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CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Following the full liberalization of the Nigeria telecommunications industry in year 2000,several mobile telecom companies were licensed, these included, Econet, now Airtel , Mtel, now moribund and MTN and consequently GLO and Etisalat.
Given the increasing number of players in the market, competition has become very stiff and subscribers are daily faced with several offers to choose from resulting into consumer switching from one network to another or multiple service provider usage and hence drop in customer base and profit levels. To stem the trend, Communication Service Providers (CSPs) are forced to devote more resources to defend their customer base against pouching.
This further explains why CSPs in Nigeria and with particular interest in MTN, GLO and Airtel have unrolled several brand equity practices to subscribers so as to retain existing ones and acquire new customers. Brand equity is the differential effect of brand knowledge on consumers’ response to the marketing of that brand (Keller 1993).Brand equity expresses the strength of the brand in the market and this lies in what the consumer has learnt, felt, seen, heard and experienced about the brand over time. The brand equity concept stresses the importance of brand in the application of customer retention strategies and provides marketers with the valuable perspectives and a common denominator to interpret the potential effects and trade-offs of various strategies and tactics for their brands,( Keller 2006).
Tery et al (2007) held that, long-term frequent price promotions would increase customers’ price-sensitivity thereby lowering brand equity as they would no longer want to pay premium prices. In agreement with Tery et al (2007) Poopola (2011) maintained that. “The tariff reduction might temporally stop MTN from further losing customers to competitors and it can help it achieve increased market share but it will never give MTN (or any other Nigeria GSM service provider) market retention.” Silva (2007) Silva similarly indicted that, ‘The common belief is that, the price or the low cost is the most important factor that determines the customer loyalty, however, the findings of the present research revealed that the most important factor for all groups was value – delivery”.
Zeithamal et al (1990) posits that, based on expectancy disconfirmation theory, customer satisfaction is a key antecedent to loyalty and repurchase. In contrast, Arussy, (2007) in a study on satisfaction and bank employee retention indicated that, there is little correlation between customer satisfaction and customer retention. In a study conducted by Arussy, only 17% of satisfied customers of financial institutions claimed that they would not entertain a competing offer. Considering price as a predictor of retention rate, Terry et al (2007) submitted that, retaliatory-pricing was a short-term strategy that could not promote high retention rate and consequently high customer life time value as such advocated for marketing practices that promote high brand-equity as a strategic approach to customer retention.
Contributing on the drivers of effective customer retention programme, Lowenstein (2007) points out that to be successful with a customer loyalty programme, rely on both tangible and intangible assets, rational (functional, quality, cost etc) and emotional (trust, service, communication) components of the brand.Brigita, (2001) held that, high churn rates and multiple operator usage might be prevented in one way by forming relationship between the customer and the brand, In further justifying brand equity as a competent driver of customer retention, Ferguson and Brohaugh, (2008) indicated that, “As consumers’ choices expand, the importance of matching customer-brand relationship strategy becomes more and more important for the operators’ success”.The National Punch (2014) reported that Nigeria Communications Commission (NCC) had imposed fines in the total sum of 647.5million on three service operators-Airtel and MTN, 185 million each, Glo 277.5 million for poor quality of service performing below. In addition they were barred from selling Subscriber Identification Module (SIM) cards between 1st march to 31st march, 2014 to reduce high Traffic Channel Congestion (TCHcong) and Dropped Call rates (DCR).The Executive Vice Chairman, NCC, Eugene Juwah commented that, “We have been on this for too long. User experience must improve. We will not sacrifice the enormous successes recorded in the industry to continued poor quality of service”.
From the foregoing, the failure of the brand equity practices by Airtel, Mtn and Glo Nigeria to improve consumer experience, enhance customer retention rate and earn them competitive advantage over one another in agreement with the literatures above posed an important research problem. In addition, available literatures evaluating the impact of brand equity dimensions on customer retention are very terse and in most cases out-side the Nigeria Telecom industry. It is in view of this gap that the researcher has chosen; BrandEquity and Customer Retention in the Nigeria Telecommunications Industry as a subject of study.
1.2 Statement of the Problem
Customer retention has become a major concern for Communication Service Providers in Nigeria due to increased competition in the market place with it’s attendant multiple alternative offers in the face of consumer’s expectations for high quality value delivery. The brand equity practices by MTN, Airtel and GLO –Nigeria have delivered below subscribers’ expectations resulting into brand defections and multiple operator usage. Brigita (2001) submitted that, high churn rates and multiple operator usage might be prevented in one way by forming relationship between the customer and the brand. In further justifying brand equity as a relational partner for driving customer retention, Ferguson and Borhungh, (2008) indicated that, “as Consumers’ choices expand, the importance of matching customer-brand relationship strategy becomes more and more important for the operators’ success”. High brand equity levels are known to lead to higher consumer preferences and purchase intentions, (Cob-Walgrin et al 1995).
From the foregoing, various researchers have recommended a strong relationship between the customer and the brand as a way-out for ensuring high customer retention rate. Contrastingly, the brand equity practices by MTN, GLO and Airtel over the years have not been able to stop customer defections and multiple operator usage rather, this has eroded their customer base, lost market share and drop in the ultimate bottom line profits. The National Punch (2014) reported that “apart from being unable to get value for money expended, subscribers are also subjected to mental and psychological trauma associated to constraints to communication”. Thus under the aegis of National association of Telecom Subscribers, subscribers are demanding compensation for poor quality of service (QoS) in court,(National Punch, 2014).
The research problem therefore is to evaluate the Customer-Based Brand Equity (CBBE) practices (brand awareness, brand associations, perceived quality and brand loyalty) by MTN, GLO and Airtel with a view of determining why neither of the service providers have been able to stem customer defection and increase customer retention rate, differentiate the competition and attain industry leadership.
1.3 Objectives of the Study
The main objective of this study is to determine the relationship of brand equity practices by MTN, GLO and Airtel on customer retention.
Specifically, the study focused on the following objectives:
- To determine the relationship between brand-awareness and customer
retention in the mobile telephone services sector.
- To determine the relationship between brand association and customer – retention in the mobile telecom industry.
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To determine the relationship between brand perceived quality and customerretention in the mobile communications service industry.
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To ascertain the relationship between brand image and customer-retention in the mobile telecom service industry.
1.4 Research Questions
Based on the objectives of the study, the followings are the research question considered in this research work.
- What is the relationship between brand awareness and customer retention in the Nigerian telecom sector?
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What is the relationship between brand association and customer retention in the Nigerian telecom industry?
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What is the relationship between brand perceived quality and customer retention in the Nigerian telecom sector?
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What is the relationship between brand image and customer retention in the Nigerian telecom sector?
1.5 Research Hypotheses
The following (H0) hypotheses were tested for the study.
- There is no relationship between brand awareness and customer- retention in the Nigerian Mobile Telecom Industry.
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There is no relationship between brand association and customer-retention in the Mobile Telecom Industry.
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There is no relationship between brand perceived quality and customer retention in the Mobile communications Industry.
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There is no relationship between brand image and customer-retention in the Mobile Telecom service Industry
1.6 Significance of the Study
This study is relevant to all stake holders as thus:
To the communication service providers, it will serve as a guide for building customer-retention strategies that will endure in the short and long-run with a balance between a favourable customer retention rate and sustainable brand equity while to the academic cycle, this study will add value to the existing body of knowledge and trigger further studies on some researchable related issues raised but not exhausted as they did not constitute the focus of this study.
In addition, the findings and recommendations when implemented will help consumers to enjoy quality services delivered by operators thus saving the cost of switching from one service provider to another and save the inconvenience of carrying multiple lines simultaneously.
To the regulatory body, the Nigeria Telecommunications Commission will use the findings and recommendations to develop, improve and or reinforce a competitive policy frame-work that discourages commoditization of products/services by CSPs and encourage high value-delivery technologies and support services. More so, the implementation of the findings and recommendations of this study work by CSPs and NCC will ultimately result into high customer retention rate (enhanced life- time- value), routinization of operations, high brand image, reduced cost of operations, high profitability and hence improved shareholder value and confidence.
This will also guide and give investors the confidence to invest as they see the brand- equity of CSPs rising with the corresponding willingness of subscribers to pay premium prices for the products and services offered.
1.7 Area of the Study
This study shall be limited to non-contract (pre-paid) mobile phone subscribers within Lafia, Nassarawa State and Makurdi, Benue State of Nigeria.
1.8 Scope of the Study
The study was limited to understanding and proffering solutions to why the inconsistent associations of non-contract customers and consequent erosion of revenues and bottom line profits of the mobile telecom service providers ( MTN, Glo and Airtel) in light of the brand equity practices in the Nigeria Telecom Industry.
1.9 Operational Definition of Terms
The following concepts are defined as used in the study. Conceptual definitions below have been adopted for the study.
Customer Retention: Is a deeply held commitment to re-buy or re-patronize a preferred product or service consistently in the future, despite situational influences and marketing efforts having the potential to cause switching behavior (Oliver, 1997). Brand Equity: According to Keller, (1993), it is the differential effect of brand knowledge on consumers’ response to the marketing of that brand. Brand equity expresses the power of the brand and this lies in what the consumers have learnt, felt, seen and heard or experienced about the brand over time.
Customer: A customer is a party that receives and or consumes products (goods and services) and has the ability to choose between different products and suppliers. www.businessdictionary.com
Brand:A brand is name, phrase, design, symbol or some combination of these elements that identifies organization’s services and differentiates it from the competition. (Lovelock & Wirtz, 2007).
Brand Awareness: This is the easiness and frequency at which a customer recalls and recognizes a brand when the customer wants to make a purchase and or consumption decision (Keller, 2003).
Brand Association: This is defined as the links between the mental nodes that represent any piece of information like brand, attributes, personality, usage, benefits, image in the consumer’s mind. Krishnan (1996).
Brand’s Perceived Quality: Zeithamal (1998) defined perceived quality as consumer’s overall judgment about a brand’s superiority or excellence when compared to competitors’ brands.
Brand Loyalty: It is the degree to which a consumer consistently purchases the same brand within a product category despite marketing activities capable of causing switching (Moisescu, 2006).
References
Adegoke, A.S. & Babaloa, I.T. (2011),” Quality of Services Analysis of GSM Telephone System in Nigeria”. American journal of Scientific and Industrial Research. Vol. 2, No. 5 pp. 707-712.
Arussy, L. (2007), “Best Customer Retention Strategies”. http://www.searchcrm.
techtarget.com/feature/best-customer-retention-strategies. Accessed on 20/4/2011.
Ball, D.; Coelho, P.S. & Vilares, M.J. (2006), “Service Personalization and Loyalty”. Journal of Services Marketing. Vol. 20 No.6, pp.391-403.
Brigita, S. (2001), “The Role of Ethics in Customer Retention”. KTU Panevezys Institute, Faculty of Management, Kauno Technologies Universities.
Cob-Walgren, C.J.; Beal, C. & Donthu, N. (1995),” Brand Equity, Brand Preferences and Purchase Intend”. Journal of Advertising Vol. 24 No.3. pp.25-40.
Fergusun, K & Brohaugh, B. (2008), “Telecom’s Search for the Ultimate Customer Loyalty Platform”. Journal of Consumer Marketing Vol.25.No. 2. pp.314-318.
Jiang, M.S. & Dong, W. (2003), “The Study on the Frequencies of Price Promotion Influencing Brand Equity in China”. Journal of Management World Vol.1, No. 7, pp.144-146.
Keller, L. K. (2001), “Building Customer-Based Brand Equity: A Blueprint for Creating Strong Brands”. A working Paper Series, Marketing Science Institute, Boston, MA, No. 01-107. http://www.msi.org/publications/publication.cfm?pub=35. Accessed 14/2/2011.
Keller, K.L. (1993),” Conceptualizing, Measuring and Managing Customer-Brand Equity”. Journal of Marketing . Vol. 57 No. 1. pp.1-22.
Keller, L. (2006), Measuring Brand Equity, In Handbook of Marketing Research Do’s and Don‘ts, eds. Rajiv Grover and Macro Vreins, 546-568.
Lovelock, C. & Wirtz J. (2007), Services Marketing: People, Technology, Strategy. Pearson Prentice-Hall, New Jersey.
Lowenstein, M.W. (1995), Customer Retention: An integrated Process for Keeping your Best Customers. Milwuakee, Wis. ASQC Quality Press. pp.7-9.
Luzarvic, V. & Petrovic-Lazarevic, S. (2007), “Increasing Brand Loyalty of Generation Y for Future Market”. Monach University: Department of Management Working Paper.
National Punch, (2012),” 95.8 Million Nigerians Registered 110.4 Million SIM Cards” Vol.17, No.20, 081, pp.l&19.