MINISTRY OF EDUCATION AND TRANNING
UNIVERSITY OF ECONOMICS, HO CHI MINH CITY
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TRƢƠNG THỊ TUYẾT 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
------------

TRƢƠNG THỊ TUYẾT DUNG

INFLUENTIAL FACTORS ON WORD
OF MOUTH IN SERVICE INDUSTRIES
(THE CASE OF HIGHER EDUCATION
IN HOCHIMINH CITY, VIETNAM)

Subject: Master of Business Administrator
Code: 60.34.05

MASTER THESIS IN BUSINESS ADMINISTRATION

Trương Thị Tuyết Dung


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TABLE OF CONTENT
ABSTRACT ..................................................................................................... 7
CHAPTER 1 INTRODUCTION ................................................................... 8
1.1. Introduction............................................................................................................................................... 8
1.2. Research Objectives ................................................................................................................................ 10
1.3. Research methodology and research scope ........................................................................................... 11
1.4. Significances of the research .................................................................................................................. 11
1.5. Structure of the research ........................................................................................................................ 12

CHAPTER 2 LITERATURE REVIEW ..................................................... 12
2.1. Introduction............................................................................................................................................. 12
2.2. Higher education as a service ................................................................................................................. 13
2.3. Word-of-Mouth (WOM) ........................................................................................................................ 13
2.3.1. Definition & characteristics ................................................................................................................ 13
2.3.2. Role of WOM in decision of consumers ............................................................................................. 15
2.3.3. Effectiveness of WOM ......................................................................................................................... 17
2.4. Development of research model and hypothesis .................................................................................. 18
2.4.1. Satisfaction ........................................................................................................................................... 18
2.4.2. Loyalty .................................................................................................................................................. 19
2.4.3. Service quality ...................................................................................................................................... 20
2.4.4. The perceived value ............................................................................................................................. 21
2.4.5. Trust ...................................................................................................................................................... 22
2.4.6. Reference intention to enroll ............................................................................................................... 23
2.4.7. Proposed conceptual model and hypotheses ...................................................................................... 23
2.5. Summary ................................................................................................................................................. 24

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
4.4.2. The adjusted research hypothesis ....................................................................................................... 51
4.5. Testing the adjusted research model and the hypotheses .................................................................... 51
4.5.1. Testing the adjusted research model .................................................................................................. 51
4.5.2 Results of testing hypotheses ................................................................................................................ 54
4.5.3. Boostrap test ......................................................................................................................................... 56
4.6. Summary ................................................................................................................................................. 57

CHAPTER 5 CONCLUSION AND IMPLICATION ............................... 58
5.1. Introduction............................................................................................................................................. 58
5.2. Findings ................................................................................................................................................... 58
5.3 Recommendations ................................................................................................................................... 58
5.4. Limitation and future research .............................................................................................................. 59

LIST OF REFERENCES ............................................................................. 60
APPENDIX 1 QUESTIONNAIRE .............................................................. 71
APPENDIX 2 CRONBACH’S ALPHA ANALYSIS ................................. 79
APPENDIX 3 EXPLORATORY FACTOR ANALYSIS (EFA) .............. 82
APPENDIX 4 CFA , SEM RESULTS ......................................................... 87


Figure 4.5. Standard regression of modified structural model ..................................54


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ABSTRACT
This study aims to exam the factors effective in the formation of word-ofmouth about the services of higher education and their results among students in Ho
Chi Minh City.
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

population) are at higher education institutions (Runckel, 2012); i.e., Vietnam‟s
proportion of college students is still half that of Thailand and a third that of South
Korea (Maine International Trade Center, 2010). Moreover, according to data from
MOET in 2007, higher education in Vietnam faces many challenges such as ratio of
students to faculty is low at 1/30; quality of faculty is not as high as needed (for
example, only 14% of faculty have a doctoral degree and 33% have a masters
degree); quality assurance in education remains weak; enrollment is concentrated in
a few academic disciplines (nearly 50% of all students major in economics/
business). Therefore, it is a requirement for higher education institutions to make
efforts to meet demand of modern business society.
In addition, as higher education provision is a service and students are
expected to pay fees for their educational trainings, it seems appropriate that higher
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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service industries such as higher education in developing countries like Vietnam.
Therefore, the present study has these objectives :


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

Identifying important factors effective in the formation of positive

word-of-mouth in higher educational sector in Hochiminh City.


Adjusting measurement scale and testing theoretical framework on the

factors effective on the formation of positive word-of-mouth about higher education
service
1.3. Research methodology and research scope
This study was conducted by 2 steps: pilot study and main study.
In the pilot study, an approach was conducted by interviewing the students
who have experiences in studying in higher education institutions in Ho Chi Minh
city to explore whether the scales for measuring the construct sections are suitable
or not. After that, some necessary adjustments have been made.
In the main study, a quantitative approach was used. Data analysis is
conducted to test reliability of the measurement scales relied on Cronbach‟s alpha
coefficient and Exploratory Factor Analysis (EFA). Then the Confirmatory Factor
Analysis was used to test the validity of the measurement scales. After that,
structural equation modeling (SEM) was employed for testing the proposed model
and hypotheses. SPSS software version 16 and Amos 21 was used for data analysis
in this study.

LITERATURE REVIEW
2.1. Introduction
This chapter reviews the theoretical basis of the study about influential
factors on words of mouth in service industries and also presents a conceptual
model including hypotheses of the study. Chapter 2 is composed of four main parts:
(1) literature review of higher education as a service, (2) literature of word-ofmouth, (3) literature review of factors affecting on word of mouth in services
industries and reference intention as well as proposed conceptual model and
hypothesis of the study.


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2.2. Higher education as a service
Higher education can be regarded as a service industry (Oldfield and Baron,
2000). Students are regarded as consumers of service, being “partners” in the
learning process as they consciously pick, choose and buy the service (Yorke, 1999).
Moreover, researchers such as Barnett (2011) also consider students as key
stakeholders in the process of higher education while Dill and Soo (2005) value the
importance of their opinion for improvement in quality of higher education.
Hennig-Thurau et al. (2001) point out that educational services “fall into the field
of services marketing” and differ from other professional services in the manner
that educational services play a central role in the students‟ lives and students
require huge amounts of motivation and intellectual skills to attain their goals.
Furthermore, educational services have several service characteristics such as
intangible, complex, perishable, heterogeneous (Swanson and Davis, 2000; Voss et
al., 2010). In addition, the professor‟s teaching efforts are simultaneously
“produced” and “consumed” with both professor and student being part of the
teaching experience (Shank et al., 1995). Therefore, as a service, it is believed that
higher educational institutions‟ success primarily depends on the efforts of both
students as consumers and professors as service providers (Cooper, 2007).

the WOM communication was defined as the act of telling at
least one friend or acquaintance about the dissatisfaction
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
telling others about the unsatisfactory experience (that is,
negative WOM)
WOM communication is conceptualized herein as a group
phenomenon – an exchange of comments, thoughts, and ideas
among two or more individuals in which none of the
individuals represent a marketing source
WOM refers to information communications between private
parties concerning evaluations of goods and services
WOM is “an act by consumers providing information to other
consumers.”
WOM is “the exchange of information about a product or
service among people who are independent of the producer”

As it is indicated from table 1 that WOM is often defined as being informal
and non-commercial communication and as an exchange of information between
two or more individuals regarding a product or a service. Moreover, Soderlund &
Rosengren (2007) expose that WOM is the informal transfer of positive or negative
purchase and consumption-related behavior between consumers. Brown et al (2005)
extend the definition when they propose that in its broadest sense, a WOM
communication includes any information about a target object (e.g. company, brand)
transferred from one individual to another. These communications can be mutual
conversations or one-way suggestions and recommendations ; live or recorded; in
person, by telephone, by email, or by any other means of communication; one-toone, one-to-many, or group discussion as long as they are from or among people
perceived as non-commercial interest in encouraging others to a product or a service

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 postpurchase uncertainty (Martilla, 1971).


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WOM is likely to be more important in service contexts as service is
intangible, non-standard, non-guaranteed, and thus, difficult to evaluate prior to
purchase, higher perceived risk than goods, and impossible for consumers to
undertake a pre-purchase trial to reduce perceived risk (Zeithaml et al., 1985).
Consumers tend to engage in WOM conversation with the aim to gain more
information that will help them eventually reduces the risk and understand the
service prior to consumption (Bristor, 1990). Service consumers usually think of
asking for opinions first before making purchase decision (Murray, 1991); therefore,
they rely on the opinions of other consumers to form expectations and evaluate the
service (Bansal, 2000). For instance, a research by Walker (1995) reveals that over
40 percent of Americans actively seek the advice of family and friends when they
shop for services.
In service sector, researchers find that WOM‟s influence is likely different
from one service to another. Because of the characteristics of services, consumers
make evaluations by three criteria : 1) search qualities of the service which
encompass the attributes of the service that consumers can determinate prior to
purchase; 2) experience qualities of the service which are described as the attributes
of the service that consumers

can ascertain during the consumption after the


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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investigates that only 14 per cent of people believe what they see, read or hear in
advertising while, surprisingly, 90 per cent of people will believe their family,
friends, or colleagues who have experienced a service or product because they know
they do not have a vested interest in it. More recently, Hogan et al. (2004) note that
WOM can be three times effective than advertising. Marsden at al. (2005)
concludes that WOM is at least twice as powerful as traditional marketing
communications in term of influencing sales and is about 50% more effective than it
was in 30 years‟ time due to the growth of electronic WOM via mobile and internet.
In addition, Trusov et al. (2009) go on to conclude that WOM communication
plays a significant role when firms want to acquire new customers and that WOM is
likely to have larger and longer lasting effects than other marketer-controlled
sources. Furthermore, nowadays, WOM is considered as powerful communication
tool because of its two distinctive functions – persuasion and the ripple effect

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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as well as after the student finishes his or her studies. Loyalty is considered to be
depend on a favorable attitude that is based on cognitive, affective and conative
antecedents and on positive repurchase intentions (Dick and Basu, 1994; Gremler
and Brown, 1999). It is indicated that loyal customers tends to make positive
recommendation to friends and relatives, have more incentives to get new
information as well as resist more negative information about

the organization

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



relationship quality (along with satisfaction and commitment), has positive
influences on WOM (Dwyer et al., 1987; Hennig-Thurau et al., 2002). According
to the literature stated, the fifth hypothesis can be suggested as follows:


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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