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Customer Clubs in Telecommunications - A Relationship Marketing Perspective
Karlstad University, Faculty of Economic Sciences, Communication and IT, Service Research Center. Karlstad University, Faculty of Economic Sciences, Communication and IT, Department of Business Administration.ORCID iD: 0000-0001-8278-1442
Karlstad University, Faculty of Economic Sciences, Communication and IT, Service Research Center. Karlstad University, Faculty of Economic Sciences, Communication and IT, Department of Business Administration.
Karlstad University, Faculty of Economic Sciences, Communication and IT, Service Research Center. Karlstad University, Faculty of Economic Sciences, Communication and IT, Department of Business Administration. Karlstad University, Faculty of Economic Sciences, Communication and IT, The Service and Market Oriented Transport Research Group.
2004 (English)In: Managing Service Quality 14(2/39), pp 157-168Article in journal (Refereed)
Abstract [en]

Abstract

Similar to most industries telecommunications has introduced customer or loyalty clubs to their customers during a number of years. Customer clubs occurred as negations of the consequences the deregulated market initiated. Customer clubs are a recognizable part of most CRM strategies, their effect on customer loyalty are, however, not obvious. This study presents result on the fact that the majority of the customers included in clubs do not consider their participation to engage them more than before regarding the telecom service provider. In comparison, excluded customers reflect, however, differently on their telecom relationship. This article evaluates two qualitatively conducted studies, in which customer experiences are contrasted against customer switching processes. Based on the qualitative studies some evidence has been quantified regarding responses to customer clubs. The roles of customer experiences as reasons for switching telecom providers are hence revealed and confronted with the customer-club maintenance function on relationships.

Customers connect loyalty more and more to customer-club programs in their minds because of the offer frequency to them of varying memberships in order to receive benefits of all kinds for being a company-regular customer. Literature suggests different definition of loyalty and retention (Johnson and Gustafsson 2000) specifying that loyalty embeds an extended behavioral loyalty including also attitudinal aspects (Oliver 1997), while retention more is a customer maintenance measure as differing actions for keeping customers (Stauss et al. 2001). McGoldrick and Andre (1997) point out that loyalty should be a long-term strategic goal, and not the subject of a series of short-term tactical schemes . The reason of their statement is that customer preferences change over time and that it is important to be able to include the changes in the definition on loyalty. Oliver (1997) indicates following the same line that loyalty is a deeply held commitment to rebuy or repatronize a preferred product or service consistently in the future, despite situational influences and marketing efforts having the potential to cause switching behaviour (Oliver 1997, p. 392). Such definition disagrees, however, with the relationship perspective. Relationships have been considered dynamic with changing character and the interaction with customers is therefore suggested to be close in order to know the customer Gummesson 1995; Grönroos 1996). Recently, relationships are deliberately suggested to need new forms of reflecting tools in order to capture the dynamism (Roos 2002; Edvardsson et. al 2002). The influence of the context is assigned a considerable significance (Bolton et al. 2000), the competitors, for example, are by the authors established to have a complex impact on customer-relationship dynamism and even cause switching.

Customer clubs can be argued to be a part of or a way to perform relationship marketing. Relationship marketing was in its early shape a tool for keeping customers instead of continuously focusing on new customers (Berry 1983; Grönroos 1983). In this article we use that original statement and nature of relationship marketing as our basis. However, we do know that tools were lacking for introducing relationship-marketing procedures into companies strategies as the procedures were introduced in the literature. Personnel were considered key factors (Gummesson 1993) and moment-of-truth the marketplace of the mission for learning to know the customer. At the moment, it seems to be more a question of devising schemes. All customers are regular customers of several companies. The main problem is that customers not always are always aware of the difference being a regular customer included in the customer club or just being a customer.

The purpose

The purpose of this paper is to deliberately study how customers in a Swedish telecommunication company perceive and identify the customer-club membership in terms of effect on loyalty and retention.

The role of satisfaction in customer clubs

An important question regarding satisfaction and customers included in customer clubs is: do these kinds of programs increase customer satisfaction? Bolton et al. (2000) emphasize the importance of understanding the role of satisfaction regarding customer clubs. According to literature (Jones and Sasser 1995; Bolton and Lemon 1999; Bolton 1998) customer clubs have a longitudinal effect on customer relationships if customers perceive the experiences satisfactory. In other words, the usage level become crucial in customer clubs, otherwise customers are not able to build there perceived satisfaction particularly on experiences.

Bolton (1998) carried out in the cellular communication industry. She argues that constant failures, even if recovery is perceived by customers as satisfactory, decrease the duration of the relationship. In other words, customers update their relationships according to an anchoring and adjustment process. The adjustment process is motivated by the impact of new information, and customers with a long relationship consequently have higher cumulative satisfaction and fewer perceived losses. Those with many perceived losses normally do not have long relationships, according to this study. Therefore, she suggests that service providers should understand early indicators of switching.

Loyalty

Concepts such as retention and re-purchasing are frequently used as indicators of loyalty (Dufer and Moulins 1989; Reichheld and Sasser 1990; Bolton and Drew 1991; Cronin and Taylor 1992; Denison and Knox 1993; Reichheld 1996).

The link between usage, satisfaction and loyalty is in this article highlighted by introducing the influence of comparability of attributes on switching (Keaveney 1995; Bolton 1998; Roos 1999). When alternatives decreases, the likelihood for perceiving the evaluated attributes more satisfactory increases, which in turn has effect on re-purchase (choice) intention. In telecommunication it seems to be crucial to understand the process behind satisfactory perceived experiences. Srinivasan (1987) argues, for example, that customers do not evaluate the technology itself, because it is too complicated for most of them. They only process the technology-change perception, and are not able to evaluate it. Simonson and Tversky (1992) put it in the following way: performance defines the goal of a purchase. Price, for example, which is central in telecommunication-customer perceptions, is merely considered to be a tool with which to achieve the goal. As a consequence, whereas the experience may be perceived of as more important than price, and thus may affect choice probability, the price may affect the extent of choice. Performance uncertainty, which may appear as uncertainty related to possible wrong choices, needs to be reduced in order to facilitate choice. Customers need to feel safe in their purchasing. Nowlis and Simonson (1996) discuss the topic in terms of how different kinds of attributes compete intrinsically based on the ease of comparison. In sum, in order to build strong customer relationships in a business where the products as in telecommunications is rather similar among competitors and additionally difficult to evaluate in terms of rare contacts to the company, satisfactory experiences become important. Therefore it seems necessary and useful to stress the usage of the products both in terms of frequency and up sell. Then the possibility for partly switching (Roos 1999) to a competitor may be reduced and the prerequisite for satisfactory experiences increased.

The procedure of the qualitative study

The qualitative part of our study was designed to include both interviews as well as focus groups. The reason for including two different kinds of tools for collecting qualitative data was to achieve appropriate richness regarding understanding the variables behind customers evaluation of the telecommunication companys customer club.

The basis for the strategic sample was that the included customers had to reach a set volume of telecommunication traffic. Among the 800 customers that met the established conditions we randomly chose 12 customers with customer-club membership and 12 customers representing not members. We interviewed altogether 30 customers of the telecommunication company.

Additionally to 24 interviews among member and not members of the customer club, ordinary customers were collected for focus groups interviews. The logic behind the two-part qualitative study was partly the maturity regarding richness of variables communicating important issues regarding customer clubs and partly the opportunity it served being able to include customers belonging to differing interest groups. The customers of the focus groups were chosen with the special request of being capable to both describe their membership properly, but also to compare their membership of the telecommunication customer club with other clubs and membership. Therefore, the age became important and customers between 30-55 years were applied for. They had to have a membership of at least 6 months to telecommunication club and additionally one or more other memberships of customer clubs.

Results

The overall impression is that customers do not perceive the customer-club membership to add relevant value to their relationship with the telecommunication company. It appears, however, obviously that on the whole, customers in the club differ regarding their evaluation of the telecommunication company. However, there is no clear distinction between perception of customers included in the customer club and customers that have not signed up for a membership. Accordingly, the customer club seems to indirectly add value to the relationship rather than influence retention.

Verification

A survey telephone was carried out in order to verify that the variables captured in the previous qualitative studies were relevant. In all the survey covered 898 respondents and the used sample was a representative sample with regards to age and geographical spread of all of The Companys customers. The respondents were asked to rate a number of issues on a 10-grade scale.

In the sample (Table 1) there were 135 (15%) respondents that stated they were members and 566 (63%) that stated that they were non-members. It was interesting to find that in our sample 197 stated that they did not know whether or not they were members.

There are 600 000 members for 4 200 000 customers (14 %).

Table 1. Members and not members of the customer club

n Percentage

Member 135 15%

Non-member 566 63%

Do not know 197 22%



If the loyalty club were to have the effects that it was originally intended to have, we would expect that the customers that are members would have higher ratings for the intended loyalty compared to non-members. The measures for intended loyalty that we use in this study can be found in Table 2.

Given the art of the service, i.e. that the customers do not chose the service provider every time. In the telecom business a customer has the same service provider until he chooses another. The first two measures in Table 2 of intended loyalty is appropriate in this service context. The measures are whether or not the customer would stay on as a customer and that the customers have no reason to switch from the service provider. Generally the members score higher for these questions on intended loyalty. But the differences are only significant for the first measure and not the second one.



One question measures the intention to switch, and two questions can be considered as measures of intended loyalty. That is if they were choosing today would they chose Telia again. Finally one question measures how faithful they are towards Telia, meaning if they could be a customer to more than one supplier simultaneously.

If we study Table 2 we find that this is generally the case but the differences between members and non-members are not large enough in order to be significant which in turn makes us question how well the loyalty program actually works. One of the really interesting questions in the quantitative study is whether the respondent or not the respondents could consider having more than one operator at the same time, which is a clear indicator concerning how loyal the respondents really are. The differences between members and non-members are really small for this question.

Table 2. Satisfaction and differences between members and non-members

Member Non-member Sig

Loyalty Continue as a customer to the company 8.14 7.59 0.032

No reason for switching 7.14 6.69 0.144

Can consider having more than one operator 6.82 6.88 0.854

Likelihood of speaking favorably about the company to others 6.46 6.19 0.336

Likelihood of choosing The company again 6.98 6.69 0.288

Customer Satisfaction Overall satisfaction 7.37 6.75 0.003

Performance versus the customers ideal service provider in the category 7.23 6.84 0.055

Expectancy disconfirmation 6.62 6.50 0.541



Apart from loyalty we also included attitude questions in the form of customer satisfaction measures in the quantitative study. Since we are working from a relationship perspective we think of customer satisfaction an overall evaluation of the consumption experience. Cumulative customer satisfaction as such is usually measured through three survey measures: overall satisfaction, expectancy-disconfirmation, and performance versus an ideal product or service in the category (Johnson et. al., 2001).

As can be seen from Table 2 we actually do find significant differences between members and non-members for the customer satisfaction measures, which in turn implies that the loyalty program actually has some effect. Members are overall more satisfied with Telia as a service provider and they are closer to an ideal service provider. There are, however, no difference between the to groups when Telias performance is compared to the respondents expectations.

The results from this exploratory study both confirm and disconfirm the effects of loyalty programs. The proofs against the loyalty program is that a large share of the population is uncertain whether or not they actually are members in the program, which makes it questionable how attractive a membership really is. Members of the loyalty program does not seem particularly loyal to Telia, although some of the ratings for the loyalty questions are higher it is not significantly higher. The proof in favor of the loyalty program is that the members actually seem to have higher satisfaction ratings which implies that the loyalty program actually has some effect on the members attitude toward Telia.

References



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Bolton, Ruth N. (1998), A Dynamic Model of the Duration of the Customers Relationship with a Continuous Service Provider: The Role of Satisfaction. Marketing Science, Vol. 17, No. 1, 1998, pp. 45-65.

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Place, publisher, year, edition, pages
2004.
National Category
Business Administration
Research subject
Business Administration
Identifiers
URN: urn:nbn:se:kau:diva-17953OAI: oai:DiVA.org:kau-17953DiVA: diva2:591572
Available from: 2013-01-21 Created: 2013-01-21 Last updated: 2014-12-11

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