistics process and software. Without my advisor s guidance and support, this project would not have materialized. Secondly, I would like to give special thanks to all members of my thesis committee for their insightful comments and advices. Thirdly, I would like to express my sincere appreciation to my professors and lecturers at School of Business Administration, International University for teaching and training me during these four years. The knowledge and skills that I have learnt contributed very much to the completion of this thesis. Last but not least, I would like to thanks all the participants (my family and my friends) who contributed to my work, not just only for their responses but also for the good suggestions they made and their kind help during my thesis process. Ho Chi Minh City, December, 2013 iii

4 TABLE OF CONTENTS ACKNOWLEDGEMENT... iii LIST OF TABLES... vii LIST OF FIGURES... ix ABSTRACT... x CHAPTER 1: INTRODUCTION Background Research problems and objectives Scope and Limitations Significant of the study Organization of the study... 6 CHAPTER 2: LITERATURE REVIEW Definition of customer loyalty Internet service and customer loyalty Factors influencing customer loyalty (Conceptual framework) Paramaporn et al. (2012) Naser et al. (2013) Conceptual framework Network quality and service quality Customer Support and service quality Information support and service quality Security/privacy and service quality Value and service quality Service quality and corporate image Service quality and commitment Service quality and customer satisfaction Service quality and trust...18 iv

5 Service quality and switching cost Trust and Switching cost Corporate image and customer loyalty Commitment and customer loyalty Customer satisfaction and customer loyalty Trust and customer loyalty Switching cost and customer loyalty Service quality and customer loyalty...23 CHAPTER 3: RESEARCH METHODOLOGY Research design Qualitative approach: Quantitative approach Questionnaire design Sampling Data Collection Data Analysis CHAPTER 4: DATA ANALYSIS AND RESULTS Data analysis Response rate Demographics of respondents: Descriptive statistics: Reliability Test Factor Analysis Correlation testing: Structural Equation Modeling (SEM) Confirmatory Factor Analysis Structural Equation Modeling (SEM)...68 CHAPTER 5: CONCLUSION AND RECOMMENDATION v

6 5.1 Conclusion Practical Implication Limitations and recommendation for future research LIST OF REFERENCES APPENDIX A APPENDIX B APPENDIX C APPENDIX D APPENDIX E vi

7 LIST OF TABLES Table : Defining satisfaction Table 3.2: Measurement scales Table 4.1: Response rate Table 4.1.1: Gender Table 4.1.2: Age Table 4.1.3: Income Table 4.1.4: Providers Table 4.1.5: Length of internet service using Table 4.2: Descriptive statistics of question items Table 4.3: Evaluating Cronbach s Alpha Index Table 4.3*: Cronbach s Alpha of Variables Table 4.4.1: KMO and Bartlett's Test of all factors Table 4.4.2: Total Variance Explained of all factors Table 4.4.3: Pattern Matrix of all factors Table 4.4.4: KMO and Bartlett's Test of Customer Loyalty Table 4.4.5: Component Matrix of Customer Loyalty Table 4.4.6: Total Variance Explained of Customer Loyalty Table 4.5: Correlation of Satisfaction, Commitment, Corporate Image, Service Quality vii

8 and Customer Loyal...58 Table 4.6: Fix index and criterion Table : Internal consistency reliability and composite reliability Table : Regression weight of all factors Table : Standardized Regression weight of all factors Table : Convergent and discriminant validity and correlation matrix Table : P- value used for testing the Hypotheses Table : Result of Hypotheses Testing viii

9 LIST OF FIGURES Figure 1: Internet Users in Vietnam in Figure 2: Models of factors influencing customer loyalty in ISPs (Paramaporn et al., 2012) Figure 3: Models of factors influencing customer loyalty in ISPs (Naser et al., 2013) Figure 4: Proposed conceptual model Figure 5: Gender Figure 6: Age Figure 7:Income Figure 8: Providers Figure 9: Length of using Internet Service Providers Figure 10: Final research model ix

10 ABSTRACT Nowadays, in terms of internet service providers (ISPs), it is essential for them to understand the key factors affecting customer loyalty. These issues are important for the long-term business success of any service provider. This research aims to investigate the determinants that influence on customer loyalty of Internet Service Providers (ISP) in Ho Chi Minh City. The results show that network quality, customer support, security/ privacy and value have positive impact on service quality. Meanwhile, there is no support for the relationship between information support and service quality. Most importantly, the study illustrates that trusts, satisfaction, switching cost, corporate image, and commitment have positive impact on customer loyalty. On the other hand, the positive impact between switching cost and trust as well as switching cost and customer loyalty are not supported. The findings are important for internet service providers identify factors influencing customer loyalty towards internet service providers in Ho Chi Minh city and create strategies to strengthen and improve their competitiveness, in other words, to become successful and have more loyal customers, which ultimately will lead to more profit. Structural Equation modeling is used to test the hypotheses. This study is based on a random sample of 450 participants who are living in Ho Chi Minh City, Vietnam. Keywords: Customer loyalty, internet service providers (ISPs) x

11 CHAPTER 1 INTRODUCTION Background Developing and sustaining long-term relationships with customers are fundamental concerns to numerous companies. In this context, customer loyalty is considered as a preferable option by more and more entrepreneurs as it helps with a better understanding of the link between consumers and entrepreneurs. For a company, in order to maintain a stable level of profits when the market reaches the saturation point, retaining existing customers is more important than an offensive one as its aim is to expand the size of the overall market by causing potential customers subscribe to its services (Fornell, 1992, Ahmad & Buttle, 2002). In Vietnam, the customer loyalty is an essential need for the survival and development of many entrepreneurs. There are many researches being conducted on the measuring brand loyalty in many different areas such as products, fast food restaurants, banks, etc. However, there are very few studies of customer loyalty in internet provider service industry. According to the statistical report of the Vietnam Internet Network Information Center (VNIC), in June 2012, the number of Internet users in Vietnam is over 31 million, equivalent to 35.4 percent of the scale using the average capita (see Figure 1). For more than fifteen years of development, along with the development of internet services, the number of ISPs has also increased significantly, leading to fierce competition between ISPs, especially in a 1

12 developing country like Vietnam. So far, more than ten ISPs has been operating in Vietnam include VDC / VNPT, Viettel, FPT, Netnam, SPT. In fact, customer loyalty among of three leading Internet companies (VDC / VNPT, Viettel, FPT) has obtained more than 85 percent of total Internet service market in Vietnam. As a result, the ISPs must try their best to develop their marketing strategies and improve their business performance to increase the level of competition. From the above statistics, we can understand that the competition of Internet services in Vietnam is a fierce battle between the three major ISPs: VDC / VNPT, Viettel and FPT. Figure 1 Internet Users in Vietnam, (Source: Vietnam Internet Network Information Center) 2

13 In addition to the diversification of services, improving customer satisfaction and customer loyalty is considered to be the most effective way to compete in the market, especially in the telecommunications industry that is on brink of saturation point in some years time. Customer loyalty is believed as the most effective weapon for the provider to complete with other competitors since it is the key variable that attracts the customers intention to stay with their current providers (Khatibi et al., 2002). The providers who can meet customer expectations will get higher market share and greater profitability, and vice versa, encourage their customers to become loyal (Khatibi et al., 2002). Expanding loyal customers can assist in generating a business s profitability because the cost of retaining existing customers is less than that of acquiring new ones (Reichheld, Teal, 1996). Therefore, understanding how and why a sense of loyalty develops in customers remains one of the crucial management issues of our day. By assessing the Internet service users in Ho Chi Minh City, this research will give useful information to identify factors that impact on customer loyalty towards internet service providers. In other words, this research provides ISPs the direction and valuable understandings of what factors should be taken into account to become successful and have more loyal customers. Previous studies show that customer loyalty provides the foundation of sustainable competitive advantage of the company, and that developing and increasing customer loyalty is a very important factor in the firm s growth and performance (Reichheld, 1996; Lee & Cunningham, 2001). However, not enough studies have been conducted on the subject of the internet provider services industry in Ho Chi Minh City; only a small number of research papers have been published. This is partly due to relatively short history of the industry. Despite the existence of the basic Internet services in Vietnam was started in the early nineties, by 1997, the Internet service provider's first commercial (ISP) opened for business - Vietnam Data Communication Company (VDC) under Vietnam Posts & Telecommunications Group (VNPT). Thus, only in the late 1990s the study on the factors affecting customer 3

14 loyalty and switching vendors started. Switching costs have also received attention for having a potential impact on customer loyalty (Yang and Peterson, 2004; Lee and Cunningham, 2001, Wong, 2011). However, there is a number of studies dealing with service quality as an antecedent of loyalty, the researchers consider service quality as an antecedent of switching costs are limited in number (Meng and Eliott, 2009). In particular, whereas most of the studies on examining interactions between factors affecting customer loyalty have occurred in developed countries, little has been done in underdeveloped and developing nations. Furthermore, many previous researchers concentrated on only one construction of customer loyalty which is mainly service quality when carrying out the measurement customer loyalty. There is a little attention on different constructions of customer loyalty including influential factors, cognitive and affective determinants. Therefore, in alignment to fulfill this gap, this research will explore the more relevant literature customer loyalty and from that develops a thorough model that comprises the major theories so that a complete overview of the phenomenon on both construction of customer loyalty including influential factors, cognitive and affective determinants. From all mentioned above, there is an urgent need to identify factors that influence customer loyalty towards internet service providers as well as to provide some suggestions for internet service providers in Vietnam. This study will focus on internet service providers in Ho Chi Minh City Research problems and objectives What are factors influencing customer loyalty towards internet service provider? How do these factors influence on loyalty of Internet service s customers? What can be suggested for internet service providers inside Vietnam and other outsiders in terms of gaining customer loyalty? Therefore, the objectives of this study are as follows: 4

15 To identify factors influencing customer loyalty towards internet service providers. To examine the affecting level of each factor on Vietnamese internet users loyalty. To give some recommendations for internet service providers in terms of gaining customer loyalty in the competitive telecommunication market Scope and Limitations This research is conducted in the scale within Ho Chi Minh City and on customers of internet service providers. Moreover, it is mainly focus on some internet providers that have large number of customers in central districts. Thus, the findings of this research cannot illustrate the overall satisfaction level of entire customers in Vietnam. This research may not reflect the opinions of all Internet service s customers in HCMC as the survey is conducted on some internet in the central districts. Lack of time and experience to analysis within many Internet service s customers within different internet service providers are some limitations the research facing to since this research examines only one period, which would not reveal factors with long-term effects Significant of the study The internet is the greatest scientific achievements of mankind. In particular, Ho Chi Minh City is the economic and cultural center of the country; the competition between internet service providers is ongoing fierce. There are many different internet service providers such as Group Vietnam Posts and Telecommunications (VNPT), Corporation for Investment and Development Technology (FPT), Far Corporation the Army (Viettel), etc. This service allows customers to access high-speed Internet technology-based digital subscriber line ADSL asymmetric. This level of competition is evident by the continuous reduction of tariffs from internet providers along with increasing number of customer is the percentage of customers who leave providers also increasingly. 5

16 According to modern views, the business towards customers is a vital element of every business. In order to survive and grow, enterprises must constantly improve the level of customer satisfaction for quality of service or product providers. This quality must be evaluated by the customer and not purely by business. In order to do so, entrepreneurs must regularly measure the satisfaction level as well as understand the reasons and the formation of customer loyalty in the service market as an important issue for businesses. Therefore, the scale measurements of different constructions of customer loyalty including influential factors, cognitive and affective determinants of internet services, which impact on satisfaction and loyalty for their services will enables service providers to capture components affect internet service quality. In addition, measures to improve the level of satisfaction and loyalty of customers for internet services will help service providers have a more comprehensive view of the quality of internet services. On that basis, these businesses will offer strategies to keep customers attract potential customers and create competitive advantage Organization of the study Chapter 1: Introduction Introduce the research topic and a brief background about it, followed by the research problem and objectives. Chapter 2: Literature Review Review previous studies and build up a conceptual framework and model that will be applied in this study. Chapter 3: Methodology Set the hypotheses for the research and discuss the method of collecting data for this research 6

17 CHAPTER 2 LITERATURE REVIEW This chapter gives an overview of literature and models that are related to the research problem presented in the previous chapter. This chapter presents the key concepts of customer loyalty, internet service and customer loyalty as well as some related researches in order to give a clear idea about the research area Definition of customer loyalty The majority of early loyalty studies took a behavioral approach, and interpreted loyalty as synonymous with repeat purchase. Jacoby and Chestnut (1978) presented one of the most well known conceptual definitions of brand loyalty. Jacoby and Chestnut (1978, cited in Albert Caruana 2002) described loyalty as the biased (i.e. non-random), behavioral response (i.e. purchase), expressed over time, by some decision making unit, with respect to one or more alternative brands out of a set of such brands, and is a function of psychological (i.e. decision making, evaluation) processes have explored the psychological meaning of loyalty in an effort to distinguish it from behavioral (i.e., repeat purchase) definition. In addition, from a measurement perspective, O Mally (1998, p. 49) suggests that behavioral measures of loyalty provide a more realistic picture of how well the brand is doing vis-à-vis competitors....a major criticism of the behavioral loyalty approach is that it fails to distinguish customers making purchase decisions because of genuine brand preference, from those who purchase solely for convenience or cost reasons. 7

18 On the other hand, many researchers argued that brand loyalty should be strongly measured by attitudinal commitment which can be seen as set of stated beliefs. Dick and Basu (1994, cited in Garland and Gendall, 2004) suggested that brand loyalty should not only be regarded as purchase behavior but also attitude of customers. These attitudes can be identified by asking how much people say they like the brand; feel committed to it and recommend it to others. However, attitudinal measures may not be an accurate representation of reality, as they are not based on actual purchases. A consumer may rationalize his choice when questioned by the researcher, and make up an evaluation of brands even when no explicit evaluation is made in real shopping situation. Since theory of behavioral definitions has just focused on one dimension of brand loyalty, behavioral measurement as well as attitudinal definitions has only looked at attitudinal commitment. Therefore, these gaps are addressed by many researchers, who measured brand loyalty by combining behavioral and attitudinal measurement in which the strength of attitudes is the key predictor of a brand s purchase and repeat patronage. Day (1969, cited in Sharyn and Bennett, Rebekah, 2001) was one of the first researchers opining that brand loyalty should be evaluated on the basis of attitudinal as well as behavioral criteria. Oliver (1997, cited in Bee & Havitz, 2010, p.140) defined brand loyalty as a deeply held commitment to rebuy or repatronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing despite situational influences and marketing efforts are having the potential to cause switching behavior. The dominant of his philosophy is to look at brand loyalty on two dimensions: behavioral and attitudinal. Brand loyalty has had a rich tradition of research in the field and the construct is sometimes identified as having a complex mixture of attitudinal and behavioral elements. Brand loyalty should be regarded as the strength of the relationship between an attitudinal evaluation and a behavioral intention. However, the weakness of his theory is that it only indicated the brand loyalty phases. His model does not focus on investigating factors that influence brand loyalty toward customers. Therefore, this study will focus on both aspect of customer loyalty including attitudinal and behavioral aspect. 8

19 Additionally, previous studies of factors influencing customer loyalty often put focus on customer satisfaction and service quality such as Dick & Basu (1994), Gerpott et al (2001), Lee & Cunningham (2001). Customers experiencing a high level of satisfaction are likely to stay with their current provider and maintain their subscription. However, according to some studies, customer satisfaction, while positive affect customer loyalty, is not always a sufficient condition, in some cases, not create the desired effect. Thus, there is an urgent need to analyze other potentially influential factors. It is in this context that the concepts of trust, brand image, commitment, customer satisfaction and switching cost have been proposed. 2.2 Internet service and customer loyalty Without the loyalty of the customers, the service providers may not be able to maintain their competitive advantage. This can be explained as loyal customers are easier to serve and make fewer demands on staff because they know and understand the business processes of the company (Chow & Holden 1997). Customer loyalty and profitability also stay with a business, the more profit the business can achieve (Reichheld & Teal 1996). Customer loyalty appears to provide additional and repeat patronages are less likely to shop around for the competition for better deals (Bowen and Chen 2001). In other words, the company generated profits from long-term relationships of them. Generally, many advantages come up when businesses have loyal customers including increasing profits, premium rates, long-term relationships and commitment, purchase intention and positive from-of mouth as well as switching barriers to prevent customers from changing their current services (Reichheld & Teal 1996). Therefore, customer loyalty cannot be ignored and most companies have tried their best to meet their clients to develop long-term relationships with their customers and to ensure that their customers are loyal Factors influencing customer loyalty (Conceptual framework) Factors that influence customer loyalty have been examined for several decades by many researchers and practitioners. Many model describing factors of customer loyalty were 9

20 developed by different authors. Here are two conceptual frameworks that are used for this study Paramaporn et al. (2012) The model of Paramaporn et al. (2012) was developed from a variety of models in the marketing literature. The first set of constructs includes specific elements of the ISP to identify the quality of services. Service quality model was first introduced by Parasuraman et al. (1985), and is called SERVQUAL, including (1) Tangible: appearance of physical facilities, equipment, personnel and communication materials, (2) reliability: the ability to perform the promising services responsibly and accurately, (3) response: customers are willing to help (4) guarantee: knowledge and courtesy of employees, and the ability to increase the trust and confidence of customers, and (5) empathy: caring and the attention to provide to customers. SERVQUAL was initiated based on Parasuraman et al's (1985) model of the gap between performance and expectations: as performance exceeds expectations, quality increases, and vice versa. In other words, the central idea of this model is to consider service quality is a function of the differences or gaps between expectations and perceptions (Zeithaml et al., 1996). Figure 2 Models of factors influencing customer loyalty in ISPs (Paramaporn et al., 2012) 10

21 The antecedents to the construct of service quality are identified as network quality, customer support, website support; security and value (see Figure 2). Network quality consists of the number of errors, download and upload speeds and system response time (Vlachos & Vrechopoulos, 2008). In the telecommunications industry, network quality and call quality are important drivers of customer satisfaction (Ahn et al., 2006). Although the quality of the network appears to be significantly important in determining the quality of service, Abdolvand et al. (2006) suggested that businesses should not only work on this factor, but also consider the translation value added services and customer support to increase customer satisfaction and service quality. Customer support and technical support are indicated by the performance of the Customer support staff which is reflected by the knowledge, enthusiasm, and professionalism of their timeliness. Website support refers to the information provided by the ISP for their customers. Website support includes accuracy, relevance and updated information (Kim & Niehm, 2009). In addition, security and privacy are associated with customers feelings of protection and safety during their transactions and usage, for example, feeling secure to provide their personal information (Vlachos & Vrehopoulos, 2008). Value-added service, promotional activities and their accomplishment which contribute to customer perceived values are found to be important factors in determining service quality (Aydin & Özer, 2005). Website support consists of accuracy, consistent and up to date information (Kim & Niehm, 2009). In addition, privacy and security related to the customer's feelings about the protection and safety of transactions and their usage, for instance, a sense of security to provide their personal information (Vrehopoulos & Vlachos, 2008). Value-added services, promotional activities and their achievements contribute to customer perceived value is determined to be an important factor in determining the quality of service (Aydin & Özer, 2005). The second set of construct for the model of Paramaporn et al. (2012) is the basic relationship between overall service quality and customer trust evaluation, overall satisfaction and commitment. Basically, consumers are driven by the overall quality of service, which comes from a stable quality and fast internet, a quick response and ready to serve the customer 11

22 support team, a high level of security/privacy that is trusted by customers (Vlachos & Vrehopoulos, 2008), and a value reasonableness of the service provider (Aydin & Özer, 2005) Naser et al. (2013) In this research, the researchers considered numerous factors that may influence the loyalty of customers in the Iran context. The research indicated that there is a positive relationship between switching cost, trust, corporate image and perceived service quality with customer loyalty. Switching cost was found to be the most critical factor in affecting users' customer loyalty. Figure 3 Models of factors influencing customer loyalty in ISPs (Naser et al., 2013) 12

23 2.4. Conceptual framework Developing and sustaining the brand loyalty is the biggest challenge in the relentless competition market. Brand loyalty is a multidimensional construct. The conceptual framework of this study which is adjusted from the model of Paramaporn et al., (2012), and Naser et al., (2013) for measuring factors influencing customer loyalty. The reason is that it has the same way defining the term customer loyalty which later was the theoretical guide for identifying factors. Choosing this model will make sure the strong connection with the perspective the researcher examines customer loyalty. The combination of two models will give a general and clear overview of specific factors of two sets of construction of customer loyalty including influential factors, cognitive and affective determinants. The conceptual model includes influential factors of service quality such as network quality, customer service, information support, security and value. It also consists of influential of customer loyalty including trust, satisfaction, commitment, switching cost and corporate image. Additionally, two of models above were conducted in Thailand, and Iran, which are in Asia region. Therefore, it is suitable for the context of Vietnam, a developing country. Furthermore, this model has the combination between behavioral and attitudinal determinants. This model presents not only behavioral factors but also attitudinal factors which combine together to help the researcher investigates customer loyalty towards internet service provider both subjectively and objectively. Therefore, the switching cost is behavioral loyalty and commitment is attitudinal loyalty. The dimensions which are shown in the proposed model include influential factors (network quality, Customer Support, information support, security and value), cognitive and affective determinants (trust, satisfaction, commitment, switching cost and corporate image and loyalty). 13

24 Figure 4: Proposed conceptual framework Network quality and service quality Network quality is one of the most important drivers of overall service quality leads to customer satisfaction in the context of telecommunications (Wang et al., 2004; Chun & Hahn, 2007). Previous literatures suggested that stable transmission speed and coverage are core attributes of network quality (Woo & Fock, 1999; RB Mohd Yaacob, 2011). The stability and speed of transmission are important internet services to users and they will consider changing vendors because the stability and speed factors (RB Mohd Yaacob, 2011). Therefore, it is certain to hypothesize that: H1: Network quality has a positive impact on service quality 14

25 Customer Support and service quality According to Loomba (1998), Customer support can be simply defined as a set of activities that ensures product availability for trouble free use to consumers over its useful lifespan. Customer support is also referred as product support, after sales service, technical support or simply service (Goffin and New, 2001). It is required for achieving customer satisfaction and long term relationships which is identified and emphasized by many researchers- (Armistead and Clark, 1992; Athaide et al., 1996; Cespedes, 1995; Teresko, 1994). In customer relationship research, customer support has often been viewed as isolated from the core service and studied focusing on, e.g. critical incidents resulting in complaining and switching (Roos and Edvardsson, 2008). In current competitive market role of the customers is becoming more critical because customers are the base for the success of any business. According to Wolfinbarger (2003), customer loyalty is an important factor what influence service quality since it is strongly predictive of customer judgments of quality. H2: Customer support has a positive impact on service quality Information support and service quality Information support includes accuracy, consistent and up to date information (Kim & Niehm, 2009). Accuracy is agreement with an attribute of a real-world entity, a value stored in database, or the result of an arithmetic calculation. Completeness is determined for some specific applications, and it refers to whether all data forwarded to the concerned applications are present. Information support is an important factor which contributes to the overall service quality. Therefore, it is certain to hypothesize that: H3: Information support has a positive impact on service quality 15

26 Security/privacy and service quality Security and privacy deal with a sense of feeling safe when using the service and privacy of shared information (Parasuraman et al., 2005). Security and privacy are related feelings of client protection and safety of transactions and their use, for example, a sense of security to provide their personal information (Vlachos & Vrehopoulos 2008). In the study of Vlachos & Vrehopoulos (2008), privacy concerns have a strong positive impact on perceptions of service quality. Therefore, the following hypothesis has been proposed: H4: Security/privacy has a positive impact on service quality Value and service quality Punniyamoorthy and Raj (2007) describe perceived value as the consumer s overall assessment of the utility of a product based on perceptions of what is received and what is given. Perceived value was expressed in terms of functional value, emotional value, price worthiness and social value following the study of Sweetney and Soutar (2001). Value-added services, promotional activities and their achievements contribute to customer perceived value is determined to be an important factor in determining the quality of service (Aydin & Özer, 2005). Hence, the following hypothesis has been proposed: H5: Value has a positive impact on service quality Service quality and corporate image Corporate image is a key factor in assessing the overall service quality (Gummesson and Grönroos, 1988). According to Keller (1993), the corporate image is a perception of an organization is held in the memory of consumers and act as a filter affects the perception of the operation of the company. Corporate image is derived from all the consumer experience of our customers, and quality of service as the representative of the consumer experience. Therefore, the perception 16

27 of service quality directly affects the perception of corporate image (Aydin and Ozer, 2005). Thus, the following hypothesis has been proposed: H6: Service quality has a positive impact on corporate image Service quality and commitment Regarding the relationship between service quality and commitment, Dick and Basu (1994) argues that perceived service quality is a cognitive evaluation of data services and efforts to strengthen customer communications of confidence in the quality of service will improve their patronage of the company. Kelley and Davis (1994) found that when customers receive high quality service, they will have the level of commitment of the company, for example, they would be willing to support companies (Kelly and Davis 1994). Focusing on the impact of awareness of the specific service components for their commitment, Fullerton (2004) also identified that the sign of the quality of service as the interaction between the staff and customer support, tangible features of service quality as the physical environment of the service provider, and outcomes of quality such as customers evaluation service activities as a prerequisite turn of commitment in service relationships. Furthermore, customers perception of reliability and responsiveness staff lead to the affective commitment. (Gruen et al 2000). Therefore, the following hypothesis has been proposed: H7: Service quality has a positive impact on commitment Service quality and customer satisfaction In recent years, there has been a high importance on the quality of service and customer satisfaction in business. Cronin and Taylor (1992) have demonstrated service quality is an important antecedent of customer satisfaction. Sureshchandar, Rajendran, and Anantharaman, (2002) also reported a strong relationship between service quality and 17

28 customer satisfaction in their study. Spreng and Mackoy (1996) shows that the higher service quality, the higher customer satisfaction. The study focused on the telecommunications service carried out by Wang et al. (2004), and Turel and Serenko (2006) reaffirmed the positive relationship between service quality and customer satisfaction. Therefore, the following hypothesis has been proposed: H8: Service quality has a positive impact on customer satisfaction Service quality and trust Several studies have recognized the relationship between service quality and trust is one of the positive and formidable in the context of relationship marketing (Hsieh & Hiang, 2004). Service quality can help Service Providers to gain the trust of customers (Doney & Cannon, 1997). Foster and Cadogen (2000) asserted that perceived service quality positively affects customer confidence, thus Coulter and Coulter (2003). Therefore, following hypothesis has been proposed: H9: Service quality has a positive impact on trust Service quality and switching cost Chadha & Kapoor (2009) explore the impact of switching costs, service quality and customer satisfaction on customer loyalty of the mobile service providers in the Indian market and find a positive relationship between switching costs and customer perceived service quality, customer satisfaction and customer loyalty. It has been revealed switching costs and service quality affects customers' intentions to stay with a particular service provider. Therefore, the following hypothesis is proposed: H10: Service quality has a positive impact on switching cost 18

29 Trust and Switching cost Recent evidence suggests a positive relationship between trust and switching costs (Yen et al., 2011; Konuk & Konuk, 2012). In other words, brand trust can be attributed as a switching barrier by the customers. In this context, the process of handling complaints when customers trust the brand after appropriate resolution, their switching costs are expected to be increased. Thus, the following hypothesis is proposed. H11: Trust has a positive impact on switching cost Corporate image and customer loyalty As mentioned in the above definition of corporate image, it is determined the corporate image as the overall impression of a company remaining in the minds of customers. Corporate image which is a perception of a company is organized in the memory of our customers and act as a filter, affecting perceptions of the activities by the company (Lai et al., 2009). Nguyen and Leblanc (2001) said that customers are exposed to the reality created by a company; they tend to build up a picture related to the company. In general, customers hold a series of reflections shown in the framework of mental or intellectual about a company in their right mind (Orth & Green, 2009). In addition, Juhl et al. (2002) suggested that corporate image is one of the factors that influence the decision of customers loyal to a company; if customers have a positive impression on corporate image; there is a loyalty towards the company and a lower tendency to move to another company. Davies et al (2002) also notice that customers will become loyal if they found corporate image of a company in a favorable light. They appreciate the corporate image as one of the most important factors that influence customer loyalty. Furthermore, Nguyen and Leblanc (2001) have shown that corporate image is positively associated with customer loyalty in three areas namely, telecommunications, retail 19

30 and education. Kristensen et al (2000) also reported a positive relationship between corporate image and customer loyalty in the context of the Danish postal service. Andreassen and Lindestad (1998) also refers to the corporate image plays an important role in promoting customer loyalty. Therefore, the following hypothesis has been proposed: H12: Corporate image has a positive impact on customer loyalty Commitment and customer loyalty Anderson and Weitz (1992, cited in RN Bolton, 2003) refers commitment as the state of developing stable relationships with partners, accepting short-term sacrifices in order to maintain relationships and assuring the stability of the relationships. Brand commitment is a central construct in the development and maintenance the relationship because it links customers to entrepreneurs in the most effective way (Bansal et al., 2004). Thus, previous studies demonstrated the difference between commitment and loyalty and how the relationship benefits increase may lead to increased customer commitment, thereby enhancing loyalty (Agrawal et al. 2012). Wu et al. (2012) and Hur et al. (2010) discuss the various factors needed to create customer loyalty, highlighting that commitment contributes to this creation. Therefore, the following hypothesis has been proposed: H13: Commitment has a positive impact on customer loyalty Customer satisfaction and customer loyalty Definition of customer satisfaction is rich and varied. Among of many definitions, Oliver (1999) defined satisfaction in a simple and easy way to understand as a pleasurable fulfillment. The relationship between consumer satisfaction and brand loyalty has been investigated in the extant literature. Satisfied customers tend to be loyal customers (Rowley, 2005). Besides that, satisfaction is also defined by different authors in the following table. 20

31 Table : Defining Satisfaction Author year Definition Fornell 1992 Loyal customers are not necessarily satisfied. Their satisfaction Influences loyalty. Anderson 1993 Customers loyalty helps to keep customers loyal. Also, it affects company s profit and gives a competitive ability. Taylor and 1994 Satisfaction and loyalty are recognized as strongly related. Baker Jones and Sasser 1995 High customer loyalty guarantees security to customers loyalty and financial results. Heskett et al 1997 Profit, growth, customers loyalty, customers satisfaction, products and services benefits, employee facilities are directly related. Sivadas and Baker Satisfaction is found to be a necessary precursor of customer Loyalty Prewitt Reynolds and Arnold 2000 Satisfied customers have a higher likelihood of recommending that others try the source of satisfaction. Giese and Cote 2000 A summary affective response of varying intensity with a timespecific point of determination and limited duration directed toward focal points of product acquisition and consumption. Source: Collected and completed by the authors Some authors (Bolton and Drew, 1991; Fornell, 1992) reported a positive link between customer satisfaction and customer loyalty. Hart and Johnson (1999) refers to one of the important prerequisites of customer loyalty is genuine satisfaction. Similarly, Vesel and Zabkar (2009) have demonstrated that customer satisfaction is one of the important precursors of customer loyalty. Therefore, the following hypothesis has been proposed: 21

32 H14: Customer satisfaction has a positive impact on customer loyalty Trust and customer loyalty Chaudhuri and Holbrook (2001) defined brand trust as consumers willingness to rely on the ability of a brand to deliver its stated function. MQ Lin (2012) noted the relationship between brand trust and brand loyalty. Brand trust is considered as an important contributor that leads to long term loyalty. For a consumer, to establish a relationship with a particular brand, trust is crucial because without trust, development of consumer's commitment to a brand may not be possible. Numerous researchers have reported that trust is fundamental in the development of customer loyalty (Moorman et al., 1993; Morgan & Hunt, 1994; Singh & Sirdeshmukh 2000; Sirdeshmukh et al., 2002). Chiou (2004) said that trust is directly and positively related to customer satisfaction and customer loyalty. Therefore, the following hypothesis has been proposed: H15: Trust has a positive impact on customer loyalty Switching cost and customer loyalty According to Porter (1998), switching costs are the costs associated with a change to other service providers. Switching costs are defined as factors contributing to maintaining a relationship (Morgan & Hunt, 1994). In addition to the monetary cost measurement, switching costs also include the cost and time associated with psychological facing the uncertainty of finding a better alternative (Dick & Basu, 1994; Kim et al., 2003) On the classification, Burnham, Frels and Mahajan (2003), switching costs are classified as procedural switching costs, financial switching cost and relational switching costs. These costs were found negatively related to the intention of consumers to switch suppliers. Klemperer (1995) developed three types of switching costs: artificial cost, learning 22

33 cost and transaction cost. However, transaction cost is most appropriate cost. Switching costs can therefore be regarded as one of the factors discourages customers from switching to other companies, allowing them to maintain a loyal relationship with the company (Yanamandram and White, 2004, Jones et al., 2002). Moreover, the level of switching costs can have a positive influence on customer loyalty in several industries (Dick & Basu, 1994; Gremler & Brown, 1996). Andreasen (1982) reported positive effects of high switching costs on customer loyalty-related health services. Lam, Shankar and Murthy (2004) presented evidence that switching costs are positively related to customer loyalty. Therefore, following hypothesis has been formulated: H16: Switching cost has a positive impact on customer loyalty Service quality and customer loyalty Many studies have considered the relationship between service quality and loyalty of customer preferences. Boulding, W., A. Kalra, R. Staelin, and V. Zeithaml (1993) focused on the elements of the acquisition as well as the willingness to introduce measures of customer loyalty. They found a positive relationship between service quality and the ready to buy and to introduce (Akbar et al., 2009). However, some customers may remain loyal due to high switching barriers or lack of actual replacement products, while others will continue loyal because they are satisfied with the service provided (Lam et al., 2006). In addition, research has shown that perceived service quality has a positive impact on customer loyalty (Wong, CB, 2005). This is due to the quality of service was found to be related to the behavior, especially in the form of word of mouth, complaints, recommendation and switching (Al-Rousan et al., 2010). Therefore, the following hypothesis has been proposed: 23

34 H17: Service quality and customer loyalty In conclusion, this chapter is done with documents from a number of research resources such as the internet, books, white papers, etc. Briefly reviews of the literature are discussed on the earlier work of a number of researchers applied approaches, methods, or related technical framework measuring factors influencing customer loyalty. 24

35 CHAPTER 3 RESEARCH METHODOLOGY This study uses a mixture of qualitative and quantitative approach. There are two data sources are primary and secondary will be applied in this paper. Primary data is a main source data for the study including quantitative and qualitative approach. In quantitative approach, researcher designs questionnaires based on qualitative data in selecting internet service provider can be predicted for the future. It gives reliable evidence for the results. However, quantitative is the main approach Research design Qualitative approach: Qualitative approach is used to understand deeply about customer loyalty towards internet service provider and to interpret customers feelings, which can not present by quantitative approach. By using literature review, throughout looking over related studies, many concepts are being used as a theoretical guide for this research. Along with theoretical concepts, concerned articles are studies as well. These articles give an overall understanding of the current market, the context and how to understand deeply the customer s perspective on the quality of towards internet service provider. Pilot test can be understood as a trial step to conduct the survey. It can be a small survey in order to test the reliability and the working of the survey. It can also help to detect the mistake of the questionnaire design and of the research. 25

36 Quantitative approach Quantitative approach is one in which the investigator primarily uses post positivist claims for developing knowledge (i.e. cause and effect thinking, reduction to specific variables and hypotheses and questions, use of instrument and observation, and the test of theories), employs strategies of inquiry such as experiments and surveys and collects data on predetermined instruments that yield statistical data (Creswell 2003). In the evaluation of brand loyalty, quantitative research is conducted to determine how many people in a population share particular characteristic. Moreover, quantitative research is appropriate for measuring customer s perception about brand loyalty towards towards internet service providers. Fink (2003b in Saunder et al 2007) suggested that the pilot test should be at least 10 persons that are sufficient to test the meaningful and clarity of the questionnaire. In this study, the pilot test was carried out in 1 week and was applied to collect data for 50 samples. The sample of 50 participants will be the representative to help researchers verify questionnaire design. Besides, the results of the pilot test will be evidence to prove questionnaire design has good layout, easy to understand and answer as well as logical arrangement without ambiguity. It also reflects the willingness to get the answer from the respondents Questionnaire design The questionnaire is designed to receive the response from the customers. The questionnaire is designed in easy, clear and easy language to understanding. The structure in the questionnaire are clear and short, avoids making the respondents bewildered. There are two main parts in the questionnaire. The first part comprises of five inquiries in which the investigator can collect demographic information such as: gender, age and income. The statements in the questionnaire are clear and short, avoids making the respondents confused. The second part includes questions that determine factors influencing 26