MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY ------XW------ HOANG NGOC CAM TU THE RELATIONSHIP BETWEEN SERVICE QUALITY AND CUSTOMER LOYALTY: AN EMPIRICAL STUDY ON PHARMACY CUSTOMERS IN HO CHI MINH CITY MASTER THESIS OF BUSINESS ADMINISTRATION HO CHI MINH CITY – 2012 TIEU LUAN MOI download : skknchat@gmail.com MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY ------XW------ HOANG NGOC CAM TU THE RELATIONSHIP BETWEEN SERVICE QUALITY AND CUSTOMER LOYALTY: AN EMPIRICAL STUDY ON PHARMACY CUSTOMERS IN HO CHI MINH CITY Subject: Master of Business Administration Code: 60.02 MASTER THESIS OF BUSINESS ADMINISTRATION SUPERVISOR: DR. TRAN HA MINH QUAN TIEU LUAN MOI download : skknchat@gmail.com I ACKNOWLEDGEMENT For the completion of this thesis, I would like to extend my deep gratitude to Dr. Tran Ha Minh Quan, who gave me intensive support, valuable suggestion, guidance and encouragement during the time I conduct my thesis. Through his guiding I found the way to conduct thesis successfully and also the way to solve research problems.
I also want to say thankful to my classmate at eMBA K19 for their sharing knowledge and honestly support during the time we studied and conducted thesis, their passion to finish thesis and encouragement gave me more strength to get over objection on the way to graduation. Last but not least, I am grateful to my husband and my family for their warm encouragement during the time I finished the thesis. Although I has tried the best to complete the thesis, but errors could not be comprehensively avoided. Therefore, I am looking forward to receiving comments from respectful lecturers and friends, so that I can improve more on the quality of this thesis.
Hoang Ngoc Cam Tu Ho Chi Minh, 25 October 2012 TIEU LUAN MOI download : skknchat@gmail.com II COMMITMENT I would like to commit that this thesis, “THE RELATIONSHIP BETWEEN SERVICE QUALITY AND CUSTOMER LOYALTY: AN EMPIRICAL STUDY ON PHARMACY CUSTOMERS IN HO CHI MINH CITY”, was accomplished based on my independent and serious studies and scientific researches. The data was collected in reality and it has clear origins. In addition to that, the data would be trust-worthily handled and it has never been released in any menu. Hoang Ngoc Cam Tu TIEU LUAN MOI download : skknchat@gmail.com III CONTENTS ACKNOWLEDGEMENT.4 Scope and Approach.3 Relationship Between Service Quality and Loyalty.1 Service quality scale.2 Customer loyalty scale.7 Selecting the sample and collecting data.8 Method of data analysis .3 Confirmatory Factor Analysis (CFA) .3 Structural Equation Model (SEM).5 Analysis of variance (one-way and two-way ANOVA).27 TIEU LUAN MOI download : skknchat@gmail.1 Characteristic of qualified respondents .3 Reliability of the measurements.1 Reliable Test of Service Quality (SERVPERF) Measurement .2 Reliable test of customer loyalty scale.4 Confirmatory factor analysis .6 Analysis of variance .1 The effect of gender on loyalty.2 The effect of age on loyalty.3 The effect of income on loyalty.
Discussion on findings. Contribution of the current study .4 Limitations and Future research .XVIII TABLES Table 2-1: Five Dimensions of Service quality TIEU LUAN MOI download : skknchat@gmail.com V Table 2-2: Loyalty Scale Table 3-1: Survey Items Used in The Study-Service Quality Scale Table 3-2: Survey Items Used in The Study-Customer Loyalty Scale Table 3-3: Assessing fit indices Table 4-1: Variables Table 4-2: Socio-demographic Characteristics of The Qualified respondents Table 4-3: Assessment of Normality Table 4-4: Reliability of Service Quality Measurement (SERVPERF scale) Table 4-5 Reliability of loyalty measurement Table 4-6: Composite reliability Table 4-7: Standardized Regression Weights – Hypothesized Model Table 4-8: Assessing Fit Indices – Modified Model Table 4-9: Regression Weights: (Group number 1 - Default model) Table 4-10: T-test of gender toward loyalty (BI) Table 4-11: ANOVA Test Of Age Toward Loyalty. Table 4-12: ANOVA Test Of Education Toward Loyalty. Table 4-13: ANOVA test of income toward loyalty FIGURES Figure 2-1: The conceptual Model Figure 3-1: The research process TIEU LUAN MOI download : skknchat@gmail.com VI Figure 3-2: The translation process Figure 4-1: CFA model Figure 4-2: SEM result (standardized estimate) TIEU LUAN MOI download : skknchat@gmail.com 1 CHAPTER I: INTRODUCTION 1.1 Problem Statement From 2001 to 2008, Vietnamese pharmaceutical market has increased significantly with average about 19.9% per year, especially in 2008 the growth was up to 25.5% compared to 2007 (Tan et al.
In recent years, with the higher average income, Vietnamese people tend to spend more on healthcare service. While average expense for medicine of Vietnamese people in 1998 was just about 5.5 USD, in 2008 the average expense for medicine was 16.5 USD and up to 19.77 USD in 2009 (Tan et al. The growth in pharmaceutical market is attributed by increasing trend in self-medication, inline with the greater awareness of health issues. As end-stage in medicine distribution (along with hospitals), pharmacies has become the most important factor to ensure the good consuming medicine product to most of consumer, the best place for self-medication.
Especially in rural areas, where patient rather visit pharmacies than hospital for their minor health problem, pharmacies are not only places to buy drug but also places where patient can get fast and effective medicine for their simple disease. At pharmacies, patient can be advised how to use medicine safety and effectively. In Vietnam, when patient got health problem, most of them will go to pharmacies nearby to take some medicine; this situation make the role of pharmacies become more and more important. TIEU LUAN MOI download : skknchat@gmail.com 2 Adapted to Ministry of Health regulation in 2007, that all pharmacies in Ho Chi Minh City should be improved to GPP (Good Pharmacy Practices) standard to increase service to consumer, pharmacies has been put in a new competition for increasing infrastructure and service quality.
More and more new GPP pharmacies appeared in HCM city in year 2011 with many formalism of increasing service: pharmacist or doctor available, economic price, gift for loyal customer…etc. Pharmacies are doing their best to increase service quality to attract loyal customer to maximize profit. Aim at understanding how to improve loyalty pharmacy customer, this research is conducted to clarify relationship between service quality and customer loyalty.2 Research Objective To examine if any dimension of service quality, that are tangibility, reliability, responsiveness, assurance and empathy effect on loyalty in pharmaceutical market. To investigate if there is any difference on mean of loyalty of pharmaceutical consumer between demographic factors such as income, age, and gender.1 Academic Contribution TIEU LUAN MOI download : skknchat@gmail.com 3 Although there have been many studies on bank, supermarket and other services, the study on pharmacy service is still spare.
This study is one of few studies conducted on pharmacy service. This paper contributes to the research field of service quality and loyalty in two aspects: First, this paper examine on pharmacy service, which is not many research have been conduct so far. Second, this paper explores a model to demonstrate that if pharmacy loyalty is a consequence of pharmacy service quality? 1.2 Business Contribution For pharmacies: This paper examines if and how factors of service quality affect customer loyalty so that pharmacies can chose which factor of service quality should be improved to retain customers and maximize profit. For retail chain of pharmacies: The understanding of relationship between factors of service quality and customer loyalty in pharmacy market can help retail pharmacy companies building suitable marketing strategy.4 Scope and Approach This study is conducted in HCM city, the biggest city in Vietnam.
HCM city is also the city with highest number of pharmacies nation- wide, this city is also the 1st city to have new GPP pharmacy and pharmacy chain. With high competition, pharmacies in HCM city also focus on increasing service quality than in other areas. TIEU LUAN MOI download : skknchat@gmail.com 4 Data were collected by direct interview to pharmacies customer in HCM city. Respondents who are collected randomly are diversified at any career, age, income, men or women and all of them are customers of different pharmacies in HCM city.
The study is conducted in 2 main phases: pilot study and main study. The purpose of the pilot study is to check the contents and to examine the measurement scales. Then the main study is conducted to confirm the measurement scales, to test the hypotheses and to confirm the research model.5 Research Structure The study is reported in 5 chapters: Chapter 1: Introduction will provide the research background, research objectives, as well as research scope and approach. Chapter 2: Literature review provides theoretical and empirical backgroundbehind the hypothesized research model.
Chapter 3: Methodology details the methodologies the author use to conductthis research. Chapter 4: Analysis is conducted based on the collected data to test thehypotheses and answer the research questions. Chapter 5: The author discusses the results; provide practical implication,and possible directions for future research. TIEU LUAN MOI download : skknchat@gmail.com 5 CHAPTER II: LITERATURE REVIEW In this chapter, the author review about previous investigations on relationship between service quality and customer loyalty to develop the hypothesized model.
The service quality, which has been investigated and defined long time ago by many researchers, may be captured with perception model (Cronin and Taylor, 1994) or captured with disconfirmation model (Parasuraman et al. However, despite these attempts and its perceived importance in marketing theory and practice (Jones and Sasser, 1995; Reichfeld &Sasser, 1990), customer loyalty still “presents an enigma to researchers” (Oliver, 1996). Implicitly, service loyalty is often incorporated as an ultimate dependent variable in service quality models (Fornell et al., 1996), yet the precise nature of the service quality-service loyalty connection has remained fuzzy as the result of limited conceptualizations and contradictory empirical results (Boulding et al. Most studies that have examined the service quality-service loyalty relationship focused on one specific industry only,limiting the general ability of results (e.
Crosby and Stephens, 1987; Kelleyet al., 1993; Rust and Zahorik, 1993). Some results show that if customers satisfy with service quality, they tend to repeat purchase with that service (Chaudhuri, 1994). In this research the author examine the relationship between service quality and customer loyalty in pharmacy service. TIEU LUAN MOI download : skknchat@gmail.1 Service Quality Service quality is difficult to evaluate clearly because services are intangibles, heterogeneous, cannot be stored, and production and consumption are simultaneous (Athnassopoulos et al.
Researchers are interested in finding the identification of service quality but they have not agreed how to measure it yet. Cronin and Taylor (1992) suggest that perceptions of service quality more closely match customer evaluation of the service provided. However, Parasuraman et al., (1994) argue that disconfirmation is valid and further, it allows service providers to identify gaps in the service provided. In the disconfirmation model, service quality is defined as the comparison of service expectations with actual performance perceptions (Parasuraman et al.
They also called SERVQUAL model. The core idea is that service quality is a function of the difference scores or gaps between expectations and perception. Therefore, service quality is a multidimensional concept. They find five dimension of service quality are reliability (ability to deliver the promised service dependably and accurately), responsiveness (willingness to help customers and provide prompt service), assurance (ability to inspire trust and confidence), empathy (customers are individuals) and tangibles (elements that represent the service physically).
SERVQUAL is useful scale to measure service quality by making suitable adjustment for industry and country contextual effect. SERVQUAL has been proven the validity and reliability through many ranges of service fields: Tyre TIEU LUAN MOI download : skknchat@gmail.com 7 Shop (Carman, 1990); discount and department store (Finn and Lamb, 1991; Teas, 1993), medical services (Brown & Swartz, 1989), hospitals (Babakus &Mangold, 1992), higher education (Boulding et al. However, SERVQUAL is criticized for theoretical and operational issues. Brown et al., (1993) have questioned the validity and the reliability of the differences between expectations and performance.
Tea (1993) questioned the validity of perception-expectation gap with conceptual and operational problem in the definition of the expectation.