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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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