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Proceedings of the Second Middle East Conference on Global Business, Economics, Finance and Banking (ME15Dubai Conference) ISBN: 978-1-941505-26-7 Dubai-UAE, 22-24 May, 2015 Paper ID: D542 1 www.globalbizresearch.org Exploring the Relationship between Relationship Marketing, Relationship Quality, and Customer Loyalty in Nigerian Telecommunication Industry Donald Rotimi Ogungbade, Faculty of Management Studies, Osun State Polytechnic, Iree, Nigeria. E-mail: [email protected] _____________________________________________________________________ Abstract Despite the increases in the number of telecommunication operators in Nigeria and the massive promotional activities embarked upon by these operators, increasing number of customers still express dissatisfaction with the level of services being provided. Given a good knowledge of relationship marketing, understanding customer satisfaction and loyalty has become a most critical issue for Mobile Telecom operators. This paper examined the effect of quality service, price perception, brand image and value offers on customer satisfaction and how satisfaction influences the loyalty of customers in modern business operations. Data was collected from 81 pre-paid mobile subscribers from four operators (MTN, Airtel, Glo and Etisalat) through self-administered survey questionnaire. The Statistical Package for Social Science (SPSS) software was employed to analyze the data collected from the survey with the aid of Multiple Regression Analysis (OLS) estimation. The findings show that service quality, price perception, brand image and value offers are predictors of customer satisfaction. The findings also indicate that customer satisfaction has high strong influence on customer loyalty but it was however concluded that customer satisfaction alone cannot lead to loyalty unless it is backed up with trust towards both the service and the service provider. ___________________________________________________________________________ Keywords: Relationship Marketing, Relationship Quality, Customer Loyalty, Trust, Satisfaction.

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Page 1: Exploring the Relationship between Relationship …globalbizresearch.org/Dubai_Conference2015_May/conference/psd/D542.pdfcollected from 81 pre-paid mobile subscribers from four operators

Proceedings of the Second Middle East Conference on Global Business, Economics, Finance and Banking (ME15Dubai Conference) ISBN: 978-1-941505-26-7

Dubai-UAE, 22-24 May, 2015 Paper ID: D542

1 www.globalbizresearch.org

Exploring the Relationship between Relationship Marketing,

Relationship Quality, and Customer Loyalty in Nigerian

Telecommunication Industry

Donald Rotimi Ogungbade,

Faculty of Management Studies,

Osun State Polytechnic, Iree, Nigeria.

E-mail: [email protected]

_____________________________________________________________________

Abstract

Despite the increases in the number of telecommunication operators in Nigeria and the

massive promotional activities embarked upon by these operators, increasing number of

customers still express dissatisfaction with the level of services being provided. Given a good

knowledge of relationship marketing, understanding customer satisfaction and loyalty has

become a most critical issue for Mobile Telecom operators. This paper examined the effect of

quality service, price perception, brand image and value offers on customer satisfaction and

how satisfaction influences the loyalty of customers in modern business operations. Data was

collected from 81 pre-paid mobile subscribers from four operators (MTN, Airtel, Glo and

Etisalat) through self-administered survey questionnaire. The Statistical Package for Social

Science (SPSS) software was employed to analyze the data collected from the survey with the

aid of Multiple Regression Analysis (OLS) estimation. The findings show that service quality,

price perception, brand image and value offers are predictors of customer satisfaction. The

findings also indicate that customer satisfaction has high strong influence on customer loyalty

but it was however concluded that customer satisfaction alone cannot lead to loyalty unless it

is backed up with trust towards both the service and the service provider.

___________________________________________________________________________

Keywords: Relationship Marketing, Relationship Quality, Customer Loyalty, Trust,

Satisfaction.

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Proceedings of the Second Middle East Conference on Global Business, Economics, Finance and Banking (ME15Dubai Conference) ISBN: 978-1-941505-26-7

Dubai-UAE, 22-24 May, 2015 Paper ID: D542

2 www.globalbizresearch.org

1. Introduction

The telecommunication industry is becoming one of the most important industries in the

world. The telecommunication industry includes radio, television, fixed and mobile telephone

and the internet. Telecommunication influences the world economy and the

telecommunication industry’s revenue was estimated to be $1.2 trillion in 2006. In Nigeria,

percentage contribution to the GDP increased to 7.76% in September 2013 from 3.66% in

September 2009.The sector has contributed and continued to contribute towards the

development of socio economic condition of Nigeria.

The process of deregulating the telecommunication industry in Nigeria began in 1992

with the establishment of Nigerian Communications Commission by Decree 75 of 1992. The

objectives of the regulation have been to create an environment which would facilitate the

supply of telecommunication services, allowing private entrepreneurs to enter the market

while promoting fair competition and enhancing level of service for the concerned. The sector

was formally liberalized in January 2001 with Econet and MTN taking off in June and

August, 2001 respectively. The country has 183,047 active subscribers (fixed wired/wireless

lines), 138,530,830 active subscribers (mobile cellular GSM) and 2,108,960 active

subscribers (mobile CDMA lines) as at January 2015 (Nigerian Communication

Commission). So, the Nigerian telecommunication industry has already become a mature

market. The major Nigerian mobile operators – MTN, Glo, Airtel, and Etisalat – have

launched a mobile marketing initiative with the four companies sharing more than 90% of

Nigerian telecommunication market.

The GSM mobile telecommunication sector in Nigeria is very much competitive and this

competition trend is increasing. Nigerian subscribers now have various alternatives to choose

from according to their convenience. Therefore, to remain competitive in the market, mobile

operators have to identify the factors related to consumer satisfaction and loyalty. Cheng and

Ching, (2007) opined that with the tremendous growth in the mobile service industry, service

operators are facing two problems, i.e. to increase market share and gain competitive

advantage. Therefore, to increase market share and gain competitive advantage, operators

have to identify the factors related to relationship marketing, customer satisfaction and

loyalty.

Satisfaction and loyalty are two stages in the customer’s response to the company’s

offerings (Torres-Moraga, Vasquez-Parraga and Zamora-Gonzalez, 2008). Zeithaml, Berry

and Parasuraman,(1996) agreed that satisfaction is found to be a necessary antecedent of

customer loyalty. First, customer satisfaction makes customer have a higher likelihood of

repeating purchase; second, recommend others to try the source of satisfaction; third, become

less receptive to competitors’ offerings ( Torres-Moraga et al., 2008). In view of the above

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Proceedings of the Second Middle East Conference on Global Business, Economics, Finance and Banking (ME15Dubai Conference) ISBN: 978-1-941505-26-7

Dubai-UAE, 22-24 May, 2015 Paper ID: D542

3 www.globalbizresearch.org

submissions, customer relationship marketing plays an important role in telecommunication

industry. It demands a relationship-oriented strategy in marketing (Grönroos, 2004).

Increasing market share and gaining competitive advantage is difficult where companies

provide similar products and services. Mobile operators are facing this problem besides

customer oriented approach. The only option they have in retaining and attracting customers

is build a strong relationship with them.

2. Review of Literature

The empirical analysis has to be built on a comprehensive review of relevant researches

in the area of relationship marketing. A review of available literature on relationship

marketing is undertaken with a view to identify possible areas of enquiry. It also provides the

necessary background for the present study.

2.1 Relationship Marketing

According to Morgan and Hunt (1994), relationship marketing was defined as all the

marketing activities that are designed to establishing, developing, and maintaining successful

relational relationship with customers. Hougaard and Bjerre (2002, p.40) also defined

relationship marketing as “company behavior with the purpose of establishing, maintaining

and developing competitive and profitable customer relationship to the benefit of both

parties”. Due to profitable relationship on a lifetime basis may also create loss in some stages

during the lifetime, Hougaard and Bjerre (2002, p.40) argued that marketing management

must pay attention to three different objectives in terms of: (i) the management of the

initiation of customer relationships, (ii) the maintenance and enhancement of existing

relationships, and (iii) the handling of relationship termination.

Wulf et al. (2001) suggested that different levels of relationship duration would result in

different levels of consumption experience, producing different results, satisfaction and

loyalty with different relationship marketing tactics. Since the final purpose of relationship

marketing is to gain the maximal value of a customer, customer loyalty should be emphasized

to achieve this goal. The benefits of relationship marketing derive from the continuing

patronage of loyal customers who as a partnership are not sensitive to price cut over time

(Bowen and Shoemaker, 2003). Interdependence, mutual cooperation and commitment

between supplier and customer tend to be essential in relationship marketing, as such whole

relationship is viewed as the key to competitive advantage (Hougaard and Bjerre, 2002).

There have been various ways for marketers to implement relationship marketing

strategies, which are expected to have impact on customer retention and loyalty. In this

regard, Bansal, Taylor and James (2005) identified four varieties of strategies: service

quality, price perception, value offered, alternative attractiveness, and so on that can be used

to execute relationship marketing. Peng and Wang (2006) also examined the application of

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Proceedings of the Second Middle East Conference on Global Business, Economics, Finance and Banking (ME15Dubai Conference) ISBN: 978-1-941505-26-7

Dubai-UAE, 22-24 May, 2015 Paper ID: D542

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relationship strategies in service quality, reputation (brand), price perception, value offers.

Based on the early theories, certain relationship marketing strategies which are considered of

importance in service industry, such as service quality, price perception, value offers and

brand image, will be focused in the following parts.

2.1.1 Service Quality

High service quality is regarded as a key to succeed in competitive service markets.

Many researches have showed that service quality perceived by customers are will directly

influence customers’ satisfaction, as well as their trust in the service firm (Parasuraman ,

Zeithaml and Berry, 1988; Aydin and Özer, 2005; Ismail et al., 2006; etc.). Customers might

be satisfied when a firm provides better services than their pre-purchase expectations.

Customer trusts also emerge when customers perceive positive service quality from a firm,

and believe the service firm would bring preferable outcomes for them. Liu, Sudharshan, and

Hamer (2000), found out that delivering more effective service quality than others is one of

the ways that a firm can be successful in achieving in today’s business environment. Offering

a high quality service is considered to be a visible way to create customers trust and

satisfaction, as well as obtaining competitive advantages and building a long-term

relationship with customers. This conclusion is based on strong evidence in the literature of a

relationship between service quality and customer satisfaction

2.1.2 Price Perception

Many researchers have pointed out that price perception influences customer satisfaction

and trust (Oliver, 1997; Peng and Wang, 2006; Cheng et al., 2008; Kim et al., 2008). Peng

and Wang,( 2006) also implied that customers often switch mainly due to some pricing

issues, e.g. high price perceived, unfair or deceptive pricing practices. However, Consuegra,

Molina and Esteban (2007), Dovaliene and Virvilaite (2008) stated that customers willingly

accept increased price provided service give more satisfaction. Research has also proven that

there is positive relationship between change in customer satisfaction and increase in price

acceptability (Nadia and Zeeriya 2013)

2.1.3 Brand Image

Brand concept has been frequently discussed in marketing literatures. Brand building is

not only an important driving force for marketing physical products, it is also a vital issue for

service firms. Brand image was defined by Keller (1993) as the “perceptions about a brand as

reflected by the brand associations held in consumers’ memory.” It is thought as the

perception or mental picture of a brand formed and held in customers’ mind, through

customers’ response, whether rational or emotional (Dobni and Zinkhan, 1990).

The development of a brand relationship with customers is based on a series of brand

contacts experienced by customers (Grönroos, 2000). What customer perceives the brand

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Proceedings of the Second Middle East Conference on Global Business, Economics, Finance and Banking (ME15Dubai Conference) ISBN: 978-1-941505-26-7

Dubai-UAE, 22-24 May, 2015 Paper ID: D542

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image during such experience is critical issue for a service firm to realize. Reliability of the

brand is a major factor in the selection of a product by the customer. Aker (1996) regarded

brand personality as being the core and the closest variable to customer’s decision making in

buying. Package Promotion Group also submitted that it is certain that all brands have

personality even if the organization didn’t design the personality. They argued further that the

personality is gradually shaped in the minds of the consumers according to their activities.

Kotler and Keller (2005) also noted that consumers usually select a brand having self-concept

congruence. A positive brand image can thus be used by a firm to convey its brand value to

consumers and also generate favorable word of mouth among people. It is therefore

concluded that a positive brand image is supposed to meet customer’s expectation and offer

more benefits to customer, which may lead to customer satisfaction and trust.

2.1.4 Value Offers

According to Zeithaml and Bitner (2000), customer’s perceived value is defined as “the

customer’s overall assessment of the utility of a service based on perception of what is

received and what is given”. Service firms that provide superior value through enhanced

offers can improve customer satisfaction by increasing the customer’s perceived benefits and

reducing the sacrifice so that customer retention is improved (Ravald and Grönroos, 1996).

Schiffman and Kanuk (2004) opined that customer’s relationship with the company will be

successful when companies provide values to customers and because of these values, they

will be satisfied.

In the submission of Auh and Johnson (2005), variation in the quality and value of

products and services provided to customers creates variation in customer satisfaction and

that creates variation in customer loyalty. Based on the nature or characteristics of

consumers, what is received and what is expended vary across consumers and thus, value

represents a trade-off between what they give and what they get.

2.2 Relationship Quality

Relationship Quality (RQ) emerged from the field of Relationship Marketing (RM). Due

to the importance of relationship marketing in today’s businesses, relationship quality is

essential for assessment of relationship strength and the satisfied degree of customer needs

and expectations (Crosby & Evans & Cowles, 1990; Smith, 1998). Customers care about the

relationship as a whole and judge the relationship using past experience, expectations,

predictions, goals, and desires (Ibid). Relationship quality has been positively linked to

customer loyalty (Hennig-Thurau & Klee, 1997; Roberts, Varki, and Brodie, 2003).

Various dimensions have been used to measure relationship quality within marketing

researches. One attempt to conceptualize relationship quality has been proposed by Grosby et

al. (1990), who viewed relationship quality as a high-order construct and should contain at

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Proceedings of the Second Middle East Conference on Global Business, Economics, Finance and Banking (ME15Dubai Conference) ISBN: 978-1-941505-26-7

Dubai-UAE, 22-24 May, 2015 Paper ID: D542

6 www.globalbizresearch.org

least two dimensions: trust and satisfaction. Therefore, this paper studies relationship quality

by focusing on trust and satisfaction from customers’ perspectives.

2.2.1 Trust

The value concept is a basic constituent of relationship marketing (Palmatier, Jarvis,

Bechkoff & Kardes, 2009). The ability to provide superior value to customers is aprerequisite

when trying to establish and maintain long term customer relationships (Ravald & Gronroos,

1996). Various definitions of trusts have been given in previous literatures. Geyskens and

Steenkamp (1995) also summarized trust as the extent to which a firm believes that its

exchange partner is benevolent and honest. Doney and Cannon (1997) emphasized that trust

is the perceived credibility and benevolence. However, Ulaga and Egger (2005, pp.76-

76)extended value studies and identified four recurring characteristics: (1) customer value is a

subjective concept, (2) it is conceptualized as a trade-off between benefits and sacrifices, (3)

benefits and sacrifices can be multifaceted, and (4) value perceptions are relative to

competition.

Based on above definitions, it is clear that trust is a human characteristic that is based on

assessment of one another’s personality traits (Chu, 2009), motives and behaviors (Tian et al.,

2008). In terms of service, trust is the belief held by a customer that service providers provide

the service that meets customer needs. It has also been suggested that the level of trust is

different significantly among individuals based on their personal decision-making habits and

characteristics (Chu, 2009).

Singh and Sirdeshmukh, (2000) regarded trust as an important mediating factor between

customer behavior before and after purchasing a product which can lead to long-term

relationship and strengthened the relationship between the two parties. Many researches have

also suggested that customers’ trust is significant in building long-term relationship and

achieving customer loyalty (Berry, 1995; Bowen and Shoemaker, 2003; Chu, 2009). With

trust as a precursor, a customer becomes loyal to a firm and forms a commitment to that firm

(Bowen and Shoemaker, 2003).

2.2.2 Satisfaction

Customer satisfaction has been paid much attention among theoretical literatures and

practical researches. It is also an expected outcome of implementing marketing activities, as

providing satisfying products or services to customers relates to success achieved in today’s

tensely competitive would of business. Fornell (1992) defined satisfaction as an overall

evaluation dependent on the total purchase and consumption experience of the target product

or service performance compared with repurchase expectations over time. Oliver (1997,

1999) reviewed satisfaction as pleasurable fulfillment which is sensed by customers in the

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Proceedings of the Second Middle East Conference on Global Business, Economics, Finance and Banking (ME15Dubai Conference) ISBN: 978-1-941505-26-7

Dubai-UAE, 22-24 May, 2015 Paper ID: D542

7 www.globalbizresearch.org

consumption. It means that “the consumer senses that consumption fulfills some need, desire,

goal, or so forth and that this fulfillment is pleasurable” (Oliver, 1999, p.34).

Customer satisfaction is the necessary foundation for the company to retain the existing

customers (Guo, Xiao and Tang, (2009). Satisfaction is one of the antecedents of customer

loyalty. In prior studies done by de Ruyter & Wetzels, 2000; Deng,Lu, Wei & Zhang, 2009;

Dick & Basu, (1994), satisfaction positively affects customer loyalty. Auh and Johnson

argued that there are strong relationships between satisfaction and loyalty. Similarly, Bodet

(2008) confirmed the relationship between satisfaction and customer loyalty. Vessel and

Zabar (2009) also asserts that customer satisfaction is one of the significant determinants of

customer loyalty. In their own submission, Gerpott and Schindler (2001), are of the opinion

that satisfaction may not always be the reason that customers remain loyal but it is safe to say

that satisfied customers are more loyal. In conclusion, customer satisfaction enhances the

quality of relationship between customers and service providers, and increases the repeat

purchase behavior.

2.3 Customer Loyalty

Customer loyalty is the most important goal of implementing relationship marketing

activities. Oliver (1997) defined customer loyalty as a “deeply held commitment to rebuy or

patronize a preferred product or service consistently in the future, thereby causing repetitive

same-brand or same-set purchasing, despite situational influences and marketing efforts

having potential to cause switching behavior”

Customers are the driving force for profitable growth and customer loyalty can lead to

profitability (Hayes, 2008). According to Chu (2003), loyalty is a positive attitude and

behavior related to the level of re-purchasing commitment to brand in future. Loyal customers

are less likely to switch to competitor solely because of price, and they even make more

purchases than non-loyal customers (Bowen and Shoemaker, 2003). Loyal customers are also

considered to be the most important assets of a company.

3. Methodology

3.1 Research Questions

The following are the main objectives of this research work.

i. How well do relationship quality (service quality, price perception, value offers and brand

image) predict customer satisfaction?

ii. Which of these strategies is the best predictor of customer satisfaction?

iii. How well do relationship quality (customer satisfaction and trust) predict customer

loyalty

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Proceedings of the Second Middle East Conference on Global Business, Economics, Finance and Banking (ME15Dubai Conference) ISBN: 978-1-941505-26-7

Dubai-UAE, 22-24 May, 2015 Paper ID: D542

8 www.globalbizresearch.org

3.2 Data

This research adopts the survey method to gather data for research. After reviewing

literatures, the author designed and tested the questionnaire, which possess good content

reliability. 100 samples have been randomly selected from mobile telephone users of MTN,

Glo, Airtel and Etisalat from Osun State. The questionnaire was composed of two parts and

total 35 statements. The first part is about individual characteristics with two questions by

asking respondents’ gender and the name of the mobile telecom operator they are choosing

currently. The second part contains all the seven variables in the research model with a total

of 33 statements. Several items on each construct are developed and adopted from relevant

literatures. All of the items were measured by using a five-point Likert-type response scales,

anchored at 5 strongly agree and 1 strongly disagree. 81 effective samples were returned with

a response rate of 81%. To find the relationship between dependent and independent variable

Pearson correlation and regression analysis was used.

4. Results and Discussion

The result is analyzed with help of statistical techniques like regression.

Table 1: Regression Analysis showing Service Quality, Price Perception, Brand Image, and Value

Offers Prediction of Customer Satisfaction

Variables β t Sig R² F Sig

Service quality .292 2.456 .016

Price perception .315 2.457 .016

Brand image .146 1.096 .277 .247 6.240 .000

Value offers .036 .249 .804

Dependent variable: Customer satisfaction

The result in Table 1 shows that the predictor variables (i.e. service quality, price

perception, brand image, and value offers) were significant joint predictors of customer

satisfaction F(2,78) = 34.140; R²=0.247; p<.05 . The predictor variables jointly explained

24.7% of the variance of customer satisfaction. Therefore, the prediction of customer

satisfaction was not due to chance or error.

Furthermore, service quality (β=-.292; t=-2.457; p<.05); and price perception (β=.315;

t=2.457; p<.05) were significant independent predictors of customer satisfaction. The result

implies therefore, that the more the telecommunication companies improve on the quality of

their services and provide better pricing offers, the more the customers will be satisfied. It

also indicates that the more the telecommunication companies are creative in offering

products and services, the more will be the level of satisfaction of customers. Moreover,

brand image (β=-.149; t=-1.096); and value offers (β=.036; t=.249); are less significant. The

result provided answer to research question 1 which asked on how well the relationship

marketing strategies predict customer loyalty.

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Dubai-UAE, 22-24 May, 2015 Paper ID: D542

9 www.globalbizresearch.org

The result from the Table 1 also indicates that price perception has the highest beta value

of .315 which means that the variable makes the strongest unique contribution to explain

customer satisfaction. This result also provides answer to research question 2 which asked

about which strategy is the best predictor of customer satisfaction.

Table 2: Regression Analysis showing Trust and Customer Satisfaction Prediction of

Customer Loyalty

Variables β t Sig R² F Sig

Trust .233 1.934 .057

Customer Satisfaction .494 4.905 .000 .467 34.140 .000

Dependent variable: Customer Loyalty

The result in Table 2 shows that the predictor variables (i.e. trust and customer

satisfaction) were significant joint predictors of customer loyalty F (4, 76) =6.240; R²=0.467;

p<.05. The predictor variables jointly explained 46.7% of the variance of customer loyalty.

Therefore, the prediction of customer loyalty was not due to chance or error.

Furthermore, trust (β=-.233; t=-1.934; p.057); has positive influence on customer loyalty

but not significant while customer satisfaction (β=-.494; t=-4.905; p<.05) is significant

independent predictor of customer loyalty. Beta value shows that one percent change in

satisfaction will change loyalty by 0.664 percent. Similarly like de Ruyter and Wetzels,

(2000): Deng, Lu, Wei & Zhang,(2009); Dick & Basu,(1994), they gave evidence that

satisfaction positively affects customer loyalty. Bodet (2008) also confirmed the relationship

between satisfaction and customer loyalty. Beta value of trust also shows that one percent

change in trust will change loyalty by 0.593 percent. This is similar to the findings of Bowen

and Shoemaker (2003) that with trust as a precursor, a customer becomes loyal to a firm and

forms a commitment to that firm. Berry, 1995 and Bowen & Shoemaker (2003) also asserted

that customers’ trust has a significant role in building long term relationship and achieving

customer loyalty.

5. Conclusion and Recommendations

Retaining customers in the service industry has become a major objective of relationship

marketing. Relationship marketing tactics are considered to be essential for building long-

term relationship with customers in order to achieve mutual benefits of all parties. Although

relationship marketing tactics has been widely implemented by service providers, customers

still tend to switch to competitor. Therefore, this study was conducted to examine the impact

of relationship marketing tactics (service quality, price perception, value offered, and brand

image) on satisfaction and in turn affect the customer loyalty within Nigerian mobile

telecommunication industries. The findings of the survey can be summarized as below:

The four relationship marketing tactics are positively related to customer satisfaction.

Among the tactics, brand image tactic show lowest relationship with service quality, customer

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Dubai-UAE, 22-24 May, 2015 Paper ID: D542

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trust and satisfaction. This implies that the brand image activities implemented by the telecom

service providers, such as social responsibilities and reward refund are not effectively

perceived by customers. Satisfaction is positively related to loyalty. This result also provide

empirical evidence supporting previous theories that the higher level of trust and satisfaction

perceived by customers, the higher level of customer loyalty that will be achieved by service

providers.

Based on the above findings, we hereby make the following recommendations:

i. Service providers must review their service quality, value added services and improve

their brand image to maintain their customer base.

ii. They should identify reasons for brand switching and address them appropriately,

iii. They should put effort into reducing the number of complaints and handle complaints

properly rather than concentrating only on improved service quality.

iv. They should ensure that the product or service offered should match well with the

dynamic customer needs

v. Provision of effective communication between the service providers and the customers as

it is very essential in influencing the trust that the customers develop in the firm, their

satisfaction with the firm, and subsequently their loyalty to the firm, and

vi. They should offer a consistently positive experience to customers through increased and

improved value of service.

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Proceedings of the Second Middle East Conference on Global Business, Economics, Finance and Banking (ME15Dubai Conference) ISBN: 978-1-941505-26-7

Dubai-UAE, 22-24 May, 2015 Paper ID: D542

11 www.globalbizresearch.org

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