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
The review of previous study from different resources...

References: Anderson, J.C., Gerbing, D.W. (1988). Structural equation modeling in practice: a review and recommend two-step approach. Psychological Bulletin, 103, 411-23.
Andreassen, T. W. (1995). Small, high cost countries strategy for attracting MNC’s global investments. The International Journal of Public Sector Management, 8(3).
Andreassen, T
Barich, H., Kotler, P. (1991), A framework for marketing image management. Sloan Management Review, 32(2), 94-104.
Bitner, M. J. (1991). Service Quality: A Multidisciplinary and Multinational Perspective. New York: Lexington Books.
Bloemer, J., Ruyter, K. & Wetzels, M. (1998) “on the relationship between perceived service quality , service loyalty and switching costs”. International Journal of Industry Management, Vol. 9 no.5.
Bolton, R. N., Drew J. H. (1991). A multiple model of customers “assessments of service quality and value”. Journal of Consumer Research, 17(3), 375 – 385.
Bowen, J. T., Chen, S. L. (2001). The relationship between customer loyalty and customer satisfaction. International Journal of Contemporary Hospitality Management, 13(5), 213-217.
Chaudhuri, A., Holbrook, M. B. (2001). The chain effects from brand trust and brand affect to brand performance: the role of brand loyalty. Journal ofMarketing, 65(4), 31-93.
Cronin, J. J., Taylor, S. A. (1992). Measuring Service Quality: A reexamination and extension. Journal of Marketing, 56(7), 55 – 68.
Dimitriades, Z. S. (2006). “Customer satisfaction, loyalty and commitment in service organizations: Some evidence from Greece”. Management research News, Vol. 29 No. 12, 2006.
Ehrenberg, A. S. C. (1988). Repeat Buying: Facts, Theory and Applications. Oxford University Press, Oxford.
Fesicova, I. (2004). An index method for measurement of customer satisfaction. The TQM Magazine, 16(1), 57-66.
Fishbein, M., Ajzen, I. (1975). Belief, Attiude, Intention, and Behavior: An Introducing to Theory and Research, MA: Addison-Wesley, Reading.
Fournier, S. and Yao, J. L. (1997). Reviving brand loyalty: a conceptualization within the framework of consumer-brand relationships. International Journal of Research in Marketing, 14(5), 451-472.
Ganesh, J., Arnold, M. J., Reynolds, K. E. (2000). Understanding the customer base of service providers: an examination of the differences between switchers and stayers. Journal of Marketing, 64(7), 65-87.
Grembler, D. D., Brown, S. W. (1996). Advancing Service Quality: A Global Perspective. New York: ISQA.
Grönroos, C. (1984). A service quality model and its marketing implications. European Journal of Marketing, 18(4), 36-44.
Gummesson, E., Grönroos, C. (1988). Quality of services: lessons from the product sector, (2nd ed.) [Brochure]. Chicago, IL: American Marketing Association.
Gundlach, G. T., Murphy, P. E. (1993). Ethical and legal foundations of relational marketing exchanges. Journal of Marketing, 57(10), 35-46.
How-to Guide For Your Business.(2008). Guide to Building Customer Loyalty. Retrieved 18th March, 2008 from http://www.work.com/building-customer-loyalty-70/
Jacoby, J., Kyner, D
Johnson, M. D., Gustafsson, A., Andreassen, T. W., Lervik, L. and Cha, J. (2001). The evolution and future of national customer satisfaction index models. Journal of Economic Pcychology, 22, 217-245.
Keller, K. L. (1993). Conceptualizing, measuring and managing customer based brand equity. Journal of Marketing, 57(1), 1-22.
Kim, M. K., park M. C., & Jeong, D. H. (2004). “The effects of customer satisfaction and switching barrier on customer lolyalty in Korean mobile telecommunication services”, Telecommunications Policy, Vol. 28.
Krishnan, H. S. (1996). Characteristics of memory associations: A consumer-based brand equity perspective. International Journal of Research in Marketing, 13, 389 – 405.
Lau, G. Lee, S. (1999). Consumers’ trust in a brand and link to brand loyalty. Journal of Market Focused Management, 4, 341-70.
MacInnis, D. J., Price, L. L. (1987). The role of imagery in information processing: review and extensions. Journal of Consumer Research, 13, 473-491.
Morgan, R. M., Hunt, S D. (1994). The commitment-trust theory of relationship marketing. Journal of Marketing, 58(7), 20-38.
Nguyen, N., LeBlanc, G. (2001). Corporate Image and Corporate Reputation in customers’ Retention Decisions in Services. Journal of Retailing and Consumer Services, 8, 227-236.
Parasuraman, A., Zeithaml, V. A., Berry L. L. (1988). SERVQUAL: A multiple item scale for measuring consumer perception of service quality. Journal of Retailing, 64(1), 12 -40.
Pritchard, M. P., Howard, D. R. (1997). The loyal traveler: examining a typology of service patronage. Journal of Travelers Research, 35(4), 2-11.
Veloutsou, C., Gilbert, R.G., Moutinho, L.A., & Good, M. M. (2005), “Measuring transaction-specific satisfaction in services”, European Journal of Marketing, Vol. 39 No. 5-6.
Venetis, K.A. and Ghauri, P.N. (2000), “The importance of service quality on customer retention: an empirical study of business service relationships”, Proceedings of the Marketing in a Global Economy Conference, Buenos Aires, June 28-July 1, pp. 215-224.
Zins, A. H. (2001). Relative attitudes and commitment in customer loyalty models. International Journal of Service Industry Management, 12(3), 269-294.
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Factors Influencing Customer Loyalty Essay
  • Factors Affecting Customer Satisfaction Essay
  • Factors Affecting Customer Loyalty Towards F-Salon and Body Spa Essay
  • Factors Affecting Crime Rate Essay
  • factors affecting customer loyalty to internet banking Essay
  • customer loyalty Essay
  • "Factors Affecting Customer Loyalty in Islamic Banking Essay

Become a StudyMode Member

Sign Up - It's Free