Analysing factors that influence customer brand loyalty in the UK mobile telecommunication industry – A case study of O2 (Chapter 5)


Analysing factors that influence customer brand loyalty in the UK mobile telecommunication industry – A case study of O2 (Chapter 5)

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Chapter five: Conclusions and recommendations

5.1. Introduction

This study focused on analysing the factors influencing consumer brand loyalty in the UK mobile telecommunications industry. The study narrowed down to analysing the customers of O2. In this chapter, the researcher seeks to present the conclusions and recommendations based on the analysis and findings in the previous chapter and also in light of the literature review. Further, this chapter will highlight the limitations of the study and lastly offer directions for future research.

5.2. Conclusions

The objectives set to be achieved by this study included understanding the nature and extent of competition in the UK mobile telecommunications industry, to determine what factors are influential to customer loyalty in the same industry and to, consequently, offer O2 with recommendations that will improve its strategic fit. Firstly, the analysis into the UK telecommunications industry reveals that the industry is competition-driven as posited by Choi and Click (2006). The intensity of the competition is fueled by continued development in the telecommunications industry in the UK that has left the top domestic mobile firms, that is, EE, Vodafone and O2 scrambling to get customers. The major influence of consumer loyalty wholesomely is the reductions in switching costs due to similarity of offered services (Pedley (2013). The specific factors that the study analysed in regard to customer loyalty include price, brand value and brand perception, customer switching costs and peer influence (through word of mouth). The conclusions are as follows;

5.2.1. Price fairness

Price is evidently an important factor that influences customers’ choices of products (Srivastava and Sharma, 2013). The findings indicated that lowering of prices created room for customers to shift towards a particular brand – the one with low prices. Fundamental points in regard to prices include price of O2 in relation to that of competitors, the fairness of price across the services offered and the price-quality relationships. According to the analysis of these, the formation of prices should be done in consideration to the prices of competitors and to the quality of the services. This is so because customers always compare prices and also as extant literature indicated, they would only pay high prices for premium services. In regard to concern about prices, customers are drawn to avoid firms that charge prices that seem unfair. This is evidenced in the findings which indicated that among the limiting factors to loyalty include unfair prices.

5.2.2. Perceived brand value

Brand loyalty is also influenced by customers’ perceptions of brand value. In the analysis fo factors that limit brand loyalty, brand value emerged as respondents showed a strong disregard to a brand associated with a negative image. Majorly, customers use the strength of other brands and the level of prices and quality of services offered to attach a certain level of value to a brand and to conduct repeat purchases (Cho et al., 2014). In addition, the lower the worthiness a customer attaches to a firm the more they are likely to switch to other brands. This means that low brand value is associated with low switching costs. Among the factors that also affect brand value is word of mouth – peer – influence. The findings indicate that friends to the respondents would change the perception that a customer has on a particular brand. These peer influence also appears as a factor that would cause customers to become disloyal to a particular brand. In order to influence word of mouth to the positive, a firm is supposed to focus on preferences, quality, satisfaction and product knowledge as opposed to price only (Wang, Wei & Yu, 2008). Additionally, a firm should also endeavor to show its positive attributes through every means possible (Keller, 2013).

5.2.3. Brand switching costs

The cost implications to a customer when transitioning from one brand to another appeared as having the most positive correlation with brand loyalty. This means that brand switching costs are an important factor of consideration by firms when regulating the cost of switching. These costs are divided into learning costs, transactional costs and contractual costs (Burnham, Frels and Mahajan, 2003). The first aspect of switching costs that concerns customers is ability to acquaint with a new service provider. According to Zolnierek (2008) such costs revolve around the time it will take a customer to be at par with the price and service orientation of the new firm. Qayyum & Khang (2011) believe that rewards and bonuses also increase switching costs if a firm capitalizes on them. The same is evidenced in the findings as a majority of the customers indicated that they would not leave O2 because of the rewards and bonuses they were receiving. Lastly, the findings indicated customers that are loyal to O2 were more likely to subscribe to more services at O2 and were willing to refer their friends to O2 as opposed to competitors.

5.3. Recommendations

A correlation analysis of the factors that the study intended to test as influencing brand loyalty revealed a positive correlation to brand loyalty. This means that all these factors, that is, price fairness, brand switching costs and perceived brand value are important considerations in shielding against brand disloyalty. As such, the recommendations of this study are in line with these factors. Additionally, the findings identified the peer influence, perceived image and unfair prices as the major limiting factors to brand loyalty and thus they are also fundamental in directing the recommendations.

Firstly, as a way of curbing brand switching, the research recommends that O2 needs to offer lower prices in some of its services in relation to what competitors offer for the same services. This main reason for this is because the extant literature indicates that low switching costs attributing to friendly prices lure customers towards a brand and discourage them from leaving. Besides offering low prices, O2 needs to consider offering more bonuses and rewards to customers in relation to what competitors offer. As indicated in the findings and analysis section, bonuses and rewards are important reasons as to why customers would not consider changing brands. Bonuses and rewards can be attained through loyalty programs where the oldest and the regular shoppers will be rewarded constantly. A sum-up of rewards and bonuses and relatively lower costs in selected services would minimise the cases of customers switching to other brands.

In regard to brand image, the research recommends that the firm should continuously invest in creating a positive image to customers. In particular, the possible measure that can be undertaken is committing to ethical advertising in which case the customer will be guaranteed the same experience they saw on advert when they subscribe to the customers. Further, the firm should create a program in which the preference, product relevance and other attributes of the customer can be predetermined before trying to push sales. This can be achieved through intensive market research that is intended at establishing attributes of the customers and their current perception of the firm. As the extant literature noted, the mistake committed by most firms concentrating of improving on sales without focusing on other attributes of the customer. In summary the recommendation is that O2 needs to invest more in market research and tailor adversing according to the findings.

Lastly, the firm needs to be considerate in the prices that are charged. Extant literature revealed that it is allowed to charge high prices than competitors but only if a firm has the ability to offer premium services. As such, this study recommends that O2 needs to categorises services and offer premium services whilst charging high prices. This price discrimination approach will help compensate for the differences incurred for charging lesser than competitors for standard services. The fundamental point of note is that O2 should ensure the balance between quality of services and the prices offered is better than that of competitors such as EE  and Vodafone.

Table 5.2 Implementation of recommendations

 Recommended actionManagement actionTime needed
 Improve on rewards and bonusesManagement to find ways implement more loyalty programsOn a need basis
 To change the perceptions of O2Management to carry out market research and intensive advertisingUntil objective is attained
 To make O2 prices fairSegment services as standard and premium and charge variant pricesA continuous measure
Recommendations for O2

5.3. Study Limitations

In the conduct of the research, there are problems that the researcher encountered which may have an impact on the validity and reliability of the research findings. For starters, the researcher, being a student, encountered financial limitations. This constrained movement from one place to another hence limiting the geographical scope of the study coverage. Additionally, the researcher could not pay enough assistants to help in distribution and collection of questionnaires and thus had to cut on the number of questionnaires. Secondly, time became an issue for the researcher because the study required commitment of much time. This meant that the researcher cut down time allocation for the research due to academic commitments. Lastly, the questionnaire was being issued to random individuals selected through convenience sampling and the main issues was that respondents were on a hurry to get to their daily activities. The returned questionnaires were thus 126 out of the 150 that were issued.

5.6. Direction for future research

This study intended to analyse the factors that influence customer brand loyalty in the mobile telecommunications industry in the UK. However, the study maintained focus on a single telecommunications firm, that is, O2. Due to this, the generalisability of the research findings and therefore recommendations is limited to this case only. As such, the researcher recommends that future studies should focus on multiple cases for the sake of generalisability. Other companies that can be studied alongside O2 are EE and Vodafone. Additionally, future research should broaden the geographical scope in order to eliminate any bias associated with studying individuals in a small geographical area.

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