The Relationship Between Customer Demographics and Brand Loyalty in the Indian Telecom Sector: An Empirical Study

The Relationship Between Customer Demographics and Brand Loyalty in the Indian Telecom Sector: An Empirical Study

K Sai Prasad, Sita Mishra
DOI: 10.4018/ijcrmm.2014100103
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Customer loyalty is vital in any relationship marketing effort. With little or no product and service differentiation in the telecom sector, retaining the loyalty of customers is a big challenge. Service providers are investing substantial amounts in a variety of CRM strategies. While on one hand customer loyalty is a function of good products and services, resulting in increased levels of satisfaction, on the other hand customers' social and demographic profile plays a key role in determining a customer's loyalty to his service provider. Four types of loyalty measures were categorized and relationships with the demographic variables studied. This paper explores whether customer loyalty and demographic factors are linked in the telecom sector and to what extent. The findings and interpretation are similar to what other researchers have arrived at in the past, in that there is no significant relationship between demographic factors and loyalty. This study will have a huge impact on CRM investments in the telecom sector and will make service providers rethink their customer loyalty strategies.
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1. Introduction

The Indian telecom market is the second largest in Asia, after China. According to the India Brand Equity Foundation (IBEF) research paper the sector grew at 20 per cent annually in the last five years and has close to 900 million customers, which is approximately 3 per cent of the country’s GDP. Telecom markets around the world are generally highly competitive, resulting in increased focus on value-added services and intense price war (Qi and Zong, 2013). The Indian telecom market has been showing signs of maturity. Though the urban markets may continue to add more users through offers of multiple SIMs, tariff-based competition will continue to exert immense pressure on service providers’ customer relationship strategies (Haridasan and Venkatesh, 2011).

The young, restless and dynamic working population of India is one of the biggest factors impacting consumption of telecom services, thereby the investments in the telecom industry. Service providers are gradually recognizing the value of understanding their customer needs better by segmenting them on the basis of attitude and behavior considering a host of dynamic factors including pricing, phone ownership and peer group influence. Segmentation on the basis of demographic factors can unlock new demand besides helping to tailor customized relationship efforts. According to the Ernst & Young telecom sector report (2012), major demographic factors such as age, occupation and hierarchy in an organization play a vital role in defining the usage characteristics of customers.

The rapid adoption of smartphones and tablets has been a significant social, communication, technology and business trend, making it more challenging for service providers to match customers’ expectations with specific services.

When the Indian government introduced Mobile Number Portability (MNP) in 2010 with a view to offer customers better choices while retaining the same number, it practically sounded the death knell for a customer’s loyalty, as service providers faced the risk of loss of high-end post-paid subscribers, and a dramatic fall in profits. This view is echoed by Reichheld and Sasser (1990) who had predicted that customer churn adversely affected telecom companies because they stood to lose high-value customers. However, disengagement problems have not been fully addressed in most telecom-related brand loyalty literature published so far (Ahn, Han and Lee, 2006; Jahanzeb,, 2011; Adjei and Denanyoh, 2014), and only the extent to which communication strategies play a role in a relationship-loyalty context has been outlined by Prasaad and Mishra (2012). In this scenario loyalty is no longer seen as an absolute customer value.

For the purpose of this study four types of loyalty were considered based on LaPointe (2006)’s categorization of loyalty.

  • 1. Contractual loyalty, where a customer’s relationship is defined by a mutually-accepted rigid business agreement.

  • 2. Transactional loyalty, where a relationship is based on factors such as price, value and convenience.

  • 3. Functional loyalty, where superiority of features and attributes of a product or service characterizes the relationship.

  • 4. Emotional loyalty, where individual customers develop preferences for products and services based on their personal values, beliefs, ego, sensibilities, likes and experiences.

It is in this overall context that the present study attempts to explore the relationship between brand loyalty and demographic factors among Indian telecom customers.

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