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CHAPTER - 3
REVIEW OF LITERATURE
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CHAPTER - 3
REVIEW OF LITERATURE 3.1 Introduction
In the last few years, the demand for mobile telecommunication services has grown
exponentially (Bloom, 2005)1. The growth in consumers' use of mobile services has
been accompanied by an increase in the sophistication of mobile technology devices
(Balasubramanian et al., 2002)2. Mobile users increasingly use these devices not
only for voice communications, but also for computing purposes including internet
access, e-mail, text and multimedia transmissions (Jarvenpaa & Lang, 2005)3.
Surging demand for mobile services and proliferation of service offerings has resulted
in rampant switching behavior among mobile users. This has resulted in intense
competition, severe price wars, promotion campaigns, and attractive calling plans.
Although few studies have examined influence of customer’s demography,
satisfaction level, and external incentives on brand switching behaviour, little
attention has been paid in relation to service switching. Moreover, in the
telecommunication literature, this relationship has yielded mixed results. However, no
studies have been found to prove this in the context of India service industries let
alone in GSM cellular service context. Hence, after launching the MNP in Indian
market, it is deemed necessary to study switching of cellular services by subscribers.
This chapter presents an overview of concepts and past researches relevant to
customers’ switching behaviour. This literature review focuses on the key areas
associated with customers’ switching behaviour, such as
1. Consumer Behaviour
2. Brand
3. Brand selection and Brand Choice
4. Brand switching behaviour
5. Variety Seeking Behaviour
6. Brand Switching reasons, and influencing factors
7. Demographic factors
8. Service quality, customers satisfaction and loyalty
9. Advertising and sales promotions
10. Mobile number portability
11. Customer retention
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3.2 Consumer Behaviour
Consumer buying behaviour is a complex phenomenon, which is comprised of a
bundle of decision-making processes, economic determinants and market stimuli.
Consumer purchasing behaviour has been attracting the interest of a great number of
academic and commercial parties for many years. The complexity of the processes
with which consumer purchasing can be associated has made the phenomenon
considerably difficult to be predicted and controlled. However, as consumers are the
most essential source of revenue for business organisations, therefore their behaviour
is of significant importance for achieving market survival and financial prosperity.
Buying behaviour can be described as the set of attitudes that characterise the patterns
of consumers' choices. Buying behaviour is a phenomenon that varies depending on a
wide range of factors, such as: demographics, income, social and cultural factors.
Apart from the essential internal factors, which can be recognised as influential to
buying behaviour, there are a number of situational contexts that can be suggested to
affect consumer choices. In this respect it can be proposed that consumer behaviour is
a combination of customers' buying consciousness and external incentives which are
likely to result in behaviour remodelling (Dawson et al., 2006)4.
As buying behaviour is a key factor for companies' profitability, it is a phenomenon
that has been attracting the attention of researchers for many years. One of the fields
most significantly interested in consumer choice, is the field of marketing
(Kotler, 2000)5.
Marketing is the discipline focused on extracting knowledge on consumer behaviours
to enable companies to respond to customer expectations and facilitate organisations
in providing high quality customer service. (Groucutt et al., 2004)6.
This is why it can be suggested that the context of the present study could be of
significant importance for marketing researchers and professionals.
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Consumer Behaviour is broadly defined by various scholars & researchers as :
1. The American Marketing Association (AMA) defines consumer behaviour as
“The dynamic interaction of cognition, behaviour & environmental events by
which human beings conduct the exchange aspect of their lives”.
2. Consumer behaviour also defined as- "The study of individuals, groups, or
organizations and the processes they use to select, secure, use, and dispose of
products, services, experiences, or ideas to satisfy needs and the impacts that these
processes have on the consumer and society."
3. Mowen and Minor (2001)7 states that consumer decision making are a series of
processing results from perceiving problems, searching for solutions, evaluating
alternatives, and making decisions.
3.2.1 Consumer Buying Decision Process
Before the study of purchasing decision can be done, it is very important to
understand the motivation behind the decisions the consumer makes. Motivation is the
driving force within individuals that impels them to action. This driving force exists
as the result of an unfulfilled need. Most marketers usually tap into this and attempt to
provide a solution to satisfy consumer needs. According to Sciffman and Kanuk
(2004, pp547)8, consumers make three types of purchases: trial purchases, repeat
purchases and long term commitment purchases. Trial purchases would be when a
consumer purchases a product for the first time and buys a smaller quantity than
usual. The reason behind trial purchases is mainly for exploratory purposes whereby
the consumer evaluates a product through direct use. Usually, marketers can further
encourage consumers by providing them with free samples and coupons. When the
trial purchase is found to be satisfactory, consumers are likely to switch those brands.
Engel, Blackwell and Miniard (1995)9 present the most recognized model of
consumer purchase decision-making. This model divides the consumer purchase
decision process into five stages as follows
(1) Problem (Need) Recognition
(2) Information Search
(3) Alternative Evaluation
(4) Purchase Decision,
(5) Post-Purchase Behavior.
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Figure 3.1 – Consumer buying decision process
1. Need Recognition
The buying process starts with need recognition—the buyer recognizes a problem or
need. The buyer senses a difference between his/her actual state and some desired
state. The need can be triggered by internal stimuli or external stimuli
2. Information Search
More offenly, consumer store the need in memory or undertake an information search
related to the need. The consumer can obtain information from any of several sources.
These include personal sources (family, friends, neighbours, acquaintances),
commercial sources (advertising, salespeople, dealers, packaging, displays, Web
sites), public sources (mass media, consumer-rating organizations), and experiential
sources (handling, examining, using the product).
3. Evaluation of Alternatives
Consumer uses information and evaluates various available alternatives to arrive at a
set of final brand choices. Generally, evaluation of alternatives is based on various
factors like- cost, benefit, quality, availability, durability, service, utility, output,
performance, user friendliness, compatibility, brand popularity etc. In some cases,
consumers use careful calculations and logical thinking. At times, the same
consumers do little or no evaluating; instead they buy on impulse and intuition.
4. Purchase Decision
In the evaluation stage, the consumer ranks brands and forms purchase intentions.
Purchase decision is concerned with various terms such as finalising the brand for
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purchase, time of purchase, quantity of purchase, location of purchase, budget of
purchase etc. At this stage the purchase decision is executed in reality.
5. Post-purchase Behavior
Post purchase behaviour is concerned with the consumer's expectations and the
product's perceived performance. If the product falls short of expectations, the
consumer is disappointed; if it meets expectations, the consumer is satisfied; if it
exceeds expectations, the consumer is delighted. It is common for customers to
experience concerns after making a purchase decision. This arises from a concept that
is known as “cognitive dissonance”. The customer, having bought a product, may feel
that an alternative would have been preferable. In these circumstances that customer
will not repurchase immediately, but is likely to switch brands next time.
Engel, et al. (1995)9 further contend that purchase intention can be divided into
unplanned buying, partially planned buying and fully planned buying. Unplanned
buying means that consumers make all decisions to buy a product category and a
brand in a store. It can be regarded as an impulse buying behavior. Partially planned
buying means that consumers only decide a product category and the specification
before buying a product, and brands and types will decide in the shop later. Fully
planned buying means that consumers decide which product and brand to buy before
entering the shop.
Kotler (2003)10 proposes that individual attitudes and unpredictable situations will
influence purchase intention. Individual attitudes include personal preferences to
others and obedience to others’ expectation and unpredictable situations signify that
consumers change purchase intention because a situation is appearing, for example,
when the price is higher that expected price (Dodds et al., 1991)11.
Consumer purchase intention is considered as a subjective inclination toward a
product and can be an important index to predict consumer behavior (Fishbein &
Ajzen, 1977).12
For many consumers making decisions is a complex process that may involve several
stages. Shocker, Ben-Akiva, Boccara and Nedungadi (1991)13 suggest that not only
do consumers go through a series of stages to simplify their decision-making but that
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decision-making is made through a range of hierarchical, or nested, sets. They argue
that a consumer’s hierarchy of sets is as follows: the ‘universal set’ being all brands
available, the ‘awareness set’ being all brands of which the consumer is aware, and
the ‘consideration set’, the set of brands a consumer would consider buying from. The
consideration set was defined by Shocker et al (1991)13 as “purposefully constructed
and can be viewed as consisting of those goal satisfying alternatives salient or
accessible on a particular occasion”.
3.2.2 Types of Consumer Behaviour
The literature recognises four distinctive types of consumer buying behaviour. They
differ with respect to the frequency of occurrence, emotional involvement, decision-
making complexity and risk. In this context there are four distinctive buying
behaviour patterns which can be outlined, such as: programmed behaviour; limited
decision-making buying behaviour; extensive decision-making buying behaviour and
impulsive buying (Arnould et al., 2003).14
Programmed behaviour, also known as habitual buying behaviour, is the buying
pattern which can be characterised as the routine purchasing of low cost items, such
as: coffee; daily newspaper; tickets, etc. It is a process that involves little search for
information and low complexity of decision-making (Learn Marketing, 2010).15
Limited decision-making buying behaviour can be characterised as a buying pattern
that involves moderate levels of decision-making and comparatively low amounts of
required information to trigger purchasing. It is a buying behaviour, which can be
related to the purchasing of clothes – the consumer can easily obtain information on
the quality of the product and often spends short time on selecting and securing the
purchase (East, 1997)16.
Extensive decision-making buying behaviour (Foxall and Goldsmith, 1994)17 is
characterised with complex decision-making, where the buyer needs a comparatively
longer period to make a decision and greater amounts of information gathering. It is
buying behaviour usually provoked by expensive and infrequent purchases, which
involve higher levels of economic and psychological risk (Peter and Olson, 1999). 18
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Impulsive buying behaviour is the fourth type characterised as a buying process that
does not involve any conscious planning. It is a short-term phenomenon, which is
usually provoked by an external stimuli and irritation, making particular products
irresistible to consumers at a given short period of time (Wells and Prensky, 1997)19.
3.3 Brand
Organizations develop brands as a way to attract and keep customers by promoting
value, image, prestige, and lifestyle. By using a particular brand, consumer develops
positive image about the brand. Branding is a technique to capture consumers
psychologically. Organizations are taking advantage of psychology of human beings
by developing attractive brands (Ginden, 1993)20
Brand is 'a name, term, sign, symbol, or design, or a combination of them, intended to
identify the goods or services of one seller or group of sellers and to differentiate
them from those of competitors'. (Kotler, 1991)21.
Aaker (1995)22 defines a brand on different levels, stating that a brand is not merely
the physical product, but is also composed of brand attributes, symbols, brand-
consumer relationships, benefits of self-expression, customer profiles, associations
with the culture of the country of origin, and corporate identity. In essence, the brand
provides a simple means for the customer to distinguish it from its peers.
Pad berg et al. (1974)23 stated that in the marketing process, a brand provides a
means of communicating economic information; it facilitates product recognition and
protects the customer from the risks associated with buying an unknown brand.
Brand loyalty refers to the consumer's behaviour of repeatedly purchasing a specific
brand over a certain period of time. This is based on past behaviour, and the local
consumer is highly likely to purchase the products of a specific brand currently and in
the future. According to Aaker (1995)22, a powerful brand enjoys a high degree of
brand loyalty. Related brand choice theories claim that, in order to increase the sales
volume or market shares of a particular brand, it is necessary to either strengthen the
brand loyalty of existing customers or try to persuade the consumers of other brands
to switch. The former is called brand loyalty, and the latter, brand switching.
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A brand name, logo, or slogan will induce a consumer's positive or negative feeling
on brand image and affect. Affect will also influence consumers' behavior and
cognition. Watson and Tellegen (1985)24 also divide individual affections into
positive affections and negative affections. Brand affect is a subjective feeling after
using a product, and it is also a psychological phenomenon accompanying with
responses from emotion and mood.
Moorman et al (1992)25 and Morgan and Hunt (1994)26 define brand affect as a
positive emotional response induced from a brand. In other words, brand affect is an
exciting, cheerful and satisfying feeling when a consumer uses a product from a
brand. A positive brand affect means consumers have a good impression and feeling,
and it will raise the brand evolution in the consumers' mind. On the contrary if
consumers have a negative brand affect response, they will feel unsatisfied with a
specific brand, and brand evaluation will be very low.
Consumers view a brand as an important part of the product, and branding can add
value to a product (Kotler and Amstrong, 2005)27. Brand image is perceptions about
a brand as reflected by the brand association held in consumer (Keller et al. 2008)28.
3.3.1 Brand feelings
Brand feelings are customers’ emotional responses and reactions with respect to a
brand. They also relate to the social currency evoked by a brand. Researchers have
defined transformational advertising as advertising designed to change consumers’
perceptions of the actual usages experience with the product. The following are six
important types of brand-building feelings. (Keller et al. 2008)28
Warmth: The brand evokes soothing types of feelings and makes consumers feel a
sense of calm or peacefulness. Consumers may feel sentimental, warmhearted, or
affectionate about the brand. 36
Fun: Upbeat types of feelings make consumers feel amused, lighthearted, joyous,
playful, cheerful, and so on.
Excitement: The brand makes consumers feel energized and that they are
experiencing something special. Brands that evoke excitement may generate a sense
of elation, of “being alive”, or being cool, sexy, or so on.
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Security: The brand produces a feeling of safety, comfort, and self-assurance. As a
result of the brand, consumers do not experience worry or concerns that they might
have otherwise felt.
Social approval: consumers feel that others look favorably on their appearance,
behavior, and so on. This approval may be a result of direct acknowledgment of the
consumer’s use of the brand by others or may be less overt and a result of attribution
of product use to consumers.
Self-respect: The brand makes consumers feel better about themselves. Consumers
feel as sense of pride, accomplishment, or fulfillment. (Keller et al. 2008)28
Brand is also referred as corporate image, has been defined as an accumulated attitude
(experience based or not) towards the company (Andreassen and Lindestad,
1998)29.It is said that brand equity creates customers preferences for a brand over
competing brands Simon and Sullivan, (1993)30. Building strong brands is one of the
most important goals of product and brand management. Strong brands result in
revenue streams, both short term and long term Aaker, (1997)22. Oliver, (1999)31
defines brand loyalty as a deeply held commitment to re-buy or re-patronise a
preferred product/service consistently in the future, thereby causing repetitive same
brand purchasing, despite situational influences and marketing.
Brands are successful because people prefer them to ordinary products. In addition to
the psychological factors, brands give consumers the means whereby they can make
choices and judgments. The secret to successful branding is to influence the decisions
the way consumers perceive the company or product, and brands can affect the minds
of customers by appealing to the information acquired and analyzed. The belief that
individual difference in brand preference or choice behavior are caused by personality
differences has not always been supported by empirical research. Consumers have only
one image of a brand, one created by the deployment of the brand assets at their disposal:
name, tradition, packaging, advertising, promotion posture, pricing, trade acceptance,
sales force disciplines, customer satisfaction, repurchase patterns, etc. Clearly some brand
assets are more important to product marketers than to service marketers, and vice versa.
Some competitive environments put more of a premium on certain assets as well.
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3.4 Brand Selection and Brand Choice
Selection of service provider is a very important but challenging issue in service
marketing. This is because services are generally characterized by intangibility,
inseparability of product and consumption, difficulty of standardization and
perishability (Hill and Neeley, 1988)32. Exploring such information would help
service providers to identify appropriate marketing strategies needed to attract new
customers. Service provider selection process initiates the relationship between a
customer and a service provider and is the most important step in acquiring a new
customer for a service provider. This fact is very important bearing in mind that
consumers often buy products in a “hierarchical” order moving from relatively simple
services to more complex and expensive ones (Devlin, 2002)33. Unlike goods
marketing, services cannot be evaluated prior to purchase and can be evaluated only
during or after the service delivery. Because one of the main aspects of service
marketing is the concept of intangibility, customers may be expected to face difficulty
in assessing services offered. Some professional services (especially in health sector)
cannot be effectively evaluated even after the service has been rendered because of
high credence properties or lack of knowledge (Day and Barksdale, 1994)34. This
fact complicates the whole service provider selection process and forces consumer to
identify and base their assessments on such surrogate indicators of quality as
corporate image, office ambience, internal décor, support staff performance (Scott
and Walt, 1995)35, recommendations from friends and family, complaints, etc
When a consumer makes a product choice, he or she implicitly makes an assessment
of how well the attributes provided by the various brand alternatives will satisfy his or
her needs. When one or more brands are perceived as higher in quality or need
fulfilment than others, these brands are more likely to be chosen consistently over
time (Bass 1972)36. Thus, considerable perceived differences between brands have a
controlling effect on choice behavior in the sense that the extrinsic motivation of
adequate need fulfilment forces choice toward a particular brand. When differences
between brands are perceived to be low, brands may be perceived as substitutable,
thereby lessening this extrinsic pressure.
Previous studies (Cobb-Walgren et al. 199537; Baldinger & Rubinson 199638;
Dyson et al. 199639) concluded that a person's attitude toward a brand is relevant to
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the degree of their brand loyalty. Brand awareness and brand association are linked to
consumers' brand preferences.
Word-of-mouth credibility refers to the face to face oral communicative behavior
between the information sender and recipient (Arndt, 1967)40. Credibility information
is usually divided into two categories: positive credibility and negative credibility.
Negative creditability refers to the customers’ interpersonal communicative behavior
to bespatter a enterprise or product (Richins, 1984)41; or the behavior of a unsatisfied
customer who stopped using a certain product due to the unsatisfying deal telling his
or her friends to avoid the same disappointing experience (Leonard-Barton, 1985)42.
Negative credibility has stronger impact on consumers’ attitude and behavior which
influences consumers’ choice of brand and lead to the brand switch behavior; it not
only harms the company’s profit, but also reduces the customers’ loyalty. A research
on analysis of functional aspects of mobile handset among college going students was
carried out by Subhash Jha (2008)43. This study indicates there is a significant
relationship between selection of handset & linked brand of cellular service provider.
An analytical Study on Customers’ perception towards mobile service providers by
Girish Taneja, Neeraj Kaushik (2007)44 suggest that customer care, Service
Features, Call rates and promotion & availability are the major factors according to
customers perception which influence selection of brand of cellular service providers.
According to the research conducted by Jukka Pakola, Marjukka Pietila, Rauli
Svento & Heikki Karjaluoto (2001)45 age of purchasing a mobile phone among
young Finns has lowered from 18 -19 to 14 -15. Secondly, the factors underlying
purchase of a mobile phone were found to be manufacturers brand, market conditions
and influential persons. For the choice of brand of operator the factors were found to
be features and brand, components in pricing, quality, and influential persons.
Revati S. and Padmavathy S. (2005)46 in their research article analyzed the
awareness level among cellular service users; problem faced by the users and
examiner the factors which influence the choice of cellular service providers. Null
hypothesis for the study was that personal factors like age, gender, educational
qualification occupational status and family income of users did not influence the
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preference for cellular service providers. Results showed that only age and family
income influenced the customer decision while educational qualification, gender and
occupational status had no impact over the choice for cellular service provider.
According to the research conducted by Dholakia Viral (2011)47 Airtel was the most
preferred operator with 26% respondents voting in its favor, followed closely by
Vodafone (21%) and Idea (13%). Idea came at a distant 3rd position despite having a
big advertising campaign – “No Idea? Get Idea”
3.5 Brand Switching Behaviour
Brand switching happens when a consumer or group of consumers switches their
allegiance from one brand of a certain type of product to another. Brand switching is
the process of choosing to switch from routine use of one product or brand to steady
usage of a different but similar product. It is possible to research consumers in a
marketplace to determine their attitude to brands and their likelihood to switch from a
brand they are using at the moment, and in particular to which other brand they might
switch. This allows the building of a picture of likely brand switching behaviour.
Switching behaviour is defined as defection or customer exit (Stewart, 199448;
Hirschman, 197049). According to Boote (1998)50 and Bolton & Bronkhurst
(1995)51, switching behaviour reflects the decision that a customer makes to stop
purchasing a particular service or patronizing the service firm completely. In a service
industry context, customer switching behaviour means customers’ shift from one
service provider to another (Garland, 2002)52. The understanding of customer
switching behavior in services gained considerable attention in recent years
(Keaveney, 199553; Jones and Sasser, 199554; Rust, Lemon and Zeithaml, 200455;
Reinartz, Thomas and Kumar, 200556), although it is also pointed out that the
mechanisms of customer switching are not completely understood (Sirdershmukh,
Singh and Sabol, 200257; Agustin and Singh 200558; Homburg, Koschate and
Hoyer, 200559).
The fortunes of established brands are driven by consumers' fluctuating desires, not
by changed perceptions. When a consumer switches around within a set of brands, it's
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because his fluctuating desires temporarily alter how important it is that he receives
the benefits of one brand vs. another. Once a product has been used, a consumer's
perception of it rarely changes, but desires for the perceived benefits of competing
brands often fluctuate and it's this that creates brand switching (S. Kent Stephan and
Barry L. Tannenholz, 1994)60.
Concept of Switching Path Analysis (SPAT)
Switching path is concerned with the ending of the former relationship and the
beginning of a new one. Switching path covers the trigger, the process, and the
outcome. (Inger Roos, Bo Edvardsson, Anders Gustafsson, 2004)61
Situational triggers are defined as changes in the customers' own lives, not necessarily
related to the service provider at all. Influential triggers are factors related to the
competitive situation. Competitors' efforts to increase their market share comprise the
most common influential trigger.
Figure 3.2 - Kinds of Triggers
Critical incidents in interactions between customers and service providers are typical
Reactional triggers. Triggers represent the reasons why customers begin to consider
switching at all; in other words, why they enter a switching path. What they express
on their path as reasons for switching is referred to as switching determinants.
Wilson and Waddams (2005)62 identify Under-switching, over-switching and
consumer inaccuracy. Under-switching errors can occur where a consumer does not
switch (perhaps due to high switching costs) despite apparent benefits from doing so.
And there could also be ‘‘over-switching’’ errors where a consumer switches despite
incurring losses from doing so. Third type of error ‘‘consumer inaccuracy’’ when a
consumer makes a surplus-improving switch, but makes a mistake in the choice by
not choosing the best brand.
Triggers
Situational Triggers Influential Triggers Reactional Triggers
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Keaveney & Parthasarathy (2001)63 and Reichheld (1996)64 find that customers’
switching behaviour reduces firms’ earnings and profits. Additional profits are lost
because the initial investment on the customer (e.g. consulting or advertising costs)
are wasted and further costs are required to obtain a new customer (Colgate, Steward
& Kinsella, 199665; Reichheld & Sasser, 199066; Fornell & Wernerfelt, 198767).
In Reichheld & Sasser’s (1990)66 study, customer defection is seen as having a
stronger ability to impact on revenue than on scale, market share, unit costs, and other
factors that are usually associated with competitive advantage.
This Flash Eurobarometer68 survey on “Consumers’ views on switching services,
including services of general interest (SGI)” revealed that mobile telephone services
are among top three services which are switched by the customers in Europe.
Table 3.1 Percentage switching of Services
Services Percentage of Switch
Car insurance 25 %
Internet service 22 %
Mobile telephone services 19 %
Fixed telephone services 18 %
Mortgage loan 13 %
Savings or investments 13 %
Home Insurance 13 %
Long term loan 10 %
Current bank account 9 %
Electricity supply services 8 %
Gas supply services 7 %
3.6 Variety Seeking Behaviour
Variety seeking or novelty seeking behavior is manifested by an individual’s drive
which itself is determined by certain personality traits. For example, an individual
who is authoritarian or dogmatic is likely to exhibit an aversion towards change or
novelty. On the contrary a person characterized as extrovert or creative is likely to
look for change or novelty in daily activities (including shopping behavior).
Consumers undertake variety-seeking buying behavior in situations characterized by
low consumer involvement, but significant perceived brand differences. In such cases,
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consumers often do a lot of brand switching. Sometimes brand switching occurs for
the sake of variety rather than because of dissatisfaction. The market leader will try to
encourage habitual buying behavior by carrying large stocks and running frequent
reminder advertising. The market challenger will encourage variety seeking through
various sales promotion tools such as cash discounts, coupons, free samples that will
induce to try new brands. Variety seeking behavior has been captured in consumer
research via the notion of Optimal Stimulation Level (OSL). Individuals attempt to
adjust the level of environmental stimulation if it falls below or above their optimal by
engaging in variety seeking or avoidance behaviors (Raju 1983)69. Variety-seeking
behavior may be defined as the biased behavioral response by some decision making
unit to a specific item relative to previous responses within the same behavioral
category, due to the utility inherent in variation per se, independent of the
instrumental or functional value of the alternatives or items. People with a high need
for variety are more likely to engage in variety-seeking behavior than those with a low
need for variety. (Steenkamp and Van Trijp 1991)70
Although Variety seeking behavior and brand switching behavior are characterised by
discontinuation of use of one brand while trying another brand of the same category,
they differ in post switch usage of the brand. After brand switching, customer intent to
have a steady use of the newly switched brand provided it matched his/ her
expectations. However, the new brand tried out of need for variety will not experience
a steady use by the customers who are always looking for new options in the market.
Because variety seeking has been identified as a determinant factor in brand
switching, it is relevant to brand managers interested in developing strategies to
increase brand share and has played a key role in the modeling of purchase patterns
from consumer choice data (Bawa 199071; Feinberg; Kahn, Kalwani, and
Morrison 199272)
3.7 Reasons of Brand Switching
Though customers stand to benefit from the fierce competition that has ensued, the
high cost of customer acquisition has made it imperative for cellular service providers
to understand the reasons for customer churn. Churn is a widely-recognised problem
today for most mobile service providers. In simple terms churn refers to customers
cancelling their existing contract only to embark on a relationship with a competing
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mobile service provider. During their lifetime, customers have many opportunities to
switch service providers (competitor offers, sales promotions, etc.), and many events
within the established relationship are likely to cause service relationship deterioration
and dissolution (Gustafsson et al., 200561).
Although it is reasonable to assume that customers can be influenced to switch service
providers by a single critical incident, many researchers suggest that defection comes
from multiple problems encountered over time (Bejou & Palmer, 199873). Therefore,
studies which focus on only a single factor or failure to investigate all of the actual
factors causing customers to switch can only make a limited contribution to the
switching behaviour research (Colgate & Hedge, 2001)74.
There have been several models developed to predict brand switching and the
consequences of a brand switch. Keaveney (1995)53 model has been widely accepted
and used extensively, in academic and practitioner literature. Her study covered
service industries as diverse as hairdressers, travel agents, banks and phone
companies, collecting data on 468 critical incidents. Each critical incident was then
sorted into the eight categories of customer switching behaviour: pricing,
inconvenience, core service failures, service encounter failures, employees’ responses
to service failure, and attraction by competitors, ethical problems and involuntary
incidents. The categories identified can be used to identify reasons for brand
switching and can be easily grouped into the utility maximisation, expectation
disconfirmation and stochastic reasons, derived from repertoire market analyses.
Figure 3.3 - Keaveney model on brand switching reasons
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• Utility maximisation reasons –
Utility maximization presumes that consumers are consistently searching for a
better utility, and when they succeed they will switch brands.
• Expectation disconfirmation reasons-
Consumers evaluate consumption experiences and make satisfaction decisions by
comparing perceived performance with some consumption standard.
• Stochastic reasons –
If a brand switch occurs “as-if-random”, that is, for primarily stochastic reasons
(Bass, 1974)75, then the switch is beyond the control of the service provider.
While consumers switch between brands for any number of individual reasons,
consideration set formation theory can guide classification of these reasons or
antecedents to the brand switch. Insights from repertoire markets suggest that utility
maximisation, expectation disconfirmation, and stochastic choice might all play a role
in brand switching, and that this will affect the formation of the post-switch
consideration set.
According to Keaveney (1995)53,
• If the brand switch occurs for utility maximisation reasons then the previous brand
will still remain in the consumer's consideration set, but will now be ranked lower
than the newly preferred brand.
• If the brand switch occurs for expectation disconfirmation reasons then the
probability of the previous brand being repurchased will be greatly reduced, and
the brand is likely to be removed from the consideration set.
• If the brand switch occurs for stochastic reasons, not only will the previous brand
remain in the consumer's consideration set, but also will have the same purchase
probabilities as before the switch occurred.
3.8 Factors influencing customers brand switching behavior
Customer switching behaviours in services have become critically important to both
service firms and service marketing scholars. Service providers are much aware about
the negative outcomes of customer switching on market share and profitability (Rust
and Zahorik, 1993)76.
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3.8.1 Price
Price is an attribute that must be given up or sacrificed to obtain certain kinds of
products or services (Zeithaml et al., 1996)77. In Keaveny’s research (1995)53, the
"pricing" factor included all critical switching behaviours that involved prices, rates,
fees, charges, surcharges, service charges, penalties, price deals, coupons, and/or price
promotions. Customers in general are price conscious in their purchasing behaviour
(Beckett et al.2000)78. Price is an important factor in choice situations as a consumer’s
choices typically relies heavily on the price of alternatives (Engel, Blackwell &
Miniard, 1995)9. Several studies show that price has an important impact on
customers’ switching decisions (Stewart, 199879; Colgate et al., 199665; Keaveny,
199553).
In Colgate & Hedge’s (2001)74 study of bank customers’ switching behaviour in
Australia and New Zealand, they identify price as the top switching determinant,
followed by service failures and denial of services. Customers are in search of
products at reasonable prices and this make them to switch from one brand to other.
Dongmei Zhang (2009)80 has identified and analysed the factors that influence bank
customers’ switching behaviour in the Chinese retail banking industry. The findings
reveal that Price is one of the prominent factor which influence bank switching
behaviour of customers. Other influencing factors found are Reputation, Service
Quality, Effective Advertising, Involuntary Switching, Distance, and Switching Costs
have an impact on customers’ bank switching behaviour. The results also reveal that
the Young Age and High Income Groups are more likely to switch banks.
According to the market research conducted in Ireland by National Consumer
Agency (September 2011)81 on consumer switching behavior, the main reason of
switching of services is money saving. A large majority of consumers have saved
money by switching insurance providers, 88% for car insurance and 86% for home
insurance. 76% of consumers have saved money by switching mobile service provider
and by main grocery shop in the last year. Over 72% have saved money by switching
landline telephone provider and broadband access provider and 71% saved money by
switching electricity provider. Overall across all categories 79% of consumers, who
had switched service providers in the last twelve months, had saved money as a result.
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Figure 3.4 – Customers saved money due to switching provider (Base: All who have switched providers in the past 12 months)
Home Insurance Provider 86%
Mobile Telephone Provider 76%
Car Insurance Provider 88%
Broadband/Internet Access Provider 72%
Main Grocery Shop 76%
Electricity supply service 71%
Top up Grocery Shop 67%
Fixed/Landline Telephone Provider 72%
3.8.2 Word of mouth
On consumers’ brand switching behavior, scholars have done extensive researches,
such as discussing the brand switching behavior caused by customers’ dissatisfaction
(Richins, 1984)41; the relations among customers’ complaint, negative credibility and
brand switching (Singh, 199082); the reasons for customers’ brand switching behavior
(Keaveney, 199553), etc. However, in current researches, the scholars mainly focus on
how the consumers’ personal subjective cognitive feelings (prices, attraction of
competitors, etc) effect their brand switching behavior, but neglect the question of
whether the brand switching behavior can be effected by other people unmentioned.
Wangenheim and Bayon (2004)83 conducted a study in the German energy industry
with the purpose of examining the difference between stayers, switchers and referral
switchers. The sample included 367 switchers and 398 stayers. Their results showed
that switchers differ from stayers in their higher levels of active and lower levels of
loyalty, as well as in more passive WOMC. Referral switchers differ from other
switchers with respect to their higher satisfaction, active loyalty and more positive
WOMC giving. Within the group of switchers, the referral switchers represent a
special customer group. They exhibit higher levels of satisfaction, active and reactive
loyalty and WOMC behaviour than the other switchers. They conclude that customer
acquisition through referrals is a very important goal for companies, not only due to
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reduced costs of acquisition, but also because clients gained through referrals are
easier to satisfy and retain.
3.8.3 Inconvenience
The research on Preventing Customer Churn’ published by Pitney Bowes (2010)84
gives interesting data on why businesses lose customers. Pitney Bowes surveyed 1000
business directors/managers in each of the UK, Germany, France and the United
States asking reason for switching the suppliers in the last 12 months.
This research put forwards following Reasons for customer churn -
• In terms of customer service and product/service delivery, timing was the critical
factor. An inability to hit deadlines, allied to slow response when dealing with
queries, was the most important reason for firms to look elsewhere. Sticking to
agreed deadlines and acting rapidly to resolve any problems should therefore be
ingrained into the culture of any business. Also convenient location is a critical
factor influencing customers’ evaluation about firms. Customers tend to switch to a
new provider if the new provider is closer to their office, work place or home.
• Poor customer service and neglectful communications are the primary reasons
business owners cited for switching supplier.
Table -3.2: Country wise churning reasons
Source http://pressroom.pitneybowes.co.uk
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• Poor communications covers a wide range of topics, with over a 25 of B2B
customers likely to switch suppliers when left feeling neglected (‘not in touch’)
and/or uninformed ‘not told about updates and developments’.
• Personalizing communications in this way also helps overcome another reason for
churn – customers feeling that suppliers do not value their business.
• Respondents were also annoyed when bombarded with irrelevant marketing
material, whilst nearly a third switched as a result of firms failing to understand
and act upon their needs.
• There is also clear evidence that customers require multiple communication
channels with their suppliers. Restricting queries to e-mail only or running call
centers with staff that lack the required knowledge or authority to answer customer
questions will cost firms business.
3.8.4 Service usage
Service usage patterns can be described as three commonly used measures, minutes of
use, frequency of use and total number of distinct receivers contacted by the
subscriber (Wei & Chiu, 2002)85. In effect, the level of service usage, which is
measured by the monthly charge, is one of the most popular behavioral predictors of
defection in the previous research (Buckinx & Poel, 2005)86. Mozer et al. (2000)87
conjectured that monthly charges and usage amounts are linked to churn. However, it
is still unclear as to whether the relationship between service usage and customer
churn is truly positive or negative.
Research conducted by C Ranganathan, DongBack Seo and Yair Babad (2006)88
examines the switching behavior of mobile users who are not under any contractual
obligations to stay with a provider. Based on data on over 30,590 mobile users, they
identify significant associations between customers service usage, service bundling
and their switching behaviour.
Mitja Pirc, Universitat Pompeu Fabra (2006)89 explores the impact of usage,
budgetary constraints, involvement and customer characteristics on customers'
intention to switch mobile service provider. It is shown that the mobile services usage
effect on switching intentions is curvilinear (positive linear and negative quadratic)
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and that only the budgetary constraint regarding the service matters and not the one
related to the mobile phone. Past mobile service providers switching experience also
contributes to the intention to switch. Mobile phone ego involvement has positive
impact on customer retention; however purchase involvement (mobile phone and
services) increases customer risk.
GUO Guoqing, ZHANG Zhongke, WANG Xiaofan, LI Yisong (2008)90 discussed
the three factors’ influence on consumers’ brand switching intention, including
characteristics of credibility information sources, the level of consumers’ product and
service involvement and the different aspect of product involvement. They found out
that both the characteristics of credibility information and level of consumers’ product
or service involvement have distinct positive influence on consumers’ brand
switching intention, while influence of different product involvement aspects varies.
Sudhakar (2005)91 asserts that there are various reasons for the factors influencing
the migration of cell phone customers from prepaid to postpaid services. They are
the schemes and tariff plans, increased usage of mobile connections, need for
additional services, low air time rates of postpaid in comparison to the prepaid at the
time of purchase, reference group influence, prepaid proving economical and
availability of corporate connections. He also reveals the reasons for the customers
migrating from postpaid to prepaid connections. The customers feel that the monthly
bill is higher than what they can afford, high rental charges, service dissatisfaction and
decrease in usage of postpaid services are the various reasons which make the customers
migrate from postpaid to prepaid.
Evelyn Toh Bee Hwa, Eva Lim Wei Lee, Robin Cheng (2011)92, in their study found
that some customers of mobile services are forced to maintain their current mobile
service provider because they are tied up with a contract with them. Most of them had
a two year contract with one particular mobile service provider. It would be too
expensive for them to switch providers before the contract ends. This is a, move by
mobile service providers in order to discourage customer switching. These
respondents had voiced, dissatisfaction over this and would switch mobile service
providers at the end of the contract.
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3.8.5 Service Quality
Research on services and services marketing has grown considerably (Bateson,
199593; Henkoff, 199494; Koepp, 198795). Academics and practitioners have
demonstrated interest in issues that surround the measurement of service quality and
the conceptualization of the relationship between service quality and consumer
satisfaction (Fisk et al., 1993)96. Bateson (1995)93 states that quality is generally
conceptualized as an attitude, the customer’s comprehensive evaluation of the service
offered. It is built up from a series of evaluated experiences and hence is less
fluctuating than attitudes built from the emotions of satisfaction. Satisfaction is the
outcome of the evaluation a consumer makes of any specific transaction.
Palkar Apoorva (2004)97 explored the influence of quality attributes of the service on
customer satisfaction and payment equality, and determination of key quality
elements that determine customer retention. With the help of primary data collected
from 400 respondents. The questions to measure quality elements were investigated
based on the five dimensions of SERVOQUAL Model and the service features of
Mobile Telephony. Results of regression and factor analysis showed that quality
attributes are the most important factors for postpaid users. Usage Pattern, Service
Quality, and Billing were derived to be the most important factors, for prepaid users.
It could be interpreted that because customers perceived accumulated quality
changing their experience and evaluation for the quality continuously. Therefore,
service provider should make quality indices, which they could objectively manage
service quality by the criterion of business performance and make an effort to conduct
the continuous quality management activity to evaluate quality indices.
Parasuraman et al. (1988)98 identify five service quality dimensions for their service
quality measurement model-SERVQUAL (see Table 2.1). The five service quality
dimensions are: tangibles, reliability, responsiveness, assurance, and empathy.
Tangibles relates to the effect of physical facility, equipment, personnel and
communication materials on customers, and reliability, responsiveness, assurance, and
empathy correspond to the element of human interaction/intervention in delivery of
the service. Several researchers have also demonstrated that service quality is a multi-
dimensional construct, and the dimensions can vary across different industries
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Table 3.3: SERVQUAL Service Quality Dimensions (Parasuraman et al., 1998)98.
SERVQUAL Dimensions Description of SERVQUAL Dimensions
Tangibles Physical facilities, equipment, and appearance of personnel
Reliability Ability to perform the promised service dependably and accurately
Responsiveness Willingness to help customers and promote service
Assurance Knowledge and courtesy of employees and their ability to inspire trust and confidence
Empathy Caring such as individualised attention which the employees provides for its customers
Fisk et al., (1993)96 noted that service satisfaction and service quality are clearly
related. While Oliver (1980)99 defines that “satisfaction is a summary psychological
state resulting when the emotions surrounding disconfirmed expectations are coupled
with the consumer’s prior feelings about consumption experience”, even though some
researchers argue that service quality is an antecedent of consumer satisfaction and
consumer satisfaction exerts a stronger influence on purchase intentions than does
service quality (Cronin & Taylor, 1992)100.
The theories on relationship between service quality and customer satisfaction tend to
be mixed, if somewhat not completely distinct from some school of thoughts to
another. In lieu of above, Cronin and Taylor (1992)100 conclude that “the service
literature has left confusion as to relationship between consumer satisfaction and
service quality”.
Though many service industries are affected by the churn phenomenon the problem is
extremely acute in the telecom industry, with customers joining and quitting in short
periods. Usually, such a high churn rate is witnessed in more mature markets where
operators try to attract customers from competitors since market growth is saturated.
But with one of the lowest telecom penetrations, the Indian market is anything but
mature. In the current market scenario there is hardly any difference in offerings,
prices and quality of service offered by different operators. Cut-throat competition has
ensured that there is not much difference between the tariff plans offered by different
vendors. This is where customer service and value-added services come into play. If
an operator doesn’t anticipate market needs or does not provide value-added services
offered by the competitor, then the customer is likely to churn.
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Richard Lee, Jamie Murphy, University of Western Australia (2005)101, their
study investigates determinants that cause mobile phone Customers to transit from
being loyal to switching. It concluded that there are different factors which affect the
Customers to switch from loyalty to switching intentions such as price, technical
service quality, Functional service quality, switching costs, etc. But, the rating was
given that price is the most important factor which affects the Customers to switch
loyalties to another provider.
Previous research suggests that network quality and call quality are key drivers of
customer satisfaction/ dissatisfaction in the mobile communications services market
(Gerpott et al., 2001102; Lee et al., 2001103; Kim & Yoon, 2004104; Kim et al.,
2004105). Keaveney’s (1995)53 study of customer-switching behaviors in service
industries demonstrated that 44% customers switched their service providers because
of core service failures.
In addition, service failures have been ‘‘triggers’’ that accelerate a customer’s
decision to discontinue the service provider-customer relationship (Bolton, 1998106;
Bolton et al., 2000107; Kim, 2000108; Mozer et al., 200087). Therefore, some
technical dimensions of service quality, such as the amount of call drops and call
failures may be related to customer churn.
Informate Mobile Intelligence109 – a telecom research agency – analyzed the
number of dropped calls that customers of different service providers encountered.
Table 3.4- Percentage dropped calls of different telecom service providers
According to their study Airtel, Tata DoCoMo and Aircel were found to have the
lowest call drop rates. While Reliance and Loop had the highest.
David Murphy (2008)110 conducted a research on ‘Churn and churning reasons of
mobile users in UK and US. A representative sample of over 1,000 consumers in each
country was interviewed by email and telephone questionnaire, with an objective to
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know whether they had switched supplier over the previous year in each of a number
of sectors; how likely they were to switch over the coming year; and what the
principal reason for switching was. The primary findings of the research states that
people change supplier for not being recognised as a valuable customer, unhelpful
staff and ineffective call centres.
Keaveney (1995)53 introduced her model of service switching; she explained that
there are eight main factors dominating service switching decision. These are –
1. Pricing:
This category includes all critical switching behaviours that involved prices, rates,
fees, charges, penalties, price deals, coupons or price promotions etc.
2. Inconvenience:
The “inconvenience” category examines all the critical incidents in which customer
felt inconvenienced by service providers’ the incidents are, for instance, location,
hours of operation, waiting time for service and so on.
3. Core service failure:
This category describes all core service failures including critical incidents that
were due to mistakes or other technical problems with the service itself.
4. Service encounters failures:
Service encounters were defined as personal interactions between customers and
employees of service firms. Service encounter failures attributed to some aspect of
service employees behaviours or attitudes: (1) uncaring, (2) impolite, (3)
unresponsive or (4) unknowledgeable.
5. Employee Responses to service failures:
This category describes critical switching incidents in which customers switch, not
because of a service failure, but because of failed service recovery attempt.
6. Attraction by Competitors:
This category examines critical switching incidents in which customers switch
better service provider rather than an unsatisfactory provider who are more
personable, more reliable, provide higher quality and less expensive.
7. Ethical Problem:
This category includes critical switching incidents that describe illegal, immoral,
unsafe, unhealthy, or other behaviours that deviated widely from social norms.
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Unethical behaviours included (1) dishonest behaviour, (2) intimidating behaviour,
(3) unsafe or unhealthy practices, and (4) conflicts of interest.
8. Involuntary Switching and Seldom-Mentioned Incidents:
This category switching happens because of uncontrollable factors largely beyond
the control of either the customer or the service provider. This category of
switching incidents includes if the service provider or customer moves or other
third party payer changes.
According to Nair Vinith Kumar (2005)111 Indian mobile users are not happy with
the level of service they get. Their complaints cover the gamut of issues, from
network availability and billing, to value-added services and customer care. The
number of enquiries a call centre receives is two or three times more than the
international norms. The national average waiting time to talk to customer care is 4.1
minutes. About 61 per cent of the respondents had to wait for up to 3 minutes whereas
14 per cent had to wait for more than 7 minutes. The areas with scope for
improvement are billing complaint incidence and call success rate with respect to the
Global System for Mobile Communications (GSM) – based cellular operators.
A study on Indian cellular services users by Ganguli Shrishendu (2010)112 suggest
that customers who are more satisfied with reference to customer service & network
coverage have less likelihood to switch. But, customers are more likely to churn due
to more & better value added services provided by other operators.
The Mobile Customer Churn Study of Horsebridge Network Systems113 (a leading
UK provider of network synchronization technology, (2005) was devised to
examine the reasons behind mobile users switching operators with sample size of 500
respondents across the UK. The key findings of the study make it apparent that the
problem of customer churn is partly caused by consumers becoming frustrated at the
basic tenets of their service. Consumers have indicated that the factors most likely to
cause them to churn are quality of service, rate of call drop-off, and pricing schemes,
rather than a fashionable handset or next-generation, 3G-based services. Therefore a
fundamental issue is at stake– quality of service is at the heart of consumer
frustrations, rather than the ‘perks’ or ‘frills’ they can gain through their operators.
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Switching behaviors can vary from one culture to another, and responses to these
switching incidents also differ. Swanson Scott R., Frankel Robert, Sagan Mariusz
(Oct. 2007)114 conducted research which was based on samples drawn from Brazil,
China, Poland, Russia, and the United States. These countries were selected to
provide global diversity by including cultures from Asia, Europe, South America, and
North America. With total 1998 usable responses, chi-square tests identified
statistically significant differences between the countries for all switching behaviors
other than price.
• Switching due to inconvenience of the service provider was most likely to occur
among the Chinese respondents.
• Core service failures and inadequate responses to service failures were most likely
to be reported by the Brazil and China sample subjects.
• Unsatisfactory interactions with employees leading to switching were reported
most often by respondents from China and Russia.
• Switching attributed to finding a higher quality or more reliable service provider
was least likely to be identified in the sample from Poland.
• The service provider acting illegally, in an unsafe or an unethical manner was
indicated most often by Brazilian respondents and having to switch due to the
original service provider closing the business was most noted by the subjects in the
China and Russian samples.
Many factors cause consumers to stay with their existing provider or switch to
competitors. Most studies, as well as conventional wisdom, suggest that improving
service quality satisfies customers and thus retains their loyalty (Zeithaml, Berry and
Parasuraman, 1996)115. Conversely, customers with negative service experiences
switch or consider switching to another service provider (Jones and Sasser, 199554;
Lewis and Bingham, 1991116).
A good recovery action can transform even frustrated customers into loyal ones and
may create more goodwill than if things had gone smoothly in the first place. The
actions of service recovery helps customer to believe the firms as dependable and are
more committed to relationships, which in turn indulge them in repurchase (Dewitt et
al., 2008)117.
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However, in general customers react in two ways when they face a service failure.
These are staying with the service providers or leave (i.e. exit). To clarify this further,
when customers encounter a service failure they will either not complain, or complain
and give the service provider a chance to resolve the problem. On the other hand, they
may remain with the provider despite their dissatisfaction without complaining, or
exit. Again, if they complain they may also choose either to stay or exit, and these
depend on how the situation is tackled by the service provider i.e. the service recovery
process (Colgate and Lang, 2001)118.
Determinants of switching, however, go beyond service quality.
3.8.6 Satisfaction and Loyalty of Customer
In order to better manage customer churn, companies need to fully understand a
customer’s behavioral churn path and the factors pertaining to the customer churn.
Many of the research scholars paid attention to customer’s satisfaction and loyalty and
its association with customers’ brand switching behaviour.
Satisfaction is a feeling which results from a process of evaluating what was received
against that expected, the purchase decision itself and the fulfilment of needs or want
Armstrong & Kotler, (2005)27. Bitner and Zeithaml, (2003)119 stated that
satisfaction is the customers’ evaluation of a product or service in terms of whether
that product or service has met their needs and expectations. While Mohammad
Muzahid Akbar1 and Noorjahan Parvez (2009)120 have found customer satisfaction
to be an important mediator between perceived service quality and customer loyalty.
Customer satisfaction is a strong predictor of customer retention and customer loyalty.
Customer perceptions of quality are the single greatest predictor of customer
satisfaction while customer loyalty reflects the likelihood of repurchasing products or
services (Scott M. Smith, 2007)121. According to Serkan Aydin, Gokhan Ozer,
Omer Arasil (2005)122 Trust and customer satisfaction has direct effect on customer
loyalty, while the moderator effect of perceived switching cost on customer loyalty.
Mohammed Sohel Islam (2010)123 cited in M. Sathish, K. Santhosh Kumar, K. J.
Naveen, V. Jeevanantham (2011)124, examined the relationship between switching
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cost, corporate image, trust and Customer loyalty. The research finds that although all
the independent variables, switching cost, corporate image, and trust have certain
degree of relationship with the dependent variable, Customer loyalty, only trust has
the strongest relationship with Customer loyalty.
Bolton (1998)106 investigated the role of customer satisfaction in a dynamic model
estimating the customer’s duration with the service carrier. Gerpott, Rams, and
Schindler (2001)102 analyzed a two-stage model where overall customer satisfaction
has a significant impact on customer loyalty, which in turn influences customers’
intentions to terminate their contractual relationship. Hee-Su Kima, Choong-Han
Yoonb, (2004)125 found some determinants of subscriber churn and customer loyalty
in the Korean mobile telephony market. Kim et al. (2004)105 investigated the
adjustment effect of switching barriers on customer satisfaction and customer loyalty.
Bolton and Lemon (1999)126 in their telecommunications sector study in US
analyzed usage using the payment equity framework and have shown that a customer
will be more satisfied and less likely to switch when he or she perceives the
price/usage exchange to be more equitable.
According to Lin et al. (2000)127 brand loyalty refers to the consumer’s behaviour of
repeatedly purchasing a specific brand over a certain period of time through conscious
or unconscious decisions. On the other hand, Shukla Paurav, (2009)128 states that
brand switching occurs due to a slight decline in brand loyalty and growing
acceptance of other brands, which loosen up the consumer’s willingness to try
alternative brands. Customer loyalty expresses an intended behavior related to the
service or company (Andreassen and Lindestad, 1998)29.
Customer loyalty is the degree to which the customer has exhibited, over recent years,
repeat purchase behavior of a particular company service (Hellier et al., 2003)129,
customer loyalty has been defined as a behavioral measure (Kumar and Shah,
2004)130. Measures include proportion of purchase (Cunningham, 1956)131,
probability of purchase (Farley, 1964)132, probability of product repurchase (Kuehn,
1962)133, purchase frequency (Brody & Cunningham, 1968)134, repeat purchase
behavior (Brown, 1952)135, purchase sequence (Kahn, Kalwani, & Morrison,
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1992)72, and multiple aspects of purchase behavior (DuWors & Haines, 1990)136 and
leads to greater sales and revenue, better prediction of sales, requires minimal
marketing efforts, and creates customers who are less sensitive to the marketing
efforts of competitors (Jarvis & Wilcox, 1977)137.
Reichheld (1996)64 brought about four common beliefs about benefits of customer
loyalty:
• The costs of serving loyal customers are less;
• Loyal customers are less price sensitive;
• Loyal customers spend more time with the company;
• Loyal customers pass on positive recommendations about their favorite brands
Gerpott, Rams and Schindler (2001)102 have in their study of consumer loyalty in
mobile telecommunications in Germany used the model satisfaction-loyalty-
retention. Aydin, Ozer and Arasil (2005)122 show that customer satisfaction and
customer trust in the mobile services provider have positive and direct effect on
loyalty. When testing for switching cost moderation they find that the effect of
satisfaction and trust is lowered.
Satisfying and retaining customers to sustain business are usually firms' top priorities
in marketing strategies. Satisfied customers generate more profits to companies when
they stay loyal to the brands. The common belief is that satisfied customers have
repeat purchasing behavior, then long-term profits are provided to the companies.
However, offers from competitors can attract even loyal customers to try alternatives
or new brands. As mentioned in Jones and Sasser (1995)54, the relationships between
satisfaction and loyalty are neither simple nor linear.
Consumers switch brands not simply because they are dissatisfied with the current
brands, but may because they want to try new brands, they are attracted by the
discounts offered by other brands, or because the current brands are out of stocks.
Furthermore, advertising provides stimuli for consumers to switch brands.
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Dick and Basu (1994)138 argue that relative attitude and repeat patronage affect
customer loyalty. They classify loyalty into four dimensions, loyalty, latent loyalty,
spurious loyalty, and no loyalty.
Mittal and Lassar (1998)139 measure relationships among overall satisfaction,
intention to switch, technical quality, and functional quality. They conclude that
relationships between satisfaction and loyalty are asymmetrical while dissatisfaction
guarantees switching but satisfaction does not promise loyalty. Since satisfaction
cannot be considered equivalent to loyalty, either satisfied or dissatisfied customers
have possibilities to switch brands for certain reasons. In general, dissatisfaction is a
person’s feelings of disappointment resulting from comparing a product’s or service’s
perceived performance or outcome in relation to his or her expectations. If the
performance falls short of expectations, the customer is dissatisfied (Kotler and
Keller, 2006)140.
Kasper (1988)141 summarized three actions when customers feel dissatisfied.
According to Kasper, customers may complain about the products or services, or say
something negatively to their friends and families about the brand they are unsatisfied
with, or they may switch to other brands.
Lin, Wang and Hsieh (2003)142 conducted a research on brand-switching behavior
across three different customer groups. Customers were classified into “satisfied and
dissatisfied switchers, and stayers”, and the differences between these three groups
have been analyzed in terms of “customer satisfaction, customer involvement, and
customer loyalty”. The result shows that there is a very little difference between
advertising responsiveness across three groups of customers.
It is true that dissatisfaction can cause brand-switching, and customers may express
their dissatisfaction through switching to other brands. However, dissatisfaction is not
the only reason causing brand-switching, and satisfied customers may not stay on the
same brand (Kasper, 1988)141.
In today’s ever volatile and highly competitive market place, customers are the key
success factor for almost every kind of organizations. “Dissatisfied customers have a
96
chance to destroy the organization’s customer base and thereby erodes its fame”
(Levesque and McDougall, 1996)143.
It is evident from the existing literature that companies, especially service providers,
are more concerned about customers’ profitability and thus their satisfaction which
leads to enjoy more loyal customers. When customers are satisfied on the services of
an organization they continue their relationship with the service provider and practice
purchasing repeatedly. Repeated purchase and loyal customer base are success factors
and preconditions to guarantee a company to earn more profit and help create a strong
foothold in business arena.
Serving the existing customer base is more economic than attracting new customers.
Ndubisi (2004)144 mentioned in his research that the cost of serving one loyal
customer is significantly less than the cost of attracting and serving one new
customer. Since customers satisfaction is the tool to keep them loyal a business or
service firm can improve its customer satisfaction and thereby retention rates by
various activities available to the firms.
However, “satisfied customers are not necessarily loyal, again dissatisfied customers
do not always exit” (Rowley and Dawes, 2000145; Hirschman, 197049; Day,
1984146). Dissatisfied customers try to choose a better alternative and search different
options available. Customers have more options when a market is a competitive one.
Previous studies have identified a strong association between customer dissatisfaction
and switching (Bolton & Bronkhorst, 199551; Bansal & Taylor, 1999147; Lee et
al.2001103). Dissatisfied and complaining customers might not switch, and that
customers - who are satisfied but do not complain - might switch (Bo Edvardsson
1998)148
Dissatisfied customers will continue to demand one brand while the penalty is high
and/or they have no alternative to switch to (Lee et al.2001103)When an alternative
does exist (as in the GSM sector) and switching cost is low, dissatisfied customers can
easily defect to a rival brand. On the other hand, customers experiencing high
switching cost will tend to become loyal despite their dissatisfaction with the service
delivered.
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Measuring satisfaction or dissatisfaction may not provide a reliable base for firms to
visualize the customers who have intentions to stay with the current brands or those
who want to switch. Rationalizing customer switching behaviour provides new
insights into customer loyalty. Previous studies have revealed the existence of brand
switching behaviour and it’s relationships with satisfaction. However, researcher feels
the need to study the effects of demographic factors on brand switching.
3.8.7 Demographic Factors
Demographic characteristics of customers are possible predictors of switching
behaviour in services (Susan M Keaveney, Madhavan Parthasarathy, 2001)63.
According to Morris and Venkatesh, (2000)149 age is widely used as a demographic
variable to characterize adoption of technologies between two or more consumer
group. Yim, Eun-Jin, Hwang, Choon-Sup (2009)150 found age and gender of the
customers influences their brand-switching.
These teenagers will use influence strategies such as persuasion and bargaining
strategies to change their parents’ thoughts, feelings or behaviours to directly
influence the purchase decision (Wimalasiri, 2004151). In Denmark, younger teenagers
(aged 5 to 13 years old) imposed quite strong influence on the decision making
processes for products relevant to them and mobile phone is identified as one of the
top four items in (Martenen, A and Grǿnholdt, L., 2008152).
C Ranganathan, DongBack Seo, Yair Babadmobile (2006)88 suggests user
demographics play a dominant role in influencing mobile user behaviour. Individual
user demographics have been found to influence user attitude towards mobile services
(Okazaki, 2006)153. Studying Singaporean mobile users, Gilbert & Han (2005)154
found user characteristics to be prominent in influencing mobile consumers' behavior.
Sharma and Choubey (2007)155 have conducted research on consumer mobile
services providers in Lucknow city with 200 randomly selected respondents. This
study reveals that the level of consumer satisfaction depends on the demographic
characteristics of the respondents. Group of customer with homogeneous
demographic characteristics generally display similar expectations. Hence there is a
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need to improve cellular services in order to meet the expectations of varied
demography in order to satisfy customers.
Carroll et al. (2002)156 found that young mobile users (16-22 year olds) use mobile
services to satisfy their social and leisure needs, reinforce group identity and add
value to their lifestyles. They also found that young mobile users view mobile devices
as lifestyle-related tools rather than as task-oriented technologies. This attitudinal shift
might influence their switching intentions as well. In fact, market research studies
report young users to be heaviest users of mobile services as well as highly prone to
defection (Myring, 2006) 157.
Several scholars have reported that female users tend to experience higher levels of
anxiety than males in using technologies (Igbaria & Chakrabarti, 1990158; Brosnan
& Davidson, 1996159). Leung & Wei (2000)160 found significant gender differences
in mobile phone usage. In the context of mobile internet technology, Gilbert et al.
(2003)161 found gender to be a key variable. He found females to exhibit more
technophobia and anxiety towards mobile technologies. This anxiety is likely to
prevent them from switching from one provider to another.
As per the research conducted by Shukla Paurav, Tiago Neves, Singh Harpindar
Singh, and Thaker Poona (2007)162, in case of the young adults, characteristic
influences that have the highest impact upon brand switching behaviour include age,
accommodation and promotions. Key finding of their research shows that the older
the young adult is the more likely they are to brand switch. The family influence that
may at first make the young adult brand loyal would diminish over the period of time
as they start living their life on their own, away from home. Accommodation is
another factor that affects their brand switching behaviour. This may be due to the
locational influences and at the same time, who they are actually living with. Brand
Switching is affected by a number of independent variables and young adults feel that
the most important factor is that of promotions. Adults do not consider other factors
such as curiosity, increased choice, packaging etc as important factors for switching.
Komal Gyani Karani, Katherine A. Fraccastoro, (2010)163 claims that elderly
consumers are not only more likely to repurchase but also actively resist switching
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brands once they have established a favorite brand. According to them Elderly
consumers (above 75 years of age) are less likely than younger consumers to
switch brands because of a price increase, promotions by competitors, service or
product failure, inconvenient location or layout of stores, new product introductions
by competitors where comparative analysis of options becomes cognitively difficult,
ethical concerns with the manufacturing or retailing firm, temporary out of stock
situations, peer influence and lower quality of life.
3.8.8 Switching Cost
Customer switching costs are generally defined as costs that deter customers from
switching to a competitor’s product or service. These costs include elements such as
the customers’ time, effort, and knowledge that they invest in products, services, or
relationships. Switching costs have become more recognised and been the subject of
substantial work in the last 25 years or so, although earlier related work exists. A
useful definition of switching costs as ‘the onetime costs that customers associate with
the process of switching from one provider to another’ was used by Burnham, Frels,
& Mahajan (2003)164.
Fornell's (1992)165 switching barriers included “search costs, transaction costs,
learning costs, loyal customer discounts, customer habit, emotional cost, and
cognitive effort, coupled with financial, social and psychological risks on the part of
the buyer”. Switching costs include not only those that can be measured in monetary
terms but also the psychological effect of becoming a customer of a new firm, and the
time and effort involved in buying new brand (Kim et al, 200)104. Hence, switching
cost is partly consumer-specific (Shy, 2002)166.
Switching cost is formally defined as the cost involved in changing from one service
provider to another (Porter, 1998)167. According to Jackson (1985)168, it is the sum
of economic, psychological and physical costs. These perceived penalties for
disloyalty deter customers from switching to a rival firm's brand.Barriers to switching
can be present due to high switching costs. Switching costs reduce consumer
flexibility and lower the pressure exerted by the prospect of a consumer migrating to a
competitor.
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3.8.9 Advertising and Promotions
Marketing researchers have recognized that advertising plays a key role in the
acquisition of new customers (Bolton, Lemon and Verhoef 2004)169 and in affecting
the behavior of existing ones (Manchanda et al. 2006170; Prins and Verhoef
2007171).
Much of the advertising process is aimed at encouraging brand switching among
consumers, thus helping to grow market share for a given brand or set of brands.
Convincing consumers to switch brands is sometimes a difficult task. It is not unusual
for customers to build up a great deal of brand loyalty due to such factors as quality,
price, and availability. To encourage switching brands, advertisers will often target
quality, price, and availability as part of the strategy of encouraging brand switching.
Price is often an important factor to consumers who are tight budgets. For this reason,
advertisers often use a price comparison model to entice long time users of one brand
to try a new one. The idea is to convince the end user that it is possible to purchase the
same amount of product while spending less money and can be an effective in the
encouragement of jumping brands.
However, price is not always enough to encourage brand switching. When this is the
case, comparing the quality of one brand to another is a common approach. When
coupled with a cost savings, the comparison of quality can often sway long time
consumers at least long enough to give the newer product a try. There are consumers
who are less concerned with cost. For these users, the approach is to present the new
brand as being of superior quality to the established brand. Essentially, this means
demonstrating that the new brand can do everything the older brand can do, plus a
little more. The implication is that the one product can take the place of three
products, and may motivate brand switching.
Inger Roos, Edvardsson and Gustafsson (2004)61 have in their study in Sweden
compared state services, insurance, retail banking, telecommunications and retail.
Based on the proposed trigger theory they test for the situational trigger, reactional
trigger and influence trigger and found that telecommunications sector is mainly
influenced by influential triggers (advertising).
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Some consumers are more likely than others to rely on external, impersonal sources of
information when making purchase decisions. In a study of purchasers of new
automobiles, Furse et al. (1984)172 identified two segments of consumers,
representing 44 percent of respondents that were characterized by their above-average
use of external, impersonal sources such as brochures, pamphlets, advertisements,
magazines, reviews, and ratings. Moreover, some purchase situations are more (or
less) likely to trigger the desire for external, impersonal sources of information. In a
study of durable goods, consumers preferred advertising and other external sources
when they believed they were capable of drawing their own conclusions about
product attributes and judging the merits of the product themselves. Consumers also
prefer external, impersonal sources more when choosing goods, but less when
choosing services (Keith Murray 1991)173.
Jane Lu Hsu, Wei-Hsien Chang (2003)174 reveal the role that advertising played in
brand switching. Matthew Shum (2004)175, in the breakfast-cereals market, reports
that advertising plays a major role in encouraging customers to switch service
providers. Manchanda et al. (2006)170 show, in an online setting, that banner
advertisement has a positive effect on repeat purchase probabilities. In a recent article,
Prins and Verhoef (2007)171 report a significant effect of advertising on reducing the
adoption timing of a new service among existing customers. Service advertising
focuses mainly on informing existing and potential customers about the advantages
and benefits of the service. On the one hand, it is reasonable to think of focal
supplier’s investments in service advertising as increasing customer switching
inconvenience because positive aspects of the service are highlighted (Bolton, Lemon
and Verhoef 2004)169.
Xueling Luo (2006)176 study focused on two main factors influencing brand-
switching, namely advertising and promotion, as well as their interactions with age,
product category, and price consciousness in Chinese market. The findings show that
promotion and advertising are positively related to brand-switching, and their effects
on brand-switching may vary across different age groups and product categories.
Young customers tend to be more easily influenced by promotions and advertising for
soft drink product, whereas middle age customers are more likely to be influenced by
the promotions and advertising for skincare product. Advertising may have stronger
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impact on increasing brand awareness, and promotions tend to have stronger effect on
repeat purchase. Higher price consciousness customers are more likely to be
influenced by the content of good value for money in advertising, and they tend to
prefer price-oriented promotional tools better.
Competitors’ service advertising is expected to reduce customer switching costs.
Following the same reasoning as above, competitors will use service advertising to
create awareness and knowledge of the services offered and to show their advantages
and benefits. Exposure to this kind of advertising will make customers of the focal
firm more informed about the services supplied by the competitors, reducing the cost
involved in acquiring, evaluating and comparing the information and, at the same
time, reducing the risk involved in the switching process. Moreover, highlighting the
advantages and strengths of competitors’ services might induce switching among
existing customers of the focal firm, as they will be aware of the potential benefits of
switching providers. In this vein, Matthew Shum (2004)175 reports a significant
reduction in the switching barriers as a consequence of competitors’ advertising.
Bansal H S, Shirley F Taylor, Yannik St Jam (2005)147 suggests that service
switching is influenced less by customer evaluations of service provider
characteristics and service experience (push variables) than by alternative
attractiveness (pull variables- advertising and promotional schemes) as well as
personal and social factors (mooring variables).
Lin, Su-Man Wang, Huei-Ying Hsieh (2003)142 done research on the brand
switching behaviour of Taipei female consumers when purchasing U-V skincare
products. This study aims to further examine whether advertising can influence three
different customer groups in their satisfaction with, loyalty towards, and involvement
with service providers. Advertising was introduced as an intermediate variable, and
models of how advertising affects consumers were applied to develop a new
analytical model. This study finds that three different customer groups differ
significantly in their brand purchasing involvement but do not differ significantly in
their responses to advertising.
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Ehrenberg (2000)177 mentioned that customers may not be interested in an
advertisement for a new brand which they do not frequently purchase, and customers
may purchase more than one brand product during a period of time. Therefore, the
first step of brand choice behavior, creating brand awareness, is important. In
addition, Stimulating customers to try the new brand is also crucial, because
customers will probably only form repeat purchase behavior after they try the product.
Promotions influence consumer choice and cause consumers to switch from one brand
to another brand (Baohong Sun, Scott Neslin, Kannan Srinivasan, 2002)178. The
magnitude of the brand switching effect, at least relative to dynamic effects such as
stockpiling, has been examined by Gupta (1988)179, Chintagunta (1993)180, Chiang
(1995)181, Bucklin, Gupta and Siddarth (1998)182 and Bell, Chiang,
Padmanabhan (1999)183. Taking into account purchase incidence, brand choice and
quantity, they find that brand switching accounts for the majority of the current period
promotion effect.
Promotion tools have been considered as one of the most useful tools to influence
sales volume in a short-term period of time (Laroche et al., 2003)184. Neslin et al.
(1985)185 considered promotions as sales acceleration and maximizing tools.
According to Gupta (1988)179, the impacts of price and promotions on which brand
customer will choose, when they are willing to buy the product, and how much they
are going to buy are significant. Laroche et al. (2003)184 summarized three main
advantages of sales promotion, including “triggering unplanned purchase,
encouraging customers to purchase nonpromoted merchandises, accelerating the
number of shopping trips to the store”. Clearly, promotion has been considered one of
the stimuli of brand-switching and repeat purchase.
The main purpose of promotion could be attract more new customers, rather than
stimulate existing consumers to buy more same product. However, according to
Uncles Ehrenberg and Hammond (1995)186, price promotion has more impacts on
existing consumers rather than potential customers. In contrast, the results of other
research (Gupta, 1988179; Bell, Chiang and Padmanabhan, 1999183) shows that
superior effect of promotion is on the buyers who switch from other brands rather
than on the existing buyers. In the research conducted by Gupta (1988)179, brand-
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switching accounts more than 80% of sales increase during the promotion, including a
small percentage of sales increase comes from the switching within a brand.
Oliveira-Castro et al. (2005)187 argues that “the major impact of promotions is on
brand switching rather than increased consumption”. According to Shi, Cheung, and
Prendergast (2005)188, previous research has revealed the relationship between sales
promotion and customers’ behavioral responsiveness, and the research showed that
sales promotion has the positive influence on customers’ behavior, such as “brand
switching, stockpiling, purchase acceleration, product trial and spending larger
amounts”, although there are some arguments about the negative influences of price
promotion for higher level brands (Ehrenberg, Hammond, and Goodhardt,
1994)189. However, the negative effect on brand has not been proved by the research
conducted by Davis, Inman and McAlister (1992)190.
Research studied on five promotion tools and brand switching in Hong Kong (Shi,
Cheung, and Prendergast, 2005)188 proved that three promotion tools, price
discounts, buy-one-get-one-free offers, and in-store demonstrations, have significant
influence on brand choice and on brand-switching. Ram and Sheth (1989)191
believed that demonstrations in stores can attract customers to try new products, and
the barriers of function and emotion can be reduced. Other promotional tools, such as
“cents-off and free gift” have been also studied in Lichtenstein et al.’s research
(1997)192.
Thus the effects of advertising and promotions on brand switching have not been
exclusively examined with reference to GSM cellular services by previous
researchers. This paper intends to reveal the influence of that advertising of
promotional schemes on customers brand switching. The results of this study not only
fill in the gap of the relationships between advertising, promotions and brand
switching in marketing literature, but also benefit companies in effective planning of
their advertising and promotions for encouraging switching of competitors customers.
3.8.10 Mobile Number Portability
When it comes to telecommunication service, number means more than the means of
distinguishing a communications network or service, a carrier and a subscriber, etc.
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The number is one of the important elements organizing the environment of
telecommunications. And the number resource is a kind of a limited resource which
needs systematically and efficient management (Reinke, 1998193; Lee et al., 1999194).
However the number in mobile service has a distinctive characteristic, Most of all, the
number of mobile service is one of the important brand assets of service provider and
they are exercising brand power. And the number is regarded as a brand name so it
shows a distinctive influence on a choice of a carrier or retention of subscription. In
addition the intensity which the number acted as switching cost is stronger than any
other telecommunication services.
The number becomes a sort of intangible asset and to a customer, the changing
number means disconnection or difficulty of communications with other people, until
it is noticed. Consequently, it acts as an important switching cost. This heightens
switching barrier inside the industry, restricts a subscriber’s choice of a carrier and
then limits competition between companies in the market (Kim et al., 2004)104.
MNP allows subscribers to retain their existing mobile telephone numbers when
switching from one access service provider (telecom operator) to another, irrespective
of mobile technology or from one technology to another, of the same or any other
access service provider. In other words, it enables the subscriber to retain his/her
phone number, when switching subscription from one mobile service provider to
another. Mobile Number Portability is a fundamental prerequisite for competition in a
telecommunications market. Without this facility users are locked into their existing
suppliers and can change operator only with considerable disruption and expense.
Figure 3.5 - Mobile number portability
Competition between mobile service providers in India is already intense. The
beneficiary of this competition would be the Indian consumer. Mobile Number
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Portability benefits subscribers and increases the level of competition between service
providers, rewarding customers with the best customer service, network coverage, and
service quality. It also enables business to save time and expenses on advertising the
changed numbers, creates new opportunity for technology development, while
rewarding the most competitive and most consumer-friendly service provider.
In the Indian context, Mobile Number Portability (MNP) will encourage the
introduction and adoption of new telecom services and technologies. This will not
only benefit users but also those service providers who continually upgrade and
innovate to enhance Quality of Service (QoS). Additionally, it is a source of
competition between all telecommunications operators. MNP gives the freedom to the
consumers to switch the operator without any concern about retaining their number.
MNP implementation removes barriers to competition and ensures a fully dynamic
competitive market. Subscriber customers and operators who price competitively and
provide quality service will benefit most from execution of MNP.
Subscribers need to change their cell phone numbers when changing service
operators. Changing a cell phone number can be a major inconvenience and a barrier
preventing them from exercising the choice of changing operators. This inability
prevents customers from taking full advantage of the intense market competition
among operators or the introduction of new services and technologies. Mobile
Number Portability eliminates these hurdles.When these distinctive characteristics put
together, the number of mobile service acts as a carrier’s important intangible asset
raising customer retention and loyalty. Because this effect was eliminated with the
introduction of MNP, switching is promoted and the competition between carriers is
considerably activated. In addition, customer’s option of a carrier is spreaded with the
introduction of MNP and removal of switching barrier caused by number like
inconvenience of switching number. Influence of MNP on customer’s benefit and
competition between telecommunication carriers is expected to be huge. This is
caused from decrease or change of the effect which the number has on mobile service,
through the introduction of MNP.
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Effect of mobile number portability
Benefits to phone subscribers
• Mobility from one service provider to another, without changing the number
• Price competition if the market is competitive
• Competition among force service providers will lead to improvement in quality of
service and product innovation, in order to retain and expand the customer base
• Many value-added services may be offered by service providers to attract
customers, either free or at low costs
Costs for phone subscribers
• Telecom operator charges porting fees in many countries. These charges comprise
of administrative fees and recurring monthly fees for number porting services.
• Often, there is a waiting period for mobile subscribers to get their number
successfully ported. This waiting period ranges from 1-2 working days in Hong
Kong, to 4-7 working days in Taiwan and Singapore, resulting in too much
inconvenience for subscribers.
Benefits to telecom operators
• It increases competition by allowing consumers to switch service providers, yet
retaining their old mobile phone number, which help telecom operator to improve
its product line and services.
• It provides a fair chance to all the service providers. Player with better quality of
service and innovative products can sustain in the long term.
• It can be one of the major reasons for the industry to consolidate.
Costs for telecom operators
• Increase in churn rate directly affects the
revenues of the service provider.
• Increases price competition.
• It may put pressure on margins, as product
innovation costs and marketing costs may increase.
• Investments in back-end services
Mobile Number Portability (MNP) is officially in the market now. Mobile subscribers
no longer need to change their numbers if they want to switch to another telecom
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operator for better customer support or cheap tariff structures. Shifting to another
provider can never be so easy. Telecom companies did start their campaigns to woo
new customers thru MNP. And, almost all providers did give some official press
releases on how they were looking forward towards MNP scheme. And, now with all
the MNP campaigns floating on TV, Paper, billboards, sky scrappers and other
hoardings, lets take a call on which one fares the best – at least advertisement wise.
According to Ranot Hitesh (2011)195, ‘Ideas’
Campaign across various media promotes MNP
launch date and helpline number; leads the industry in
MNP communication’. Idea Cellular, the first mobile
operator to announce the upcoming Mobile Number
Portability (MNP) recently has now launched a Toll Free Number 1800-270-0000 to
guide over 700 million mobile subscribers on various aspects and processes and
procedures of availing MNP and porting requests from mobile subscribers who wish
to switch to Idea. With this, Idea continues to lead the industry in MNP
communication through a series of new advertisements.The earlier ads, the first such
campaign on MNP in India, showed Idea proposing the idea to unhappy mobile
consumers to switch to a network that offers better services, better products & tariffs,
and better network, through the message – ‘No Idea, Get Idea’. Idea has also launched
a microsite www.getidea.co.in – an information portal for MNP for the digital users.
According to the article published by Govindassamy
Manoj (2011)196 Vodafone, TV commercials and web
portals are all set to welcome new customers. BSNL
has gone one step ahead and advertised that its not
going to charge MNP fee of Rs.19/- for the new
customers moving in from other operators.
IDEA and Vodafone initiates with TV Commercial,
while all other operators choose print ads and other
medias over a special TV commercial for Mobile
number portability. Uninor, in its statement said – “It’s
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the day of freedom in the mobile industry today. Customers are finally free to choose
as they want. Customers now have real power to make their operators pay attention.
This is free and fair competition and we welcome it. We are ready and eager. In
Dynamic Pricing, we have a product that stands apart from anything else out there in
the market. MNP will now allow prepaid subscribers to get the benefits of upto 60%
location and time based discounts on their calls by moving to Uninor”.
A TV commercial for Airtel MNP is not seen yet. May
be Airtel is confident enough that no one would be able
to woo its customers under MNP and make them switch.
However there is MNP dedicated airtel page. Reliance
neither has a MNP dedicated TV commercial so far. But
they also have a web page for MNP. With the
commercials available so far, Vodafone is leading the pack in coming up with yet
another creative ad for MNP. And, IDEA is far better for having a descent TV
commercial for MNP.
No much preparation from other big telecom player
likes Aircel, Tata Docomo yet. Indeed, in advance of
MNP, Tata Teleservices Ltd. has introduced a
"Customer Service Charter." But it is sure that other
players would come up with similar Ads for MNP
and promote switching to their brand of service.
According to the research conducted by The Nielsen Company (2009)197 it seems
that close to one in five (18%) Indian mobile phone subscribers would change their
mobile operator if Mobile Number Portability is introduced into the market.
According to Nielsen, high spenders, postpaid subscribers and business subscribers
show a greater tendency to switch if Mobile Number Portability is introduced.
Prepaid, low and medium spend users are not motivated to switch. According to
Kapoor Abhishek, (2009)198 among the respondents, one in four Reliance and Tata
Indicom subscribers would be keen to change their operator if Mobile Number
Portability is introduced, followed by close to one in five (19%) of BSNL subscribers.
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According to Sultan Ul Arfeen, (2007)199 Pakistani market is similar to the Indian
market in many respects, with low ARPUs and a high number of operators. MNP was
implemented in Pakistan in 2007, and the impact "was minimal, with a churn rate of
less than 1 percent. The tariff war had ensured that the rates offered by the operators
were similar, thus there was no obvious reason to move from one to another.
But there is one major difference between Pakistan and India -- the cost to the
consumer of switching service provider. In Pakistan the original tariff was the
equivalent of Rs.500 (US$10.96), later reduced to Rs.250 ($5.48), though In India,
though, the cost of switching providers under MNP is fixed at just Rs.19 ($0.42), a
low price that shouldn't deter anyone wanting to make a change (Bhatia Kamlesh,
2011)200.
MNP has often been considered as a tool utilized by the Government to effect
increased competition and improve quality of service, since the subscriber has the
liberty to switch from one service provider to another. The subscriber will benefit, as
he/she gets better and innovative service at a fair price. MNP works well in the
backdrop of sound telecom system and infrastructure, highly penetrated market and in
an environment of cut-throat competition. Service providers are mostly apprehensive
about MNP due to the fear of high churn rates. However, as per the global experience,
churn rates have not necessarily moved up, after the implementation of MNP, due to
issues such as porting charges, time taken to port and homogeneity of services offered
by various operators. Intensity of competition, its impact on pricing and quality of
service are the major drivers of MNP.
According to Prateek Waghre (2011)201 within 12 days of MNP regime in Haryana
there were about 30000 to 35000 requests (0.2%) and telecommunication companies
had expected this number to rise to 1.5% over 2 months – still less than the monthly
churn of 5%. At the month end of MNP implementation total of 140,000 requests
(approx) were made of which 50,000 were rejected. The actual churn was estimated to
be around 80,000 in Haryana with a total subscriber base of 19 million.
According to Sources in the Department of Telecom, that there were teething
problems in implementing the system, with complaints coming in from various
quarters that porting was not being completed in some cases. The DoT has written to
all the operators to implement the scheme according to the rules set out by the TRAI
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and the Government. If a subscriber sends porting request to number 1900, operators
have to respond back with the unique porting code. There should not be any
exceptions or excuses for this. DoT received some complaints about operators who
are not processing porting requests , which are under investigation.
Research conducted by Dholakia Viral (2011)47 states that Network coverage (34%)
and tariff rates (30%) emerged as the top 2 reasons as to why subscribers want to avail
of MNP while retaining their number. The early set of numbers from Haryana
provides that BSNL and Reliance Communications have emerged as biggest losers in
the race of poaching subscribers led by MNP.
Graph - 3.1: Reasons for switching through MNP
Manit Satits, Pong Amit & Hitoshi Mitomo (2008)202 conducted a study on
Analysis of ‘Factors Influencing Customer Switching Decision targeting college
going students in Thailand and found that expected reduction in monthly phone bill is
still the most important factor that affects decision to switch operators. In addition, the
study indicates that brand is also another important issue when switching operators.
This means that even though most operators can provide similar services, subscribers
still choose a particular brand over others. This might be a result from being early
mover in the industry to build larger coverage area and to provide better voice quality
before others. Moreover, time to process MNP is negative related to switching
decision. If it takes longer time for subscribers to use the current phone number with
the new operator, it is less likely for subscribers to switch the operators.
Another issue is the MNP adoption fee. It is negatively related and significant to
switching decision. The less MNP fee it is, the higher probability subscribers tend to
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switch the operators. Therefore regulator should be more conscious on how to set the
MNP adoption fee. Lastly, the study suggests that post-paid users tend to switch
operators more than prepaid users when MNP becomes available.
Dong H. Shin Won Y. Kim (2007)203, conducted a research on Mobile number
portability on customer switching behaviour in the Korean mobile market. This study
seeks to investigate the effect of mobile number portability (MNP) on mobile
subscribers in Korea by focusing on subscribers' perception and behavior related to
MNP. Statistical analyses in this study reveal that subscribers perceive the switching
barrier still as high which discourages subscribers from switching service providers.
While MNP lowered switching costs considerably, a significant level of switching
costs still remains despite MNP. Carriers develop new subscriber lock-in strategies
that make them stay with current carriers. In addition, there are hidden costs other
than MNP that should burden subscribers with number porting.
The findings imply that the MNP has directly affected the industries to a greater
extent than subscribers, which suggests implications for both regulators and
industries: how to effectively enforce MNP to achieve the intended goals and how to
achieve competitive advantage with MNP.
Srinagesh and Mitchell (1999)204 analyze that MNP has significantly contributed to
the effective competition in the US mobile market. Gans et al. (2001)205 also
positively assess that MNP would encourage participants to search for and achieve
socially efficient outcomes by giving consumers' ownership of their phone number
and a right to port a number. Other studies highlight the negative aspects of MNP.
Reinke (1998)193 argues that even if number portability can increase the competition
in the telecommunication market, the means by which number portability is
implemented may either ensure or threaten competition and universal service.
Another stream of literature on the MNP effects is in analysis of customer behaviors
toward MNP. Shin (1999)194 investigates the effect of MNP in the USA by focusing
on subscribers' perception and behavior on MNP. He estimates subscriber preference
of considering attribute of choosing a carrier through conjoint analysis technique.
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They also estimate quantitative user's value given to switching cost and MNP and
conclude MNP is an important cause of decreasing switching cost.
Jeong and Park (2003)206 examine the difference of subscribers' switching intention
before and after the introduction of MNP in Korea. Their study finds the factors
associated to switching: service quality, brand image and price and service benefits.
He further analyze the structural relationships of the identified factors of brand
perceived level, service quality, a charge cut and value-added service. This study
would have been better with a specific customer retention strategy of operators with
MNP.
Lee et al. (2004)207 used contingent valuation techniques to estimate the prospective
demand for MNP in South Korea. They found that the average South Korean mobile
user was willing to pay an average of 3.24 percent of his or her monthly bill for a
mobile number portability option. Willingness to pay (WTP) showed a strong positive
association with income, awareness of MNP, and intention to switch. The authors also
found that WTP varied significantly depending on a user's network operator: the
figure was lower for customers of the incumbent operator than those using either of
the alternative operators. Other demographic variables such as age, gender and
occupation were not found to be significant. Data reported in the paper indicate that
there was significantly more switching after MNP was introduced.
In an effort to enhance competition and improve consumer satisfaction, regulators in
many countries have introduced mobile number portability (MNP) which allows
consumers to keep their mobile number when they change network provider. This is
widely regarded as a fundamental prerequisite of open competition and choice. But in
the UK, a survey conducted by the National Consumer Council 208 found that
switching is quite limited in the mobile telephony market. This may be the
consequence of high switching levels over the past few years leading to a reduction in
current switching potential. Indeed the introduction of MNP was initially expected to
result in a surge of competitive activity as carriers sought to seize the opportunity to
grow market share by attracting consumers from rivals but this did not occur as much
as some expected.
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According to a report by Analysys, a consultancy firm (2006)209, take-up has been
lower than some expected with less than 10 percent of mobile numbers being ported.
This report concludes that regulators and operators need to make improvements to
current MNP solutions which have significant barriers to consumer take-up, such as
high charges for porting a number, long delays before porting takes place, and
limitations to data services after number porting. Notably the report concludes that
one of the biggest barriers to MNP is that consumers do not realise it is available. It
warns that even with the best technical solutions and processes in place, if regulators
and operators do not publicise the availability of MNP it will fail.
Industry retention surveys have shown that while price and product are important,
most people leave any service because of dissatisfaction with the way they are treated.
They would not be looking around if they were happy with their current provider, its
service and employees. How well the operators take advantage of MNP would depend
on how soon they upgrade to customer centric marketing. There is a huge pressure on
operators to become creative marketers and focus on retention, customer loyalty and
demonstrable value. Adoption of more aggressive customer loyalty programs by the
operators will be the key to revenue enhancement and retention.
Though number of empirical papers grows quickly still there is enormous space for
investigation. Few attempts have been made to measure the effect of MNP at
subscriber levels leaving the concept of switching reasons unclearly defined terms.
The present study aims to fill this gap by investigating the effect of the introduction of
MNP on subscribers' behaviors and perceptions, and therefore their plans for
switching or remaining with mobile service provides with the introduction of MNP.
3.9 Switching barriers and customers retention
Effective Customer acquisition and retention is fundamental for the profitability and
ultimate survival of communications service providers (CSPs). The issue of brand
switching is of crucial importance to marketing research and practice, as the benefits
related to customer retention in comparison with attracting new customers is very well
explained in the literature (Shukla 2004210; Berry and Parasuraman 1991211)
115
According to Arthur Middleton Hughes (2008)212 Churn reduction in the telecom
industry is a serious problem. Managing customer churn is of great concern to global
telecommunications service companies and it is becoming a more serious problem as
the market matures. Customer churn adversely affects these companies because they
stand to lose a great deal of price premium, decreasing profit levels and a possible loss
of referrals from continuing service customers (Reichheld & Sasser, 1990)66.
Furthermore, the cost of acquiring a new customer can substantially exceed the cost of
retaining an existing customer (Siber, 1997)213. In a highly competitive and maturing
mobile telecommunications service market, a defensive marketing strategy is
becoming more important. Instead of attempting to entice new customers or lure
subscribers away from competitors, defensive marketing is concerned with reducing
customer exit and brand switching (Fornell & Wernerfelt, 1987)67.
Reichheld (1996)66 states that, the strategic focus of a company ought to shift from
acquiring customers to retaining customers by reducing customer churn.
The initial starting point for preventing such switching or reducing its occurrence
probability is to understand the motives and barriers behind this switching. The
literature identified two main types of the problems customers might experience in
their relationships with the service provider; these are manifest and judgmental
problems (Andreasen, 1977)214. Manifest problems are perceived by the customers as
issues that might be solved if reported to the management. Judgmental problems, on
the other hand, perceived as issues, which both the customer and the service provider
will have different opinions about it, i.e. most probably it will not be resolved even if
the customer complain about it to the management. The complaints, which customers
will raise to the management, are of the first type where they are expecting
resolutions, while for the second type they probably will not report it and might work
as a hidden motive in pushing customers in the switching direction (Colgate and
Hedge, 2001)74.
In a defensive service management “service recovery” plays an important role
deterring customer to switch of the service firm. There is a dramatic impact of service
recovery on organizations revenue and profitability. The strategy of service recovery
is deemed as an important element in achieving long-term customer satisfaction for
services firms and thus as a significant determinant of customer loyalty (Tax and
116
Brown, 1998)215. Gronroos (1990)216 defined service recovery process as “those
activities in which a company engages to address a customer complaint regarding a
perceived service failure”. A successful recovery attempts intensify a customer
relationship with service provider, while poor recovery leads to increase the negative
effects of failure Tax and Brown, 1998)215.
Tax and Brown (1998)215 found in their research that most of the customers are
dissatisfied with the way companies handle their complaints. That is, most customer
retain negative image about the service provider after going through a service
recovery actions. On the other hand, failed recoveries imply a leading cause of
customer switching behaviour (Keaveney, 1995)53. Fornell and Wernerfelt (1987)67
in their study argued that customers satisfaction can be reversed by well-executed
service recoveries and prevent customer switching, prevent the spread of damaging
word of mouth, and increase bottom-line performance.
Four main barriers from switching had been acknowledged as follows-
• Relationship investment, as consumers might develop relationship with service
providers that provide superior valued benefits, this relationship might prevent
them from switching even though the core service is perceived as less than optimal
because of the relationship they managed to develop.
• Switching costs, are the costs (time, monetary and psychological) emerge from
either the termination costs of the current service provider or the joining costs with
the alternative service provider, i.e. dissatisfied customers might retain with their
customers because of high switching costs (Lam et al 2004217, Morgan and Hunt
199426; Gronhaug and Gilly 1991218).
• Service recovery, the efforts of the service provider to rectify, amend and restore
the losses experienced by the customer following a service failure. The service
recovery paradox indicate that successful service recovery might result in
customers being more satisfied than prior to the problem (Tax et al 1998) 215
• Alternatives availability, perceived appropriateness of alternatives is identified as a
key factor in sustaining the relationship with the service provider, i.e. prevent
switching (Szmigin and Bourne 1998219; Bejou and Palmer 199873).
117
Research conducted by Ofcom (2006a) 220, the UK National Consumers Council
(2006) and others suggest that in the telecommunications sector there is a range of
important deterrents (Barrier) to switching, including:
• Lengthy and cumbersome switching procedures can make it inconvenient for
consumers to switch and can outweigh any potential benefits.
• Early exit charges, imposed by an existing provider, can reduce the benefits of
switching.
• Technical incompatibility of equipment can make it uneconomical to switch.
• Confusing products and non-transparent pricing can make it difficult or time
consuming to compare deals (as in the case of mobile telephony and the internet).
• Long-term deals can lock consumers into lengthy relationships with their providers
and increase the risk of them being overcharged.
According to Lesley White & Venkata Yanamandram (2007)221 four major factors
deter customers from switching to an alternative service provider: switching costs;
interpersonal relationships; attractiveness of alternatives; service recovery; & inertia.
These factors are mediated by dependence and calculative commitment -
(1) Switching cost
The switching cost is a main factor having effect on the customer retention. As the
switching cost increases, risk and burden on consumers are increased and dependency
on the service provider gets increased as a result. In other words, the more consumers
recognize the switching cost, the higher retention rate even though customers have
dissatisfaction on the service.
(2) The interpersonal relationship
The long term interpersonal relationship between the company and customers offers a
lot of benefits to the customers. Social benefits such as fellowship and personal
recognition, psychological benefits such as reducing anxiety and credit, economic
benefits such as discount, time-saving, and finally customization benefits such as
customer management and etc. Therefore the interpersonal relationship between the
company and the customers can be an important factor as a switching barrier.
118
(3) No availability of the attractiveness of alternatives
When consumers does not find that they have various alternatives or the service level,
distinguished image of the alternatives is better than the current service provider, the
possibility the customers switch the service provider is very low. Therefore, the
attractiveness of the alternatives would be a component building the switching barrier.
(4) The service recovery
The service recovery means the ability of the service provider to solve the problem
such as the customer dissatisfaction and the service failure. The active effort of the
company to solve the problem helps customer have credit on the service provider.
And appropriate effort for the service recovery can protect customers from switching
the service provider. The service recovery at the service encounter is a foundation to
develop the customer relationship into a long-term friendship. Therefore the service
recovery can be a component for the switching barrier.
No matter how customer loyalty is defined, in order to retain, any operator needs to:
• Increase subscriber satisfaction by raising offered service quality (Anderson and
Sullivan, 1993222; Brady and);
• Ensure subscribers' trust in the firm (Fournier, 1998223; Gundlach et al., 1995224;
Morgan and Hunt, 199426); and
• Establish a cost penalty for switching to another service provider, making that a
comparatively unattractive option (Jones et al, 2000225; Burnham et al, 2003164;
Feick et al, 2001103).
Of late, switching barriers have been used as effective marketing strategic tools for
many organizations to make it complex for customers when they think to change
another supplier. These barriers discourage customers from leaving the current
organization (Cohen et al.2006)226. “Even with relatively low levels of satisfaction,
the customer continues to patronize the service provider because repurchasing is
easier and more cost effective than searching for a new provider or sampling the
services of an unknown provider” (Curasi and Kennedy, 2002)227.
119
Over the next five years, the industry's biggest marketing challenge will be to control
churn rates by identifying those customers who are most likely to leave and then
taking appropriate steps to retain them. The first step therefore is predicting churn
likelihood at the customer level. Loyalty and retention are often terms used
interchangeably. While they both impact churn, they are very different and should not
be confused. Loyalty relates to an emotional bond between service provider and
consumer and typically goes beyond simple price and product promotions. As a result,
loyal customers often become brand advocates and deliver enormous value through
word-of-mouth recommendations. Unfortunately, despite such value the results of a
loyalty program are often long-term and difficult to accurately identify.
Retention strategies are instead highly visible and deliver immediate results. Such
programs relate to stopping a consumer from leaving a network at a point of churn.
Typically they are driven by price and/or product promotions. A retained customer
therefore, may not necessarily be a loyal one. By the same token, although churn can
reflect poor customer satisfaction it does not directly show the degree of satisfaction
within a subscriber base. When a customer churns because of poor customer
satisfaction it’s typically too late to perform a recovery.
To counter this, operators should use a collection of measures to better predict churn,
including, Customer Lifetime Value and Customer satisfaction analysis scores.
Customer lifetime value (CLV) represents the net present value of profits, coming
from the individual customer, which creates a flow of transactions over time (Pfeifer,
1999)228. The customers' lifetime value is constituted by three components- customer's
value over time, length of customers association and the services offered to the
customer.
3.10 Researcher has identified following gaps in the previous literature -
Although prior service switching literature has provided us with very useful
contributions, it is apparent from the overview of the literature presented above that
three research gaps exist in the literature on responses to brand switching behaviour of
customer.
120
1) Studies have specifically focused on Bank, FMCG, Retail, Energy, and Telecom
industry. But no specific research has been found pertaining to the context of
GSM cellular services and brand switching in it.
2) There has been no attempt to identify exactly which demographic factor influence
brand switching? What is the effect of dissatisfaction on brand switching? Degree
of influence of MNP on customers’ brand switching? And what is the effect of
advertising of sales promotion schemes on customer’s brand switching decision?
3) No research has hitherto investigated any patterns of brand switching in mobile
services industry.
Indeed, a gap in the literature needs to be filled. So this research study titled as
“Brand Switching Behaviour of Subscribers of GSM Cellular Services in Pune
City” shall contribute to body of knowledge while covering the identified literature
gaps mention above.
121
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