A Study on Factor influencing Telecommunication Sector Pakistan

Research Project on

A Study on Factors Influencing Customer Loyalty in Pakistan Telecommunication Industries in Karachi

Program: MBA-EVSemester: Final 2013

Submitted by:Zulfiqar Ahmad

Registration No: MBA-Eve/03-11/011

Supervised by:Mr. Tahir Iqbal

A Research Project submitted in partial fulfillment of the requirements for the Degree of MBA (Finance)

DADABHOY INSTITUTE OF HIGHER EDUCATION

KARACHI

APPROVAL SHEET

This research is entitled “A study on factors influencing customer loyalty in

Pakistan Telecommunication Industry in Karachi.” Prepared by Zulfiqar Ahmad is

accepted in partial fulfillment for the award of Master’s degree of Business

Administration (Finance).

______________________

Tahir Iqbal Research Supervisor

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LETTER OF TRANSMITTAL

To,

Mr. Tahir Iqbal

Course: Research Project

02nd Sep., 2013

Dear Sir,

Enclosed is a copy of “A study on factors influencing customer loyalty in Pakistan

Telecommunication.” This report is about the research made during the 4 months

of time period and effort, based on the need of the study, research methodology,

findings, limitations and future need.

This research gives useful information regarding the factors involved in customer

loyalty in Pakistan telecom. Although this research is made for academic

purpose, but the importance of the study cannot be ignored.

I hope that this report is acceptable to the Dada Bhoy Institute of Higher

Education and to you, while keeping in view the scope of my limited knowledge

The project was very interesting and challenging, this was throughout a learning

experience. At the end say thank to you for giving me the opportunity to extend

my knowledge and ability to look things in a different way.

Yours sincerely

Zulfiqar Ahmad

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Table of Contents

ACKNOWLEDGMENTS

ABSTRACT

CHAPTER 1: INTRODUCTION

1.1 OVERVIEW

1.2 PROBLEM STATEMENT

1.3 HYPOTHESIS

1.4 OUTLINE OF THE STUDY

1.5 DEFINATIONS

1.5.1 Defination of Customer Loyalty1.5.2 ......Defination of Perceived Value1.5.3 Defination of Service Quality

1.5.4 Defination of Corporate Image

CHAPTER 2: LITERATURE REVIEW

2.1 THE CONCEPT OF CUSTOMER LOYALY

2.2 Determinants of CUSTOMER LOYALTY

2.2.1 Service Quality and Customer Loyalty2.2.2 Customer Servicce/Care, Customer Satisfaction and Customer Loyalty2.2.3 Importance of Perceived Value2.2.4 Importance of Trust2.3.5 Corporate Imange and Customer Loyalty

CHAPTER 3: RESEARCH METHODS

3.1 METHODOLOGY OF DATA COLLECTION

3.2 SAMPLING TECHNIQUE

3.3 SAMPLE SIZE

3.4 STATISTICAL TECHNIQUE

CHAPTER 4: RESULTS

4.1 FINDING AND INTERPRATION OF RESULTS

4.2 HYPOTHESIS ASSISSMENT SUMMARY

CHAPTER 5: DISCUSSION, IMPLICATIONS, AND CONCLUSIONS

REFERENCES

APPENDIX

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ACKNOWLEDGMENTS

This dissertation would not have been possible without the guidance and the help

of my teacher Mr. Tahir Iqbal, who one way or another contributed and extended

their valuable assistance in the preparation and completion of this study.

Lastly, I offer my regards and blessings to all of those who supported me in any

respect during the completion of the project.

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ABSTRACT

Telecom services in Pakistan are clearly changing and growing. Due to rapid

development of communication technologies in past few years and changing

demand of customers, the paradigm of mobile telecommunication services is now

moving from simple voice-centered communication to a combination of high

speed data communication and multimedia. With all this, the perceptions,

believes and anticipations are changing. It is very important to identify all of these

things.

Secondly the service provider in Pakistan are working in a very tough

competition. All of the service provider are providing more or less equal services.

So it is very critical to know the exact best service provider. But still there are

some factors that can make a service provider the best in the market. In this

research paper total four of the factors will be studied, however the all of the

variables were studied before. Moreover all these variables were not studied in

any single research in Pakistan or may not be disclosed.

In this research, relationship of the service quality, corporate image, perceived

value and trust with the customer loyalty is discussed.

In this research, total four hypothesis are developed which are about impact of

corporate image, trust, perceived value, and call quality on customer loyalty. The

Authors objective was to find out the relationship between customer loyalty and

these four factors. For this I adopted convenience sampling and developed a

questionnaire.

From this research I expected the result that all of my hypothesis were accepted.

Service providers have to make it differentiating for their customers by improving

their Overall reputation, customer support, and convenience in procedures.

Keywords: Customer loyalty, value, Pakistan mobile telecom service, service quality, corporate image.

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CHAPTER 1

INTRODUCTION

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1.1 OVERVIEW

Pakistani mobile telecommunication services are clearly exhibiting signs of an

abrupt industry paradigm change and symptoms of a market in transition. Due to

rapid development of information and communication technologies in past years

and increasing demand from customers, the paradigm of mobile

telecommunication services is now moving from simple voice-centered

communication to a combination of high speed data communication and

multimedia. Some other factors such as the growth of the wireless internet, and

the use of different packages in corporate world all contribute to emphasize the

appearance of a transition period in the mobile telecommunication services

market. Also, a stagnation rate of diffusion, indicated by a fall in the rate of

increase in subscriber numbers, suggests that the market may have now reached

maturity.

If we talk about the few past years, telecommunication in Pakistan describes the

overall environment for the growing mobile telecommunications, telephone, and

internet markets. In 2008 Pakistan was the world’s thirst fastest growing

telecommunications market. Pakistan’s telecom infrastructure is improving with

foreign and domestic investments into fixed-line and mobile networks; fiber

systems are being constructed throughout the country to aid in network growth.

Mobile Telecommunications:

In January 2004 the Ministry of IT issued its Mobile Cellular Policy with

objectives to:

1. Promote efficient use of radio spectrum;

2. Increase choice for customer of cellular services at competitive

and affordable prices;

3. Encourage private investment in the cellular mobile operators;

4. Recognize of the right and obligations of mobile cellular

operators;

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5. Provide for fair competitions among mobile and fixed line

operators; and

6. Provide and effective and well defined regulatory regime that is

consistent with international best practices.

The mobile telecommunications sector is seeing very large year-to-year growth in

Pakistan. Approximately 90 percent of Pakistanis live within areas that have cell

phone coverage and more than half of all Pakistanis have access to a cell phone.

With 108 million mobile subscribers in April 2011, Pakistan has the highest

mobile penetration rate in the South Asian region.

According to the Pakistan Telecommunication Authority (PTA), Mobilink

continues to lead the market with 32.9 million subscribers, followed by Telenor

with 26.1 million, Ufone with 20.4 million, Warid Telecom with 18.1 million, and

Zong with 10.3 million, according to Telecom Indicators; by PTA 3 June 2011. All

telecom companies are working to broaden their networks in the Azad Jammu

and Kashmir and Northern Areas, which were largely ignored until recently. Five

of the seven Agencies of the tribal areas have mobile coverage. (www.pta.gov.pk)

1.2– PROBLEM STATEMENT

Brief Overview

The change of paradigm and the symptoms of a market in transition are driving

the industry’s restructuring efforts and intensifying completions between

companies. Pakistani mobile carriers are aware of importance of a customer-

oriented business strategy as a condition for sustaining their competitive edge

and maintain a stable profit level, and off course for their survival. As the numbers

of subscribers has reached its almost saturation level, creating new and securing

new customer is not only difficult but also costly in terms of marketing. Hence, it is

becoming an industry-wide belief that the best core marketing strategy for the

future is to try to retain existing customers by heightening customer loyalty and

customer value.

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Customer Loyalty

Trust

Perceived Value

Call Quality

Corporate Image

Purpose of Research

Previous studies tell that, the companies which grow with the time passing are

developing and increasing customer loyalty (Lee & Cunningham, 2001;

Reichheld, 1996). This paper analyses the antecedents of customer loyalty and

the structural relationship between these factors in the Pakistani mobile

telecommunication services industry. As researcher’s knowledge no such

previous research was made in Pakistan telecom, or may be made but was not

disclosed. It was very interesting for researcher to study the customer loyalty

factors in Pakistan telecom because there is very tough competition between the

service providers. So in such tight environment customers are free to make a

choice. Study was made to know those factors, which are considered by the

customer in such an environment.

Graphical Model

1.3- HYPOTHESIS

H1: Trust has significant impact on customer loyalty.

H2: Service quality has positive impact on customer loyalty.

H3: Perceived value has significant effect on customer loyalty.

H4: Corporate image has significant impact on customer loyalty.

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1.4- OUTLINE OF THE STUDY

Chapter #1

In chapter 1 describes the brief history of telecommunication in Pakistan, its

major service providers and Pakistan Telecommunication Authority rules in short.

Purpose of the study is also discussed, where the main contents of research are

also discussed. This chapter also covers the research hypothesis, supported by

the ample references of different authors. Key terms and definitions are also

described in this chapter.

Chapter #2

In depth review of the literature is described in chapter 2. Research is based on

the service quality, trust, perceived value, customer satisfaction and customer

loyalty. This chapter includes the in depth overview of the above given variables.

Variables are taken from the journals which were previously proved by the other

researchers, supporting tags are given at each variable support.

Chapter #3

Chapter 3 includes methods used for data collection and reason to use them.

What are the sampling techniques used and why they are used? This chapter

also defines sample size taken for research, instruments used for data collection,

research model development and them the statistical technique used in the

research, which is Chai-square technique. All the methods and techniques are

supported by the references and solid reasons, which were accepted in the

previous research studies.

Chapter #4

Chapter 4 defines the research results and their interpretations. The overall

research hypotheses and their results summary is given, which gives the clear

understanding of research purpose, hypothesis and their results, proving rejected

or accepted and further interpretation of the research hypothesis.

Chapter #5

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Chapter 5 is closing chapter, where research is discussed briefly implications of

the research are also discussed in the chapter. Need of future research and its

importance is also given.

1.5 – DEFINITIONS

1.5.1-Definition of customer loyalty

Customer loyalty is all about attracting the right customer, getting them to buy,

buy often, buy in higher quantities and bring you even more customers. Customer

loyalty is one of the most frequently addressed subjects in the marketing and

service literature (Andreassen and Lindestad, 1998)

1.5.2-Definition of Perceived Value

The worth that a product or service has in the mind of the customer. The

consumer's perceived value of a good or service affects the price that customer is

willing to pay for it. in order to obtain a higher price for their products, producers

may pursue marketing strategies to create a higher perceived value for their

products. low perceived value drives customers towards switching to others

products to increase perceived value, which consequently contributes to a decline

in loyalty (Anderson and Srinivasan, 2003).

1.5.3-Definition of Service Quality

Service quality is a comparison of customer expectations with performance of

service delivered. It is the measure of how well delivered service matches the

buyer’s expectations. In telecom the service quality ingredients are call quality,

pricing structure, mobile devices, value-added services, convenience in

procedures, and customer support. Van der Wal et al. (2002) find out that,

consistent quality affect U.S. consumer loyalty. Service quality has been

measured by call quality. According to Lin and Wang (2006) there is a positive

relationship in perceived value and customer loyalty.

1.5.4- Definition of Corporate Image

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Corporate image is the perception in consumer’s mind about the corporate entity

behind a brand. For example Unilever, behind its every brand has a good impact

on consumers due to its credibility in the market. Positive corporate images can

greatly increase the speed of new product adoption because of credibility of the

manufacturer’s claims. According to Andreassen (1999), corporate image has

significant positive impact on customer loyalty.

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CHAPTER #2

LITERATURE REVIEW

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2- LITERATURE REVIEW

2.1- The Concept of Customer Loyalty

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 excess of definitions of loyalty or customer loyalty in the present

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 telecommunication 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 network, the more that customer becomes loyal. It is

therefore the desire of all network providers firms in Pakistan 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). Customer loyalty is one of the key factors and can help a

company achieve long-term 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

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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). Ndubisi (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 level of GSM growth and intense competition in Pakistan has

left the network providers 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.

According to Oliver (1999) loyalty is a deeply held commitment to re-buy, reuse a

preferred product or service consistently in future. Loyal customers consistently

come back to buy more, they're more willing to stay despite increases in price

and they become strong advocates for the brand in their own social circles and

online.One discovery by Xerox changed the conventional wisdom, because the

Xerox totally satisfied customer were six times more likely to repurchase Xerox

products over the next 18 months than satisfied customers. Customers who have

freedom to choices is not enough to make them loyal. The only way is loyal

customers are totally satisfied customers (Frederik F. Reichheld and W. Earl

Sasser, Jr., HBR, 1990). There are three approaches of customer loyalty, the

behavioral approach, the attitudinal approach and the integrated approach (Oh,

1995).

Customer loyalty has been the subject of considerable research and has been

defined and measured in various ways (Oliver, 1997). Customer loyalty may be

defined as the customer’s fulfillment response to a consumption experience, or

some part of it. Customer satisfaction I a pleasurable fulfillment response while

dissatisfaction is an unpleasurable one (Buttle, 2004). Satisfaction and

dissatisfaction are two ends of a continuum, where the location is defined by a

comparison between expectations and outcome. Customers would be satisfied if

the outcome of the service meets expectations. When the service quality exceeds

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the expectations, the service provider has won a delighted customer.

Dissatisfaction will occur when the perceived overall service quality does not

meet expectations (Looy, Gemmel & Dierdonck, 2003). Sometimes customer’s

expectations are met, yet the customer is not satisfied. This occurs when the

expectations are low (Buttle, 2005). For example, the customer expects the flight

to be late and it gets late.

Customer satisfaction is considered to be one of the most important outcomes of

all marketing activities in a market-oriented firm. The obvious need for satisfying

the firm’s customer is to expand the business, to gain a higher market share, and

to acquire repeat and referral business, all of which lead to improved profitability

(Barsky, 1992). Studies conducted by Cronin and Taylor (1992) in service sectors

such as: banking, pest control, dry cleaning, and fast food; found that customer

satisfaction has a significant effect on purchase intentions in all four sectors.

Similarly, in the health-care sector, McAlexander et al. (1994) found that patient

satisfaction and service quality have a significant effect on future purchase

intentions.

In mobile communication service sector, it would be important to develop

marketing strategies that promote profitability by retaining existing customers

through customer loyalty and value (Kim, Park and Jeong, 2004).

Many researches find that high service quality relatesrelatively high customer

satisfaction (Cronin et al, 2000) which further leads to loyalty (Ennew and Binks,

1999; Lai et al, 2009).

2.2- Determinants of Customer Loyalty

Since customer loyalty has become major cause for organizations, a major

concern is to find out the determinants or drivers of customer loyalty (Kumar et

al., 2011). This section discusses the determinants of customer loyalty.

2.2.1- Service Quality and Customer Loyalty

Quality is conformance to requirements (Crosby, 1996). Quality is the comparison

of perceived performance and expected performance (Kang, 2006). Service

quality is the customer’s overall impression of the relative inferiority/superiority of 17

an organization and its service offerings (Bitner et al., 1990). The firm's ability to

create and sustain competitive advantage depends upon the high level of service

quality provided by the service provider (Yoo and Park, 2007). Therefore,

providing a consistently high quality service quality can differentiate one GSM

provider from others.

Theoretically, positive relationships between service quality, customer

satisfaction, and customer loyalty are well documented in the extant literature.

Services Quality is considered as a major determinant in customer retention and

building value relationship (Venetis and Ghauri, 2004). Service quality results in

repeated sales and increased market share, which leads to customer loyalty

(Buzzell and Gale, 1987). Providing a high service quality can lead an

organization to charge premium price (Brown et al., 1992). High service quality

enhances customers’ favorable behavioral intentions while simultaneously

reduces their unfavorable intentions (Zeithaml et al., 1996). The implication of the

above discussion is that with high service quality, GSM customers are attracted,

and when happy and satisfied, and have an increased propensity to stay longer

with their GSM service provider.

Empirical findings have shown positive relationships existing between service

quality and customer satisfaction, on one hand and between service quality and

customer loyalty, on the other hand in a number of industries. For example, Elnan

and Andersen (1999) found a positive relationship between service quality and

customer satisfaction in the bus industry in Norway. Coner and Gungor (2002)

found that service quality would lead towards more loyal customers in the Turkish

Metropolitan retail market. Turel and Serenko (2006) found that perceived service

quality and perceived value are the key constructs affecting the customer's

satisfaction with mobile services. Satisfaction in turn leads to customer loyalty.

Zeithaml et al. (2008) develop a conceptual model that correlates service quality,

customer satisfaction and customer loyalty. The model shows that service quality

results from reliability, assurance, responsiveness, empathy and tangibles.

Service quality is determined by reliability, responsiveness, assurance, empathy,

and tangibles (Parasuraman et al., 1985). These can be considered as the

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determinants of the broad service quality, but what are the specific determinants

of telecommunication service quality? Jahanzeb and Tasneem (2011) discuss

these under the following broad headings: communication guarantee, settlement

service, value added service (VAS) and technology innovation. Communication

guarantee results when the quality of network of the service provider is

satisfactory and there are negligible rates of call failure. The settlement service

refers to the prompt and accurate billing service that also enhances customer

satisfaction.

Customer satisfaction level can also be influenced by VAS, for example, GPRS,

Media file sharing, news updates and so on. Finally, technology innovation refers

to the feature where in the service provider rolls out new technology on a regular

basis.

According to Seth and Deshmukh ( 2004), The subject of service quality is very

rich in context of definitions, models and measurement issue. Several

researchers explored the subjects with varying perspectives and using different

methodologies. The following factors seem to be suitable for comparative

evaluations of the models:

Identification of factors affecting service quality.

Suitability for variety of services in consideration.

Flexibility to account for changing nature of customers perceptions.

Directions for improvement in service quality.

Suitability to develop a link for measurement of customer satisfaction.

Diagnosing the needs for training and education of employees.

Flexible enough for modifications as per the changes in the

environment/conditions.

Suggests suitable measures for improvements of service quality both

upstream and down stream the organization in focus.

Identifies future needs (infrastructure, resources) and thus provide help in

planning.

Accommodates use of IT in services.

Capability to be used as a tool for benchmarking.

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With these issues as focus this present study is undertaken to understand the

service quality models in the above light.

In earlier studies on mobile telecommunication services, service quality Has been

measured by call quality, pricing structure, mobile devices, value-added services,

convenience in procedures, and customer support (Kim 2000; Gerpott et al.,

2001; Lee, Lee, & Freick, 2001). As the earlier researches revealed that service

quality is a kind of attitude that is formed by the difference between customer’s

expectations (Parasuraman, Zeithaml, & Mitchell, 1990). In this context call

quality there is the difference between the pricing structure of different service

providers, although the value added services, procedures and customer support

are more or like same. According to the previous researches made in

telecommunication suggest that service quality is not only the factor influencing

the customer loyalty, as in German mobile communication consumers find

service price, phone number portability and benefit most effective loyalty

(Grepott, 2001). Korean study tells that switching costs, brand image and

perceived service quality are the ingredients of customer loyalty. So there is

difference in perceptions of people due to different strengths of relationship

across cultures.

The number of service quality dimensions varies from industry to industry

(Asubonteng, McCleary, & Swan, 1996). According to Btner and Hubert (1994)

service quality is customer’s evaluation judgment, where the degree of superiority

of performance with respect to the product.

This report choses the conceptualization of Kims (2000), Grepott et al., (2001),

Lee et al., (2001), where service quality is measured by call quality, pricing

structure, value added services, convenience in procedures and customer

support. According to Anderson and Sullivan (1993), there are strong linkages

between service quality dimensions and overall customer satisfaction. The

practice of excellent service quality has been proven that customer satisfaction

will significantly lead to customer loyalty. While the number of underlying

dimensions has been shown to vary with the service setting, it appears

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reasonable to suggest that the service core and relational dimensions will emerge

in nearly all cases as they form the basis for the service. One of the most critical

elements in a service market such as the advertising industry, is the development

of client relationships.

Service quality and customer satisfaction has become very important issue for

private sector organization, however we can say that this is important for both

customer as well as organization. Determination of service quality and customer

satisfaction is very complex issue because both issues differ from product to

product and person to person. Quality is the combination of need as well as

expectation of customer (Parsuraman et al 1991). customer satisfaction is

execution of customer response towards service provider. Satisfaction leads a

customer towards loyalty. The more a customer is satisfied the more he will be

loyal (Oliver 1997).

2.2.2- Customer Service/Care, Customer Satisfaction and Customer Loyalty

Customer service is a process that takes place between a buyer, a seller, and

third party and can influence demand in the market (Innis and La Londe, 1994).

The third party may include companies that have been licensed by a marketing

company to provide customer service. Customer care is used in a wider sense

and goes far beyond the traditional role of customer service and support; it

encompasses all the functions along the entire service delivery value chain (Katz

et al., 1998). Customer service is a system of activities that comprises customer

support systems, complaint processing, speed of complaint processing, ease of

reporting complaint and friendliness when reporting complaint (Kim et al., 2004).

Customer service is one of the most important considerations in the evaluation of

a supplier (Jackson et al., 1985).

A supplier's reputation for good service attracts potential customers and keeps

existing customers loyal. Good service additionally provides protection from price

competition (Hartley, 1989). Customer service can produce customer behaviors

that can indicate whether a customer will remain with or defect from an

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organization (Zeithaml et al., 1996). Specifically, the high levels of competition

among service providers in Nigeria necessitate adoption of different customer

service techniques to satisfy and retain the customer. The effectiveness of the

level of customer service will enhance customer retention and reduce switching

between and among service providers (Oyeniyi and Joachim, 2008).

Therefore, customer service includes all help and assistance GSM providers offer

to customers directly or indirectly prior to, during, and after purchase to provide

exciting customer experience with their products. If well leveraged, it has a

potential to offer a competitive advantage to GSM service providers and make

them to attract and retain customers. GSM providers in Nigeria provide customer

through toll free customer care line, help desk and websites. Because of its

convenience, cost free and availability, majority of subscribers in Nigeria are most

likely to be served by their network providers through toll free customer care line.

McDougall and Levesque (2000) found that all telecommunication service

providers in Malaysia differentiate themselves a high level of customer service

and this has become the most important and significant driver in customer

satisfaction. Lucas (2005) is of the opinion that by providing excellent customer

service and dealing with dissatisfaction as soon as it is identified, companies can

ensure that customers remain loyal and keep coming back. From the foregoing

discussion, GSM providers, in addition to the provision of a high service quality

and offering of an attractive and fair price, should also pay more than a passing

attention to the delivery of high and effective customer service/care. They should

invest substantial resources on infrastructure, information technology (IT) and

human resources that would provide leverage for effective and quality customer

care. They should remember that the entire idea of customer care in the telecom-

sector is about delivery exciting customer experience.

2.2.3- Importance of Perceived Value

According to Kims, Park and Jeong (2004) it is very important to develop

maketing strategies that extend profitability by retaining the existing customers

through customer loyalty and value. Previous researches have revealed that only

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the high service quality is not the reason to buy it (Olshavsky, 1985). That is why

this study aims to determine the value perception of the customers, and to give

understanding to service providers. By this study we will come to know that, how

much important is the value perception, and how to manage the value in

customers.

Perceived value has gained recent attention as a stable construct to predict

buying behavior (Chen and Dubinsky, 2003). Additionally, customers’ value

perceptions have been found to increase their willingness to buy and decrease

their intentions for alternatives (Hellier et al., 2003). Earlier research supports the

importance of commitment in relationship marketing and the need to understand

the reasons behind the behavior (Hellier et al., 2003).Early views on commitment

focused solely on repeat purchase behavior, but current definitions of customer

commitment include both the attitudinal and behavioral component (Oliver, 1999).

In service marketing commitment has been found to be the most important driver

of customer behavior (Roos et al., 2005).). Purchase based on habit is referred to

as “inertia” (Gounaris and Stathako poulos 2004). Roos et al., 2005 have found

that committed customers can identify differences between the service offerings

of other telecommunications service providers and appreciate the benefits offered

by their own service provider, but the uncommitted customers cannot state any

differences. In accordance to differences in the level of commitment, it is

important to distinguish the difference in value dimensions influence on

commitment in order to be able to plan effective marketing strategies( Minna Pura

,2005). Customer advocates are vital sources for future revenue streams and

market intelligence as they offer insight about their needs and provide the

opportunity for firms to tailor products, pricing, distribution channels, and

marketing communications (Zablah et al., 2004). Customer advocacy reflects

combinations of marketing resources that contribute to a more efficient and

effective marketing enterprise, including voluntarily sharing customer-specific

information in firm-sponsored marketing research activities, word-of-mouth

referrals, and increasing levels and proportions of current purchasing

activities(Russell Lacey and Robert M. Morgan 2007). According to Bob

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Weybright (2004) “one must look carefully at their product and service. Marketers

need to assess the competitive climate in the region, country, and world to

determine how it might affect the value of what they have to offer; learn to identify

what the purchaser needs to see or experience that supports their sense of value

while satisfying the needs that drove the purchase initially; and finally, apply what

is learned when making a decision as to where products or services are to be

sold, who… to sell to, and at what price”.

2.2.4- Importance of Trust

The concept of trust has become popular in public debate and academic analysis.

In high income countries this interest is associated with concern for the decline of

trust in governments and professionals, and in developing countries has been

prompted by debates around the motion of social capital. Trust has been

identified as a major factor influencing such things as capital investment,

relationship marketing, cross-cultural communication, learning and various types

of cooperation. Trust management is becoming also very important inside the

organization. Many of the studies focused the connection between loyalty and

trust. Morgannad Hunt define trust as one’s confidence in an exchange of value.

According to Reichheld and Schefter (2000) customer trust is the primary factor

for customer commitment and loyalty.

Concept of trust from previous researches is in various of ways. In e commerce

trusting beliefs, according to Mayer et al. (1995) are perceptions of attributes of

ecommerce, including ability, integrity and knowledge. In telecom trust is

trustworthiness including extent to which service is provided, ability to fulfill the

commitments.Trust is built up gradually and incrementally, reinforced by previous

trusting behaviour and previous positive experiences (Zand 1972; McAllister

1995; Lewicki and Bunker 1996). According to Six (2007) interpersonal trust is a

psychological state comprising the intention to accept vulnerability to the actions

of another party, based upon the expectation that the other will perform a

particular action that is important to you. Arrow (1974) considers trust as a basic

element not only for organizations but also for the economy in general, affirming

that trust is a lubricant to economic exchange.

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2.2.5-Corporate Image and Customer Loyalty

Corporate image is defined as perceptions of an organization reflected in the

associations held in consumer memory (Keller, 1993). It is the sum of people’s

perceptions of an organization. Images and perceptions are created through all

the senses: sight, sound, smell, touch, tastes and feelings experienced through

product usage, customer service, the commercial environment and corporate

communications (Smith and Taylor, 2004). It is external perception of all human

and physical resources of an organization, especially characteristics as

employees’ behaviors and attitudes, communication levels, clothing etc.

(Pampaloni, 2006). It is defined as the perception of an organization that

customers’ hold in their memories. Because it works as a filter through which a

company’s whole operation is perceived, a corporate image reflects a company’s

overall reputation and prestige (Kim and Lee, 2011). It is obvious that corporate

image is concerned with the impression an organization forms in consumers’

minds and the perception of consumers arising from this impression. It is

therefore essential that GSM operators show concern about the way it is

perceived by their variety of stakeholders such as employees, customers,

shareholders, government, media, and the general public, as this affects initial

and repeat purchase.

The role of corporate image is pivotal in today’s business environment (Gioia et

al., 2000). A positive and reinforcing corporate image is capable of generating

customer satisfaction and loyalty in organizations. Corporate and brand image

have also emerged as determinants of customer loyalty (Gronroos, 1988). There

is a relationship between corporate image, customer satisfaction and loyalty.

Higher levels of customer satisfaction increases loyalty by building a positive

corporate image (Anderson et al., 1994). A well-managed corporate identity

unconsciously reassures customers (Smith and Taylor, 2004). Corporate image is

influenced both by service quality and customer satisfaction, which in turn

influences customer loyalty (Kandampully, 2007). The high point of the above

25

discussion is that the reassurance keeps customers coming to do a repeat

business and lock them into loyalty.

Empirical findings have also shown the relationship between corporate image and

customer satisfaction and loyalty. Groholdt et al. (2000) found that corporate

image is an important driver of customer satisfaction and loyalty in the industries

of soft drinks, banking and telecommunications. Liu (2008) found that corporate

image has a significant impression on services quality, customer value, customer

satisfaction and customer loyalty in the Chinese telecommunication market. Chen

(2002) concludes that building up image is one of the important tasks to retain

customers in the Taiwan telecommunication sector.

Corporate image is one of the important factors in service evaluation (Bitner,

1991; Gronroos, 1988). Corporate image also affects customer loyalty. In service

sector Andreassen and Lindertad (1998) examined the role of corporate image in

formation of customer loyalty. The study of Andreasen and Lindestad was

replicated by Hart and Rosenberger (2004) in Australia.

Corporate image reflects the company’s overall reputation and prestige.

According to Aydin and Ozer (2005) corporate image emerges from a customer’s

net consumption experience and also the perceived service quality affect

corporate image. There is a link between corporate image and customer loyalty

(Erdem and Swait, 2004).

Corporate image is the perception of constituencies on how an organization

actually presents itself (Van Riel, 1995; Argenti, 1998), whilst corporate identity

refers to the self-presentation of an organisation through corporate logo, color,

and any signal that can easily be seen (Van Riel, 1995). Corporate reputation has

a unique meaning and is more long lasting than corporate image. Importantly, it

requires a constantly harmonious series of programs (Melewar, 2003) and should

be thoroughly crafted in line with the strategy development of an organization.

Reputation should thus be seen as “a key source of distinctiveness” to gain

competitive advantage in the changing business environment (Fombrun & Van

Riel, 2004: 5).

26

In today’s competitive business environment, Argenti (1998) points out the

importance of corporate image and identity to corporations by developing

corporate advertising campaigns as the pivotal intangible asset that should not be

ignored by corporations. This can also be considered as a monolithic identity

which makes the organization distinctive and interesting (Ind, 1992; Dowling,

1994).

Balmer and Greyser (2003) then highlight the importance of multiple identities as

a new corporate identity by developing an ACID test to illustrate how multiple

identities may enhance the visibility of corporations and combat the corporate

deadly sins. Another growing form, apart from corporate image and identity, is

corporate reputation which has been paid considerably attention since the 1990s

in the corporate communication literature (Balmer and Greyser, 2003). Fombrun

and Van Riel (2004) then reveal the importance of corporate reputation for

today’s corporations to create unique capabilities and gain competitive

advantage. By formulating the Reputation Quotient, these reputation scholars

have developed a reputation audit to gauge the reputation of corporations. This

makes corporations more visible, distinctive, authentic, transparent and

consistent in the complex business environment.

However, some scholars from different perspectives question the importance of

image or identity as a symbol or illustration that portrays the good reputation of

organizations to the public. Thus, more realistic models of reputation have been

proposed. A good image of organization alone is not enough. Understanding the

competencies trait of the corporations may yield distinctiveness to achieve a truly

good reputation (Podnar, 2004: 378). Davies et al. (2001) argue for the

importance of corporate personality as a key reputation construct to measure

both the image and identity of organizations from the perspective of

organizational behavior. From the perspective of public relations and psychology,

Grunig (1992) and, Grunig and Grunig (2003) argue that image is associated with

symbol and needs to be measured by using the quality of relationship

management rather than by reputation indicators to portray the goodwill of

organizations to their publics. Berens and Van Riel, (2004) stress the element of

27

trust as a key source of corporate credibility to measure the corporate reputation

from the perspective of business to consumer literature.

28

CHAPTER #3

RESEARCH METHODS

29

3.1- METHODOLOGY OF DATA COLLECTION

The study adopted the survey methodology to generate quantitative data.

Structured questionnaire was used to collect the data. For all the variables the

author have used 5 scale point Likert scale. The questionnaire was covering 4

variables; Trust, Call quality, perceived value, and corporate image. Three

question from each of the variable was chosen, so the percentage of variables in

questionnaire was equal. Five point likert scale was used with close ended

options; rating from 1 to 5 point having option Totally disagree to Totally Agree.

3.2- SAMPLING TECHNIQUE

Convenient Sampling

Author intends to adopt the convenient sampling technique. data will be

collected from every required area, so that the significance of the study cannot be

denied. Sample will be taken from the Karachi city, through getting hard copies

filled.

3.3- SAMPLE SIZE

Keeping the variables in view, which were 5 in total, 80 research questionnaires

were distributed there were 40 males and 40 females. Response was 100%.

Breakup of percentages of respondents with respect to service provider was 20%

each, for Telenor, Mobilink, Ufone, Warid and Zong respectively.

3.4- STATISTICAL TECHNIQUE

Chi Square technique

I compared observed data with data according to a specific hypothesis for this

purpose I used Chi-square technique. I also tested the null hypothesis through

this technique, which states that there is no significant difference between the

expected and observed result.

30

CHAPTER # 4

RESULTS

31

4.1- FINDINGS AND INTERPRETATION OF RESULTS

In this research five variables are included, in which customer loyalty is only

dependent variable, and it was assumed that customer loyalty depends upon all

of the four variables. Hypothesis against each variable is tested and discussed

below.


Count

Customer Loyalty

Total>6Month >1Yr >2Yrs >3Yrs >4Yrs

Q1to3 StronglyDisagree 1 0 0 0 0 1

Disagree 4 2 1 1 1 9

Uncertain 3 6 6 1 1 17

Agree 6 6 7 10 5 34

StronglyAgree 1 1 4 4 9 19

Total 15 15 18 16 16 80

32


Crosstab

Count

Customer Loyalty



Disagree 1 7 1 1 0 10

Uncertain 9 3 10 5 1 28

Agree 1 3 6 6 6 22


Total 15 15 18 16 16 80

33


Crosstab

Count

Customer Loyalty



Disagree 4 3 6 3 0 16


Agree 3 2 5 7 2 19


Total 15 15 18 16 16 80

34


Crosstab

Count

Customer Loyalty



Disagree 2 0 5 0 0 7


Agree 1 0 3 6 3 13


Total 15 15 18 16 16 80

35

Gender Wise


Q1to3 * Gender Crosstabulation

Count

Gender

TotalMale Female

Q1to3 StronglyDisagree 1 0 1

Disagree 3 6 9

Uncertain 8 9 17

Agree 18 16 34

StronglyAgree 10 9 19

Total 40 40 80

36



Count

Gender

TotalMale Female


Disagree 4 6 10

Uncertain 16 12 28

Agree 8 14 22


Total 40 40 80

37



Count

Gender

TotalMale Female


Disagree 8 8 16

Uncertain 14 11 25

Agree 8 11 19


Total 40 40 80

38



Count

Gender

TotalMale Female


Disagree 5 2 7

Uncertain 7 6 13

Agree 4 9 13


Total 40 40 80

39

Age Wise


Q1to3 * Age Crosstabulation

Count

Age

Total18-25 26-40 41-60+

Q1to3 StronglyDisagree 1 0 0 1

Disagree 2 4 3 9

Uncertain 8 3 6 17

Agree 8 14 12 34

StronglyAgree 8 6 5 19

Total 27 27 26 80

40



Count

Age

Total18-25 26-40 41-60+


Disagree 4 1 5 10

Uncertain 8 9 11 28

Agree 10 8 4 22


Total 27 27 26 80

41



Count

Age

Total18-25 26-40 41-60+


Disagree 7 2 7 16

Uncertain 8 10 7 25

Agree 5 8 6 19


Total 27 27 26 80

42



Count

Age

Total18-25 26-40 41-60+


Disagree 2 1 4 7

Uncertain 3 6 4 13

Agree 4 6 3 13


Total 27 27 26 80

43

4.2- HYPOTHESIS ASSESSMENT SUMMARY

Every hypothesis is tested against the dependent variable Customer Loyalty.

Using the Chi-Square, some results were obtained which are given in detail one

by one, According to our first hypothesis;


Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)

Pearson Chi-Square 28.820a 16 .025

Likelihood Ratio 27.160 16 .040

Linear-by-Linear Association 15.823 1 .000

N of Valid Cases 80

a. 20 cells (80.0%) have expected count less than 5. The minimum

expected count is .19.

In the above table sig. value is 0.025 < 0.05. In this way our hypothesis is

accepted which states that trust and Customer Loyalty has positive relationship.


.

In the above table, taking Pearson Chi-Square results, the sig. value is 0.000 44

Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)




N of Valid Cases 80


expected count is .94.

<0.05 which show that our hypotheses H2 is accepted which states that Call

Quality has significant impact on customer loyalty.


Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)




N of Valid Cases 80


expected count is 1.13.

This Table shows that the sig. value is 0.000 < 0.05, which show that our

hypothesis is accepted which shows that there is positive relationship between

perceived value and Customer Loyalty, so that our hypothesis H3 is accepted.

Perceived value has significant impact on customer loyalty.


Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)




N of Valid Cases 80


expected count is 1.31.

45

Using Pearson Chi-Square we obtained the sig. value 0.000 < 0.05 which means

that the null hypothesis is rejected which is, there is no relationship between

corporate image and Customer Loyalty, so that our hypothesis H3 is accepted

which states that there is significant impact of corporate image on customer

loyalty.

46

CHAPTER # 5

DISCUSSION, IMPLICATIONS, &CONCLUSIONS

47

DISCUSSIONS AND IMPLICATIONS

The present study is notable, because as to the knowledge of the researcher no

such study has been made by others on antecedents of customer loyalty in

Pakistan telecom, or may be made but they were not published for all. As it is

seen that our all four hypotheses accepted which were trust, service quality,

perceived value, and corporate image. In this research this is important that the

research was made in Karachi city through convenience sampling and call quality

is found to be almost equal for all the networks and that may be the reason.

Secondly the procedures are more or less same for changing or subscribing any

package. So people find it difficult to switch to or remain with the existing service

provider. Service providers have to make it differentiating for their customers by

improving their Overall reputation, customer support, and convenience in

procedures.

According to Sharma and Patterson (1999) trust plays an important role in

motivating the customers to remain loyal with the service provider. Although this

study also suggests that the trust is important factor because respondents found

to be much judgmental in case of trust. Corporate image also plays a vital role to

make customers loyal with the service provider. Different people have different

perceptions regarding the service provider, it is the service provider who makes

credibility among consumers.

This study has some limitations. There are other factor influencing customer

loyalty, apart from the factors studied above. For example demographic

characteristic, usage patterns and life style of consumers. Future studies could

focus on examining the factors cited above.

48

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APPENDIX

Questionnaire on “Factors Influencing Customer Loyalty in Pakistan Telecommunication Industries in Karachi”

I am Zulfiqar Ahmad student of MBA at DIHE request you to fill the questionnaire below

by ticking the most suitable option. Please be informed that all information obtained

through this questionnaire is to expand the frontier of knowledge and will be kept

confidential.

Biodata

1. Gender: a. Male b. Female

2. Age: a- Above 15 yrs b- above 25 yrs c- above 35 yrs d- above 45 yrs e- above 60yrs

3. Network name: a- Mobilink b- U-fone c- Telenor d- Warid e- Zong

4. Duration on Network :a- above 4yrs b-above 3yrs c-above 2yrs d-above 1yrs e-above six months

Key to Options

1 - Strongly Disagree; 2 – Disagree; 3 – Uncertain; 4 – Agree; and 5 – Strongly Agree.

S/N Statement on Research Variables 1 2 3 4 5

Trust1. I trust on the commitment of my service provider.2. I am satisfied with my service provider on the whole.3. I recommend my network to friends.

Service Quality4. I find my network coverage wide and extensive.5. I find uninterrupted connectivity whenever I call.6. I find my call failure on my network is very rare.

Perceived Value7. Overall service I receive is valuable.8. Variety of value added services (such as GPRS, free midnight calls, news

and so forth) important to me.9. I receive more valuable services from my network as compare to other

network companies.Corporate Image

10. My company’s name, quality of services, and variety of products attract me.

11. I am retained with my network because of a range of promotion (advertising, direct marketing, and events).

12. I find a fair and acceptable price of my service provider which promotes its image positively.

We appreciate your timely filling and return of this questionnaire.

57

A Study on Factor influencing Telecommunication Sector Pakistan

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