UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business
------------------------------

Nguyen Dac Huy

THE INFLUENCE OF RELATIONSHIP
QUALITY ON CUSTOMER LOYALTY – A
STUDY OF VETERINARY COMPANIES AND
THEIR AGENCIES IN VIETNAM
ID: 21120091

MASTER OF BUSINESS (Honours)
SUPERVISOR: Dr. PHAM NGOC THUY

Ho Chi Minh City – Year 2014


ACKNOWLEDGEMENTS
Firstly, I would like to express my sincere gratitude to Dr. Pham Ngoc Thuy, my
Supervisor, who has given me great guidance, inspiration and especially her motivation,
thanks for her valuable advice, suggestions and resources that helping me in accomplishing
this study.
Secondly, I would like to express my sincere thanks to all professors, tutors and officers of
MBus Program for valuable lectures, academy knowledge and your experiences transfer
throughout the period of courses at International School of Business.
I want to express my special thanks to all my colleagues, friends, customers in veterinary
medicine industry for your advice, cooperation and supports during the pilot and official
survey. Without your support, I could not successfully complete my thesis.
Ho Chi Minh City, Vietnam,

 

 

 


Table of Content
Acknowledgement....................................................................................................................ii
Abstract....................................................................................................................................iii
CHAPTER 1: INTRODUCTION
 ..............................................................................................................................
 1
 
1.1
 

Research background
 .............................................................................................................................................
 1
 

1.2
  Research problem
 .....................................................................................................................................................
 2
 
1.3
  Research objectives
 .................................................................................................................................................

 

2.2.1
  Relationship quality
 ...............................................................................................................................................
 6
 
2.2.2
  Trust
 ..............................................................................................................................................................................
 6
 
2.2.3
  Commitment
 .............................................................................................................................................................
 6
 
2.2.4
  Satisfaction
 .................................................................................................................................................................
 7
 
2.2.5
  Customer Loyalty
 .....................................................................................................................................................
 7
 
2.3
 


CHAPTER 3: RESEARCH METHODOLOGY
 ..............................................................................................
 11
 
3.1
 

General approach
 ..................................................................................................................................................
 12
 

3.2
  Research methodology, Data collection and sample size
 ........................................................................
 13
 
3.2.1
  Step 1: Qualitative study
 .....................................................................................................................................
 13
 
3.2.2
  Measurement scale
 ..............................................................................................................................................
 14
 
3.2.3
  Step 2: Pilot
 .............................................................................................................................................................

 
3.3.
 

Data analysis
 ..........................................................................................................................................................
 19
 

3.3.1
  Exploratory Factor Analysis (EFA)
 ...............................................................................................................
 19
 
3.3.2
  Reliability Analysis
 ..............................................................................................................................................
 20
 
3.3.3
  Multi-linear regression analysis
 ......................................................................................................................
 21
 
3.4
 

Chapter 3 summary
 .............................................................................................................................................
 22

  Cronbach Alpha reliability analysis
 ..............................................................................................................
 26
 
4.2.2
  Exploratory Factor Analysis
 ..............................................................................................................................
 28
 
4.3
  Hypotheses testing
 ................................................................................................................................................
 34
 
4.3.1
  Testing Assumption of Multiple Regressions
 .............................................................................................
 34
 
4.3.2
  Evaluate and test the relevance of the model
 .............................................................................................
 35
 
4.3.3
  Testing Hypotheses
 ..............................................................................................................................................
 35
 
4.4

 
5.1
  Research overview
 ................................................................................................................................................
 43
 
5.2
 

Key Findings
 .........................................................................................................................................................
 44
 

5.3
  Managerial Implicamtions
 .................................................................................................................................
 44
 
5.4
  Limitations
 ..............................................................................................................................................................
 46
 
References
 ...........................................................................................................................................................................
 47
 

Appendices...............................................................................................................................52


vii
 

 

 


CHAPTER 1: INTRODUCTION
1.1

Research background
Nowaday relationship quality is a critical success factor that influences the

competitiveness of an organization. Relationship quality is one of the important outcomes of
marketing activity.Hennig-Thurau and Alexander (1997) argued that relationship quality
represents the relationship between the firms and the customers. (p. 737 – 764). Nowadays
because of competitive environment among companies,losing customers is very costly for
companies (Athanasopoulou, 2009, p. 583-610).Researchers have concluded that there is
more times expensive to acquire new clients than to keep existing ones. So that, companies
have made efforts to developing and maintaining a long-term relationships with their
customers in order to create customer loyalty. Scant empirical research has been completed
that has examined the group environment, or the affective states within it, such as trust,
commitment, satisfaction and price as explaining the effects of relationship quality.
Vietnam is an agricultural country, so the livestock sector has a huge role in the
economy, contributing an important part in the economic development of Vietnam. During
the recent years, the industry of veterinary medicine in Vietnam has been developing
rapidly. Recent statistics show that there are now over two hundreds veterinary medicine
companies that are associated with customers systems with thousands of agencies and stores

Analyze the differences of those relationships between groups of duration of
cooperation and number of partners.

1.4 Research scope
The unit analysis in this research is organization so this research was investigated on
the owners and director of the veterinary agencies.

2
 

 

 


In terms of geography, this research carried out from Hue to Ca Mau province. The period
of conducting the survey was last from 10 June, 2014 to early July, 2014.
1.5 Research structure
The research consists of five parts:
-

Chapter I: Introduction. This chapter introduces the research background, management
problem, research problem, research objectives, research significance, and research
scope as well as research structure.

-

Chapter II: Literature review. This chapter reviews previous related theories and
research, as well as to select the research’s factors and formulate the research
hypotheses and model.

experiences related to the research topic
2.1 A brief introduction about veterinary medicine industry
The livestock sector is a key sector in the Agriculture in particularly and in the
economy generally in Vietnam. The development also brought the improvement in the
veterinary drug manufacturing which played an important role in maintain sustainably of
livestock. In order to serve to the needs of farmers and farms, the companies which produce
veterinary medicine was born in turns. In parallel with the development of veterinary
medicine companies is the appearance and development of agencies system. The veterinary
agencies are the customers of veterinary medicine companies. The agency will distribute
and sell products from the company farmers and farms which are the ultimate consumers. In
order to expand market share and increase total revenue, veterinary medicine companies are
now built and developed their system of agents across the country Vietnam. Base on that,
now more farmers have been using drugs from medicine companies Veterinary Vietnam.
Besides, in order to cater to the diverse needs of farmers, veterinary agencies and store are
distributed and sold products from many different companies. Each agency can be a
customer of 2 or 3 or more companies. Thus consumers can select and use the most suitable
products for themselves while the agencies can increase sales by doing business with many
different companies. With the fierce competition in the market today, the veterinary

4
 

 

 


medicine companies offer best policies for agencies in order to create and build up the good
relationship with their agencies. For these companies, customer loyalty is the most priority
concern and important issue.

2.2

Research Concepts

2.2.1 Relationship quality
In the past, a number of authors (e.g. Dwyer and Sejo, 1987; Moorman, Gerald and
Rohit, 1992) found that relationship quality was the association of trust, commitment and
satisfaction. These authors discussed and applied their concept in several contexts, research
projects and lead to the agreement that the concept of relationship quality is the summarize
construct of several different but related factors such as trust, commitment, satisfaction .
Therefore, this study proposes that relationship quality is combination of three components,
which are: trust, commitment and satisfaction.
2.2.2 Trust
Trust enables cooperative human endeavors (Fukuyama, 1996) and is vital to inter
organizational relationships (Gambetta, 1988; Rousseau et al., 1998). According to
Friedman, Kahn and Howe (2000) people naturally trust people, more so than technology.
Trust is also seen as an expression of confidence in an organizational environment. This
leads to cooperative behavior among individuals and groups within and between
organizations (Nandhakumar and Baskerville, 2006).
2.2.3 Commitment
There are various ideas expressed for the definition of the “commitment” concept
suggested by researchers. According to Morgan and Hunt (1994), commitment stems from

6
 

 

 


 

 


factor in affecting customer loyalty. When a customer trusts a business or brand, that
customer is to develop a positive intention toward to the business or brand and they willing
to form a positive buying intention towards the business.
Past research has shown increased trust is cited as critical for relationship success
between the customer and the business (Huang and Chiu, 2006). The development of trust is
effective relationship between both sides in the relationship. A customer will desire and
maintain a relationship with a business if he finds the benefits received to exceed the effort
in obtaining benefits. Therefore, a high degree of trust may lead to increase the relationship
with customer and then increase the customer loyalty in Vietnam veterinary medicine
industry.
H1: Trust has a positive impact on customer loyalty.
2.3.2 Commitment and customer loyalty
A high level of commitment provides the circumstance in which both parties can
achieve individual and mutual targets without fearing of opportunist behavior because more
committed partners will take control and balance short-term problems with long-term goal
achievement. Higher levels of commitment are expected with relationship success (Cai and
Wheale, 2004). Customers who are committed to a relationship might have a greater
propensity to act because of their need to remain consistent with their commitment (Liang
and Wang, 2005, p.66). More committed customers tend to form a positive overall
impression of the total duration of the relationship, including different transactions, positive
and negative, and these customers exhibit strong intentions to stay in the relationship (Du

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of cooperation as well as the agency has the relationships with multiple partners. Therefore
the difference of the duration of cooperative and the number of partners has made different
influences on customer loyalty from relationship quality between companies and agencies in
Vietnam veterinary medicine industry. With the duration as long-term partnership, the
relationship between companies and their agencies is strong and sustainable. Beside that,
having the more number of partners will reflect the good development of agency in the
market.
2.4 Research model

RELATIONSHIP
QUALITY
 

 

TRUST

H1

CUSTOMER
LOYALTY

H2
 

 


CHAPTER 3: RESEARCH METHODOLOGY
This chapter provides information related to the method applied to test the hypotheses.
The chapter includes five parts: general approach, research methodology, measurement
scale, questionnaire explanation, data collection and sample size, and data analysis.
3.1 Research Process
Step 1: This research topic with objectives was formulated.
Step 2: Literature review and theories about the relationship quality and customer loyalty
was reviewed.
Step 3: The, a research hypothesis was developed.
Step 4: A research model was formulated.
Step 5: The questionnaire was developed and the sampling methodology was decided to
ensure the objectives met.
Step 6: The questionnaire was used to interview relevant respondent.
Step 7: After completing the interview step, data was analysed and test the hypothesis and
start writing the report.
Step 8: Summarize the findings and come up with recommendation.

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Identify problem
statement and

objective of qualitative is to explore and clarify the factors of relationship quality affecting
on customer loyalty in veterinary medicine industry which was raised by previous
reseachers and adjust to be more suitable to Vietnam situation. After that, quantitative
research was conducted based on the findings from quantitative phase was specified in the
below parts.
3.2.1 Step 1: Qualitative study
Before researching on a bi scale, a small group of customers will be invited for one on
one interview, objective of this phase is to identify the impact factors on customer loyalty
by initially validating the factors proved by previous researchers and explore new factors in
Vietnam industry. In this thesis, qualitative research was conducts by group of 10
respondents through which key insights, deep-dive information about customer loyalty will

13
 

 

 


be explore. In this step, 10 respondents who are the managers and owners of veterinary
medicine agencies were interviewed.
3.2.2 Measurement scale
The original measurement scale from previous studies was used in Qualitative stage to
test their validity. After listening to customers’

feedbacks, the scales for study were

modified.
3.2.2.1 Trust

TRUST06

company will support agency
Company is a faithful business partner

TRUST07

The agency is secure in dealing with new business situations because

TRUST09

company will support agency.

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3.2.2.2 Commitment
Measurement of Commitment was also based on the Anderson and Narus (1986)
scales. Commitment was measured by four items.Commitment scale items for this study are
symbolized by COMMI
Statement

Coding

The agency is committed to the preservation of good working

SATIS21

company.
This experience of products and services from this company has

SATIS22

worked out as well as I thought it would.
I’m sure it was the right thing for me to use products and service of

SATIS23

this company.
3.2.2.4 Customer Loyalty
In the veterinary industry, customer loyalty was measured using the seven items based
on the Luarn and Lin (2013) scales. Customer Loyalty scale items for this study are
symbolized by LOYAL.

15
 

 

 


Statement

Coding



of company

The measurement scale for this study will be based on Likert scale ranging from 1 (totally
disagree) to 5 (totally agree).
(1): Totally disagree
(2): Disagree
(3): Neutral
(4): Agree
(5): Totally Agree
3.2.3 Step 2: Pilot
Pilot before quantitative research was conducted on five Vietnamese customer to finetune
some wordings and ensure statements are easy to understand and use layman language.
After this pilot, there are no changes in the key content of the questionnaire as most
customers feedbacked the questionnaire as easy to understand. After the pilot conducted and
the adjusted questionnaire, the research moved to next step.
16
 

 

 


3.2.4 Step 3: Quantitative study
The quantitative questionnaire in thesis was developed basing on both applying the
theoretical background as well as the modified measurement items from qualitative
researches as stated. The research used five-point Likert scale with 1 mean “Strongly
disagree” to 5 means “Strongly agree”. In addition, before the full fieldwork for
quantitative, a pilot test was conducted on 10 respondents to check if all the questions are

agencies and stores in the Southern of Vietnam which spread from Hue to Ca Mau province.
Questionnaire will be distributed to all the agencies and the face to face interview will be
executed to the consisting of owners or directors of these agencies.

Among those

respondents, there is around 90 % of the questionnaire qualified for the analysis.
Those are unqualified including unqualified questionnaire with skipping questions or
illogical answers or conflict answer. Those non-qualified questionnaire were removed out of
the main sample.
3.2.7 Questionnaire explanation
The final questionnaire was structure into 3 main parts
• Screening: This part is to ensure the right qualified respondents selected. As the target
of the survey who currently is the manager or owner of a veterinary medicine agency
and has the business relationship with veterinary medicine companies. Those who are
not a manager or owner of any veterinary medicine agency will not go ahead
answering the questions.
• Main questionnaire: This part is asked to run the model to see the extension to which
respondents agree with different statement in the questionnaire. Those are critical
parts to measure the impact of different factors of relationship quality on customer

18