VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS NGUYEN THANH TRUNG HIEU TRUST AND COMMITMENT IN ONLINE SHOPPING IN VIET NAM, ANTECEDENTS AND CONSEQUENCES Major: Business Administration Code: 60 34 05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisors: Dr. Tran Doan Kim Hanoi – 2011 TABLE OF CONTENTS ACKNOWLEGEMENT. iv TABLE OF CONTENTS. vi LIST OF TABLES.
viii LIST OF FIGURES. ix CHAPTER 1 INTRODUCTION. PURPOSES AND RESEARCH QUESTIONS.3 CHAPTER 2: LITERATURE REVIEW.1 CUSTOMER RELATIONSHIP MANAGEMENT .5 The relationship among commitment, trust, loyalty and retention.2 METHOD OF STATISCAL ANALYSIS.2 DATA COLLECTION METHOD .1 Measurement of variables .4 Methods of data analysis. 39 CHAPTER 4: FINDINGS AND CONCLUSION.1 The determinants of Trust .2 The determinants of Commitment .3 The determinants of Customer Loyalty .4 The determinants of Customer Retention.
54 CHAPTER 5: CONCLUSION AND RECOMMENDATIONS.2 For e-commerce in Vietnam. 89 LIST OF TABLES Table 3.1 Descriptive Statistics of Scales .3 The Determinants of Trust .4 Regression Diagnostics – Trust .5 The Determinants of Commitment .6 Regression Diagnostics – Commitment .7 The Direct Determinants of Customer Loyalty .8 Regression Diagnostics – Customer Loyalty.9 The Determinants of Customer Loyalty .10 Regression Diagnostics –Customer Loyalty.11 The Direct Determinants of Customer Retention .12 Regression Diagnostics - Customer Retention .13 The Determinants of Customer Retention.14 Regression Diagnostics –Customer Retention.60 LIST OF FIGURES Figure 2.1 Model of determinants of customer loyalty and retention for online shopping (research framework). BACKGROUND The Internet‟s success over a few decades has changed many things in today‟s social life. People now can communicate virtually and can buy virtually anything without going to the stores or supermarket.
E-commerce in general and shopping online in particular has helped companies gain a new effective distribution channels beyond traditional ones and has also helped customers save their time. As a result, shopping online has developed exponentially with the evidence of rapidly increasing the revenues from e-business and the number of trading transactions through Internet. In Vietnam, e-commerce is one of those areas receiving support from the government. In the Ministry of Industry and Trading, there is an E-commerce Development Centre which observes, analyze the development of e- commerce and finds various solutions to further develop e-commerce in Vietnam.
They post annual reports on the Vietnam e-commerce situation. The number of enterprises applying for e-business in Vietnam increased gradually from 8% to 12% in the period of 2006 – 2009 according to the reports of E-commerce Development Centre in 2009. In other words, many products will be supplied through Internet and customers in Vietnam can buy goods by searching without going to supermarket or stores like at the present. However, traditional buying habits have with many characteristics such as the close relationship between buyers and sellers where buyers can communicate and ask sellers about products or sellers can introduce new products through the many convenience stores in Vietnam.
These may create barriers to the development of online business in Vietnam. Other barriers preventing shopping online in Vietnam such as electronic payment systems, supplied by banks and network systems companies also are mentioned in the media. PURPOSES AND RESEARCH QUESTIONS E-commerce in Vietnam has government and commercial enterprise attention but the number of customers shopping online is still limited. People are not yet ready to trade online.
Moreover, with the limited number of current customers, what should companies do to keep them and develop close relationships with them? How can companies ensure customer product repurchase or recommend others people to use them? Most research in Vietnam focuses on the development of e-commerce from the point of view of the companies applying, but rarely studies how to attract and keep customers shopping online. Therefore, the objective of this research is to explore the relationship between trust, commitment, loyalty and retention, the four main areas identified in various previous studies on customer relationship marketing. Based on such relationship patterns, the research will discuss which factors influence customer loyalty and customer retention and recommend how to encourage and keep customers shopping online in Vietnam. From the objectives of the research, two research questions emerged and can be stated as following.
What are the antecedents of trust and commitment? 2. How do trust and commitment influence customer loyalty and customer retention in online shopping in Vietnam? 1. METHODOLOGY The objective of research is to test the hypothesis to find out the relationship between variables in online shopping in Vietnam lending to a deductive research approach and the research purpose is explanatory. The research will start with a literature review which reviews the theories related to the topic researched to investigate often studied areas in customer relationship in marketing areas and to develop hypotheses for this research.
According to the recommendations of the research method, a survey strategy with questionnaire is chosen to find the answers to the research questions. A questionnaire is then built for data collection with 28 questions adapted from previous research (the questionaire included many questions from other many previous research- not from only one paper) to measure both independent and dependent variables. A pilot test is used to make sure the participants and researchers understand the meaning of questions. The data collected are analyzed by the SPSS program.
Firstly, it will be checked whether distribution normally or not and then statistics calculate by running correlations and multiple regressions to determine if the hypotheses stated in this research are supported or rejected which are reflected the relationships among four main areas are the same or different with current studies. DEFINITIONS The research is going to tests the relationship between customer trust, customer commitment, customer loyalty and customer retention, stated key components in theories of customer relationship management and these relationships will be tested in one particular business sector, namely; e- commerce and online shopping in particular. Several concepts need to be defined for the research. Payne and Frow (2005) defined Customer relationship management (CRM) as “a strategic approach that is concerned with creating improved shareholder value through development of appropriate relationships with key customers and customer segments.
CRM unites the potential of relationship marketing strategies and IT to create profitable, long term relationships with customers and other key stakeholders. CRM provides enhanced opportunities to use data and information to both understand customers and co-create value with them. This requires a cross-functional integration of processes, people, operations and marketing capabilities that is enabled through information, technology and applications” Turban and King (2003) defined E-commerce (EC) as “the process of buying, selling, or exchanging products, services, and information via computer networks, including the Internet” Mosuwe et.al (2004) defined ”Shopping online means customer intentions to shop on the Internet It refers to the way people buy products through Internet from companies having e-business. It belongs to the type of business to customers (B2C) within the larger concept of e-commerce”.
Morgan and Hunt (1994) defined Trust as “the perception of confidence in the exchange partner‟s reliability and integrity”. Morgan and Hunt (1994) defined “Commitment as an enduring desire to maintain a valued relationship. It is the commitment in the mind of the customer towards the company and the maintainance of the relationship between them”. Oliver (1999) defined “Customer loyalty as a deeply held commitment to re-buy or re-patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior” Gerpott (2001) defined Customer retention as “maintaining the business relationship established between a supplier and a customer”.
CHAPTER 2: LITERATURE REVIEW This chapter reviews literature relating to the research questions and hypotheses of this study. First, the chapter begins with a summary of the definition of customer relationship management (CRM). Then, the relationships of four areas of CRM including trust, commitment, loyalty and retention are discussed. The theoretical evidence of impact of factors on these four areas is provided.
After reviewing the literature related to variables in customer relationship management, the research model has been developed as a research framework. The research framework includes two main hypothese parts: nine main hypotheses (from all types of H1 to H4 hypothese) to test the different relationship between variables and 10 additional hypotheses (from all types of H5 to H6 hypothese) are developed to test the role of mediator of trust and commitment in the model. The research framework of this study is the synthesis of the findings of previous authors in order to explain the reserch problems. The research of this paper has conducted in Vietnam.
Therefore, the results of this study will have certain significance.1 CUSTOMER RELATIONSHIP MANAGEMENT Payne and Frow (2005) defined “CRM is a strategic approach that is concerned with creating improved shareholder value through development of appropriate relationships with key customers and customer segments. CRM unites the potential of relationship marketing strategies and IT to create profitable, long term relationships with customers and other key stakeholders. CRM provides enhanced opportunities to use data and information to both understand customers and cocreate value with them. This requires a cross- functional integration of processes, people, operations, and marketing capabilities that is enabled through information, technology, and applications”.
This definition is quite complete because it shows the constituent activities of CRM and how CRM is incorporated in companies. Since the concept of CRM appears mid-1990s, CRM has gone through three generations in the development of this area. According to Kumar and Reinartz (2006). the author has studied many of the CRM noted in his research stated that “The first generation functional CRM‟s approach was used as a way to increase sales and improve the services.
CRM at that time identified different activities such as sales force automation or customer services and support”. And, the next gerenation of CRM is “customer-facing front end approach‟‟. At that time, CRM was considered as the way to fill the gaps in enterprise resource planning (ERP) functionality and the company‟s business needs, namely; the customer-facing front end. Customer relationship management through interaction with customers before selling to after sales through the means of communication such as telephone or internet is not achieved goal in 1990s.
By the end of 2002, strategic approach to the third generation began when the company had to draw experience from the implementation of unsucssessful of the old version of CRM. So, they not only focused on customer-facing front- end, as in second generation, but also paid attention to back-end systems, namely partners and suppliers. Evently, they integrated both of them with Internet technology. Therefore, CRM at the moment is not only a technology solution but also is the company's strategy.
As the result, CRM plays as an important role in the growth of the revenue line in a company.1 Definition of trust Because uncertainties exist in transactions though the Internet, many researchers have stated that trust is an important factor influences the successful developing of e-commerce. So, trust is consider as an important role in many social and economic interactions relating to uncertainty and dependency. In addition, There are two important factors influenced by Trust in online transactions, which are the security and privacy, so the concept trust is very important to defined. Besides the convenience of e-commerce by bringing buyers and sellers also have limitations such as lack of direct communication between buyers and sellers, between buyers and goods.
In order to reduce the barriers, supplier need to develop a trustworthy relationship to increase customer loyalty. Moreover, Teo & Liu ( 2007) considered “Consumer trust as an important aspect of e-commerce, and understanding its antecedents and consequences is a prime concern for the following reasons. First, the antecedents of trust enable us to know the relative importance of factors affecting trust. Understanding these factors would play an important role in devising appropriate measures to facilitate trust.
Second, the consequences of trust would enable us to better understand the importance of trust and its effect on online buying behaviour”. In term of the organizational trust literature, Mayer et al.