ABSTRACT
This work focused on the Influence of Loyalty Programs on Retention of Visafone Customers in Umuahia. In order to carry out this work, both primary and secondary data were used. Primary is basically the Questionnaire and secondary data includes abstracts from published and unpublished works like flyers, handbills, publications, Library, internet and so on. The data was however analyzed with the help of tables and simple percentages. The technique used for testing the hypothesis was the regression analysis technique. Findings proved that customer loyalty programs breed customer retention and this yields profits to the Company. So it was recommended among other things that organizations should adopt using a well-organized loyalty programs so as to maximally satisfy their customers in order to retain their loyalty and continuous patronage which translates to high profit margin.
TABLE OF CONTENTS
Title ……………………………………………………………… i
Declaration ………………………………………………………..……. iii
Certification ………………………..…………………………….. iv
Dedication ………………………………………………………. v
Acknowledgements ……………………………………………….. vi
Abstract ……………………………,,………………………………… vii
Table of Contents ………………………….……………………………. viii
CHAPTER 1: INTRODUCTION
1.1 Background to the Study ……………………………….… 1
1.2 Statement of the Problem ……………………………………………. 4
1.3 Objective of the Study ………………………..…………………. 6
1.4 Research Questions …………………………………………. 6
1.5 Research Hypotheses …………………………………………. 7
1.6 Significance of the Study ……………………………………. 7
1.7 Scope of the Study …..…………………………………………..……. 8
1.8 Limitations of the Study ……………………………...…………… 8
1.9 Operational Definition of Terms …………………………………….. 9
1.10 Organization of the Study …………………………………………… 10
CHAPTER 2: REVIEW OF RELATED LITERATURE
2.0 Introduction …………………………………………………...… 11
2.1 Conceptual Framework ……………………..……………………... 11
2.1.1 Brief history ………………………………..…………………... 12
2.1.2 Strategic direction of Visafone ……………………….…… 14
2.1.3 Key element of the Visafone strategy ……………………………. 15
2.1.4 Visafone customer loyalty program …………………………….. 19
2.1.5 Customer loyalty program …………………………………………….. 22
2.1.6 Customer loyalty/retention ……………………………………………… 26
2.1.7 Input factor of customer loyalty/retention …………………… 27
2.1.8 Output factor of customer loyalty/retention ……………………… 34
2.1.9 Relationship marketing concept and issues ………………. 36
2.1.10 Marketing mix management model …………………………….. 40
2.2 Theoretical Framework ………..………………………………..… 42
2.2.1 The attraction theory ……………………………………………….. 42
2.2.2 The social exchange theory ……………………………………... 43
2.2.3 The equity theory …………………………………………………..…. 43
2.3 Review of Empirical Studies ……………………………………… 45
2.4 Summary of Literature Review ……………………………………….… 48
CHAPTER 3: RESEARCH METHODOLOGY
3.0 Introduction ……………………………………………………………... 51
3.1 Research Design ……………………………………………….. 51
3.2 Population of the Study …………………………………………….… 51
3.3 Sample Size and Sampling Techniques ………………………………. 52
3.4 Research Instrument ……………………………………………… 52
3.5 Psychometric Properties of the Research Instrument ……………. 53
3.5.1 Validity of the instrument …………………………………………….. 53
3.5.2 Reliability of the instrument ………………………………..…............... 53
3.6 Administration of the Instrument ……………………….…………..… 53
3.7 Scoring of Instrument or Measurement of Variables ……............. 54
3.8 Sources of Data Collection ……………………………………………… 54
3.9 Model Specification ……………………………………………………… 54
3.10 Method of Data Analysis ………………………………………. 55
3.11 Test of the Hypothesis ………………………………….…………… 56
3.12 The Study Area ………………………………………………………. 56
CHAPTER 4: DATA PRESENTATION, ANALYSIS AND INTERPRETATION
4.0 Introduction ……………………………………………………. 58
4.1 Questionnaire Administration ……………………………………… 58
4.2 Sample Characteristics …………………………………………..… 58
4.3 Data Presentation …………………………………..….…….. 60
4.4 Analysis of Research Questions ……………………….…………….. 67
4.5 Test of Hypothesis ……………………………………..………. 68
4.6 Discussion of Findings ………………………………….….. 69
CHAPTER 5: SUMMARY, CONCLUSION AND RECOMMENTAITONS
5.1 Summary of Major Findings ……………………………………… 72
5.2 Conclusion …………………………………………………… 72
5.3 Recommendations ……………………………………………. 74
5.4 Suggestions for Further Studies …………………………………….. 75
References
Questionnaire
List of Tables
LIST OF TABLES
3.11 Test of the hypothesis (coefficients) ……………………………... 56
4.1 Distribution of questionnaire and response ……….………….. 60
4.2 Age distribution of respondents …………………………..…… 60
4.3 Relationship with the organization distribution …………..….… 60
4.4 Educational qualification distribution ………………….….…… 61
4.5 Employment distribution ………………………………………..… 61
4.6 Marital status distribution ……………………………………..…… 62
4.7 Loyalty program of Visafone distribution ………….…………… 62
4.8 Customer loyalty and retention distribution ………………… 63
4.9 Service quality distribution ……………………………………….… 63
4.10 Visafone profitability distribution ………………….…………… 64
4.11 Product/Service customers are interested on distribution ….… 64
4.12 Distribution based on quality service ………………….……… 65
4.13 Distribution based on staff motivation ……….……….………… 65
4.14 Distribution on loyalty programs and retention ………………… 66
4.15 Regression analysis of retention, satisfaction,
profitability and quality service in Visafone . . . . .. …… …. . . 67
4.16 Test of the hypothesis (coefficients) …………………..…….… 68
CHAPTER 1
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
In today’s competitive environment, customer service management which is the nexus of customer loyalty and retention has played strategic roles in improving, managing, retaining and developing customers’ loyalty.
The past decade has seen many firms adopting a customer focus – often through a formal program of customer relationship management hereinafter called ‘CRM’ (Chen and Popovic 2003). Even though, Nwokah (2012), reasoning with Zehrer (2009), customers are still leaving due to dissatisfaction, despite the large investments in implementing CRM programs. Recent advances in information technology have provided the tools for marketing managers to create a new generation of CRM maneuvers. One of such tactics that thousands of firms have considered, and which many have adopted, is to establish a customer loyalty program or schemes.
Typically, these programs offer financial and relationship rewards to customers, and in some instances remunerations also accrue to third‐parties such as charities (Alabi 1996). Two aims of customer loyalty schemes stand out. One is to increase sales revenues by raising purchase/usage levels, and/or increasing the range of products bought from the supplier. A second aim is more defensive – by building a closer bond between the brand and current customers. It is hoped to maintain the current customer base. The popularity of these programs is based on the argument that profits can be increased significantly by achieving either of these aims.
Every organization, especially in the telecommunication sectors, which is the focus of this work, have to take into consideration how best to serve its potential and existing customers in order to retain them. (Lamont 2001).
The Nigerian telecommunication industry has experienced phenomenal growth in its subscribers’ base, making it a highly competitive sector. And in this strongly competitive and liberalized telecommunication industry, customers are able to choose among multiple service providers based on their level of satisfaction, affordability, and service quality of the service providers. (NCC 2009).
According to NCC (2009), the major challenge facing telecommunication service providers in Nigeria today is the continuous growing competition and customers’ expectation of service quality. Customers’ demand and competition are forcing firms to cut loose from the traditional customer satisfaction paradigm to adopt proactive strategies which will assist them to take the topnotch in this competitive market place.
Telecommunication firms operating in Nigeria are consequently put into lot of pressures due to increase in competition. Various strategies are formulated to retain the customers and the fundamental of it is to increase the service quality level. The headway converts to quality service to customers (Ahmossawi, 2001).
Customer support services and service assurance are particularly essential in the telecommunication service context because it provides high level of customer satisfaction and hence becomes a key to competitive advantage (Ndukwe, 2004).
The effect of poor performance will be particularly dismal for the telecommunication industry in Nigeria due to the presence of increase in cut throat competition, poor service quality delivery, customer support services, network switching which has the potency of affecting the national telecommunication infrastructure (Biljani, & Jusuf, 2011).
Specifically, according to The Guardian Newspaper (2008), many problems now plague the performance of Nigerian Telecommunication industry such as rising cost of energy and threats of stoppage of telecommunication operations by their regulatory agencies. At the firm level is low customer patronage, lack of customer satisfaction, low market share, low profit margins, etc.
In the face of all these challenges, the firms do their best to improve on their workforce, motivate them and ensure that work conditions are interesting. However, management knows fully well that focusing on customer’s loyalty is pertinent, they thought of ways to improve their lots.
Since these problems cannot be totally eliminated but only managed, telecom operators now seek for other means through which they can keep and retain their existing customers as well as getting new ones. Bearing in mind that they are in a perfect competitive market, where there are many buyers and many sellers of homogenous goods and services, they now focused on customer loyalty scheme. This is intended to help them retain their customers and in turn ensure that the figures posted on their balance sheet are not just positive but mouthwatering. (Ndukwe 2004).
In a bid to corner and control firmly its own share of the market, Visafone Communications Ltd, hereinafter referred to as “Visafone” or “The Company” has adopted a lot of strategies to enable it sail through this muddy water. These are seen in the areas of customer loyalty scheme which is targeted at not just customers’ retention but high turnover patronage.
The primary target is to bring joy to Nigerian subscribers’ by giving them the freedom to talk and communicate while providing them with innovative, exciting and affordable products as well as value added services. Visafone will go the extra mile in ensuring that their customers and subscribers are well served by adopting the best possible standards in the industry while revolutionizing the telecommunications sector by providing Nigerians with a veritable passport to reach the world.
1.2 STATEMENT OF THE PROBLEM
According to a study of Nigerian Telecommunication Industry by Omotayo and Joachim (2008), telecommunication operators had little understanding or regard for customers loyalty and retention. Customer loyalty and retention schemes were not given deserved attention. Telecom operators, like other firms in other sectors of the economy, are involved in one loyalty program/scheme or the other. But whether these programs or schemes keep and retain customers leaves much to be desired.
Consequently, the problem with telecoms operators, Visafone inclusive, is seen basically in the inability of Management to determine the influence of loyalty programs on the retention of their customers. It is very possible that it is not the programs that keep customers, rather other issues like quality of service and rates.
Moreso, there is need for the Company to identify customers who are qualified for loyalty schemes based on set or established criteria. There are different categories of customers specifically determined by the volume and value of their transactions.
In addition, Visafone focuses on adequate staff motivation because loyalty program alone cannot retain customer in the face of poorly motivated workforce.
Furthermore, it is necessary to find out whether these programs actually lead to increased profitability of the Company. This is to avoid waste of resources and derailing from the set objectives.
Equally the inability of Visafone to focus on unique program, different from what other telecom operators are doing, to motivate their customers and finally, go further to ascertain the impact of such schemes vis a vis their loyalty – hence the problems they are facing today.
However, the major problem of this research work is inability of Companies (Visafone) to participate in customer loyalty program which leads to increased Return on Investment. Whereby a company fails to engage in loyalty program, it normally affects the number of their high net-worth who they document as customers. This is because most people would like to patronize firms that have their interest at heart. Another problem is lack of trained staff. To engage in loyalty program, staff need to be trained so that the program will be conducted effectively. Poor management of such program would have a negative effect on company’s performance (Ndukwe, 2004).
1.3 OBJECTIVE OF THE STUDY
The general objective of the study is to determine the influence of loyalty programs on retention of Visafone customers in Umuahia. Specifically, the objectives of this work are to:
i. determine the influence of loyalty programs on customer retention;
ii. survey the influence of service quality on retention of Visafone customers;
iii. examine the effect of staff motivation on the retention of Visafone customers;
iv. determine the effect of customer loyalty on the profitability of Visafone company;
v. identify the relationship between the loyalty programs and customer retention in Visafone.
1.4 RESEARCH QUESTIONS
This study attempts to provide answers to the following research questions:
i. What are the influences of loyalty programs on customer retention?
ii. What are the influences of service quality on retention of Visafone customers?
iii. What are the effects of staff motivation on the retention of Visafone customers?
iv. What are the effects of loyalty programs on the profitability of Visafone Company?
v. What is the relationship between the loyalty programs and customer retention in Visafone?
1.5 RESEARCH HYPOTHESIS
To provide the desired framework for the study, the main issues to be addressed are summarized in the following hypothesis to be tested:
H01: There is no significant relationship between loyalty programs and customer retention.
H02: There is no significant relationship between staff motivation and customer retention.
H03: There is no significant relationship between customer loyalty programs and profitability.
H04: There is no significant relationship between service quality and customer loyalty.
1.6 SIGNIFICANCE OF THE STUDY
The significance of the study lies in the attempt to determine the role of loyalty programs on customer retention by Visafone. Upon completion of this work;
The Company will benefit from this work because loyalty programs help to retain customers and eventually lead to increase in profitability.
The study will broaden the knowledge of students on this topic and its impact on the Company. It will add marginally to the existing empirical literatures.
Investors will also benefit from this work because it will serve as a guide or medium of feedback to Visafone and their potential investors.
Equally, it will be of great value to management, researchers, investors, government and students as a point of reference and will equally form the basis for further research study.
1.7 SCOPE OF THE STUDY
This work focused on Telecommunication Companies with special reference to Visafone. The administration of the research instruments is limited to subscribers in Umuahia Office of the Company only. The survey involved the Visafone staff, subscribers, dealers and owners of cyber cafes in Umuahia. This scope serves as a guiding principle to the work, thereby limiting the research with its scope.
1.8 LIMITATIONS OF THE STUDY
The limitations of this study include some of unavoidable constraints and problems encountered in the process. They are as follows:
Finance: This type of study required adequate money to enable the researcher visit the necessary places for collection of data. Insufficient fund will hinder an in-depth study of this research since there are other family financial needs of the researcher. Although the researcher, as a family man, has a lot of things to do with money, he is poised to making the best use of the available monetary resources to get the job properly done.
Non-availability of records: This is one of the most important limiting factors in the course of this study. This includes the problems of easily getting the appropriate data due to bureaucracy which hinders the information flow in the country.
Time: Since this study is one of the many courses offered by the researcher, the researcher will be constrained by time to carry out an indent research on the study. However, the researcher is poised to making the best use of the available time to get the job properly done.
1.9 OPERATIONAL DEFINITION OF TERMS
To enable us understand the terms used on this study, the following terms have been operationally defined:
1. Customer – Anybody that uses Visafone products like customized handsets, desktop phones, modem, SIM, router, etc. for either or both commercial or private purposes. It also includes dealers of these products and operator of cyber café that uses these products. Also included here is anyone that buys airtime, even if the person is giving it to another person.
2. Loyalty Programs – They are structured marketing strategies designed to encourage customers to continue to do business associated with the programs. They are effective ways to increase customer retention and improve profitability.
3. Customer Retention – this is the act of keeping something or someone. In business it is the activity that a selling organization undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship.
4. Telecom - Refers to exchange of information between two or more entities. This is Communication technology which uses channels to transmit information (as electrical signals), either over a physical medium (such as signal cables) or in the form of electromagnetic waves.
5. Satisfaction - The fulfillment or gratification of a desire, need or appetite: a happy or pleased feeling because of something that you did or something that happened to you. It is the act of providing what is needed or desired; the act of satisfying a need or desire or a result that deals with a problem or complaint in an acceptable way.
1.10 ORGANISATION OF THE STUDY
This research study is divided into five chapters and is structured as follows:
Chapter One focuses on the background of the study, statement of the problem, objectives of the study, research questions, research hypothesis, significance of the study, limitation of the study, definition of terms and the organization of the study. Chapter Two reviews renowned authors Literatures on the subject matter. This includes the review of empirical literature. Chapter Three contains the methodology of the study. The methodology includes the area and scope of the study, sampling procedure and techniques, method of data collection and analysis. Chapter Four focuses on the presentation of data, analysis and interpretation of data collected for the study. Finally, Chapter Five being made up of the summary of findings, conclusions and recommendations.
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