Is Loyalty Dead?: Marketing Strategies to Survive in the Saturated Telecommunication Market

By Farzana Quoquab and Jihad Mohammad

This book is for those who are interested to know more about the recent trend of service loyalty and service switching among mobile phone service users. This timely and important book is an essential guide for researchers, policy makers, managers, and marketers to develop an insight to better strategize and effectively implement loyalty programs and prevent their customers from switching.

The term loyalty is acknowledged as an important indicator of the likely success of a service business, whereas switching costs a service firm the customers future revenue stream. However, recent research revealed that, in many industries, satisfied customers also tend to switch. This book discusses the role of switching cost and consumer innovativeness in explaining consumers switching tendency.

Last but not the least, this book offers a richer explanation about loyalty and switching phenomena than past studies that mostly discussed these two constructs in isolation. Nowadays, divided loyalty as well as switching became a common issue, which made it difficult for the company managers to retain their customers for a long time. With no exception, the mobile phone service market is also filled with divided loyal ones as well as switchers. This book presents some depth and breadth strategies for the mobile phone network service providers in order to manage such promiscuous customers.

• Language: English
• Publisher: Partridge Publishing Singapore
• Release date: Jul 11, 2016
• ISBN: 9781482866100

Farzana Quoquab

Dr. Farzana Quoquab is a senior lecturer at International Business School, UTM. She has published cases in peer-reviewed international journals such as Asian Case Research Journal, IIUM journal of case studies in management and Emerald Emerging Markets Case Studies. Since 2010, she has produced 9 cases to be used to facilitate the class room learning. She is one of the editorial board members of ‘Case Studies in Business and Management’ and ‘Journal of Economic and Administrative Science’. Dr. Jihad Mohammad is a senior lecturer at International Business School, UTM, Malaysia. He has presented papers at various international and national conferences and published articles in peer-reviewed international journals. He has versatile career exposure. His area of research interest includes organizational citizenship behaviour, psychological ownership, psychological capital, leadership, innovation, and Islamic work ethics. Dr. Maizaitulaidawati Md Husin is a Senior Lecturer at UTM International Business School. She has published in Journal of Islamic Marketing, Journal of Islamic Accounting and Business Research, International Business Management, Jurnal Teknologi, among others. Her main research interests lie in Islamic Banking and Finance, Takaful, Islamic Economics, Islamic Marketing and Consumer Behaviour. Dr Arif Hassan is a Professor at Department of Business Administration, International Islamic University Malaysia. He has published four books and over 50 research papers in peer reviewed journals. He has received several best paper awards during conference presentations, including the best paper for international implication award and a finalist for the Caroline-Dexter award during Academy of Management conference, 2016. He has interest in case writing and case teaching methods and has served as the founding Chief-Editor of the IIUM Journal of Case Studies in Management.

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Copyright © 2016 by Farzana Quoquab Habib and Jihad Mohammad.

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Contents

About the Authors

Preface

Value of This Book

Acknowledgement

Service Loyalty and Swithcing: Two Sides of the Coin

Is Loyalty Dead? Gaps in The Theory and Practices

Mobile Phone Service Providers: The Loyalty Dilemma

Drivers of Service Loyalty And Switching Phenomena in The Mobile Phone Service Industry

How to Move Forward?

References

About the Authors

D r. Farzana Quoquab is a senior lecturer at International Business School, UTM. She has received her Doctorate degree from Universiti Kebangsaan Malaysia. She has presented papers at various international and national conferences and published articles in peer-reviewed international journals such as IIUM Journal of Case Studies in Management, World Review of Business Research, Business and Management Quarterly Review, Economics and Tecknology Management Review, Global Business and Management Research: An International Journal, Asian Case Research Journal, Asia Pacific Journal of Marketing and Logistics, International Journal of Economics and Management, International Journal of Business Governance and Ethics, Emerald Emerging Markets Case Studies, Asian Academy of Management Journal and Journal of Islamic Marketing. Since 2008, she has produced 53 international conference proceedings and eight book chapters. She is one of the editorial board members of ‘Case Studies in Business and Management’ and ‘Journal of Economic and Administrative Science’.

Dr. Jihad Mohammad is a senior lecturer at International Business School, UTM, Malaysia. He has received his DBA degree from Universiti Kebangsaan Malaysia. He has presented papers at various international and national conferences and published articles in peer-reviewed international journals. He has versatile career exposure. He has conducted workshops for postgraduate students regarding research methodology and PLS-SEM. His area of research interest includes organizational citizenship behaviour, psychological ownership, psychological capital, leadership, innovation, and Islamic work ethics.

Preface

A chieving loyalty of its customers has become the main concern for the service industry managers since it contributes significantly to firms’ profitability, their survival and growth, and for providing new referral for the firm through positive word of mouth. However, it is commonly agreed that, retaining current customers and precluding them from switching is a very difficult task due to the availability of alternative service providers. When consumers make a switch, many established relationships with the service provider are likely to deteriorate and dissolve. As a consequence, dissatisfied switchers can generate negative word of mouth that can damage a firm’s reputation and brand image. In addition, the firm needs to spend money to attract new consumers through advertising and offering promotion or initial discounts. In fact, some business analysts have indicated that the costs of gaining new consumers are five times more expensive in comparison to the cost of maintaining current consumers. Hence, the effort to retain current consumers is much more worthwhile than searching for new ones. Due to these serious problems, researchers and practitioners are very much concerned to understand the issues that are related to making consumers loyal and reducing the switching rate in their industries. As such it became the priority to write this book in order to contribute to the existing body of knowledge about the issues pertaining to service loyalty and switching.

This book highlights the essentials about loyalty and switching phenomena to its readers. It also provides the knowledge about the struggle of mobile phone service providers in order to retain their current customers and to prevent them from switch. The book consists of five chapters. The first chapter briefly discusses the two issues namely service loyalty and switching and differentiates service switching from service loyalty. In the second chapter, the existing gaps in the literature as well as in practice are highlighted. The third chapter provides an overview of the mobile phone service industry from Malaysian perspective. This chapter also discusses the mobile phone service providers’ dilemma in keeping their customers loyal in the competitive landscape. The fourth chapter provides detail discussion on the drivers of service loyalty and switching based on mobile phone service industry context. Lastly, the fifth chapter provides suggestions for academicians and practitioners regarding how to move forward having divided loyals and switchers.

We designed this book to discuss about the recent trend of service loyalty and service switching among mobile phone service users. We expanded our emphasis on discussing the loyalty and switching issues together, while most of the present literature discusses these two phenomena separately. Through this book, we have tried to provide better understanding to our readers about the both sides of the coin: service loyalty and switching.

Value of This Book

T his book provides significant theoretical and practical insights in the field. More specifically, this book provides understanding about loyalty and switching constructs in the context of mobile phone service usage. We expect that, it will help readers to understand that consumers’ switching behaviour is not a mirror image of loyalty. Also, we addressed the drivers of customer loyalty in the context of mobile phone service usage. Without such knowledge, service providers would give priority to the wrong yard stick to make their users satisfied and loyal, would provide wrong incentives to its loyal consumers, would neglect the useful service quality dimensions, would emphasize on wrong drivers, and thus would not be able to reduce the intensity of their users’ switching.

This book serves as a useful guide for telecommunication service providers where a long term relationship is required between the provider and the customers under contractual agreement on voluntary basis. The book has derived several important options for the service providers to enable better strategizing and effectively implement loyalty programs and prevent their customers from switching. Specifically this book recommends building both breadth and depth of usage as strategic imperatives.

To conclude, significant insights on loyalty and switching constructs provide important contribution toward building sustainable consumer relationships and businesses in the industries. As mobile telecommunications and many other technological services become more integrated in the society, such knowledge serves as foundation not only for service providing organizations’ sustainability but also for societal well-being.

Acknowledgement

A s we present this book, we would like to take a moment to thank the people who have provided us with valuable insights about the service loyalty and switching phenomena through their publications and to those who contributed to the success of this book directly or indirectly.

A particular acknowledgment is due to six individuals who have contributed to our knowledge and understanding regarding the subject matter of the book and to become a better writer. They are Professor Dr. Aliah Hanim M. Salleh, Associate Professor Dr. Norjaya Mohd. Yasin, Associate Profession Dr. Khairul Akmaliah Adham, Dr. Nor Liza Abdullah, Professor Dr. June Poon, and Professor Dr. Nik Rahimah Nik Yacob.

Finally, we would like to express our deepest gratitude to our family, whose endless love and support gave us the strength and confidence to complete this book. To our parents, Professor S. M. Habibur Rahman and Mrs. Kamrun Nessa Begum, thank you for being such incredible inspiration in our life to further our knowledge and for motivating us to become researcher. Thank you so much for your prayer, sacrifices, understanding and unconditional love and support.

Farzan Quoquab

Jihad Mohammad

Service Loyalty and Swithcing: Two Sides of the Coin

A lthough switching is regarded as the opposite of loyalty, it is not the mirror image. In a seminal study, in examining the effect of quality upon behavioural intention, Zeithaml et al. (1996) ran exploratory factor analysis upon 13 items which produced two clearly distinct factors, namely, favourable intention and unfavourable intention. Later, they named favourable intention as loyalty and unfavourable intention as switching. Moreover, studies reveal that different factors influence loyalty and switching in different ways. For example, in a qualitative study, considering service switching and service loyalty as two different constructs, Lee and Murphy (2005) found that service quality is more crucial in service switching than service loyalty. Hence, it is clearly understood that the way consumers behave towards service loyalty does not have to be in the opposite manner of service switching all the time. Thereby, it is justified to consider service loyalty and service switching as two different constructs.

In particular, service loyalty and service switching phenomena are clearly different from product based loyalty and switching as service loyalty requires true loyalty which is not so obvious in the product sector. Consumers who are non-committal towards their product (e.g., switching and coming back again and so and forth) can still be considered as loyal. On the contrary, true loyalty is essential to become loyal towards a service provider and switching the service provider once is considered as switching. The social judgement theory (Sherif & Hovland 1961; Sherif et al. 1965) helps explaining this notion. When consumers are highly committed towards a particular service provider, the latitude of acceptance narrows (true loyalty), the latitude of neutrality become zero (switching), and the latitude of rejection widen. This clearly differentiates the service switching construct from service loyalty.

Therefore, this book considers these two phenomena as two different constructs and attempts to discuss further in explaining the service loyalty and switching in the context of mobile phone service usage.

SERVICE LOYALTY

Since its inception in 1940s, (see Guest 1942, 1944) the term ‘loyalty’ has received a considerable amount of research attention due to its various monetary and non-monetary benefits accruing to firm’s growth. Gaining competitive advantage (Bharadwaj et al. 1993), profitability, survival, success and growth, (Buzzell et al. 1975; Reichheld 1993, 2002; Reichheld & Sasser 1990; Schultz 2005), and positive word of mouth (Gremler & Brown 1999; Woratschek & Horbel 2003; Zeithaml et al. 1996) is only the tip of the iceberg (see Table 1). Therefore, customer retention has become the Holy Grail in industries from airlines to wireless (Baldinger & Robinson 1997; Bristow & Sebastian 2001; Coyles & Gokey 2005; Fornell 1992; Heskett 2002; Heskett et al. 1994; Salegna & Goodwin 2005).

Table 1 Monetary and non-monetary benefits of loyalty