Analyzing the factors influencing customer brand loyalty in the UK mobile telecommunication industry – A case study of O2


Analyzing the factors influencing customer brand loyalty in the UK mobile telecommunication industry – A case study of O2

Chapter 1: Introduction

1.0  Research Background

Customers are considered an essential part to any organisation because they form the end consumer of products and services. Johnston and Clark (2008) depict customers as the end of the distribution chain and the highest among equals in a business circle. As a result companies are on the verge of contending and satisfying their potential clients by providing essential and tailored products and services to suit the needs of customers. With that in mind, the companies ought to maintain the relationship with the customers by value adding and positioning their brands above their competitors for the purpose of easier recognition and preference (Clifton et al., 2003). This factor bears the business terminology ‘branding’ that Mathieson (2005) opines as the process through which a product is edged into a consumer’s mind through advertisements consistently.

Therefore, brand loyalty is created characterized by the customer’s attraction and preference towards a specific product noted by repeated purchases amid competitor’s rival brands (Czerniawski and Maloney, 1999; Miletsky and Smith, 2009). In that regard, it’s imperative for companies to consider some factors that will improve their products and services quality, promptness or supply in respect to positioning it competitively above their market rivals. This means that the companies should embrace brand loyalty as a way to improve and maintain their sales (Ramaseshan and Stein, 2014). As defined by Investopedia (2010) brand loyalty is the trend created by a customer based on preferences regardless of price variations and convenience. To edge brand loyalty, companies adopt varied marketing strategies for instance, loyalty rewarding programs, product incentives and also ensure the recipients are their brand ambassadors to use word-of-mouth in disseminating the information to their friends (Webber, 2011).

The mobile telecommunications industry in UK is one of the sectors that require brand loyalty to maintain its customers amid the tight competition of emerging competitors (Valletti and Cave, 1998). In the last decade and half, the numerous changes that have been observed in the telecommunications industry have resulted into more world connectivity through the internet linked through mobile telecommunications networks (Swanson, 2001). Telecommunication providers have been compelled to go a notch higher in innovation and implementation of cutting edge technology as a way to place their products and services above board (Gentzoglanis and Henten, 2010). Therefore in a turbulent market like the UK forms the best case study for the level of competition that is really on its best. That is orchestrated by generally improved infrastructure and higher rate of mobile telecommunication penetration rate (Roberts, 2003).

Consequently, with each company operating above board in quality, they now form another competing level through mobile wars in the lines or quality enhancement, data and voice transfer speeds and reliance among many other competing platforms (Heath and Dalle, 2009). Scholars like Roberts (2003) allude that ‘competition is healthy’, these words come with a cost implication that the mobile telecommunication companies in the UK have invested to realise improved infrastructure and services. This paper investigates and synthesises the factors that determine and influence customer brand loyalty in the telecommunications industry in the United Kingdom (UK). With O2 as the case study, this chapter will analyse the research rationale and objectives with a clearly defined internal look into one of the UK’s giant telecommunications companies.

1.1  Organisational Overview

O2 is an established second-best telecommunication company in the UK with 26.2% of market share after EE Limited. The company that is headquartered at Slough is the commercial brand of Telefonica UK Limited (A Spanish-owned Telecommunications Company) (Titcomb, 2013).  Its large customer base that stretches over 23 million subscribers forms O2’s revenue catchment base in its wide product and service dissemination (Garside, 2012). In its website, O2 projects its market share to hit 35% by the second quarter of 2015, with more domination of customers switching to its upgraded network platform of 4G. However, maintaining older versions of 2G, 3G and Wi-Fi provision has placed it competitive for providing a variety to the customers’ satisfaction with current network coverage of 84% in the UK (, 2015).

O2 is banking on customer loyalty and product diversification to maintain its clientele base and lure more in the fiercely competed telecommunications industry in the UK. As of end of 2014, the company had a workforce of over 21,000 employees in all its divisions in the UK (Gard, 2014). Smith (2014) says that the recent turbulent impact of roaming regulation declined the company’s revenues by 6.1% to stand at £1.12 billion but increased O2’s new customers by 175,000 new active registrations. The Guardian newspaper alluded that O2 has the lowest customer turnover rate among its major competitors forming it a formidable brand with higher loyalty rates (The Guardian, 2014).

1.2  Research rationale

Research rationale in this paper will be focused in two perspectives for the sake of unearthing the core values of this research. Therefore, both Theoretical rationale and Practical rationale will be clearly elaborated (Saunders et al., 2009).

1.2.1 Theoretical rationale

Gentzoglanis & Henten (2010) opines that the ever increasing competition in the telecommunications industry in the UK is a phenomenon that many companies are flexing towards in the effort to raising their portfolio in product and service improvement. Several theoretical perspectives and researches have been mainly focusing on the consumer satisfaction through innovation and technological aspects embedded in the telecommunications sector to improve its appeal towards the customers (Miller, 2008). This being a service industry, scholars have thrown less weight behind customer service oriented telecommunication components   that ought to be considered to position a company strategically in the market amid the increasing competition (Amin et al. 2012). On the other hand, Dube et al. (2007) reveals that minimal attributed studies have been done on the customer retention techniques from a price reduction-war environment, for instance the one experienced in the UK telecommunication industry.

Despite that past research by (Solomon, 1986; Gillick, 1991; Valletti and Cave, 1998) on the dynamically changing trends and preferences in the telecommunications and further studies after the emergence of wide use of mobile telecommunications by (Weight, 2008 and Wise, 2014), more focus was on the development and the technological transformations and the impacts of the mobile telecommunications on business and the society.  However, this paper will tackle the fundamental factors that determine brand loyalty and the measures that O2 will take to reduce the rate at which the customers will be tempted to engage on brand switching. In other words, consideration of brand preference and retention factors which aids customers to regularly use the company’s services despite increasing new entrants and heightening advertisements and promotions from competitor companies.

1.2.2 Practical rationale

On the practical rationale face, many companies have been glued in developing and tailor-making products and services to lure customers through technology improvements for instance the physical appearance through designs and innovations (Gentzoglanis and Henten, 2010). Fundamentally, the market front has also received a wide research and analysis to ascertain the trends, but as Amin et al. (2012) says, more effort is switching from the precarious branding wars to concentrate more on what the customer wants, prefers and could appreciate more. Following that, more focus on studying the customer behaviour and trends towards product loyalty.

This research therefore investigates the attributes of customer preferences and inducting aspects that draw a customer to differentiated preference towards products and services. The study further goes an extra mile to explain the need to fully understand those deliverables, apart from factors like price reductions and tariffs that attract customers (Chapleo, 2014). Other aspects like the success of the company can play a great role in either pulling or pushing away customers. On that note, companies ought to understand that maintaining brand loyalty will drastically reduce the rate of brand switching that comes with reduced revenues and profits (Ramaseshan & Stein, 2014). The emphasis of this paper will thereafter form a basis of understanding and implementing a better business development strategy to help ceiling the loopholes created by brand switching and resulting to brand loyalty.

1.3 Research aim and objectives

Competitors in the case scenario of the mobile telecommunications have several ways in which they enhance their market footing against their perceived rivals. On that line, the company in question; in this case O2 will have to step-up its operational manner, product and services range, customer care, after sales service just but to name a few, in order to counter competition that is mounted from the other side of its business rivals like EE among others (Dubey et al., 2013). Despite that, this paper will be aiming to understand the competitors’ merits and strategies to counter and outshine O2’s customer preference rate to favour its revenue gains. Following that, a number of objectives will be important to be considered to shape the papers aim;

  • To analyse the competitive environment of the UK mobile telecommunication industry;
  • To analyse to what extent that competitors’ factors (e.g. low-price competitors, customer perceived competitor’s brand value, perceived brand switching costs, competitors’ word of mouth) can influence customer brand loyalty
  • By analyzing the factors influencing customer brand loyalty, to help O2 improve its strategic fit in response to the competition in the UK mobile telecom industry

1.4 Dissertation structure

This structure highlights the working framework of this research with chapter 1 introducing the topic and highlighting the research background, research rationale and objectives of the study. Chapter 2 will tackle the literature review with analysis of previous researches on brand loyalty and other factors that influence customer loyal behaviours towards a brand. Additionally, since this study will adopt a positivism philosophy, then development of an hypothesis with research question will also be elaborated in this chapter. Chapter 3 analyses the research methods used to obtain data, process it and analysis considering research ethics for a better research. On the other hand, chapter 4 synthesises the research findings and presents an analysis of the research findings in a manner to picture the findings in a manner understood better. And finally, chapter 5 covers brings forth the conclusion discussions and fronts recommendations with an outline of the research limitations for use in future research.

Chapter 2: Literature Review

2.1 Introduction

This chapter reviews literature on various issues relating to the influence of competitors’ factors on customer brand loyalty with strategies, models and outcomes of past researchers’ works. In regards to this, the chapter will focus on defining customer brand loyalty. It will go further to highlight on what past scholars wrote in regard to factors related to competitors that influence customer loyal behaviours and how companies should strategically positioning themselves with the factors affecting customer brand loyalty. In doing so, the paper will be seeking to bridge the gap left in the past researches hence affirming the rationale of this study. Therefore in order for the threats facing the telecom industry in the UK to be identified effectively, this paper will use the PESTLE framework to expose the external factors that can affect the level of customer loyalty any operator will enjoy in this market niche. Agata and Nakamura (2013) went further to support the fact that this analytical tool will cover the political, economic, social, technological, legal and environmental perspectives which in turn will expose the entire environment in which the UK telecom organizations operate in.

2.2 Analysis of the competitive environment of the UK telecommunication industry

Choi and Click (2006) depicted that the thriving of the telecommunication industry in the UK has mainly been steered by the hiked competition amongst domestic telecom operators. This competition has had a direct impact on the levels of customer loyalty experienced from so many of the UK dwellers, since it has resulted to the lowering of the switching costs amongst telecom service providers in the UK  as illustrated by Pedley (2013). According to Gentzoglanis and Henten (2010), it has become very critical for many such companies to take a leading role in ensuring that they have embraced competitive aspects to ensure that customers will remain loyal to its brand. In order to ensure this happens the companies must be sure of the competitive external forces they are working against. This will give them the appropriate picture of the strategic capabilities they should equip themselves with.

2.1.1 Political

Any drift in the political set-up in the UK government will have a direct impact on the operations of a business. Infante & Vallejo (2012) in fact affirmed the fact that one of such moves in the UK telecom industry is the urge by European Union through its roaming regulation, to reduce the usage of the mobile phone in the overseas countries by 70%. This will drastically reduce the revenues telecom companies in the UK have been enjoying from roaming of their UK customers in foreign countries. Jairo (2006) reported that the particular regulation has also seen to it that there is an increase in rights of customers in the UK. This make the customers to have high rights on deciding on how they prefer the telecom services to be delivered by any telecom operators, even when their preferences are costly to the operators. This has a direct negative impact the revenue streams of such operators, as they try to comply with the needs of the customers, and win their loyalty (Brand Finance, 2015). In accordance to Lachenmeier et al (2013), the European Union Regulatory Framework has the mandate to make key strategic decisions on any aspect regarding communication. This gives the operators very limited rights on the decisions they make pertaining the products they are offering to the market.

2.1.2 Economic

As stated by Cline and Wolff (2012), the 2007 Great economic depression and the 2012 Euro zone Debt crisis impact is still felt till today in the UK market, hence affecting the financial operations implemented by the telecom organizations. Firstly, these financial crises increased the rate of inflation thus resulting to the relatively low GDP levels which have dominated the country (Kara and Nelson, n.d.). This has in turn resulted to the loss of so many jobs amongst the locals thus having a direct impact on the purchasing powers of the UK dwellers. With a GDP deficit ratio of 13%, investors or even policy makers have become very scared to invest wholly in this niche, thus affecting the profit levels which were once enjoyed from this market (Blanchflower and Shadforth, 2007). Worse still, banks and other financial institutions have been slower to offer financial assistance to support telecom organisations, as they seek for such financial instruments to fuel their growth (Roselli, 2012). This has had a direct impact on the growth rate experienced amongst many firms in the UK telecom industry.

2.1.3 Social

Social interaction and reliance on the telecom infrastructure has greatly increased in the UK with the advent of the mobile telephone to get to the 4G platform (Lin and Wang, 2014). Since then, there has been increased customer demand to access the internet platform as most of them tend to access Twitter and Face book social media platform, which have become too popular in this population (Umans, 2013). More so, mobile telecommunication has become a critical aspect in the lives of the UK locals and following the recent financial crunch, most of them tend to be a lot more cautious on their spending patterns (Riley, Rosazza-Bondibene and Young, 2014). This can only mean that a telecom provider will need to offer very strategic tariffs, speeds and reliability to ensure that it wins its customer loyalty (Lin and Wang, 2014). The UK is also a baby boomer generation; therefore this hikes the manufacturing costs of telecom providers, as they have to customize the telecom platform to have mobile phone apps which will fit the tastes and preferences of all the customers (Roberts, 2012).

2.1.4 Technological

The UK telecommunication industry has been highly revolutionized as the sector faces great advancement with the implementation of the 4G and android smart phone technologies (Zhao, 2014). This offers the platform for telecom players to be able to compete effectively, as they seek to offer innovative telecom solutions to the UK dwellers. The 4G platform has greatly improved the internet platform to offer very high and reliable speeds to the telecom providers hence ensuring that customers enjoy using their mobile phones, with negligible fears of downtimes (Collins, 2006).

2.1.5 Environmental

The telecommunication industry has always been in the limelight in the UK, for contributing highly to the region’s high carbon footprint, ever since it was initialized (Jones and Liddle, 2011). According to Gentzoglanis & Henten (2010) stringent legislation and policies have been passed by the UK government and environmental lobbyist to ensure that this has been regulated by this industry. Worse still, eco-friendly mobile phone gadgets are highly advocated and preferred in UK, hiking the operational and manufacturing costs of many telecom providers, as they seek to comply (Edwards, Smith and BÃchs, 2013).

2.1.6 Legal factors

Legal perspectives will always play a big role in the UK telecom sector through deregulation as mainly effected by the European Union body (Scherer, n.d.). This is so since deregulation will always tend to change the rule of engagement thus affecting the level of competition enjoyed in the industry by companies (Tombs and Whyte, 2012). This is so since deregulation comes with more changes for the company to adapt to, in order for it to be rendered sustainable in this market.

2.3 Customer brand loyalty

Mao (2010) touted that the building of loyal customers begins with the creation of a detailed customer profile. Subsequently an innovative loyalty and elaborate incentive framework which supports the rewarding of customers for business continuation should be developed as supported by Witkowska (2010). At this point, it becomes critical to acknowledge how telecom companies in the UK decide on who is a loyal customer. Nguyen (2013) further states that it’s clear that over 90% of them use the churn rates to ascertain on this aspect. However, this perspective is never reliable since it bases its determination on the potential of the telecom company churning customers. Therefore, the loyalty programs are deemed to always be the most ideal solution for this. Uncles et al (2003) affirmed that this is so since customer loyalty will easily be determined by factors such as satisfaction, retention levels and loyalty aspects which finally result in the decreased levels of churning. The loyalty program options which are currently used in the telecom industry by its providers include points, upgrades, discounts and free services.

The loyalty programs on the other hand must be relevant, achievable and economically viable so that the company does not incur unnecessary expenses. As stated by Nguyen (2013), the effectiveness of any of these loyalty options will highly depend on the unique behaviours been possessed by the UK dwellers. Liu (2007) in fact stated that this creates a connection point between the telecom providers and the UK customers by providing them with consistent and reliable contacts via which communication is effected through loyalty programs. Uncles et al (2003) was in agreement that by implementing such loyalty programs it’s clear to note that telecoms are able to form and implement strategies whereby customer will feel satisfied ensuring that their industrious lifestyles are sufficiently enriched through speedy and reliable communication with their families and peers, via the strong telecom platform. However, regardless of the research which has been carried out by various authors in regard to customer brand loyalty in the UK telecommunication sector, very little has been researched on how competitor’s factors influence customer loyalty. Furthermore, the previous studies have not also been too keen on analysing how factors affecting customer’s brand loyalty in the UK telecommunication sector affect the strategic fit of firms operating in it. These aspects have been catered for in depth in the discussion that follows.

2.4 Low price attractiveness and its influence on customer loyalty

Price is a determinant in the choice of market or the products and services a customer will go for in any market (Srivastava and Sharma, 2013). In telecommunication market for instance, the customer will have need to compare prices of both the products/ gadgets and the cost of the services for him/ her to settle for a cost friendly option. Schultz (2014) found out that lower price from competitors attracts brand switching that in turns affects the loyalty of customers. According to a research by Dong & Won (2007), pricing formation, pricing systems and additional fee are the three major components of price that influence brand loyalty.

2.4.1. Pricing formation

Pricing formation refers to the company’s structured manner in which it sets and regulates its call charges. This can be done following the company’s cost of operation and nature of the service provided (Jiang, Chou and Tao, 2011). Dong & Won (2007) further stated that, government regulations and legislations among others can also affect the pricing formation. Therefore, these factors come to play and affect the agreed pricing of services that can change from time to the other depending on when these changes and determinants vary.

2.4.2. Pricing system

This factor refers to the scheme formulated to regulate and vary prices of mobile telecommunication services (Selvi, 2012). The scheme provides a range of varied prices basing on times of the day, seasons, availability of incentives through extra purchases for instance on specific airtime (unit of calling per specific amount and time). Ramirez (2007) affirmed that inclusion of calling tariffs that are the regulated call rates per specified time with bonuses or lowered calling rates at varied periods directly affect the brand loyalty and preference of a specific brand by customers.

2.4.3. Additional fee

This is the fee of extra services to the normal and basic calling and data transfer charges for instance, activation and termination charges, charges imposed on added services and those of third party mobile applications (commonly referred as apps) in example of smartphones (Bodhani, 2011).

Several theories have been formulated in regards to effect of pricing and how it affects brand loyalty. Griffin (2013) elaborated the Pricingstrategy theory that bases its arguments on cost-based, demand-based or competition-based pricing. In this regards to the telecom industry, this theory’s application lies on the competition-based pricing where the companies flex their process both in terms of mainly lowering their talk-time prices and also in terms switching costs to attract brand switching from competitor customers hence increasing customer base. This theory therefore demands for a careful analysis of the markets and competitor pricing strategy before setting a mark-up price lower. Contrary to that, Pascoe (2014) expresses an opinion that other telecom value adds their services commensurate to the price increase to convince customers with increased value and price at the same time for the customers to see the value of their money.

Further studies by Fuha (2005) and Lee& Murphy (2005) revealed that change in price directly affect the company preference from the customers’ perspective. The report further says that a reduction in mobile service charges attracts brand loyalty in the UK telecommunications industry. In this regard, for instance O2 engages in placing its service bearable with variations using seasons and time of the day charge variations to stay above its competitors (, 2015).

2.5 Customer perceived brand value and its influence on customer loyalty

Brand value according to Severi & Ling (2013) is the worthiness of a brand between the perceived calculated value and the actual value measured through customer loyalty towards the brand, customer retention and turnover ratios among other parameters. Many previous literatures have largely shed light in brand satisfaction and brand loyalty, but this paper will offer the limitation that has not been full elaborated and analyzed; the value of the brand vis-à-vis how the customer sees a competitors’ product (Sonnier and Ainslie, 2011). This correlates with The Economist (2013) which revealed that, a customer will be influenced by brand value and worthiness of a company. The opposite reputed company on the other side will attract brand switching, a preserve many companies never want to experience (Wieseke, Alavi and Habel, 2014).

Theoretically, Keller (2013) brought forth the Keller’s brand equity model that resonates around how customers perceive the product or service. The model advocates for building exceptional customer experience to engrave the positive attributes of the brand in the customers’ preferential platform. This means that this product should satisfy and meet the expectations of the consumer for it to warrantee repeated purchases and recommendations to friends. By so doing, Cho et al. (2014) says that the customer enhances his/ her cognitive, sensory and close association towards the product. This model’s application lies on the fact that the telecom companies ought to research the market on tastes, changes and customer preferences and imbed their products and services with technological innovation to deliver satisfying products. This will in turns enhance brand loyalty amongst its customers and on the other side encourage switching from competitors to join the brand.

However, Temporal and Trott (2001) and Oswald (2012) are opined that a customer is a recipient of the dynamics that result from the competitors’ market. Additionally, Kim et al. (2008) reveals in his research that, customer loyalty towards a brand can be taken positively or negatively by how the customer understands the brand value of a product from a certain company. Sharif (2009) stated that the mobile telecommunication industry is largely dependent on its service division of revenues from calls, data transfer among others as compared to revenues as a result of products like the devices and gadgets. Further researches by Aaker, (2004) and an online research portal Brand Finance (2015) supported the same stand by findings that quantified the service industry to have taken over 62% of the global business in the intangible platform forming $19.5 trillion. As a result, the value of a brand is integral component and is directly influencing the customer brand loyalty.

Wang, Wei & Yu (2008) considered research-based approaches as elements that measure consumer behaviour and attitudes without a financial value attached to the brands. This research further concluded that aspects of product knowledge, relevance, preferences and satisfaction to a customer as variables to consider vis-à-vis the product sales volumes. On the same front, a study by Vazifehdoost (2014) brought forth an element of measures of behavioural aspects like market share and relative price as considerable variables to aid valuation of brand value. The findings changed the aspects of consideration of how the telecom companies can reap positively by investing in advertising and more product awareness to enhance more product knowledge. However the researches did not consider perspectives related to research and development, product design and innovation in the context of their effect on the customer preference. Hence this research will cover that gap in its extensive consideration of such pertinent factors.

On the same line, Abimbola (2009) says that financial investment that is cost based drives the value of a brand by considering the aggregate historic costs and the current value added to the same product. This element however has its shortfalls in that there is no direct link between investment made and the value of the brand that has been accrued with time. Therefore, its important for companies not to consider only advertisements and promotion but rather other important components like employee trainings, packaging and product design to break it even in the market.

Additionally, Goldfarb, Lu & Moorthy (2009) presented a brand value measurement based on a comparable framework in which solely depends on the product comparisons with similar products or services. This however according to Robinson (2009) my be hard to rely on at times because the same products may not be easily compared even if they are designed similarly since companies dwell on product differentiation to mark-up their products. This comparisons can lead to brand premium price setting since the companies may be tempted to use the future way of projecting variation of price to value a brand (Akhter, 2009).

2.6 Perceived brand switching costs and its influence on customer loyalty

Slootmaekers et al. (2008) defined brand switching as the costs incurred during the shifting time of a customer from one mobile telecommunication provider to the other. This cast is well elaborated by a research by Qayyum & Khang (2011) which portends that switching costs are gradual costs that comes with time. These switching costs may be influenced by costs related to transactional, contractual and learning within the customers’ switching time (Burnham, Frels and Mahajan, 2003).

Transactional cost – this refers to the costs incurred when the customer is ending the current relationship and spurs through to the time of starting a new relationship with a new service provider (Shi et al., 2011).

Contractual cost – this is the cost imposed by the service provider to the customer as an incentive for showing loyalty despite the competitors’ offers. It can be incurred when the service provider thinks that his/ her customer could be easily swayed to another service provider and there is need to retain the customer (Qayyum & Khang, 2011). This can be in form of discounts, rewards just to name a few.

Learning cost – this cost is incurred as a result of the customer trying to learn and bring him or herself to speed with the new service provider’s new product or service (Zolnierek, 2008).

Research by Ganesh et al (2009) highlighted that it’s vital for telecom service providers to understand their loyal customers and the fact that switching cost is one of the deterrents to most customers to switch. Despite all that the study was limited to the ways a telecommunication company can mark-up its switching rates vis-à-vis that of the competitor so as to attract more and discourage switching. This study therefore will focus on the dynamics that determine the regulation and adjustments that the service provider ought to check in terms of making switching costs higher and discouraging brand switching to encourage brand loyalty.

In support of the same, Lees et al. (2007) says that the higher cost of switching makes it harder for the customer to switch brands hence necessary for service providers to invest in it. More researchers like Selvi (2012) have eluded that benefits of the rival service provider therefore should at all times be maintained below those of the current service provider to avoid switching. On a contrary opinion, Kikuchi (2009) says switching costs work well with reduced costs of service but with higher leverage in switching costs so that the value and benefits deter the customer from switching. Following that, a company’s financial growth is dependent on customer retention therefore vital to ensure that current customers and attracting more from the rival service providers is highly encouraged.

Shi et al. (2011) on the other hand revealed that incentives, other price reductions and service customisation towards a loyal customer encourage brand loyalty. These findings were supported by Aaker (2004) and Fraering & Minor (2013) who focused on switching trends among the youth in the telecom industry in the US. The findings further narrowed down the preference towards the service provider with more incentives and increased switching costs to discourage switching. Therefore this study will give more basis on the general populations in the UK, market with more demographics and difference in preference and perception towards the switching costs, making this research relevant for future researches.

2.7 Word of mouth and its influence on customer loyalty

This refers to the marketing technique used to retain and attract customers that require the company or brand to depend on customers to woo more customers (Webber, 2011). Kazemi et al. (2013) study revealed that word of mouth accelerates the brand identity and commitment having have come through peers and previous customers. However, the research didn’t address the independent view of the new customer about the brand and his/ her loyalty prior to the influence and the word of mouth. This makes the flare for this research to hang on and cover the gap by bringing to light the contribution of brand loyalty in regards to word of mouth. Additionally, Ganesh et al (2009) stated that word of mouth among the customers in the mobile telecom preference cannot be relied on since it is easily distorted on transfer as each person will tend to give a different opinion as per their understanding of the information. This will therefore mean that word of mouth cannot be used as a perspective to influence customer loyalty. Webber (2011) further alludes that most customers nowadays mainly use the online platform instead of word of mouth to share information pertaining a brand they are loyal to. However, Kazemi et al. (2013) is not in agreement with this perspective as he claims that in the telecommunication sector, most customers with prior product and service experience will use word of mouth to refer or recommend potential customers to a certain telecommunication brand. In relation to the same aspect, Lee & Murphy (2005) said that quality telecommunication products with high levels of customer satisfaction favours word of mouth technique in that as friends meet and talk about their positive experience with a product or service, it creates a marketing platform that leads to new customer introductions and affirming the old customers in case they are customers already.

2.8 Recommendations from previous research

In accordance to the existing literatures by previous scholars, players in the UK telecom industry ought to adopt several key factors in its wake to both embrace and steer the mobile telecommunication industry to greater heights. In that regard, firstly; research by Maletič et al. (2014) pointed out that reduction of telecomservice prices should always be considered by the companies as it easily aids them in a strategic positioning to develop well itscustomers brand loyalty. On the same front, Dess (2012) stated that customers should use product price as a comparative platform towards the rest of the products offered by other similar companies before making a preference. Findings in a study by Kent (2008) further affirmed that customers will tend to be loyal to this brand on the basis of perceived lower costs than rivals. However other literatures negate this stand as they recommend that more consideration should be thrown behind the dynamics of either price increase or reduction.Aloysius et al. (2012) revealed that non-price elements like degree of quality, service and advertising among others in a marketing mix theory can help raise the company’s preference rate among the customers setting its brand loyalty in fair rates. Dess (2012) opines in a research that was geared to establish brand loyalty in the US market in telecom industry that such non-price aspects seem to be adding incomparable value to the final product and the premium price will then be justifiable.

Secondly, Ho Voon (2006) states that the telecom industries in the UK market ought to throw their focus on the service quality as a way to customer satisfaction and experience. This research further alluded that differentiation perspective of products and service amongst rivals by offering high levels of clarity, customer service and even high coverage areas increase brand preference. On a contrary opinion, Sarreal (2008) recommended that it’s better to increase the service network even if the company rides on a lesser network strength to count on more footing and wider coverage then improve the network later. However this study recommends that players in the telecom industry in the UK should focus on customer satisfying network to cater for the less but well connected clients and can ride on other service providers to outsource the network bandwidth for further distances. By doing this, the company can gain more brand loyalty and preference from customers.

Thirdly, in accordance to literature by Emari (2012) says that brand image can only be sufficient if it is directly correlated to brand identity which is the packaging of the brand from a manufacturer’s perception. His findings are backed up by more recommendations by Selvi (2012) and Chapleo (2014) that appeals for service improvement through differentiation and innovation to appeal, satisfy and meet expectations of the customer. However, Andreani et al. (2012) states that there is need for companies to differentiate between brand identity and brand image and once this two factors are taken into consideration, the brand loyalty will emanate from the customers preference as a result of understanding the company’s view of the product and the customer’s perspective.

Further studies by Kent (2008) and Mosavi (2012) touted that customers have a high voice and even have the government back up via the enacting of protectionist legislation that favours consumer rights. Additionally, Chapleo (2014) addressed mobile telecoms loopholes in protecting the privacy of their customers through data and voice-calls. In that regard, Chapleo (2014)further affirmed that stringent security protocols should be implemented as a remedy to curb any possible network hacking. In this light, this research proposes a highly adherence of telecom providers to set legislations to reduce incidents of insecurity within customer privacy in the communication sector and adoption of technologically improved voice and data protocols to protect their customers.

Fourthly, research by Ramaseshan and Stein (2014) pointed out the fact that for any telecom player to have its operations sustainable, they must be able to frequently carry out market research to ensure that they are abreast of the tastes and preferences of the customers. They affirmed that this would easily enable the players to deliver the right quality of products and services which would be trusted by the consumers by having them attaching the right brand value to it, an aspect which will in turn positively affect their loyalty to the brand.

Finally, Dube et al. (2007) recommended that telecom players should consider the adherence to corporate social responsibility aspects in their product manufacturing or even service delivery. This is so as he claimed that, such customers will attach so much value to such a brand considering how important CSR perspectives have become to the world today, hence winning over their loyalty.

2.9 Research hypotheses/questions

Research questions forms a vital part of the research itself. Ryan (2002) says that in order to bring out the objectives and the desired outcomes of the research, the research question forms an important tool that shapes the research. In regards to customers’ brand loyalty towards the mobile telecommunications industry in the UK, this research will draw the following research questions;

  • What is brand loyalty in relation to the mobile telecommunication industry?
  • How can mobile service providers encourage brand loyalty?
  • How competitive is the mobile telecommunication industry in the UK?
  • What are the factors influencing customers’ brand loyalty in the mobile telecommunication in the UK?
  • What influences customer preferences and trends in mobile telecommunication industry in the UK?

2.10 Chapter summary

In summary, this paper’s literature review highlighted the analysis of the telecom industry in the UK with a clear understanding of the previous scholarly literatures, their objectives, perspectives and findings. Through the factors that influence brand loyalty such as lower competitors’ prices and how different players in the telecom industry have strived to drop their prices both in the service and switching costs. Using other past studies, this paper evaluated how brand value impacts the loyalty to a brand with customers’ preference shifting to a product or service with quality and which satisfies their expectations. In addition, this research how brand switching and the costs involved can form dynamics which will either affect brand loyalty positively or otherwise. Models and theories related to price, customer brand loyalty, brand value and word of mouth also bring out the aspects to influence customer brand loyalty in the UK mobile telecommunication industry. This research further investigated the research gaps created by previous researches and recommends sound mitigation measures and approaches onto which the telecom companies should adopt to increase their customers’ brand loyalty.

Chapter 3: Research Methodology

3.0 Introduction

In this chapter is the methodology section. The intent of the methodology chapter is to discuss and justify the methods and procedures that the research has used to arrive at the research objectives. Under this section, the researcher discusses the research philosophy, approach, strategy, instruments, sampling methods, data collection procedures, data analysis, research ethics and concludes with the chapter summary.

3.1 Research philosophy

Research philosophy, according to Denzin and Lincoln (2011), is basis that a researcher uses to come up with a particular view regarding the world. It provides a platform to guide in articulating ideas and knowledge regarding particular research questions. Partington (2002) notes the inquiry into many bodies of knowledge involves intense observation, reflection, theoretical underpinnings and testing of various theories. This necessitates s framework that needs to guide this process. Partington (2002) continues to note that this framework is the research philosophy; a framework concerned with methods of knowledge-creation in intellectual fields. Among the research philosophies prevalent in academic research are positivism and interpretivism. Positivism takes the stance that scientific research needs to be guided by a set of theories and facts of which the researcher is distinct. It seeks to explain causal relationships. On the other hand the interpretivism approach seeks to understand scenarios through perceived knowledge as opposed to objective knowledge. This has been pointed out as a research problem given it fails to observe a strict methodological protocol (Carson, 2001).

This research takes a positivist approach attributing to the fact that the study on the factors influencing customer brand loyalty in the UK telecom industry is achieved through the use of scientific measurement tools and relied on observable facts away from the researcher’s value-based judgments. In addition, besides being characterised by objectivity, the research arrives at the conclusion through establishment of causal relationships.

3.2 Research approach

The study takes an inductive approach. Inductive approach posits that the sequence of conducting a scientific research should start with observation and gathering of facts then the analysis will give the researcher reliable conclusions that can be added to existent theories (Wilson, 2010). Another fundamental of the inductive approach is that there is application of scientific tools such as interviews and questionnaires that guide the researcher in data collection (Gratton and Jones, 2010). In this particular research, data is collected through an administration of questionnaires to a sample of O2 customers. In addition, as per the guidelines of the inductive approach, this study begins with observations drawn from the researcher’s experience and the literature review on brand loyalty factors surrounding the UK telecommunication industry as well as on customer brand loyalty in general, then transitions to collection and analysis of data that ends up with a theory as an outcome. The process that leads to the findings also involved the observation of trends and patterns in the data collected.

The inductive approach can be contrasted to the deductive approach that begins from existent theories and ends up in observations and findings. The researcher in a deductive approach usually tries to assess the validity of an existent theory in a particular scenario. Thusly, the use of inductive approach in this study is further justified by this. The inductive approach has been credited over deductive approach for its ability to explain phenomenon from different perspectives – without the restriction of theories (Babbie, 2015).  Inductive and deductive approaches can be summarised as below.

Inductive and deductive approach

Figure 3.1.: A contrast between inductive and deductive approach (Wilson, 2010)

3.3. Research strategy

The main aim of this research is to establish a causal relationship between industry factors and brand loyalty in the UK telecommunications market. The research narrows down to the study of a single organisation – O2. Regardless, the sample size for the study remains considerably large and thusly for effectiveness the researcher uses the survey method. Check and Schutt (2012) notes that survey research is crucial in researches that have a large sample size and therefore require wide generalisability. Check and Schutt (2012) continue to identify the strength of survey research as versatility, that is, it can be used in conducting a variety of researches, efficiency – it can measure many variables without having to generate additional requirements in terms of time and cost – and generalisability – suitable when research findings need to represent a considerably large population. Using the survey method the researcher was able to carry out a study of O2 with a possibility of extrapolating the results to the UK communications industry. The appropriateness of the choice of company is due to the fact that O2 is a leading telecommunications provider in the UK serving over 24 million customers and having 450 retail stores around UK (The Blue, 2015). Thusly, it is a good representation of the UK telecommunications industry. Being a public listed firm in the London stock exchange, information about out is easily accessible.

3.4 Research instrument

The instruments that are used in conducting a case study research are paramount in ensuring validity. As Simons (2009) points out, effective collection of data is a backbone to every research and ‘self; is the most efficient instrument that a researcher has. Besides self, there are other data collection instruments including questionnaires and interviews. As is common in case studies, – which adopt the quantitative approach – this study used survey questionnaire as a method of collecting data. Farquhar (2012) supports the use of data collection instruments firstly because they demonstrate that protocol was adhered to in data collection. Secondly, survey questionnaires highly structured and thus are critical in ensuring that the collected data is reliable. The researcher, through the use of survey questionnaires, was able to partly address the issues of time and cost since questionnaires were administered to a considerably large group and the costs were relatively low in relation to other perceived methods of data collection. The researcher also noted that the application of interviews would not only raise the cost of the research but would open room for bias in the responses and complicate the data analysis process. -This is attributing to the fact that interviews are open-ended and thus there is no similarity in the choice of responses (Myers, 2009). Interviews also, according to Myers (2009), as opposed to questionnaires require piloting which would have been time consuming in this study.

3.5. Research design

Research design is defined by Salkind (2010) as the general plan that avails the researcher with a logical structure that is used to address the research problems and thusly answer the research questions. It is a crucial element of the research methodology. In this research, the main concept was to investigate the impact of competitor factors on the consumer brand loyalty in the UK telecommunications industry. The particular case study was O2. The research firstly involved the researcher conducting a detailed review of the extant literature on the customer brand loyalty and factors that influence it, that is, brand perception, price, and trust among others. This review of literature offered an understanding as to the contribution of other authors and researches on the same topic.

The research then conducted collection of data from a sample of customers at O2. The customers were selected through convenience sampling. Majorly, the number of customers surveyed was a small portion taken as a representative of the telecommunication market since the researcher argued that, in view of availability of time and financial resources, it was impractical to survey the entire telecommunications industry. The questionnaires were highly structured as per the connotations of quantitative research. The intent of the questionnaires was to gather demographic data as well as data regarding O2 and its competitors in terms of factors influencing customer loyalty. The close-ended questionnaires enabled the researcher to achieve similarity in the choice of responses thus saving the input needed to carry out an analysis. Other factors that were addressed before admittance of the questionnaires included limiting the number of question in each section of the questionnaire to save time and ensure the respondents are engaged. Data gathered from the survey questionnaires was analysed using statistical tools including statistical packages for social sciences (SPSS) and MS excel packages. Using the statistical data analysis methods the researcher was able to analyse elements such as the frequency analysis, correlation analysis, regression analysis, mean among others. The aforementioned methods are used identified by Israel (2008) as apt for quantitative research.

3.6 Data collection and analysis

In regard to collection of data, the study took a survey approach. The survey method, according to Farquhar (2012), is used in the collection of data on a face to face, mail or phone call basis by the use of structured questionnaires and other data collection tools. The study used convenience sampling to administer survey questionnaires to a 150 respondents who were O2 customers. The study was carried out in Newcastle citing the fact that it is a populous city in England and this made it easy to come across willing O2 customers. The questionnaires were structured in four sections consisting of the warm-up section (Q1-5), factors influencing brand loyalty (Q6-9), limiting factors on loyalty (Q10) and demographics section (Q11-15). Part of them questions (Q6-11) were coded using a five point likert scale ranging from strongly disagree to strongly agree but all the questions were close-ended. Such aided the researcher in attenuating the complexity that comes along with open-ended questions. Divergent responses arising from lack of uniform answers can thus complicate this process. Of the issued 150 questionnaires, 126 (84%) of them were completed successfully and returned and thus were usable in analysis. Secondary data collection involved an elaborate research into literature on customer loyalty, competitor factors as well as data on O2. Secondary data was used to complement findings on primary data. Data obtained was analysed by the use of statistical measurement softwares including SPSS and MS excel. Responses to the demographic section were analysed in MS excel and presented in graphs and percentages. The rest of the questions were analysed separately using SPSS and then resented in the form of tables and graphs. The researcher analysed each question separately considering answers from different respondents.

3.7 Research Ethics

In research, data is obtained from respondents and the model that the researcher uses to treat and interact with respondents is crucial in determining whether the research was ethical. Oliver (2010) notes that for a research to be termed as ethical the respondents must be treated with respect and assured on their privacy as well as anonymity. In regard to the aforementioned, the researcher began by seeking the consent of the respondent. This was backed up by the choice of convenience sampling by the researcher which offered flexibility – the respondent could be any customer of O2 as long as they consented to the study. The researcher also explained to the respondents the major purposes of the study highlighting the need for their contributions before handing them the questionnaires. The designing of the questionnaires used was done observing the anonymity of the respondents and thus no names or contact details were exchanged in the process. Lastly, the researcher assured the respondents that the information garnered from the study would be used solely for purposes related to the study.

3.8. Summary

This chapter sought to explain and justify the methodology that was used in the research. The study adopted a positivist approach. Using the positivist stance, the study adopted a survey approach by analysis O2 customers. The strategy applied involved guidelines of the survey method under which the survey questionnaires were handed out to a selected sample of O2 customers. The questionnaires were coded using a likert scale and the selection of the sample was through convenience sampling. Lastly, the data collected from the questionnaires was analysed by use of statistical tools such as SPSS and MS excel.

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