Testing a model of customer - Based brand equity in the Vietnamese banking servic

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY Lâm Hồng Phong Testing a Model of CUSTOMER-BASED BRAND EQUITY In The Vietnamese Banking Service MASTER’S THESIS In Business Administration Ology code: 60.34.05 Supervisor Dr. Trần Hà Minh Quân Ho Chi Minh City 2009 i Acknowledgement This research project would not have been possible without the support of many people. Firstly I wish to express my deep sincere gratitude to my supervisor, Dr. Tran Ha Minh Quan for his invaluable advices and helps. Without him, this thesis could not have been completed. Special thanks to all instructors without whose knowledge and assistance this study would not have been successful. My debt is also acknowledged to Dr. Barry Clough from Dragon-Mekong-CTU for his kindness and help in English editing. I would like to express my deepest gratitude and honor to my dear parents for not only the love they devote to me but also for the time I took from them which should have been my devotion to them in their aged time. My thanks would also go to all of my classmates, my colleagues, especially my “old pals”, Nguyen Thanh Trung and Ms Dang Hai Yen for all of their friendship and encouragement. I also wish to thank my friends in Vietcombank, VPBank, Navibank and Tien Phong bank for their great support. My thanks would also go to the respondents, without them, my thesis could not have been done. Finally, my greatest thanks would go to my dear wife, Vu Thi Thuy Duong and my two sons, Vu and Phuc who are my whole life and are the greatest inspiration and encouragement for me to overcome all difficulties through the duration of my study. ii Abstract This study reports on the research results by testing the model of customer- based brand equity proposed by Martensen & Grønholdt (2004) into banking industry of Vietnam. A study of 295 respondents from two bank brands was conducted in Can Tho city. Multiple linear regression technique was used to test the hypotheses and research model. According to the results, the original model was applicable in Vietnamese retail banking service with some adaptation. Service quality and price were confirmed to have positive impacts on both rational and emotional evaluations. However, the other associations such as brand differentiation, brand promise and trust and credibility were found significant in relation with only either rational evaluation or emotional evaluation. The different weights of the relationships between brand associations and brand evaluations, and between brand evaluations and customer-brand relationships, have some implications for bank managers who might use them as a source of reference for CRM strategy. The study also provided a modified model of customer-based brand equity that could be used as a point of departure for those who would like to conduct a further research into brand equity in banking industry in Vietnam. Key word: banking, customer-based brand equity, customer-brand relationship iii TABLE OF CONTENT Acknowledgement.............................................................................................................i Abstract ............................................................................................................................ii TABLE OF CONTENT ................................................................................................. iii LIST OF FIGURES..........................................................................................................v Chapter 1: INTRODUCTION..........................................................................................1 1.1 Introduction ............................................................................................................1 1.2 Research background..............................................................................................1 1.3 Problem statement .................................................................................................2 1.4 Research objective..................................................................................................3 1.5 Scope and methodology of the study .....................................................................4 1.5.1 Scope of the study............................................................................................4 1.5.2 Research Method .............................................................................................5 1.6 Structure of the study..............................................................................................5 Chapter 2: LITERATURE REVIEW...............................................................................7 2.1 Introduction ............................................................................................................7 2.2 A brand versus a product........................................................................................7 2.3 Brand equity .........................................................................................................11 2.3.1 Brand associations .........................................................................................13 2.3.2 Brand evaluations .........................................................................................19 2.3.3 Customer-brand relationship .........................................................................22 2.4 Generation of hypotheses .....................................................................................24 2.5 Conclusion............................................................................................................25 Chapter 3: METHODOLOGY.......................................................................................27 3.1. Introduction .....................................................................................................27 3.2. Business research ............................................................................................27 3.3. Research design...............................................................................................28 3.4. Item generation................................................................................................29 3.4.1 Scale to measure rational associations..........................................................29 Scale to measure price. ...............................................................................................31 3.4.2 Scale to measure rational and emotional associations..................................32 Scale to measure brand promise. ................................................................................32 3.4.3 Scale to measure brand evaluations..............................................................32 3.4.4 Scale to measure customer- brand relationship ............................................33 3.5. Pilot test ...........................................................................................................33 3.6. Main survey.....................................................................................................34 3.6.1 Brand selection .............................................................................................35 iv 3.6.2 Sampling ......................................................................................................35 3.6.3 Sample size ...................................................................................................36 3.7. Conclusion.......................................................................................................36 Chapter 4: DATA ANALYSIS AND FINDINGS........................................................38 4.1 Introduction ..........................................................................................................38 4.2. Descriptions of sample ........................................................................................38 4.3. Scales assessment ................................................................................................40 4.3.1 Reliability testing...........................................................................................40 4.3.2 Exploratory factor analysis ............................................................................42 4.4 Testing the research model and the hypotheses ...................................................46 4.4.1 Testing correlations between all constructs .............................................46 4.4.2 Testing research model ............................................................................46 4.5 Findings and conclusion..................................................................................56 4.5.1 Findings .........................................................................................................56 4.5.2 Conclusion .....................................................................................................58 Chapter 5: CONCLUSIONS AND IMPLICATIONS.....................................................................59 5.1 Introduction ..........................................................................................................59 5.2 Conclusions of the study ......................................................................................59 5.2.1 Summary of all hypotheses............................................................................59 5.2.2 Conclusions of the study................................................................................60 5.3 Implications of the study ......................................................................................61 5.3.1 Theoretical implications ................................................................................61 5.3.2 Practical implications.....................................................................................62 5.4 Limitations and recommendations for further research .......................................63 List of References ..........................................................................................................65 Appendix 1 – Questionnaire (Vietnamese version) .......................................................68 Appendix 2 – Observed variables ..................................................................................71 Appendix 3 - Descriptive Statistics of variables............................................................73 v LIST OF FIGURES FIGURE 1.1. OUTLINE OF CHAPTER 1 ................................................................................1 FIGURE 1.2. STRUCTURE OF THE STUDY ...........................................................................6 FIGURE 2.1. THE STRUCTURE OF CHAPTER 2....................................................................7 FIGURE 2.2. A BRAND VERSUS A PRODUCT.......................................................................9 FIGURE 2.3 ORIGINAL MODEL OF CUSTOMER–BASED BRAND EQUITY.........................14 FIGURE 2.4. RESEARCH MODEL OF CUSTOMER-BASED BRAND EQUITY ......................26 FIGURE 3.1. OUTLINE OF CHAPTER 3 ..............................................................................27 FIGURE 3.2. RESEARCH PROCESS....................................................................................30 FIGURE 4.1. OUTLINE OF CHAPTER 3 ..............................................................................38 FIGURE 4.2. AGE GROUPS OF RESPONDENTS ..................................................................39 FIGURE 4.3 FREQUENCY OF TRANSACTIONS ..................................................................40 FIGURE 4.4. RELATIONSHIPS BETWEEN RATIONAL EVALUATION AND THE BRAND ASSOCIATIONS ..............................................................................47 FIGURE 4.5. RESULTS OF MODEL I ..................................................................................50 FIGURE 4.6. RELATIONSHIPS BETWEEN EMOTIONAL EVALUATION AND THE BRAND ASSOCIATIONS ..............................................................................51 FIGURE 4.7. RESULTS OF MODEL II ................................................................................53 FIGURE 4.8A – HYPOTHESIS 11 TESTING RESULT ...........................................................54 FIGURE 4.8B. RESULTS OF MODEL III B ..........................................................................55 FIGURE 4.9. ADJUSTED MODEL OF CBBE IN BANKING SERVICE ...................................58 FIGURE 5.1 – OUTLINE OF CHAPTER 5 ............................................................................59 vi LIST OF TABLES TABLE 4.1 – SAMPLE CHARACTERISTICS ........................................................................39 TABLE 4.2 – RELIABILITY OF THE MEASUREMENT INSTRUMENT....................................41 TABLE 4.3 – ROTATED COMPONENT MATRIX .................................................................44 TABLE 4.4 – EFA RESULT FOR INDIVIDUAL MEASUREMENT SCALES .............................45 TABLE 4.5 – CORRELATION MATRIX...............................................................................48 TABLE 4.5A. MODEL SUMMARY .....................................................................................49 TABLE 4.5B – COEFFICIENTS A ........................................................................................49 TABLE 4.6 – SUMMARY OF HYPOTHESES TESTING RESULTS (MODEL I).........................50 TABLE 4.6A - MODEL II SUMMARY ...............................................................................51 TABLE 4.6B - COEFFICIENTSA .........................................................................................52 TABLE 4.7 – SUMMARY OF HYPOTHESES TESTING RESULTS (MODEL II)........................52 TABLE 4.7A - MODEL III A SUMMARY ...........................................................................53 TABLE 4.7B - COEFFICIENTSA .........................................................................................54 TABLE 4.8A - MODEL III B SUMMARY ...........................................................................55 TABLE 4.8B – COEFFICIENTS A ........................................................................................55 TABLE 4.9 – SUMMARY OF HYPOTHESES TESTING RESULTS (MODEL IIIA,B).................56 TABLE 5.1. SUMMARY OF HYPOTHESES..........................................................................60 1 Chapter 1: INTRODUCTION 1.1 Introduction This chapter portrays general introduction for the current study with which research problem, research objectives and research questions are provided as the rationale for this study. An introduction to the methodology to be used and the scope of the study is also addressed in this chapter. At the end of the chapter, the structure of this study is provided. The Outline of this chapter is shown in figure 1.1 Figure 1.1. Outline of chapter 1 1.2 Research background In a more globalized and integrated economy with increasing deregulation, competition in the banking industry become significantly fiercer. Research into less successful financial brands shows that inadequate support for the brand and, confusion and lack of understanding of branding are two important factors that constrain the success of these brands (Chernatony and Cottam, 2006). For banks today, the strength and marketing power of an institution’s brand is 1.1 Introduction 1.2 Research background 1.3 Problem statement 1.4 Research objectives 1.5 Scope and Methodology 1.6 Structure of the study 2 rapidly becoming one of the critical levers for differentiation and hence competitive advantages. Without doubt, a good brand increases value for a particular product or service, and thus it is called brand equity. In marketing literature, brand equity is defined and measured differently. Brand equity is either conceptualized or measured, or both. Despite the fact that there are different conceptions about brand equity, however, there are two major viewpoints from which to consider brand equity: the financial perspective and customer-based perspective. Financial perspectives focus on the financial outcome for the firm (Taylor et al, 2005), for example, by using certain techniques to extract the brand equity’s value from the intangible value of the firm. The other perspective focuses largely on the knowledge and relations that customers have with the brand (Aaker, 1991; Keller, 1993, 2001). Compared to the former perspective, the later is more fruitful in marketing literature. Despite the important role of brand equity, however, much attention and efforts are devoted to the brand equity in goods marketing, while research into its contribution to service, especially in banking industry, is very limited. Recent years have seen a significant and rapid growth of the banking industry in Vietnam, especially in the growth of the Vietnamese commercial join stock banks. This trend opens up abundant choices for the customer, but also banks with fierce competition, so banks now face the crucial problem of customer switch. In this circumstance, the disadvantage of Vietnamese banks is apparently not only weakness in financial strength, technology, diversification of products and services, but also insufficient attention in branding. Branding strategy is one of the most critical weaknesses of Vietnamese banks (Tap Chi Ke Toan, 2007). 1.3 Problem statement Building a strong brand with significant (brand) equity is seen as providing a host of 3 possible benefits to a firm, including greater customer loyalty (Keller, 2001). Brand equity is one of the most important marketing concepts and has been an area of interest for marketing academics and practitioners as well. There are a numbers of models of brand equity in common marketing settings (Farquhar,1989; David A. Aaker, 1991; Kevin L. Keller, 1993, 2001; Ambler et al, 2002; Netemeyer et al, 2004; Martesen and Grønholdt, 2004) or in financial service perspectives (Taylor et al, 2005). However, to my best knowledge, there is no model of brand equity that particularly focuses on banking service. It might be worthwhile and necessary to build a brand equity model in banking service. Brand equity in banking service deserves elaboration in some regards. “ First and foremost, unlike other financial firms, banks act as intermediaries between borrowers and lenders and, in so doing, they offer a unique form of asset transformation” (Shelagh Heffernan, 2005). Bank transactions usually involve a large sum of money and hence, trust and price (in terms of interest rates…) appear to be critical matters in the industry. Second, bank transactions, especially lending, are more complicated than transactions for other products and services. For example, before a loan is approved, it takes time and effort to get through an assessment process that is strictly regulated (by the State bank and/or by laws). Finally, most of the brand equity models are conceptualized by Western authors and validated in developed countries. This poses the question of whether or not these models work well in a developing country like Vietnam. 1.4 Research objective As noted above, in a highly competitive banking sector, a strong brand is likely to sustain competitive advantage for the bank that holds the brand. It is widely agreed in the literature that strong brand increases customers’ trust of the invisible purchase. Strong brands enable customers to better visualize and understand intangible product