Customer Retention in Telecom Industry

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Customer Retention: With Special Reference to Telecommunication Industry in Sri Lanka

K. A. Silva
Lanka Com Services (Pvt) Limited, Colombo, Sri Lanka
S. T. W. S. Yapa
Department of Decision sciences, University of Sri Jayewardenepura, Nugegoda, Sri Lanka

The landscape of the telecommunication industry in Sri Lanka has been changed drastically since the deregulation of telecommunication sector in early 1990s. Number of service providers has been increased from one, i.e state monopoly, to more than 70 within a short period of time. With the increased competition telecom service providers find it difficult to retain the existing customers. In that context the objective of this research explanatory study was to identify the main factors that determine the customer loyalty of corporate telecommunication customers. A questionnaire survey done among 131 users of corporate sector revealed that the most important factor determining the customer loyalty was the ability of the service provider to add value to customer’s business process, contrary to the common belief that the low price keeps the customer with the same provider. However, it was found that relative importance of the factors is not the same between two different groups, i.e. IT personnel and Non-IT personnel. Therefore, the findings of this research provide a guideline for service providers in designing customer loyalty programmes.

Keywords : Customer Loyalty, Telecommunication Industry, Information and Communication Technology


The world has taken cognizance of the emergence of the service industry as a prominent contributor to its economy over the last century. A number of countries in the last few decades have experienced a dramatic change in the importance of services and the role of the services sector in their economies (Sharma, 2002; Nankervis and Pearson, 2002; Edwards and Croker, 2001).

Sri Lanka too experienced a significant growth in the services sector in the last few decades. Its share of contribution to the Gross Domestic Product (GDP) and employment in the sector rose considerably between 1970 and 2006 [Central Bank of Sri Lanka (CBSL), 2007].

In the last couple of decades, a large portion of growth of the service industry in Sri Lanka was attributed to the development of Telecommunications industry. Telecommunications industry as a whole in the global sphere expanded and made dominance due to the convergence of it with Information Technology (IT), which resulted in the emergence of Information & Communication Technology (ICT) and Multi media. ICT dramatically changed the world socially, politically and economically. The deregulation of the telecom industry in Sri Lanka in the early 1990s brought multiple players/ service providers to the country. The number of telecom operators stands at 75, as of October 2007 ( With the competition becoming tough, service providers realized that retaining one’s existing customer base is important as much as the acquiring of a new customer (Coyles and Gokey, 2005). In that context, service providers realized the importance of knowing the attributes that customers consider as relevant, in deciding whether to continue or not to continue with a particular service provider.


This research intended to make an explanatory study into the aspects/ attributes that customers consider relevant in deciding whether to continue with the current service provider (retain) or to switch to an alternative provider (migrate) or to switch off completely (defect). However, the customer decision making process is not the same for individual customers and the corporate customers. Therefore, it is difficult find a set of characteristics common to both categories. Hence, this research was restricted to corporate customers. The main objective of this research was to ascertain the relative importance of characteristic/s...
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