The issue of Customer’s switching to other service providers have been the cause of intensive research from many years now and have given rise to many theories.Due to the increased competition in the telecommunication industry it has become extremely important for the companies to pay attention towards retaining of the customers.This research study particularly investigated the causes of customer switching behavior.A prolific way to gain the knowledge about the switching behavior of customers is basically to examine the various factors that play imtegral role in switching behavior. This qualitative research study has offered new insights by defining and identifying the customer’s rationale to switch from one service provider to another. The model is estimated using the data set on the number of switching behavior. A total of 100 respondents were surveyed to identify the factors that have a greater effect on the customer satisfaction.The data were analyzed by the Optimal Scaling (Categorical Regression)to test the hypothesis. The model identified thatâ€¦
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CHAPTER ONE: INTRODUCTION
This research tried to find out the underlying factors that made the customer to switchover to another service provider in telecom industry. The telecommunication industry is one of the most important industries of the world. In order to gain competitive advantage as competition is getting more and more intense, the companies are compelled to innovate and do their best for the customer satisfaction. As in the telecom industry the customers have multiple choices to select among service providers and actively seek their rights of switching from one telecom service provider to another. In this ferocious competition customers requires better services at reasonable prices, while service providers concentrating on retention of the most profitable customers instead of acquisition..The technology in telecommunication industry is booming with fast pace thus bringing the changes in the sizes and types of network services. Multiple tariffs plans are usually offered by the network service providers to compete in their menu plans and to provide the quality of service. In the telecom industry the service providers try to attract the large number of customers to exploit the consumer’s preference heterogeneity. The need to understand that why customers switch to another service providers have usually become a key area of study. The switching behavior has to be analyzed to identify the possible drivers leading to customer switching behavior It’s entirely apparent that when a customer decides to switch over to another network they try to figure out that which service provider offers them best. The switching costs also affect the customer switching behavior. The customers switch when they find that their potential savings relatively exceeds switching cost. The deep understanding of the customer’s switching behavior in the telecom industry has an important proposition for the service providers.
This study helps us to analyze the factors that cause the switching behavior. As the telecom industry has been growing rapidly and the rate of penetration also increased, the number of new customers subscribing to thus can’t be reduced. Where as in the mature market with a base of shrinking potential subscribers, stealing the customers of competitors and retaining its own customers has become the most important strategy for the service firms. Therefore the service firms have got more interested in knowing and understanding the underlying factors leading to switching behavior of customers, as customers are totally heterogeneous in nature and can repeat switching from time to time. As stated in the relevant literature the service of high quality helps to create customer satisfaction, loyalty and market share growth by petition for new customers and improved financial performance and productivity (Lewis, 1993); Andereson, Fornell & Lehmann, 1994) . According to Hackl, Scharitzer, and Zuba (2000) had demonstrating it by adding that customer satisfaction is a prerequisite of customer retention, satisfaction and loyalty.
Those customers who are loyal plays vital role in building up businesses, by setting up distinct moves, by paying the premium prices and providing the companies with a set of potential new customers by positive word of mouth. (Ganesh et. al. referred in Aydin and Ozer, 2004)
In fact the telecom industry losses their customers more frequently so it’s usually challenging thing for the service providers to retain their existing customers and attract the new customers
In telecom industry it has been observed that the customers when remained connected with the particular network or the service provider then the long tenure of their relationship is particularly very important for the success of a company in this competitive era. (Gerpott et. al. 2001 referred in Aydin and Ozer 2004).
Price has been considered as one of the major contributing factors in brand switching in telecom industry as the customers were price-concious. Kay, (2006) argued that brand image has been built-in into the lives as well as the minds of customers because brands were considered to be not only the company’s property but also as a culture or a social property by customers.
STATEMENT OF THE PROBLEM
The fundamental problem in predicting the customer choices exist in the fact that brand switching decisions of the customers are solely made on the bases of several different criteria simultaneously which includes factors like brand image, features, network quality, prices, etc. Thus the frequent switching behavior of customers has compelled to review such factors that affect the telecom industry. Thus the problem has been more confounded in telecom industry where customers get attracted towards the competitor’s offers & features and analyzes the expectations of the customers regarding the telecom industry services.
OBJECTIVES OF THE STUDY
The basic purpose of this study is to determine the factors that influence the customers to switch from their particular service providers to others and to access the problems generally faced by the service users and their satisfaction towards the different cell phone service providers.
SCOPE OF THE STUDY
The scope of this study is limited to five major players of Telecom industry and those are Mobilink , Ufone, Telenor, Warid, & Zong. The objective of this study is to examine the underlying factors that led to the customer switching behavior. This study has been carried out in the Karachi city of Pakistan. The Purpose of this study is to know the customer satisfaction for these various telecom service providers. The leading switching behavior of customers in telecom industry is a question of study to analyze the factors influencing their switching behavior and how important they perceive these various factors.
H1: Price has a significant impact on brand switching in the telecom industry.
H2: Network Quality has a significant impact on brand switching in the telecom industry.
H3: Brand Image has a significant impact on brand switching in the telecom industry.
H4: Value Added Services have a significant impact on brand switching in the telecom industry.
H5: Sales Promotions have a significant impact on brand switching in the telecom industry.
H6: There are no differences w.r.t demographics for customer satisfaction in telecom industry.
CHAPTER TWO: LITERATURE REVIEW
Much attention has been given to the concept of brand (Kotler, 1991 p.442) defined “Brand as a name, term, sign, symbol, or design, or combination of them which is intended to identify the goods of one seller or group of sellers and to differentiate them from those of competitors. To interpret the perception of the company people usually developed knowledge systems (i.e schemas) Corporate Image believed to have identical characteristics as self-schema (Markus,1977) with consideration to persuade the buyer’s purchasing decision i.e good image of corporate encourages purchase from one company by abridge decision rules.
(Bateson 1995) stated that the service quality is generally conceptualized as an attitude, the evaluation of the service offered. Quality is basically made up from a series of evaluated experiences and are usually fluctuates less comparatively than attitudes built from the satisfaction emotions. Parasuraman et al. (1988) stated that the customers judge the service quality on the basis of overall firm’s superiority and excellence. According to (Gronroos, 2000) the evaluation of service quality by customers could be judge through the interaction process that exactly happens or perceived by customers leave a critical impacts on customers. (Parasuraman et al., 1988; Aydin and Ã-zer, 2005; Ismail et al., 2006; etc.) If service is high in quality it is regarded as a key to succeed in most competitive service markets. Many researchers have indicated that the customer satisfaction and the customer’s trust in that service firm is directly influence by the service quality being provided. The pre-purchase expectations if fulfilled with the kind of service quality being provided the customers might be satisfied. The telecom industry which is basically the service industry, the service quality is an important factor to develop the customer’s satisfaction and loyalty. (Gronroos 1984) analyzed the two distinct service quality dimensions which are technical and functional quality. Technical quality is something that customers get as an conclusion of an dealings with the service provider. Where as the functional quality is something that has to do with how the service has been delivered. (McDougall and Levesque 2000) also analyzes the theory of technical quality, although in the type of core service quality i.e. product or service related offerings. As compare to technical quality, functional quality tends to be more important in customer satisfaction. (Lim, Widdows, and Park 2006) has identified the five distinctive proportions of cell phone service quality, and the indirect and direct effects on economic value, and emotional value on faithfulness through customer satisfaction. These are usually network, billing, pricing, data and customer services. According to ( Johnson & Sirikit, 2002) the perceptions of the customers about the service quality affects their behavior intentions. Even though if one telecommunication company has been preferred by the customer to the over another based on the perceived quality of the service provided, that customer might engaged in a repurchasing cycle and that would most probably leads to recommending the specific service providers to their peers.
Modern research has tried to set up the bases for improving the understanding of customers’ switching behavior and can be expressed in two main areas:
(1) The factors and the processes underlying customer switching decisions.
(2) The exact factors that encourage switching.
(The effort of Roos 1999) He discriminates among the three determinants of switching decisions using the Switching Path Analysis Technique (SPAT): (a) Pushing determinants (the basis to switch to another supplier). (b) Pulling determinants (factors that stimulate the customers to come reverse to the original supplier) and (c) Swayers (they do not cause switching by themselves; they can only lessen or reinforce the switching decision).
Though the most of the concentration is given to the specific factors that lead to switching behavior literature.(Bansal et al.2005), Portraying from repositioning literature, thus create a model of customers’ switching behavior that recognizes the method by which customers make a decision to switch service providers. (Roos 1999), He has also identified the determinants that play an integral role in customers switching behavior. He has also emphasized on push, pull and mooring variables that are fundamental to the switching process. (Keaveney 1995), Among his most significant revolutionary works, classify eight factors coming behind customers’ switching decisions in most of the service industries, which includes core service breakdown, employee reaction to service failures, attraction by competitors, pricing or inconvenience. Collectively with the variables point out above. It has also identified the subsequent as determinants of customers’ decisions to switch suppliers: Customer Dissatisfaction (Swinyard and Whitlark, 1994), perceived quality (Rust and Zahoric, 1993), awarenessof alternatives (Capraro et al., 2003), location (Jones et al., 2003) and switching costs(Klemperer, 1995; Burnham et al., 2003).
(Keaveney 1995) has also identified several other leading factors that associate with the customer switching decision and those differences are the person’s attitude, behavior, and of course the socio-demographic characteristics .
Switching cost plays an integral role extensively in literature. Well switching cost appears in different terms to every researcher to (Benkenstein and Stuhlreier,2004) switching cost is related to poor service quality and to (Gerrard and Cunnininggham, 2004) its related to the customer’s reaction to high prices where as to (Bowen and Chen 2001) switching cost is thus the action taken by the customer when the customer get dissatisfy. ( Burnham, Frelsand & Mahajan 2003),
He has classified switching cost as the following: (a) procedural switching costs, (b) financial switching costs, (c) relational switching costs.
However these cost were negatively correlated with the customer’s switching behavior pattern.
Klemperer (1995) defined the three types of switching cost (a) artificial cost (b) learning cost
(c) transaction cost..
Where as the most important is the transaction cost which shows that the customer should be aware of the cost incurs while switching to another service providers.( Jones, Mothersbaugh and Beatty 2000) and (Sharma and Patterson 2000) they recommended that switching costs are basically the factors themselves in influential switching. (Bumham, Frels and Mahajam 2003) survey in cross- industry specify that switching cost such as financial loss and suspicions with the new service provider discourage consumers from switching to other service providers regardless of dissatisfaction. References of family and friends and pressure for consistency could also dispirit customers from switching through peers, expectation, customs and traditional values.
Customer satisfaction among theoretical literatures has been given much consideration. (Fornell 1992) defined that satisfaction derives from the overall assessment depending upon the total consumption and purchase experience of the service compared with repurchasing expectations over time.
The evaluation that a customer makes of any definite transaction is known as Satisfaction. While ( Oliver 1980) stated that ” Satisfaction is a summary psychological state resulting when the emotions surrounding disconfirmed expectations are coupled with the consumer’s prior feelings about consumption experience”.
In marketing literatures, customer satisfaction has been an indicator in evaluating the relationship between customers and service providers.
According to Li (2008), five emotions perceived by customers as below are satisfactory:
(1) Satisfaction: the products can be accepted or tolerated;
(2) Content: the products bring people with a positive and happy experience;
(3) Relieved: the products remove people’s negative state.
(4) Novelty: the products bring people with freshness and exciting;
(5) Surprise: the products make customer unexpectedly pleased
(Yi and Jeon, 2003) His study is based on the subscription market . Customers basically subscribe to mobile phone services with no purpose of switching, they tend to remain loyal with the present service until and unless some factors prompt them to switch to another network for improved features or services. The research shows that customer satisfaction is basically could not be fully explained through customer retention that if customer is retained he is satisfied. There are other underlying factors to determine the switching. (Inger 2008) He analyzed that the fine understanding of the emotion that plays an important role in customer switching behavior and identifies the occurrence of negative distinct emotions in terms of distinct triggers. The findings was that the emotions identified were located in the relationship trigger part and was immensely expressed by the respondents during their switching behavior in forms of anxiety, annoyance, disappointment and dissatisfaction, stress tension etc. (Seth et al 2008) describes in his study that to manage the customer perceived service quality for a cellular mobile phone, it analyzes that the service quality attributes is very important whereas responsiveness is its most important dimension, followed by other dimensions such as reliability, customer network quality, assurance ,empathy and tangibles. (Kalpana and Chinnadurai 2006) analyzes in their study named “Promotional Schemes for Cellular Services”. stated that the increased in competition and customer’s changed taste and preferences in all over the world prompting the companies to change their strategies as well. The study revealed that the advertisement plays vital role in influencing the customers to switch over.
Brand image was defined by Keller (1993, p3) as the “perceptions about a brand as reflected by the brand associations held in consumers’ memory.”
According to (Dobni and Zinkhan, 1990) brand image is a perception or a picture of a brand created in the minds of customers through different responses of customers that could be emotional or rational. ( Gronroos 2007, p.287) “A brand is not first built and then perceived by the customers.Instead, every step in the branding process, every brand massages, is separately perceived by customers and together add up to a brand image, which is formed in customers’ minds”.(Gronroos 2000) stated that the relationship of brand being develop with the customers is usually based on a series of contacts with brands experienced by the customers.
The customers build brand image in their mind through different sources such as word of mouth, public reputation, and marketing communication. The positive brand image prevents the customers from switching to another brand. The more value the brand hole the more profitable would it be for the company (Ibid).
CORE SERVICE FAILURES:
Core service failure has been seen as the major cause of customer’s switching behavior in (Susan Keaveney 1995) study. Core service failures might be itself the major cause or it could be accompanied by other reasons that makes the customer to switch. Basically the Core Service Failures includes all the that are due to errors or the technical problems caused by the service providers themselves.( Keaveney 1995) stated that the core service failures includes the errors of billing, service mistakes and service disasters. If the customer sees the billing errors or if accompanied by the delay in correcting those errors he or she is likely to switch to another service provider.
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In the cell phone industry as the new features, packages plans etc are introduced they need to change or update their billing systems which may ultimately could result in billing problems. As mentioned above another factor of core service failure is service disaster or service catastrophes which is the breakdown of the companies core service function which makes the customers to switch because of the loss of their time and money.
Example: Mr. Rob Simpson asked his service provider to make his call forwarded to another cell phone number after 3 rings. But due to some service problems, the calls could not be forwarded. And as Mr. Simpson was an incensed customer delay in addressing such problems might lead to the switching behavior.
(Keaveney’s 1995) study indicated that the third most important factor in switching behavior is pricing. Pricing basically includes call charges, rates, penalty, surcharges or fees. Customers switch at times when they perceived that the price is high and that’s totally unfair because they have the reference prices on their mind which they tend to compare it with past experience or the acceptable charges for the values or the services that are being rendered to them. Customers compare the prices of the competitors that what other service providers are offering them for the same service.
According to (Peng and Wang, 2006) high pricing negatively influenced the purchase probabilities of customers. (Lichtenstein et al., 1993) stated that the perception of price usually thought to be related to price searching. (Oliver 1997) stated that the customer’s relate the prices to the service quality and then generate dissatisfaction or satisfaction. And if a customer thinks that the price is comparatively fair then only the customer would go for transaction with service provider. According to previous studies (Cheng et al.2008) suggested the two dimensions of price perception. The first one is rationality of prices which shows the way that how the price is being perceived by the customers as compared to its competitors. And the other is basically the value for money. According to (chitty et al., 2007) High quality services as compare to low quality equivalents cost more. (Oliver, 1997; Peng and Wang, 2006; Cheng et al., 2008; Kim et al., 2008). These researchers have described the price as being the most influential factor on customer satisfaction and trust. ( Peng and Wang, 2006) stated that the customers mainly switch due to pricing issues i.e high, unfair pricing.
Another category of pricing which leads to switching behavior relates to deceptive pricing. In which the customer has not been given all the subsidiary charges and the final price when charged is more then the customer’s expectations and the price quoted to customer.
Example: The customer subscribed for the free minutes for a particular time duration i.e certain minutes free till that particular time and if the customer exceeds the minutes in either time period there are an additional charges
Such kind of hidden pricing causes high churns that prompts the customers to switch to another service providers. (Ericsson Consumer lab survey 2004) studies showed that the 86% of the customers select their service providers on the basis of the pricing of the plans and the features thus makes it a critical factors in choosing the service provider.
Keaveney’s study indicates that the inconvenience by the service providers leads the customers to switch to another service operator. The inconvenience includes the factors such as time elapse, long hours of operations, waiting for the service or the location of the operator. As in customer services the clients have to wait for so long on the telephone for the customer representative. One solution that has been suggested by (Taylor 1994) to stay away from infuriating the waiting clients is to “Filling time can reduce the anger and the uncertainty felt by the waiting client”
(Zeithami 1988) stated that the customers judge the consumption value after comparing its benefits that could be gain from other services as well along with their cost.(Ravald and Grönroos, 1996). Proposed that the service providers through enhanced offers provide the superior value to improve the customer satisfaction by increasing the benefits and decreasing the benefits so that the customer is retained.
Competition makes the service providers in telecommunication industry to attract the new customers to its network by persuading them, offering them the large amount of discounts, promotional time bound free-calling etc. These offers has led the customers with number of choices specially those who are price- conscious. (Weisser, 2004 p.33) ” Truth is probably you don’t need to switch carriers to get bargainâ€¦score a deal just by calling your current carrier and threatening to switch”. A price war in any kind of industry is not good because it makes the industry less profitable by constant discounting, which makes the customer price-sensitive and more likely to switch.
A frequent complain by the customers is that while the service providers announce a low call rates/price for the package, there are mostly hidden charges not specified. Such hidden pricing can be harmful in the long run as the massive customers can switch as they get much better offer.
While the callings patterns of customers frequently changes, optimisation of the rate plans needs to be done to make sure that it best suits the customer’s needs to prevent the customer’s from switching.
(Steward, 1993) Network Services is one of the most important pillars in a telecom industry. Network services include call quality, network connectivity, and network coverage. From customer’s point of view the dropped calls, stagnant or broke conversations can make the customers frustrated and annoyed. (Shah, 1996) The enhanced landline communication quality of today with the good voice clarity and call quality has raised the customer’s level of expectation similarly in cell phone industry. (Boney 1997) stated that the mostly people just used the phone but what exactly and truly the customer wants was a clear call, a good connection, and a good network coverage so that the phone can be easily taken where they want to. (Steward, 1996) stated that the advancement of network technologies and air boundary standards were swiftly becoming more complex. Therefore any drop calls, static, weak signals or broken connections could simply lead to customer’s dissatisfaction and churn. (Shah 1996) stated that background noise could also be another factor leading to customer’s switching. The echo canceller was at the centre of very intricate digital network that can help service providers to deliver rge good quality of service to the customers.
Boney (1997) studies indicated that the most important aspects of service is the customer service value. As a result a variety of choices should be offered which includes contract options, handsets features and pricing etc. Among all these Pricing is the most importantly related to the customer’s value. According to (Meyers 1997) building up the brand image includes lots of responsibilities like paying continuous attention to the needs and the requirements of the customers in markets. Ensuring the satisfaction among employees, creating brand equity and brand association. Emerging up with new technology stages and concentrating on expansion by developing new services for their customers. According to (Ryan 1995) The service providers needed to improve their billing systems in line to continue eccentric out accurate bills. Billing system was basically the lifeblood of any business. If the service providers could not have the billing systems accuracy or in capable to bill in a timely pattern, they could be into a huge cash flow problems that could destroy the business. ( Burdiek 1993) studies showed that the customer quality model for a cell phone services yet not exist, despite the reality that a incredible quantity of industry capital had been owed to model another network performance characteristics.. Garelis (1996) revealed that by executing a technology that offered our employees with the accurate tools, we facilitated them to take possession of their jobs, and that enhanced the overall value of service provided. Inventive software applications were used for the improvement of the quality of services to the customers. ( Lonergan 1999) revealed that the churn remained a main
Challenge for the cell phone providers. The most common reason of churn among customers was switching over to another network service provider. Even though 25% of customers had left their previous service providers to avail the promotional offers by other service providers.
Customers switch over to different service providers for several reasons. The reasons could be that the service provider fails to meet the needs of its customers because of the changing demand patterns and circumstances. Or a customer might get better offers from its competitors. However if the motive of any business is to get the knowledge of the customer behavior, and how and why in the customer base the fluctuations can take place is critical for the effective management of customer relationships.
Relationship with the customers is a dynamic process that involves the interaction between a service providers and the customers. According to (Bolton 1998; LaBarbera and Mazursky 1983; Rust et al.1999). The process of consumption that the customers go through leads them to the decision of whether to switch or to stay with the company.
The main reasons or the sources of the fluctuation in customers relationships in the situation of the switching course is known as “trigger”.( Gustafsson, Johnson, and
Roos 2005; Roos 1999; Roos, Edvardsson, and Gustafsson 2004; Roos, Gustafsson, and Edvardsson 2006). Previously carried out studies have shown that triggers can be categorized in terms of the own lives of the customers known as “situational triggers” the impact of market known as “influential trigger” and the conventional critical incidents known as “reactional triggers”. This study described that the two facets considered being very important for the inclusive understanding of the customers who switches very frequently. (Roos 1999) stated that the customer relationships are triggered by the driving forces that usually have long lasting effects on customers. Customers if experiences a trigger, they may own some sort of sensitivity to switching deliberately or nondeliberately. (Roos, Gustafsson, and Edvardsson 2006) If sensitivity persists in customer relationships it influences customer’s valuation and steadily causes switchover to competitors. The literature offers theoretical support for this assumption that when customers are attracted by other alternatives they demonstrate quiescent attitude towards their existing service providers that persuade their switching behavior. According to (Dambrun and Guimond 2004) referred to implied attitudes as an insensible mode of definite behavior.(Hastie and Park 1986; Meyer 1987). Park and Mittal (1985) stated that the stimulated capacity of a switching condition is not always the same from the perspective of an aggregate customer. It differs by depending on the variety of offers presented to the customers by the competitors. In the framework of this study the outcome of this condition is switching because the competitor contact plays an influencing role.
(Gopinath 2005) stated that the trigger is referred to time-related changes and the definite factors that included in them. Customers who willing to switch are definitely sensitive to change.(Ahluwalia, Burnkrant, and Unnava 2000; Garbarino and Johnson 1999; Gustafsson, Johnson, and Roos 2005; Roos, Gustafsson, and Edvardsson 2006).
When customers are confronted by such situations they become familiar with the reasons that the service providers they had chosen is no longer good enough and valid. Thus such kind of difficulty causes sensitivity and those customers actively try to switch over to another service provider to get a better subscription, whereas (situational trigger) reflects those customers who get easily attracted to advertisements and company promotions make them to switch over and to belief on the advertisements promises known as (influential trigger) and lastly those customers who have been treated harshly or badly move to n
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