Full Project – Customer relationship marketing and customer loyalty in mobile telecommunication industry

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CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

As the competitive environment becomes more turbulent, the most important issue the sellers face is no longer to provide excellent, good quality products or services, but also to keep loyal customers who will contribute long-term profit to organizations (Tseng, 2007). To compete in such competitive and interactive marketplace, marketers are forced to look beyond the traditional 4Ps of marketing strategy for achieving competitive advantage. Therefore, relationship marketing among other marketing strategies has become an alternative means for organizations to build strong, ongoing associations with their customers (Andaleeb, 2006).The development of relationship marketing has received a lot of attention in both academy and practice areas in the last few decades. It was during the last decade of the 20th century that relationship marketing began to dominate the marketing field (Egan, 2001). During this period, relationship marketing became a major trend in marketing and management of business applied and practiced by many all over the world.

Relationship marketing is a strategy designed to promote customer loyalty, interaction and long-term engagement with customers by providing them with information directly suited to their needs and interests and by promoting open communication. This approach often results in increased word-of-mouth activity, repeat business and a willingness on the customer’s part to provide information to the organization (Peng and Wang, 2006). Buyers and sellers in markets achieve mutual benefits through developing relationships.

Relationship marketing tactics are thus approaches to apply relationship marketing in practice (Tseng, 2007).

Effective customer-oriented relationship marketing tactics may help marketers to acquire customers, keep customers, and maximize customer profitability, and finally build up customer loyalty.

The telecommunication industry is becoming one of the most important industries in the world. The telecommunication industry includes radio, television, fixed and mobile telephone and the internet. Telecommunication influences the world economy and the telecommunication industry’s revenue was estimated to be $1.2 trillion in 2006. In Nigeria, percentage contribution to the GDP increased to 7.76% in September 2013 from 3.66% in September 2009.The sector has contributed and continued to contribute towards the development of socio economic condition of Nigeria.

The process of deregulating the telecommunication industry in Nigeria began in 1992 with the establishment of Nigerian Communications Commission by Decree 75 of 1992. The objectives of the regulation have been to create an environment which would facilitate the supply of telecommunication services, allowing private entrepreneurs to enter the market while promoting fair competition and enhancing level of service for the concerned. The sector was formally liberalized in January 2001 with Econet and MTN taking off in June and August, 2001 respectively. The country has 183,047 active subscribers (fixed wired/wireless lines), 138,530,830 active subscribers (mobile cellular GSM) and 2,108,960 active subscribers (mobile CDMA lines) as at January 2015 (Nigerian Communication Commission). So, the Nigerian telecommunication industry has already become a mature market. The major Nigerian mobile operators – MTN, Glo, Airtel, and Etisalat – have launched a mobile marketing initiative with the four companies sharing more than 90% of Nigerian telecommunication market.

The GSM mobile telecommunication sector in Nigeria is very much competitive and this competition trend is increasing. Nigerian subscribers now have various alternatives to choose from according to their convenience. Therefore, to remain competitive in the market, mobile operators have to identify the factors related to consumer satisfaction and loyalty. Cheng and Ching, (2007) opined that with the tremendous growth in the mobile service industry, service operators are facing two problems, i.e. to increase market share and gain competitive advantage. Therefore, to increase market share and gain competitive advantage, operators have to identify the factors related to relationship marketing, customer satisfaction and loyalty.

The astronomical growth in the subscriber base of the GSM has led to intense and cut-throating competition in the GSM market of Nigeria. The competition is exacerbated by the lower switching costs among the subscribers of the various networks, which manifest in the frequency with which they (subscribers) freely enter and leave the networks. In term of financial outlay it costs subscribers as low as N100 to acquire SIM (Subscriber Identification Module) and this makes it cheaper for subscribers to traverse from one network to another. The negative effect of this is the inability of the operators to retain and make existing customers loyal. With the competition becoming tough, service providers realized that retaining one’s existing customer base is important as much as the acquiring of a new customer (Coyles and Gokey, 2005).There is also a problem of the declining growth in the GSM subscriber base in Nigeria making it more difficult to attract new subscribers and necessitating again the need to retain the acquired customers. The situation, according to Long and Chun (2004) makes mobile telecommunication companies not only to promote their service quality, but also change their marketing core strategy to holding their existing customers by enhancing and optimizing the customer loyalty.

In the light of this intense competition, the major challenge confronting all the mobile operators in Nigeria, therefore is the determination and execution of various marketing initiatives that would not only lead to attraction of new subscribers, but also retention of the existing ones who would then become loyal customers. There are overwhelming arguments supporting that it is more expensive to win new customers than to keep existing ones (Reichheld and Sasser, 1990; Ennew and Binks, 1996; Harmozi and Giles, 2004; Pfeifer, 2005 ;).

The need for customer loyalty in business has been recognized by many scholars. Customer loyalty is one of the most frequently discussed subjects in the marketing and service literature (Eshghi et al., 2007; Heskett and Sasser, 2010). There is a plethora of definitions of loyalty and/or customer loyalty in the extant literature. Customer loyalty is customer repeating purchase intention to some specific products or services in the future (Jones et al., 1995). It is making customers feel committed: When the benefits are meaningful to them, they will stay on (Grossman, 1998). Loyalty is used to describe the willingness of a customer to continue patronizing a firm’s goods and services over a long period of time and on a repeated and preferably exclusive basis, and voluntarily recommending the firm’s products to friends and associates (Lovelock, 1996). Customer loyalty is the result of an organization’s creating a benefit for customers so that they will maintain and increasingly repeat business with the organization (Anderson and Jacobsen, 2000). From the forgoing, loyalty in GSM market is concerned with the length of time and the frequency with which customers stay and remain on a network. The longer the time a customer remains on and the more frequently a customer patronizes a GSM network, the more that customer becomes loyal. It is therefore the desire of all GSM firms in Nigeria to retain large number of their customers on their networks.

Customer loyalty provides the foundation for a company’s sustained competitive edge. Different researchers have given credence to the reason why developing customer loyalty is beneficial to firms, including GSM providers. Developing and increasing loyalty is a crucial factor in companies’ growth and performance (Reichheld, 1996 and Lee and Cunningham, 2001). Customer loyalty is one of the key factors and can help a company achieve longterm success (Andres, 2007).The significance of customer loyalty is that it is closely related to the company’s continued survival and to strong future growth (Fornell, 1992). Hence, for a company to maintain a stable profit level when subscription level has reached saturation point, the market is mature and competition is fierce, a defensive strategy which strives to retain existing customers is more important than an aggressive one (Fornell, 1992 and Ahmad and Buttle, 2002). Ndubisi (2005) and Pfeifer (2005) point out that the cost of serving a loyal customer is five or six times less than a new customer. Walsh et al. (2005) state that it is better to look after the existing customer before acquiring new customers.

From the above, it is evident that a telecom firm that promotes customer loyalty has a lot to benefit from. The current saturated level of GSM growth and intense competition in Nigeria has left the operators with no option other than seeking to maintain the existing customers and lock them into loyalty. Bulk of the current marketing efforts by these firms is aimed at retaining and making customers loyal.

1.2 Statement of the problem

An Effective CRM has become a strategic imperative for companies in virtually every business sector. Companies are moving closer to their customers, expanding more effort in finding new ways to create value for their customers and transforming the customer relationship into one of solution finding and partnering rather than one of selling and order taking (Szming 2003)

Despite much attention is given to the provision of quality service and satisfaction to consumers; some telecommunication companies render weak services and thereby take consumers for granted. Almost all the telecommunication companies encounter similar problems in meeting customer expectations and customer satisfaction. Majority of the customers encounter problems of poor service delivery in areas of voicemail, short message services and data services.

Various Scholars have reviewed the concept of customer relationship in different contexts. Muturi (2004) researched on factors that determine customer loyalty to a mobile phone service provider the case of mobile phone users in Nairobi and found out that the major factor are service quality, price indifference and perceived value. Tanui (2007) conducted a survey of customer loyalty programs applied by petrol stations in Nairobi and found that the main factors that contributed to customer loyalty to their products were attractiveness of the brand personality and perceived quality while Mungai (2007) studied the factors that determine customer loyalty the case of the port of Mombasa and found out that Customer Satisfaction, perceived quality and brand loyalty were the main determinant.

Taking into consideration the preceding discussion and the subsequent benefits that can be obtained from customer loyalty and CRM, little research has been conducted to obtain a better understanding of customer relationship marketing and customer loyalty in mobile telecommunication industry. It is as a result of the problems identified above that this study is being embarked upon to examine the relationship between customer relationship marketing and customer loyalty in the Nigerian telecommunication industry.

1.3 Research Questions

Based on the problem stated above, the following research questions were raised:

How does Trust affect Customer Loyalty in Telecommunication Industry in Nigeria?
Does Commitment affect Customer Loyalty in Telecommunication Industry in Nigeria?

How does Communication affect Customer Loyalty in Telecommunication Industry in Nigeria?

Research Objective

The main objective of the study was to analyze the relationship between customer relationship marketing and customer loyalty in the mobile telecommunication sector in Nigeria. The specific objectives are;

To determine the relationship between Trust and customer loyalty in the mobile telecommunication Industry in Nigeria
To examine the relationship between Commitment and Customer loyalty in Telecommunication Industry in Nigeria

To determine the relationship between Communication and Customer Loyalty in Telecommunication Industry in Nigeria

1.5 Research Hypothesis

In line with the Objectives, the following null hypotheses were drawn to guide the thrust

Of this study:

Ho₁ Trust has no significant effect on Customer Loyalty in Telecommunication Industry in Nigeria.

Ho2 Commitment has no significant effect on Customer Loyalty in Telecommunication Industry in Nigeria.

Ho3 Communication has no significant effect on Customer Loyalty in Telecommunication Industry in Nigeria.

1.6 Significance of the Study

The study focuses on the topic of customer relationship marketing and customer loyalty, in this regard; scholars in this area will use this study as a form of reference. In addition, researchers will be able to gain additional knowledge from the study given that it is focusing on the telecommunication industry.

Customer Relationship marketing (CRM) has become a strategic imperative for all companies as its effective implementation can increase customer satisfaction, loyalty and retention and so, overall sales and repeat purchases. The research results will provide assistance to telecommunication companies’ management to better satisfy its customers, respond to their needs efficiently and on timely manners.

Further, adopting CRM would be the platform for building a good partnership with customers which consequently leads to services development and improvement.

Moreover, other public sector enterprises could benefit from the study (parastatals, Ministries, etc); as this study would highlight the importance of building a good relation with customers which could result in performance improvements and better decision making process.

1.7 Scope of the Study

The study focuses on internet service provision in four major local government areas in Nasarawa State. This is because on aggregate, these local government account for less than half of the GSM Internet users, and there is a wide scope of a large number of GSM Internet users living in these areas. This study focus on four major local government areas in Nasarawa State and the concluded study will therefore be generalised to reflect the reality of Nasarawa State as a whole. One fact revealed during our exploratory survey was that local government in Nasarawa State are very homogenous. Due to the similarity of these cities, we decided to save time and survey four local governments and then extrapolate the result across the country.

Generally, scope of internet provision and usage will emphasise computer usage mainly and supported by other devices. Many devices access internet services, for example computers, smart phones, personal digital assistants, cameras, watches and any device connected to a telephone line.

Nigeria has internet penetration of 97.2 million users or 52% of Nigerians connected to the internet of some sort. However, the large internet access is made through smart-phones through one or more the four main GSM operators; MTN, Glo, Airtel and Etisalat, across the country. This study considers the smart phone mobile internet users.

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Full Project – Customer relationship marketing and customer loyalty in mobile telecommunication industry

Full Project – Customer relationship marketing and customer loyalty in mobile telecommunication industry

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Full Project – Customer relationship marketing and customer loyalty in mobile telecommunication industry

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