INTRODUCTION
Rational of the study
Infrastructure construction is a key focus in Vietnam, driven by rapid urbanization and the growing housing demands of the middle class, which has led to increased public works and high-rise projects This surge presents significant growth opportunities for the building materials industry, particularly the ceramic sector, which has experienced stable growth over the past decade According to the Vietnam Building Ceramic Association, the building materials market grew by 10% annually from 2000 to 2005, with an impressive 20% annual growth in the subsequent two years As a result, Vietnam's ceramic tile market has become increasingly attractive to both domestic and foreign investors, with 20 companies currently participating To thrive in this competitive landscape, ceramic companies must prioritize customer retention, especially among valuable business clients, while also striving to acquire new customers to maximize profits.
In the competitive landscape of the ceramics industry, businesses must prioritize customer retention, especially during challenging times, while avoiding the pitfalls of maintaining unprofitable clients Identifying the vital 20% of customers that contribute to 80% of profits is essential Agents, as company representatives, play a crucial role, generating the majority of revenue Conducting research to pinpoint the key factors influencing customer retention can empower organizations to develop effective strategies that ensure mutual long-term benefits for both the company and its clients.
The statement of the problem
Numerous studies have highlighted the advantages of customer retention for organizations (Colgate et al., 2007; Reichheld and Sasser, 1990), yet research on B2B customer retention remains limited While many companies acknowledge the economic benefits of retaining existing customers over acquiring new ones, many ceramic companies continue to prioritize attracting new customers rather than focusing on the retention of their current clientele This trend is driven by traditional beliefs centered on profit and customer satisfaction, leading to greater investment in customer satisfaction initiatives rather than retention strategies.
Organizations often believe that expanding their market or acquiring new customers is the key to maximizing profits However, research by Reichheld and Sasser (1990) indicates that retaining existing customers is more cost-effective, with a mere 5% increase in customer retention potentially boosting profitability by 25% to 85%, depending on the industry Long-term customer relationships lead to reduced switching behavior, lower price sensitivity, decreased service costs, and increased word-of-mouth referrals Therefore, focusing on customer retention allows firms to save costs and enhance profits by fostering strong, lasting relationships that encourage repeat business.
Customer satisfaction is traditionally regarded as essential for a company's success and long-term competitiveness, as it encourages repeat purchases and customer loyalty However, even highly satisfied customers may switch to other suppliers Research by John Wiley & Sons, Inc (1997) indicates that a weak or nonexistent relationship between customer satisfaction, customer relationship management, and customer loyalty can lead to increased switching behavior Switching barriers significantly influence customers' decisions to remain with their current providers, acting as a crucial variable in the relationship between satisfaction and retention (Lee & Cunningham, 2001; Colgate & Lang, 2001; Jones et al., 2000; Kim et al., 2004) Therefore, companies must prioritize customer retention strategies moving forward.
In today's competitive ceramic industry and challenging building material market, firms must enhance their adaptability and differentiate themselves from competitors to thrive amidst economic uncertainty.
Customer retention is essential for organizations as it encourages existing customers to continue purchasing from their current providers Even dissatisfied customers can be retained due to switching barriers, which significantly impact customer retention rates.
Despite the current success of the company, systematically enhancing the customer retention strategy can significantly boost its competitive edge This study focuses on the factors influencing switching barriers for agents in Vietnam's ceramic industry The thesis aims to deepen the understanding of customer retention in the B2B sector, providing insights to improve company-customer relationships and optimize the operational conditions of ceramic companies.
Research objective
The purpose of this research as following:
- To identify significant factors of switching barrier effect on customer retention in Ceramic Companies in Vietnam
- To measure the effect of these key factors related with customer retention in Vietnam ceramic companies.
Research questions
- What are the main determinant factors impacting on B2B customer retention?
- How can these factors influence on customer retention by the view of agents in Ceramic Companies in Vietnam?
Scope of the research
This research focuses on the agents, specifically B2B customers, of My Duc Ceramic Company, who also serve as sales representatives for Dong Tam Group and White Horse Ceramic Company, as well as other ceramic companies in Vietnam, due to time constraints.
This research will focus on major companies, specifically My Duc Ceramic, Dong Tam, and White Horse, with conclusions drawn solely from the information obtained from these entities.
Research methodology
This research is conducted by using qualitative approach through interviewing experienced experts and quantitative method
The data collected from the survey was primarily obtained through structured interview The questionnaires are delivered to agents of MDC in three main markets in Vietnam directly
Qualitative research was conducted through in-depth interviews with key managers at My Duc Ceramics Company, including the International Sales Manager, Local Sales Manager, and Service Team Manager This research aimed to identify and refine customer retention dimensions, with the findings serving as the foundation for developing the official study questionnaire.
Quantitative research was conducted by distributing questionnaires to agents of MDC in Hanoi City, Danang City, and Ho Chi Minh City The collected data will be analyzed using SPSS version 16.0.
The structure of the research
This research includes five chapters:
As presented, this chapter mentioned about rational of the research, statement of the problem, research objectives, research questions, scope and limit of the research and research methodology
This chapter gives theories related to customer retention or background for the research
This chapter develops the research model, hypotheses, research process and a methodology for data analysis
Chapter 4: Research finding and result
This chapter gives the research finding according to analysis the collected data
This concluding chapter summarizes key findings and offers recommendations for enhancing customer retention strategies in Vietnamese ceramic companies, while also outlining suggestions for future research directions.
LITERATURE REVIEW
Ceramic tile
Ceramic tile has been crafted for over 4,000 years to meet human needs for aesthetically pleasing, durable, and functional living spaces Historical evidence of beautiful tiled surfaces can be found in ancient structures like the pyramids, Babylonian ruins, and Greek cities The Near East is credited with the invention of decorative tile work, which has enjoyed widespread popularity and diverse designs By the second half of the 12th century, decorated tiles became common in Europe, with notable contributions from Spain, Italy, England, the Netherlands, and Germany Today, several Asian countries, including Malaysia, Thailand, Indonesia, Sri Lanka, China, India, and Vietnam, have emerged as significant producers of ceramic tiles.
Ceramic tiles are crafted from clay, sand, and other chemicals, shaped and then either sun-dried or fired in a kiln at high temperatures to produce the final product They are classified into two categories based on the firing process: unglazed tiles, which are fired once, and glazed tiles, which undergo a second firing Additionally, ceramic tiles
Ceramic tiles are versatile and can be applied to various surfaces such as walls, floors, ceilings, and fireplaces, as well as in murals and as exterior cladding for buildings Their aesthetic appeal and exceptional durability make them a popular choice for commercial spaces, especially in high-traffic areas like lobbies and restrooms.
Vietnam's ceramic production boasts a rich history that dates back to the Bac Son period (4th-3rd centuries BCE) and saw significant growth during the Lý period (1010-1225) As demand for high-quality pottery and porcelain surged, numerous ceramic production centers emerged across the country The Vietnam Ceramic Association was established in 1986, starting with three factories and expanding to over 20 today Leading brands such as My Duc, Dong Tam, and White Horse have adopted advanced technologies to cater to the high-end market My Duc ceramics is renowned for its premium quality, while Dong Tam offers a diverse range of designs for the mass market, and White Horse ranks third among top ceramic brands in Vietnam.
Vietnam has emerged as a significant ceramics supply hub, driven by its strong design capabilities and artistic quality The country's ceramics industry, supported by various craft villages across provinces, successfully blends traditional craftsmanship with contemporary influences As a result, ceramics account for over 60% of Vietnam's total output Today, Vietnam stands as the largest tile manufacturer in Southwest Asia and ranks among the top tile producers globally.
The ceramic tile industry has experienced significant growth in recent years, highlighting its potential However, the market faces challenges due to an oversupply of products, driven by numerous domestic and international manufacturers, particularly from China, where tiles are often sold at lower prices than those of local companies Furthermore, the economic crisis has adversely impacted the ceramic sector, underscoring the urgent need for improvements to enhance competitiveness and sustainability.
B2B customer
B2B customer refers to the established practice of business-to-business transactions, which focus on selling products and services to companies and wholesale buyers In contrast, B2C, or business-to-consumer, targets individual customers While many organizations operate with both B2B and B2C elements, some companies specialize exclusively in B2B services Notably, the majority of products and services sold in the market are classified as B2B.
B2B customers exhibit distinct characteristics compared to B2C customers, as B2B products tend to be more complex and B2B buyers are generally more rational in their decision-making In the B2B market, personal relationships hold greater significance, and buyers often engage in longer-term purchasing commitments Additionally, B2B customers can be categorized into needs-based segments, which show similarities across various industries.
A price-focused segment, which has a transactional outlook to doing business and does not seek any ‗extras‘ Companies are often small
The target segment consists of quality and brand-conscious consumers who prioritize premium products and are willing to invest in them Companies catering to this market aim for high profit margins, emphasizing the strategic significance of their products and services Typically, these businesses are medium to large in size, reflecting their commitment to delivering exceptional value.
A service-oriented segment demands exceptional product quality and variety, along with superior after-sales support, timely delivery, and excellent customer service This segment typically engages in purchasing substantial volumes of products.
A partnership-oriented segment typically comprises key accounts that prioritize trust and reliability, viewing the supplier as a strategic partner These customers consider the products and services essential to their operations and often represent larger enterprises.
B2B communities are typically smaller and have more focused needs compared to B2C communities, often revolving around specific products, services, or problem-solving scenarios The influence of B2B communities on organizations is significant, directly affecting core operations like customer service, marketing, product development, and sales To excel in B2B customer service, companies must invest in well-structured training programs for employees to effectively address customer issues Both internal and external training methods can be employed, allowing organizations to choose the best approach based on their goals A dedicated customer service department, staffed with knowledgeable consultants, is essential to manage issues before they escalate and harm the company's reputation Consequently, organizations should prioritize time and resources for customer service activities to ensure a positive impact on their overall success.
B2B buyers are more discerning due to their responsibility for making informed purchasing decisions for their companies They prioritize quality to minimize risks and are willing to invest more than typical consumers, expecting greater value in return Additionally, they seek active engagement with the products or services provided, rather than simply being passive recipients.
Business customers are often seen as more valuable long-term clients compared to individual consumers, primarily due to the significant volume of sales they generate The presence of a B2B component is crucial for manufacturers, as it opens the door to lucrative sales opportunities that would otherwise be missed Consequently, retaining these business clients offers substantial benefits, making the potential loss of such customers a serious concern.
Customer satisfaction
Customer satisfaction is a crucial concept for both marketers and consumer researchers, as it plays a vital role in achieving success in competitive markets Numerous definitions of customer satisfaction exist, highlighting its significance in understanding consumer behavior and preferences.
Customer satisfaction is defined as an overall attitude or emotional response towards a service provider, reflecting the difference between customer expectations and actual experiences (2004) Zeithaml and Bitner (2000) describe it as the evaluation of a product or service based on its ability to meet customer needs and expectations Kotler (2000) adds that satisfaction arises from the feelings of pleasure or disappointment that result from comparing perceived performance with expectations Ultimately, customer satisfaction is a response to whether a company's performance meets or exceeds these expectations, making it a vital objective for businesses.
The relationship between customer satisfaction and customer retention
Despite over 1,200 articles on customer satisfaction, recent studies highlight its crucial role in customer retention, making it a key focus in relational marketing (Rush & Zahorik, 1993) Kotler (2000) emphasizes that higher customer satisfaction leads to increased loyalty and reduced churn However, market competitiveness can alter this dynamic; in less competitive markets, customers may remain loyal despite dissatisfaction, while in highly competitive environments, even satisfied customers may switch providers (J.Best, 2009) Kordick (1988) found that 15% of unsatisfied customers returned to the same dealers, and Gierl (1993) reported that 40% to 62% of satisfied customers still changed brands Notably, customer retention rates for dissatisfied customers surpassed those of satisfied customers in eight out of nine product categories examined.
Many marketers believe that customer retention is synonymous with satisfaction and repurchase intention However, satisfaction does not guarantee continued purchases from the same provider, as there can be a disparity between what customers express and their actual behavior Even if customers are pleased with a product, service, or brand, they may choose to switch to competitors that offer better value Consequently, in a highly competitive market, the correlation between customer satisfaction and retention can be weak or even absent in certain analyses.
Customer‘s retention
Customer retention is a multifaceted concept often defined as the act of keeping customers engaged with a brand, encompassing aspects such as repurchase intentions, referrals, and brand loyalty Zeithaml et al (1996) highlight that retention involves not only the intention to repurchase but also the influence of positive or negative word of mouth and price sensitivity Aspinall (2001) further emphasizes that retention is linked to customer satisfaction and the establishment of strong relationships, reflecting customers' choices to repeatedly engage with a company's products In essence, customer retention strategies aim to minimize defections by ensuring that customers remain active and satisfied, ultimately reducing the costs associated with acquiring new customers.
Customer retention differs from customer loyalty, despite both being sources of profit (Oyeniyi and Abolaji, 2008) Loyalty encompasses both attitudinal and behavioral dimensions, where behavioral loyalty is defined by repeat purchases and purchasing patterns, while attitudinal loyalty reflects a customer's commitment and positive feelings towards a brand However, research by Uncles et al (2003) and Blackwell et al (1999) indicates that brand attitude is a weak predictor of repeat purchases, as individual characteristics and situational factors play significant roles Customer retention lacks attitudinal elements (Jacoby & Chestnut, 1978), meaning a customer can remain with a provider without being loyal Retention may stem from mandatory or voluntary reasons, while true loyalty represents a deeper commitment that prevents customers from switching to competitors, even when attractive offers are available.
Successful customer retention begins with the initial interaction between an organization and its customers, extending throughout the entire relationship It involves surpassing customer expectations to foster loyalty, emphasizing customer value over mere profit maximization and shareholder interests in the core business strategy.
To enhance customer retention rates, businesses should focus on value-added services that benefit both the company and its customers in the long run By fostering positive relationships, these services enable companies to retain existing customers over competitors, as customers begin to view the organization as a partner rather than just a supplier This partnership approach aligns the interests of the organization with those of the customers, emphasizing the importance of understanding and addressing the unique needs of each customer for mutual success.
Repurchase intention refers to a customer's assessment of the likelihood of buying a specific service again from the same provider, influenced by their current situation and future circumstances (Hellier et al., 2003) This intention is shaped by various factors, including psychological influences, economic conditions, environmental considerations, and the customer's capacity and necessity to make a purchase (Pickering and Isherwood, 1974).
Customer retention significantly influences profitability, as revenue from long-term customers can exceed that of regular customers by more than 1.7 times (John Fleming and Jim Asplund).
Customer retention is crucial for business profitability, as acquiring new customers is significantly more expensive—up to five times higher—than retaining existing ones A higher customer retention rate leads to greater profit impacts, as long-term customers are less likely to switch brands and are generally less price-sensitive These loyal customers often promote the brand through word-of-mouth, are satisfied with their relationships, and are more inclined to purchase additional high-margin products Consequently, investing in customer retention strategies can enhance overall profitability, making it a vital focus for businesses aiming to convert customer loyalty into increased revenue.
Increasing customer retention not only simplifies and enhances employee satisfaction but also contributes to a cycle of improved customer satisfaction Happy employees lead to happier customers, creating a positive feedback loop Therefore, companies should focus on providing compelling reasons for customers to stay loyal in the long term.
The impact of switching barriers on customer retention is gaining attention among researchers, as traditional models often emphasize customer satisfaction as the primary factor influencing retention While satisfied customers can still be enticed by competitors (Jones and Sasser, 1995), some dissatisfied customers may remain loyal due to the perception that alternatives won't offer better service (Reichheld, 1996) This indicates that satisfaction alone does not guarantee retention, particularly in highly competitive markets Consequently, the concept of switching barriers has emerged, highlighting their significant role in influencing customers' decisions to remain with their current providers Research indicates that switching barriers serve as an adjustment variable in the relationship between customer satisfaction and retention (Lee & Cunningham, 2001; Colgate & Lang, 2001; Jones et al., 2000) Kim et al (2004) further explore this dynamic by examining the effects of both customer satisfaction and switching barriers on retention in her thesis.
In a highly competitive market, customer satisfaction alone is insufficient to ensure loyalty, as customers may switch providers due to numerous available options Research indicates that switching barriers play a crucial role in customer retention, as they can be perceived positively or negatively These barriers, which encompass social and emotional costs associated with changing providers, significantly impact customer retention by making transitions difficult or costly (Fornell, 1992; Jones et al., 2000) Studies by Dwyer et al (1987) and Heide and Weiss (1995) suggest that customers are inclined to maintain existing relationships to avoid economic switching costs, which can deter them from moving to alternative service providers even when dissatisfied Empirical evidence from Ping (1993) further supports the notion that switching costs influence retailer-supplier loyalty.
Many authors researched and defined the switching barrier variables following:
Tore Nilssen 1985 Endogenous cost: attractiveness of alternatives
Rusbult et al 1986 Alternative quality: how appealing are the alternatives
Investment in relation: time, energy, self-disclosures, shared experiences, a number of children, etc…
1989 Uncertainty cost: cost associated with the psychological uncertainty that accompanies the performance of an untested service provider
Set-up cost: the time and effort associated with the process of initiating a relationship with a new provider, or setting up a new service for initial use
Contractual agreements frequently provide economic advantages for remaining with an established firm, making the potential loss of these benefits a significant deterrent to switching providers.
Soft assets: procedural investments and customer-specific expertise which enhance switching cost perceptions
Switching cost: transaction, learning and artificial
Fornell 1992 Search costs, transaction costs, learning costs, loyal customer discounts, customer habit, emotional costs, cognitive effort, financial, social and psychological risk
Ping 1993 Switching cost: cost in the time and money to change supplier
Attractiveness of alternatives: how much better or worse in various dimensions an alternative wholesaler would be
Investment: how much time, energy and money invested in the relationship
Uniqueness of investment in this wholesaler
Jones et al 2000 Interpersonal relationship: friend or bond with employee
Switching cost: hassle to change, time and effort
Attractiveness of alternatives: how good other suppliers would be in comparison with current supplier
Table 2.1: Define of switching barrier variables
Switching barriers are influenced by various factors, as defined by researchers Fornell (1992) and Jone et al (2000) describe switching barriers as the difficulties or costs associated with changing carriers, brands, or products, particularly for dissatisfied customers Fornell outlines several components of these barriers, including search costs, transaction costs, learning costs, loyalty discounts, customer habits, emotional costs, cognitive effort, and various risks—financial, social, and psychological Tore Nilssen (1992) further categorizes these costs into endogenous and exogenous types; endogenous costs refer to the internal efforts required to retain customers, while exogenous costs relate to the attractiveness of alternative options presented by competitors.
Despite extensive research on switching barriers in consumer markets, studies in B2B markets remain limited Key factors influencing switching barriers include switching costs (Lam et al., 2004; Nielson, 1996; Sengupta et al., 1997; Wathne et al., 2001), interpersonal relationships (Young and Denize, 1995), and the attractiveness of alternative providers (Ping, 1993, 1997, 2003) Kim et al (2004) explored these factors in the context of loyalty within the Korean mobile telecommunications sector Similarly, Ho Thi Phuong Minh (2009) applied this model to assess the impact of switching barriers on customer retention in Vietnam's mobile service market Thus, switching costs, interpersonal relationships, and the attractiveness of alternatives are crucial elements in understanding switching barriers.
To enhance retention rates, even among dissatisfied customers, businesses must acknowledge the perceived risks associated with switching providers By implementing strategies that create high switching costs, companies can effectively discourage customers from migrating to competitors' products, brands, or services.
Switching costs refer to the expenses and challenges customers face when changing from one service provider to another Numerous studies highlight that these costs significantly impact customer retention, as higher switching costs create risks and burdens for consumers (Jone et al., 2000; Keaveney, 1995).
Research model and hypothesis
The literature review identifies four key factors influencing switching barriers that significantly impact customer retention in ceramic companies in Vietnam: Move-in costs, Benefit/Loss costs, Interpersonal relationships, and the Attractiveness of alternatives.
Figure 2.2: The suggested research model
Move-in costs refer to the expenses customers incur when switching to new service providers If customers view these costs as excessive, they may decide against transitioning to a new provider This leads us to our initial hypothesis.
H 1 : Move-in cost has positive impact on customer retention
When transitioning to new suppliers, customers may forfeit the advantages offered by their current providers, a phenomenon known as Benefit or Loss costs If these costs are minimal and not significant enough to concern agents, customers can effortlessly switch to competitors This scenario supports the second hypothesis.
H 2 : Benefit/ Loss costs has positive impact on customer retention
* Interpersonal relationship is more important in business because it takes benefit for both company and agent And the long term interpersonal relationship between the
Loss costs Move - in cost company and customer offers a lot of benefits to the customer So, we suggest the hypothesis as following:
H 3 : Interpersonal relationship has positive impact on customer retention
The attractiveness of alternatives significantly influences retention decisions in a competitive market With numerous options available, agents can easily switch to new providers that offer greater benefits, making it essential for businesses to enhance their value propositions to retain customers.
H 4 : Attractiveness of alternatives has negative impact on customer retention
RESEARCH DESIGN
Research design
This study aims to identify the key factors influencing customer retention in the business-to-business (B2B) product sector, focusing on the importance of maintaining relationships with current providers A theoretical model is proposed, outlining the interrelationships among these factors The findings are particularly relevant for ceramic companies in Vietnam, offering insights into customer retention strategies and the critical role of switching barriers for achieving long-term competitive advantage Additionally, recommendations are provided for MDC to enhance customer loyalty based on thorough analysis and evaluation, along with suggestions for future research directions.
The research began with theoretical foundations and transitioned into data collection, utilizing both qualitative and quantitative methods While no single data collection method is universally superior, interviews stand out as a crucial source of information (Yin).
In 2003, a comprehensive understanding of customer retention was developed through discussions on the topic To gather primary data, qualitative research was conducted via face-to-face interviews with key managers at My Duc Ceramics Limited Company, including the International Sales Manager, Local Sales Manager, and Service Team Manager This process helped identify initial factors for a customer retention questionnaire Subsequently, quantitative research was executed by distributing questionnaires directly to 121 MDC agents located in Hanoi, Danang, and Ho Chi Minh City to collect data.
The research was implemented in steps following:
- Basic concepts of customer‘s retention, switching barrier
- Initial model (based on previous study and deep interview)
The research commenced by identifying the research problem, objectives, and questions, followed by a literature review on customer retention, satisfaction, and B2B relationships, which provided models applicable to ceramic companies in Vietnam Drawing from the literature and in-depth interviews with managers at MDC, a suggested model was developed Market research data was collected and analyzed using Cronbach's alpha and Exploratory Factor Analysis (EFA) to eliminate unsuitable variables Subsequently, regression analysis was conducted to explore the relationships between independent and dependent variables, identifying key factors that inform recommendations for enhancing customer retention in Vietnamese ceramic companies.
Official research
Based on the theories of Jone et al (2000), Kim et al (2004), and Ho Thi Phuong Minh (2009), along with discussions with managers at My Duc Ceramics Company, customer retention variables in Vietnam's ceramic industry are identified These variables include four key factors: move-in cost, benefit/loss cost, interpersonal relationships, and the attractiveness of alternatives.
It takes time and costs for learning about new products, services and processes of new suppliers Mov.1
You could spend money and time to change the business‘s plan or strategy when moving to new providers
You may spend a lot of money and couldn‘t have the profit in the first time with new providers Mov.3
It takes time to convince customers to use or buy Mov.4 products of new providers
It takes time to negotiation with new providers about supporting equipment, sales policy, etc Mov.5
It takes time and cost to invest on new equipment with new providers Mov.6
You will miss promotion programs of current providers Ben.7
You will miss benefit of loyal customer of current providers Ben.8
You will miss sales policy (commission, transportation, debit or payment term, sponsor, etc.) from current providers
You will lose the business opportunities with contractors, architects or designers who will be introduced by current providers
You will lose business with customers who interest in products and/or services of current providers Ben.11 You will reduce the diversity of goods in your store Ben.12
You are familiar with current providers and its products and/or services Int.13
You have relationship with current providers and its staffs Int.14
You have to build personal relationships with new providers Int.15
You may not know all the benefits and the risks of new providers Att.16
The quality of products and services of new providers is better than that of current providers Att.17
Business strategy, image and reputation of new providers is suitable for you Att.18
New providers have sales policy (commission, transportation, debit or payment term, sponsor, etc) better than current providers
New providers want to create more favorable advantage for your business Att.20
Overall, you feel difficult in switching to other providers Gen.21
You will continue to do business with current providers Gen.22
You are likely to recommend the current providers to others Gen.23
Table 3.1 : Summary of retention factors and measurement scale
The switching barrier was assessed using twenty-three questions, while customer retention was evaluated through three key items: the perceived difficulty of switching to other providers, the intention to continue business with current providers, and the likelihood of recommending these providers to others.
Interviews served as the primary data collection method, ensuring optimal results through a well-structured questionnaire, detailed in the appendix of this research The questionnaire comprised two sections: Part 1 focused on gathering customer information for statistical analysis, while Part 2 included 23 items across four key factors to assess the hypothesized relationships A five-point Likert scale, ranging from "1=Strongly disagree" to "5=Strongly agree," was employed to evaluate respondents' levels of agreement or disagreement with the presented items.
The appropriate sample size for research varies based on the measurement method and researcher perspectives According to Bollen (1989) and Hatcher (1994), the sample size should be determined by the number of variables, requiring a minimum of five samples per variable or five times the number of variables Hair et al (1998) suggest that a minimum sample size should range from 100 to 150 In this study, with 23 tentative questions, the minimum sample size calculated is 115 The research was conducted with 121 agents, representing 40% of the agents in the ceramic market in Vietnam These agents were selected from key domestic markets in Ho Chi Minh City, Danang City, and Hanoi City, which are significant hubs for major ceramic companies such as My Duc, Dong Tam Group, and White Horse Ceramic Company, reflecting the collaborative nature of agents within the ceramics industry.
The thesis aims to identify key factors of switching barriers that impact B2B customer retention, focusing on medium to high-value agents as data sources This selection is based on the agents' revenue or sales volume contributions to each ceramic company.
Data were collected through a questionnaire distributed directly to agents' owners, with a 100% response rate from the participants The completed questionnaires were analyzed using SPSS software (version 16.0), employing confirmatory factor analysis for all constructs This study utilized the regression method, based on a sample of 121 respondents.
This chapter presents the proposed research model derived from the literature review, outlining the research methodology employed in the study It details the data collection methods, the research process, the verification of the measurement scale, the design of the questionnaire, and the analysis techniques utilized.
DATA ANALYSIS AND FINDINGS
Characteristics of the samples
To prioritize customer relationships, businesses must focus on their most valuable clients, specifically the 20% who generate 80% of revenue High-value and medium-value agents are crucial for profitability, contributing significantly to a company's success In the case of MDC, high-value agents account for approximately 73% of profits, generating between 6 to 9 billion VND, while medium-value agents contribute 27% with revenues exceeding 9 billion VND Notably, 90.9% of high-value agents and 79.5% of medium-value agents are located in Ho Chi Minh City and Danang City, underscoring the importance of these regions for MDC's financial performance.
The characterristic of samples did not include age, gender, marital status because of B2B customers The research herein focused on their revenue and location
The research focused on major markets in Vietnam, targeting 121 national agents with a structured sample distribution Specifically, 50 high and medium value agents were selected from Ho Chi Minh City and Hanoi, while 21 were chosen from Danang, reflecting the varying market levels across these cities.
The initial section of the questionnaire focused on identifying current providers and the number of selected supplier agents in cooperation Analysis revealed that all respondents were distributors for more than two ceramic companies Consequently, the findings of this thesis are applicable to nearly all ceramic companies, not just MDC, and can be utilized to improve customer retention, thereby boosting additional revenue and profit.
After being sent, questionnaires will be collected and analyzed by using SPSS 16.0 software.
Statistical Result
4.2.1 Variables for measuring switching barrier
The analysis of 100% collected questionnaires reveals significant differences in customer evaluations regarding switching barriers in Vietnam's ceramic industry, with a mean value of 3.4628 indicating a strong concern among customers about these barriers Conversely, the mean value for the attractiveness of alternatives is below 3, suggesting that B2B customers are largely indifferent to this factor This indifference may stem from the challenging economic conditions in Vietnam, particularly within the construction materials sector, where survival is the primary focus for companies, especially ceramic manufacturers Consequently, agents tend to overlook alternative options and prioritize maximizing opportunities, minimizing costs, and mitigating risks, highlighting the substantial impact of the economic climate on their supplier-switching considerations.
N Mean Std Deviation Minimum Maximum
Table 4.1: Descriptive statistics of switching barrier measurement
N Mean Std Deviation Minimum Maximum
Table 4.2 : Descriptive statistics of customer retention measurement
The mean score for overall customer retention, as shown in Table 4.2, is approximately 3, indicating that while scores are below four on the five-point Likert scale, they remain above three This suggests that agents are hesitant to remain with their current providers The reluctance stems from a desire to minimize risks associated with switching providers during challenging times Consequently, this presents an opportunity for current providers to develop effective customer retention strategies for future sales.
Data Analysis
This section analyzes data using Cronbach's Alpha reliability and Exploratory Factor Analysis (EFA) to identify an effective customer retention model for ceramic companies in Vietnam The analysis aims to compare the collected data with existing theories and suggested models As outlined in Chapter 3, the study examines four independent variables and one dependent variable, measured through 23 items that gauge the level of agreement or disagreement among participants regarding their current providers.
This section analyzes data using Cronbach's Alpha reliability and Exploratory Factor Analysis (EFA) to identify an appropriate model for customer retention in Vietnamese ceramic companies The analysis aims to compare the collected data with existing theories and suggested models, highlighting any differences or similarities.
As presented in chapter 3, there are four independent variables and 1 dependent variable measured by 23 items to indicate how agreed or disagreed agents were with current providers
4.3.1 Reliability evaluation through Cronbach’s Alpha
Cronbach's alpha is a crucial tool for identifying unsuitable items during the initial evaluation phase Nunnally and Bernstein (1994) suggest that a "corrected item-total correlation" greater than 0.3 and a Cronbach's Alpha value exceeding 0.6 are essential criteria for selecting quality items Additionally, items are removed if their "Cronbach's alpha if item deleted" value is higher than the overall Cronbach's Alpha coefficient Following this assessment, the remaining items undergo further analysis through Exploratory Factor Analysis (EFA).
Scale Mean if Item Deleted
Scale Variance if Item Deleted
Cronbach's Alpha if Item Deleted
Move-in cost – Cronbach’s Alpha: 0.896
Benefit/Loss costs – Cronbach’s Alpha: 0.843
Attractiveness of alternative – Cronbach’s Alpha: 0.863
Customer retention (Gen) – Cronbach’s Alpha: 0.772
Table 4.3: Reliability test of switching barrier and customer retention
The testing results, presented in Table 4.3, indicate that the Cronbach's Alpha for nearly all scales is high, exceeding 0.3 However, the item "Ben 8" should be excluded, as its "Cronbach's Alpha if item deleted" value is greater than the overall Cronbach's Alpha coefficient for the "Benefit/loss cost" factor.
After dropped this item, the Cronbach‘s Alpha coefficient is increased from 0.843 to 0.875 as following:
Scale Mean if Item Deleted
Scale Variance if Item Deleted
Cronbach's Alpha if Item Deleted
Move-in cost – Cronbach’s Alpha: 0.896
Benefit/Loss costs – Cronbach’s Alpha: 0.875
Attractiveness of alternative – Cronbach’s Alpha: 0.863
Customer retention (Gen) – Cronbach’s Alpha: 0.772
Table 4.4: Final Reliability test of switching barrier and customer retention
Now all items fulfilled the requirements for further analysis at 0.896, 0.875, 0.859, 0.863 and 0.772 respectively Therefore, these items are successfully chosen for the next step: EFA test
4.3.2 Evaluation the measurement scale by using Exploratory Factor
4.3.2.1 Some rules in EFA test
Exploratory Factor analysis requests the factors must be testing by six norms as following:
The Kaiser-Meyer-Olkin (KMO) measure assesses the suitability of variables for factor analysis, with values ranging from 0.5 to 1 According to Hutcheson and Sofroniou (1999), KMO values between 0.5 and 0.7 are considered mediocre, while values from 0.7 to 0.8 are classified as good Values between 0.8 and 0.9 are deemed great, and those exceeding 0.9 are regarded as most useful for effective variable grouping.
- Eigenvalue, measures the variance in all the variables counted by that factor, should be over 1.0
- Communality, the proportion of variance explained by the underlying factors, should be above 0.5 (Field, 2005)
- Factor loading is higher than 0.5 in a factor (Jun et al., 2002)
- The differences between factor loadings in each observed variables not lower than 0.3 (Jabnoun et al., 2003) or one items should explain for one factor
Exploratory Factor Analysis (EFA) evaluates and adjusts the measurement scale by testing inter-correlation between variables This aims to identify the better group or factor from 22 items remaining
Step 1: the fist result of EFA analysis for switching barrier
The analysis of twenty-two items yielded a KMO value of 0.841 with a significance level of 0.000 Additionally, four components exhibited eigenvalues greater than 1, collectively accounting for 71.075% of the cumulative variance extracted, surpassing the 50% threshold This indicates that these four components effectively explain 71.075% of the dependent variable.
All items exhibit factor loadings exceeding 0.3, but Ben12 shows loadings of 0.510 for factor 3 and 0.496 for factor 4, indicating its dual explanatory capacity With a factor loading value around 0.5 and observed variable differences below 0.3, it is recommended that Ben12 be eliminated Additionally, all variables require re-rotation for convergence.
1 2 3 4 mov2 785 mov3 761 mov1 757 mov4 744 mov6 677 mov5 639 411 att19 899 att16 831 att18 684 att17 676 att20 -.440 626 ben7 823 ben9 797 ben11 730 ben10 651 ben12 510 496 int13 880 int14 831 int15 721
Extraction Method: Principal Component Analysis
Rotation Method: Varimax with Kaiser Normalization a Rotation converged in 6 iterations
Step 2: The second result of EFA analysis for switching barrier
1 2 3 4 mov2 787 mov3 765 mov1 762 mov4 745 mov6 680 mov5 653 att19 890 att16 823 att17 694 att18 664 att20 -.437 649 ben7 826 ben9 804 ben11 414 720 ben10 653 int13 881 int14 835 int15 722
Extraction Method: Principal Component Analysis
Rotation Method: Varimax with Kaiser Normalization a Rotation converged in 6 iterations
Following the convergence of rotation, the cumulative increase in the explanation of four components related to customer retention rose from 71.075% to 72.035% Additionally, all items now exhibit a factor loading value exceeding 0.6, satisfying the criteria of the Exploratory Factor Analysis (EFA) test These findings represent the final results of the EFA test.
Based on the result of the rotated factor matrix, the research model is adjusted The items in sub-factors of switching barrier are changed
- The factor 1 includes Mov1, Mov2, Mov3, Mov4, Mov5, and Mov6 It is the same with old independent variables so we keep the name ―Move-in cost‖ for it
- The factor 2 comprises Att16, Att17, Att18, Att19, Att20 with name
- The factor 3 includes Ben7, Ben9, Ben10, Ben 11 which called ―Benefit/loss cost‖
- The three factor loadings Int13, Int14, Int15 under factor 4 It also called
The EFA analysis results for customer satisfaction reveal a KMO value of 0.692 and a significance level of 0.000, indicating strong validity With a cumulative variance of 68.714% and factor loadings exceeding 0.5, the items related to customer retention meet the necessary criteria and are categorized as "General."
Kaiser-Meyer-Olkin Measure of Sampling
Table 4.7: KMO and Bartlett’s Test
Initial Eigenvalues Extraction Sums of Squared Loadings
Extraction Method: Principal Component Analysis a 1 components extracted
Table 4.9: Final EFA analysis result of customer retention
The EFA results indicate that while the items associated with each factor have been modified, the factors themselves remain consistent with the previous model Consequently, the initial model is deemed suitable for further testing.
H 1 : Move-in cost has positive impact on customer retention
H 2 : Benefit/ Loss costs has positive impact on customer retention
H 3 : Interpersonal relationship has positive impact on customer retention
H 4 : Attractiveness of alternatives has negative impact on customer retention
A correlation coefficient quantifies the strength of the linear relationship between two variables The Pearson correlation coefficient is the most widely used measure, with values typically accepted between +/- 0.25 and +/- 0.75 A higher Pearson correlation coefficient indicates a stronger correlation, as noted by Field (2005).
Loss costs Move - in cost correlation coefficient value is zero, that means no liner relationship between variables
M_MOV M_BEN M_INT M_ATT M_GEN
** Correlation is significant at the 0.01 level (2-tailed)
According to Table 4.10, all values are significant at the 0.01 level (2-tailed), and the Pearson Correlation values meet the necessary criteria This indicates that the five factors exhibit a linear relationship, making them suitable for the next step: Regression Analysis.
Regression analysis identifies the key factors influencing customer retention, focusing on four independent variables: move-in cost, benefit/loss cost, interpersonal relationships, and the attractiveness of alternatives, alongside one dependent variable, general customer retention This analysis was conducted using the regression method in SPSS 16.0, with the results detailed below.
Std Error of the Estimate
1 692 a 480 462 51118 a Predictors: (Constant), M_ATT, M_INT, M_BEN, M_MOV b Dependent Variable: M_GEN
According to Table 4.11, the model accounts for 48% of the variance in customer retention, influenced by four independent variables: Move-in cost, Benefit/loss cost, Interpersonal relationship, and Attractiveness of alternatives Additionally, 51.12% of customer retention is impacted by other factors.
Squares df Mean Square F Sig
Total 58.239 120 a Predictors: (Constant), M_ATT, M_INT, M_BEN, M_MOV b Dependent Variable: M_GEN
The ANOVA results indicate a significant relationship between four independent variables and the dependent variable, as evidenced by a p-value of 0.000 This supports the appropriateness of using linear regression for the analysis.
B Std Error Beta Tolerance VIF
CONCLUSIONS AND RECOMMENDATIONS
Conclusions
Research indicates that switching barriers significantly influence B2B customer retention in Vietnam's ceramic industry While Kim et al (2004) found a small coefficient of 0.195 for switching barriers affecting customer loyalty in Korean mobile services, Ho Thi Phuong Minh (2009) reported an increase to 0.324 in her study on Vietnam's mobile service sector Current data reveals that this coefficient has now surpassed 0.5 for B2B customers in ceramic companies, highlighting a strong concern among these customers regarding switching barriers and their impact on retention.
Recent interest in retention marketing has led to the emergence of numerous effective strategies Among these, certain approaches stand out as particularly beneficial for business marketers based on analytical results.
This research conducts an empirical analysis of the impact of switching barriers on customer retention in the ceramic industry, offering valuable insights for managers It highlights the structure and effects of these barriers, providing new concepts for enhancing customer loyalty Additionally, the chapter summarizes the findings and presents recommendations for developing effective customer retention strategies for businesses in Vietnam's ceramic sector.
To enhance customer retention, ceramic companies must prioritize maximizing switching barriers, particularly in an environment where agents are hesitant to leave due to associated costs and established relationships Key factors influencing these barriers include Benefit/loss cost, Interpersonal relationships, and Move-in costs Specifically, every unit increase in Benefit/loss cost correlates with a 0.372 point rise in customer retention scores, while Interpersonal relationships and Move-in costs contribute coefficients of 0.215 and 0.195, respectively By understanding and addressing these elements, managers can develop effective strategies to retain existing customers, improve agent retention, boost efficiency, and reduce costs.
In light of the current economic crisis, ceramic industry agents are prioritizing cost-effective business strategies over exploring alternative options This challenging environment encourages enterprises to enhance internal operations instead of making substantial investments in new programs, ultimately aiming to improve efficiency for both agents and the companies To navigate these difficulties, ceramic companies must assess their strengths and weaknesses to develop more efficient and cost-effective business strategies Additionally, implementing well-planned customer retention strategies is crucial to prevent negative reactions and align with the companies' capabilities.
Recommendations
Focusing on benefit/loss cost is crucial for enhancing customer retention, as current promotions and sales policies must be thoughtfully evaluated and adjusted to meet the high appreciation levels of agents, with factor loadings of 0.890 and 0.823 (see table 4.6) Organizations can boost customer retention by encouraging customers to share their positive experiences, which highlights the importance of developing robust customer reward programs and value-added services for long-term agents Additionally, ceramic companies should implement more promotions targeting consumers and their friends or family, as this can significantly influence purchasing decisions and enhance word-of-mouth marketing.
The benefits of a sales policy, particularly regarding commission or discount rates, play a crucial role in attracting B2B customers Higher commissions can strengthen distribution networks and boost future sales However, Vietnamese ceramic companies are facing intense competition from foreign rivals, especially China, which dominates the market with over 80% of low-priced products and high commission rates Given the current challenging economic climate, local providers are hesitant to adjust prices or commissions due to potential impacts on their financial stability Instead, many are opting to revise their payment policies by offering flexible payment terms, such as increased credit limits, extended payment durations, or alternative payment methods This support during tough times can help maintain customer loyalty and ensure long-term relationships with existing suppliers.
To effectively reach end-users, companies should prioritize and accelerate their advertising efforts through television, online platforms, and printed materials, as many local businesses often overlook this strategy Implementing comparative advertising can showcase the strengths and advantages of a company's products and services over competitors, providing clear information to potential customers Research indicates that relative quality assessments, which evaluate competitive offerings, are more predictive of customer retention than absolute quality evaluations (Hennig-Thurau).
1997) Moreover, companies should build good website containing updated information about products, services, promotion and contact information This can help end-users easily to approach suppliers‘ products
Product and service quality plays a crucial role in customer retention, providing significant competitive advantages for companies and their distributors While not always explicitly stated, the impact of quality on retaining customers is a fundamental aspect of effective customer retention strategies globally To attract and maintain a loyal customer base, businesses must prioritize the enhancement of both their product and service quality.
To enhance interpersonal relationships, ceramic companies should prioritize building strong connections with their customers This begins with ensuring that customers have a clear understanding of the company's products and services, facilitated through supportive materials, experience sharing, and training programs As the exchange of products and services is essential in any buyer-seller relationship (Hennig-Thurau, 1997), companies must continually improve their offerings to streamline transactions for customers Additionally, suppliers should provide valuable market information to help agents seize opportunities and mitigate risks A straightforward and effective process, coupled with enthusiastic support from suppliers in addressing customer inquiries and resolving issues promptly, can significantly enhance customer retention.
To enhance service quality, MDC must focus on improving the skills and attitudes of both front office and back office staff The front office serves as a vital team that interacts directly with customers, while the back office encompasses essential functions that operate behind the scenes, away from customer visibility.
To enhance customer satisfaction and dealer confidence, the company should increase investment in sales representatives who offer direct support to MDC clients Additionally, recognizing that exceptional service stems from motivated employees, MDC must implement an effective reward system to boost employee satisfaction.
Satisfied employees are key to delivering excellent services, making it essential for ceramic companies to foster strong relationships with their agents To enhance the customer experience, firms should implement effective reward systems while simultaneously improving their products and services Additionally, investing in the training and development of staff is crucial, particularly for front office teams that directly interact with customers, such as sales representatives By prioritizing employee satisfaction and skill enhancement, companies can ensure a positive experience for their customers.
Analysis reveals that the "move-in cost" significantly influences customer retention, with agents primarily concerned about the time and financial investment required to change their business plans, as well as the lack of immediate profit Increased hesitation among agents correlates with a reduced desire for customers to switch providers Therefore, companies must closely monitor agents' situations and business activities to provide timely support and make informed decisions regarding investments and network expansion, ultimately benefiting both companies and agents while fostering strong relationships.
Gathering information may appear straightforward for a company, but often it is dispersed across various departments and lacks organization, making it challenging to quickly connect data to individual customers.
In 2002, the importance of customer data became clear, emphasizing the need for centralized systems that enable companies to make quicker and more informed decisions By developing comprehensive customer databases, businesses can implement tailored programs for each client, ultimately saving time and costs while avoiding the pitfalls of ineffective, outdated strategies This approach is particularly beneficial for addressing urgent issues faced by agents, ensuring timely and efficient management solutions.
Companies can enhance customer retention by identifying potential and loyal customers, while also understanding the reasons behind those who consider switching providers By directly interviewing customers, businesses can uncover root causes of dissatisfaction and address issues promptly An attentive marketer can implement effective defection prevention strategies by identifying key variables and capturing relevant signals to remedy the situation.
In the future, MDC should integrate various methods to enhance switching barriers as a means to better connect with customers Analyzing competitors and understanding customer needs will be crucial for effective marketing strategies (Kotler 2203, 274) In today's competitive global market, businesses are striving to increase profits while retaining existing customers and attracting new ones Despite being a relatively large company, MDC must recognize that implementing retention programs requires a significant investment of financial, mental, and time resources.
Effective customer retention management is essential for creating a viable business environment for agents, relying on a combination of strategic suggestions A successful strategy necessitates the collective efforts of all relevant departments, including the board of directors and both front and back office staff, who must be aligned with the company's mission Clear communication of this mission is crucial for empowering the organization Leaders must acknowledge the significance of customer retention, as companies that excel in this area tend to experience faster growth.
Research limitations
This thesis acknowledges several limitations, particularly the differing characteristics of agents in Hanoi, Danang, and Ho Chi Minh, which may impact customer retention Research by Jessica Mascareigne and Venka Tako K Yanamandadram highlights additional factors influencing customer retention, including distributive justice, procedural justice, communication effectiveness, customer involvement, and customer trust Furthermore, the relationship quality and customer retention are affected by intrapsychic, contextual, and situational factors To address these limitations, future research should explore these variables in greater depth.
In the ceramic industry in Vietnam, understanding the contextualized business conditions is essential, as these factors serve as adjusting variables in the existing interactions To enhance the analysis, it is crucial to increase the sample size and compare these factors with those in other industries.
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