Solutions to increase individual customer loyalty at Vietnam Joint Stock Commercial Bank for Industry and Trade by 2018

found little difference between the loyalty of less satisfied customers and satisfied customers. However, they showed a huge difference between the loyalty of satisfied customers and fully satisfied customers (Le The Gioi et al., 2011).

A slight decrease in complete satisfaction can produce a large decrease in loyalty. An AT&T study found that 70% of customers who said they were satisfied with a product or service were still willing to switch to a competitor, and highly satisfied customers were much more loyal. Xerox found that customers who were completely satisfied with a company were six times more likely to repurchase than those who were not satisfied.

With banks, customer loyalty is demonstrated when a customer has chosen to transact with a bank, will continue to transact with that bank, at the same time encourage others to use the bank's services and when in need of using another service, will continue to consider this bank as the first choice even though they know there may be a better choice at another bank.

1.2. Benefits of loyalty

First, loyal customers are valuable assets for businesses. Research by Frederick Reichheld shows that if the number of loyal customers increases by 5%, a company can increase profits by up to 60%. Just 20% of a company's regular customers bring in 80% of the company's profits.

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Second, loyal customers help the company gain a stable source of long-term profits through repeat purchases. Not only that, once loyal, customers often increase their purchases and easily buy other products and services from the company. At the same time, loyal customers are the ones that competitors find most difficult to attract. They always stick with the company even in the most difficult times - a sustainable source of profits.

Third, loyal customers also help companies increase profits by reducing costs such as: advertising costs, outreach, introduction, building new databases, understanding purchasing behavior, service, etc. At the same time, the company also saves transaction time. In many cases, because of familiarity and loyalty, customers not only serve themselves but also help the company serve other customers.

Moreover, more than any other channel, loyal customers are the best and most effective promoters of a company. They are satisfied with the company's goods and services and will share it with everyone. Those referrals are invaluable to the company. What's more, this is a great promotional channel that is free.

1.3. Previous studies on factors affecting customer loyalty

 Research by Beerli, Martin and Quintana (2004)

Beerli, Martin and Quintana (2004) studied loyalty in the retail banking sector, this study was conducted on the survey subjects of customers transacting at 6 large banks in Canaria city, Spain. The results of the study confirmed that two antecedent factors affecting the loyalty of banking customers are: satisfaction and switching costs. However, the satisfaction factor has a much stronger impact than switching costs. Meanwhile, increasing perceived service quality will lead to increased customer satisfaction and vice versa. Customer satisfaction has a positive effect on loyalty; the more satisfaction increases, the more loyal customers are to the bank.

 Research by Nguyen Thi Mai Trang (2006)

Nguyen Thi Mai Trang (2006) examined the relationship between service quality, satisfaction with supermarket attributes and consumer loyalty to the supermarket. The research results showed that service quality is an important factor in customer satisfaction as well as increasing customer loyalty to the supermarket.

Furthermore, the results also showed that age and income factors did not influence the role of service quality on supermarket customer satisfaction and loyalty.

 Research by Bilal Afsar et al. (2010)

Bilal Afsar et al. (2010) built a model of factors affecting customer loyalty in the banking sector in Pakistan, based on information collected from 325 customers using banking services in this country. Bilal Afsar et al. showed that customer loyalty is determined based on factors such as customer satisfaction, commitment between the bank and the customer and switching costs. In which, the correlation between the two variables satisfaction and loyalty shows that a small change in satisfaction can have a big impact on customer loyalty to the bank. Therefore, it is very important for managers to grasp the needs of customers and make customers feel satisfied. Next is the commitment between the bank and the customer and finally switching costs have a big impact on customer loyalty. The study has contributed to further explore the factors of bank-customer commitment affecting customer loyalty in Pakistani banks.

 Research by Goulrou Abdollarhi (2008)

Goulrou Abdollarhi (2008) established a research model on customer loyalty in the banking industry in Iran. The study was conducted based on the results of a survey of 400 customers who are transacting at Iranian banks. The factors that were confirmed to affect customer loyalty include: tangible service quality, intangible service quality, satisfaction, switching costs, decision to choose a transaction bank and habits. In which, the satisfaction factor has the greatest impact on loyalty, followed by tangible service quality, intangible service quality, switching costs, decision to choose a transaction bank and habits.

Service quality is an important factor that plays a key role in making customers loyal. In the banking industry, the product of the bank is the service. This means that the customer's perception of the service is the same as their perception of a product in another industry. To clearly show the influence of service quality on customer loyalty, Goulrou Abdollarhi divided service quality into two parts: tangible quality (what can be seen) and intangible quality (what cannot be seen).

Satisfaction in banking means that the product or service provided to customers makes them feel satisfied and meets their expectations.

Switching costs are the prices that customers pay when they move from one organization to another or from one brand to another. There will be some costs when they want to leave, so this discourages them from moving.

Bank selection decision: when a customer chooses an institution and uses some services here, such as choosing a bank and using financial services. If the bank meets some of the customer's criteria and is selected, then the customer's loyalty to the bank in the future is possible and likely to happen.

Habit is an extremely important factor because 40% to 60% of customers use an organization's services because of habit.

1.4. Proposing factors affecting customer loyalty at Vietnam Joint Stock Commercial Bank for Industry and Trade

The author inherits the research of Goulrou Abdollarhi (2008) to identify factors affecting customer loyalty for the following reasons:

- Goulrou Abdollarhi's (2008) study on customer loyalty was conducted in the banking sector.

- Based on the research of Beerli, Martin and Quintana (2004), author Goulrou A. (2008) adjusted and developed the factors affecting loyalty in the Iranian market, a country with a developing economy, so it is quite similar to Vietnam. Therefore, the author decided to inherit this research to study customer loyalty in the Vietnamese banking market.

Thus, the factors affecting customer loyalty at Vietnam Joint Stock Commercial Bank for Industry and Trade include: tangible service quality, intangible service quality, customer satisfaction, switching costs, decision to choose a transaction bank and habits. The specific content of these factors is presented below:

- Tangible service quality and intangible service quality

Service quality is considered the antecedent of customer satisfaction and loyalty and is defined as the result of a comparison between customer expectations of a service and customer assessment of the extent to which the service meets their expectations (Caruana, 2002).

Gronroos (1984) mentioned that the quality of a service is the result of an evaluation process in which consumers compare what they expect to receive with what they actually receive.

Bloemer et al. (1998) showed a clear relationship between service quality, tendency to repurchase, recommend and reject other better suppliers. All factors including tendency to repurchase, recommend and reject other better suppliers are the tendencies and behaviors that create customer loyalty.

Service quality is considered an important factor in the profitability and success of the company. Firstly, service quality is considered as one of the factors that create service differentiation and competitive advantage to attract new customers and increase market share (Venetis and Ghauri, 2000). Secondly, service quality increases

the rate at which customers return to buy more, buy more, use other services, become less price sensitive, and tell others about their great experiences (Venetis and Ghauri, 2000).

Goulrou Abdollahi (2008) believes that service/product quality is the result of comparing customers' expectations of a service and their perceptions of that service when it has been performed. According to the research results of Goulrou Abdollahi (2008), service quality is divided into two groups: tangible service quality and intangible service quality.

Tangible service quality is what customers receive and see with their eyes through the services and products provided by the bank. It can be the staff's uniform, the bank's equipment, or the benefits that customers feel through the diversification, modernity of the products, etc. That is, customers want the core services in the bank's business to truly meet their needs and expect the bank's products or services to be truly valuable compared to the costs they pay. First, the bank must understand the needs and expectations of customers, must demonstrate the ability to perform the service appropriately and on time the first time. At the same time, develop systems and standardize procedures to ensure the consistent provision of reliable products and services. Ensure that promises made through the media are real and achievable. It is also important to consider the influence of the surrounding environment such as office decoration, office supplies, equipment.

Invisible service quality is what customers receive and feel without seeing it with their eyes. This perceived quality focuses mainly on the human factor. That is, customers expect the communication attitude of bank employees to show friendliness and warmth; to receive respect, listening and good after-sales policies from the bank. This requires the organization to train employees so that they can meet the needs of customers, create trust through knowledge and skills, create

Professional, dedicated staff in service. Train staff to recognize customer needs, thereby making customers feel important by meeting their needs and understanding their concerns, developing long-term relationships with customers.

- Customer satisfaction

In a highly competitive market, customer satisfaction is considered a major success, as customer satisfaction leads to customer retention and thus organizational profitability (Jamal and Kamal, 2002). Satisfaction is a customer's post-purchase evaluation and emotional response to the experience of a product or service. Satisfaction is considered a reliable predictor of behaviors such as repurchase intention, word-of-mouth recommendations, and loyalty.

Jamal and Kamal (2002) stated that customer satisfaction is generally the fulfillment of their expectations. Furthermore, Jamal and Kamal (2002) described customer satisfaction as the customer’s feeling or attitude towards a product or service after having used it. Egan (2004) combined many definitions of many authors and defined customer satisfaction as the customer’s psychological process of evaluating the results of the service received with previous expectations.

Satisfaction is a person's feeling of pleasure or disappointment resulting from comparing a product's perceived performance with expectations (Kotler, 2000, cited in Lin, 2003). Customer satisfaction is defined as the result of feelings and cognitions, where some standard is compared with the perceived performance. If the perception of a service performance falls below expectations, the customer is dissatisfied. Conversely, if the perception exceeds expectations, the customer is satisfied. The judgment of satisfaction is related to all experiences with the product, the sales process, and the after-sales service of the business (Lin, 2003).

When it comes to customer satisfaction research, it is much more important than making customers happy to make them feel completely satisfied.

With passively satisfied customers, they can leave the bank at any time while the group of customers who feel “completely satisfied” will be loyal customers of the bank. This understanding will help the bank have flexible measures to improve service quality for each different customer group.

- Conversion costs

Porter (1998) defines switching costs as the costs associated with changing from one service provider to another. In addition to monetary costs, switching costs can also be associated with the time and psychological effort involved in dealing with the risks of dealing with a new provider (Bloemer et al., 1998). For this reason, switching costs can be viewed as a cost to customers of switching to a competitor of the bank (Aydin and Ozer, 2005).

In the banking industry, switching costs are in the form of costs such as closing an account at one bank and opening a new account at another, problems arising from customers' partners who are used to paying for goods through the old account number, travel costs if the bank is located in a different location further away; or costs when customers want to terminate a loan at a bank such as prepayment penalties, notarization and re-registration costs, and costs for the time and effort customers spend preparing loan applications at a new bank... Customers will be less likely to switch to other banks when it requires large capital costs, large search costs, loss of benefits for loyal customers, etc.

Customers must consider the risks they may encounter when using a service at a bank they have not used before (Aydin and Ozer, 2005). Especially for service products, there is a risk when the quality of service cannot be assessed before purchase (Aydin and Ozer, 2005).

To reduce the customer's anxiety about making a wrong decision, the customer can gather information before actually experiencing it. During this process, if the customer

When customers change their bank, they can compare the service at this bank with the previous bank. If the service at the old bank is better, switching to a new bank is not advisable.

Thus, switching costs are a factor that directly affects customer price sensitivity and it also affects loyalty (Aydin and Ozer, 2005).

- Decide on the choice of transaction bank

There is a relationship between other factors and loyalty, the level of consideration when making a choice decision may be another factor that affects loyalty. Consideration when making a decision is based on information gathering (Petty and Cacioppo, 1997), customer motivation and ability when considering choosing a bank to do business with (Bloemer and Ruyter, 1998).

If customers do not perceive the difference between different banks, their motivation and ability to consider when choosing will be higher, otherwise the level of consideration in the decision-making process of customers may be low. Therefore, making customers perceive the difference between banks is very important.

A review of the literature shows that the factors influencing customers’ choice of banks vary from country to country. Sayani and Miniaoui (2013) studied the determinants of bank choice among customers in their dealings with Islamic banks. Bank reputation, referrals, benefits and recommendations from friends and family did not influence the decision making on bank selection. Blankson et al. (2007) also conducted a comparative study between the US, Taiwan and Ghana on the factors of bank selection. In the US, the important factor influencing the decision to choose a bank was convenience, while in Taiwan and Ghana it was competitiveness. There are similarities in bank selection among countries with differences in culture and level of economic development.

The results of Kennington et al. (1996) showed that the most important variables influencing customer choice were reputation, price and service. Reputation and security were more important to men and family and friends were more important to women. High-income customers were not concerned about interest rates, but they were concerned about reputation, service quality and convenience. For customers with lower incomes, interest rates were clearly the main concern.

According to Goulrou Abdollahi (2008), when customers need to choose a bank to transact with, they will compare many banks they know. The decision to choose is formed based on the level of careful consideration and the customer's feelings about different banks. Finally, they will find the most satisfactory bank according to their own point of view. With the convincing information about the bank that customers collect before making that decision, they will have a more interested and closer feeling towards the chosen bank. Therefore, customers will be more loyal to the chosen bank.

- Habit

It is a fact that habits often guide behavioral tendencies as people gain experience. When a behavior becomes a habit, or a good behavior is practiced, it becomes automatic and is performed without conscious decision. Habits are what an individual usually does first in certain situations or circumstances (Gefen, 2003).

According to Lin and Wang (2006), about 40-60% of customers buy from the same store through the power of habit. Customers visit websites out of habit rather than through an evaluation of the perceived benefits and costs offered. Indeed, when it comes to habits, people tend to ignore external information or rational strategies. Such an effect is a central element in the theory of attitudes and attitude change (Triandis, 1971): that is, behavioral intention, which is the product of attitudes, social norms, and influences exerted by habits.

Trafimow (2000) compared the TRA and related theories using habit as an antecedent of behavioral intention and found that habit can directly influence behavioral intention more than attitude and social norms. This suggests that habit alone can explain the reasons for continuing to use a service. When this factor is included in loyalty research, it is shown that customers tend to repeat their purchase behavior at a certain location (a place where they have purchased before), due to the habit of wanting to go to a certain place. Therefore, habit also has an impact on customer loyalty.

Goulrou Abdollahi (2008) stated that the consumption habits of customers in the banking and finance industry are the habits of choosing a bank to transact and using many different products and services provided by that bank. Strong usage habits will make customers tend to ignore bad information about the service and the supplier as well as ignore advertising information, service offers of another unit to continue using the services of the current unit.

Chapter 1 Summary

Chapter one presents some basic theories about customer loyalty and factors affecting loyalty. Through some studies on customer loyalty, the author proposes using the research model of Goulrou Abdollahi (2008) to measure customer loyalty including six factors: tangible service quality, intangible service quality, customer satisfaction, switching costs, decision to choose a bank to transact with and habits.

CHAPTER 2: ANALYSIS OF THE CURRENT STATE OF CUSTOMER LOYALTY AT THE BANK

VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE

2.1. Overview of the formation process and business performance of Vietinbank

2.1.1. History of formation and development of Vietinbank

Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank) was established in 1988 after being separated from the State Bank of Vietnam under Decree No. 53/HDBT dated March 26, 1988 of the Council of Ministers. Initially, the bank was called Vietnam Bank for Industry and Trade (Incombank) - a state-owned bank established with the purpose of continuing all lending activities separated from the "Trade Department" of the State Bank. With the reform in 1990, which redefined the role of the State Bank and divided the banking system into two levels, Incombank was affirmed as a commercial bank, more specifically specializing in transactions with components in the industrial and commercial sectors. After more than 20 years of operation, on April 15, 2008, Vietnam Bank for Industry and Trade changed its brand name from Incombank to the new brand Vietinbank. Then, on July 8, 2009, after the successful equitization process, the bank announced its decision to change its name to Vietnam Joint Stock Commercial Bank for Industry and Trade, with a charter capital of over 15 trillion VND, an increase of more than 34.8% compared to the old charter capital.

After more than 26 years of establishment and development, Vietinbank has affirmed its position as a leading commercial bank, holding a leading and dominant role in the Vietnamese monetary market, and is also the first State-owned commercial bank with foreign strategic shareholder IFC. Currently, Vietinbank ranks second in total assets, has a domestic market share of about 15% and is a commercial bank with the best credit quality in Vietnam. The strength of Vietinbank is demonstrated through the following aspects:

Has a nationwide network with 01 Transaction Office in Hanoi; 03 public service units; 02 representative offices in Ho Chi Minh City and Da Nang City; 01 representative office in Myanmar; 149 first-level branches in 63 provinces and centrally-run cities nationwide and 03 branches abroad (02 branches in Germany and 01 branch in Lao PDR).

There are 9 independent accounting companies: Financial Leasing Company, Industrial and Commercial Securities Company, Debt Management and Asset Exploitation Company, Vietinbank Insurance Company, Fund Management Company, Gold and Gemstone Company, Trade Union Company, Global Money Transfer Company, Vietinbank Aviva Company and 5 public service units: Information Technology Center, Card Center, Human Resource Training and Development School, Bank Star I motel and Bank Star II motel.

- Cua Lo.

At the end of 2012, VietinBank signed a strategic investment contract with The Bank of Tokyo – Mitsubishi UFJ, Ltd – the largest bank in Japan, a major member of MUFG Group – the third largest financial group in the world. The deal to sell 20% of capital, earning approximately 750 million USD, is considered the largest and most successful M&A deal in Vietnam to date. This event not only raised the prestige, position and strength of VietinBank to a new level but also contributed to enhancing Vietnam's position before international investors.

It is the only bank in Vietnam to be voted into the list of 2000 largest companies in the world for two consecutive years, Top 500 most valuable banking brands in the world in the banking industry and awarded many prestigious awards at home and abroad.

Founding member and joint venture partner of INDOVINA Bank.

Has relationships with over 1,000 correspondent banks in more than 90 countries and territories worldwide.

The first bank in Vietnam to be granted ISO 9001:2000 certification.

Member of Vietnam Bankers Association, Asian Bankers Association, Society for Worldwide Interbank Financial Telecommunication (SWIFT), VISA and MASTER international card issuance and payment organizations.

Being the first bank in Vietnam to open a branch in Europe, marking a remarkable development of Vietnam's finance in the regional and world markets.

The main activities of Vietnam Joint Stock Commercial Bank for Industry and Trade are to carry out banking transactions including mobilizing and receiving short-term, medium-term and long-term deposits from organizations and individuals; making short-term, medium-term and long-term loans to organizations and individuals based on the nature and capacity of the bank's capital sources; making payments between organizations and individuals; carrying out foreign currency transactions, international trade finance services, discounting commercial papers, bonds and other valuable papers and other banking services permitted by the State Bank of Vietnam.

2.1.2. Overview of Vietinbank's business performance in the period 2010-2014

Growth in total assets

Figure 2.1: Total assets over the years (Unit: billion VND)

(Source: Vietinbank Annual Report 2010-2014)

Vietinbank's total assets in 2010 were VND 243,785 billion (an increase of VND 123,946 billion - equivalent to 50.84% compared to 2009), in 2011 they were VND 460,420 billion (an increase of 25.21% compared to 2011).

2010), 2012 was 503,530 billion (up 9.36% compared to 2011), 2013 was

576,368 billion (up 14.47% compared to 2012), in 2014 it was 661,132 billion (up 14.71% compared to 2013). Thus, in 5 years (from 2010 - 2014), Vietinbank's total assets increased by a total of 293,401 billion, equivalent to 79.79%.

Capital growth

Figure 2.2: Capital over the years (Unit: billion VND)

(Source: Vietinbank Annual Report 2010-2014)

Following the successful IPO in 2009, the Vietnam Joint Stock Commercial Bank for Industry and Trade officially transformed into the Vietnam Joint Stock Commercial Bank for Industry and Trade on July 3, 2009 with a charter capital of over VND 15 trillion, an increase of more than 34.8% compared to the old charter capital and on July 16, 2009, Vietinbank's shares with the stock code CTG were listed on the Ho Chi Minh City Stock Exchange. This is considered an important milestone marking the success in the equitization process of one of the largest state-owned commercial banks in the economy. In 2010, Vietinbank successfully increased its capital by more than VND 3,000 billion, reaching VND 18,170 billion, and successfully signed cooperation and investment documents, officially selecting the International Finance Corporation (IFC) as the first foreign strategic shareholder. Based on the approval of the Government and the General Meeting of Shareholders, in 2011 VietinBank completed the sale of 10% of its charter capital and received a secondary loan (eligible for inclusion in Tier 2 equity) from its foreign partner.

Solutions to increase individual customer loyalty at Vietnam Joint Stock Commercial Bank for Industry and Trade by 2018 - 2

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