Idea Transcript
PRODUCT BRANDING AS A TOOL FOR INCREASING CONSUMER LOYALTY IN THE TELECOMMUNICATION INDUSTRY IN NIGERIA
BY NWAZULUOKE VICTOR CHUKWUNEME PG/MBA/10/55104
DEPARTMENT OF MARKETING FACULTY OF BUSINESS ADMINISTRATION, UNIVERSITY OFNIGERIA ENUGU CAMPUS
JUNE, 2012
1
TITLE PAGE
PRODUCT BRANDING AS A TOOL FOR INCREASING CONSUMER LOYALTY IN THE TELECOMMUNICATION INDUSTRY IN NIGERIA
BY NWAZULUOKE VICTOR CHUKWUNEME PG/MBA/10/55104
BEING A RESEARCH PROJECT REPORT SUBMITTED TO THE DEPARTMENT OF MARKETING, FACULTY OF BUSINESS ADMINISTRATION, UNIVERSITY OF NIGERIA, ENUGU CAMPUS IN PARTIAL FULFILMENT FOR THE AWARD OF THE DEGREE OF MASTERS IN BUSINESS ADMINISTRATION.
SUPERVISOR: DR. MRS. J. O. NNABUKO
JUNE, 2012 2
CERTIFICATION PAGE
I, Nwazuluoke Victor Chukwuneme, a post graduate student of the Department of Marketing, University of Nigeria, Enugu Campus with the Registration number PG/MBA/10/55104 has satisfactorily completed the requirements for the course and research work for the award of the degree of Masters in Business Administration.
The work embodied in this project is original and has not been submitted in part or in full for any other degree of this or any other University.
Nwazuluoke Victor Chukwuneme
Date
3
APPROVAL PAGE
This Project has been approved for the Department of Marketing, Faculty of Business Administration, University Nigeria, Enugu Campus.
By
Dr. Mrs. J. O. Nnabuko
Date
Supervisor
Dr. Sc. Moguluwa
Date
Head of Department of Marketing
4
DEDICATION
I dedicate this work to God, the source of all wisdom, thanking Him for His love, grace, mercies and supplies towards me and my academic pursuits. Also I dedicate to my late grandmother for her love and support towards my live.
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ACKNOWLEDGEMENTS
The process of preparing this work was not an easy one. Nonetheless, some people contributed both financially and morally towards it execution. First I want to thank the Almighty God the source of every good and perfect gift for His love and mercies that I enjoy in all my pursuit in life. I wish to express my profound gratitude over the assistance and encouragement received from my supervisor Dr. Mrs. J. O. Nnabukoiin this work, may the God Almighty continue to assist you all through you stay on earth. I also owe special regards to my lovely parents Mr. and Mrs. Martin Nwazuluoke for their spiritual, moral and financial supports. Mom and Dad you are the best, may God grant you long life and prosperity, Amen. Also my profound gratitude to my spiritual parents Pastor and Mrs. JoeAnyanwu, thanks for you spiritual and financial supports, I appreciate them all. I am also grateful to all my friends who in one way or the other contributed to the success of this work, particularly Emma, Uzor, Esther, OkorieEne, Cally, Pastor Ejike, Ik, Princess, Samson and Emeka. Not forgetting my dear aunty oge, thanks for everything, you are the best.
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ABSTRACT Prior to the advent of GSM in 2001, phone penetration was low to the verge of negligible. Nitel had the monopoly. But all that changed with the GSM revolution brought by the licensing of Econet(now Airtel), Mtel, MTN and the later entry of Glo and Etisalat into the industry.At first, all that was needed for marketing success was availability. Because the demand for phone was far more than the supply, these companies were on a roll, snapping subscribers after subscribers from phone starved Nigerians. That has since changed. With the fierce competition and the saturated market already, telecom operators must work hard to reduce cost, win new customers and most importantly retain the existing ones. This study is based on product branding as a tool for increasing consumer loyalty in the Nigeria telecommunication industry. The main objective is to determine the relationship between product branding and consumer loyalty in the Nigeria telecommunication industry. Primary data used for this work which was sourced through questionnaire administered to customers of the four major telecommunication companies in Nigeria (MTN, Airtel, Globacom and Etisalat) residing in Enugu metropolis. The population of the study was 812,708, but the sample size was 400 which were determined with the use of the yamane’s equation. Out of the 400 administered, only 392 were returned. A descriptive statistic technique was also adopted for the study and the statistical tool for the test of the formulated hypothesis was chi square formulae, with the aid of the SPSS software. The study revealed that Product branding and features has a significant effect on product choice and customer patronage and also that Product diversification and innovation has a significant effect on consumer choice and patronage. It also shows that Brand loyal customers are prone to brand switch in response to changes in tariff of other brands and that there is a significant relationship between product branding and consumer loyalty in the Nigerian telecommunication industry. The researcher recommend that telecommunication firms should expand their network coverage, improve the quality of service their offer and provide better access to other networks within and outside Nigeria. The industry should also improve their customer service and value added services, because the findings shows that consumers are not satisfied the quality of these factors. Telecommunication providers in Nigeria should be constantly involved in product innovation and diversification, as to increase customer’s product choice. They must come up with friendly tariff in order to increase customer loyalty and reduce brand switch.Finally that telecommunication providers in Nigeria must see product branding as a very important aspect of it marketing strategy and must be given a serious approach, because it go a long way to determines the success or failure of the product offer to the market, the firm in question and it ability to achieve consumer loyalty.
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TABLE OF CONTENTS Title Page …………………………………………………………………………….
i
Approval Page ………………………………………………………………………
ii
Certification Page ………………………………………………………………….
iii
Dedication …………………………………………………………………………..
iv
Acknowledgements ……………………………………………………………….
v
Abstract ……………………………………………………………………………..
vi
Table of Contents ……………………………………………………………… …
vii
List of Tables ……………………………………………………………………..
xi
List of Figures ……………………………………………………………………
xii
CHAPTER ONE 1.0
Introduction ………………………………………………………………
1
1.1
Background of the Study ………………………………………………
1
1.2
Statement of the Problem ………………………………………………
4
1.3
Objectives of the Study …………………………………………………
6
1.4
Research Questions ……………………………………………………..
6
1.5
Research Hypotheses ……………………………………………………
7
1.6
Significance of the Study ……………………………………………….
8
1.7
Scope of the Study ……………………………………………………….
8
1.8
Limitation of the Study ………………………………………………….
9
1.9
Definition of Terms ……………………………………………………….
9
References ……………………………………………………………………………
11
8
CHAPTER TWO:
REVIEW OF RELATED LITERATURE
2.1
Introduction …………………………………………………………………
12
2.2
Definition and Meaning of Product ……………………………………
12
2.2.1 Product Levels ……………………………………………………………… 13 2.2.2 Product Classifications …………………………………………………… 15 2.2.3 Product Differentiation and Design ……………………………………. 16 2.2.4 Product Life Cycle ………………………………………………………….. 17 2.3
Product Branding and its Importance …………………………………. 18
2.3.1 Kinds of Branding ………………………………………………………….. 24 2.3.2 Base (Primary) Brand ……………………………………………………… 26 2.3.3 Brand Extensions ………………………………………………………….. 26 2.3.4 Importance of Branding …………………………………………………… 26 2.4
Role of the Brand …………………………………………………………… 29
2.4.1 Benefits of the Brand ………………………………………………………. 31 2.5
Consumer Loyalty …………………………………………………………... 32
2.5.1 Brand Loyalty ………………………………………………………………… 36 2.5.2 Segmentation Based on Customer Loyalty ……………………………. 38 2.5.3 Factors Affecting Customer Loyalty …………………………………….. 42 2.5.4 Consequences of Customer‘s Loyalty …………………………………… 44 2.6
Concept of Consumer‘s Behaviour and Marketing Strategy ………. 45
2.6.1 Model of Consumer Behaviour …………………………………………… 47 2.6.2 Factors Influencing Consumer Behaviour …………………………….. 47 2.6.3 Types of Buying Behaviours ………………………………………………. 56 2.6.4 Buyer Decision Process ……………………………………………………. 59 9
2.6.5 The Buyer Decision Process for New Products ……………………….. 64 2.6.6 Marketing Strategy ………………………………………………………….. 65 2.7
The Nigerian Telecommunication ……………………………………….. 66
2.7.1 The Revolutionary Years …………………………………………………… 67 2.8
GSM Operators in Nigeria …………………………………………………. 68
2.9
Understanding the Mobile Phone Market Drivers ……………………. 75
2.9.1 Usage Benefit versus Technical Performance ………………………… 76 2.9.2 Generalization of Mobile Phone and Market Segmentation ………. 78 2.9.3 Different Marketing Messages ……………………………………………. 80 2.10 Telecommunication and Economic Development ……………………. 81 2.10.1 Other Countries‘ Experience …………………………………………….. 82 2.10.2 Economic Impacts of Telecommunication Growth in Nigeria …… 85 References ……………………………………………………………………………. 88 CHAPTER THREE:
RESEARCH METHODOLOGY
3.1
Introduction ………………………………………………………………… 95
3.2
Research Design …………………………………………………………… 95
3.3
Sources of Data ……………………………………………………………. 96
3.4
Pilot Survey …………………………………………………………………. 96
3.5
Population of Study ……………………………………………………….. 96
3.6
Sample Size Determination ………………………………………………. 98
3.7
Sampling Techniques ………………………………………………………. 99
3.8
Instrument of Data Collection ……………………………………………. 99
3.9
Validity and Reliability of Study …………………………………………. 100
3.10 Techniques of Data Presentation and Analysis ………………………. 101 Reference ……………………………………………………………………………… 102 10
Appendix 1 ……………………………………………………………………………. 103 Appendix 11 ………………………………………………………………………….. 107 CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS 4.1
Introduction ………………………………………………………………….. 108
4.2
Demography of the Respondents ………………………………………… 108
4.3
Hypothesis Testing ………………………………………………………….. 113
CHAPTER FIVE:
SUMMARY OF FINDINGS, RECOMMENDATIONS AND CONCLUSION
5.1
Summary of Findings ………………………………………………………. 119
5.2
Conclusions ……………………………………………………………………119
5.3
Recommendations …………………………………………………………… 120
Bibliography ………………………………………………………………………….. 121
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LIST OF TABLES
Table 1:
Population of Enugu Metropolis …………………………………. 96
Table 2:
The Sample Size of 400 for the Consumer‘s Stratified ………… 99
Table 3:
Age Distribution of the Respondents …………………………… 103
Table 4:
Six Distribution of the Respondents ……………………………. 104
Table 5:
Marital Status of the Respondents ……………………………….105
Table 6:
Educational Level of the Respondents …………………………..106
Table 7:
Occupation of the Respondents ………………………………….. 106
Table 8:
A Chi Square Cross Tabulation Analysis of the Effect of Product Branding and Features on Customer Choice and Patronage…108
Table 9:
A Chi Square Cross Tabulation Analysis of the Effect of Product Diversification and Innovation on Consumer Choice and Patronage ……………………………………………………………… 110
Table 10:
A Chi Square Analysis of Brand Switch in Response to Changes in Tariff of Other Brands …………………………………………...112
Table 11:
A Correlation Analysis of Product Branding and Consumer Loyalty…………………………………………………………………….113
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LIST OF FIGURES Figure 1: Bar charts showing age distribution of the respondents…………104 Figure 2: Pie chart showing sex distribution of the respondents……………105 Figure 3: Bar charts showing the distribution of respondents………………..107 Figure 4: Bar charts showing factors that affect consumers‘ choice and Patronage………………………………………………………………………107
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CHAPTER ONE INTRODUCTION 1.1 Background of the Study The Nigerian Telecommunication industry has experienced exponential growth in the last ten years, going from active subscriber lines of 400,000 and teledensity of 0.04% to active subscriber lines of over 90 million and teledensity of 64.88% as of July 2011(Juwah, 2011). The Country telecom market has been described as one of the fastest growing telecommunication markets in the world. The driving factor is government‘s robust policy which fully liberalized the sector about a decade ago when the story of progress and development in the sector really started to unfold. The industry is experiencing stiff competition and it is the duty of every player in the industry to develop a good marketing strategic plan that will enable it win a good portion of the market. The current situation in the market shows that it is already saturated. Most potential customers already have a telephone line or two, unlike the initial stage of the deregulation of the industry. It is not enough to get customers in the industry, but also converting them to loyal customers. The real competition here now is not mainly on getting new customers but retaining the existing ones. If any company must survive in the industry, it must shift it marketing strategy from just winning new customers to retaining existing ones. Recent years have shown a growing interest in customer loyalty. The globalization of competition, saturation of markets, and development of information technology have enhanced customer awareness and created a situation where long-term success is no longer achieved through optimized product price and qualities. Instead, companies build their success on a longterm customer relationship. According to former studies, it can cost as much as six times more to win a new customer than it does to keep an existing one. (Rosenberg et al. 1984: 45) Depending on the particular industry, it is possible 14
to increase profit by up to 60% after reducing potential migration by 5%. (Reichheld 1993: 65) Hence we can see that the increase and retention of loyal customers has become a key factor for long-term success of the companies. The main emphasis in marketing has shifted from winning new customers to the retention of existing ones, which is trying to win their loyalty. . Prus & Randall then describe customer loyalty as follows: "Customer loyalty is a composite of a number of qualities. It is driven by customer satisfaction, yet it also involves a commitment on the part of the customer to make a sustained investment in an ongoing relationship with a brand or company. Finally, customer loyalty is reflected by a combination of attitudes (intention to buy again and/or buy additional products or services from the same company, willingness to recommend the company to others, commitment to the company demonstrated by a resistance to switching to a competitor) and behaviors (repeat purchasing, purchasing more and different products or services from the same company, recommending the company to others)".Customer loyalty is all about attracting the right customer, getting them to buy, buy often, buy in higher quantities and bring you even more customers. Customer loyalty is when an organization receives the ultimate reward for the way it interacts with its customers. Loyal customers buy more, buy longer and tell more people that's true customer loyalty."(Ellen Goodwright, 2010). It can also be seen as the extent of faithfulness of a consumers to a particular brand, expressed through their repeat purchases, irrespective of the marketing pressure generated by the competing brands. Customer loyalty is the continued and regular patronage of a business in the face of alternative economic activities and competitive attempts to disrupt the relationship. Customer loyalty often results in other secondary benefits to the firm such as brand advocacy, direct referrals, and price insensitivity. Jones and Sasser (1995) indentified three parts of consumer loyalty: re-buy intention, primary behaviour and secondary level behaviour. According to Jones and Sasser (1995) re-buy intention refers to future intention of the consumer to re-purchase the product or service; 15
primary behaviour means the practical re-visiting behavior of a consumer; while secondary-level behavior indicates the willingness of a customer to recommend the product to others and enhances customer loyalty through human relationship (Chen, Chen and Hsieh, 2007). Customer loyalty is one major thing that brands need to thrive in the market place. When customers are loyal to a brand, they become ambassadors by mouthing good stories about the brand. It is a basic truth that when customers are happy, they go to a large extent to promote a good image for the brand. Customer loyalty is all about relevance and meaning throughout every customer touch point. It is all about making the brand experience more intimate relationship with the customers. For companies in the industry to achieve this (brand loyalty), it must pay more attention to it product branding. Many products offered to the market have to be branded, and branding is one of the elements in the product planning activities of a firm. It has to do with the efforts a firm makes in choosing, developing, projecting and establishing its own brand(s) of products. Branding has emerged as a top management priority in the last decades due to the growing realization that brands are one of the most valuable intangible assets that firms have. Companies are realizing the power of good branding (brand name) to create instant consumer recognition of the company‘s product. In this highly competitive environment, branding (brand name) may be the sellers‘ last chance to influence buyers and also differentiate it from like products. Many definitions of branding have been offered by different authors and a lot of reasons have also been deduced by different authorities as justifications for the adoption of branding as a marketing strategy. Branding is a fixation of special and unique image or attribute to a particular product which makes it to be exceptional among other products in the eyes and minds of consumers. (Ehikwe 2005). From the above definition of branding, it means that a brand has an added value to the physical product beyond the core product. These may be aesthetic, emotional, 16
psychological and philosophical values that are embedded in the minds and hearts of consumers. Based on the definition, a brand is a product and the value-added which personifies it beyond the core product. Mccarthy and Perreault (1985) as captured in Anyanwu (1999), commenting on branding said that it is the use of a name, term, symbol or design or a combination of these to identify a product. This statement infers that branding identifies the product for the consumer and relates it to branding and product design. Obiesie (2003), captured the very essence of branding when he described it as an integral and intimate part of a product strategy. This suggests that a product is not complete until it is given a name, mark or symbol. He went further to describe branding as a name, term, sign, symbol, or design or a combination of these which is intended to identify the goods or services of one seller or group of sellers and distinguish them from those of its competitors. American Marketing Association (2011), defines a brand as a name, term, design, symbol or device, or any combination thereof which is adopted and used by a manufacturer or merchant to identify his goods and to distinguish them those sold by other manufacturers, or in the case of services performed by others. A brand can take many forms, including a name, sign, symbol, color combination or slogan. 1.2 Statement of the Problem Prior to the advent of GSM in 2001, phone penetration was low to the verge of negligible. Nitel had the monopoly. But all that changed with the GSM revolution brought by the licensing of Econet(now Airtel), Mtel, MTN and the later entry of Glo and Etisalat into the industry. At first, all that was needed for marketing success was availability. Because the demand for phone was far more than the supply, these companies were on a roll, snapping subscribers after subscribers from phone starved Nigerians.
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That has since changed. The landscape is becoming more competitive and the growth rates of yesteryears are becoming hard to replicate. In a nutshell, continued success in the contemporary Nigerian GSM market calls for marketing wizardry. Despite the figure being brandished by NCC, the Nigerian telecom market is reaching saturation point. Most of the new lines being activated are purchased by people who already own one or more phones. An additional phone line does not translate to increase airtime usage; in fact the reverse is mostly the case. The mobile industry ARPU (Average Revenue Per User) in 2003 was around US $54 per month but as at December 2008, it has fallen to $13 (Popoola, 2010). With the fierce competition and the saturated market already, telecom operators must work hard to reduce cost, win new customers and most importantly retain the existing ones. To retain consumers in face of this keen competition, service providers must develop marketing strategies that will not only win customers but to retain them also. Branding has been identified as one of the major tool in the hands of firms to increase consumer loyalty. In this highly competitive environment, branding (brand name) may be the sellers‘ last chance to influence buyers and also differentiate it from like products. . Branding is a fixation of special and unique image or attribute to a particular product which makes it to be exceptional among other products in the eyes and minds of consumers (Ehikwe, 2005).From the above definition of branding; it means that a brand has an added value to the physical product beyond the core
product.
These
may
be
aesthetic,
emotional,
psychological
and
philosophical values that are embedded in the minds and hearts of consumers. Based on the definition, a brand is a product and the value-added which personifies it beyond the core product. The issues then are; to what extent does product branding and feature increase customer patronage and loyalty? Does product diversification and innovation have a positive effect on customer loyalty and purchase of telecommunication
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product? Is it more profitable to win new customers or to retain the existing ones? Is product brand as a tool increases consumer loyalty in the Nigeria telecommunication industry? 1.3 Objectives of Study Given the fierce competitive of the telecommunication market and the saturation nature of it also, the importance of achieving consumer loyalty cannot be over emphasize. Product branding is the major tool for influence buyers and differentiating firm‘s products from like products. Also it has been identified as a tool for establishment and increasing consumer loyalty. This study was intended to achieve the following objectives: •
To identify whether product branding and features have an effect on product choice and patronage for telecommunication products.
•
To identify whether product diversification and innovation have an effect on consumer choice and patronage for telecommunication product.
•
Are brand loyal customers prone to brand switch in response to changes in tariff of other brands.
•
To determine the relationship between product branding and consumer loyalty in the Nigeria telecommunication industry.
1.4 Research Questions •
Does product branding and features have an effect on product choice and patronage for telecommunication products?
•
Does product diversification and innovation have an effect on consumer choice and patronage for telecommunication product?
•
What is the effect of change in tariff of other brands on a loyal brand customer in switching brand?
•
Does product branding have a relationship with consumer loyalty in the Nigeria telecommunication industry?
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1.5 Research Hypotheses A statistical hypothesis is a statement or assumption about an unknown population parameter. It is also a prediction or a conjecture stated well in advanced of observation about what can be expected to occur under stated conditions (Asika, 2001).It is a tentative statement about phenomena whose validity is usually unknown (Onwumere, 2005). Polit and Hungler (1978) defined it as a tentative prediction and explanation of the relationship between two or more variables. Hypothesis one Ho: Product branding and features do not have a significant effect on product choice and customer patronage for telecommunication products. Hi: Product branding and features have a significant effect on product choice and customer patronage for telecommunication products. Hypothesis two Ho: Product diversification and innovation do not have a significant effect on consumer choice and patronage for telecommunication product. Hi: Product diversification and innovation have a significant effect on consumer choice and patronage for telecommunication product Hypothesis three Ho: Brand loyal customers are not prone to brand switch in response to changes in tariff of other brands. Hi: Brand loyal customers are prone to brand switch in response to changes in tariff of other brands.
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Hypothesis four Ho: There is no significant relationship between Product branding and consumer loyalty in the Nigeria telecommunication industry. Hi: There is a significant relationship between Product branding and consumer loyalty in the Nigeria telecommunication industry. 1.6 Significance of Study This study is significant in the sense that it throws more light to the effect of branding on consumer loyalty, which is the optimal target of marketing. The result of the work will benefit the management of the four major GSM providers in the industry, as it shows them the perception of the market of it product branding. The information gotten here will enable adjust where there is need for in order to project a better brand image in the minds of their customers and potential customers? Also this research work is expected to provide to the academic sector a new horizon of enlightenment, as it will serve as a basis for further research into related topics. 1.7 Scope of Study This study will not cover in full the entire factor that affects and increases consumer loyalty rather emphasis will be placed on the impact of product branding on consumer loyalty. The study will evaluate product branding as a tool for increase consumer loyalty in the telecommunication industry. Also the study is not done on the entire Nigeria telecommunication industry but only on those four major companies (MTN, GLO AIRTEL and ETISALAT) offering the Global System of Mobile (GSM) services in the industry.
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1.8 Limitation of the Study The study was limited by a number of factors which are as follows •
Time factor: The coverage of this work would have been widened. The researcher might have expanded the research to a regional or a national level, but due to time has reduced to a state level.
•
Financial demands: Also for a work of this nature to be done fully, it need a lot of financial support which at the moment was not much available to the researcher and has led to him to work in accordance to his financial strength.
1.9 Definition of Terms Telecommunication: This is define as communication over a distance, generally by electronic means (Hutchinson New century Encyclopedia, 1995). Telephone: Instrument for communicating by voice long distance, invented by United States inventor Alexander Graham Bill (Hutchinson New century Encyclopedia, 1995). Global System for Mobile Communications (GSM): This is a standard set developed by the European Telecommunications Standards Institute (ETSI) to describe technologies for second generation (2G) digital cellular networks. Developed as a replacement for first generation (1G) analog cellular networks, the GSM standard originally described a digital, circuit switched network optimized for full duplex voice telephony. (From Wikipedia, the free encyclopedia, 2011). Teledensity: The number of landline telephones in use for every 100 individuals living within an area. A teledensity greater than 100 means there are more telephones than people. Third-world countries may have a teledensity of less than 10.(From Wikipedia, the free encyclopedia, 2011) Analogue system: A telephone system, which uses signals which are the exact reproductions of the sound being transmitted. It transmits an electric current 22
that copies the pattern of sound wares of the speaker‘s voice over wire which is converted back to sound waves by the telephone receiver. (World Book Encyclopedia, 1979). Digital system: A telephone system where signals are converted into codes and transmitted through optical fibers at a very high speed to a receiver where it is decoded. (World Book Encyclopedia, 1979) Bluetooth: Short range radio technology expanding wireless connectivity to personal and business mobile devices enabling users to connect their mobile phones, computers, printers, digital cameras and other electronic devices to one another without cables. Short message service (SMS): A text message communication service prescribed by the European Telecommunications Standard Institute. A single short message can contain text up to a maximum of 160 characters and can be promptly transmitted provided the receiving terminal is on and within the mobile network transmission range. Multimedia message service (MMS): This is a new standard that is being defined for use in advanced wireless terminals. The service concept is derived from short message service and allows for non-real-time transmission of various kinds of multimedia contents like images, audio, video clips e.t.c. General packet radio service (GPRS): This provides packet switched data primarily for GSM based 2G networks. GPRS network elements consist of two main elements: Service GPRS support node (SGSN) and Gateway GPRS support node (GGSN). Wireless application protocol (WAP): This is the de facto worldwide standard for providing internet communication and advanced telephone services on digital mobile phones, digital assistance and other wireless terminals.
23
REFERENCES American Marketing Association, (2011) ‗‘Definition of Terms‘ in McNair and Hansen, H. L. Readings in Marketing‘‘, New York: McGraw-Hill. Anyanwu, A. (1999), Marketing Management, Benin City: Barioz Publishers. Asika,
N.(2001),
Research
methodology
in
behavioural
sciences,
Ikeja,
Longman publishers. Chen, et al. (2007) ‗‘Correlation of service quality, Customer Satisfaction Chen, J. And Ching, R. K. H. (2007) ‗‘ The effects of mobile customer relationship management on customer loyalty: brand image does matter‘‘. Journal of Economic Psychology, 16, 311-329. Customer loyalty and life Style at Hot Springs Hotels‘‘.
Journal of
International Management Studies, August, 51-59. Ehikwe, A. E., (2005), Advertising and other Promotional Strategies, Enugu: Precision Publishers Limited. Jones, T. S.J. (1995) "Why Satisfied Customers Defect", Harvard Business Review: November-December, pp. 88-99. Juwah, E. (2011), Driving investment in Nigerian telecommunication market, Nigerian Communication Commission. Onwumere, J.U. (2005) Business and Economic Research Methods, Lagos Donvinto: Limited. Polit, D and Hungler, B. (1978). Nursing Research: Principles and methods. Philadephia: J.B Lippincott.co.
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CHAPTER TWO REVIEW OF RELATED LITERATURE 2.1 Introduction Literature review refers to all printed materials which deals on a particular subject. It is usually contained in journals, books, newspapers, magazines, synopsis, and extracts. To review literature in a research context means to exhaustively survey or search out what has been done in a particular subject area over a period of time (Uzoagulu, 1998). A more comprehensive definition was given by Politt and Hungler (1978). They defined it as ―the systematic identification, location, scrutiny and summary of written materials that contain information on a research problem‖. This exercise is very crucial because no work or study is entirely new. This chapter examines literature on product branding as a tool for increasing consumer loyalty in telecommunication industry. Both local and foreign literatures were reviewed. Effort was made to marry both to get the desired result. The chapter reviewed the concept and theory of product branding, consumer loyalty, consumer buying behavior and marketing strategy. Literature on the importance and role of branding, the Nigerian telecommunication industry, mobile phone market drivers and telecommunication and economic development were all reviewed here. This work has a space to occupy on this topic in Nigeria and also in the world, as it is intended to add to the body of existing literatures on this topic by adding to and extending previous contributions. 2.2 Definition and Meaning of Product Many people think a product is only a tangible offering, but it is more than that. Broadly, a product is anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, persons, places, properties, organization, information and ideals (Kotler and Keller, 2009: 358). A product is a good, service or idea consisting of a bundle of 25
tangible and intangible attributes that satisfy customer and is received in exchange for money or some other unit of value (Adirika, 2007). According to Paul and James (2001: 86) a product is the sum of the physical, psychological and sociological satisfaction the buyer derives from purchase, ownership and consumption. A product is everything that is considered inclusive of satisfaction and utilities that the buyer obtains in the purchase (Robert, 1992: 385). According to (Charles and Reuben: 224) a product is the basic ingredient in the exchange process. The expectation that satisfaction will be realized through exchange is what a product represents; it is the focus bringing buyers and sellers together to make exchange. In general, product is defined as a ―thing produced by labour or effort‖ or the ―result of an act or a process‖. It can also be seen as a good, idea, method, information, object or service that is the end result of a process and serve as a need or want satisfier. It is usually a bundle of tangible and intangible attributes (benefits, features, functions uses) that a seller offers to a buyer for purchase. Law defines it as a commercially distributed good that is tangible personal property, output or result of a fabrication, manufacturing or production process and passes through a distribution channel before being consumed or used. The marketer see it as a good or service that most closely meets the requirements of a particular market or segment and yield enough profit to justify its continued existence, while the economist see it as goods (physical) and service (intangible) while has the ability to give utility to the consumer or user. 2.2.1 Product Levels According to Kotler and Keller (2009, 358) there are five different levels of product which must be well understood in other to produce a product that will satisfy the need of the targeted market. Each level adds more customer value and five constitute a customer value hierarchy.
26
1.
Core Benefit: This is the service or benefit the customer is really buying
(example, a hotel guest is buying rest and sleep). Marketers must see themselves as benefit providers. 2.
Basic product: These are the basic benefits that accompany the core
benefit. At this level, the marketer must turn the core benefit into a basic product. Thus a hotel room includes a bed, bathroom, towels, desk, dresser and closet. 3.
Expected product: These are set of attributes and conditions that the
buyer normally expects when he purchase the product. Hotel guests expect a clean bed, fresh towels, working lamps and relative degree of quietness. 4.
Augmented product: At this level, the marketer prepares an augmented
product that exceeds customer expectations. In developed countries brand positioning and competition takes place at this level while in developing countries, this takes place mostly at the expected product level. 5.
Potential product: This encompasses all the possible augmentations
and transformations the product might undergo in the future. Here the producer searches for new ways to satisfy customers and distinguish their offering. According to marketing teacher newsletter product has three levels as explained below; the core product which is not the tangible physical product. You cannot touch it because it is the benefit of the product that makes it valuable; the actual product is the tangible, physical product. This is what the average person would think of under the generic banner of product; the augmented product is the non-physical part of the product. It usually consists of lots of added value, for which you may or may not pay a premium.
27
2.2.2 Product Classifications kotler and keller (2009: 359) classified product into three groups according to durability and tangibility, which are as follows; 1. Non-durable goods: These are tangible goods normally consumed in one, or a few uses, such as beer and soap. Because these goods are purchased frequently, the appropriate strategy is to make them available in
many
locations, change only a small markup and advertise heavily to induce trial and build brand preference. 2.
Durable goods: These are tangible goods that normally survive many
uses (refrigerators, machine, tools and cloths). Durable products normally require more personal selling and service, command a higher margin and require more seller guarantee. 3. Services: These are intangible, inseparable, variable and perishable products. As a result, they require more quality control, supplier credibility and adaptability (example, haircuts, legal advice and appliance repairs). 4. Consumer goods: This is classification of vast array of goods consumer buy based on their shopping habits. There are divided into convenience, shopping, specialty and unsought goods. 5. Industrial goods: Industrial goods are classified in terms of their relative cost and how they enter the production process. They are classified into material and parts, capital items, supplies and business services. Charles and Reuben (1980: 232) classified product into four pairs; durable and non-durable categories. This classification reflects the life expectancy of a product; also perishable and non-perishable ones, the factor of perishable ability here can be psychological as well as physical; and also necessity and luxuries ones, necessity are those ones that are essential while luxuries are
28
those that match wants more than needs; and finally those product that are price elastic and those that are price inelastic. According to Paul and James (2001: 87) product are classified based on basic criteria; end use or market and degree of processing or physical transformation (Agricultural, organizational and consumer product). 2.2.3 Product Differentiation and Design To be branded, products must be differentiated. Physical products vary in their potential for differentiation. At one extreme, we find products that allow little variation (chicken, aspirin and steel). Yet even here some differentiation is possible. At the other extreme are products capable of high differentiation such as automobiles, commercial buildings and furniture. Product can be differentiated in the following ways, form, features, customization,
performance
quality,
conformance
quality,
durability,
reliability, repair ability and style (Kotler and Keller, 2009: 361). Design has become an increasingly important means of differentiation. As competition intensifies, design offers a potent way to differentiate and position a company‘s products and services. It is the factor that will often give a company its competitive edge. Design is the totality of features that affects how a product looks, feels and functions in terms of customer requirement (Kotler and Keller, 2009: 365). While product design may appear to be inconsequential, it actually as complex as any other part of the bundle of utility and often spell the difference between marketing success and failure (Charles and Reuben, 1980: 251). Distinctive or unique design is one method of differentiating a relatively homogeneous product, in some cases companies have begun utilizing designing strategies to strengthen their brands by updating it (Robert, 1992: 94).
29
2.2.4 Product Life Cycle This is the life cycle of most products as they are been introduced into the market. A company‘s positioning and differentiation strategy must change as the product, market and competitors change over the product life cycle (Kotler and Keller, 2009: 318). The product life cycle is divided into four stages. 1. Introduction stage: This is when the product is introduced into the market. This stage is characterized by slow sales growth and profits are nonexistent because of the heavy expenses of product introduction. 2. Growth stage: This stage is characterized by a growth in sales due to rapid market acceptance of the product and this leads to substantial profit improvement. 3. Maturity stage: At this stage, the product has reached it peak. Here there is a slowdown in sales growth because the product has achieved acceptance by most potential buyers. At this point profits stabilize or decline because of increased competition. 4. Decline stage: Here sales begin to go down and a profit erodes. As the term suggests, marketers see products variation of products and brands as going through a life cycle that begins with commercialization and ends with removal from the market place. This is defined in terms of two dimension, sales volume and time (Charles and Reuben, 1980: 291). According to the product life cycle is divided into five stages; introduction or pioneering stage, here product has not been accepted by the market. Rapid growth or market acceptance stage, here sales rise at an increasing rate as consumers accept and demand the product. Slow growth or turbulence stage, here sales climb high but at a decreasing rate. Saturation or maturity stage, here sales level off. Everyone seems to have the product. Decline or obsolescence stage, here sales turn downward, profit usually decreases and competitors leave the scene. 30
During this stage, the strategy for an individual company is to exploit the product to attain all possible profit before making the final decision to eliminate it. 2.3 Product Branding and its Importance Many products offered to the market have to be branded, and branding is one of the elements in the product planning activities of a firm. It has to do with the efforts a firm makes in choosing, developing, projecting and establishing its own brand(s) of products. Branding has emerged as a top management priority in the last decades due to the growing realization that brands are one of the most valuable intangible assets that firms have. Companies are realizing the power of good branding (brand name) to create instant consumer recognition of the company‘s product. For example, in an average Supermarket, which stocks 15,000 to 17,000 items, the typical shopper passes by some 300 items per minute, and 53 percent of all purchases are made on impulse (Abrams, 2002). In this highly competitive environment, branding (brand name) may be the sellers‘ last chance to influence buyers. Many definitions of branding have been offered by different authors and a lot of reasons have also been deduced by different authorities as justifications for the adoption of branding as a marketing strategy. What is more, the popularity of a brand has often been said to be a direct push for sales turnover (Ogbuji, 2008: 247). Not minding the vagaries of definitions of branding, the fact still remains that it is an important aspect of every firms marketing activity that cannot be over looked. Branding has been said to be as important as a child‘s naming ceremony and as old as man/creation (Okpara 2002: 160). According to Kotler and Keller (2009: 276) a brand is thus a product or service whose dimensions differentiate it in some way from other products or services designed to satisfy the same need. The differences may be functional, rational, or tangible or intangible related to what the brand represent. It involves decisions that establish an identity for a product with the 31
goal of distinguishing it from competitors offering. Branding is a fixation of special and unique image or attribute to a particular product which makes it to be exceptional among other products in the eyes and minds of consumers. (Ehikwe 2005: 176).From the above definition of branding, it means that a brand has an added value to the physical product beyond the core product. These may be aesthetic, emotional, psychological and philosophical values that are embedded in the minds and hearts of consumers. Based on the definition, a brand is a product and the value-added which personifies it beyond the core product. Onah and Thomas (2004: 239) identified the various types of brands as manufacturer‘s brand and private brands. They posited that branding helps to facilitate the performance of the various other Marketing Management functions like New Product Introduction, Advertising and other Promotions, Pricing etc. It is strongly speculated that most times, what consumers buy is name and not quality or functionality or performance. Mccarthy and Perreault (1985) as captured in Anyanwu (1999: 160), commenting on branding said that it is the use of a name, term, symbol or design or a combination of these to identify a product. This statement infers that branding identifies the product for the consumer and relates it to branding and product design. Obiesie (2003: 41) captured the very essence of branding when he described it as an integral and intimate part of a product strategy. This suggests that a product is not complete until it is given a name, mark or symbol. He went further to describe branding as a name, term, sign, symbol, or design or a combination of these which is intended to identify the goods or services of one seller or group of sellers and distinguish them from those of its competitors. Okpara (2002: 160) defined branding as ―the imaginative process of creating a unique, relevant and harmonious name, term, sign, symbol, or its combination to identify a company‘s product and to differentiate them from those of the competitors‖. From the foregoing discussions, it is obvious that the essence of 32
branding is to aerate a distinctive and unique product whose name rings a bell and commands ‗the influence of consumers positively in terms of one‘s purchase behaviour. This against the backdrop that for a bigger and more resonating name, for a better perceived name, certain consumers will be willing to pay a little more. Anyanwu (2003: 18) defined branding as the use of a name, term, symbol, design or combination of these to identify a product. It also includes the use of brand name, brand mark and trademark. He also opined that branding is very essential for advertising effectiveness because it is branding that distinguishes similar goods of different manufacturers. The above definition explained that branding is a major product strategy in that it helps to position the product in the minds of the consumers. It is a major determinant of how consumers react to both the promotional activities of firms and actual purchase. Brand according to Anozie (2006: 35) is a long-term profitable bond between an offering and a customer. This relationship is based on economic, emotional, and/or experiential value, backed by everyday operational excellence and consistently measured for accountability, usually by customer profitability. The above definition of a brand has several key concepts. One is profitability. For businesses, the only purpose to branding is to increase profitability. It is not to generate great creative or catchy taglines or win awards. If any branding tactic does not contribute to greater profitability, it is not worth it, such is the case of biscuits. Again, the definition also stresses that brands require a relationship. Anyone can sell a product once but what is required for profitability is repeat sales. It is only after those repeat sales that a brand relationship is formed. The next key component is value can be related to price, an experience or feeling , but
no one
buys anything
unless value is seen.
Every day
operational excellence is viewed as the ability to consistently fulfill a brand promise. Without the ability to ship on time ensure quality and provide service, no brand can succeed. ―In many ways, the organization is the brand‖. Finally 33
measurement is key. Measurement enables benchmarks, which in turn ensures accountability. Measurement let you know what is working in terms of ROI, and what isn‘t. Measurement ensures better decision-making. Without data, it is just guessing. It is consequently safe to extrapolate that branding distinguishes the product or service of a manufacturer(s) from that of other manufacturer(s) of the same or similar products. This distinctive element is particularly crucial for the repeat purchasers and first- buyers or prospects of malt drinks. American Marketing Association (2011: 9) defines a brand as a name, term, design, symbol or device, or any combination thereof which is adopted and used by a manufacturer or merchant to identify his goods and to distinguish them those sold by other manufacturers, or in the case of services performed by others. A brand can take many forms, including a name, sign, symbol, color combination or slogan. For example, Coca Cola is the name of a brand make by a particular company. The word branding began simply as a way to tell one person's cattle from another by means of a hot iron stamp. The word brand has continued to evolve to encompass identity — it affects the personality of a product, company or service. It is defined by a perception, good or bad, that your customers or prospects have about you. Therefore it makes sense to understand that branding is not about getting your prospects to see you as the only market to choose you over the competition, but it is about getting your prospects to see you as the only one that provides a solution to their problem. The objectives that a good brand will achieve include:
Delivers the message clearly
Confirms your credibility
Connects your target prospects emotionally
Motivates the buyer
Concretes user loyalty 34
To be successful in branding, you must understand the needs and wants of your customers and prospects. You do this by integrating your brand strategies your company at every point of public contact. Your brand resides within the hearts and minds of customers, clients, and prospects. It is the sum total of their experiences and perceptions, some of which n influence, and some that you cannot. A brand is the one thing that you can own that nobody can take away from you,‖ say Howard Kosgrove, Vice Principal of Marketing at Lindsay, Stone and Briggs Advertising in Madison. Everything else, they can steal. They can steal your secrets. Eventually, your patent will expire. Your physical plant will wear technology will change. But your brand can go on and live. It creates a last value above and beyond all the other elements of your business. A strong brand is invaluable as the battle for customers intensifies day by day. Important to spend time investing in researching, defining, and building your brand After all, your brand is the source of a promise to your consumer. It‘s a foundational piece in your marketing communication and one you do not want to without. Van Auken (2007), sees a brand as the personification of a product, services or organization. It is also the source of a relationship with customers. Like a person, it must have human qualities and possesses a soul. He further suggested the following attributes of a brand; • As a person-possessing core values and a personality. • The brand is the source of the organizations relationship with people. • Strives to create an emotional connection with your consumer. • The most successful brands tap into deeply felt human needs. • Commands positive perception among consumers or customers. • A brand must possess integrity; that is, it must deliver what it promises always. 35
Van Auken (2007), compiled a list of characteristics of leading brands as follows; - Has very high awareness. - Increases customer loyalty. - Decreases price sensitivity. - Results in increased market share, especially for the target customers. Of great importance in this list of characteristics is that it reduces price sensitivity, commands customer loyalty and commands positive perception among consumers or customers. This goes to suggest probably, why branding may influence consumer purchase behaviour. Levitt (1981: 94) opined that branding is usually a way of distinguishing a company‘s product from those of competing products. It should be an assumption that companies, particularly those starting new and who are not sure of what consumers reaction to their products would be, would approach the branding exercise with a lot of ambivalence. The resultant name, term, sign, symbol or any combination is what comes out as the brand. This means that a brand can come in form of a name or mark. (Brassington and Pettitt,1997: 267). Ifezue (1990: 143) stated that branding helps to supplement advertising and personal selling. Branding seeks to provide a prospect that has been notified through advertising, the means of identifying the product in the market place. Therefore, brand name is another product attribute that can contribute to consumer acceptance of a product. It can be extended to refer to the visual features such as package, colour, typography design, slogan, which should assist in stimulating and maintaining demand. A branded product once acceptable to the consumer can lead to brand loyalty, good brand image and thus, greater market acceptance of such product. 36
Branding is defined as a way in the product planning activities of a firm. It has to do with the efforts a firm makes in choosing, developing, projecting and establishing its own brand(s) of products. Because branding adds to value of products, market acceptance and achieve competitive edge over others market, designation of branding include brand name, brand mark, trade mark copyright, family branding, individual branding, manufacturers brand, distributor‘s brand, primary brand, secondary brands etc. Olakunle K. Olakunori (1999: 185). It is the need for differentiation that gives rise to the branding of products as mark of identification, differentiation and recognition in the presence of so many products that have similar outlook. (Anyanwu, 1993: 22). 2.3.1 Kinds of Branding A brand cannot be all things to all people. By definition, no one brand is going to appeal to all customers. On the contrary, branding is based on the concept of singularity — targeting individuals in a personal manner. A product may possess more than one, out of the numerous types of branding we have today. (http://en.wikipedia.org/wiki/Brand). Some of them include; 1. National or manufacturer brand: As the name implies, manufacturer brands are initiated by the producers which make it possible for their names to be identified at the point of purchase. The manufacturer brands are the best known brands in any product category. The marketers of these brands stress quality and rely heavily on advertising and sales promotion (Anyanwu 2000: 109). 2. Private or customer brand: Private brands are initiated and owned by resellers. A brand is exclusive to a man, a distributor, a store and a private individual or customer. A brand that is localized (Ehikwe, 2005: 177). Example of this type of brand is where are made in Aba, Lagos or even U.K., for boutique 37
stores such as ―Emphasis‖ etc. It is worthy to note that most popular stores abroad such as Penny, Saks, Marks and Spencer etc, all have their wears made in their name by designers elsewhere. (Okpara 2002: 161). This type of branding is not so common in Nigeria. It is expected that with time, the environment will be conducive for private brands. Essentially, the arrangement involves the manufacturers and resellers. The manufacturer will supply goods manufactured by him but labeled with the reseller‘s own brand. These products may be the same with the one the manufacturer sells or of different specifications and quality. (Anyanwu 2000:109). The reasons why distributors may want to develop their own brands include: -
A desire to limit the control of the manufacturer.
-
A desire to create a store or company identity and loyalty.
-
A desire to introduce greater price variation.
-
A desire to protect margins which may fall as a result of competition
among powerful manufacturers. (Anyanwu, 2000:110). 3. Licensed brand: This is where a company gets a license from the owner to produce or market a brand. Example is the Tura (UK), marketed by J. Udeagbala Holdings, or say, Presidential Tailors licensed to adopt ―Bill Blass‖ or ―Gucci name on its wears (Okpara 2002: 161). 4. Co-branding: This is where two companies or more use their different: established brand names on a new product. Gazie S. Okpara (2002: 161). Cobranding is a way for businesses to extend their brand‘s identity and cut expenses by partnering with compatible products and services. On the web, Co- branding or what is better known as strategic relationships are rampant. Besides content swaps, companies invite branded products and services to be sold from their sites in what are known as affiliate programs. 38
Co-branding works because it creates new excitements for the brands involved. One brand teams with another to offer a product with an enhanced (or seemingly so) benefit. However, before one jumps into co-branded relationship, he must ask himself if the excitement that the deal will bring will build the brand or sabotage it. Sometimes, a co-branding strategy isn‘t advantageous as it
may
seem,
particularly
for
small
companies
that
oftentimes
get
overshadowed by larger partners. 2.2.3 Base (Primary) Brand A brand that is existing as the main and only brand from where other brands take roots in an organization. (Ehikwe, 2005: 178). It is also the brand that a company gives extensive promotion and emphasis to, such as Maltina. (Olakunle, 1999: 187). This is a company‘s core brand or umbrella brand. Primary brands typically garner a large percentage of a company‘s revenue potential and therefore need to be given priority and have a sufficient amount of advertising in order to root them firmly. 2.3.3 Brand Extension This is an additional brand or brands to the base brand which is the use of the same brand name for new products in the same production organization. (Ehikwe, 2005: 178). This is also a situation where existing strong brand name can be used as a vehicle for new or modified products. 2.3.4 Importance of Branding A product is something made in a factory, a brand is something that is bought by the customer. A product can be copied by a competitor; a brand is unique. A product can be quickly outdated; a successful brand is timeless."- Stephen King, WPP Group, London. The importance of branding a product lies in the fact that branding means recognition and an identity. Branding is an important marketing function. When it comes to the actual word 'branding', its origins can be connected to the activity of branding of milk giving animals. Farmers, 39
animal owners often branded their cows and buffaloes with their signature brands. The milk of animals that were taken better care of were always in demand and of course, costly. Though many of us may feel that this kind of branding does not have any connection to the modern corporate branding, I definitely have to disagree. This is probably the pioneer branding process. Since the milk was from a family of very well cared and well tended animals, it was recognized to be of very high quality and people were ready to pay more for it. The same principle of branding is applied today. A set of related products that are manufactured by a company and are sold as a family of products under the marquee or banner of a brand has a certain recognition and a place of respect within that very market. Branding the product thus, is a means of creation of identification and recognition in the market. It is not just a process of getting a trademark and logo, but it is process of evolving as a well reputed name on the market and field. A very well-known brand that has become the identity of the market itself is the office equipment manufacturer 'Xerox'. Though it is a company's name, the act of photocopying is termed as 'Xeroxing'. Let
look
at
the
importance
of
branding
from
different
perspectives.
1. Important of branding to business: From the point of view of a business, the process of branding involves making of a trademark and a good name. A registered trademark and a name ensure individuality and uniqueness of a particular product or family of products. The lawful registration of the trademark means that any competitor cannot copy any of the elements and names of the products. Branding can be done for anything that can be promoted in the consumer's market, may it be a simple label, a family of products or an umbrella brand. People can also have a personal brand. The primary advantage of branding is that it is safeguarded from unlawful activities and at the same time, it is also a way of developing a good reputation in the market. Often you might see some new product carry the tag that says 'from the makers of ...brand', well this is another advantage of branding. When a business who owns an already famous brand wants to launch a new brand in 40
the market, they can use the pre-earned goodwill and reputation for the new launch. The advantage is that, people are bound to purchase the new products out of curiosity. 2. Importance of branding in marketing: Marketing primarily involves the study of demand in a market and creating a response in the form of supply. In the field of marketing, the brand name plays an important role as it helps the people to promote the brand name and its merits quite easily. Apart from that, it also becomes possible for the marketing people to generate intelligence information about the brands popularity and also what people exactly want from the brand owning company. As a result of a brand loyal group of consumers, it also becomes easier for marketing department to asses regular and promised demand. Apart from that, schemes such as free gifts and discounts often boost the sales as the brand is an important icon of the market. 3. Importance of branding in advertising: Advertising is often considered to be a part of marketing however; branding a particular product helps the advertisers to provide catchy logos and advertisements. As a brand name can never
be
copied,
advertisers
face
lesser
heat
from
unauthenticated
advertisements, effectively, their advertisement creation gets protected. Apart from that advertisers can initiate fearless and independent advertising as due to the process of branding, the consumers are already well aware of the product, its identity and nature. In short, the importance of branding can be summed up in simple words 'successful branding is a process that generates revenue that cannot be counted, it creates a reputation that is felt not seen, it is an asset that one cannot show on a balance sheet (Scholasticus K, 2011).
41
2.4 Role of the Brand In the technique of branding first started, it was meant to make identifying and differentiating a product easier. Over time, brands came to embrace a performance or benefit promise, for the product, certainly, but eventually also for company behind the brand. Today, brand plays a much bigger role. Brand has been co-opted as powerful symbols in lager debates about economics, social issues, and politics. The power of brands to communicate a complex message quickly and with emotional impact and the ability of brands to attract media attention, make them ideal tools in the hands of activists. Brand identify the source or maker of a product and allow consumers to assign responsibility for its performance to a particular manufacturer or distributor (Kotler and Keller,2009: 277).Consumers learn about brands through past experiences with the product and its marketing programs, finding out which brands satisfy their needs and which do not. Brands also perform valuable functions; first they simplify product handling or tracing. It also helps to organize inventory and accounting records. It offers the legal protection for unique features or aspects of the product. Brands signal a certain level of quality so that satisfied buyers can easily choose the product again. A strong brand will provide a reassurance that can have an enormous impart when a buyer has to choose between two objectively fairly similar offers, for example in Nigeria, MTN has capitalized on its brand image carried over from its successful operations in African countries to be the leading GSM service provider in Nigeria. Brand loyalty provides predictability and security of demand for the firm, and creates barriers to entry that make it difficult for more firms to enter the market, example Microsoft and its market dominance in the software industry has created a huge barrier for other software companies. Loyalty can translate into customer willingness to pay a higher price, often 20% to 25% more than competing brands.In implementing branding strategy, branding is considered sometimes risky. However, it is pursued because the firms believe that its
42
benefits will outweigh added cost of developing the brand through promotion and risks and responsibility assumed in maintaining its quality image. The crucial role of branding according to (Okpara 2002) can be captured from three perspectives‖ Consumers, Manufacturers and Intermediaries. a. Consumers: For consumers, product branding does the followings; i.
Facilitates the identification and purchase of preferred product choices.
ii
Enthrones some status symbols on users of the product.
iii.
Especially for new products, they can help in the first-hand evaluation of the products‘ likely suitability and quality, judging from who is the owner of the brand.
b.
Manufacturers: Product branding to the manufacturers is vital the following ways;
i.
It affords a manufacturer on exclusive legal protection for his unique efforts and product features, from competitive parody.
ii. It is vital in differentiating and serving market segments of various purses, purposes and personalities. iii.
It facilitates the identification of a manufacturers‘ product on the retail shelves.
iv. It can provide a manufacturer with an avenue to escape the travails of price related competition, c. Intermediaries: These include the wholesalers, retailers, agents, jobbers etc. A typical store, supermarket or distributor benefits from branding in the following ways;
43
i. The brands are usually advertised by the manufacturers, thereby making sales easier for intermediaries. ii. It makes description and location of needed products by shoppers much easier. iii. It Promotional materials based on product brands are usually given as gifts to intermediaries. 2.4.1 Benefits of Branding i Pride: A professionally designed logo and Brand
will show that you are
committed to presenting your company as a major contender in your market. ii Visibility: Most prospective consumers look for highly visible, well-defined businesses, and the "look and feel" of your identity plays a major role in their decision making process. iii Credibility: Establishing credibility with a strong visual message in a professionally developed Brand, used throughout all of your business and marketing communications, will keep you a step ahead of your competition. iv Appearance: A professionally developed Brand positions your company to work with larger organizations and increases your margins by allowing you to set premium rates for your products and / or services. v Retention: Most people remember what they see much better than what they hear or read.
Having a consistent visual identity throughout all of your
business and marketing communications will keep you at the forefront of existing and potential clients‘ minds when they have a need for your products and or services.
44
vi Differentiation: When partnered with a strategic marketing program, a welldesigned logo and a strong identity system will position your business far above the competition in your market. vii Stability: Even if you are unable to claim that you‘ve been in business for ―over 30 years‖, having a functional Brand / Identity system gives the impression that your business is dedicated to the industry you serve. viii Support: When you present a well-rounded business package, your business goals and objectives are more clearly defined and this will improve your chances of getting venture capital or other forms of financial assistance. 2.5 Consumer Loyalty Recent years have shown a growing interest in customer loyalty. The globalization of competition, saturation of markets, and development of information technology have enhanced customer awareness and created a situation where long-term success is no longer achieved through optimized product price and qualities. Instead, companies build their success on a longterm customer relationship. According to former studies, it can cost as much as six times more to win a new customer than it does to keep an existing one. (Rosenberg et al. 1984: 45) Depending on the particular industry, it is possible to increase profit by up to 60% after reducing potential migration by 5%. (Reichheld 1993: 65) Hence we can see that the increase and retention of loyal customers has become a key factor for long-term success of the companies. The main emphasis in marketing has shifted from winning new customers to the retention of existing ones, that is trying to win their loyalty. Customer loyalty is not always easy to construe and many definitions have been proposed. Let's first settle what customer loyalty is not according to Prus and Randall (1995).
45
a. Customer loyalty is not customer satisfaction: Satisfaction is a necessary but not sufficient criterion. We know that "very satisfied" to "satisfied" customers sometimes switch to competitors. b. Customer loyalty is not a response to trial offers or incentives: Customers who react to incentives are often highly disloyal and they often leave as fast as they came. They are very much inclined to respond to a competitor's incentive. c. Customer loyalty is not a strong market share: High level of market share can also be influenced by other factors such as poor performance by competitors or price issues. d. Customer loyalty is not repeat buying or habitual buying: Some of your consumers choose your products because of convenience or habits and they can be tempted to defect for any reason. Prus & Randall then describe customer loyalty as follows: "Customer loyalty is a composite of a number of qualities. It is driven by customer satisfaction, yet it also involves a commitment on the part of the customer to make a sustained investment in an ongoing relationship with a brand or company. Finally, customer loyalty is reflected by a combination of attitudes (intention to buy again and/or buy additional products or services from the same company, willingness to recommend the company to others, commitment to the company demonstrated by a resistance to switching to a competitor) and behaviors (repeat purchasing, purchasing more and different products or services from the same company, recommending the company to others)". Customer loyalty is all about attracting the right customer, getting them to buy, buy often, buy in higher quantities and bring you even more customers. Customer loyalty is when an organization receives the ultimate reward for the way it interacts with its customers. Loyal customers buy more, buy longer and tell more people - that's true customer loyalty."(Ellen Goodwright,2010). It can also be seen as the extent of faithfulness of a consumers to a particular brand, 46
expressed through their repeat purchases, irrespective of the marketing pressure generated by the competing brands. Loyalty is an old-fashioned word traditionally used to describe fidelity and enthusiastic devotion to a country, a cause, or an individual. It has also been used in a business context, to describe a customer‘s willingness to continue patronizing a firm over the long term, preferably on an exclusive basis, and recommending the firm‘s products to friends and associates (Lovelock and Wirtz 2011). Customer loyalty is the continued and regular patronage of a business in the face of alternative economic activities and competitive attempts to disrupt the relationship. Customer loyalty often results in other secondary benefits to the firm such as brand advocacy, direct referrals, and price insensitivity. Jones and Sasser (1995) identified three parts of consumer loyalty: re-buy intention, primary behaviour and secondary level behaviour. According to Jones and Sasser (1995) re-buy intention refers to future intention of the consumer to repurchase the product or service; primary behaviour means the practical revisiting behavior of a consumer; while secondary-level behavior indicates the willingness of a customer to recommend the product to others and enhances customer loyalty through human relationship (Chen, Chen and Hsieh, 2007). Oliver (1999) further stated that loyalty is a deeply held commitment to re-buy or patronize a preferred product or service consistently in the future, thereby causing repetitive same-brand or same-brand set purchasing. Chen and Ching, (2007) suggested that loyalty comprises of two dimensions: behavior and attitude. The behavior dimension is characterized by consequential actions resulting from loyalty, while attitudinal dimension refers to formative behavior as commitment i.e. a desire to maintain a valued relationship. More importantly, the consumer‘s attitude toward a product or service including attitudinal preference and commitment has a greater impact on forming loyalty. Loyalty therefore, is desirous by all business managers as it has established that it is cheaper to retain a customer than to win a new one (Rust and Zahorik, 1993). We can differentiate between behavioural and attitudinal 47
loyalty, also referred to as share-of-wallet and share-of-heart respectively. Behavioural loyalty refers to customers buying exclusively or mostly only one brand, whereas attitudinal loyalty is all about having an emotional attachment to a brand, liking it more than others, and even loving it. These two types of loyalty are independent, for example, one can give a 100 percent share-ofwallet to a bus company that passes one‘s home to work, but would still be deeply unhappy with that organization‘s service and be ready to switch as soon as a viable alternative is on offer. True loyalty requires both share-of-wallet and share-of-heart so that customers continue buying even when situational factors may make repeat purchase difficult, such as stock outage or alternative providers trying to persuade customers to switch using promotional offers. However, attitudinal loyalty in itself is not a guarantee of profitability and firms need to be efficient in translating
these
attitudes
and
loyalty
intentions
into
actual
loyalty
behaviours. This includes:
Increased share-of-wallet such as encouraging a customer to buy more from a brand, and less from its competitors which results in selling more units to a customer;
Up-selling to higher level products, meaning selling more expensive, higher value products, which results in the higher revenue from the customer for a constant number of products sold;
Cross-selling of products the customers currently does not buy, this means in addition to the products a customer already buys, a company sells different products to that customer;
Referrals
such
as
customer
give
positive
word-of-mouth
and
recommendations to buy the firm‘s products to friends and associates that lead to sales.
48
Example many Apple customers show absolute loyalty to Apple and even dislike competing products. Apple fans identify with its trendy brand and love its integrated and smart solutions, sleek design and excellent product quality. These customers seem to increasingly live in an ―Appleworld‖, where they tightly integrate the use of several Apple products such as their MacBook, iPod, iPhone and iPad).
They frequently
download and buy software, apps, songs and ebooks from Apple‘s Store and iTunes. These customers have a deeply held commitment to re-buy and re-patronize Apple products and services consistently in the future, against all odds and at all costs despite strong marketing efforts of competitors (adapted from a definition of customer loyalty from Oliver 1997). 2.5.1 Brand Loyalty Customer loyalty is one major thing that brands need to thrive in the market place. When customers are loyal to a brand, they become ambassadors by mouthing good stories about the brand. It is a basic truth that when customers are happy, they go to a large extent to promote a good image for the brand. Customer loyalty is all about relevance and meaning throughout every customer touch point. It is all about making the brand experience more intimate relationship with the customers. Brand loyalty is a result of consumer behaviour and is affected by a person‘s preferences. Loyal customers will consistently purchase products from their preferred brands, regardless of convenience or price. Companies will often use different marketing strategies to cultivate loyal customers, be it is through loyalty programs (i.e. rewards programs) or trials and incentives (ex. samples and free gifts). Companies that successfully cultivate loyal customers also develop brand ambassadors – consumers that will market a certain brand and talk positively about it among
49
their friends. This is free word-of-mouth marketing for the company and is often very effective. The American Marketing Association defines brand loyalty as: 1. "The
situation
in
which
a
consumer
generally
buys
the
same
manufacturer-originated product or service repeatedly over time rather than buying from multiple suppliers within the category" (sales promotion definition). 2. "The degree to which a consumer consistently purchases the same brand within a product class" (consumer behavior definition). In a survey of nearly 200 senior marketing managers, 69 percent responded that they found the "loyalty" metric very useful. Brand loyalty, in marketing, consists of a consumer's commitment to repurchase or otherwise continue using the brand and can be demonstrated by repeated buying of a product or service, or other positive behaviors such as word of mouth advocacy. There are many operational definitions of brand loyalty. In general, brand loyalty can be defined as the strength of preference for a brand compared to other similar available options. This is often measured in terms of repeat purchase behaviour or price sensitivity (Brandchannel.com, 2006). However, Bloemer and Kasper (1995) defined true brand loyalty as having six necessary conditions which are: 1) the biased (i.e. non-random); 2) behavioural response (i.e. purchase); 3) expressed over time; 4) by some decision-making unit; 5) with respect to one or more alternative brands out of a set of such brands; and 6) a function of psychological processes. True brand loyalty exists when customers have a high relative attitude toward the brand exhibited through repurchase behaviour. This type of loyalty can be a great asset to the firm: customers are willing to pay higher prices, may cost less to serve and can bring in new customers to the firm (Reichheld and 50
Sasser, 1990). Simply chooses the familiar brand on the basis of some overall positive feelings towards it. This overall positive evaluation stems from past experience with the particular brand under consideration. Amine (1998) in her literature distinguishes two main approaches to define the loyalty construct: the behavioural one suggests that the repeat purchasing of a brand over time by a consumer expresses their loyalty, and; the attitudinal perspective which assumes that consistent buying of a brand is a necessary but not sufficient condition of ‗true‘ brand loyalty and it must be complemented with a positive attitude towards this brand to ensure that this behaviour will be pursued further. Thus, brand loyalty is a function of both behaviour and attitudes. It is a Consumer‘s preference to buy a particular brand in a product category. It occurs because consumers perceive that the brand offers the right product features, image, or level of quality at the right price. This perception becomes the foundation for new buying habits. Consumers will initially make a trial product of the brand and, when satisfied with the purchase, tend to form habits and continue to purchase the same brand because the product is safe and familiar. 2.5.2 Segmentation Based on Customer Loyalty There are multiple approaches to customer loyalty. Theories of behavioral loyalty were dominating until 1970 considering loyalty as the function of the share of total purchases (Cunningham 1956:118; Farley 1964:9), function of buying frequency or buying pattern (Tucker 1964: 32; Sheth 1968: 398) or function of buying probability (Harary et al. 1962; McConnell 1968:14; Wernerfelt 1991: 231). These approaches looked at brand loyalty in terms of outcomes (repeat purchase behavior) rather than reasons, until Day (1969) introduced the two-dimensional concept of brand loyalty, which stated that loyalty should be evaluated with both behavioral and attitudinal criteria. 51
Contemporary researches consider and accent the psychological (mostly attitudinal and emotional) factor of loyalty (Jacoby et al. 1973:2; Oliver 1999: 34; Chaudury 1995: 28; Djupe 2000: 79; Reichheld 2003: 47). There are also 6 Andres Kuusik approaches comparing loyalty with marriage (Hofmeyr et al. 2000: 53–83; Lewitt 1983: 89; Dwyer et al. 1987: 14). These different approaches allow distinguishing customers as whether behaviorally or emotionally loyal. Behaviorally loyal customers act loyal but have no emotional bond with the brand or the supplier whereas emotionally loyal customers do. Jones and Sasser call these two kind of loyalty accordingly false or true long term loyalty (Jones et al. 1995: 90). Hofmeyr and Rice (2000: 87) divide customers to loyal (behavioral) or committed (emotional). Emotional loyalty is much stronger and longer lasting than behavioral loyalty. It‘s an enduring desire to maintain a valued relationship. The relationship is so important for the customer that he or she makes maximum efforts to maintain it. (Morgan et al. 1995: 24; Reichheld 2003: 9; Moorman et al. 1992: 316) Highly bonded customers will buy repeatedly from a provider to which they are bonded, recommends that provider to others, and strongly defend these choices to others – insisting that they have chosen the ―best‖ product or service. (Butz et al. 1996: 65). Behaviorally loyal customers could be divided to sub-segments by the reason of acting: • Forced to be loyal, • Loyal due to inertia or • Functionally loyal. Customers are forced to be loyal when they have to be clients even if they do not want to. Customers may be forced to consume certain products or products/services offered by certain vendor e.g. when the company acts as a monopoly or the poor financial status of the customer is limiting his selection of goods. Grönholdt, Martensen and Kristensen have found that companies 52
with low price strategy had a much higher loyalty than expected from their customer satisfaction. On the other hand, companies that had used a lot of energy on branding indeed had a high customer satisfaction but they did not have a correspondingly high loyalty. (Grönholdt et al. 2000: 512) Forced loyalty could be established through creating exit barriers as well. Loyal behaviour may also result from inertia – customer does not move to another vendor due to comfort or relatively low importance of operation – if the choice has low importance, there is no point to spend time and effort on searching for alternatives. Thus, based on his faith in the suitability of the current product, the customer continues to use it without checking alternatives. It‘s in accordance to Oliver‘s approach of cognitive loyalty: the loyalty that is based on brand belief only. ―Cognition can be based on prior or vicarious knowledge or on recent experience-based information. If the transaction is routine, so that satisfaction is not processed (e.g. trash pickup, utility provision), the depth of loyalty is no deeper than mere performance.‖ (Oliver 1999: 35) Hofmeyr and Rice (2000: 23) say that one of the reasons that customers don‘t switch brands when they are dissatisfied is that they feel that the alternatives are just as bad as the brand they are using or even worse. Inertia may be caused also by lack of information about attractive characteristics of the brands (Wernerfelt 1991:231). Functionally loyal customers are loyal because they have an objective reason to be. Wernerfelt points out ―cost-based brand loyalty‖ where brand utilities have a positive influence on brand choice. (Wernerfelt 1991:231) Functional loyalty can be created by functional values using price, quality, distribution, usage convenience of a product or through different loyalty programs (points, coupons, games, draws etc.) giving a concrete reason to prefer certain supplier. Unfortunately competitors can most easily copy functional values. Thus, creating functional value offers a fleeting competitive advantage: functional loyalty can‘t be very long lasting. (Barnes 2003: 8) Jones and Sasser (1995:94) 53
propose three measures of loyalty that could be used in segmentation by loyalty: • Customer’s primary behavior: Regency, frequency and amount of purchase; • Customer’s secondary behavior: Customer referrals, endorsements and spreading the word; • Customer’s intent to repurchase: Is the customer ready to repurchase in the future. Based on the theoretical literature presented above, the customers of a certain telecommunication provider could be segmented by their loyalty as follows a. Committed or emotionally loyal customers: active customers who use only the certain provider‘s services and declare that they will use only this provider in the future and recommend this provider to others; b. Behaviorally loyal customers: active customers who use only the certain provider‘s services and declare that they will use only this provider in the future but do not agree to recommend this provider to others (inert or Functionally loyal); c. Ambivalent or dubious customers: active customers who use only the certain provider‘s services but don‘t know which provider they will use in the future; d. Disloyal reducers: customers who have reduced or will reduce the percentage of the provider‘s services in their usage; e. Leavers: customers who declare, that they will certainly leave this provider.
54
2.5.3 Factors Affecting Customer Loyalty The impact of satisfaction on loyalty has been the most popular subject of studies. Several studies have revealed that there exists a direct connection between satisfaction and loyalty: satisfied customers become loyal and dissatisfied customers move to another vendor. (Heskett et al. 1993: 165–167) The primary objective of creating ACSI (American Customer Satisfaction Index) in 1984 was to explain the development of customer loyalty. In ACSI model customer satisfaction has three antecedents: perceived quality, perceived value and customer expectations. (Anderson et al. 2000: 873) In the ECSI (European Customer Satisfaction Index) Model perceived quality is divided into two elements: ―hard ware‖, which consists of the quality of the product or service attributes, and ―human ware‖, which represents the associated customer interactive elements in service, i.e. the personal behaviour and atmosphere of the service environment. (Grönholdt et al. 2000: 510) In both model increased satisfaction should increase customer loyalty. When the satisfaction is low customers have the option to exit (e.g. going to a competitor) or express their complaints. Researches have shown that 60–80% of customers who defect to a competitor said they were satisfied or very satisfied on the survey just prior to their defection. (Reichheld et al. 2000: 137) So it‘s clear that there must be also other factors beside satisfaction that have a certain impact on customer loyalty. Image of brand or supplier is one of the most complex factors. It affects loyalty at least in two ways. Firstly, customer may use his preferences to present his own image. That may occur both in conscious and subconscious level. According to the Belk‘s theory of extended self, people define themselves by the possessions they have, manage or create. (Belk 1988: 160) Aaker has shown how consumers prefer brands with personality traits that are congruent with the personality traits that constitute their (malleable) selfschemas (Aaker 1999: 45) Kim, Han and Park have researched the link between brand personality and loyalty. They did get positive support to hypothesis that the
55
attractiveness of the brand personality indirectly affects brand loyalty. (Kim et al. 2001: 203) Tidwell and Horgan (1993: 349) have showed that people use products to enhance self-image. Secondly, according to social identity theory, people tend to classify themselves into different social categories. That leads to evaluation of objectives and values in various groups and organisations in comparison with the customer‘s own values and objectives. They prefer partners who share similar objectives and values. (Ashforth et al. 2001: 23) Fournier (1998: 366) states that consumer-brand relationships are more a matter of perceived goal compatibility. Brands cohere into systems that consumers create not only to aid living but also to give meanings to their lives. Oliver (1999: 40) argues that for fully bonded loyalty the consumable must be part of the consumer‘s selfidentity and his or her social-identity. Trustworthiness of the partner is a factor that has certain impact on the establishment of loyalty – nobody expects a long-term relation with a partner that cannot be trusted. Trustworthiness is one criterion for measuring the value of the partner. (Doney et al. 1997: 46) Spekman (1988: 79) calls trust a cornerstone of the strategic partnership. Morgan and Hunt (1994: 22) posit that trust is a major determinant of relationship commitment: brand trust leads to brand loyalty because trust creates exchange relationships that are highly valued. Chauduri and Holbrook (2001: 91) have showed that brand trust is directly related to both purchase and attitudinal loyalty. Many authors have accented that trust is important in conditions of uncertainty (Moorman et al. 1992: 315; Doney et al. 1997: 36; Dwyer et al. 1987: 12–13; Morgan et al. 1994: 23). Uncertainty may be caused by dependence or large choice: people tend then to prefer popular or familiar brands or partners. Many definitions describe loyalty as a desire to retain a valuable or important relationship. (Morgan et al 1994: 22; Moorman et al. 1992: 316) That way the establishment of loyalty is predetermined by the importance of relevant 56
relationship or selection. Weiss (2001) points out three aspects that may increase the importance of the relationship: • Strategic importance of a product, • High risks involved in the transaction or • Costs incurred by cancellation of contracts. Hofmeyr and Rice point out that the more important the relationship is to a person, the more willing that person is to tolerate dissatisfaction in favour of trying to fix it. By contrast, when a relationship doesn‘t matter, then even the perfectly satisfied consumer can switch on a whim. (Hofmeyr et al. 2000: 60). A relationship can also be made important by personal approach. Various authors have compared loyalty with marriage (Levitt 1983; Dwyer et al. 1987; Gummeson 1998; Hofmeyr et al. 2000). Marriage is one of the most personal and important relationships. That means that intimacy is one determinant for importance of relationship. Levitt (1983: 89) has considered a role of salesman in making relationship more personal. 2.5.4 Consequences of Customers Loyalty Businesses with high customers' loyalty rates have proven to reach great financial results. Buchanan & Gillies identified six reasons explaining why long-term customers are more profitable than others are: a. Regular customers place frequent, consistent orders and, therefore, usually cost less to serve. b. Long-established customers tend to buy more. c. Satisfied customers may sometimes pay premium prices d. Retaining customers makes it difficult for the competitors to enter a market or increase their share.
57
e. Satisfied customers often refer new customers to the supplier at virtually no cost. f. The cost of acquiring and serving new customers can be substantial. A higher retention rate implies that fewer new customers need be acquired, and that they can be acquired more cheaply. In fact, the acquisition cost of a new customer is three to five times more expensive than retention cost. We could also add that a loyal customer is more willing to give feedback on his dissatisfaction and becomes this way a sort of quality controller. Finally, loyalty is an excellent weapon, since it is almost impossible to measure a competitor's retention rate. 2.6 Concept of Consumer Behaviour and Marketing Strategy Consumer behaviour is a very important aspect of marketing. This is not far from the fact that the consumer constitutes the nucleus of every business venture. The understanding of consumer behaviour can be facilitated if we appreciate its relationship with human behaviour. Consumer behaviour, according to Anyanwu and Okafor (1995: 32), is an element within human behaviour. Consumer behaviour, as an aspect of human behaviour, concerns those human actions involved in the purchase of goods and services from the marketing firms (Anyanwu and Okafor, 1995:33). Boone and Kurtz (1980:105) as contained in Anyanwu (2003:75) define consumer behaviour as ‗the acts of individuals in obtaining and using goods and services including the decision process that precede and determine these acts.‖ They borrowed extensively from Engel et. al (1966:5). They defined consumer behaviour as the ―acts of individuals in obtaining and using economic goods and services including the decision process that precede and determine these acts‖. Okpara (1998:5) sees consumer behaviour as a process 58
whereby individuals decide when, what, where, how and from whom to purchase goods and services. Consumers are people whose actions positively or negatively impacts on the activities of a marketing organization. Some of the marketing stimuli that could be used to elicit favourable responses from consumers include, product attributes like brand name, colour, mark, distribution strategies etc. The ability of a marketer to properly manage these elements goes a long way in determining the success or otherwise of a marketing programme. Anyanwu (2003:74). Anyanwu (1997) as contained in Anyaogu (2007:9), defined consumer behaviour as those problem solving activities of consumers undertaken by a consumer with a view to reducing product related risk while enhancing satisfaction by buying the right goods and services. This definition simply suggests that every action a consumer takes is calculated carefully towards purchasing the right product that ensures a solution to his need problem. This is however, not always true given the fact that consumers are not always rational in their thinking and could be propelled by an inner or external force beyond their control, into taken actions that are not in their best interest. The only thing that happens at the end of the day, is that repeat purchase might not occur assuming the marketer did not employ the tool of promotion to forestall the occurrence of cognitive dissonance or its attendant problems. lnfact, consumers could equally be made to buy a particular brand of product at a higher price than it is worth This, one believes, is not in the best interest of the consumer, as the best interest of every consumer is defined by being able to maximize satisfaction from every kobo expended from his income. Marketing stimuli consist of the four Ps: product, price, place, and promotion. Other stimuli include major forces and events in the buyer's environment: economic, technological, political, and cultural. All these inputs enter the buyer's black box, where they are turned into a set of observable buyer responses: product 59
choice, brand choice, dealer choice, purchase timing, and purchase amount. The marketer wants to understand how the stimuli are changed into responses inside the consumer's black box, which has two parts. First, the buyer's characteristics influence how he or she perceives and reacts to the stimuli. Second, the buyer's decision process itself affects the buyer's behavior. Consumer purchases are influenced strongly by cultural, social, personal, and psychological characteristics. 2.6.1 Model of Consumer Behaviour Consumers make many buying decisions every day. Most large companies‘ research consumer buying decisions in great detail to answer questions about what consumers buy, where they buy, how and how much they buy, when they buy, and why they buy. Marketers can study actual consumer purchases to find out what they buy, where, and how much. But learning about the whys of consumer buying behaviour is not so easy; the answers are often locked deep within the consumer's head. The central question for marketers is: How do consumers respond to various marketing efforts the company might use? The company that really understands how consumers will respond to different product features, prices, and advertising appeals has a great advantage over its competitors. 2.6.2 Factors Influencing Consumer Behaviour Markets have to be understood before marketing strategies can be developed. People using consumer markets buy goods and services for personal consumption. Consumers vary tremendously in age, income, education, tastes, and
other
factors.
Consumer
behavior
is
influenced
by
the
buyer's
characteristics and by the buyer's decision process. Buyer characteristics include four major factors: cultural, social, personal, and psychological. We can say that following factors can influence the Buying decision of the buyer:
60
A. Cultural Factors Cultural factors exert the broadest and deepest influence on consumer behavior. The marketer needs to understand the role played by the buyer's culture, subculture, and social class. i. Culture: Culture is the most basic cause of a person's wants and behavior. Human behavior is largely learned. Growing up in a society, a child learns basic values, perceptions, wants, and behaviors from the family and other important institutions. A person normally learns or is exposed to the following values: achievement and success, activity and involvement, efficiency and practicality,
progress,
material
comfort,
individualism,
freedom,
humanitarianism, youthfulness, and fitness and health. Every group or society has a culture, and cultural influences on buying behavior may vary greatly from country to country. Failure to adjust to these differences can result in ineffective marketing or embarrassing mistakes. For example, business representatives of a U.S. community trying to market itself in Taiwan found this out the hard way. Seeking more foreign trade, they arrived in Taiwan bearing gifts of green baseball caps. It turned out that the trip was scheduled a month before Taiwan elections, and that green was the color of the political opposition party. Worse yet, the visitors learned after the fact that according to Taiwan culture, a man wears green to signify that his wife has been unfaithful. The head of the community delegation later noted, "I don't know whatever happened to those green hats, but the trip gave us an understanding of the extreme
differences
in our cultures." International marketers must understand the culture in each international market and adapt their marketing strategies accordingly. ii. Subculture: Each culture contains smaller subcultures or groups of people with shared value systems based on common life experiences and situations. 61
Subcultures include nationalities, religions, racial groups, and geographic regions. Many subcultures make up important market segments, and marketers often design products and marketing programs tailored to their needs. Here are examples of four such important subculture groups. iii. Social Class: Almost every society has some form of social class structure. Social Classes are society's relatively permanent and ordered divisions whose members share similar values, interests, and behaviors. Social class is not determined by a single factor, such as income, but is measured as a combination of occupation, income, education, wealth, and other variables. In some social systems, members of different classes are reared for certain roles and cannot change their social positions. Marketers are interested in social class because people within a given social class tend to exhibit similar buying behavior. Social classes show distinct product and brand preferences in areas such as clothing, home furnishings, leisure activity, and automobiles. B. Social Factors A consumer's behavior also is influenced by social factors, such as the consumer's small groups, family, and social roles and status. i. Groups: Many small groups influence a person‘s behavior. Groups that have a direct influence and to which a person belongs are called membership groups. In contrast, reference groups serve as direct (faceto- face) or indirect points of comparison or reference in forming a person's attitudes or behavior. Reference groups to which they do not belong often influence people. Marketers try to identify the reference groups of their target markets. Reference groups expose a person to new behaviors and lifestyles, influence the person's attitudes and self-concept, and create pressures to conform that may affect the person's product and brand choices.
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The importance of group influence varies across products and brands. It tends to be strongest when the product is visible to others whom the buyer respects. Manufacturers of products and brands subjected to strong group influence must figure out how to reach opinion leaders—people within a reference group who, because of special skills, knowledge, personality, or other characteristics, exert influence on others. Many marketers try to identify opinion leaders for their products and direct marketing efforts toward them. In other cases, advertisements can simulate opinion leadership, thereby reducing the need for consumers to seek advice from others. The importance of group influence varies across products and brands. It tends to be strongest when the product is visible to others whom the buyer respects. Purchases of products that are bought and used privately are not much affected by group influences because neither the product nor the brand will be noticed by others. ii. Family: Family members can strongly influence buyer behavior. The family is the most important consumer buying organization in society, and it has been researched extensively. Marketers are interested in the roles and influence of the husband, wife, and children on the purchase of different products and services. Husband-wife involvement varies widely by product category and by stage in the buying process. Buying roles change with evolving consumer lifestyles. Such changes suggest that marketers who've typically sold their products to only women or only men are now courting the opposite sex. For example, with research revealing that women now account for nearly half of all hardware store purchases, home improvement retailers such as Home 63
Depot and Builders Square have turned what once were intimidating warehouses into female friendly retail outlets. The new Builders Square II outlets feature decorator design centers at the front of the store. To attract more women, Builders Square runs ads targeting women in Home, House Beautiful, Woman's Day, and Better Homes and Gardens. Home Depot even offers bridal registries. Similarly, after research indicated that women now make up 34 percent of the luxury car market, Cadillac has started paying more attention to this important segment. Male car designers at Cadillac are going about their work with paper clips on their fingers to simulate what it feels like to operate buttons, knobs, and other interior features with longer fingernails. The Cadillac Catera features an air-conditioned glove box to preserve such items as lipstick and film. Under the hood, yellow markings highlight where fluid fills go. Children may also have a strong influence on family buying decisions. For example, it ran ads to woo these "back-seat consumers" in Sports Illustrated for Kids, which attracts mostly 8- to 14- year-old boys. "We're kidding ourselves when we think kids aren't aware of brands," says Venture's brand manager, adding that even she was surprised at how often parents told her that kids played a tie-breaking role in deciding which car to buy. In the case of expensive products and services, husbands and wives often make joint decisions. iii. Roles and Status: A person belongs to many groups family, clubs, organizations. The person's position in each group can be defined in terms of both role and status. A role consists of the activities people are expected to perform according to the persons around them.
64
C Personal Factors A buyer's decisions also are influenced by personal characteristics such as the buyer's age and lifecycle stage, occupation, economic situation, lifestyle, and personality and self-concept. i.
Age and Life-Cycle Stage: People change the goods and services they
buy over their lifetimes. Tastes in food, clothes, furniture, and recreation are often age related. Buying is also shaped by the stage of the family life cycle, the stages through which families might pass as they mature over time. Marketers often define their target markets in terms of life-cycle stage and develop appropriate products and marketing plans for each stage. Traditional family life-cycle stages include young singles and married couples with children. ii.
Occupation: A person's occupation affects the goods and services
bought. Blue-collar workers tend to buy more rugged work clothes, whereas white-collar workers buy more business suits. Marketers try to identify the occupational groups that have an above-average interest in their products and services. A company can even specialize in making products needed by a given occupational group. Thus, computer software companies will design different products for brand managers, accountants, engineers, lawyers, and doctors. iii. Economic Situation: A person's economic situation will affect product choice. Marketers of income-sensitive goods watch trends in personal income, savings, and interest rates. If economic indicators point to a recession, marketers can take steps to redesign, reposition, and reprice their products closely. iii.
Lifestyle: People coming from the same subculture, social class, and
occupation may have quite different lifestyles. Life style is a person's pattern of living as expressed in his or her psychographics. It involves measuring consumers' major AIO dimensions—activities (work,
65
hobbies, shopping, sports, social events), interests (food, fashion, family, recreation), and opinions (about themselves, social issues, business, products). Lifestyle captures something more than the person's social class or personality. It profiles a person's whole pattern of acting and interacting in the world. Several research firms have developed lifestyle classifications. It divides consumers into eight groups based on two major dimensions: self-orientation and resources. Self-orientation groups include principle-oriented consumers who buy based on their views of the world; status-oriented buyers who base their purchases on the actions and opinions of others; and action-oriented buyers who are driven by their desire for activity, variety, and risk taking. Consumers within each orientation are further classified into those with abundant resources and those with minimal resources, depending on whether they have high or low levels of income, education, health, self-confidence, energy, and other factors. Consumers with either very high or very low levels of resources are classified without regard to their self-orientations (actualizers, strugglers). Actualizers are people with so
many resources that they can indulge in any or
all self-orientations. In contrast, strugglers are people with too few resources to be included in any consumer orientation. iv.
Personality and Self-Concept: Each person's distinct personality
influences his or her buying behavior. Personality refers to the unique psychological characteristics that lead to relatively consistent and lasting responses to one's own environment. Personality is usually described in terms of
traits
such
as
self-confidence,
dominance,
sociability,
autonomy,
defensiveness, adaptability, and aggressiveness. Personality can be useful in analyzing consumer behavior for certain product or brand choices. For example, coffee marketers have discovered that heavy coffee drinkers tend to be high
66
on sociability. Thus, to attract customers, Starbucks and other coffeehouses create environments in which people can relax and socialize over a cup of steaming coffee. Many marketers use a concept related to personality, a person's self-concept (also called self-image). The basic self-concept premise is that people's possessions contribute to and reflect their identities; that is, "we are what we have." Thus, in order to understand consumer behavior, the marketer must first understand the relationship between consumer selfconcept and possessions. For example, the founder and chief executive of Barnes and Noble, the nation's leading bookseller, notes that people buy books to support their self-images: D Psychological Factors A person's buying choices are further influenced by four major psychological factors: motivation, perception, learning, and beliefs and attitudes. i.
Motivation: A person has many needs at any given time. Some are
biological, arising from states of tension such as hunger, thirst, or discomfort. Others are psychological, arising from the need for recognition, esteem, or belonging. Most of these needs will not be strong enough to motivate the person to act at a given point in time. A need becomes a motive when it is aroused to a sufficient level of intensity. A motive (or drive) is a need that is sufficiently pressing to direct the person to seek satisfaction. Psychologists have developed theories of human motivation. Two of the most popular—the theories of Sigmund Freud and Abraham Maslow—have quite different meanings for consumer analysis and marketing. ii.
Maslow's theory of motivation: Abraham Maslow sought to explain why
people are driven by particular needs at particular times. Why does one person spend much time and energy on personal safety and
67
another on gaining the esteem of others? Maslow's answer is that human needs are arranged in a hierarchy, from the most pressing to the least pressing. Maslow's hierarchy of needs is shown in Figure. In order of importance, they are physiological needs, safety needs, social needs, esteem needs, and selfactualization needs. A person tries to satisfy the most important need first. When that need is satisfied, it will stop being a motivator and the person will then try to satisfy the next most important need. For example, starving people (physiological need) will not take an interest in the latest happenings in the art world (self-actualization needs), nor in how they are seen or esteemed by others (social or esteem needs), nor even in whether they are breathing clean air (safety needs). But as each important need is satisfied, the next most important need will come into play. iii.
Perception: A motivated person is ready to act. How the person acts is
influenced by his or her own perception of the situation. All of us learn by the flow of information through our five senses: sight, hearing, smell, touch, and taste. However, each of us receives, organizes, and interprets this sensory information in an individual way. Perception is the process by which people select, organize, and interpret information to form a meaningful picture of the world. People can form different perceptions of the same stimulus because of three perceptual processes: selective attention, selective distortion, and selective retention. People are exposed to a great amount of stimuli every day. For example, the average person may be exposed to more than 1,500 ads in a single day. It is impossible for a person to pay attention to all these stimuli. Selective attention—the tendency for people to screen out most of the information to which they are exposed—means that marketers have to work especially hard to attract the consumer's attention. Even noted stimuli do not always come across in the intended way. Each person fits incoming
68
information into an existing mind-set. Selective distortion describes the tendency of people to interpret information in a way that will support what they already believe. Selective distortion means that marketers must try to understand the mind-sets of consumers and how these will affect interpretations of advertising and sales information. iv.
Learning: When people act, they learn. Learning describes changes in an
individual's behavior arising from experience. Learning theorists say that most human behavior is learned. Learning occurs through the interplay of drives, stimuli, cues, responses, and reinforcement. v.
Beliefs and attitudes: Through doing and learning, people acquire beliefs and
attitudes. These, in turn, influence their buying behavior. A belief is a descriptive thought that a person has about something. Buying behavior differs greatly for a tube of toothpaste, a tennis racket, an expensive camera, and a new car. More complex decisions usually involve more buying participants and more buyer deliberation. Figure shows types of consumer buying behavior based on the degree of buyer involvement and the degree of differences among brands. 2.6.3. Types Buying Behaviours
Complex buying behavior: Consumers undertake complex buying behavior
when they are highly involved in a purchase and perceive significant differences among brands. Consumers may be highly involved when the product is expensive, risky, purchased infrequently, and highly self-expressive. Typically, the consumer has much to learn about the product category. For example, a personal computer buyer may not know what attributes to consider. Many product features carry no real meaning: a "Pentium Pro chip," "super VGA resolution," or "megs of RAM." This buyer will pass through a learning process, first developing beliefs about the product, then attitudes, and then making a
69
thoughtful purchase choice. Marketers of high-involvement products must understand the information-gathering and evaluation behavior of highinvolvement consumers. They need to help buyers learn about product-class attributes and their relative importance, and about what the company's brand offers on the important attributes. Marketers need to differentiate their brand's features, perhaps by describing the brand's benefits using print media with long copy. They must motivate store salespeople and the buyer's acquaintances to influence the final brand choice.
Dissonance-reducing buying behaviour: Dissonance reducing buying
behavior occurs when consumers are highly involved with an expensive, infrequent, or risky purchase, but see little difference among brands. For example, consumers buying carpeting may face a high-involvement decision because carpeting is expensive and self-expressive. Yet buyers may consider most carpet brands in a given price range to be the same. In this case, because perceived brand differences are not large, buyers may shop around to learn what is available, but buy relatively quickly. They may respond primarily to a good price or to purchase convenience. After the purchase, consumers might experience post purchase dissonance (after-sale discomfort) when they notice certain disadvantages of the purchased carpet brand or hear favorable things about brands not purchased. To counter such dissonance, the marketer's after-sale communications should provide evidence and support to help consumers feel good about their brand choices.
Habitual buying behaviour: Habitual buying behavior occurs under
conditions of low consumer involvement and little significant brand difference. For example, take salt. Consumers have little involvement in this product category—they simply go to the store and reach for a brand. If they keep reaching for the same brand, it is out of habit rather than strong brand loyalty. Consumers appear to have low involvement
70
with most low-cost, frequently purchased products. In such cases, consumer behavior does not pass through the usual belief-attitude-behavior sequence. Consumers do not search extensively for information about the brands, evaluate brand characteristics, and make weighty decisions about which brands to buy. Instead, they passively receive information as they watch television or read magazines. Ad repetition creates brand familiarity rather than brand conviction. Consumers do not form strong attitudes toward a brand; they select the brand because it is familiar. Because they are not highly involved with the product, consumers may not evaluate the choice even after purchase. Thus, the buying process involves
brand beliefs formed by passive
learning, followed by purchase behavior, which may or may not be followed by evaluation. Because buyers are not highly committed to any brands, marketers of low-involvement products with few brand differences often use price and sales promotions to stimulate product trial. In advertising for a lowinvolvement product, ad copy should stress only a few key points. Visual symbols and imagery are important because they can be remembered easily and associated with the brand. Ad campaigns should include high repetition of short-duration messages. Television is usually more effective than print media because it is a low-involvement medium suitable for passive learning. Advertising planning should be based on classical conditioning theory, in which buyers learn to identify a certain product by a symbol repeatedly attached to it. Marketers can try to convert low-involvement products into higher-involvement ones by linking them to some involving issue. Procter and Gamble does this when it links Crest toothpaste to avoiding cavities. At best, these strategies can raise consumer involvement from a low to a moderate level. However, they are not likely to propel the consumer into highly involved buying behavior.
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Variety-seeking
Buying
Behavior:
Consumers
undertake
variety
seeking buying behavior in situations characterized by low consumer involvement but significant perceived brand differences. In such cases, consumers often do a lot of brand switching. For example, when buying cookies, a consumer may hold some beliefs, choose a cookie brand without much evaluation, then evaluate that brand during consumption. But the next time, the consumer might pick another brand out of boredom or simply to try something different. Brand switching occurs for the sake of variety rather than because of dissatisfaction. In such product categories, the marketing strategy may differ for the market leader and minor brands. The market leader will try to encourage habitual buying behavior by dominating shelf space, keeping shelves fully stocked, and running frequent reminder advertising. Challenger firms will encourage variety seeking by offering lower prices, special deals, coupons, free samples, and advertising that presents reasons for trying something new. 2.6.4 Buyer Decision Process Now that we have looked at the influences that affect buyers, we are ready to look at how consumers make buying decisions. Figure below shows that the buyer decision process consists of five stages: need recognition, information search, and evaluation of alternatives, purchase decision, and post purchase behavior. Clearly, the buying process starts long before actual purchase and continues long after. Marketers need to focus on the entire buying process rather than on just the purchase decision. The figure implies that consumers pass through all five stages with every purchase. But in more routine purchases, consumers often skip or reverse some of these stages. A woman buying her regular brand of
72
toothpaste would recognize the need and go right to the purchase decision, skipping information search and evaluation. • Need recognition: The buying process starts with need recognition, the buyer recognizes a problem or need. The buyer senses a difference between his or her actual state and some desired state. The need can be triggered by internal stimuli when one of the person's normal needs, hunger, thirst raises to a level high enough to become a drive. A need can also be triggered by external stimuli. At this stage, the
marketer should research consumers to find out
what kinds of needs or problems arise, what brought them about, and how they led the consumer to this particular product. By gathering such information, the marketer can identify the factors that most often trigger interest in the product and can develop marketing programs that involve these factors. • Information search: An aroused consumer may or may not search for more information. If the consumer's drive is strong and a satisfying product is near at hand, the consumer is likely to buy it then. If not, the consumer may store the need in memory or undertake an information search related to the need. At one level, the consumer may simply enter heightened attention. The consumer can obtain information from any of several sources. These include personal sources
(family,
friends,
neighbors,
acquaintances),
commercial
sources
(advertising, salespeople, dealers, packaging, displays, Web sites), public sources (mass media, consumer-rating organizations), and experiential sources (handling, examining, using the product). The relative influence of these information sources varies with the product and the buyer. Generally, the consumer receives the most information about a product from commercial sources—those controlled by the marketer. The most effective sources, however, tend to be personal. Commercial sources normally inform the buyer, but personal sources legitimize or evaluate products for the buyer.
73
People often ask others, friends, relatives, acquaintances, professionals for recommendations concerning a product or service. Thus, companies have a strong interest in building such word-of mouth sources. These sources have two chief advantages. First, they are convincing: Word of mouth is the only promotion method that is of consumers, by consumers, and for consumers. Having loyal, satisfied customers that brag about doing business with you is the dream of every business owner. Not only are satisfied customers repeating buyers, but they are also walking, talking billboards for your business. Second, the costs are low. Keeping in touch with satisfied customers and turning them into word-of-mouth advocates costs the business relatively little. As more information is obtained, the consumer's awareness and knowledge of the available brands and features increases. The information also helped her drop certain brands from consideration. A company must design its marketing mix to make prospects aware of and knowledgeable about its brand. It should carefully identify consumers' sources of information and the importance of each source. Consumers should be asked how they first heard about the brand, what information they received, and what importance they placed on different information sources. • Evaluation of alternatives: We have seen how the consumer uses information to arrive at a set of final brand choices. How does the consumer choose among the alternative brands? The marketer needs to know about alternatives evaluation—that is, how the consumer processes information to arrive at brand choices. Unfortunately, consumers do not use a simple and single evaluation process in all buying situations. Instead, several evaluation processes are at work. The consumer arrives at attitudes toward different brands through some evaluation
procedure.
How
consumers
go
about
evaluating
purchase
alternatives depends on the individual consumer and the specific buying situation. In some cases, consumers use careful calculations and logical 74
thinking. At other times, the same consumers do little or no evaluating; instead they buy on impulse and rely on intuition. Sometimes consumers make buying decisions on their own; sometimes they turn to friends, consumer guides, or salespeople for buying advice. Marketers should study buyers to find out how they actually evaluate brand alternatives. If they know what evaluative processes go on, marketers can take steps to influence the buyer's decision. • Purchase Decision: In the evaluation stage, the consumer ranks brands and forms purchase intentions. Generally, the consumer's purchase decision will be to buy the most preferred brand, but two factors can come between the purchase intention and the purchase decision. The first factor is the attitudes of others. The second factor is unexpected situational factors. The consumer may form a purchase intention based on
factors such as expected income,
expected price, and expected product benefits. However, unexpected events may change the purchase intention. Thus, preferences and even purchase intentions do not always result in actual purchase choice. • Post purchase behavior: The marketer's job does not end when the product is bought. After purchasing the product, the consumer will be satisfied or dissatisfied and will engage in post purchase behavior of interest to the marketer. What determines whether the buyer is satisfied or dissatisfied with a purchase? The answer lies in the relationship between the consumer's expectations and the product's perceived performance. If the product falls short of expectations, the consumer is disappointed; if it meets expectations, the consumer is satisfied; if it exceeds expectations, the consumer is delighted. The larger the gap between expectations and performance, the greater the consumer's dissatisfaction. This suggests that sellers should make product claims that faithfully represent the product's performance so that buyers are satisfied. Some sellers might even understate performance levels to boost consumer satisfaction with the product. For example, Boeing's salespeople tend to be conservative when they estimate the potential benefits of their aircraft. 75
They almost always underestimate fuel efficiency, they promise a five percent savings that turns out to be eight percent. Customers are delighted with betterthan-expected performance; they buy again and tell other potential customers that Boeing lives up to its promises. Almost all major purchases result in cognitive dissonance, or discomfort caused by post purchase conflict. After the purchase, consumers are satisfied with the benefits of the chosen brand and are glad to avoid the drawbacks of the brands not bought. However, every purchase involves compromise. Consumers feel uneasy about acquiring the drawbacks of the chosen brand and about losing the benefits of the brands not purchased. Thus, consumers feel at least some post purchase dissonance for every purchase. Why is it so important to satisfy the customer, such satisfaction is important because a company's sales come from two basic groups; new customers and retained customers. It usually costs more to attract new customers than to retain current ones, and the best way to retain current customers is to keep them satisfied. Customer satisfaction is a key to making lasting connections with consumers and growing consumers and reaping their customer lifetime value. Satisfied customers buy a product again, talk favorably to others about the product, pay less attention to competing brands and advertising, and buy other products from the company. Many marketers go beyond merely meeting the expectations of customers—they aim to delight the customer. A delighted customer is even more likely to purchase again and to talk favorably about the product and company. A dissatisfied consumer responds differently. Whereas, on average, a satisfied customer tells 3 people about a good product experience, a dissatisfied customer gripes to 11 people. In fact, one study showed that 13 percent of the people who had a problem with an organization complained about the company to more than 20 people. Clearly, bad word of mouth travels farther and faster
76
than good word of mouth and can quickly damage consumer attitudes about a company and its products. Therefore, a company would be wise to measure customer satisfaction regularly. It cannot simply rely on dissatisfied customers to volunteer their complaints when they are dissatisfied. Some 96 percent of unhappy customers never tell the company about their problem. Companies should set up systems that encourage customers to complain. In this way, the company can learn how well it is doing and how it can improve. The 3M Company claims that over two-thirds of its new-product ideas come from listening to customer complaints. But listening is not enough—the company also must respond constructively to the complaints it receives. 2.6.5 The Buyer Decision Process for New Products We have looked at the stages buyers go through in trying to satisfy a need. Buyers may pass quickly or slowly through these stages, and some of the stages may even be reversed. Much depends on the nature of the buyer, the product, and the buying situation. We now look at how buyers approach the purchase of new products. A new product is a good, service, or idea that is perceived by some potential customers as new. It may have been around for a while, but our interest is in how consumers learn about products for the first time and make decisions on whether to adopt them. We define the adoption process as "the mental process through which an individual passes from first learning about an innovation to final adoption, and adoption as the decision by an individual to become a regular user of the product. Consumers go through five stages in the process of adopting a new product: • Awareness: The consumer becomes aware of the new product, but lacks information about it. • Interest: The consumer seeks information about the new product. 77
• Evaluation: The consumer considers whether trying the new product makes sense. • Trial: The consumer tries the new product on a small scale to improve his or her estimate of its value. • Adoption: The consumer decides to make full and regular use of the new product. This model suggests that the new-product marketer should think about how to help consumers move through these stages. A manufacturer of large-screen televisions may discover that many consumers in the interest stage do not move to the trial stage because of uncertainty and the large investment. If these same consumers were willing to use a large-screen television on a trial basis for a small fee, the manufacturer should consider offering a trial-use plan with an option to buy. 2.6.6 Marketing Strategy Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sale and achieve a sustainable competitive advantage. It is composed of several interrelated elements. The first and most important is market selection: choosing the markets to be served. Product planning includes the specific products the company sells, makeup of the product line, and the design of individual offerings in the line. All marketing strategy is built on STP: Segmentation, Targeting, and Positioning. A company discovers different needs and groups in the marketplace, targets those needs and groups that it can satisfy in a superior way, and then positions its offering so that the target market recognizes the company‘s distinctive offering and image. Marketing strategies serve as the fundamental underpinning of marketing objectives. Plans and objectives are generally tested for measurable results. Commonly marketing strategies are developed as multi-year plans, with a tactical plan detailing
78
specific actions to be accomplished in the current year. Time horizons covered by the marketing plan vary by company, by industry, and by nation, however, time horizons are becoming shorter as the speed of change in the environment increases. Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned. Marketing strategy involves careful scanning of the internal and external environment. The internal environmental factors include
the
constraints.
marketing External
mix,
plus
environmental
performance factors
analysis
include
and
strategic
customer
analysis,
competitor analysis, target market analysis, as well as evaluation of any elements of the technological, economic, cultural or political and legal environment likely to impact the company. A key component of marketing strategy is often to keep marketing in line with a company‘s overarching mission statement. Besides SWOT analysis, portfolio analysis such as the GE/McKinsey or COPE analysis can be performed to determine the strategic focus. Once a thorough environmental scan is complete, a strategic plan can be constructed to identify business alternatives, establish challenging goals, determine the optimal marketing mix to attain these goals, and detail implementation. A final step in developing a marketing strategy is to create a plan to monitor progress and set of contingencies if problems arise in the implementation of the plan. 2.7 The Nigerian Telecommunication Industry The Nigerian Telecommunication industry has experienced exponential growth in the last ten years, going from active subscriber lines of 400,000 and teledensity of 0.04% to active subscriber lines of over 90 million and teledensity of 64.88% as of July 2011(Juwah, 2011). The Country telecom market has been described as one of the fastest growing telecommunication markets in the world. The driving factor is government‘s robust policy which fully liberalized the sector about a decade ago when the story of progress and development in the sector really started to unfold. The evolution in the Nigeria 79
telecommunication
industry
can
be
divided
into
two
phases.
The first phase in this evolution was the period covering over 100 years, from the colonial era through our political independence in 1960, to the year 2000. From1886 when the first telegraphic submarine cable was laid by the British firm, Cable and Wireless Ltd to independence in 1960, Nigeria had 18,724 fixed telephone lines. Between 1960 and year 2000, the active subscriber base grew to 400,000 fixed lines for the then estimated 120 million of population. This long period was characterized by several restrictions to the sector, and particularly by monopolistic approach to telecommunications businesses as was globally dictated then. Although liberalization began to manifest in the early 80s, the 90s, was still not as eventful. The most eventful period is the second phase of this historical evolution of the Nigerian telecommunications sector between 2000 and 2011. The underlining factors that pushed this phase up the ladder of history include a strong desire on the part of a democratic government to liberalize the sector, and the subsequent enthronement of a strong independent regulatory regime sustained by professionals with clear vision and purpose about global trends in telecommunications evolution and its business potentials, and how to translate them for services delivery within our geographical entity. It is noted here that although the deregulation of the sector began in 1993 when the establishment of the Nigerian Communications Commission as prescribed by Decree 75 of 1992 came into effect, some segments of the market were still restricted to the monopoly incumbent operator until the operator came under the oversight of the telecom regulator in 2001 when it was formally licensed as an operator. 2.7.1 The Revolutionary Years The
decade
from
2000
till
date,
have
been
described
as
Nigeria‘s
telecommunication revolution, given the quantum of growth in the diverse
80
fields of telecommunications services delivery, and regulatory advancements. At the beginning of that decade, the new democratic government encouraged the evolution of a more focused National Telecommunications Policy, in which the private sector played very significant roles in its articulation. This policy enabled the telecom regulator to reinvigorate the regulatory framework in a way that boosted the confidence of investors. The result was that the competition which ensued as the outcome of the major auctioning of digital mobile licenses in Nigeria in 2001, spurred many activities in the sector. Stories were told about some companies targeting about 200,000 lines per annum, ended up with up to Five Million subscribers. Companies who were capable of rolling out basic services, attracted millions of Nigerians who had hitherto been starved of basic telecommunications services for several years. With the telecom operators rolling out services in an environment where individuals and corporate organizations have been yearning for services, resulted in the revolution as the nation‘s active subscription and teledensity rose dramatically. With only about 400,000 lines in 2001, with a dismal 0.4 teledensity, the number of active lines by end of January 2011 stood at 89.8 Million lines, resulting in an impressive teledensity of 64.16. 2.8 GSM Operators in Nigeria Prior to the advent of GSM in 2001, phone penetration was low to the verge of negligible. Nitel had the monopoly. But all that changed with the GSM revolution brought by the licensing of Econet (now Airtel), Mtel, MTN and the later entry of Glo and Etisalat into the industry (Williams, 2010). MTN (Mobile Telephone Network) MTN Nigeria is partly owned by MTN South Africa, which controls 76% of the former shares with the residual shares owned by private Nigerian investors and institutional investors. The company was one of the three winners of the auctioned GSM licenses and obtained it license at a cost of US$285Million in 81
1999. MTN was the first to commence commercial rollout in August 2001 and the company along with other licensees in the sub sector, enjoyed the five years exclusive period granted them by the NCC. This exclusivity ended on February 2006. It is the undisputed market leader by coverage, revenue and subscriber base. This is easily attributable to MTN‘s marketing savvy. Effective differentiation and positioning are the biggest determinants of marketing success. And MTN is a master of the craft, exemplified by its product and service actually owning values — real and perceived, rational and emotional in the consumers‘ minds. And their possession of these values and meaning in the consumers‘ minds (beyond primacy of product) has enabled them to successfully differentiate themselves. Coverage: That was the original competitive advantage of MTN. In the early years of GSM in Nigeria, while its main competitor– Zain (then Econet) was mired in management crisis, MTN was building capacity and adding town after town under its coverage. After which it started covering all the major highways in the country. And having achieved broader coverage than its competitors, MTN quickly reflected this in its positioning statement and changed its tagline from the best connection (a generic and daft tagline) to everywhere you go. It then followed logically that if you want to be able to use your phone wherever you may be in the country, you have only one choice: get connected to MTN. Reliability: This message is subtly embedded in the company communication message. It is really doubtful whether MTN has a more quality network than its competitors, but that is not the issue. The issue is that MTN was smart enough to take advantage of an unexploited positioning opportunity. The result is that MTN owns the word reliability in the customers mind. Leadership: This is largely a quantitative issue. With over 40% of the market, the leadership position is a given. And coupled with its association with coverage and reliability, MTN‘s leadership is unquestionable. 82
MTN‘s charges are about the highest in the market, yet the company still adds more new subscribers than its competitors year after year. This is just one of the benefits MTN is enjoying from its supremely high brand equity. However for MTN to continue to enjoy its position, it must become even better in its marketing. Leaders lose when they make mistake in their marketing strategy. MTN‘s market success was helped by the mediocrity of its competitors‘ marketing. And it would be naïve of MTN to expect a continuation of this state of affairs. In fact, the entrant of Etisalat into the Nigerian telecoms market is already changing the marketing landscape in the industry. And most especially, MTN needs to know that as much as your brand equity gives you price premium, in an industry like telecoms, it is only for a time. This is because as the number of offering within a category multiplies, the differences between them start to become increasingly trivial and loyalty to the best value replaces any previous loyalty to a brand. AIRTEL There are only a few brand mis-management graver than that of Zain Nigeria. On august 5, 2001, Airtel (Then Econet) became the first telecoms operator to launch commercial GSM services in Nigeria. In its first two years of operation in Nigeria, the company was running neck to neck with MTN for the leadership position in the industry. But a deluge of management crisis led to its loss of momentum. This situation was further compounded by the perennial identity change of the company five times in the last eight years. Econet, Vmobile, Celtel, Zain and Airtel. All these factors make the job of managing the brand a challenging one. Unfortunately, the company‘s marketing has been average at best. Positioning: what does Zain stand for? What associative cue does the name Zain evoke? To me the answer is confusion. This sad state of affairs is not only
83
the result of perennial identity change; it also results from poor product management strategy. Zain has so many products in the market that it is very difficult for a prospective subscriber to know the one that is most suitable for him. The way to build a strong brand is having a narrow focus and owning a word in the mind. Because Zain lacks any meaningful differentiation, it will always realize meager results from its marketing. The result has been that Zain has had to compete on price. Now, if being the low price provider is Zain‘s value proposition, then the smart thing for Zain is to convey it in all its messages and in everything it does. This, Zain has failed to do. It is not all gloom for the brand. Zain needs to first take stock of its marketing asset and devise ways to get the optimum result from them. For instance, survey after survey has shown that Zain is perceived as a most customer focused company. But Zain seems oblivious of this great marketing asset that if properly utilized can pay huge dividend to its brand. This, coupled with its low price could form the nucleus of Zain‘s positioning strategy. And a brand perceived as customer-centric will always enjoy market success. When word circulated in June last year that Zain Nigeria (now Airtel) was on the verge of another name change, the telecommunications network instantly became the butt of mild jokes. It was the telecom sector‘s chameleon (known for changing its colours often), many observers teased. It was the most ‗mobile‘ of the mobile telephone operators, some other commentators remarked. These comments were not unexpected; the operator had shed its name five times since starting out in 2001 as Econet Wireless, Nigeria‘s first ever GSM operator, and ending up (for now) last November as Airtel Nigeria, its sixth name, after India‘s Bharti Airtel acquired controlling stakes in the network. For telephone users, it has not been a mere name change: with it has emerged a new lease of life. Airtel was to change the way Nigerians communicated by crashing call tariffs to record levels. With the introduction of its 2Good tariff plan, Airtel is enabling subscribers the benefit of calling any network in Nigeria 84
and the United States of America at the rate of 20 kobo per second (N12 per minute). This is, however, premised on the basis that the subscriber‘s first minute of call per day is billed at 60 kobo per second. Thereafter, for the rest of the day, all calls are at 20 kobo per second. Subscribers also get 20 free monthly on-net short messages. Jolted by the carrot Airtel dangled to phone users, rival operators especially MTN and Globacom responded, though not in equal measure. MTN rolled out a similar tariff plan that allows subscribers to call at the same 20 kobo per second rate as Airtel‘s, but to only five registered numbers – three MTN numbers, one other network and an international number. Before Airtel struck, new entrant Etisalat had been offering subscribers a call tariff that was the cheapest. Branded Easylife, the package allows those on the network to call any network at a slightly higher 25 kobo per second, though with a daily access charge of N20. Airtel has reaped big too – what with a quantum leap in its subscriber base and increased call rates out of its network. Although pioneer of the GSM operations in Nigeria, it was slipping to third on volume of business, behind MTN, the clear leader and Glo, which is a national carrier. Relatively new entrant, Etisalat, was creeping up on Airtel as subscribers migrated from high to low rates. Bharti Airtel realised an aggressive marketing strategy was urgently necessary if its $10.7bn investment would not be a waste. Airtel Chief Executive Officer in charge of International Operations, Manoj Kohli, said: ―We will not go for tariff cut. We will go for a long-term affordability strategy which is good for the customer and for the company.‖ Bharti is replicating in Nigeria the strategy that has won it wide patronage in India.
85
GLO (GLOBACOM) Globacom won the license for second National operator (SNO) in the third quarter of 2002. The SNO was given a level playing field with the existing National carrier, NITEL and as a result has access to all the licenses NITEL already has. Since it launched its services on August 29, 2003 Glo mobile has been at the forefront of revolutionary changes in the GSM sector in Nigeria, offering both prepaid and contract services along with a range of value added services. If there is any company whose entry into the Nigerian telecom industry was greeted with great anticipation and expectations by the public, it was Glo. This was due to: 1. The huge publicity that accompanied the story of how the company won, lost and fought to re-win operating license from NCC 2. The company came at a time Nigerians were becoming increasingly disgruntled by the high cost of GSM service. And Glo did not disappoint. At least initially, it won wide market acceptance and goodwill by launching its service on per seconds billing (i.e. the prevailing practice then was per minute billing whereby even if your call terminates after one second, you still pay for the full minute). It also priced its sim cards cheaper than what was available in the market thereby ensuring that more people had access to its service. And it paid off. Despite being a late entrant into the market, in a little over three years, GLO captured about 25% of the Nigerian GSM market. Unfortunately, the company marketing since then has been mediocre and wasteful. Effective marketing involves much more than overpriced ads and flashy celebrity display. If there is any marketing practice Glo is known for, it is her unprecedented use of celebrity endorsement. But celebrity endorsement as a core brand building strategy is simply stupid (except in some industries like lifestyle, cosmetics and fashion). Another marketing practice associated with Glo is sales promotion. In fact, it is an
86
inside joke in the Nigerian marketing community that Glo doesn‘t do marketing—it does only promotion. The problem is, you don‘t build a brand by sales promotion—you only build temporary sales. Glo probably has more marketing assets (at least potentially) than its competitors. Exploiting just one or two of this is enough to leave competitors gasping for breath. For example: 1. Glo is the only Nigerian owned GSM brand– this means its profits are kept in Nigeria…..(though this might not be the best positioning strategy for a company with international aspirations) 2. Glo is the first single company to build a $800 million high capacity fibre optic cable—this huge investment shows GLO‘s belief in and commitment to Nigeria and its resolve to provide its subscribers the highest quality service. In the other words, Glo has the most claims to the word quality in the customers mind. The potency of these assets is that they could be used to connect with the market on emotional level. All that is needed is a good positioning strategy. But that for now is what is lacking in Globacom. ETISALAT Etisalat came into Nigeria in 2008 and has coverage in almost all part of the country. The company was established on August 30, 1976 in United Arab Emirates (UAE). Had Etisalat entered the Nigerian telecoms market earlier, it probably would have attained market leadership by now. The reason for this is not farfetched: Etisalat is simply the most creative marketer in the Nigerian telecoms industry. Etisalat‘s market entry strategy was the most well thought out I have seen in Nigeria. First, the company recognized it was coming into a developed market which means it would have to gain customers from the existing providers. And to overcome this uphill task, Etisalat started by first identifying the singular 87
reason people find it difficult to change their GSM service provider even when they are dis-satisfied with the service they are getting—which is that changing provider will mean changing phone number, (i.e. there is no sim convergence in Nigeria ) a daunting and inconvenient prospect. This Etisalat addressed by asking people to choose any phone number they want and people did. Choosing numbers that are similar to their existing numbers, as a result, Etisalat gained hundreds of thousands of subscribers even before it launched its services. Segmentation and targeting: Here Etisalat performed better than its competitors. For example, it effectively targeted the young population with Easy clique, a product that resonates well with that market segment. Promotion: Etisalat has become the trend setter in the industry as far as meaningful sales promotion is concerned. In fact, its competitors have been reduced to copying its promotions. But, despite all the above Etisalat still needs to improve its marketing. What the company needs most at this stage is a deepening of its subscriber base. As much as brand building is vital, at least equal if not more attention should be devoted to sales building marketing. 2.9 Understanding the Mobile Phone Market Drivers The mobile phone phenomenon is unique in the histories of both the telecommunication and consumer electronics markets. In less than a decade, people have adopted mobile phones on a massive scale, as a result of which yearly global handset production will probably exceed a record of 450 million units in 2003(Pierre, 2004). This is about three times the size of the television or PC markets. Growth has been fuelled by the spectacular evolution of mobile phone technologies, both in terms of performance and miniaturization. As a result, unlike many other appliances, users change their mobile phones on
88
average every two years. Consequently, replacement handsets today represent about 80% of all mobile phone purchases. Currently, several families of standards coexist: Global System for Mobile communication (GSM), Code Division Multiple Access (CDMA), Time Division Multiple Access (TDMA) and Personal Digital Cellular (PDC). There is not yet a ―universal mobile phone‖. In addition, each standard offers an endless range of features.
The
difficulties
are
compounded
by
the
fact
that
different
manufacturers and mobile operators do not always refer to features and services by the same name, although they may well appear similar to the users. Therefore, trying to describe the market using a purely technical approach is not only complicated, but also irrelevant when it comes to understanding its drivers and inhibitors. Explaining user behaviour has become a key issue for all mobile phone players: manufacturers, operators and service providers. Most users are now experienced, having used a mobile phone for an average of 31 months. A consumer-based marketing segmentation is becoming more appropriate in the mobile phone market. 2.9.1 Usage Benefits versus Technical Performance Recent
years
have
proved
that
in
the
mobile
communication
world
technological innovation can either leave users totally disinterested, or lead to amazing market success. Two cases that epitomize these extremes are the failure of the Wireless Application Protocol (WAP) mobile Internet service and the boom in Short Message Service (SMS) text messages. In 1999, the major players involved in the GSM market were preparing for a predicted ―mobile revolution‖ that would bring the Internet to every one‘s pocket. The promise was strong. Users were offered the ability to browse the Internet from their mobile phones anywhere at any time. Manufacturers and operators made enormous efforts to implement this new feature, which resulted from extensive standardization work in the WAP Forum. It required phones to implement new ergonomic features, such as soft keys, larger screens and specific scrolling 89
systems. At that time, mobile operators were enthused by NTT DoCoMo‘s success with I-mode, the Japanese mobile Internet service, and therefore demanded that manufacturers provide a wide range of products with WAP capabilities. Almost everything was done to ensure that the technology was widely available, easy to use and with an understandable billing system. Nevertheless, in 2002, some three years after the introduction of the first WAP phone, only 5% of GSM users had ever tried WAP, this is because, first, from a billing perspective, users were used to accessing the Internet for nothing using their PCs, whereas WAP was quite expensive. Second, the perceived quality and quantity of information that could be displayed on a small black and white screen were poor compared with a computer screen. Third, the success of Imode was built on messaging, which represented (and still does today) more than 40% of usage (see Figure 1). All in all, few consumers were ready to adopt a technology that would have pushed their mobile phone usage outside the personal communication arena. The success of SMS has clearly shown that mobile technologies can create great value if they build on established usage. In December 2002, according to the GSM association some 30 billion SMS messages were sent worldwide, compared with just four billion during the same month three years previously. Today, around 78% of mobile phone users with SMS capable handsets use the service, with each user sending 15 messages per week, on average. SMS combines all the elements for consumer success. Above all it is a simple technology, addressing a simple need: the exchange of 160 character written messages from one mobile phone to another. This feature has been implemented on almost every GSM phone from the beginning, with the result that there is now a very large installed base of SMS-enabled phones. Once the issue of interoperability between operators was resolved in 1999, the market took off. Although operators did not invest heavily to support the marketing launch of SMS, it quickly became their main source of data revenues and a sociological phenomenon, particularly among young people. Today, 97% of younger users (15 to 24 years old) use SMS, each sending 24 90
messages a week. This has been boosted by the use of SMS as a medium for voting in major TV shows. In addition, the billing of SMS has always been easily understood by users who pay a fee for each message sent. These two examples demonstrate that consumers adopt new features primarily because of the usage benefits rather than because of their technological performance. If this is the case, what is the role of technology in the mobile handset market segmentation? 2.9.2 Generalization of Mobile Phones and Market Segmentation Cellular technologies gave birth to the fastest growing consumer market ever. Not surprisingly, the market segmentation has changed at the same pace. At first the problem was simple because mobile phones were rare, expensive and heavy devices exclusively used by wealthy people and international business executives. The market segmentation was then largely based on technology and economics. In 1997, usage exceeded 10% in most Western European countries and, thanks to a number of important technical breakthroughs, manufacturers were able to widen their product ranges and offer consumer handsets at much more affordable prices. This was the start of the consumer market segmentation. The early mobile phone adopters had turned into two very different groups. First the business users, the core target of operators at that time because they represented the most profitable customers, thanks to their extensive usage of voice and a willingness to make more use of mobile data. Second, the ―trendies‖, who tended to consider their mobile phones as a status symbol, and were therefore ready to pay a fortune to get the latest and smallest phone. The bulk of the market was made up of consumers who were purchasing their first mobile phones. At that time, usage and technology had equivalent roles. Early adopters had increased their usage, and consumers were expected to follow more or less the 91
same learning curve driven by the availability of new features. Today the picture is much more complex with mobile phone penetration currently above 70% of the population in Western European countries. Volume sales are now essentially for replacement phones with more features. Handsets have evolved from being merely a technological gadget to being a ―commodity‖ that people carry with them all the time, like their keys or their wallet. In five years, the former three groups expanded to six different types. The differentiation between the user groups now depends on usage complexity and the user‘s personal involvement with his or her phone. Logically, we observe the traditionally opposite attitudes towards technology as in other markets, with ―early adopters‖ (or ―forerunners‖) and ―laggards‖ (or ―uninvolved‖). However, between these extremes are several specific types of behaviour. The main characteristics of each type are: • Uninvolved: Make only limited use of their handsets and are not interested in anything more. They consider a mobile phone merely as a communication tool, and therefore expect it to be easy to use. Usage is restricted to a few calls per month and they own old handsets with limited functionality. Such users are much older than the average. This group is important in Europe. • New life harmony: These users know a lot about mobile phones, but make only limited use of their handsets. For them, mobile phones have become part of everyday life and are no longer fashionable. In their personal values they are looking for an ―active and varied life‖. Although they have a recent handset, they have no interest in new features. They are younger than the average. This group is mainly found in Europe. • Voice as a link: This type of user, who tends to be a ―show-off‖, is focused on the emotional aspects of using a mobile phone. It allows them to share emotions with others, sometimes for no particular reason. Their usage is voice centric. Although curious about new features, they behave as a ―passive
92
followers‖, with new functions not being perceived as a real need. They are older than the average. • Adopters: These are pragmatic users who consider mobile phone as a practical tool. They show a relatively strong personal link with their handset Even though their usage is basic, they make considerable use of their mobiles. They are ready to adopt new features if they meet their needs. • Intense: Such people consider their mobiles as an indispensable link to their relatives. Their handset is above all a communication tool, and they make way above average use of SMS. They are expert users with a strong interest in new functions, and are much younger than the average. This group is more important in Asia. • Forerunners: These are passionate users who expect their mobiles to reflect their personality. They are almost addicted to their mobile phones, and are generally over-equipped with hi-tech devices. Such people use all the handset‘s features and make frequent calls, using their phone for both voice communication and text messaging. Their handset is no longer simply a communication tool, but a multimedia device. They are much younger than the average. This group is more important in Asia. 2.9.3 Different Marketing Messages It is more difficult for mobile phone manufacturers to target the ―in-between‖ types. Users groups, like new life harmony, are emerging from a so-called ―mobile generation‖. For many marketing experts, these young people have been considered as a core target. They are supposed to crave all the forthcoming mobile multimedia applications, such as picture messaging and video streaming. Although such users tend to be young and trendy, with a good knowledge of the possibilities of mobile phones, they are not interested in new functions. This is a sign that arguments like ―buy this because it‘s the latest technology‖ will no longer tempt such users to replace their handsets. In 93
Europe, this group represents nearly 30% of all mobile owners. Should the industry feel threatened by this, probably not. It could simply mean that, now that the market is mature and has reached almost every category of the population;
fewer
people
are
fascinated
by
technological
performance,
particularly the younger generation. They do not express any particular expectations, but are aware of the latest technology developments. Their lack of enthusiasm is largely because of the way in which technology is being sold to them, rather than any rejection of the new services or functions themselves. Such users expect new technologies to naturally adapt to their needs. 2.10 Telecommunication and Economic Development Presently, telecommunication facilities in Nigeria, first established in 1886 by the colonial administration, is undergoing very rapid change and explosive growth and it has been argued that this has economic growth potentials for the economy. Recently, the role of telecommunication infrastructure in enhancing economic growth has been a subject for discourse in the economic literature. Arguments are that the development of a modern nation to its full potential in contemporary
world
can
never
be
attained
without
adequate
telecommunications infrastructure. This implies that the development of telecommunication infrastructure will significantly boost economic growth and development.
In
fact,
information
tools
such
as
telephones,
personal
computers, and the internet are increasingly critical to economic success and personal advancement. All these help to encourage economic growth. For instance, Ndukwe (2004) posited that in today‘s world, modern digital telecommunications networks are as necessary to economic growth and to attracting foreign investment as are programs dedicated to promoting healthcare, electricity, transportation and agriculture. Furthermore, a reliable telecommunications networks can improve the productivity and efficiency of other sectors of the economy and enhance the quality of life generally. Studies have
also
shown
that
there
is
a
positive
relationship
between 94
telecommunication infrastructure development and economic growth. Among these studies are International Telecommunications Union (ITU) (2003), the World Bank (2003), Sridhar and Sridhar (2003 and 2004) and Noll (2000). These studies showed that there is a direct correlation between telephone penetration and economic growth. All these notwithstanding, most of the values
derivable
from
info-communications
development
have
been
concentrated in the developed countries of the world neglecting the developing and less developed countries. For instance, Africa has less than 3% of the world‘s main lines although it accounts for more than 12% of the world‘s population (Ndukwe, 2004) and in Nigeria the telephone density is estimated at around 5 telephones for about 100 people or five per cent. As telephones tend to be concentrated in the cities, access in rural areas is even much more limited and/or non-existent in many parts of the country. This, among others, shows that the potentials of telecommunications infrastructure development in promoting economic growth in Nigeria is being underutilized. 2.10.1 Other Countries Experience The positive relationship between telecommunication and economic growth is evident given the various studies that abound. For instance, Jorgenson (2001) study of the United States showed that investment in information technology (IT) contributed more than one-half of the recent increase in the US economic growth. His study was collaborated by Kraemer and Dedrick (2001) who, using data from 43 countries, upheld the view that the growth in IT investment is correlated with productivity growth. Oulton (2001)study of the United Kingdom showed that in the beginning and later part of 1990s, Information and Communication Technology‘s (ICT) contribution to GDP growth was 0.36% and 0.57% respectively. For Beligium, Kegels, van Overbeke and van Zandweghe, (2002) found that the accumulation of ICT capital has a significant impact on output growth and average labour productivity growth. CEPII (2003) study on 95
France showed that in the early 1990s to the mid 1990s, ICT‘s contribution to capital growth in increased from 0.25 percent to 0.45 percent. In Asia, Seo and Lee, (2000) did a study on Korea and their finding showed a significant contribution from ICT investment while another study by the Australia National Office of Information in 2003, also confirmed that ICT and services have become
pervasive,
transformation.
general-purpose
They
opined
that
enablers given
the
of
economic enabling
and
social
socio-economic
environment, ICT would provide the platforms on which the growth in productivity, innovation and social well-being can be constructed. And using 12 Asia-Pacific countries and data from 1984 to 1990, Kraemer and Dedrick (1994) confirmed that IT investment is positively correlated with gross domestic product (GDP) and productivity growth. Various studies have also found varying degree of ICT‘s contribution to economic growth, especially with respect to developing and developed countries. These studies include Dewan and Kraemer (1998 and 2000), which using data from 36 countries for the period 1987 to 1993, stated that IT capital is positively correlated with labour productivity in developed countries but not in the developing countries; Schreyer (2000) studied the G-7 countries for the period 1990-1996, and found that IT contributed significantly to the productivity growth in all seven countries, but the magnitude differs across countries; Daveri (2000), used 18 OECD and European Union (EU) countries and data from 1992 to 1997 for his own study. He revealed that IT‘s contribution to GDP growth in the 1990s for all countries studied was significant, however, the contribution in EU countries was lesser than in other industrialized countries; Pohjola (2001) studied 39 countries, using data from 1990 to 1995, and observed that IT investment shows 80% gross returns for OECD countries, but developing countries did not experience significant returns. Zhen-Wei Qiang, Pitt and Ayers (2003), in their study summarized that the various results obtained by different countries and regions on the contribution of ICT to the growth stimulate the debate over exactly how much influence ICT has on economic growth. De Long and 96
Summers (1993) reported a strong correlation between investment and productivity growth in developing countries. Sridhar and Sridhar (2005) warned that telecommunication infrastructure is also a little different from other infrastructure, as a determinant of economic growth because of the existence of network externalities, a phenomenon that increases the value of a service with increase in the number of users. As a result, the impact of telecom infrastructure on economic development is more pronounced as compared to other traditional infrastructure. This observable fact has been demonstrated by Kim et. Al (1997). They did an analysis of online service competition and found that there exists a negative network externality, which was fallout from congestion and this affects the subscription level of telecom services at the particular moment although it forces service providers and regulators to accelerate the investment in telecom infrastructure. For Norton (1992), he demonstrated that convergence could occur if developing countries could add to their stock of telephones rapidly, since they reduce transaction costs. Garbade and Silber (1978) found that there was statistical evidence that the two innovations in communication technology (the telegraph and TransAtlantic cable) led to efficient market places worldwide through significant and rapid narrowing on inter-market price differentials. Bayes et. al. (1999) found that that half of all telephone calls involved economic purposes such as discussing employment opportunities, prices of the commodities, land transactions, remittances and other business items. They also reported that the average prices of agricultural commodities were higher in villages with phones than in villages without phones. Leff (1984) argues that firms can also have more physically dispersed activity with increased telecom services (for instance, encourage telecommuting of their employees) and enjoy economy of scale and scope while Sridhar and Sridhar (2003) studies the impact of telecommunication infrastructure and the telecommuting it enables, on spatial dispersion of population, using data from the United States. Their result shows that technology is a complement, not a substitute, for face-to-face interaction. 97
In terms of methodologies used, De Long and Summers (1993) who reported a strong correlation between investment and productivity growth in developing countries used regression analysis as well as instrumental variables. Eggleston et. al. (2002) show how basic telecommunication infrastructure can create a ―digital provide‖ by making market efficient through information dissemination to isolated and deprived locals and improve the living standards of the world‘s poor, which in turn accelerates growth. Their analysis was based on references and examples. Also, Cronin et. al. (1993b) finds a statistically significant causal relationship
between
productivity
growth
and
portion
attributable
to
telecommunications. Their study used the Peterson Index. Cronin et. al. (1991) used the Granger, Sims and modified Sims tests to confirm the existence of feedback process in which economic activity and growth stimulates demands for telecommunication services. They opined that as the economy grows, more telecommunications facilities are needed to conduct the increased business transactions. Cronin et. al. (1993a) examined this relationship at the state and sub-state levels using data from the state of Pennsylvania in the United States. Their study corroborate at both the state and county levels that telecommunication investment affects economic activity and that economic activity can affect telecommunications investment. Roller and Waverman (2001), using data for OECD countries, were the first to use simultaneous approach to incorporate both effects in the economic model in order to validate the hypothesis of reverse causality. Overall, Gupta, (2000) submitted an estimate that one percent growth in telecommunication services generates three percent growth in the economy. 2.10.2 Economic Impacts of Telecommunication Growth in Nigeria In terms of growth, Nigeria is ranked the largest and fastest growing telecom market in Africa and among the ten fastest telecom growth markets in the world, an indication of its robustness to return on investments. From a private sector investment of about US$50 Million in 1999 when the current democratic 98
regime came in place, the telecommunication industry in Nigeria has by end of 2009, attracted more than US$18 Billion in private sector investments, including Direct Foreign Investment. More than N300 Billion has been contributed to the coffers of the federal Government through Frequency Spectrum sales, enabling government to plough back revenues earned from the sector for provision of development infrastructure at the various levels of government. The impact of this on the economic growth has become impressive. Telecommunications sector now contributes significantly to the Gross Domestic Product, GDP, which was hitherto dominated by the oil and sector. The percentage share of GDP from the sector rose from 0.06 in 1999 to 3.66 by end of 2009. According to estimates by Pyramid Research in a 2010 report, the annual revenue from mobile services represents between 2% and 7% of African countries‘ Nominal GDP; in Nigeria this ratio is close to 4%. It may be important to add that the recent global economic meltdown did not substantially affect the uptake of mobile services by the Nigerian subscribes as the monthly growth rate of active subscription averaged at about 1.2 million over a long period and has continued thereafter. The growth in the telecommunications sector has had significant impact in the other sectors of the economy. The financial sector is perhaps, the one whose activities have been deepened much more by telecommunications, than any other activity in recent times. In commercial banking services, the quantum of transactions catalyzed by telecommunications services may yet be captured and it is doubtful if any bank in Nigeria is not a major beneficiary. In the improvement of investment portfolio, the financial sector has done tremendously well as most banks are involved on one loan syndication or another. The recent one being syndication of US$650 Million by eight Nigerian banks, for the mobile operator, Etisalat. This just took place last month, March 2011. In facilitating banking transactional services, the telecommunications industry has provided the bedrock for the finance industry. Electronic banking facilities such as ATM services, online financial transactions, international credit and debit card 99
facilities, airline ticketing and reservations, are some of the numerous ways that telecommunications industry has aided the growth, sophistication, security and quick transactions in the Nigerian financial sector. There are reasons to believe that the telecommunication industry in Nigeria and its accelerated growth in the last few years has impacted very positively on the media industry. The volume of advertisements, and media related business activities traded off on account of telecommunications services and products, may not be easily quantified but the strong indications are there to be seen. Economists also may have been trying to quantify the volume of employments brought about by the telecommunications industry as many skilled and less skilled Nigerians have found succour on direct and indirect employments opened up by the telecommunications industry. The huge volume of business that the telecoms sector is driving in the Nigerian economy has become more manifest in recent years. This year 2011, the sector‘s contribution to the country‘s gross domestic product, GDP, is expected to exceed the combined inputs of the manufacturing, banking, insurance and solid minerals sectors, according to estimates by the Federal Ministry of Finance (Olajide, 2011). The telecom sector‘s contribution this year, computed with Nigeria‘s gross domestic product figures put at $206.66bn by the International Monetary Fund, IMF, is estimated at $15.7bn, amounting to 7.6 per cent of the GDP. Finance and Insurance, manufacturing and solid minerals are put at 2.5, 4.5 and 0.4 per cent in that order, totaling 7.4 per cent, which is 0.2 per cent less than the 7.6 per cent estimates for the telecoms sector. Since 2005 (four years after it was liberalized), the telecommunication sector remains the third largest contributor to the country‘s GDP in the non-oil sector, after agriculture and trade.
100
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CHAPTER THREE RESEARCH METHODOLOGY 3.1 Introduction This chapter highlights the research methodology to be adopted for the study. It constitutes the backbone of research as it identifies the basic research design, the nature and sources of data, population of the study, the survey instrument employed and analytical techniques. It also explains the descriptive and computational technicalities that will be used to test the hypothesis postulated in chapter one. 3.2 Research Design A research design is a kind of blue print that guides the researcher in making investigations and analysis (Onwumere, 2006:16). In particular, research design seek to answer the questions about the what, where, when, how and by what means data would be generated to provide the solutions under investigation (Eboh, 2009). The researcher made use of survey research design in obtaining, analyzing and interpreting of the data. Survey research design is the commonly used method by social psychologist. It has to do with drawing up a set of question on various subjects to which selected members of a population are requested to react. The researcher intends to employ the survey method for the study because of the following reasons; 1. It permits the accurate assessment of the whole population of the study. 2. It interprets, synthesizes and integrates data, and points to implications and interrelationship. 3. Surveys are versatile and practical especially in administration, in that they identifies present conditions that points to present needs.
108
3.3 Sources of Data The primary and secondary source of data was extensively employed in conducting this research work. Primary Source of Data The researcher intends to make use of primary data that was collected from the customers of the four major telecommunication companies in Nigeria residing in Enugu metropolis. The data was collected via the use of questionnaire that was administered to the customers of telecommunication industry residing in Enugu metropolis. These will provide raw data and opportunity for thorough investigation of the research problems. 3.4 Pilot Survey This is a preliminary piece of research conducted before a complete survey to test the effectiveness of the research methodology. This should be completed before the final survey commences. Then intention is to alert the researcher of any difficulties that were not anticipated at the research proposal stage. A pilot survey was carried out in order to assess the questionnaire comprehension and eliminate potential problems. The preliminary questionnaire was administered to 30 of the respondents. From the pilot survey, it was known that the questionnaire were perfect and reliable for the study. 3.5 Population of Study The population of this study is the customers or users of MTN, GLO, ETISALAT and AIRTEL in Enugu metropolis. The consumers of GSM services in Enugu metropolis are (722664). Table 3.1 Population of Enugu Metropolis L.G.A
MALE
FEMALE
TOTAL
Enugu East
132816
146273
279089
Enugu North
121625
123227
244852
Enugu South
94461
194262
198723
348902
373762
722664
SOURCE: NBS, 2008:26 109
Enugu metropolis is made up of Enugu East, Enugu North and Enugu South local government areas: from the above table, the population of Enugu metropolis as at 2006 is 722664. But this figure should be projected to reflect the 2011 study year. Let P = is the projected population as at the end of the year 2010. B = is the base population as at the year 2006, which is 722664. r = is the rate of projection, which is 0.0298 (NBS, 2006: 15). n = is the gap from 2006 to 2011, inclusively, which is 5 years. Since 2006 = B Then 2007 = B + Br = B (1+r) (by factorization) And 2008 = B (1+r) (1+r) From the above: It can be observed that the common rate of increase is (1+r), It follows that it is a geometric progression (GP). Since B (1+r)
=
B (1+r) (1+ r)
B
B (1+r)
This (1+r) is the exponential factor, But in GP, Tn = AR (n-1) (David- Osuagwu, Anemelu and Onyeozili, 2004:84). Where Tn is the nth term (GP) ―A‖ is the first term (B) R is the common ratio (1+r) n is the number counted inclusively, Therefore, substituting, P= B(1+r)n-1 P= 722664 (1 + 0.00298)5-1 = 722664 (1 + 0.00298)4 = 722664 × 1.1246
= 812708 110
Therefore population of GSM users in Enugu metropolis is 812708 3.6 Sample Size Determination The sample size will be determined from the population, using the appropriate formula such as the yamane‘s equation which is stated below; n =
N 1 + N(e) ²
Where n = sample size N= population e = sampling error (5%) 1 = constant Therefore n = n = 812708 1 + 812708 (0.05) ² n = 812708 2032.77
n = 400 The customer sample size is 400
111
3.7 Sampling Technique The sampling technique for the study is the stratified probabilistic sampling technique method. For the purpose of obtaining a reliable result, the 400 will be stratified and only those who are knowledgeable participants in the telecommunication industry process will be surveyed. The sample size of 400 for the audience/consumer‘s is stratified below; Table 3.2 Serial
L.G.A
POPULATION POPULATION SAMPLE
Number
2006
2010
SIZE
1
ENUGU EAST
279089
313863
154
2
ENUGU NOTRH
244852
275361
136
3
ENUGU SOUTH
198723
223484
110
722664
812708
400
TOTAL
Enugu East= 313863 × 400 = 154 812708 Enugu North = 275361 × 400 =136 812708 Enugu South = 223484 × 400 = 110 812708s 3.8
Instrument of Data Collection
Data collection was done by means of questionnaire constructed by the researcher. It was drawn strictly based on extensive literature search on customer loyalty in the telecommunication industry. The questionnaire was divided into two sections. Section A includes the demography of the 112
respondents while Section B includes both open-ended and closed-ended questions about the objectives of the study. These questions were used to enable the respondents choose from the available options by ticking the option that best described their disposition and give their opinion about the subject matter. 3.9 Validity and Reliability of Study Validity was determined by the degree of provision of correct response from sample object by the relevant research design/instrument. To test for face validity of the instrument, the questionnaire was given to colleagues and then the supervisor for corrections and suggestions in line with the objectives of study. All corrections and amendments were effected and the instrument declared valid for the study. Reliability shows consistency, dependability and predictability of measuring instruments, thus showing its power of accuracy. (Onwumere, 2005:39).A pilot study was carried out to ensure reliability of the instrument. 30 questionnaires were tested for internal consistencies of responses using a measure of reliability called Cronbach‘s alpha. The formula is as follows: α=k (cov/var) 1+(k−1) (cov/var Where K = Number of items on the survey Cov = Average inter-item covariance Var = Average item variance 1
= Constant
The result revealed that the Cronbach‘s alpha coefficient (α) of (0.873 ), indicates a very strong reliability. Therefore, the instrument is reliable for the study.
113
3.9 Techniques of Data Presentation and Analysis. A descriptive statistics which includes frequency and percentages were used to answer the research questions and results were presented in tables and charts. An inferential statistics which includes chi square analysis was used to test the hypothesis and thus the association between categorical variables. All analysis was done using a statistical software package known as SPSS (Statistical package for social sciences) version 15.
114
REFERENCES Aham, A. (2000) Research Methodology in Business and Social Science, Owerri Cannon Publishers. Amaechi, U.F. (2005) Basic Business Statistics, Enugu: Precision Publishers Limited. Anyanwu, A. (2000) Research Methodology in Business and Social Sciences, Owerri: Cannon Publishers Nig. LTD. Asika, N. (1999) Research Methodology in the Behavioural Sciences, Ibadan Longman Publishers. Eboh, E.C. (2009). Social and Economic research principles and methods. Enugu: African Institute for Applied Economics Onwumere, J.U. (2005) Business and Economic Research Methods, Lagos Donvinto: Limited. Ugwuonah, G.E. (2005) Data Analysis and Interpretation: A Computer Based Approach, Uwani-Enugu, Cheston Limited.
115
Appendix I
Faculty of Business Administration Department of Marketing, University of Nigeria, Enugu campus 9th May, 2012 Please, this questionnaire is meant to elicit information on branding as a tool for increasing consumer loyalty in Nigerian telecommunication industry. You are to assist by providing answers to the questions. The information given will be used for academic purpose, and be handled with utmost confidentiality. Thanks for your anticipated co-operation. Nwazuluoke Victor (Researcher)
116
SECTION A 1)
Age
(a) less than 16 yrs [
(d) 26 – 30 [
]
] (b) 16 – 20 [ ] (C) 21 – 25 [ ]
(e) 31 – 35 [
] (f) 36 – 40 (g) 41- 45 [
]
(h)
above 45 yrs. 2)
Sex (a) Male [
] (b) Female [
3)
Marital status (a) Single [
]
] (b) Married [
] (c)Divorced/separated [
] (d)
widowed [ ] 4)
Educational Level
(a) Primary [
] (b) Secondary [
] (c) Tertiary [
]
(d)
None [
]
5)
Occupation (a) Trader [ ] (b) Farmer [ ] (c) Civil Servant [ ] (d) Student [ ] (e) others please specify ……………………. SECTION B
1)
Are you using any telecommunication services currently? (a) Yes [ ] (b) No [ ]
2)
If yes, which telecommunication service provider? (a)
MTN
[ ]
(b) AIRTEL
[ ]
(C) GLOBACOM
[ ]
(d) ETISALAT
[ ]
117
3) How long have you been connected to your current network? 0-6mths
6-12mths
1-2yrs
2yrs/above
MTN AIRTEL GLO ETISALAT 4)
What is the purpose of your subscription? (a) Personal [
5)
]
(b) business [
]
What is the most important factor(s) you considered before choosing a telecommunication service provider? (tick as appropriate) (a) Coverage
[ ]
(b) Quality of service
[ ]
(c) Tariff
[ ]
(d) Customers service
[ ]
(e) Promotion
[ ]
(f) Value added service
[ ]
(g) Access to other networks [ ] 6)
Which innovative plan(s) are you currently on? (tick as appropriate)\ (a) Prepaid air time
[ ]
(b) Mobile banking
[ ]
(c) Mobile Internet
[ ]
(d) Mobile cable TV
[ ]
(e) Video conferencing
[ ]
(f) Sim Backup
[ ]
(g) Improved caller tunes
[ ]
118
6) Have you ever switched networks? (a) Yes (b) No 6) If yes, what was your reason? ------------------------------------------------------------------------------------------------------------------7)
Which of these factors influence your brand loyalty? (tick as appropriate)
Factors
Strongly Agree
Undecided
Disagree
agree
Strongly disagree
Coverage Quality of service Tariff Customer service Promotion Value added service Access
to
other
network 10)
How would you describe the services of your network provider? (a) Satisfactory [ ] (b) Unsatisfactory [ (d) Fair [
] (c) Poor [
]
]
119
Appendix II Reliability
Scale: ALL VARIABLES
120
CHAPTER FOUR 4.0
DATA PRESENTATION AND ANALYSIS
4.1
Introduction
This chapter presents the analysis of the research data and interpretation of results. Out of 400 questionnaires shared, 392 were returned which is 98% return rate. The Statistical Package for Social Sciences (SPSS) VERSION 18 was used for the statistical analysis. 4.2
Demography of The Respondents
Table 4.1:
Age distribution of the respondents Cumulati Freque
Valid
ve
ncy
Percent Percent
Percent
7
1.8
1.8
1.8
16-20 yrs
121
30.9
30.9
32.7
21-25yrs
154
39.3
39.3
71.9
26-30yrs
53
13.5
13.5
85.5
31-35yrs
25
6.4
6.4
91.8
36-40yrs
12
3.1
3.1
94.9
41-45yrs
6
1.5
1.5
96.4
14
3.6
3.6
100.0
392
100.0
100.0
Vali
Less
d
16yrs
Above yrs Total
than
45
121
Fig 4.1: showing age distribution of the respondents Table 4.1 shows that 121(30.9%) of the respondents are within the age bracket 16-20 years, 154(39.3%) within 21-25 years, 53(13.5%) within 26-30 years and 25(6.4%) within 31-35 years. 12(3.1%) of the respondents are within the age range 36-40, 6(1.5%) are within 41-45, and 14(3.6%) are above 45 years while 7(1.8%) are less than 16 years. This indicates that majority of the respondents are within the ages 16 and 25 years.
Table 4.2: Sex distribution of the respondents
Valid
Male Female Total
Frequency 218 174
Percent 55.6 44.4
Valid Percent 55.6 44.4
392
100.0
100.0
Cumulative Percent 55.6 100.0
Table 4.2: shows that 218(55.6%) are male while 174(44.4%) are female, indicating that there were more male respondents than females, for the study 122
Fig 4.2: Showing sex distribution of the respondents Table 4.3: Marital Status of the respondents
Valid
Single Married Divorced/separated Widowed Total
Frequency 306
Percent 78.1
Valid Percent 78.1
Cumulative Percent 78.1
73
18.6
18.6
96.7
7
1.8
1.8
98.5 100.0
6
1.5
1.5
392
100.0
100.0
Table 4.3 shows that 306(78.1%) are single, 73(18.6%) are married, 7(1.8%) are divorced/separated and 6(1.5%) are widowed. From the result, majority of the respondents are single.
123
Table 4.4: Educational level of the respondents
Valid
Primary Secondary Tertiary
Frequency 20
Percent 5.1
Valid Percent 5.1
Cumulative Percent 5.1
26
6.6
6.6
11.7
332
84.7
84.7
96.4 100.0
None
14
3.6
3.6
Total
392
100.0
100.0
Table 4.4 shows that most of the respondents have attained tertiary level of education {332(84.7%)}. 20(5.1%) have primary education, 26(6.6%) have secondary education while 14(3.6%) have none. Table 4.5: Occupation of the respondents
Valid
Frequency 40
Percent 10.2
Valid Percent 10.2
Cumulative Percent 10.2
40
10.2
10.2
20.4
Student
293
74.7
74.7
95.2
Others
19
4.8
4.8
100.0
392
100.0
100.0
Trader Civil servant
Total
Table 4.5 shows that majority of the respondents are students {293(74.7%)}. 40(10.2%) are traders, 40(10.2%) are civil servants while 19(4.8%) have other occupations.
124
Fig 4.3: Distribution of Respondents‘ network patronage Fig 4.3 shows that majority of the respondents (64%) patronize MTN more, followed by ETISALAT (17%), AIRTEL (12%) and then GLOBACOM (17%).
Fig 4.4: showing factors that affect consumers‘ choice and patronage Fig 4.4 shows that coverage (69%) is a major factor that affect consumers‘ choice and patronage. 57% believe quality of service is a significant factor. Only 34% and 31% agree tariff and access to other networks are factors; whereas, 125
9%, 13% and 14% went for promotion, value added service and customers‘ service
as
factors
that
influence
consumers‘
choice
and
patronage.
4.3:HYPOTHESIS TESTING Hypothesis 1 Ho: Product branding and features do not have a significant effect on product choice and customer patronage for telecommunication products. H1:
Product branding and features has a significant effect on product choice and customer patronage for telecommunication products.
Table 4.6: A chi square cross tabulation analysis of the effect of product branding and features on customer choice and patronage. Customer choice/patronage Product
MTN(
AIRTE
GLO(
ETISALA
branding/features
%)
L(%)
%)
T(%)
d.f
X2
P-
Decisio
cal
valu
n
e Coverage
177(6
33(12)
13(5)
48(18)
3
44.7
5) Quality of service
113(4
40(18)
13(6)
61(27)
3
60.2
9) Tariff
69(51
26(19)
6(4)
35(26)
3
24.6
) Customers service
21(38
13(24)
0(0)
21(38)
3
34.2
) Promotion
14(40
0(0)
0(0)
21(60)
3
50.9
) Value added service
13(25
12(23)
6(12)
21(40)
3
40.9