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Student number: 20055928 BUSINESS PROJECT THE RELATIONSHIP BETWEEN CUSTOMER ENGAGEMENT AND CUSTOMER LOYALTY IN HOTEL INDUSTRY IN HO CHI MINH CITY, VIETNAM Studenent number : 20055928 Supervisor : NGUYEN NHU TY Word count : 8037 Declaration: I declare that the coursework submitted is my own work and has not (either in whole or part) been submitted towards the award of any other qualification either at UWE or elsewhere. I have fully attributed/referenced all sources of information used during the completion of my assignment, and I am aware that failure to do so constitutes an assessment offense. Ho Chi Minh City, Viet nam 2021 ABSTRACT In recent years, the hospitality sector has been developing at a rapid rate and becoming one of the main economic sectors in every country, especially the hotel industry. As the number of hotels keep rising each year, it leads to the development and competitiveness in the hotel industry. Thus, customer engagement is an effective tool to predict loyalty which is one of the main factors measuring the hotel development. This study aims to analyze the relationship between customer engagement and loyalty in the hotel industry in Vietnam, specifically in Ho Chi Minh City. Five dimensions of customer engagement are absorption, enthusiasm, attention, identification and interaction are examined to have a significant impact on customer loyalty. The research survey was completed with 355 respondents and the data set was analyzed by the exploratory factor analysis and regression analysis. The findings show that all five elements have a positive correlation to customer loyalty and absorption has the strongest impact among five dimensions. Key words: absorption, enthusiasm, attention, identification, interaction, customer engagement, customer loyalty, hotel industry. CONTENTS PAGE CHAPTER I : INTRODUCTION…………………………………………………………6 1.1. Study background…………………………………………………………………..6 1.2. Business issue………………………………………………………………………..7 1.3. Research purpose………………………………………………………………........7 1.4. Research scope………………………………………………………………………7 1.5. Research structure…………………………………………………………………..8 CHAPTER II : LITERATURE REVIEW………………………………………………...9 2.1. The customer engagement…………………………………………………………..9 2.1.1. Dimensions of customer engagement…………………………………………...11 2.1.1.1. Absorption………………………………………………………………….11 2.1.1.2. Enthusiasm…………………………………………………………………12 2.1.1.3. Attention……………………………………………………………………12 2.1.1.4. Identification……………………………………………………………….12 2.1.1.5. Interaction………………………………………………………………….12 2.2. Customer loyalty…………………………………………………………………….13 2.3. Research model……………………………………………………………………...14 2.4. Research hypotheses……………………………………………………………......15 2.5. Research questions………………………………………………………………….15 CHAPTER III : RESEARCH METHODOLOGY 3.1. Study paradigm……………………………………………………………………..16 3.2. Variable measurement……………………………………………………………...16 3.3. Sample size………………………………………………………………………......17 3.4. Justification of methodology and methods………………………………………..18 3.5. Research design limitations……………………………………………………….18 CHAPTER IV : DATA ANALYSIS AND DISCUSSION……………………………....19 4.1 Demographic information………………………………………………………….19 4.1.1. Gender………………………………………………………………………….19 4.1.2. Age……………………………………………………………………………..20 4.1.3. Job……………………………………………………………………………...21 4.1.4. Income………………………………………………………………………….22 4.2. Reliability test……………………………………………………………………....23 4.3. Exploratory Factor Analysis (EFA)………………………………………………30 4.3.1. EFA result for independent variables ………………………………………….30 4.3.2 EFA result for dependent variable……………………………………………....33 4.4. Correlations………………………………………………………………………...35 4.5. Regression analysis………………………………………………………………...36 4.6. Detection of regression assumption violation (Check model error)…………….38 4.6.1. First-order autocorrelation……………………………………………………..38 4.6.2. The change of variance of remainder………………………………………….38 4.6.3. Assume that the remainder has a normal distribution…………………………39 4.6.4. The phenomenon of multi-collinearity………………………………………...39 4.7. Descriptive analysis………………………………………………………………..40 CHAPTER V : CONCLUSION AND RECOMMENDATION………………………...43 5.1. Key findings………………………………………………………………………...43 5.1.1. Absorption impact on Customer Loyalty……………………………………....43 5.1.2. Enthusiasm impact on Customer Loyalty……………………………………....43 5.1.3. Attention impact on Customer Loyalty………………………………………...44 5.1.4. Identification impact on Customer Loyalty…………………………………....44 5.1.5. Interaction impact on Customer Loyalty……………………………………....44 5.2. Practical implication………………………………………………………………….45 5.3. Limitations……………………………………………………………………….........46 5.4. Recommendations for further research……………………………………………..46 REFERENCES………………………………………………………………………….....47 APPENDIX…………………………………………………………………………………55 List of table……………………………………………………………………………....55 CHAPTER I : INTRODUCTION 1.1. Study background In the marketing literature, customer engagement has been widely covered. This topic is driven by the demand to explore new ways to meet the customer needs and wants so that can improve their engagement with the loyalty of the firm. Managers consider it as necessary (Tierney, 2013). Customer engagement has been ranked as the priority in many industries, including tourism and hospitality (Yoo and Bai, 2013), it can be seen as a major predictor to the success of the firm and plays a key role in revenue and profitability improvement (Thakur and Summey, 2010). Customer engagement brings lots of benefits for companies such as higher revenue, reduced transaction costs, better word of mouth and financial performances (Angulo-Ruiz et al., 2014; Palmatier et al., 2007). The engagement is created by the customer relationships with the service organization. In recent years, the conceptualization of customer engagement has been identified as the vital prospect and received interest from many researchers. However, there are a few resources about that factor. Although hospitality companies have widely used customer engagement techniques to evaluate customer loyalty, a brief discussion of this concept is needed. Customer engagement has a huge potential to influence customer behavior and has been regarded as an effective retention and acquisition tool for creating and maintaining competitive advantages (Brodie, Ilic, Juric and Hollebeek, 2013; Hollebeek, Glynn and Brodie, 2014). Moreover, engagement improves the marketing productivity (Sheth and Parvatlyar, 1995), has close relationship with customer loyalty (Bowden, 2009), and can be used as a tool to explain customer behaviors (Hollebeek, Glynn and Brodie, 2014). Researchers suggested that in integrated and dynamic environments, customer engagement represents a strategic objective for achieving high corporate efficiency, which includes superior competitiveness and revenue growth (Brodie, Hollebeek, Juric and Ilic, 2011). Customers who are engaged can also improve the organizational performance, value, brand image and loyalty (Brodie et al., 2013; Hoyer, Chandy, Dorotic, Krafft and Singh 2010). Both theoretical and empirical studies are increasingly raising awareness about the importance of improving existing customer relationships through developing engagement with the business in order to achieve long-term profitability (Kumar et al., 2010). In other words, these long-term relationships have the potential to increase performance, efficiency and effectiveness of hotels. There is substantial evidence that good customer relationships result in positive recommendation, advanced customer satisfaction, an advanced repurchase frequency, and, more importantly, customer loyalty (Hennig-Thurau, Gwinner and Gremler, 2002; Palmatier et al., 2006). Thus, retaining existing customers and maintaining good customer relationships tightly is a much more profitable and effective strategy than constantly seeking and attracting new customers (Anderson & Mittal, 2000). Due to several benefits above, nowadays, many top managers tend to recognize the emergency of improving customer engagement management in order to build and maintain long-term relationships with customers and they see loyalty as their ultimate goal in developing performance and business strategies (Berman and Evans, 2007; Reichheld and Schefter, 2000). 1.2. The business issue The hospitality industry brings a lot of economic benefits to the country. It stimulates tourism demand and creates many new job opportunities. (Langviniene and Daunoraviciute, 2015). Thus, customers are one of the most important assets in the hospitality sector. The success of the hospitality sector, especially the hotel industry, mainly based on creating long-term and engaging key customer relationships. In the customer relationship, engagement plays an important role in evaluating the service efficiency through the customer behaviors toward perceptions of belief, honesty, enthusiasm, and pride (McEwen, 2004). Therefore, it is essential for all hotels to explore and gain sustainable competitive advantage to reach the customer engagement (Rather and Sharma, 2016). In order to keep the long-lasting relationship with customers, many hotels adopt a loyalty program strategy. They succeed in attracting new customers but fail to acquire their engagement in the long term because of lacking understanding about the factors affecting customer engagement behaviors. 1.3. Research purpose Most of customer engagement literature is researched in the context of the USA and Europe so that it leads to the shortage in developing countries. This study aims to emphasize the relationship between the customer loyalty and the customer engagement in the hotel industry in Vietnam, specifically in Ho Chi Minh City and suggest some appropriate approach to measure the loyalty based on a set of empirical evidence. 1.4. Research scope The research focuses on the hotel industry in Vietnam, specifically in Ho Chi Minh city and targets everyone who used to stay in hotels. The survey is constructed by two methods : online and offline. By online survey, it aims to target students ranging from 18 to 24 years old so that the survey is conducted on many university groups. In terms of offline surveys, it focuses on employed people and others. 1.5. Research structure This paper go through five parts as following : Chapter I : Introduction Providing the overall background of hotel industry, the implication of customer engagement to research and practice; giving research scope and purpose. Chapter II : Literature review Evaluating the concept of customer engagement and loyalty Building the theoretical framework to suggest the relationship between customer engagement and loyalty Giving the main research question and formulating the research hypotheses Chapter III : Methodology Giving the justification for using that method, sample size and the table of variable measurement. Recognizing some research design limitations. Chapter IV : Data analysis and discussion Performing the survey data analysis and discussion. Chapter V : Conclusion and recommendation Summarize the finding results Performing research implication Identifying some research limitations Recommendation for further research CHAPTER II : LITERATURE REVIEW 2.1. The customer engagement (CE) definition Since the huge demand of the market, there is a set of academic research describing the concept of customer engagement that leads to a varied definition for this term. In basic words, MSI (2010) defines it as the relationship between customer and brand. According to Verhoef, Reinartz and Krafft (2010), the customer engagement has been seen as the top priority in the company since it has the function in building the behavioral orientation which leads to the customer behavior such as word of mouth, recommendation, writing reviews (Marketing Science Institute, 2010). It was also defined as the degree to which a customer's comprehension, physical and emotional involvement in a firm (Patterson, Yu, and Ruyter, 2006). Additionally, it can be displayed as the level of customer investment and response with the company products or services (Ashley et al., 2011; Vivek et al., 2012). Conversely,