Building Customer Loyalty through Value Added Services
A Case of Telecom Sector
Doctoral Thesis / Dissertation 2011 276 Pages
TABLE OF CONTENTS
List of Tables
List of Figures
List of Acronyms Used
Chapter 1: Introduction
1.1 Relevance of Services Sector in Economy
1.2 Telecommunication Services: Importance and Evolution
1.3 Evolution of Telecom Services in India
1.4 Value Added Services (VAS): Concept and Evolution
1.5 Categories of Mobile Value Added Services
1.5.1 Entertainment VAS
1.5.2 Information VAS
1.5.3 mCommerce VAS
1.5.4 Mobile Applications
1.6 Key Value Added Services
1.6.1 Short Message Service (SMS) or Text Messaging
1.6.2 Instant Messaging
1.6.3 Multimedia Messaging Service (MMS)
1.6.4 Mobile Email
1.6.5 Video Service and Mobile TV
1.6.6 Caller Ring Back Tones (CRBT)
1.6.7 Wireless Internet
1.7 Market Size of Indian Mobile Value Added Services (VAS) Sector
1.8 Marketing of Telecom Services
1.8.1 Service Quality
1.8.2 Perceived Value
1.8.3 Customer Satisfaction
1.8.4 Customer Loyalty
1.9 Need For Study
1.10 Outline of the Study
Chapter 2: Review of Literature
2.1 Research Papers and Articles in Journals
2.2 Published Books
2.3 Industry Reports
2.4 Thesis and Dissertations
2.5 Other Miscellaneous Papers/Articles
2.6 Research Gap
Chapter 3: Profile of Companies
3.1 Introduction to Indian Cellular Market
3.2 Bharti Airtel Limited
3.2.1 Company Background
3.2.3 Recent Initiatives
3.2.4 Corporate Vision and Promise
3.2.5 Management Team
3.3 Vodafone Essar Limited
3.3.1 Company Background
184.108.40.206 Vodafone Group Plc
220.127.116.11 Vodafone Essar Limited
3.3.3 Recent Developments
3.3.4 Corporate Vision and Strategy
3.4 Reliance Communications Limited
3.4.1 Company Background
3.4.3 Recent Initiatives
3.4.4 Corporate Vision and Mission
3.4.5 Board of Directors
3.5 Bharat Sanchar Nigam Limited (BSNL)
3.5.1 Company Background and History
3.5.2 Corporate Vision and Mission
3.5.3 Board of Directors
Chapter 4: Research Methodology
4.1 Research Purpose
4.2 Research Hypotheses
4.3 Research Objectives
4.4 Questionnaire Design and Development
4.4.1 Quality of Value Added Services
4.4.2 Service Quality
4.4.3 Perceived Value of Services
4.4.4 Customer Satisfaction
4.4.5 Customer Loyalty
4.5 Pretesting and Final Instrument
4.5.1 Value Added Services
4.5.2 Perceived value of Services
4.5.3 Overall Service Quality
4.5.4 Customer Satisfaction
4.5.5 Customer Loyalty
4.7 Data Tabulation, Statistical Tools and Techniques Used for Processing
4.7.1 Measure of Central Tendency (Mean)
4.7.2 Measure of Dispersion (Standard Deviation)
4.7.3 Regression Analysis
4.7.4 Percentage Analysis
4.7.5 Analysis of Variance (ANOVA)
4.7.6 Factor Analysis
4.7.7 Reliability Analysis of Measurement Scales
Chapter 5: Data Analysis and Interpretations
5.1 Demographic Profile
5.2 Factor Analysis
5.3 Descriptive Statistics for Various Measurement Items
5.4 Regression Analysis
5.4.1 Impact of Value Added Services (VAS) offered on Perceived Service Quality
5.4.2 Relationship between Perceived Service Quality and Perceived Value of Services
5.4.3 Relationship between Perceived Value of Services and Customer Satisfaction
5.4.4 Relationship between Customer Satisfaction and Customer Loyalty
18.104.22.168 Relationship between Customer Satisfaction and Customers’ Intention to Use Services in Future
22.214.171.124 Relationship between Customer Satisfaction and Customers’ Intention to Recommend Services to Others
5.4.5 Relationship between Value Added Services (VAS) offered and Perceived Value of Services
5.4.6 Relationship between Value Added Services (VAS) offered and Customer Satisfaction
5.4.7 Relationship between Value Added Services (VAS) offered and Customers’ Intention to Use Services in Future
5.4.8 Relationship between Value Added Services (VAS) offered and Customers’ Intention to Recommend Services to Others
5.4.9 Relationship between Perceived Service Quality and Customer Satisfaction
5.4.10 Relationship between Perceived Service Quality and Customers’ Intention to Use Services in Future
5.4.11 Relationship between Perceived Service Quality and Customers’ Intention to Recommend Services to Others
5.4.12 Relationship between Perceived Value of Services and Customers’ Intention to Use Services in Future
5.4.13 Relationship between Perceived value of Services and Customers’ Intention to Recommend Services to Others
5.5 Hypotheses Testing
5.6 Analysis of Variance (ANOVA)
5.6.1 ANOVA for Value Added Services
5.6.2 ANOVA for Perceived Service Quality, Perceived Value of Services and Customer Satisfaction
5.6.3 ANOVA for Customer Loyalty
Chapter 6: Summary, Conclusion and Suggestions
6.1 Synoptic View
6.2 Objectives of the Study and Their Achievement
6.3 Validity of Hypotheses Tested
6.4 Analysis of Variance of Means
6.5 Conclusions and Suggestions
6.6 Limitations of the Study
6.7 Research Contribution, Managerial Implications and Direction for Future Research
LIST OF TABLES
Table 1.1 Performance in Services Growth of Top 12 Countries
Table 1.2 Revenue Structure of Indian Cellular Operators
Table 5.1 Respondents in Select Cities
Table 5.2 Gender Profile of Respondents
Table 5.3 Age-wise Representation of Respondents
Table 5.4 Type of Connection of Respondents
Table 5.5 KMO and Bartlett’s Test
Table 5.6 Total Variance Explained
Table 5.7 Constructs and Composite Reliability
Table 5.8 Features of Value Added Services
Table 5.9 Reliability of Value Added Services
Table 5.10 Comfort in Usage of Value Added Services
Table 5.11 Personal Attention Given by Operator
Table 5.12 Mean Values of Various Factors of VAS
Table 5.13 Perceived Value of Services
Table 5.14 Overall Service Quality
Table 5.15 Customer Satisfaction Level
Table 5.16 Intention to Use Services in Future
Table 5.17 Intention to Recommend Services to Others
Table 5.18a Regression Analysis: VAS and Perceived SQ
Table 5.18b Regression Coefficients: VAS and Perceived SQ
Table 5.19a Regression Analysis: Perceived SQ and PV of Services
Table 5.19b Regression Coefficients: Perceived SQ and PV of Services
Table 5.20a Regression Analysis: PV of Services and CS
Table 5.20b Regression Coefficients: PV of Services and CS
Table 5.21a Regression Analysis: CS and Intention to Use Services in Future
Table 5.21b Regression Coefficients: CS and Intention to Use Services in Future
Table 5.22a Regression Analysis: CS and Intention to Recommend Services to Others
Table 5.22b Regression Coefficients: CS and Intention to Recommend Services to Others
Table 5.23a Regression Analysis: VAS and PV of Services
Table 5.23b Regression Coefficients: VAS and PV of Services
Table 5.24a Regression Analysis: VAS and CS
Table 5.24b Regression Coefficients: VAS and CS
Table 5.25a Regression Analysis: VAS and Intention to Use Services in Future
Table Number Table Title Page
Table 5.25b Regression Coefficients: VAS and Intention to Use Services in Future
Table 5.26a Regression Analysis: VAS and Intention to Recommend Services to Others
Table 5.26b Regression Coefficients: VAS and Intention to Recommend Services to Others
Table 5.27a Regression Analysis: SQ and CS
Table 5.27b Regression Coefficients: SQ and CS
Table 5.28a Regression Analysis: SQ and Intention to Use Services in Future
Table 5.28b Regression Coefficients: SQ and Intention to Use Services in Future
Table 5.29a Regression Analysis: SQ and Intention to Recommend Services to Others
Table 5.29b Regression Coefficients: SQ and Intention to Recommend Services to Others
Table 5.30a Regression Analysis: PV of Services and Intention to Use Services in Future
Table 5.30b Regression Coefficients: PV of Services and Intention to Use Services in Future
Table 5.31a Regression Analysis: PV of Services and Intention to Recommend Services to Others
Table 5.31b Regression Coefficients: PV of Services and Intention to Recommend Services to Others
Table 5.32a ANOVA: VAS with respect to the Operators
Table 5.32b Tukey’s HSD Homogeneous Subsets for Features of VAS
Table 5.32c Tukey’s HSD Homogeneous Subsets for Reliability of VAS
Table 5.32d Tukey’s HSD Homogeneous Subsets for Comfort in Usage of VAS
Table 5.32e Tukey’s HSD Homogeneous Subsets for Personal Attention Given by Operator
Table 5.33a ANOVA: SQ, PV of Services and CS with respect to Operators
Table 5.33b Tukey’s HSD Homogeneous Subsets for Service Quality
Table 5.33c Tukey’s Homogeneous Subsets for Perceived Value of Services
Table 5.33d Tukey’s Homogeneous Subsets for Customer Satisfaction
Table 5.34a ANOVA: Customers’ Intention to Use Services in Future and Intention to Recommend Services to Others with respect to Operators
Table 5.34b Tukey’s HSD Homogeneous Subsets for Customers’ Intention to Use Services in Future
Table 5.34c Tukey’s HSD Homogeneous Subsets for Customers’ Intention to Recommend Services to Others
LIST OF FIGURES
Figure 1.1 Mobile Network
Figure 1.2 Evolution of Value Added Services in India
Figure 1.3 Categories of Value Added Services
Figure 3.1 Composition of Indian Telecom Subscribers
Figure 3.2 Composition of Indian Cellular Subscribers
Figure 3.3 Group-wise market share (in terms of subscribers) of Indian GSM Operators
Figure 3.4 Proportion of Pre-Paid & Post-Paid Subscribers in Indian GSM Market
Figure 3.5 Global Presence of Airtel
Figure 3.6 Global Presence of Vodafone
Figure 5.1 Respondents of Select Operators
Figure 5.2 Respondents Using Different Types of Value Added Services
LIST OF ACRONYMS USED
illustration not visible in this excerpt
CHAPTER 1 INTRODUCTION
“It is high time that the ideal of success should be replaced by ideal of service.”
----- Albert Einstein
1.1 RELEVANCE OF SERVICES SECTOR IN ECONOMY
Services constitute the tertiary sector in an economy, including all activities that are neither related to agriculture nor manufacturing. The emergence of services sector can be traced back to post World War-II era, when it started assuming greater significance in rebuilding the world economies that were devastated due to the collapse of manufacturing sector. Eventually, this phenomenon led to a change in the basic structure of economies with services becoming the dominant component. However, with the passage of time, newer services were developed leading to their simultaneous commercialization and professionalization. As a result, the services sector became the back-bone of every economy. According to the Indian Economic Survey 2010-11, UN National Accounts Statistics in its report published on 4th February 2011, has also mentioned that the services sector with an overall share of 64.2 percent in world GDP in 2009 (Table 1.1), has been playing a dominant role in the world order, especially in high-income countries which have transited to services-led growth.
From education to entertainment, finance, fast-food, travel, telephone, advertisement to market research, maintenance services, retailing etc. services are widely used by people and organizations today. More so with the advancements in new technologies like telecommunication, information based technologies and continuous innovations in performing business functions; a radical change has taken place in the living-habits, tastes, preferences, needs and requirements of people.
Table 1.1: Performance in Services Growth of Top 12 Countries
illustration not visible in this excerpt
Source: Indian Economic Survey 2010-11
* Ranks are based on GDP at current prices ** In 2009-10 as per CSO, India.
In response to this, the corporate sector has been developing multi-faceted services to deliver the best to the society leading to a phenomenal growth of services sector. This fact holds truth in Indian context also, where GDP of 7,87,7947 crores (at current market prices, 2010-11)
with a growth rate of 8.6% gets a contribution of around 55.2% from a very dynamic and substantial services sector that had an expected growth rate of around 10% for the year 2010- 11 (Indian Economic Survey, 2010-11). While referring to Table1.1, India with a services sector share of 52% in national GDP in 2009 and 55.2% in 2009-10 has been compared with the other 11 countries, which have recorded the highest overall GDP. The comparison clearly indicates that China’s share of services in its national GDP at 39.2 per cent has been lowest among all. However, in terms of services growth rate, China (CAGR: 10.5 per cent) followed by India (CAGR: 8.9 per cent) have emerged as the two fastest growing economies among the top 12 countries. Further, in the global crisis year of 2009, when most of the countries have recorded negative growth in services, only China(9.4 per cent), India (6.8 per cent), and Brazil (2.6 per cent) registered positive growth. Further analyzing the services sector, it has been seen that telecommunication, as a service, has emerged as the sunrise sector in almost all the economies. It is so because globally, the focus is shifting towards the telecom sector, especially in recent years, due to the enormous growth of Information Technology and its significant impact on the rest of the economy.
1.2 TELECOMMUNICATION SERVICES: IMPORTANCE AND EVOLUTION
Telecommunication refers to the transmission of information, over significant distances, for the purpose of communication. In earlier times, telecommunication involved the use of visual signals, such as beacons, smoke, semaphore telegraphs, signal flags, and optical heliographs, or audio messages via coded drumbeats, lung-blown horns, or sent by loud whistles. In the modern age of electricity and electronics, telecommunication now also includes the use of electrical devices such as telegraphs, telephones, and teletypes, the use of radio and microwave communications, as well as fiber optics and their associated electronics, plus the use of the orbiting satellites and the internet.
Due to such a wide spectrum of mediums being used for telecommunications globally, the industry has been estimated to be about US$4 trillion sector in 2010. It is one of the major employment providers in the world, with nearly 1 million employees in the United States of America alone (Plunkett, 2010). Besides being the major employment provider, the cellular industry has impacted the economies at both structural as well as economic level so much so that it has emerged as the complex new industry with advanced technologies, organizational and human capabilities to deliver the services to final user on the one hand and on the other with large multiplier effects in terms of investments, income and employment. Even, it is to further mention that many aspects of production and distribution systems have changed since the advent of mobiles contributing towards the enhanced productivity. It has shrunk boundaries of the world. Moreover, roaming the world with an access to information and communication has been possible due to mobile telephony, developments in its technology and the global standards. Various agencies have estimated the global wireless subscriber base in 2010 to be around 5.3 billion users (The World Fact Book, 2011). Without such developments, globalization as a phenomenon would not have taken place as fast as it has over the recent years.
From this, it can be inferred that the mobile communication has been a key factor for economic growth and social change. Hence, it can be said that in the present scenario where every economy depends heavily upon communication technologies and the internet based industries, telecommunication has emerged as one of the important services. A similar trend has been observed in Indian services sector, where telecommunication services have recorded a phenomenal growth, which is evident from the fact that the Indian telecom sector has grown from a level of 22.8 million telephone subscribers in 1999 to 54.6 million in 2003 and 764.77 million at the end of November 2010. Wireless telephone connections have been a major contributor to this growth as the number of wireless connections rose from 3.57 million in March 2001 to 729.58 million by the end of November 2010. Further, this sector has attracted FDI inflows of around 46,727 crores during April 2000 to December 2010, which accounted for 8% of total inflows during the same period (Indian Economic Survey, 2010-11).
As far as, the emergence of mobile telephony as a service is concerned, the story of digital wireless and cellular communication started in 1940’s when commercial mobile telephony began. The first service named Mobile Telephone Service (MTS) was launched by AT&T in America on 17th June, 1946. The next four decades saw a rather sluggish growth and development in mobile telephony primarily due to slow technological innovations, cautiousness of businesses and most importantly the government regulations. By mid 80’s many innovations took place and by early 90’s low cost microprocessors and digital switching technology became easily available paving the way for wireless revolution which resulted into a spectacular growth in global telecom industry that was never seen before.
While referring to the wireless revolution, cellular telephony has been one of the key contributors in the growth of such services. Cellular telephony derives its name from the partition of a geographic area into small “cells”. Each cell is covered by a ‘cell site’ which is a site where antennas, radio transmitters and receivers are placed to create a radio coverage area in the mobile network. They are powerful enough to enable connectivity with cellular phones (mobile terminals), within its area. The set of cells forms the radio access network, and the radio frequencies are used for the transmission of calls and data. Voice and data that is exchanged between a mobile terminal and regular phone networks, or the internet, are transmitted via the mobile network which consists of the cellular operator’s radio access network and core network (Pashtan, 2006).
Figure 1.1: Mobile Network
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Source: Wireless Terrestrial Communications: Cellular Telephony (Pashtan, 2006)
The maiden commercial launch of first generation (1G) cellular services took place in Scandinavian countries with the name of Nordic Mobile Telephone (NMT) service in 1981, which was the starting point in the mobile revolution. While in USA, the Advanced Mobile Phone Service (AMPS) cellular system was launched in 1983. During early 1980s another analog system was developed by Motorola which was known as Total Access Communications System (TACS). These analog-technology based mobile systems are referred to as first generation or 1G services. The technological development that distinguished the First Generation mobile phones from the previous generation was the use of multiple cell sites, and the ability to transfer calls from one site to the next as the user travelled between cells during a conversation.
With the passage of time, the number of cellular subscribers grew that led to the need for increased network capacity to accommodate a growing subscriber base. This was answered by the invention of systems that used digital transmission technique instead of analog technique used in first generation. In the 1990s, the 'second generation' (2G) mobile phone systems emerged, in which NMT was replaced by Global System for Mobile Communication (GSM) services. It was developed by European Telecommunications Standard Institute (ETSI) in the late 1980’s under a joint European project. In 1991 the first GSM network named Radiolinja (now Elisa) was launched in Finland. In United States, Telecommunications Industry Association (TIA) developed Code Division Multiple Access (CDMA) platform referred to as cdmaOne in 1993 and Time Division Multiple Access (TDMA) used mainly in the American continents. Personal Digital Cellular (PDC), introduced in Japan, was one of the other small- scale 2G systems rolled out during this time.
The second generation also introduced a new method of communication called Short Message Service (SMS) or text messaging. It was initially available only on GSM networks but eventually became available on all digital networks. The first machine-generated SMS message was sent in the United Kingdom on 3 December 1992, followed by the first person- to-person SMS sent in Finland in 1993. The advent of prepaid services in the late 1990s soon made SMS the most preferred method of communication amongst the young people, a trend that later on spread across all ages. 2G also introduced the ability to access media content on mobile phones. In 1998, the first downloadable content sold to mobile phones was the ring tone, launched by Finland's Radiolinja. Later on, advertising on the mobile phone also appeared in Finland when a free daily SMS news headline service was launched in 2000, sponsored by some advertisers. Trials of mobile payments were also introduced in Finland and Sweden in 1998 where a mobile phone was used to pay for a Coca Cola vending machine and car parking. The first commercial payment system to supplement banks and credit cards was launched in the Philippines in 1999 simultaneously by mobile operators Globe and Smart.
The 2G systems supported only basic data services with limited capacity. So in order to provide better support for data services, ETSI developed the General Packet Radio Service (GPRS), which is a 2.5 Generation (2.5G) wireless communication system. It is a packet transmission system that overlays GSM and inter-works with external packet data networks such as the internet. The first full internet service on mobile phones was introduced by NTT DoCoMo in Japan in 1999.
As the use of 2G phones became more widespread, consumers began to utilize mobile phones in their daily lives with the demand for higher capacity, faster data transmission rates, and better quality-of-service. This was the limitation of 2G technology. Another limitation was the various incompatibilities between the different standards, mainly GSM and cdmaOne. So the industry began to work on the next generation of technology known as 3G, which was spearheaded by the International Telecommunications Union (ITU) and referred to as International Mobile Telecommunications 2000 (IMT-2000). These efforts didn’t lead to an agreement on one common standard and as a result, there were a number of standards to handle the evolution of GSM and cdmaOne platforms. Some of the standards were based on Wideband-CDMA (W-CDMA), also referred to as universal mobile telecommunications systems (UMTS); which were developed by original GSM proponents and handled by the Third Generation Partnership Project (3GPP) established in 1998. The stated objectives of 3GPP were to develop a 3G mobile system based on evolved GSM core networks and the radio access technologies that they supported.
On the other hand evolution of the cdmaOne standard, referred to as cdma2000, has been managed by another standards body, 3GPP2, established in 1999. 3GPP2 is a collaborative 3G telecommunications specifications project that comprises North American and Asian interests developing global specifications for ANSI/TIA/EIA-41 cellular networks. Another organization that has been actively involved in the progression of CDMA networks is the CDMA Development Group (CDG), an international consortium of companies who have joined together to lead the adoption and evolution of CDMA wireless systems around the world. The main technological point of difference between 3G and 2G technologies has been the use of packet switching rather than circuit switching for data transmission. During the development of 3G systems, 2.5G systems such as CDMA2000 1x and GPRS were developed as extensions to existing 2G networks. These provided some of the features of 3G without fulfilling the promised high data rates or full range of multimedia services.
By 2009, industry realized that, at some point, 3G networks would be overwhelmed by the growth of bandwidth-intensive applications like streaming media (Saeed 2006). Consequently, the industry began looking to data-optimized 4th-generation (4G) technologies, with the promise of speed improvements up to ten folds over existing 3G technologies. The first two commercially available technologies labelled as 4G were the WiMAX standard (offered in the United States of America by Sprint) and the LTE standard, first offered in Scandinavia by TeliaSonera. One of the main ways in which 4G differs technologically from 3G is that it employs an all-IP (Internet Protocol) network instead of circuit switching. Thus, 4G has introduced a treatment of voice calls just like any other type of streaming audio media, utilizing packet switching over internet, LAN or WAN networks via Voice over Internet Protocol (VoIP).
1.3 EVOLUTION OF TELECOM SERVICES IN INDIA
In Indian context, the history of telecommunication industry can be traced back to the year 1851, when the first operational landlines were laid by the government near erstwhile Calcutta, the seat of British Empire. The commercial telecom services were introduced in India in the year 1881 (BSNL knowledge base). Since then the Indian telecom sector has come a long way from being a premium service towards providing affordable and effective communication facilities to the Indian masses.
Around sixteen years ago in 1995, when government announced the launch of mobile services and simultaneously threw the business open to private players, as many as eighteen Indian companies ventured into the business. These were big industrial groups like Tatas, Birlas, Ambanis, Nandas and Modis. Second league of players comprised of BPL, Jhawars of Usha Martin, Thapars of Ballarpur Industries and Analjit Singh of Max India. Lastly there were a string of small telecom equipment makers like Rajiv Mehrotra of Syam Telecom, C.Sivasankaran of Dishnet, Mahendra Nahata of HFCL and Sunil Mittal of Bharti Telecom. During the past sixteen years the industry has seen an erratic growth due to the regulatory uncertainties, policy upheavals, technology disruptions and accompanying regulatory wranglers. From a few thousand subscribers in 1995 to less than a million in 1998, the industry now serves more than 729 million subscribers (Economic Survey 2010-11) and India, today holds the position of having second largest network in the world after China. All the cellular operators jointly add up to some 8.5 million to 10 million new subscribers to the network every month making India one of the fastest growing telecom markets in the world. This is because in the beginning, cell phones were not about mobility in India but just an access to a phone service.
In 1995, mobile phones in India were priced at not less than 20,000. However, today these phones are available for as low as 1,500 On the other hand, airtime charges have come down from 14.5 per minute in 1995 to 10-40 paisa per minute presently, indicating a fierce competition among the Indian telecom players. Thus, with the competition becoming intense, the Government felt an urgent need to not only regulate but also give a direction to the telecom sector. Therefore, an important development took place in the form of establishment of Telecom Regulatory Authority of India (TRAI) in 1997.
The turning point in telecom sector came in the year 2002, when Reliance Infocomm entered the mobile business by offering limited mobility using CDMA technology at phenomenally low prices that ultimately led the government to make licenses ‘technology neutral’ by introducing a Unified Service Access License (USAL) resulting in an all round tariff reduction and explosion of subscriber base. These developments not only led to a rapid growth but also helped a great deal towards maximization of consumer benefits as tariffs decreased considerably across the board.
Besides reduction in tariffs, the information revolution also had a deep penetrating effect on the cellular industry. In the beginning, mobile phones which were just simple phones with mobility feature, in the late 1990’s, transformed into a hand held computer when Nokia introduced the ‘Communicator’, a GSM mobile phone. This event earmarked a paradigm shift in cellular services, i.e. from emphasis on voice to concentrating on data. Then came in the all-in-one camera phones in the year 2000 that enabled the users to take, send and receive images by e-mail. This rapid evolution of mobile phones, from just a phone to a multimedia device, and advancements in the cellular operating technology has paved way for mobile Value Added Services (VAS).
1.4 VALUE ADDED SERVICES (VAS): CONCEPT AND EVOLUTION
Value Added Services (VAS) in telecommunication industry refers to non-core services, which are added to the core or basic services, i.e., standard voice calls and fax transmission including bearer services. The value added services add value in total services offering. They stimulate incremental demand for the core or basic services besides enhancing profitability. However, these can sometimes be provided as standalone services but the essential feature is that they do not cannibalize the core or basic service. Moreover when such services are added to the core or basic service, these can be sold at a premium price and therefore, they lead to provision of operational synergy with core or basic services. Besides, they are also used as a tool for differentiation and allow mobile operators to develop another stream of revenue.
Indian mobile industry when started was primarily seen as a substitute to conventional landline phones. It was high premium service, affordable to only few. By early 2000, Person to Person (P2P) SMS was the only value added service being offered to as well as used by mobile subscribers. Slowly other value added services such as wallpaper and graphic downloads entered the market and value added services started gaining momentum. However, Value Added Services (VAS) offerings till mid 2003-04, were primarily basic applications and focused on entertainment. These were followed by high order value added services such as ringtones, voting /contest participation. By the year 2005-06, Indian wireless industry crossed the level of 50 million subscribers and famous TV shows such as KBC (Kaun Banega Crorepati) and Indian Idol were introduced on Indian television that resulted in large number of viewers participating in SMS contests.
With the arrival of year 2007-08, SMS started becoming a commodity among urban users. High end value added services such as Caller Ring Back Tone (CRBT), mobile internet and mCommerce slowly started being adopted by the subscribers in urban circles. On the other side, rural subscribers were getting added in large numbers who were new entrants; for them entertainment VAS (SMS and downloads) continued to be the main services. Today, in year 2011, a number of new offerings such as Mobile TV, social networking, etc. entering the Mobile value added services domain are being witnessed. Similarly Mobile Applications (Mobile Apps), potentially the next big thing in value added services is already witnessing large push from supply side. Figure 1.2 below, graphically depicts the evolution of value added services in India.
Figure 1.2: Evolution of Value Added Services in India
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Source: Report on Mobile VAS in India: 2010 by IAMAI & eTechnology Group @ IMRB, July 2010
Presently, the mobile value added services market in India is characterised by entertainment, music and sports. It is generally the younger segment of the consumers who take maximum advantage of such Value Added Services. Hence, there is a need to focus on the other Value Added Services such as Informational, Transactional etc. so that all segments of consumers get benefits of the growth of Value Added Services sector (IAMAI & eTechnology Group @ IMRB, 2008).
1.5 CATEGORIES OF MOBILE VALUE ADDED SERVICES
Internet And Mobile Association of India (IAMAI) has classified the Value Added Services offered by mobile operators into four broad categories namely: Entertainment, Information, mCommerce and Mobile Applications (IAMAI & eTechnology Group @ IMRB, 2010). Graphical presentation is given in Figure 1.3 below.
Figure 1.3: Categories of Value Added Services
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Source: Report on Mobile VAS in India: 2010 by IAMAI & eTechnology Group @ IMRB, July 2010.
1.5.1 Entertainment VAS
This category of services is the key revenue generators for Indian mobile value added services market as these services aim at providing means of entertainment to the consumers during their leisure time and also stimulates mass appeal leading to high volume business, both in terms of subscribers and usage. Major services of this category include Jokes, Ring-tones download, Caller Ring Back Tone (CRBT), Games, Music/Songs download and various contests/voting services, dating and chatting services. Moreover, Bollywood and Cricket have traditionally been the main contents in Indian entertainment VAS. However it is to mention that with the further evolution of cellular services, entertainment VAS will continue to have a high perceived value among the users both in urban as well as rural areas.
1.5.2 Information VAS
These services target the information needs of the end users by providing relevant content. It is not a mass appeal offering like Entertainment VAS, but a specific segment target tool. Information VAS includes services like information on movie tickets, news, banking account, other products like real-estate, education, stock updates, weather etc. Its usage has been low among urban users due to a number of alternatives available for accessing the required information. On the other hand, rural users, who require information services like weather updates, crop prices, farming related information, do not have much access to alternate sources of information. This fact hence puts forth a wide potential for such services to be accepted by rural mobile users.
1.5.3 mCommerce VAS
These are most complex value added services and require high involvement of users and service providers. These are also known as transactional services as they involve some transaction like buying movie tickets or transfer of money from one bank account to the other or simply the payment of utility bills using a mobile phone. Traditionally, Mobile Banking and Mobile Payments have been the two types of mCommerce value added services being offered by the cellular operators. Until last year, only highly evolved and matured mobile users availed these services and that too mainly in urban markets. However, with the issuance of guidelines for mCommerce and mBanking by Reserve Bank of India, many Indian banks like SBI and ICICI Bank etc. have launched mobile banking service for their customers using GPRS and SMS platforms. On the other hand, almost all the operators have been working to develop mCommerce services using different access modes like GPRS, Unstructured Supplementary Services Data (USSD), Sim Application Toolkit (STK), etc. these services have started gaining popularity with each passing day.
1.5.4 Mobile Applications
This is a relatively new category in which mobile service providers, device manufacturers and content aggregators have come together to offer mobile applications to the subscribers. These applications can be used for various purposes like entertainment, informational access or for initiating transactions.
1.6 KEY VALUE ADDED SERVICES
The cellular operators in Indian market provide a number of value added services to the customers. Some of the key value added services being offered are:
1.6.1 Short Message Service (SMS) or Text messaging
This is the most widely used value added service globally that enables the cell-phone user to send and receive short text messages on any cellular phone number, across mobile operators whether local, national or even international. These messages are referred to as Short Message Service (SMS) messages because the length of a message is generally limited to 160 characters. Users can also send longer messages but they are sent in parts of 160 characters and the mobile subscriber is billed separately for each part. The best utility feature in this service is that if the mobile phone of intended receiver is turned off or even out of the network coverage area, the text messages are stored in the network and delivery is retried until its successful delivery, though for a limited number of hours (for example, 72 hours). This service in which SMSs are exchanged between mobile subscribers is also referred to as Pointto-Point or Person-to-Person or simply P2P SMS.
Another advanced variant of this service is Premium SMS. It allows users to send SMS to automated systems to access services offered by the mobile value added services providers. This is called a premium service because the user is charged at higher rate for sending this message as compared to normal P2P SMS. Examples of premium SMS-based services include participation in contests and games and polls, information downloads like scores, stock updates, weather etc.
1.6.2 Instant Messaging (IM)
Instant messages (IM) are short text messages exchanged between users who are interested to chat in real-time. After a user signs on to IM service from a mobile device, a list of friends (referred to as a buddy list) appears on the mobile subscriber’s screen using familiar screen names or IDs. Each user is identified by a text identifier referred to as “short code” or “screen name”, and messages are sent to these identifiers, not to phone numbers as in SMS. Most mobile IM systems have been designed as extensions of traditional internet services like AOL Instant Messenger (AIM) and Yahoo! Messenger that extend the reach of IM to mobile users. There are often two ways to access the IM services. Either by downloading an IM application to the mobile terminal or with the help of a mobile browser interface. In recent times, IM service in the form of Black Berry (BB) Messenger service is gaining popularity among young college going people and working professionals.
1.6.3 Multimedia Messaging Service (MMS)
It allows the user to exchange pictures, video, and voice messages to another mobile terminal or e-mail address. Mobile subscribers can take a photo or video using their mobile terminal's embedded camera or a camera attachment, and send it to a mobile number or e-mail address. Similarly, they can record a voice message on their mobile terminal and send it as a MMS message.
1.6.4 Mobile E-mail
Mobile e-mail allows users to check conventional e-mail on their mobile terminal. The mobile subscribers can either download a dedicated mobile application that can connect to the subscribers’ mail inbox or visit the mobile website through web browser in their phone. Some e-mail services provide “e-mail alerts” that are sent to a subscriber’s mobile phone to inform the mobile subscriber that there are new e-mails in his inbox.
1.6.5 Video service and mobile TV
Video-on-demand service allows mobile subscribers to get TV clips from their favourite programs, music videos, breaking news stories, weather information, and sports clips, which are typically of few seconds of length.
Mobile TV is a relatively recent live broadcasting service that is also offered in 3G networks for a monthly subscription fee. Mobile users can subscribe to live broadcasting packages from TV networks of their choice.
1.6.6 Caller Ring Back Tones (CRBT)
Operators are looking out for fresh applications and services to generate extra revenues. CRBT presents an exclusive possibility to derive revenues during the idle time when a mobile phone is ringing. This service enables the subscriber to specify a predefined Ring Back Tone (RBT) to be played back to specific caller or a set of callers or all callers instead of the traditional RBT. Hence anyone who calls the subscriber of this service gets to listen to a popular melody or sound or some personalized greeting message instead of the regular tone, regardless of their operator, location or phone model used. This service like SMS is one of the most popular value added services among cell phone users in India.
CRBT leads to frequent use of provisioning channels like GPRS/WAP, SMS, and IVR etc for selecting and changing RBTs, which directly drives the network usage revenue of the operator. Moreover, this service doesn't require much advertising efforts because the callers of a subscriber are unlimited and hence the service gets advertised virtually free of cost.
1.6.7 Wireless Internet
Access to the wireless Internet is provided through a micro-browser on the mobile terminal using General Packet Radio Services (GPRS)/ Wireless Application Protocol (WAP). The types of content that can be accessed include news related to entertainment, sports, economy, business, general issues, any relevant information for their use, read articles from channels such as CNN and major newspapers, receive movie times and reviews, dining recommendations, check the weather forecast, get flight times and traffic reports, etc. Besides these, wireless internet also serves as a medium for accessing other value added services.
A special category of Internet content services that are of primary interest to mobile subscribers is Location-Based Services. These services are designed to provide information that is relevant to the subscriber’s local area. In some services the subscriber types in the location, for example, a postal code, and specifies a maximum distance that bounds the area of interest for the requested information like name and address of restaurants, coffee shops, movie theatre, doctors and other establishments of interest, nearby their location. They allow subscribers to receive on their mobile terminals real-time location information on the whereabouts of co-workers or of vehicles of a fleet. Use of Global Positioning System (GPS) and Navigational Services guide the subscriber to a specified destination using visual and audible turn-by-turn driving directions. Moreover, the mobile subscriber can access any web site by entering its Uniform Resource Locator (URL) internet address.
1.7 MARKET SIZE OF INDIAN MOBILE VALUE ADDED SERVICES (VAS) SECTOR
As per TRAI report, the annual revenue for the wireless industry was 1,07,110 Crores in financial year 2009-2010 (Telecom Regulatory Authority of India: Annual Report, 2009-10). The importance of value added services can be explained with the help of table 1.2 below, which gives the breakup of revenue structures of Indian cellular operators offering GSM and CDMA services as per the performance report of Telecom Regulatory Authority of India (TRAI) that was released on 12th January, 2011. The contribution of value added services in revenue stream of cellular operators is up to the tune of 17.6% (Table 1.2). Moreover, as per the report of IAMAI, Indian mobile value added services industry has grown from 2,850 crores in December 2006 to 11,860 crores in June 2010, representing a growth of more than 316 percent in less than four years time. Further, introduction of the next generation service like 3G in the beginning of this year has significantly revolutionized the sector, as it has experienced phenomenal growth in Value Added Services. Thereby, indicating the huge potential for Value Added Services (VAS), as the main focus of 3G is also on provision of such services.
These services are being developed with an understanding that the customers’ needs are improving and they may graduate from basic voice to other network capable services which offer greater flexibility, convenience and higher value to the users. Therefore, the service providers, who shall upgrade their services in line with these changing needs, will be able to provide an enriching service experience to customers thereby differentiating themselves from others.
Table 1.2: Revenue structure of Indian Cellular Operators
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Source: Telecom Regulatory Authority of India (12th January, 2011): The Indian Telecom Services Performance Indicators July-September 2010.
Thus, all these facts highlight the relevance of value added services in an ever growing telecom market as a key strategic tool, not only for differentiation of services but also as a factor responsible for developing satisfaction and loyalty among the customers. This is more so true due to the intense competition being faced by the operators in this market on the one hand and on the other very demanding customers. In such a scenario, the challenge for Indian cellular operators is to understand the preferences of their customers better and then to successfully offer the services that foster greater customer retention, as the entry of new global players in telecom market has resulted in ever-increasing customer acquisition and retention costs. Moreover, Average Revenue Per User (ARPU) per month has been decreasing consistently over a period of time, which is also evident from the fact that the ARPU decreased from 164 for GSM operators and 89 for CDMA operators in September 2009 to 110 for GSM operators and 73 for CDMA operators (Telecom Regulatory Authority of India, 12th January 2011: The Indian Telecom Services Performance Indicators July- September 2010). The tariffs for telecom services in India are one of the lowest in the world right now and there is every possibility of further reductions. The situation is even more alarming, if analysis of teledensity figures of India is undertaken, which suggests that there is a wide gap between rural teledensity (30.18 percent in November 2010) and urban tele- density (143.95 percent in November 2010) pointing towards the fact that the market still has a large untapped potential. However, the situation has further been complicated with the invocation of number portability, as it is going to enhance the customer churn rate. This is also a major reason for the cellular operators to look for value added offerings for their customers in order to increase their ARPUs and survive in the coming tough times.
1.8 MARKETING OF TELECOM SERVICES
The reason behind the growing importance of value added services in telecom arena comes from the important marketing concepts of Customer Loyalty, Lifetime Value and Product Differentiation. In telecom services, it is frequently pointed out that once customer has been acquired and connected to the network of a particular operator, their long term relations with the operator are of greater importance for the success of the company in the competitive markets than they are in any other industry (Grepott, 2001). This is due to the fact that cellular service providers do not differentiate from each other. They all deliver more or less the same service, leading to high competition.
The pre-requisite condition for gaining customers’ loyalty is to raise the quality of service in their perceptions as high perceived quality of service leads to higher satisfaction among customers and ultimately resulting into customers becoming loyal (Boulding et al. 1993; Fornell 1996; Brady & Robertson, 2001). However, loyalty is dependent upon many other factors like switching cost, type of industry and level of differentiation of products under a given category (Fornell, 1992; Grepott et al. 2001; Sharma, 2003). As such, Value Added Services serve as a tool in the hands of cellular operators to increase differentiation of their services offerings from that of rivals through innovative content, thereby inducing loyalty among the customers to continue to stay with the same service provider. Mobile operators are now looking at different ways to expand beyond basic voice services in order to tap the explosive growth in the subscriber base, especially in rural markets that are characterized by low income levels and to prevent the churn of their existing customer base.
In an interview given to The Economic Times (17th June, 2009) Mr. Romal Shetty, Director (Telecom) at KPMG said, “Initially everyone was going after subscriber numbers. Now, they are looking at quality of subscribers. This explains the emphasis on value added services (VAS), which bring in higher revenues.”
The above statement brings us back again to the fact that despite the tremendous growth achieved by cellular operators in terms of number of subscribers, their Average Revenue Per User (ARPU) per month has been decreasing and in order to improve the revenue streams, the operators need to look for such alternatives that induce higher usage by consumers and ultimately higher revenues. This concern is addressed by the effective use of innovative value added services by the telecom operators as it provisions the operators with the ability to charge premium price for the added offerings. Hence, Value Added Services are fast becoming backbone of telecom service providers, as users look beyond voice therefore leading to emergence of mobiles more as a personal computing device. The convergence of technologies and emergence of new applications is another thrilling area, wherein the broadcasting and entertainment industries are witnessing a revolution. The emergence of 3G services, IPTV, Mobile TV and Mobile Number Portability (MNP) are further expected to change the scenario in coming years.
The cellular industry, being a service segment, requires constant interaction and attention of the service provider, unlike FMCG or furniture segments, where goods once sold demand no further attention from the seller/supplier. This implies that the success and survival of an operator hinges on the Quality of Service (QoS) it provides. The low call charges or upfront costs of mobile are only a bait to lure customers and only the Quality of Service can ensure the retention capability for a service provider. As per the Industry reports, more than 90% of cell-phone users are prepaid customers, indicating a margin for higher customer churn rate (Telecom Regulatory Authority of India, 12th January 2011: The Indian Telecom Services Performance Indicators July-September 2010.). The thin profit margins to the mobile service providers despite a phenomenal increase in subscriber base, have forced them to look beyond voice based service. Be it a landline or mobile telephonic system, value added services act as enablers to activate the falling revenue line of telecom service operators by providing bundle of non-voice based data services. It is therefore true that due to new networks, high bandwidth availability, transition from circuit-switched to packet networks, upgrades and rollouts of 3G happening globally and mobile handset standards and technology supporting new formats (3G, SIP, etc.), the concept of value added services has changed substantially. Soon, value added services will not just be entertainment-oriented services like full song download or selling caller-ring-back tones but a major tool for customer satisfaction and retention.
1.8.1 Service Quality
Service Quality refers to a global assessment, that is, the customers’ overall impression of the relative inferiority/superiority of the organization and its services (Parasuraman et al., 1988 and Bolton and Drew, 1991; Zeithaml, 1988). It is form of an attitude, that results from the comparison of expectations with performance but it is not equivalent to satisfaction. Perception of service quality occurs at multiple levels in an organization- for example, with the core service, physical environment, interaction with the service providers, etc. (Bitner and Hubert, 1994). Customer expectations and perceived performance of services have been found to be main antecedents of perceived service quality (Chadha and Kapoor, 2009).
Apart from the different conceptualizations, various ways of measurement have also been proposed. One of the major concepts for measurement of service quality is ‘expectation - perception’ gap method, propounded by researchers such as Parasuraman et al. (1985 & 1988) and Rust and Zahorik (1995). But researchers such as Mazis et al. (1975), Bolton and Drew (1991), Babakus and Boller (1992), Babakus and Mangold (1992), Cronin and Taylor (1992& 1994), Boulding et al. (1993), Brown et al. (1993), Teas (1993) and Patterson and Johnson (1993) argue that the ‘expectation - perception’ gap is not appropriate for measuring service quality. Furthermore, according to a number of researchers, the degree of usage of a service influences the formation of customers’ expectations.
Customers’ expectations for continuously provided services (such as the telephone service) or long-lasting durable goods are passive, and disconfirmation does not operate unless service changes occur that are outside the range of experience-based norms (Oliver and Swan 1989). This has been reinforced by Bolton and Drew (1991) who claimed that as telephone service is a continuous service, customer responses should be affected only by performance evaluations.
Many researchers argue that there is a link between customers’ purchase intentions and service quality. Among these are Headley and Miller (1993), who conducted research in a primary clinic setting. The study is based on understanding the possibility of a link between perceived service quality and its various dimensions and a patient’s future intent to complain, compliment, repeat purchase, switch providers and/or not use the service at all. Their findings revealed that perceived higher service quality will generate favourable intentions (for example repurchase, complementing) and that perceived lower service quality will lead to unfavourable intentions (for example complaining, switching and non-use of any services).
Further, Boulding et al. (1993) while conducting a laboratory experiment studied the influence of service quality on behavioural intentions in two different settings. It involved two simulated visits to a hotel and an educational institution. For behavioural intentions, they used two measures which were, repeat business and willingness to provide favourable word of mouth. Their findings indicate that service quality perceptions positively influenced behavioural intentions and willingness to recommend.
Zeithaml et al. (1996) also developed a conceptual model that depicted the behavioural consequences of service quality that incorporated a more extensive multiple-item behavioural intentions measure distinguishing intentions into favourable and unfavourable. They also examined the impact of service quality on the different types of behavioural intentions. The model was empirically examined, and the customers of four companies (computer manufacturer, retail chain, automobile insurer and life insurer) were surveyed by mail. They claimed that the results indicated towards strong evidence that customer behavioural intentions were strongly influenced by service quality.
Ennew and Binks (1996) tried to explore the relationships between service quality, customer relationships and customer loyalty in the banking sector. They examined factors affecting customer retention and defection, and the extent to which these were influenced by service quality. The outcomes of the research point towards the fact that service quality is an important factor, which contributes to an organization’s ability to retain loyal customers, and thus contributes to improved organizational performance.
Kangis and Zhang (2000) studied the link between service quality and customer retention in banking sector. Their findings show that service quality has an effect on customer retention through being related to the stated intention to continue doing business with the bank.
Blery et al. (2009) conducted a research in order to identify the influence of service quality on customer loyalty in Greek mobile telephony sector. For the purpose, they used SERVPERF model which is a performance based model for measuring service quality and uses five dimensions (i.e. Reliability, Assurance, Tangibles, Empathy and Responsiveness) and twenty two items of SERVQUAL model given by Parasuraman et al. (1988). The main point of difference between two techniques has been that the former ignores the importance weights. The conclusions that they drew from their research was that service quality is an important decision making criterion for service consumers and any effort to improve quality will be beneficial for cellular operators.
Oyeniyi et al. (2008) concluded that there is a relationship between the level of perceived service quality/value and customer satisfaction, i.e. customer will be satisfied, if perceived value of service is high. Important point highlighted in this research is the changing focus of marketing, i.e. from acquiring new customers to retaining customers through service quality.
From above discussion it can be said that the customers’ repurchase intentions to a great extent are influenced by service quality.
1.8.2 Perceived Value
Value implies a trade-off between benefits and sacrifices. Moreover, it implies an interaction between a customer and a product or service (Payne and Holt, 2001). In economic terms, ‘value’ has traditionally been equated with utility or desirability. In this regard, the ‘theory of utility’ provides the conceptual groundwork of the value construct (Tellis and Gaeth, 1990). This theory states that consumers derive value according to the difference between the ‘utility’ provided by the attributes of a product and the ‘disutility’ represented by the price paid.
However, Sánchez-Fernández et al. (2007) argued that the nature of perceived value is complex and multi-dimensional that involves more than a mere rational assessment of ‘utility’. Moreover, ‘price’ is, in itself, an indistinct and elusive construct (Dodds et al., 1991; Woodruff and Gardial, 1996). Although ‘price’ is usually understood as the monetary value of a product, a full appreciation of the concept also includes considerations of the time, effort and search involved in the overall cost or sacrifice made by the customer in the consumption experience. It is thus apparent that perceived value is a broader and richer construct than a mere trade-off between ‘utility’ and ‘price’ (Monroe, 1990; Zeithaml, 1988).
The first determinant of overall customer satisfaction is perceived quality and the second determinant of overall customer satisfaction is perceived value (Fornell et al., 1996). Customer satisfaction is recognized as being highly associated with ‘value’ and is based, conceptually, on the amalgamation of service quality attributes with such attributes as price (Athanassopoulos, 2000, p. 192).Perceived price is defined according to Zeithaml (1988) as the price as it is encoded by the consumer. Chang and Wildt (1994) defined perceived price as the consumers’ perceptual representation or subjective perception of the objective price of the product/service. As Storbacka et al. (1994) and Patterson and Spreng (1997) claimed that buyers have an acceptable price range for a given purchase, rather than a single price, and this should not be ignored, because in the case of continuously provided services, it serves as normative price expectation for the service (Bolton and Lemon, 1999).
According to the literature, price has an effect on customer purchase intentions. As Engel et al. (1995) mentioned, price is an important factor influencing consumers’ purchase behaviour. In addition, Chang and Wildt (1994) examined the links among price, product attribute cues, perceived quality and value and purchase intention. They conducted a laboratory experiment for a student housing service unit and a PC purchasing unit. Their findings indicated that both perceived price and perceived quality had direct effects on purchase intentions. Blery et al. (2009) concluded that perceived price of service is negatively associated with repurchase intention. Further that repeat business depends also on other factors like barriers to switching to other providers, transaction costs and search costs etc. Hence it is important for service providers to match their service offerings according to customer’s perceived price for their services.
1.8.3 Customer Satisfaction
“Customer Satisfaction is an output, resulting from the customer’s pre-purchase comparison of expected performance with perceived actual performance and incurred cost”, (Churchill and Surprenant, 1982). According to Yi (1991) the customer satisfaction operates in two different ways, i.e. transaction specific and general overall. The transaction concept concerns customers’ satisfaction as the assessment made after a specific purchase. Overall satisfaction refers to the customers’ rating of the brand, based on all encounters and experiences (Johnson and Fornell 1991).
Parasuraman et al. (1994) have suggested that satisfaction is influenced by service quality, product quality and price. They researched satisfaction on a transactional level, implying that the overall satisfaction is a function of transactions. A widely accepted definition is given by Oliver (1997) as, “Satisfaction is the consumers’ fulfilment response. It is a judgment that a product or service feature, or the product of service itself, provided (or providing) a pleasurable level of consumption-related fulfilment, including levels of under- or over- fulfilment.” Further, Satisfaction with a product/service is a construct that requires experience and use of a product or service (Oliver, 1997). Hence, the end consumer, who actually consumes the service, should be considered rather than the customer who pays for it.
Neda Shishavi (2006) concludes that the consumer satisfaction is an emotional response pertaining to a particular focus (such as expectations, product, consumption experience, etc.) that occurs at a certain time (after consumption or after choice or based on accumulated experience, etc.). Customer Satisfaction has significant implications for the economic performance of firms. For example, customer satisfaction has been found to have a positive impact on customer loyalty and usage behaviour and a negative impact on customer complaints (Fornell 1992). Increased customer loyalty may increase usage levels, secure future revenues (Rust, Moorman and Dickson 2002), and minimize the likelihood of customer defection (Sullivan 1993). Customer Satisfaction may also reduce costs related to warranties, complaints, defective goods, and field service costs (Fornell 1992).
Oyeniyi et al. (2008) examined the potential constructs in customer retention by investigating the chain of effects of retention from customer service, satisfaction, value and behavioural intention. They conclude by saying that when customer service is high, customer retention is also high as customer retention is achieved only when the customers believe that customer services offered are effective and high and up to their level of satisfaction. And that Customer’s behavioural intentions have a strong influence on customer retention. Customers are likely to continue their patronage if they are satisfied with the perceived value of service. Hence continued patronage would lead to retention of customers.
Eze et al. (2008) studied Internet Service Providers’ (ISPs) service quality and customer satisfaction in southern region of Malaysia. They argue that as competition is increasing in ICT service sector, it is becoming hard for ISPs to satisfy and retain customers. They made a point that out of various dimensions of service quality of the ISPs, all but Reliability factor were significantly present. Hence Malaysian ISPs should improve their service reliability in order to improve their overall service offerings and customer satisfaction. Chadha and Kapoor (2009) in their study suggested that the service providers should maximize service quality and customer satisfaction in order to enhance customer loyalty by concentrating their efforts on improving network quality, pricing and Value Added Services (VAS).
1.8.4 Customer Loyalty
Customer loyalty is viewed as the strength of the relationship between an individual’s relative attitude and repeat patronage. It refers to a favourable attitude towards a particular brand in addition to repeating it repeatedly (Day 1969). According to Dick and Basu (1994), it is a relationship between relative attitude towards an entity and repeat patronage behaviour. Jones and Sasser (1995) conceptualized customer loyalty as the feeling of attachment to or affection for a company’s people, products or services.
According to the literature, customer loyalty can be defined as an attitude and as behavioural loyalty (Hallowell 1996). Loyalty as an attitude is the consumer’s relatively enduring affective orientation for a product, store or service (Parasuraman et al.1988). Behavioural loyalty is the customer’s intention to repurchase the product/service (Hallowell 1996).