Factors Affecting Customer Loyalty

Topics: Marketing, Quality of service, Service Pages: 23 (5981 words) Published: October 26, 2008
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 emphasis on customer loyalty as there is perceived to be a link to profitability. In fact, loyal customers tend to purchase more, they will even accept higher prices and have a positive word-of-mouth effect, telling friends and family, thus adding them to the number of loyal customers. Besides, we clearly know that the cost of selling to new customers is much higher than the cost of selling to existing customers.

The aim of this research is to examine the relationship between the existing factors and customer loyalty, at the same time to find out which factor is best to determine the level of customer loyalty.

In this research, we proposed Maxis Communication Berhad as the research subject as it is known to be the main competitor in the mobile phone service market based in Malaysia. Potential factors affecting customer loyalty are discussed. Besides, a survey is carried out in Universiti Tunku Abdul Rahman, Sungai Long using a survey questionnaire. Data was obtained from 60 students who are currently Maxis users. The data collected was analyzed by using a statistical software package which is known as SPSS program.

In order for companies to sustain in a competitive edge, building customer loyalty is rather crucial. Since loyalty is a key in customer development and profitability, it is important for organizations to understand the loyalty condition in more detail, and to use this understanding to develop the relationship further with customers which falls in the loyal category. The results of this study will provide evidence to organizations on what are the key reasons that possibly will influence customer to make repeating purchases. Hence, allowing organizations to focus on areas by viewing from customer’s perspective in which will result in higher profit and building a closer bond between the brand and current customers in its hoped to maintain current customer base.

Literature Review
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