Customer satisfaction and loyalty drivers in the Zambian mobile telecommunications industry

Abstract

This paper explores the extent to which customer satisfaction, service quality, customer service, price, corporate image, and network coverage influence customer loyalty in the mobile telecommunications industry in the emerging market country of Zambia. The study is important because emerging market countries including Zambia present a contextual setting in which there has been very high growth in mobile phone penetration within a short period of time. Based on survey data from a convenience sample of 221 mobile subscribers, and using partial least squares analysis, the study found that the antecedents of customer satisfaction (i.e., service quality, customer service, corporate image, price, and network coverage) explained 54% of the variance in customer satisfaction while customer satisfaction itself explained 37.4% of the variance in customer loyalty. Though service quality, customer service, corporate image, and network coverage were positively related to customer satisfaction as expected, there was no evidence to support the hypothesized negative relationship between the price level and customer satisfaction. Corresponding author: Mlenga G. Jere Email addresses for corresponding author: mlenga.jere@gsb.uct.ac.za First submission received: 17th February 2018 Revised submission received: 24th April 2018 Accepted: 22nd May 2018 Introduction In today’s competitive markets, customer loyalty is a major concern for firms. To create loyal customers, firms have to understand the factors that drive customer loyalty, an important and frequently addressed subject in marketing (Heskett and Sasser, 2010). The value of customer loyalty stems from the notion that loyal customers contribute to the value of firms by enabling firms to minimize customer acquisition costs by focusing on customer retention (Boora and Singh, 2011). Research suggests that customer loyalty is a key determinant of long-term brand viability (Krishnamurthi and Raj, 1991). Developing and increasing customer loyalty is therefore crucial for a firm’s growth and performance (Lee and Cunningham, 2001). It is contended that a defensive strategy focused on existing customer retention is more important than an aggressive strategy focused on new customer acquisition (Fornell, 1992; Ahmad and Buttle, 2002). An important driver of customer loyalty is customer satisfaction. Customers make their assessment of customer satisfaction based on a number of value drivers or individual product features relevant to the purchase. In the literature, value drivers that have been used as determinants of customer satisfaction in mobile telecommunications research include service quality, price, corporate image, customer service, and network coverage. These factors were used to measure customer satisfaction in this study. Emerging market countries including those in Africa have experienced very rapid growth in the use of mobile technology. To illustrate, between 2002 and 2014, cell phone ownership amongst adults grew from 8% to 83% and 33% to 89% in Ghana and South Africa respectively compared with growth from 64% to 89% in the US (see for example, Pew Research Center, 2015). According to the Zambia Information and Communications Authority (ZICTA, 2013), the penetration rate in Zambia experienced a Journal of Business and Retail Management Research (JBRMR), Vol. 13 Issue 2 December 2018 www.jbrmr.com A Journal of the Academy of Business and Retail Management (ABRM) 121 growth rate of about 75% from 1.9 per 100 inhabitants in 2003 to 77 per 100 inhabitants by 2013. ZICTA also estimates that by December 2014, there were 10.1 million subscribers distributed amongst the three mobile service providers in Zambia namely MTN (48%), Airtel (37%), and Zamtel (15%) (The Post, 2015). It is in the context of this rapid transition in mobile penetration that this study investigated the drivers of customer satisfaction and customer loyalty in the Zambian mobile telecommunications industry. The specific research objectives of the study were to: a) assess the effect of corporate image on customer satisfaction, b) assess the effect of price on customer satisfaction, c) assess the effect of network coverage on customer satisfaction, d) assess the effect of service quality on customer satisfaction, e) assess the effect of customer service on customer satisfaction, and f) assess the effect customer satisfaction on customer loyalty. Literature review 2.1 Customer loyalty and customer satisfaction Oliver (1999, p.34) describes loyalty as “a deeply held commitment to rebuy or repatronize a preferred product/service consistently in the future, thereby causing repetitive same-brand purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior.” It is in part a reflection of how confident customers are about the future of the offering and the supplier’s future that takes into account the competitive landscape. Customer loyalty is important because it is closely associated with business survival and growth (Kim, Park, and Jeong, 2004). Given the importance of customer loyalty, it is imperative to understand its determinants (Kumar, Batista and Maull, 2011). Previous research demonstrates that increasing customer satisfaction contributes to customer retention and customer loyalty (Kim et al., 2004, Gerpott, Rams and Schindler, 2001). Customer satisfaction is defined by Gerpott et al. (2001, p.253-254) as “an experience-based assessment made by the customer of how far his own expectations about the individual characteristics or the overall functionality of the services obtained from the provider have been fulfilled.” It is a consumer’s post-purchase evaluation and affective response to an offering (Oliver, 1992) and an important predictor of repurchase intentions, wordof-mouth recommendations, and customer loyalty (Eggert and Ulaga, 2002). High customer satisfaction contributes to increased customer loyalty (Fornell, 1992) while low customer satisfaction implies greater customer turnover and higher customer replacement costs (Anderson, Fornell and Leymann, 1994). Though a positive correlation exists between customer satisfaction and customer loyalty (Dick and Basu, 1994), customer loyalty may be observed without high customer satisfaction being in place (Gerpott et al. 2001). In mobile telecommunication services research, customer satisfaction is as a strong driver of customer loyalty. For example, Lim, Widdows and Park’s (2006) study of the US mobile services market found customer satisfaction to be a strong predictor of customer loyalty. In the Taiwanese mobile services market, Liu et al. (2011) found that satisfied customers were more likely to stay with their carrier and also recommend them to others. An investigation of customer loyalty determinants in the Nigerian telecommunications sector found that service quality, customer satisfaction, and corporate image were important drivers of customer loyalty (Adeleke and Aminu, 2012). However, while positive relationships between customer satisfaction and customer loyalty are widely reported; some studies have discovered a negative relationship between the two variables. For example, Coyles and Gokey (2005) observed that customer satisfaction on its own is not a strong indicator of customer loyalty even though it plays an important role in combination with other factors such price, customer service, and service quality. Boohene and Agyapong’s (2011) analysis of customer loyalty in the Ghanaian telecommunications sector discovered that customer satisfaction had a significant, but negative effect on loyalty, implying that despite the low levels of satisfaction, consumers still remained loyal to their network providers. However, the general consensus is that customer satisfaction has a strong positive effect on customer loyalty. Therefore, it is hypothesized that: Hypothesis 1: Higher levels of customer satisfaction are positively associated with higher levels of customer loyalty in the Zambian mobile telecommunications industry. Journal of Business and Retail Management Research (JBRMR), Vol. 13 Issue 2 December 2018 www.jbrmr.com A Journal of the Academy of Business and Retail Management (ABRM) 122 2.2 Determinants of customer satisfaction While many factors influence customer satisfaction, it is difficult to find one study that has investigated all the influencing factors simultaneously and jointly (Aydin and Ozer, 2005). Based on the literature, the following determinants of customer satisfaction are important and included in this study: service quality, price, customer service, corporate image, network coverage, and customer satisfaction. Service quality: Quality is customer’s overall impression of the relative inferiority or superiority of an organization and its service offerings (Bitner et al., 1990). Research shows that service quality positively influences customer satisfaction (Gotlieb, Grewal, and Brown, 1994) and that it is a major determinant of customer retention (Venetis and Ghauri, 2004) as it results in repeat sales, increased market share, customer loyalty (Buzzell and Gale, 1987), and premium prices (Brown, Churchill, and Peter, 1993). In the telecommunications industry, service quality is also known to drive customer satisfaction (Deng, et al., 2010). The foregoing discussion leads to the following hypothesis: Hypothesis 2: Higher levels of service quality are positively associated with higher levels of customer satisfaction in the Zambian mobile telecommunications industry. Price: To acknowledge that offering high levels of service quality may be not sufficient to attract and retain customers; marketers increasingly rely on both price and service quality in their competitive strategies (Haquea et al., 2010). While Bolton and Drew (1991) found that price considerations influenced customer loyalty; Kim, Park, and Jeong (2016) found that price does not have a significant effect on customer