Factors Affecting Customer Loyalty

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Factors Affecting Customer Loyalty

By | October 2008
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Introduction and Problem Definition
The growth for mobile service has been gradually developing from a total number of subscribers of 1.513 million at the end of 1996 to 7.477 million in 2001. (Malaysian Communication and Multimedia Commission, MCMC) The market for the telecommunication industry in Malaysia is highly competitive. This industry is currently dominated by 3 operators Telekom, Maxis and DiGi. For example, as Maxis Communications Berhad (“Maxis”) being one of the most favorable choice for users, Maxis believes that the main competitive factors in the mobile services market are network coverage, service quality, pricing and brand. Therefore, these could be the main factors that determine the level of customer loyalty towards Maxis.

A critical issue for the continued success of a firm is its capability to retain its current customers and make them loyal to its brands (Dekimpe et al., 1997). Customer loyalty is vital to a company as disloyal customers can amount to millions of lost revenue and profit. Studies were also conducted in the financial services industry show that increasing customer loyalty by 5 percent could lead to 25-75 percent profit growth (Chan et al., 2001).

Generally, loyalty is something that consumers may exhibit to brands, services, stores, product categories. Here, we use the term customer loyalty as opposed to brand loyalty; this is to emphasize that loyalty is a feature of people, rather than something inherent in brands. Oliver (1997) defines customer loyalty as a deeply held commitment to rebuy or repatronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior.

Due to the aggressive competition in the telecommunication industry, many companies are losing customers at a formidable rate. Thus, companies recognized the need to place greater...