Broadband customer satisfaction affects loyalty towards the Company

Spring 2010

Broadband Service Research Project University of Central Punjab

ACKNOWLEDGEMENTS
We are very thankful to Allah Almighty who has given us the power and ability to think and judge the matters and then to make use of the blessed abilities. Our most respectable teacher Mis Khansa is the source who directed us to apply our abilities in the correct direction. Special gratitude to our Professors, Parents and Friends for their encouragement and support.

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Abstract
The purpose of this research was to determine if a relationship existed between different levels of customer satisfaction in Broadband Internet services and Customer loyalty towards a service provider. Previous research on this relationship has provided mixed results. Our research shows a moderate positive relationship exist between the level of customer satisfaction in Broadband Internet services and Customer loyalty towards a service provider. While there could be several reasons for this relationship, these results suggest that there is a difference in loyalty level of customer as the level of satisfaction varies. In this study our purpose was just to find whether a satisfied customer result as a loyal customer of any particular company or not.

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CHAPTE R
1

TITLE
Introduction Background Objective Significance Review of literature Theoretical framework Hypothesis and Operationalization of Variables Research Design Survey Research Population Sampling Design Tools of data collection Data Processing Data Analysis Score Index Bivariate table General Findings Presentation of findings Testing Hypothesis Discussion Summary, Conclusions and Recommendations Summary Conclusion Recommendation References Appendix

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Table of Content:-

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List of tables:Table
1.1

Title
Level of Broadband customers satisfaction is positively associated with level of loyalty

Page No
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List of Figures:Figures
1.1 1.2

Title
Schematic diagram Linear positive relationship

Page No
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Introduction:Background:
Consider a person who does not feel any sense of loyalty towards his broadband Internet Service Provider, and is always in search of any better alternates available in the market. Such a customer as soon as he finds any second option, he switches towards it, without even analyzing that may be the benefits extracted from the switch are marginal. However in such a scenario the customer is no faulty, but the Internet service provider can be accused to buildup this kind of situation in which customer was forced to be in a state of indifference. This state of indifference is in a result of low level of satisfaction of the customer towards the service he is using. Customer Loyalty with a company is very important for the success of any business system. For service-oriented businesses like the broadband Internet segment of Pakistans Internet industry, one of the key challenges is how to raise the level of loyalty of customers towards a particular company. As Pakistan ranks 4th in broadband Internet growth (World Broadband Statistics, 2008), customer loyalty is gaining increasing attention since loyal customers are seen as essential components to organizational success. So companies want to retain their customers, since such retention will lead the company to a greater number of loyal customers, more profits and increased market share can be gained. While much research literature has focused on Customer Loyalty and Satisfaction and describing its determinants but not much work has been done to determine exactly what affects customer loyalty in the broadband internet industry. However identifying the exact drivers that have the largest impact on customer loyalty in this sector, are still not fully understood.

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Objective:
This research intended to make an explanatory study into the aspects/ attributes that force customers while deciding whether to continue with the current Broadband Internet service provider or to switch to an alternative provider (in other words customer retention). However, the customer decision making process is not the same for individual customers and the corporate customers; however we focus on individual customers more in our research. The main objective of this research is to ascertain the relative importance of characteristics that affect the satisfaction and loyalty of customers in Broadband segment. We also intend to measure the kind and direction of the relationship that exist between Customer Satisfaction and Customer Loyalty in Broadband industry.

Significance:
In today's competitive environment gaining and maintaining customer loyalty is becoming more and more of a challenge. Companies can no longer afford to become complacent in their marketing efforts directed at existing customers, particularly with the cost of new customer acquisition increasing. An essential way to hold your ground against the competition is by keeping existing customers happy and continuing to increase sales to this group. Marketing activities and new promotions directed at your existing customers are essential to keeping in the forefront of their minds. This also allows you to keep them apprised of new product offering and special events. When the marketing to existing customers is neglected, typically you will see an "out of sight, out of mind" result. In simple words an indifferent customer who is finding better alternatives to switch. If your customers are then targeted by your competition attempting to acquire their own new customers they feel no sense of loyalty to you or your company.

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Every company, even the best ones, loose customers. It's for given. To stay at the status quo, or even grow the business you need a steady supply of new customers to replace the old ones. Now, if your business isn't good at customer retention, which is the ability to keep customers loyal to the company, your company is losing a lot of business. So you need to replace them with a lot of new customers, this is bad for business for two reasons: On average, it costs 5 times as much to get a new customer than to keep an existing one. Customers, who have bought from you before, are much more likely to buy from you again.

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Review of Literature:Customer loyalty is viewed as the strength of the relationship between an individuals relative attitude and repeat patronage. The relationship is seen as mediated by social norms and situational factors. Cognitive, affective, and co native antecedents of relative attitude are identified as contributing to loyalty, along with motivational, perceptual, and behavioural consequences (Dick and Basu , 1994). In the customer centred business, survival remains to the degree that customer satisfaction is met and switching barriers are increased. Previous research studies have shows that the repurchase intent was the main benefit of customer loyalty. However, some had identified multiple benefits like repurchase intent, price tolerance, willingness to recommend etc. In reaching loyalty, vendors should manage satisfaction and switching barriers (Naranyandas, 1998). Loyalty too has a pyramid effect that suggests of having hierarchy in loyalty levels between customer and vendor. Change in loyalty level will manifest itself in the presence of specific attitude and behaviour (Aaker, 1991). Customer satisfaction and higher switching barriers are integral part of customer Loyalty process. Customer Retention is also primary measure of loyalty. There is a positive relationship between changes in satisfaction and share of wallet. In particular, the initial satisfaction level and the conditional percentage of change in satisfaction significantly correspond to changes in share of wallet. Income and length of the relationship negatively moderate this relationship (Cooil et al., 2007). Loyalty and retention although positively moderate with share of wallet it is necessary to examine the cost of maintaining the particular customer. It is not guaranteed that every customer loyalty generates contribution. Therefore the concept of Customer lifetime Value (CLV) plays an important role. In creating loyalty and thereby CLV, it would be prudent to explore qualities of loyalty. Two types of primary loyalty qualities had been identified in the previous researches, i.e. Attitudinal Loyalty and Behavioural Loyalty, out of which attitudinal loyalty could be the most important dimension for marketers to monitor perceived switching barriers (Rundel Thiele, 2005). While research literature has focused customer loyalty and describing its determinants but not much work has been done to determine exactly what affects customer loyalty in the Internet industry especially the

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broadband segment and identifying which drivers have the largest impact on customer loyalty in this sector, are not fully understood.

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Theoretical Framework:A theoretical framework guides your research, determining what things you will measure, and what statistical relationships you will look for. Customer satisfaction in Broadband Internet service will lead to customer loyalty towards the particular service provider; as a result there will be an increase in the profitability of the organization. So from the following we can conclude that the involved dependant variable (customer loyalty) is positively associated with (customer satisfaction) which is our independent variable.

Customer Satisfaction

Customer Loyalty

The concept of customer Loyalty is understood as a combination of customers favorable attitude and the behavior of repurchase. Customers experiencing a high level of satisfaction are likely to remain with their existing providers and maintain their subscription. According to our research we have seen that more the customer is satisfied with the Broadband connection he is using the more he moves up the ladder of customer loyalty towards the particular service provider. Whereas customer satisfaction itself consist of different dimensions or features, which have to be fulfilled to reach loyalty. Measuring loyalty itself is a complete procedure and is said to prevail depending on the certain attitude of the customer. The propositions can be arranged sequentially as:

Level of customer satisfaction increased Less he is psychologically irritated Lesser intentions to switch initiate Less he is in concerned of in hunt of alternatives Increased chances that he retains
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Long term relationship develop Level of Customer Loyalty is increased

Figure 1.1: Schematic Diagram of Theoretical Framework

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Hypothesis and Operationalization of Variables

Hypothesis:
The Level of Customer satisfaction of Broadband Internet connection is positively associated to level of customer loyalty with the company.

Logic for hypothesis:

In theoretical framework are discussed the logics for customer loyalty with a company when the customer satisfaction level toward the Internet connection is increased. It is a sequential effect which is self explanatory.

Developed Hypothesis Statements:Higher Service Quality is associated with higher level of Customer Satisfaction Higher Customer Support is associated with higher level of Customer Satisfaction Higher Device Functionality is associated with higher level of Customer Satisfaction Higher Pricing Structure is associated with higher level of Customer Satisfaction Higher Attractiveness of services is associated with higher level of Customer Satisfaction Higher Convenience in procedures is associated with higher level of Customer Satisfaction Higher Willingness of Long term relationship is associated with higher level of Customer Loyalty Higher Positive Perception is associated with higher level of Customer Loyalty Higher Brand likeliness is associated with higher level of Customer Loyalty

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Higher Value-added Services is associated with higher level of Customer Loyalty Higher Economic perception is associated with higher level of Customer Loyalty

Measurement of variables:
We have two variables in our research hypothesis which we measured in research and surveys.
1. Level of Customer satisfaction

2. Level of customer loyalty

1.

Level of Customer satisfaction:- Customer satisfaction is

an independent variable. It has features which are known as dimensions, by the fulfillment of these features the customer satisfaction level can be attained and improved.

2.

Level of customer loyalty:- customer loyalty is a dependent

variable. It has its own dimensions, by the fulfillment of those dimensions it can be said that the customer loyalty is attained.

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Dimensions and their Elements of Customer Satisfaction and Loyalty:Dimensions of level of Customer satisfaction
o Service Quality o Customer Support o Device Functionality o Pricing Structure o Convenience in procedures o Attractiveness of services

Elements of above Dimensions o Service Quality (Connectivity, Speed Variation) (Question 1 and 2 in appendix) o Customer Support (Waiting time, Courteous) (See question no 3 and 4) o Device Functionality (Signal reception, Device Suite) (See question no 5 and 6) o Pricing Structure (Competitive pricing, Clear rates) (See question no 7 and 8)
o

Convenience in procedures

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(Bill Payment modes, Package conversion) (Question 9and 10)
o

Attractiveness of services (Bandwidth, Technology) (See question no 11 and 12)

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Dimensions of level of Customer Loyalty

o Willingness of Long term relationship o Positive Perception o Brand likeliness o Value-added Services o Economic perception

Elements of above Dimensions o Willingness of Long term relationship (Switching intention, Annual membership) (Question 13 and 14)
o

Positive Perception (You attitude, Emotional attachment) (Question 15 and 16)

o Brand likeliness (Reference, Will to repurchase) (See question no 17 and 18) o Value-added Services (Regular discounts, Prizes) (See question no 19 and 20) o Economic perception (Promotional activities, Odd even pricing) (Question 21 and 22)

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Research Design
Survey Research:The approach we have used to collect primary data is to communicate we people directly. Therefore we have used Human Interactive Media. We intend to handover Questionnaire to people to record responses from them.

Population:
In our research project our target population was basically customers of Broadband service providers, more specifically we can say our focus was only the customers of the companies BrainNet, LinkDotNet, PTCL Broadband, Wateen Wireless, Wi-Tribe WiMax and WorldCall EVDO Wireless Broadband. The population is homogeneous because we have only taken broadband customers. The logic for choosing only these six companies is that these are the prominent names that come in mind when we talk about Broadband internet. The other reason for choosing them is the easiness to approach the customers of these companies. By simply stepping near any of the Customer Care Centers of these companies we can easily find our target population. We have chosen Customers of these Companies due to the reason that they are the best people who can give perfect answers about their satisfaction and loyalty level.

Sampling Design:
We used the probability sampling in our research project. We have chosen the simple random sampling because it assures that element in the population have an equal chance of being included in the sample. In it we assigned each member of the sampling frame a number, and then selected sample units by a random method.

Sampling Frame:
The sampling frame being used is the list of the customers of these six companies. These companies maintain computerized record of their customers with the help of databases, thus we have taken some help from them as well to confirm our sampling frame.

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Sample size:
The sampling frame which we have used was the customers of above mentioned six broadband service providers and we have taken sample size of 3000 for our research (500 from each company). In our survey we have used this sample size to collect data to approve our hypothesis. The sample size can be of any gender (male or female).

Sampling Unit:
For observing the overall situation we have used the Broadband customers as a unit of observation and to analyze all the data which we have collected by doing survey we again used the Broadband customers as the unit of analysis.

Tools of Data Collection:

The success of a researcher depends on the data one has collected. In order to measure level of satisfaction of broadband customers and level of loyalty with the company we have used the survey technique. For this purpose, we have used Questionnaire. We have given the questionnaire to Broadband customers to collect the relevant data for our research report.

Logic behind choosing the questionnaire technique:

We have used the questionnaire technique because our target population was educated due to the reason that we knew that using internet requires basic education. We do not need to take interviews if our population is educated because interviews take lots of time and no one has a time to give us interview.

Data Processing:
We have used computerized data processing technique. From manual Questionnaires we have converted them into Computerized Excel Sheets.

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Scoring:
As we have shown above the elements on each dimension we also have number of statements on each element (see on pg no. for questionnaire). We have used 5 point scale (Lickard scale) in our questionnaire. There are positive as well as negative statements in our questionnaire.

Level of Satisfaction of Broadband Customer

Strongl y Disagre e 1

Disagre e 2

Neutra l 3

Agree 4

Strongl y Agree 5

Data Analysis:Score Index:

Score index for level of satisfaction of broadband customers:There were 12 statements related to the above variable; on each statement a person could get a score of 1 to 5. Total score for a person could range from a minimum of (1*12) =12 to a maximum of (5*12) =60. Lower score will show low satisfaction and high sores will show high satisfaction for their broadband connection. Minimum score score 12 60 To make categories class interval ranges from 12-60 12- 28 29-44 45-60 Lowest level Medium level High level Lowest Satisfaction Medium Satisfaction High Satisfaction Maximum

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2. Score index for level of Loyalty of Broadband customers:There were 10 statements related to the above variable; on each statement a person could get a score of 1 to 5. Total score for a person could range from a minimum of (10*1) =10 to a maximum of (10*5) =50. Lower score will show low Level of loyalty and high scores will show high Level of loyalty of customers with the company Minimum score score 10 To make categories class interval ranges from 10-50 10- 22 23-36 37-50 Lowest level Medium level High level Lowest Loyalty Medium Loyalty High Loyalty 50 Maximum

Bivariate table:For analyzing our overall survey statistically we used the bivariate table which is shown below:

Table 1.1: Level of Broadband customers satisfaction is positively associated with level of loyalty Level Of Customer Satisfaction Level of Customer Loyalty High Medium Low Total

Low 300 100 600 100 0

% 30 10 60 100

Mediu m 150 550 300 1000

% 15 55 30 100

High 700 150 150 1000

% 70 15 15 100

Total 1150 800 1050 3000

% 38 27 35 100

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Table Analysis:According to the above table the shaded % values are of specific importance in reference to our hypothesis, whereas they are increasing upwards, thus a upward sloping curve is observed. It means that there is a linear positive relationship between level of satisfaction and the level of loyalty of the Broadband customers. Further on inspection we can see from the table that out of highly satisfied customers 70% of the respondents feel highly loyal with the company when there is high level of satisfaction. Whereas out of lower satisfied customers 60% of the respondents feel lower level of loyalty towards the company when they have low level of satisfaction. Whereas we can see that greater % of medium level satisfied customers are subject to medium level customer loyalty which is 55%.This relationship can be more precisely explained by the graph shown below:

Fig 1.2: Linear positive relationship

High Level of Customers Satisfaction

Low

Low Level of Customers Loyalty

High

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General Findings:
To do a survey, the questionnaire we have designed, includes some data related to Broadband customers e.g. their gender, name and their occupation. It was like:Name: Gender: Occupation:

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Presentation of Findings:Testing Hypothesis:

After doing all the analysis above, we proved that the level of satisfaction of customers positively affects the level of customers loyalty towards the company. We have proved it by doing analysis through bivariate table (See table no. 1.1 on pg: 13) and by showing the graph (see fig: 1.2 on pg: 14) which was showing the linear positive relationship. So at the end we accept the alternative hypothesis:The Level of Customer satisfaction of Broadband Internet connection is positively associated to level of customer loyalty with the company. And reject the null hypothesis.

Discussion:However in the review of literature we did not find much evidence of the dimensions and elements of customer satisfaction and loyalty but however people of different countries and institutes have discovered the strong relationship between customer satisfaction and customer loyalty. With the passage of time the trend of customer retention has increased and different researchers in the past had already pointed out the important variables involved in retaining customers. The debate on customer satisfaction and customer loyalty has been raised in several researches and we have continued from the place they have left. We continued by specifying the exact variables which result in increasing the customer satisfaction towards a service provider and that eventually results in raising the Customer loyalty with a specific company.

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Summary, Conclusion and Recommendations

Summary:The importance of use of internet technology is raising day by day and with it the increase in competition among service providers are also increasing. The hot question for every company is how to retain the customers. Previous studies have guided the companies well about the variables they have to work on to retain their existing customers. In this research our intentions were to conduct a basic research on the factors that affect customer satisfaction of a Broadband Internet connection. After a detailed review of literature we have tried to emphasis on the factors which were not discussed in detail before. Through statistical data analysis and figures we have clearly proved the linear positive relationship between Broadband Customer satisfaction and loyalty towards a company. All the date was retrieved by giving Questionnaires to Broadband customers of six different companies. Out of the whole population of broadband customers a sample size of 300 customers was chosen. At the end we have accepted our alternative hypothesis and rejected the null hypothesis.

Conclusion:At the end we come towards our conclusion that in this fact moving world today, when World has turned out to become a global village it is very important to provide state of the art technology of internet to people so that they can cope up with the fast pace of life style today. It is not only a matter of gaining new customers but we have clearly proven above that the retaining of existing customers is important. Satisfying existing customers with best services will increase their loyalty level towards the company and the retaining of these customers can be made possible.

Recommendations:On the basis of our research we recommend that customers must be given importance and their satisfaction must be the first priority of Broadband service providers for retaining them on long term basis.

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References:Anderson, Eugene W., Mittal, Vikas (2000), "Strengthening the Satisfaction-Profit Chain, Journal of Service Research, 3, 2, 107-120 Gerpott Torsten J., Wolfgang Rams, Andreas Schindler (2001), "Customer retention, loyalty, and satisfaction in the German mobile cellular telecommunications market", Telecommunication Policy, 25, 4 (May), 249-269 Hallowell, R. (1996), The relationships of customer satisfaction, customer loyalty, and profitability: an empirical study, International Journal of Service Industry Management,7, 4, 27-42 Jia, G., Yan, H., (2005), Empirical analysis on the forming model of customer loyalty: the case study of mobile communication service, Services Systems and Services Management, Vol. 1, June, 133- 137 Kim, Moon-Koo, Park, Myeong-Cheol, Jeong, Dong-Heon (2004), "The effects of customer satisfaction and switching barrier on customer loyalty in Korean mobile telecommunication services", Telecommunications Policy 28, 145159 Patterson, P.G., Smith, T. (2003), A cross-cultural study of switching barriers and prosparity to with service providers, Journal of Retailing, 79, 107-120 PTA Annual Reports 2008, Retrieved November 23, 2009, from http://www.pta.gov.pk/index.php? option=com_content&task=view&id=361&Itemid=590 Reinartz, W., Kumar , V. (2002), Mismanagement of Customer Loyalty, Harvard Business Publishing, Jul 01 Wong, Chi-Bo and Mula, Joseph M. (2009), The moderating effect of switching costs on the customer satisfaction-retention link: retail internet banking service in Hong Kong, 11th IBIMA Conference: Innovation and Knowledge Management in Twin Track Economies, 46 World Broadband Statistics (2008), Retrieved November 22, 2009, from http://pointtopic.com/contentDownload/operatorsource/dslreports/world %20broadband%20statistics%20q4%202008.pdf

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Appendix:Broadband Survey Questionnaire:Dear Sir/Madam, we are a group of final year students from University of Central Punjab undertaking a research study on Broadband services. You are invited to participate in our survey only for academic purpose. It will take few minutes to complete the questionnaire. Your participation in this study is completely voluntary. It is very important for us to learn your opinions. 1) Age ________ 2) Gender Male Female 3) Occupation Student Professional Business Other
4) I am using following broadband services. (More than 1 option can be

selected)
BrainNet / BrainTel

CyberNet /CyberXtreme LinkDotNet

PTCL DSL Broadband

PTCL EVO Wireless Broadband Wateen DSL

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Wateen Wireless WiMax Wi-Tribe WiMax WorldCall EVDO Wireless Broadband

WorldCall Cable Broadband Other__________________

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Please mark in the relevant following boxes: Disagree Strongly Disagree Agree Strongly Agree Neutral

1. My broadband service connectivity is good.

2. My broadband service speed is stable.

3. I do not have to wait long to talk to the Customer

Representative. 4. The Customer Representatives of the company at are very polite and courteous. 5. I am satisfied with the signal reception of my broadband device. 6. I find my Device Software very easy to install. 7. I do not find much difference in the rates of other Broadband service providers. 8. The tariff schedule of my service provider is clear and easy to understand. 9. I find my payment mode to be easy. 10. I can easily and quickly change my Broadband package. 11. I consider the Bandwidth offerings of other service providers are same as my provider. 12. The technology used by my provider is the same as being used by other providers now a day. 13. I have intentions to switch my broadband internet connection as soon as I find a better alternative. 14. I will not buy an Annual membership of my internet connection even if discounted package is offered. 15. My service provider always gives value to my opinions and wants. 16. I feel emotionally attached to the brand of my service provider.
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17. I refer others to buy connection from my service provider. 18. It I would be needing another connection in future I would not hesitate to repurchase the same brand. 19. I am satisfied with the no of Discounts my service provider offers annually. 20. My service provider conducts lucky draws and gives away prizes. 21. My Broadband service provider claims in advertisements to be most economical. 22. My service provider uses prices like Rs.299 or Rs.1999. Thank you for your valuable time!

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