MINISTRY OF EDUCATION AND TRANNING
UNIVERSITY OF ECONOMICS, HO CHI MINH CITY

TRNG TH TUYT DUNG INFLUENTIAL FACTORS ON WORD
OF MOUTH IN SERVICE INDUSTRIES
(THE CASE OF HIGHER EDUCATION
IN HOCHIMINH CITY, VIETNAM)

MASTER THESIS IN BUSINESS ADMINISTRATION
HO CHI MINH CITY – 2014
MINISTRY OF EDUCATION AND TRANNING
UNIVERSITY OF ECONOMICS HO CHI MINH CITY


TRNG TH TUYT DUNG

INFLUENTIAL FACTORS ON WORD
OF MOUTH IN SERVICE INDUSTRIES
(THE CASE OF HIGHER EDUCATION

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COMMITMENT

I would like to commit that this thesis, “Influential factors on word of mouth
in service industries (the case of higher education in Hochiminh city, Vietnam)”,
was accomplished based on my independent and serious study and scientific
research. 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.
Trng Th Tuyt Dung
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TABLE OF CONTENT


3.3. 2. Questionnaire development 29
3.3.3. Questionnaire design 29
3.4. Pilot study 30
3.4.1. Qualitative pilot study 30
3.4.2. Quantitative pilot study 30
3.5. Quantitative main study 31
3.5.1. Research sampling 31
3.5.2. Collecting data 31
3.5.3. Methods of data analysis 31
3.5.4. Data cleaning 32
3.5.5. Reliability assessment of measurement scales (Cronbach's alpha) 32
3.5.6. Exploratory factor analysis (EFA) 32
3.5.7. Confirmatory factor analysis (CFA) and SEM: 34
3.5.8. Bootstrap Method 36
3.6. Summary 36
CHAPTER 4 DATA ANALYSIS AND FINDINGS 37

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4.1. Introduction 37
4.2. Descriptions of sample 37
4.3. Reliability and validity of the measurement scale 38
4.3.1. Reliability (Cronbach’s alpha) 39
4.3.2. Exploratory factor analysis (EFA) 41
4.3.2.1. EFA implementation for independent variables 41
4.3.2.2. EFA implementation for dependent variable 45
4.3.2.2.1. EFA for Word of Mouth (WOM): 45
4.3.2.2.2. EFA for Reference Intention (INT): 46
4.3.3 Confirmatory Factor Analysis: 47
4.4. Adjust the research model and the hypotheses 50
4.4.1. The adjusted research model 50

Table 4.9. Decriptive statistics, factor loads and Cronbach‟s alpha coefficients 48
Table 4.10. Pearson Correlation 49
Table 4.11. Results of testing hypothesis 55
Table 4.12. Square multiple Correlations (R
2
) 56
Table 4.13 Boostrap results with N = 500 56 6
LIST OF FIGURE

Figure 2.1. Proposed conceptual model of the research 24
Figure 3.1. Research process 26
Figure 4.1. Standardized measurement model of variables 50
Figure 4.2. The adjusted research model 51
Figure 4.3. Initial Structure Model 52
Figure 4.4. Nonstandard regression of the modified structural model 53
Figure 4.5. Standard regression of modified structural model 54
A structural model with dimensions of factors affecting word-of-mouth,
word-of-mouth and their results was tested with a sample of 223 students of higher
educational institutions in Ho Chi Minh City, Vietnam.
The results of the study indicate that to Vietnamese consumers, perceived
value, satisfaction and loyalty are factors effective in the formation of Word of
mouth about higher educational institutions and Word of Mouth can affect on
students‟ intention to refer to enroll at the institutions. These findings suggest that
educational managers should make efforts to improve their mental image in students
and to make students more satisfied in order to encourage them producing positive
word-of-mouth about the organization.
KEYWORDS: word of mouth, Hochiminh City, higher education,
consumer‟s behavior

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CHAPTER 1
INTRODUCTION
1.1. Introduction
From marketer perspective, Word-of-mouth (WOM) is an important area and
a key player for marketing research as this form of communication is regarded to
have greater influences on other people‟s choices compared to other forms of
communication (Murray, 1991; Day, 1971) and thus, more effective than other
marketing tools and conventional advertising media (Engel et al., 1969; Katz and
Lazarfeld, 1955). Although a WOM communication can be very influential in any
purchase decision, previous researches suggest that its influence seems to be greater
in services contexts (Ettenson and Turner, 1997; Murray, 1991). Even within the
service sector, WOM seems to have different influences in different service
contexts because risk is regarded higher in some service purchase situations than it
is in others (Bansal and Voyer, 2000; Still et al., 1984). Education is a special
service situation in which WOM seems to be significant (Cook and Zallocco, 1983;
Mazzarol and Soutar, 2002).

education institutions make a shift from being product-led ( i.e., relying on the
product to sell) towards a more “customer-led” approach (Angell et al., 2008).
When consumers (in this context, students) makes an uncertain and high-risk
decision in service industries (like choosing a university), they may rely heavily on
WOM communications such as the advice and suggestions from others who have
experienced the service (Kinard and Capella, 2006). Moreover, WOM‟s importance
is highlighted as consumers often trust each other more than they trust
communication from organizations (Zeithaml and Bitner, 1996). As a result,
educational managers need to understand the formation of WOM and its role in
their organizations‟ success.
Studies on WOM have exposed that its effectiveness is relied on the
overwhelming influence which it makes on consumer behavior. Reicheld (1996)

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points out that these effects are enlarged by a higher degree of customer loyalty and
profitability. Researchers have found that WOM is strongly and positively
connected with consumers‟ levels of trust (Bergeron at al, 2003), service quality
(Parasuraman et al, 1988), satisfaction (Anderson, 1998), perceived value (Hartline
& Jones, 1996), relationship quality (Boles et al., 1997), and with consumers‟
intention to purchase (Crocker, 1986). Furthermore, within the higher education
context, Athiyaman (1997) found that student attitude to the university is positively
related to positive WOM subsequent to their enrolment (post-enrolment
communication behavior). More recently, Jayawardhena & Wright (2009) add
further distribution when they find excitement positively influences on positive
WOM. Especially, Yasvari et al. (2012) propose and empirically test a
comprehensive model to examine factors effective on WOM in a service context
(Iran Airline Company) and their results. Their study indicates that five factors - (1)
satisfaction, (2) trust, (3) service quality, (4) the perceived value and, (5) loyalty
are found to be effective on WOM and can affect on consumers‟ decision about
using the service. In this study, the author uses the model of Yasvari et al. to test

and hypotheses. SPSS software version 16 and Amos 21 was used for data analysis
in this study.
1.4. Significances of the research
This study is practically meaningful in WOM literatures in service industry
in Vietnam with the result from examining factors effective on WOM and the effect
of WOM, as the outcomes of these factors, on the intention of consumers to refer to
higher education institutions.
The results of this study are expected to enhance educational managers‟
understanding of WOM formation and its roles in their organizations. Such an
understanding will help higher education institutions to build suitable programs to
meet demands of students and father, to provide qualified workers, managers for the

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country as well as to promote their reputations in a burgeoning industry like
Hochiminh city.
The result of the study is also distributed as a source of reference for
marketing researchers in Vietnam market.
1.5. Structure of the research
The present study is structured in five chapters. Chapter 1 covers research
background, research objectives, research methodology, and necessary of the study.
Chapter 2 comprises the current knowledge of marketing scholars regarding WOM,
some important factors effective on it and their results as well as proposes a
conceptual model for the research. Chapter 3 assigns the research methodology used
to modify and evaluate the measurement scales, the hypotheses and the research
model of the study. Chapter 4 presents discussions about the analysis of data related
to the evaluation of measurement scales, research model and hypotheses. Lastly,
Chapter 5 gives some main conclusions and recommendations based on the results
of the study in chapter 4 as well as points out some limitations of this study.

CHAPTER 2

2.3.1. Definition & characteristics
There are many definitions about WOM from past to present. Table 1 below
is derived from a chronological list about WOM definitions made by Goyette et al
(2010). We implement a definition of WOM by Silverman (2011) to the last row of
the table.
Table 1.1: Definitions of Word-of-Mouth
Author/ Researcher
Definition
Arndt (1967, p.3)
WOM is defined as oral, person to person communication
between a receiver and a communicator whom the receiver
perceives as non-commercial concerning a brand, a product, or

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a service
Richins (1983, p.17)
the WOM communication was defined as the act of telling at
least one friend or acquaintance about the dissatisfaction
Westbrook (1987, p.
261)
In a post purchase context, consumer WOM transmissions
consist of informal communications directed at other
consumers about the ownership, usage, or characteristics of
particular goods and services and/or their sellers
Singh (1990, p. 1)
telling others about the unsatisfactory experience (that is,
negative WOM)
Bone (1992, p. 579)
WOM communication is conceptualized herein as a group
phenomenon – an exchange of comments, thoughts, and ideas

columnists, consumers, and experts appeared in newspapers, magazines, specialized
publications, online discussion forums, and expert systems are regarded as
impersonal sources of WOM recommendations (Senecal & Nantel, 2004).
It is suggested consumers are stimulated to share their experiences with
others by cognitive elements such as satisfaction, acquiescence and irritation
(Neelamegham & Jain, 1999). People generating WOM communications are likely
motivated by personality, sociability, and a desire to help others (Lau & Ng, 2001).
In addition, researchers find that WOM‟s ability to occur between consumers seems
to be influenced by the tie strength (i.e. the intensity of the social relationship
between consumers) (Bansal and Voyer, 2000), and by homophile (i.e. how similar)
or heterophony (how dissimilar) such consumers are in terms of their backgrounds,
opinions, likes and dislikes (Steward & Conway, 1996; Gilly et al., 1998).
2.3.2. Role of WOM in decision of consumers
Evidence indicates consumers‟ buying decision process of goods and
services is strongly influenced by WOM communications (Richins, 1983).
Reichheld (1996) reveals that WOM impacts significantly on consumer behavior
and consequently on sales. Researches emphasize that when consumers who involve
deeply in decision making and purchase having little or no expertise in a product or
service, they tend to refer to others‟ opinion more frequently and rely on WOM
communications more than on other sources of information (Bansal, 2000).
According to Price et al. (1995), information exchange about a product through
WOM makes a consumer more powerful and decreases the asymmetry in the
information exchanged between the consumer the producer and accordingly,
increases (in case of positive WOM) or decreases (in case of negative WOM) the
acceptance speed of the product. Especially, WOM is more important in the final
stages of purchase process because it reassure consumers as well as reduces post-
purchase uncertainty (Martilla, 1971).

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WOM is likely to be more important in service contexts as service is

In an environment in which consumers‟ trust of both organizations and
advertising has been reduced, WOM gives a way to gain a significant competitive
advantage (International Word of Mouth Marketing Conference, 2005). Both of
WOM and traditional advertising can be seen as forms of advocacy; however,
WOM is perceived free of vested interest while advertising and commercial
communication is information from a source having vested interest in presenting the
information in a particular way (Silverman, 2011). It is evident that consumers
generally view WOM as more credible and trustworthy than marketing
communications (Lau & Ng, 2001). Podoshen (2008) attributes to researches in this
area by showing that opinions of consumers‟ friends, family and acquaintances are
considered credible because they are sincere and without any prejudice. In addition,
Smith and Swinyard (1982) investigates that a WOM given through direct product
experience is more credible, and thus, more effective than advertising. The main
point to the concept of WOM is the belief that the producer of the product or the
service does not control the information; therefore, it is expected to be freer of bias,
more relevant, more complete, more trustworthy, and thus more accurate than
commercial information (Silverman, 2011).
Research studies generally support the fact that WOM is widely recognized
as one of the most effective communication tools and has a greater influence on
consumers‟ decisions compared to other forms of communication (Murray, 1991;
Day, 1971). In their study as early as 1955, Katz and Lazarsfeld find out that WOM
is seven times more effective than newspaper ads, four times more effective than
direct sales, and twice as effective as radio advertising. Day (1971) adds further
evidence to the view by stating that WOM is nine times more effective than
advertising in changing consumer attitudes from negative or neutral attitudes into
positive ones, while Morin (1983) shows that “other people‟s recommendations” are
three times more effective than advertising in terms of stimulating purchases of over
60 different products. Rusticus (2006) proves the WOM effectiveness when he

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or dissatisfied experiencing a product or service (Anderson, 1998). The satisfied
mode is based on the level the product or service performance exceeding from
customers‟ expectation and is probably resulted in positive WOM , referring to
pleasant experiences (Maxham and Netemeyer, 2002;) , while dissatisfied emotion
depends on the level customer‟s expectations are not met and may lead to negative
WOM, including product denigration, unpleasant experiences, negative feelings,
rumor and private complaining to (Richins, 1983). These results illustrate that it is
crucial for companies to be able to maximize WOM from highly satisfied customers
and to minimize WOM from customers with low levels of satisfaction. Findings of
Ranaweera & Prabhu (2003) state two types of purchase behavior, including
repurchase intention and WOM, are affected by the level of customer‟s satisfaction.
Furthermore, most authors agree that satisfaction is a key antecedent of WOM
(Anderson, 1998; Babin et al., 2005; de Matos & Rossi, 2008) and that in cases of
extreme customer satisfaction WOM occurs more frequently (Anderson, 1998).
More recently, researchers such as Brown et al. (2005), Heitmann et al. (2007) and
Wangenheim and Bayon (2007) demonstrate that customer‟s satisfaction regarding
a service or product significant affects on the formation of WOM about a company.
Therefore, within higher education context, we put forward the first hypothesis as
follows:
The first hypothesis (H1): student's satisfaction has a positive effect on the
formation of positive WOM about higher education institutions
2.4.2. Loyalty
Loyalty, a key factor to achieve company success and sustainability, may be
defined as intention or predisposition of a customer to repurchase from the same
organization (Edvardsson et al., 2000), which results from the belief that the value
received from one provider is greater than the value available from other
alternatives (Hallowell, 1996). Helgesen and Nesset (2007) suggest that student
loyalty can be related both to the period when a student is enrolled at the university

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industries. Studies conducted by Boulding et al. (1993) indicates that customers‟
perceptions of service quality are importantly connected with their behavioral
reactions beneficial to the service provider (e.g. generate positive WOM,
recommend the service, etc.)”. Empirical studies propose that service quality is a
factor determining WOM (Bloemer et al., 1999) because in the context of the
service quality field, it can be stated that the consumer with high service quality
perception will have tendencies to recommend the service provider, and thus, a
positive WOM will occur in this manner In addition, recently researches
consistently suggest that service quality leads to customer satisfaction, positive
WOM, attraction of new customers, enhanced corporate image, and so forth
(Zabkar et al., 2009; Zeithaml et al., 2006). Following the above discussion, we
suggest the third hypothesis as below:
The third hypothesis (H3): service quality has positive effect on the
formation of positive WOM about higher education institutions
2.4.4. The perceived value
The perceived value is overall evaluation of customers in concern of the
desirability of a product based on perceptions from they receives and what they
gives for it (Zeithaml, 1988). In other words, perceived value is the equity concept
which refers to customers‟ evaluation of what is fair, right, or deserved for the
perceived cost (money, time, energy consumption, etc.) of the offering (Bolton &
Lemon, 1999). According to Sirdeshmukh et al. (2002), the perceived value of
customers makes equable on behavioral intentions of loyalty toward the service
provider. In addition, Hartline and Jones (1996)‟s research indicates that the
perceived value affects on the behavioral intentions of customers, especially on
WOM. The reason for these intentions is that the more satisfied customers are with
their current service providers, the more likely that they believe they are receiving a
valuable service from their supplier, and thus, have more commitments to the
service provider and try to recommend the members of the reference group to be

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The fifth hypothesis (H5): trust has a positive effect on the formation of
positive WOM about higher education institutions
2.4.6. Reference intention to enroll
Purchase intention involves subjective judgment for future behavior (Engel
et al., 2001); in other words, it stands for what we would like to buy in the future.
According to Lin and Lu (2010), purchase intention may cover some meanings,
such as referring to the possibility for consumers to be „„willing‟‟ to consider
buying; representing what a person „„wants‟‟ to buy in the future; revealing the
decision of a consumer to „„buy‟‟ a company‟s product „„again.” Researches state
that repurchase and positive WOM would be positively correlated to one another
(Bloemer et al., 1999; Ewing, 2000). Moreover, studies of different service sectors
have proved effects of words of mouth on purchasing the services provided by
service companies in different companies. For example, Smith and Vogt (1995)
finds in their study of WOM and advertising and the hotel industry that negative
WOM mitigates consumers „trust in advertisements, brand preference, and purchase
intention. Oneil et al. (2002) do a research in tourism in Australia and find that
verbal recommendations of communicators lead to the increase in the sale of local
drinks. Consistently, Yasvari et al. (2012) make a research in Iran airline companies
and their results prove that WOM can affect on customers‟ intention of referring to
service companies. Based on the discussions above, we prose the following
hypothesis in context of higher education:
The sixth hypothesis (H6): Positive WOM has a positive significant effect
on the intention of students to refer to enroll higher education institutions
2.4.7. Proposed conceptual model and hypotheses
With a review of the literature in the field of word of mouth above, six
proposed hypotheses can be displayed as the conceptual model in figure 2.