Mobile Telecommunication Customer Loyalty in Nigeria: Determining factors
This Master’s thesis sought to assess and analyze the variables capable of influencing loyalty of mobile phone subscribers as well as how service providers can enhance loyalty of their customers in Nigeria. The study was basically a survey that used the quantitative approach. A structured questionnaire was developed and personally administered to a sample of University of Ilorin students across four major GSM operators in the country. Four hundred (400) respondents were sampled through a stratified random sampling. Out of this, three hundred and forty-eight (348) copies of the questionnaire constituting 87% response rate were got for analysis. Of the eleven (11) operational factors that were used to assess loyalty of customers in the Nigeria Mobile Telecoms industry, all variables except Brand Image and Service Centre Quality were found to be capable of influencing customer loyalty and also considered as the most important loyalty variables in the industry. The unavailability of Mobile Number Portability was found to be a prominent factor in tying consumers down to service providers while the generally low satisfaction with the present state of service delivery in the industry also plays a role in this direction. Therefore, the retention been enjoyed by the service providers can be described as circumstantial. Part of the recommendations given include the service providers embarking upon drives that will reduce to its barest minimum drop calls, improve call quality and SMS delivery which is likely to make subscribers perceive given quality as high among others
CHAPTER ONE INTRODUCTION
1.1 Background of the research
With the increasing competition in the market, customer loyalty has become a decisive factor in long-term business profits. At its high, customer loyalty connotes the high entry barriers for the competitor to enter the market, and it significantly contributes to reduction in marketing costs. Attracting new customers requires a company to invest quite much time and money and this process always span a long period of time associated with uncertainties and risks.
The number of loyal customers as a sign of market share is more meaningful and significant than the total number of customers. More loyal customers translate to high profits. Loyal customers will continue to purchase or receive the product or service from the same enterprises and they will be willing to pay higher prices for the quality products and first-class services, thereby increasing sales revenue. From the afore mentioned, the focus of many enterprise managers at this point is on marketing management aspects to improve customer loyalty in order to gain the competitive advantage in the face of fierce competition. The importance of customer loyalty has been identified by many researchers and academicians in different commercial enterprises in years past (Ahn, 2006; Gerpott el al, 2001; Lee 2001). This importance in no doubt does not exclude the telecommunication industry and by extension the Nigerian telecoms industry.
Nowadays, as the mobile telecommunication market is being saturated, the growth rate won't be higher than it used to be some times ago. The situation makes mobile telecommunication companies not only to promote their service quality, but also change their marketing core strategy from expansion to holding their existing customers by enhancing and optimizing the customers’ loyalty. (Long-Yi Lin & Jen-Chun, 2004)
Telecommunication industry is a very typical industry, customer's importance to enterprises, and how to attract, develop and maintain customers has became more and more important in the sharp internationalized mobile telecommunication competitions. The issue of how to improve customer loyalty is a very important for mobile communication operators. Therefore, customer loyalty is playing a significant role in the telecommunication market competition because it has become a critical variable in the fight for survival among telecom operators.
Research has shown the importance of loyal customers in business enterprises and not excluding the telecom sector. The facts presented by Schmidt (2006) go as follows:
- The typical company gets 65% of its business from its existing customers.
- It costs 5 times more to find a new customer than to keep an existing customer happy.
- It takes 12 good service experiences to overcome a single bad one.
- 7 out of 10 customers who switch to the competition do so because of poor service
- 91% of unhappy customers won’t buy again from the company that displeased them
- And unhappy customers will not only defect, they will grumble to 9 of their friends.
He however continued by writing that:
If an enterprise is rated by a customer as five on a scale of one to five, such customer is six times more likely to return than if the enterprise rating is four. Also, dissatisfied customers whose complaints are taken care of are very likely to remain loyal, and often become “customer advocates” if you go out of your way to fix their problem. All these are pointing to the fact that attending to the needs, satisfying and gaining the confidence of customers breed loyalty and in the long run increases the net worth of an enterprise.
Customer loyalty is one of the most domineering factors that drive the profits of the operators in the telecom industry (Ramneck & Preety, 2009). Loyalty programs or drive towards ensuring customer loyalty are capable of stabilizing market because loyal customers are less sensitive to price. The more stable the market the higher the profit margins (Muller, 1998). We think customer loyalty is very important in mobile telecom industry and hence, the need for the variables relating to it to be understood.
1.2 The Characteristics of Nigerian Mobile Telecom Market
A large, evolving and profitable market
Nigerian Mobile Telecom market is indeed the fastest growing market in Africa, maintaining its lead with active subscribers of about 78 million (NCC, March 2010) and relegating South Africa to second place with about 45 million subscribers. Nigerian telecoms came into mainstream in 2001 when the deregulation of the subsector of the economy gave way to private involvement. The telecommunication system was opened up with the issuance of Global System for Mobile communication (GSM) unified license in 2001. GSM license in Nigeria cost about US$285million. Nigerian Telecommunication (NITEL) was the only operator in the market before 2001 with subscribers of about 500,000 from a population of about 140 million. The deregulation ushered in telecom players like MTN, Glo Mobile, Zain formerly Celtel, Etisalat, Visafone, Multilinks, Starcomm and Zoom formerly Reltel. The telecom regulator in Nigeria is Nigerian Telecommunication Commission (NCC), with reference to NCC Act 2003; 3-(1) “There is established of a commission to be known as Nigerian Telecommunications Commission with responsibility for the regulation of the telecommunication sector in Nigeria”.
The market is divided into urban and semi-urban, and rural market. Tele density in the urban is about 65% while semi urban is about 45% and rural is less than 15%. Product Segmentation is GSM and Code Division Multiple Access (CDMA). (www.ncc.gov.ng, March 2009)
MTN, Zain, Glo and Etisalat control the GSM market. While Visafone, Multilinks, Starcomm and Zoom formerly Reltel are in the CDMA product segment. The market shares of these major mobile telecoms are MTN-40.54%, Zain- 30.20%, Glo Mobile-28.11 and Etisalat- 0.7%, M-Tel Mobile phone business of NITEL-0.45%. While Visafone leads the CDMA market, follow by Multilinks, Starcomms, and Zoom. (www.ncc.gov.ng, March 2009)
The Growth Progression
From a bit above 500,000 NITEL fixed wire line and mobile subscribers in 2001. The industry grew to over 7million subscribers in 2004; in December 2008 the subscribers in the market grew to 62.99million. An addition of 22.59 million subscribers in 2008 alone represented 56% annual growth rate. Recent figure as at January 2009 put the subscribers’ base at 64.16. While GSM subscribers are in the range of 57million, CDMA subscription in Nigeria grew from just 380,000 in 2007 to more than 6million at the end of 2008. The country intelligent report on Nigeria by Pyramid research (2009) stated that the market grew by 23% with total industry revenue of US$8.42billion. With mobile penetration of 42% revenue will increase to US$11.14billion by 2013 with forecasted annual increase of 5.7%. The telecom market has been named the largest mobile market in Africa. Tele density of 0.73% in 2001 has steadily increase over the year to 33.72% as at December 2006 and about 45% aggregate in December 2008. The current market installed capacity is 117.892 million as at December 2008. The mobile industry ARPU (Average Revenue per User) in 2003 was around US$54 per month but as at 2008 December was US$13. (www.ncc.gov.ng, March 2009).
It is however expected that ARPU will continue to fall with competition, and also as the service providers dig deeper into the lower strata of the society in villages to explore the ever ready market available naturally by the country’s population strength
- Mobile number portability (MNP) does not exist in the Nigerian mobile telecoms market.
Mobile number portability (MNP) is the ability that enables mobile telephone users to retain their mobile telephone numbers when changing operators. Many countries are MNP countries for example, USA, Sweden, Denmark, Germany, Korea, UK, Turkey etc. But till now, Nigeria does not have MNP, so if a subscriber wants to change from one operator to another, he or she has to worry about a plenty of trouble after using a new cell phone number, like to inform every contact, miss a lot of phone calls and so on.
- Majority consumers buy handsets by themselves.
Before Third Generation (3G), Global System for Mobile Communications (GSM) and Code Division Multiple Access (CDMA) are the two main network technologies. The CDMA operators require proprietary handsets that are linked to one carrier only. But for GSM, Subscriber Identity Module (SIM) card itself is tied to the network of an operator, rather than an actual phone. So operators, who use CDMA, always sell mobile service together with a handset while business model of operators who use GSM is to sell SIM card to their customers. The majority of subscribers in Nigeria are using GSM, that is to say, operators only sell SIM card to their customers and their customers buy cell phone separately. So the willingness to switch cell phones would not be an issue that makes customers change operators as long as they are in GSM network.
1.2.1 The Current situation of Nigerian Mobile Telecom Industry
There are about fourteen mobile operators in the Nigerian mobile telecom industry, they are: MTN, Globacom, Zain, Etisalat, Visafone, EMTS, M-Tel, Multi-Links, Starcomms, Reliance, M-Tel, Zoom, Intercellular and Onet. These operators not only supply the basic mobile voice services but also value-added services such as data, IP telephone and multimedia, though the bulk of their service is around voice and text
All the operators are privately owned with the exception of M-tel that has government stake and it is also been touted for privatization. However, regulation of the sector rests on a government agency in the name of National Communication Commission (NCC).
Though controlled by the same department of the government, competition between the operators is serious and very fierce.
1.3 Statement of the Problem
Research into what factors impact on customer loyalty has been carried out in other countries such as South Korea, Germany, and France and so on. Gerpott (2001) considers the network quality, which is reflected in excellent indoor and outdoor coverage and in the clarity of voice reproduction without any connection break-downs; the price paid for obtaining access to and using the network; the quality of the exchange of information between customer and supplier (1) in response to customer (telephone) enquiries and (2) in the course of interactive activities initiated by the network operator (e.g., presentation of an invoice) have an important impact on customer loyalty in Germany market. Lee (2001) thinks pricing, area coverage, clarity of sound, access to provider, precision of billing service and perceived difficulty to switch are the main factors which have important impact on customer loyalty in France. Ahn (2006) considers that call drop rate (percentage of abnormally terminated calls), the number of complaints, monthly billed amounts and customers with a non-use or suspended status are positively associated with the probability of customer churn in South Korea mobile telecom industry.
From the review of literature above, we find that different countries have different factors that affect their customer loyalty in the mobile telecom market. Comparing with the other mobile telecom market situation, the Nigerian market is a different one (in terms of structure, status and market saturation) and thus the need to understand the peculiarities of factors on which the loyalty of mobile telecom users hinge on. As earlier stated that different countries have different factors that affect their country’s customer loyalty in the mobile telecom market, thus, Nigeria as the most populous African country and indeed a force to be reckoned with in the World League of Nations when it comes to population is not unlikely to have different factors that affect mobile telecom customer loyalty. Hence addressing questions like what factors affect the loyalty of customers in Nigeria’s Mobile Telecoms industry and how has operators fared on these factors will be of importance in this thesis.
1.4 Research Questions
The purpose of this thesis is to find out what kind of specific and concrete operational factors have important impact on Nigeria mobile telecom customers’ loyalty. The questions to be addressed by his study include:
- What factors have important impact on customer loyalty in Nigeria telecom industry?
- What is the performance of the service providers collectively on these aspects?
- How can service providers map out better ways of enhancing customer loyalty?
1.5 Objectives of the Study
The overall objective of the study is to gain a better understand of the variables that affect the loyalty of customers/users of mobile telecommunication service as provided by the service providers.
The specific objectives are to:
(i) Investigate which factors specifically affect the loyalty of mobile telecom users.
(ii) Investigate the performance of the telecom service providers against the identified factors.
(iii) Determine how service providers can better enhance the loyalty of their customers.
1.6 Justification for the Study
The study is immensely significant in diverse ways to business/marketing practitioners, policy makers and stakeholders within the telecom sector. To the management of Nigeria’s mobile telecom networks, the findings and results that will be reported in this study will provide a more reliable scientific measure and perspectives for describing and evaluating the variables that affect the loyalty of their customers towards the services they deliver. This will provide empirical support for management strategic decisions in several critical areas of their operations, and above all, provide a justifiably valid and reliable guide to designing workable service delivery improvement strategies for creating and delivering customer value, achieving customer satisfaction and loyalty, building long-term mutually beneficial relationship with profitable customers and achieve sustainable business growth in Nigeria.
To policy makers like government agencies such as the National Communication Commission (NCC), the finding and results of this study will provide invaluable insights and a more reliable guide to monitoring the impact of the operations of Nigeria’s mobile telecom operators. It could also serve as a yardstick for measuring partly their respective policy goals and objectives. Particularly, it will facilitate immensely the National Communication Commission (NCC) in achieving some of its policy goals, which include: enhancing the reliability and efficiency in the provision of communication services.
1.8 Scope and Delimitation
The mobile telecommunication operators under review for this thesis are basically the GSM operators and these also exclude M-tel which at the time of this thesis is almost nonfunctional. Therefore the survey took a holistic look at the customer loyalty factors of the industry as a whole and not in any way attempt to single out a particular service provider. Data for the study was generated from questionnaire personally administered to carefully selected students of the University o Ilorin, Ilorin Kwara State.
CHAPTER TWO LITERATURE REVIEW
2.1 Conceptual Framework
2.1.1 Customer Loyalty
Customer loyalty has been studied both in the academic field and real business world for years. To keep a long-term relation with their customers is one of the most important goals of many companies in the modern business world. The cost to keep existing customers is much cheaper than obtaining new customers. Rosenberg and Czepiel (1984) indicated that expense of keeping an existing customer is less than one sixth of winning a new customer. Customer loyalty now is one of the key factors can help a company win long-term success (Andres Kuusik 2007).
Customer loyalty can be classified into proactive loyalty and situational loyalty. Oliver (1999) suggested that proactive loyalty occurs when a consumer frequently buys a brand and settles for no other substitute while situational loyalty exists when the buyer purchases a brand for a special occasion. We can also classify customer loyalty into the behavior loyalty and the attitude loyalty. Behavior based customer loyalty focuses on the long-term choice probability for a brand, for example, repeat purchase probability, while, attitudinal loyalty focuses on brand recommendations, resistance to superior products, repurchase intention, and so on. (Xu-Xiaoli, Wan-Yinghong, Huan-Zhijian, Liu-Hui 2006)
- Behavior Loyalty
Many scholars (Ehrenberg, 1991; Soderlund, 1998; Ja-Shen Chen et al. 2006.) think loyalty refers to customer’s consistent purchasing behavior. Jacoby and Kyner (1973) opined that customer loyalty is the behavioral outcome of a customer’s preference for a particular brand from a selection of similar brands, over a period of time, which, importantly is the result of an evaluative decision-making process. But can we equate repurchasing activity of a customer of the same brand product to loyalty? Amine (1998) thinks that repurchasing under the two cases earlier outlined above can not be called loyalty purchasing:
(1) Consumers’ repurchasing may be due to the consumers’ tendency to reduce or avoid search efforts. There is a high probability of interrupting this consistent buying and switching to another brand at the first opportunity or inducement to do so (price increasing, new brand launching or brand out of stock). This kind of repurchasing can be called inertia purchasing.
(2) When there is a narrow choice in a product category, the repeat purchasing improves too. This consistent brand buying may express more inertia or constrained repeated behavior rather than loyalty with commitment to that brand. Consumer commitment towards the purchase (behavior loyalty) of same brand doesn’t mean he/she is a loyal consumer.
- Attitudinal Loyalty
What is attitudinal loyalty? Jacoby and Chestnut (1978) defined it as a customer’s predisposition towards a brand. It is a function of psychological processes. Amine (1998) considers the commitment towards a brand as attitudinal loyalty. Baldinger and Rubinson (2001) also believe this kind of commitment is a dispositional commitment. Bandyopadhyay et al. (2007) think attitude strength of a brand is operationalized by the number of positive attributes associated with the brand. (A person has a stronger (or weaker) attitude toward a brand when he/she believes that the brand possesses more (or less) positive attributes.) While Rundle-Thiele (2005) use word of mouth as a measure of attitudinal loyalty.
- Attitude-Behavior Loyalty
Behavioral loyalty suggests that the repeat purchasing of a brand over time by a consumer expresses their loyalty, while the attitudinal perspective assumes that consistent buying of a brand is a necessary but not sufficient condition to ‘true’ brand loyalty (Amine 1998). Likewise Dick and Basu (1994) precisely suggested that a favorable attitude and repeat purchase were required to define loyalty. Behavior loyalty must be complemented with a positive attitude towards this brand to ensure that this behavior will be pursued further. Oliver (1999) defines loyalty as a deeply held commitment to re-buy or re-patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior. Dick and Basu (1994) state that, “customer loyalty is viewed as the strength of the relationship between an individual’s relative attitude and their repeat patronage”.
In this research we define the loyal customer from two aspects: (1) repeat purchasing the same brand products (2) positive word of mouth. Both are indispensable. Here the word of mouth means the extent to which customers inform friends and family (Rundle-Thiele, 2005). In this thesis, we agree with Butcher et al. (2001) view about positive word of mouth. They identify four variations of the concept of positive word of mouth: (1) providing positive word of mouth (2) recommending the service to others (3) encourage others to use service (4) defending the service provider's virtues
2.1.2 The Antecedents of Customer Loyalty
We think there are three factors that can lead to customer loyalty. The first one is customer satisfaction (Amine, A., 1998; Oliver, 1999; Butcher et al., 2001; Li Liu, 2008). Butcher say the increased loyalty results from high levels of customer satisfaction. The second factor is switching cost. Switching cost has a positive relationship with customer loyalty and Fornell (1992) stated that switching cost have impact on the connection between customer loyalty and satisfaction. The third one is the corporate image. Corporate image and customer satisfaction have mutual effect on each other. And in turn they both have impact on customer loyalty
Customer Satisfaction: Butcher et al. (2001) opined that increased loyalty results from high level of customer satisfaction. Oliver (1999) had earlier described it in a more figurative way: “satisfaction becomes transformed into loyalty much like a caterpillar becomes transformed into a butterfly. After this metamorphosis, the two creatures are not the same and share virtually no common characteristics except for their biological origins.”
Switching Cost: Switching cost has to do with the aggregate of cost, both financial and non-financial related that a customer will consider before embarking on a move to dump a current product/service for a new one and this has to do with the intention of a customer willing to repurchase. Switching cost is positively related to customer loyalty and Fornell (1992) stated that switching cost have impact on the connection between customer loyalty and satisfaction.
Corporate Image: Corporate image and customer satisfaction have mutual effect on each other. And in turn they both have impact on customer loyalty. These factors are put into consideration in coming up with the model to measure loyalty.
2.1.3 Customer Loyalty: Does it Really Work?
There are large numbers of research on the function of customer loyalty. But does customer loyalty really work? Dowling and Uncles (1997) think loyalty is not working. Launching and maintaining loyalty programs cost firms money (Muller, E., 1998). There are “Leaky Bucket Theory” and “Polygamous Loyalty” that exist in the market. The empirical record and the predictive norms show that only about 10 percent of buyers for many types of frequently purchased consumer goods are 100 percent loyal to a particular brand over a one-year period. Moreover, 100 percent loyal buyers tend to be light buyers of the product or service. Most of customers not only buy one brand (Polygamous loyalty). For example, surveys of European business airline travelers show that more than 80 percent are members of more than one airline loyalty scheme. Customers don’t only loyal to one company (Ehrenberg et al. 1988).
However, in mobile telecom industry the situation is different. The multi-brand loyalty does not exist in the market. Usually one customer only chooses one mobile operator at one time. Once customers have been acquired and connected to a certain network of an operator, their long-term relations with the operator are settled. It is more important to the company’s success than some other industry sectors (Gerpott et al. 2001). We are not sure the percentage of loyal customers in the whole customers but we know "80/20 law" (Dowling and Uncles, M., 1997). The 80/20 law states that about 80 percent of revenue typically comes from only 20 percent of customers. With such a skewed distribution of customers, it makes sense to concentrate most marketing resources on the 20 percent. Most of these customers are loyal customers.
Loyalty programs can stabilize market because loyal customers are less sensitive to price. The more stable the market the higher profit margins (Muller, E., 1998). We think customer loyalty is very important in mobile telecom industry.
2.1.4 New Trend of Customer Loyalty
There are several levels of customers (Cary, W. and Adams, A. 2009):
1. Dissatisfied customer--Looking for someone else to provide product or service.
2. Satisfied customer---Open to the next better opportunity.
3. Loyal customer--Returns despite offers by the competition.
Nearly two decades after loyalty theories radically changed the business world, the balance of power has shifted from companies to customer, now the market is more customer- oriented market, and customer loyalty is becoming more and more indispensable and important in the real market. Now more than ever, organizations need to understand the mechanisms of customer loyalty to profit from it (Cary, W. and Adams, A. 2009). As such, Jennifer Kirkby (2008) provides a trip through the history of customer loyalty and shows how we can learn from past mistakes and current thinking. Loyalty today is not what it uses to be.
Loyalty is more qualitative and subjective – it is a feeling of connection to, and belief in, a company and its proposition, created by a ‘feel good’ factor from interactions. Products with after-sales service no longer sufficed, the customers wanted better experiences with suppliers and had started to use the internet to advise each other on which companies to use: three-quarters of consumers would recommend their favorites company to others. So customer loyalty is different between industries. And it also has been added more meaning right now by the development of the technology (Jennifer Kirkby, 2008).
Five key loyalty-marketing trends are identified and explored in detail, while you think about customer loyalty; you might want to take the following five factors into considerations. (Michael T. Capizzi and Rick Ferguson, 2005)
- Ubiquity; Existence or apparent existence everywhere at the same time; omnipresence
- Technology enables but imagination wins. The ability to confront and deal with reality by using the creative power of the mind; resourcefulness
- Coalition lite; an alliance of people, factions, parties, or nations; a combination into one body; a union).
- Customer analytics; Division of a subject into elemental parts or basic principles; Using, or subjecting a subject to a methodology involving algebra or other methods of mathematical analysis; Proving a known truth by reasoning from that which is to be proved.
- the Wow! Factor wow
Used to expressing wonder, amazement, or great pleasure. This is the outstanding success.
2.2 Customer satisfaction
2.2.1 The Definition of Customer Satisfaction
As the key driver of customer loyalty, many researchers increased emphasis on customer satisfaction. High level of customer satisfaction may lead to more loyal customers which means can bring more profit for enterprise. There are many kinds of definition of customer satisfaction, but no precise definition has already been developed. Just like Oliver (1999) said the working of customer mind is like a black box. That is an observer can only see what goes in and what comes out but not what happened inside. Satisfaction may result from a very simple or a complex process involving extensive cognitive, affective and other undiscovered psychological and physiological dynamics (Oh & Parks, 1997).
Comparing the definitions of satisfaction, it can be found that satisfaction is stated to be a relative concept always judged in relation to a standard (Yuksel Atila et al., 2001). That means if you define customer satisfaction on different angles, you can get different definition. Usually, many researchers conceptualize customer satisfaction as a personal feeling that customers compare perceived quality performance with expectations. This kind of conception is represented by Oliver’s (1980) expectancy-disconfirmation framework. He states that customers compare the perceived quality of products and service with their prior expectations. The difference between expectations and perceived quality is called disconfirmation. If it is positive disconfirmation (the expectations are met or exceeded), the consumer is satisfied; if it is negative disconfirmation (perceived quality falls short of expectations), and then the customer is dissatisfied. The model was further developed by Anderson et al. (1993).
Some other researchers suggest that customer satisfaction can be defined at two levels (Bitner & Hubbert, 1994; Jones et al. 2000; Bodet, Guillaume, 2008). They are transaction-specific satisfaction and overall satisfaction (holistic). Transaction-specific satisfaction refers to the consumer’s satisfaction with a discrete service encounter. It is based on the individual level; they base their judgment of customer satisfaction on a specific purchase occasion. Overall satisfaction refers to the consumer’s overall subjective post-consumption evaluative judgment based on all encounters and experiences with particular organization. Wang, Yonggui et al. (2004) opined that overall satisfaction is more fundamental and useful than transaction-specific consumer satisfaction in predicting subsequent consumer behaviors and a firm’s past, present and future performance. ACSI (American Customer Satisfaction Index), SCSB and ECSI define customer satisfaction as overall satisfaction. So here, our theoretical framework treats customer satisfaction as overall satisfaction.
2.2.2 The Definition of Perceived Quality of Products and Service
From the end of last century, companies already realized that understanding and meeting consumer’s need is very important for their company. It can help companies get competitive advantages. Supplying high quality products and service seems very important. Companies that have goods and services that are perceived as being of high quality typically have greater market share, higher return on investment, and higher asset turnover than firms which have goods and services perceived as being of low quality (Kim et al., 2004).
The definition of quality which we will use in our thesis refers to perceived quality. Because it was found that the objective quality concepts are not identical for managers, customers and researchers (Zeithaml 1988). We need a higher level abstract definition to describe the quality. Definition of perceived quality seems suitable under the situation. Zeithaml (1988) describes perceived quality as consumer’s judgment about the superiority or excellence of a product or service. The perceived quality has two primary components of consumption experience (Fornell 1996):
(1) Customization, that is, the degree to which the firm's offering is customized to meet heterogeneous customer needs, and
(2) Reliability, that is, the degree to which the firm's offering is reliable, standardized, and free from deficiencies.
O'Loughlin (2004) thinks that there are two general kinds of conceptions of perceived quality: product quality (hardware) and service quality (software/humanware). Perceived product quality is the evaluation of recent consumption experience of products. Perceived service quality is the evaluation of recent consumption experience of associated services like customer service, conditions of product display, range of services and products etc.
2.2.3 Customer Loyalty and Perceived Quality
According to Ahn’s (2006) research in Korea, call drop rate (percentage of abnormally terminated calls) has a significant impact on the probability of churn; however, the call failure rate (the percentage of calls that are not initiated due to interference or poor coverage) does not. While Gerpott (2001) considers the network quality, which is reflected in excellent indoor and outdoor coverage and in the clarity of voice reproduction without any connection break-downs, as one of the key drivers of customer satisfaction in Germany market. Lee (2001) thinks the quality of core services (coverage of the calling area and clarity of sound) is very important on customer satisfaction in France telecom market. There is no relative or similar research in Nigeria’s Telecom Industry, but we think Nigeria telecom market is similar with others. That is the coverage of the area and call quality (clarity of voice) are key drivers of customer satisfaction. Customer satisfaction has a strong relationship with customer loyalty which has already been proved, so does coverage of the area and call quality (clarity of voice) have big importance on customer loyalty?
SMS play a great important role in telecommunication in the Nigerian setting. Though it might seem more pronounced amongst the educated younger generation. More people choose to send SMS to express their love to others, especially for young boys and girls. Usually, we will receive / send a lot of SMS during the festival to get / express wishes. The second reason is that text has a unique charm it can express something that the language may not express. The third reason is that young people are the main groups of SMS users and they like communicating via SMS not only because it’s cheaper than the call, but also because they can send it every time in any places. For example, many students like to send SMS while classes are going on.
But usually one SMS only contain 160 characters which give a large limitation to mobile users in Nigeria when they send SMS. We also have problems relating to missing our SMS during the sending process, especially at the “peak time” (for example the festive periods). Going by the youth been a vibrant population of phone users it is important that this angle be investigated as this might have a strong relationship with customer loyalty.
In this thesis, the “network quality” refers to the internet connection and the speed to login website, received and send email etc. with cell phone. In 3G era, the quality of product for different telecom companies is largely dependent on the speed of internet. If the mobile operator can supply high speed mobile internet, it should be able to win more customers.
Nobody will deny that price is a key driver when people make a purchasing decision. Especially for the telecom industry, people usually store certain amount money in their account. So they will make balance inquiry from time to time: how much money already been consumed and how much left. If the inquiry system is not reliable, nobody will feel assured when they are consuming. So we want to know does the convenient and reliable inquiring balance system have a big importance on customer loyalty.
It’s hard to find a mobile operators’ service center on the street in western countries. This might not be unconnected with the fact that people are already used to dealing with most of their transaction through the internet and customer care line. But in Nigeria it is a different scenario. Most people still patronize the service centers.
Compared with service center, the customer care line service has some incomparable advantages. (1) You can transact whenever (24 hours service) and wherever you like and the call is free.
(2) It can handle complaints.
In our pre-description, we know the importance of loyal customers for the firms. Its central role in maintaining customer loyalty clearly positions complaint handling as an important strategic tool for enterprises. Complaints represent an opportunity to remedy product or service related problems and to positively influence subsequent customer behavior. Dealing effectively with complaints can have a dramatic impact on customers' evaluations of the experiences for the encounter service as well as enhance their likelihood of repurchase and limit the spread of damaging negative word-of mouth (Blodgett, 1997). If a firm can deal efficiently with a customer’s complaints with high quality, the complain customer can transfer into been a loyal customer. Nigerians no doubt like other people of the world like to use explicit way to express their mind and such is the same when they are complaining. While costumers will prefer to complain through the customer care line for the inherent advantage in it, the service quality delivered by the workers in the service center and hotline are very important. It might directly influence the consumers experience and affect the consumer overall satisfaction.
So in this thesis, we will like to investigate the effect of the service quality of service center and customer care hotline on customer loyalty. We treat the overall evaluation of the encounter service (face to face service, call hotline etc.) quality as perceived service quality.
2.2.4 The Definition of Perceived Customer Value
The market is driven by customers’ demand. With advancements in science and technology, there is no great difference among the same category products. Many firms are transforming their focus from looking internally within the organization for improvement by way of quality management, downsizing, business process re-engineering or lean production and agile manufacturing to customers (Wang Yonggui, 2004). Customer value which has a significant impact on behavior intentions of customer has been considered as a successful factor for firms.
Like other definitions discussed before, there are many different expressions of the concept of perceived value. These definitions are very popular and already are widely used by many researchers in their research papers:
- Value is the consumer’s overall assessment of the utility of a product based on perceptions of what is received and what is given. (Zeithaml 1988)
- Buyers’ perceptions of value represent a trade-off between the quality or benefits they perceive in the product relative to the sacrifice they perceive for paying the price. (Monroe 1990)
- Customer value is market perceived quality adjusted for the relative price of your product. (Gale 1994)
- Customer value as a customer perceived preference for and evaluation of those product attributes, attribute performances, and consequences arising from use that facilitate achieving the customer’s goals and purposes in use situations (Woodruff, 1997).
Comparing these definitions, we can find some consensus among them. There is some form of trade-off between what the consumer gives up (price, sacrifice) and what the consumer receives (utility, quality, benefits) (Doods, 1991; Woodruff, 1999; Kashyap & Bojanic, 2000). It implies at the same time that when consumers are able to practically evaluate trade-offs between price and quality, perceived overall value may provide the best summary evaluation of the experience (Kashyap, 2000). All the value is based on the customer’s perspective. In this thesis, we adopt the definition of customer value as “the perceived level of product quality relative to the price paid” as defined by Fornell, (1996).
2.2.5 Customer Loyalty and Customer Perceived Value
When we talk about the value of products, a word usually appeared in our mind: “price”. Price is often used by consumers as an extrinsic product-quality cue (Teas & Agarwal, 2000). Scitovszky (1945) observed that the use of price as an indicator of product quality is not irrational, but represents a belief that price in the marketplace is determined by the interplay of the forces of competitive supply and demand. Generally, people perceive price as just a number which present how much money you should pay if you want to get a product or service. That is what we called “actual price”. But do consumers really remember the actual price of the products in their daily lives? Research has revealed that consumers do not always know or remember actual prices of products. Instead, they encode prices in ways that are meaningful to them (Teas & Agarwal, 2000). This is what we usually called “perceived price”. Zeithaml (1988) defined perceived price as “what is given up or sacrificed to obtain a product”. Here what we give up can be money but can also be non-monetary things like time, convenience and search costs or a combination of some or all of them.
Just like we stated earlier, customer value is the comparison between perceived quality and perceived price. Comparing quality with price can balance the difference in income among people.