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CUSTOMER SATISFACTION IN THE MOBILE TELECOMMUNICATIONS INDUSTRY IN NIGERIA. Presented to Blekinge Institute of Technology, Department of Management, Ronneby, Sweden, in fulfilment of the requirement for the Degree of Master of Business Administration (MBA). BY: DR. ENIOLA SAMUEL SUPERVISOR: TOM MICHEL © December 2006 ABSTRACT Customer satisfaction is a fundamental marketing construct in the last three decades. In the past, it was unpopular and unaccepted concept because companies thought it was more important to gain new customers than retain the existing ones.

However, in this present decade, companies have gained better understanding of the importance of customer satisfaction (especially service producing companies) and adopted it as a high priority operational goal. This study aimed at investigation the overall customer satisfaction of the mobile telecoms industry in Nigeria, factors influencing satisfaction and the relationship between satisfaction and demographics. The results obtained in this research indicated that 57% of the respondents were satisfied and 5% highly satisfied.

The combination of network quality, billing, validity period and customer support (mobile services attributes) showed strong relationship with satisfaction while age, gender, location and employment variables showed weak relationship. ACKNOWLEDGEMENTS My sincere gratitude and appreciation to God, for the gift of life and love. I also wish to thank my supervisor, Tom Michel, for his suggestions and advice and all the people (Marianne, Jacqueline, Margarita, Frank, etc) who made my stay in Sweden a wonderful experience. Finally, to my wife, Temitope, thank you for being a friend and all your supports. TABLE OF CONTENTS

Title page 1 Abstract 2 Acknowledgements 3 Table of contents 4 List of tables 7 List of figures 8 Preface 9 CHAPTER ONE . 1 Introduction 11 1. Background 11 2. Objective and purpose of study 15 CHAPTER TWO 1. Literature review 17 1. Customer satisfaction 17 2. . 1a Definition 17 2. 1. 1b Antecedents 22 2. 1. 1c Assessment and benefits 30 2. 1. 1d Consequences 35 2. Demographics and customer satisfaction 38 CHAPTER THREE 1. Research method 42 1. Research framework 42 2. Selection of interviewers 43 3. Selection of respondents 44 4.

Research instrument 45 3. 2 Research design 48 CHAPTER FOUR 1. Data analysis and discussion 49 1. Frequency statistics 49 2. Analysis of customer satisfaction 50 2.

Customer satisfaction among the demographic variables 51 3. Factors influencing customer satisfaction 54 1. Relationship between network quality and satisfaction 54 2. Relationship between billing and customer satisfaction 55 3. Relationship between validity period and satisfaction 55 4. Relationship between customer support and satisfaction 56 5.

Relationship between network quality, billing, validity period, 57 customer support and customer satisfaction 4. 4 Relationship between demographic variables and satisfaction 58 1. Relationship between age and customer satisfaction 58 2. Relationship between gender and customer satisfaction 59 3. Relationship between location and customer satisfaction 60 4. Relationship between employment and customer satisfaction 60 5.

Relationship between age, gender and satisfaction 61 6. Relationship between age, location and satisfaction 61 7. Relationship between age, employment and satisfaction 62 8. Relationship between gender, location and satisfaction 62 9. Relationship between gender, employment and satisfaction 63 10. Relationship between location, employment and satisfaction 63 11.

Relationship between age, gender, location, employment 64 and customer satisfaction CHAPTER FIVE 5. 1 Conclusion 65 REFERENCE 68 APPENDIXES App. 1 Questionnaire 81 App. – 17 Full details of the data analysis 83 LIST OF TABLES 1. Operational definitions 47 1. Frequency statistics 49 2. Customer satisfaction frequency statistics 50 3. Customer satisfaction with the demographic groups 51 4. Customer satisfaction in 2 categories of demographic groups 52 5.

Relationship between network quality and satisfaction 54 6. Relationship between billing and satisfaction 55 7. Relationship between validity period and satisfaction 55 8. Relationship between customer support and satisfaction 56 9. Relationship between network quality, billing, validity period, 57 customer support and satisfaction 10. Relationship between age and customer satisfaction 58 11.

Relationship between gender and customer satisfaction 59 12. Relationship between location and customer satisfaction 60 13. Relationship between employment and satisfaction 60 14. Relationship between age, gender and satisfaction 61 15. Relationship between age, location and satisfaction 61 16. Relationship between age, employment and satisfaction 62 17. Relationship between gender, location and satisfaction 62 18.

Relationship between gender, employment and satisfaction 63 19. Relationship between location, employment and satisfaction 63 20. Relationship between age, gender, location, employment and 64 customer satisfaction LIST OF FIGURES 1. American Customer Satisfaction Model (ACSM) 34 1. Conceptual structure of the study 43 1. Pie-chart representation of customer satisfaction 50 PREFACE

The Global System of Mobile Communications (GSM) is a digital technology with a worldwide acceptance and plays an important role in the socioeconomic development of countries. Thus, several management experts have paid research attention to this industry (one of the studies done concerns the customer satisfaction). Customer satisfaction is the assessment of the performance of a product or service by customers and this construct is important for successful business performance. Nigeria introduced the mobile telephony five years ago and few studies have been done on the benefits and mpact of its mobile telecoms development. However, there is no research done on the customer satisfaction of the Nigerian mobile telecoms industry. Therefore, there is need to create awareness among academic institutions, regulators and mobile operators of the importance of customers to the development of the industry. Objective – this study is aimed at investigating the customer satisfaction of the mobile telecoms industry in Nigeria, the factors that influence it and the relationship between demographic variables and satisfaction.

Limitations – there is no available literature on customer satisfaction of the telecoms industry in Nigeria to consult neither are the mobile operators willing to cooperate. The summaries of the chapters of this study are as follow: Chapter 1 – Introduction: The GSM technology began in Europe and less than 10 years after it launch, it gained worldwide acceptance. Nigeria introduced the mobile telecoms in 2001 and despite its economic benefits, there is no research done on the customer satisfaction of its mobile telecoms.

This study investigated the customer satisfaction of the mobile telecoms performance, factors influencing it and the significant relationship between demographic variables and customer satisfaction. Chapter 2 – Literature review: In this study, customer satisfaction definition adopted is that of Homburg and Bruhn (1998) which is “an experience-based assessment made by the customer of how far his own expectations about the individual characteristics or the overall functionality of the services obtained from the provider have been fulfilled”.

Its antecedent include customer need and expectation, perceived value, service quality, internal satisfaction and complaint management. The consequences are customer loyalty, customer retention and profitability. The benefits of this concept are repurchase propensity, word of mouth recommendation, low cost of transaction, etc. Chapter 3 – Research method: 400 respondents were administered questionnaires on the streets of 4 different locations of Lagos State (Ikeja, Lagos Island, Mushin and Victoria Island) in Nigeria. The questionnaire contained 2 sections, A and B.

Section A contained questions on age, gender, employment, location and section B contained questions on call quality, billing, validity period (duration of use), customer care support and customer satisfaction evaluation. Chapter 4 – Data analysis and discussion: The data collected was analysed with the Statistical Package for Social Sciences (SPSS). The assessment of customer satisfaction was done with descriptive analysis and the relationship between mobile service attributes, demographic variables and customer satisfaction was analysed with the linear regression. 7% of the respondents were satisfied and 5% very satisfied with mobile telecoms performance, network quality, billing, validity period and overall customer care (mobile service attributes) demonstrated strong relationship with customer satisfaction while age, gender and employment variables (demographics) showed weak relationship. Chapter 5- Conclusion: Based on the results of the data analysis, mobile operators need to maximise customer satisfaction to enhance successful business performance and an important way to achieve this is to improve on the mobile service attributes.

Secondly, mobile operators can establish different market segments and adopt strategies to satisfy needs of different customers. CHAPTER ONE 5 INTRODUCTION 1. 1. 1 BACKGROUND The Global System of Mobile Communications (GSM) is a second-generation digital technology, which was originally developed in Europe and in less than ten years after the commercial launch, it developed into world’s leading and fastest growing mobile standard (GSM Assoc. , 2006).

Lonergan et al. (2004) reported that at the beginning of 2004, there were over 1. 3 billion mobile phone users worldwide and by 2007, the demand for mobile services would have grown at an average annual rate of 9. 1%. The GSM Association estimates that the GSM technology is used by more than one in five people of the world’s population, representing approximately 77% of the world’s cellular market and is estimated to account for 73% of the world’s digital market and 72% of the world’s wireless market (GSM Assoc. 2006). This growth principally results from the establishment of new networks in developing countries rather than from an increase in mobile access lines in developed countries (Serenko and Turel, 2006). African countries are actively involved in the establishment of the mobile services and specifically, Nigeria is the focus of this study. Gerpott et al. (2001) wrote that since 1990s, the telecommunications sector has become an important key in the development of the economy of developed countries.

This results from the saturated markets, de-regulation of telecommunications industry (removal of monopoly rights, especially enjoyed by state-owned telecoms networks), increasing number of mobile service providers, enormous technical development and intense market competition. Szyperski & Loebbecke (1999) wrote that this increasing economic importance and benefits of telecommunications firms motivated many management scholars (especially marketing experts) to devote attention to this sector.

Wilfert (1999); Gerpott (1998); and Booz. Allen and Hamilton (1995) pointed out that marketing strategies are very important in telecommunications services because once customers have subscribed to a particular telecommunications service provider, their long-term link with this provider is of greater importance to the success of the company than they are in other industry sectors. Hence, service providers need to form a continous lasting relationship with their customers to know them better and satisfy their needs adequately.

Studies conducted to explore factors affecting satisfaction, loyalty and retention in mobile telecommunications industry include: Gerpott et al. (2001) investigated customer satisfaction, loyalty and retention in the German mobile telecommunications among 684 respondents and reported that customer retention can not be equated with customer loyalty and/or customer satisfaction, rather a two-stage causal link can be assumed in which customer satisfaction drives customer loyalty which in turn has impacts on customer retention.

However, these three factors are important for superior economic success among telecommunication service providers. Kim et al. (2004) investigated the effects of customer satisfaction and switching barrier on customer loyalty among 350 respondents in Korea and reported that call quality, value-added services and customer support have significant impact on customer satisfaction. Thus, to maximize customer satisfaction, focus should be on service quality and customer-oriented services. Switching barrier on the other hand is affected by switching costs (e. . loss cost, move-in cost, and interpersonal relationships) and was revealed to have an adjustment effect on customer satisfaction and customer loyalty. Serenko and Turel (2006) investigated customer satisfaction with mobiles services in Canada and reported that perceived quality and perceived value are the key factors influencing satisfaction with mobile services. Customer care is reported to be negatively related to customer satisfaction, which means that a more satisfied customer is less prone to complain.

Hence, they concluded that customer satisfaction is the only single measure that better capture the range of services, prices and quality and moreso, this measure is an important performance indicator useful for both regulators and mobile service providers. In summary, these studies support the theory that highly satisfied customers stay longer, buy more, less sensitive to price increases from their providers or price decreases from competitors.

Nigeria, a developing country, in 1992 introduced its first mobile phone services, through the joint venture between NITEL and DSL of Canada to form Mobile Telecommunications Service (MTS), (Ndukwe, 2005, pp 26). In January 2001, the regulatory body NCC, modernised and expanded the mobile telecommunications network and services by granting GSM license to three service providers; MTN Nigeria, Econet Wireless (now Vmobile), and the first national carrier, NITEL (initially MTS, privatised to form Mtel).

In 2002, the second national carrier, Globacom was also granted license to commence operation. Since the launch of the GSM, the number of subscribers in Nigeria has greatly increased. Ndukwe (2005, pp 37-38, 40) reported that between 1998 and 2000, the number of mobile lines was 35,000 but grew to over 11 million as of March 2005, with a growth rate of more than a million lines annually since 2002. This translated to an increase from the total density of 0. 4 lines per 100 inhabitants in 1998 to 9. 47 lines per 100 inhabitants currently.

Additionally, this sector has attracted an investment of over US $8 billion and has greatly increased the number of employed people directly (those working with the GSM companies) or indirectly (this includes various levels of dealerships, cell phone vendors, repair shops, suppliers of accessories, fixed and mobile call shops and street recharge card hawkers) (Hoff, 2006). The number of the employed people is reported to be over 300,000 Nigerians in 2005 (Ndukwe, 2005). Other benefits include easy, affordable and quick access to phone by different categories of the opulation, reduced frequency of travelling, etc (Adomi, 2003), and all these benefits contribute to the socio- economic development of the country. Based on the annual growth rate of the subscribers, and increasing teledensity, Nigeria is one of the fastest growing telecoms market in Africa (Hoff, 2006). Additionally, the population count of over 130 million people and GDP per capita and PPP valuation of US $1,776 (estimated in 2005) (OECD, 2006) presents a massive growth potential for the mobile telecoms sector and the customer base is estimated to reach 23 million subscribers in 2007 and 32 million subscribers in 2009 (Hoff, 2006).

This anticipated increase in the customer base will translate into better social and economic development, resulting from more financial investments from the service operators. Despite the economic and social benefits of the mobile telecommunications to Nigerian economy and market, unlike the developed countries, there is no marketing or management research attention to this sector. However, it is probable that the mobile operators conduct satisfaction surveys and other marketing research but contact with the mobile operators for any useful information yielded no response 1.

This limitation affected this study in that there are currently no literature materials on customer satisfaction of the Nigerian mobile telecoms industry to consult. The majority of literature available (few in number) focuses on the study of the impact and development of the telecommunications, mobile telephony, communications, etc. This lack of adequate research in the mobile telecoms sector may prevent it from acquiring knowledge useful for development. According to Serenko and Turel (2006), customer satisfaction measurement addresses both users and public interests and such studies can assist in economic and social development.

Therefore, there is need to gain more understanding in the area of customer satisfaction. Jackson et al. (1996), Platow et al. (1997), and Homburg and Giering (2001) expressed that customer behaviours and attitudes are greatly influenced by demographic, situational, environmental and psychological factors and these factors can be used by companies and policy makers to develop strategies to meet different needs of the different customer segments. Hence, there is need to gain more understanding of the influence of these factors on customer satisfaction. The author consulted the websites of the mobile operators to view their various customer-oriented practices and contacted their customer services departments through electronic mails to introduce the study, to confirm if they conduct customer satisfaction surveys and ask for any useful input, but yielded no response. 1. 1. 2 OBJECTIVES AND PURPOSE OF STUDY The objective of this research work is to investigate: 1. Overall customer satisfaction of the Nigerian mobile telecoms industry 2. Factors influencing customer satisfaction 3.

The link between certain demographic variables (age, gender, type of employment and location) and customer satisfaction in the Nigerian mobile telephone industry. 4. Using the results of the study to provide strategies to improve the mobile telecoms industry. In order to explore the aforementioned objectives, this study adopts the following hypotheses: ? Customer satisfaction of the Nigerian mobile telecoms industry H1. Nigerian customers are satisfied with the mobile telecoms industry H2. Customer satisfaction differs among various groups of the demographic variables (age, gender, employment type and locations). Factors influencing customer satisfaction H3. There is a strong relationship between network quality and customer satisfaction H4. There is a strong relationship between billing and customer satisfaction H5. There is a strong relationship between validity period and customer satisfaction H6. There is a strong relationship between customer care support and customer satisfaction H7. There is a strong relationship between network quality, billing, validity period, customer care support and customer satisfaction ? Relationship between certain demographic variables and customer satisfaction H8.

There is a strong relationship between age and customer satisfaction H9. There is a strong relationship between gender and customer satisfaction H10. There is a strong relationship between location and customer satisfaction H11. There is a strong relationship between employment and customer satisfaction H12. There is a strong relationship between age, gender and customer satisfaction H13. There is a strong relationship between age, location and customer satisfaction H14. There is a strong relationship between age, employment and customer satisfaction H15.

There is a strong relationship between gender, location and customer satisfaction H16. There is a strong relationship between gender, employment and customer satisfaction H17. There is a strong relationship between location, employment and customer satisfaction H18. There is a strong relationship between age, gender, location, employment and customer satisfaction The purpose of this research is to: 1. Understand customer satisfaction with the performance of the Nigerian mobile telephone industry. 2. Identify factors that influence customer satisfaction in Nigeria.

This study was conducted by administering 400 questionnaires in 4 different locations (100 questionnaires per location) of Lagos State, Nigeria, the commercial centre of the country. Most business transactions have been carried out in this State since the colonial era and most industries have their headquarters sited here. The locations include; Ikeja, Lagos Island, Mushin and Victoria Island. The limitations encountered in this study include: 1. Lack of available literature on customer satisfaction of the mobile telephone industry or any other industry in Nigeria. 2. Lack of cooperation from the mobile telephone operators.

CHAPTER TWO 1. LITERATURE REVIEW 2. 1. 1 CUSTOMER SATISFACTION Customer satisfaction, as a construct, has been fundamental to marketing for over three decades. As early as 1960, Keith (1960) defined marketing as “satisfying the needs and desires of the consumer”. Hunt (1982) reported that by the 1970s, interest in customer satisfaction had increase to such an extent that over 500 studies were published. This trend continued and by 1992, Peterson and Wilson estimated the amount of academic and trade articles on customer satisfaction to be over 15,000.

Several studies have shown that it costs about five times to gain a new customer as it does to keep an existing customer (Naumann, 1995) and this results into more interest in customer relationships. Thus, several companies are adopting customer satisfaction as their operational goal with a carefully designed framework. Hill and Alexander (2000) wrote in their book that “companies now have big investment in database marketing, relationship management and customer planning to move closer to their customers”.

Jones and Sasser (1995) wrote that “achieving customer satisfaction is the main goal for most service firms today”. Increasing customer satisfaction has been shown to directly affect companies’ market share, which leads to improved profits, positive recommendation, lower marketing expenditures (Reichheld, 1996; Heskett et al. , 1997), and greatly impact the corporate image and survival (Pizam and Ellis, 1999). 2. 1. 1a DEFINITION Parker and Mathew (2001) expressed that there are two basic definitional approaches of the concept of customer satisfaction.

The first approach defines satisfaction as a process and the second approach defines satisfaction as an outcome of a consumption experience. These two approaches are complementary, as often one depends on the other. Customer satisfaction as a process is defined as an evaluation between what was received and what was expected (Oliver, 1977, 1981; Olson and Dover, 1979; Tse and Wilton, 1988), emphasizing the perceptual, evaluative and psychological processes that contribute to customer satisfaction (Vavra, 1997, p. 4).

Parker and Mathews (2001) however noted that the process of satisfaction definitions concentrates on the antecedents to satisfaction rather than satisfaction itself. Satisfaction as a process is the most widely adopted description of customer satisfaction and a lot of research efforts have been directed at understanding the process approach of satisfaction evaluations (Parker and Mathews, 2001). This approach has its origin in the discrepancy theory (Porter, 1961), which argued that satisfaction is determined by the perception of a difference between some standard and actual performance.

Cardozo (1965); and Howard and Sheth (1969) developed the contrast theory, which showed that consumers would exaggerate any contrasts between expectations and product evaluations. Olshavsky and Miller (1972); and Olson and Dover (1979) developed the assimilation theory, which means that perceived quality is directly increasing with expectations. Assimilation effects occur when the difference between expectations and quality is too small to be perceived. Anderson (1973) further developed this theory into assimilation-contrast theory, which means if the discrepancy is too large to be assimilated then the contrast effects occur.

The assimilation-contrast effects occur when the difference between expectations and quality is too large to be perceived and this difference is exaggerated by consumers. According to Parker and Mathews (2001), the most popular descendant of the discrepancy theories is the expectation disconfirmation theory (Oliver, 1977, 1981), which stated that the result of customers’ perceptions of the difference between their perceptions of performance and their expectations of performance. Positive disconfirmation leads to increased satisfaction, with negative disconfirmation having the opposite effect.

Yi (1990) expressed that customers buy products or services with pre-purchase expectations about anticipated performance, once the bought product or service has been used, outcomes are compared against expectations. If the outcome matches expectations, the result is confirmation. When there are differences between expectations and outcomes, disconfirmation occurs. Positive disconfirmation occurs when product or service performance exceeds expectations. Therefore, satisfaction is caused by positive disconfirmation or confirmation of customer expectations, and dissatisfaction is the negative disconfirmation of customer expectations (Yi, 1990).

While several studies support the disconfirmation paradigm, others do not. For instance, Churchill and Surprenant (1982) found that neither disconfirmation nor expectations had any effect on customer satisfaction with durable products. Weiner (1980, and 1985); and Folkes (1984) proposed the attribution theory, which stated that when a customer purchases a product or service, if the consumption is below expectation, the customer is convinced that the supplier causes the dissatisfaction.

The complaining customer is focused on restoring justice and the satisfaction outcome is driven by perceived fairness of the outcome of complaining. Westbrook and Reilly (1983) proposed the value-percept theory, which defines satisfaction as an emotional response caused by a cognitive-evaluative process, which is the comparison of the product or service to one’s values rather than an expectation. So, satisfaction is a discrepancy between the observed and the desired. Fisk and Young (1985); Swan and Oliver (1985) proposed the equity theory, which tated that individuals compare their input and output ratios with those of others and feel equitable treated. Equity judgement is based on two steps; first, the customer compares the outcome to the input and secondly, performs a relative comparison of the outcome to the other party. Pizam and Ellis (1999) reported that there are two additional distinct theories of customer satisfaction apart from the seven aforementioned ones and these include: 1. Comparison-level 2. Generalized negativity; and

The outcome approach of the customer satisfaction is defined as the end-state satisfaction resulting from the experience of consumption. This post- consumption state can be an outcome that occurs without comparing expectations (Oliver, 1996); or may be a cognitive state of reward, an emotional response that may occur as the result of comparing expected and actual performance or a comparison of rewards and costs to the anticipated consequences (Vavra, 1997, p. 4). Furthermore, Parker and Mathews (2001) expressed that attention has been focused on the nature of satisfaction of the outcome approach which include: 1.

Emotion – Satisfaction is viewed as the surprise element of product or service purchase and or consumption experiences (Oliver, 1981), or is an affective response to a specific consumption experience (Westbrook and Reilly, 1983). This acknowledges the input of comparative cognitive processes but goes further by stating that these may be just one of the determinants of the affective “state” satisfaction (Park and Mathews, 2001). 2. Fulfillment –The theories of motivation state that people are driven by the desire to satisfy their needs (Maslow, 1943) or by their behaviour aimed at achieving the relevant goals (Vroom, 1964).

However, satisfaction can be either way viewed as the end-point in the motivational process. Thus “consumer satisfaction can be seen as the consumer’s fulfillment response” (Rust and Oliver, 1994, p. 4). 3. State – Oliver (1989) expressed that there are four framework of satisfaction, which relates to reinforcement and arousal. “Satisfaction-as-pleasure” results from positive reinforcement, where the product or service is adding to an aroused resting state, and “satisfaction-as-relief” results from negative reinforcement .

In relation to arousal, low arousal fulfillment is defined as “satisfaction-as contentment”, a result of the product or service performing adequately in an ongoing passive sense. High arousal satisfaction is defined as “satisfaction as either positive (delight) or negative surprise” which could be a shock (Rust and Oliver, 1994). The other customer satisfaction definitions include: Satisfaction is “the cognitive state of the buyer about the appropriateness or inappropriateness of the reward received in exchange for the service experienced (Howard and Seth, 1969, pp. 45); the evaluation of emotions (Hunt, 1977, p. 460); the favorability of the individual’s subjective evaluation (Westbrook, 1980, p. 49); a positive outcome from the outlay of scarce resources (Bearden and Teel, 1983a, p. 21); an overall customer attitude towards a service provider (Levesque and McDougall, 1996, pp. 14); is a judgment that a product or service feature, or the product or service itself, provided (or is providing) a pleasurable level of consumption-related fulfillment, included levels of under- or overfulfillment (Oliver,1997, p. 3); is an experience-based assessment made by the customer of how far his own expectations about the individual characteristics or the overall functionality of the services obtained from the provider have been fulfilled (Homburg and Bruhn, 1998); the fulfillment of some need, goal or desire (Oliver, 1999); an emotional reaction to the difference between what customers anticipate and what they receive (Zineldin, 2000); is based on a customer’s estimated experience of the extent to which a provider’s services fulfill his or her expectations (Gerpott et al. 001)”. For this study, customer satisfaction definition used is that of Homburg and Bruhn (1998) which is “an experience-based assessment made by the customer of how far his own expectations about the individual characteristics or the overall functionality of the services obtained from the provider have been fulfilled”. The relevance of this definition to this study is that it indicates that customers assess the mobile services based on experience of use and the rating is done in accordance with the mobile services attributes.

In this study, customer satisfaction with the Nigerian mobile services will be evaluated based on customers experience of network quality, billing, validity period and customer care support. 2. 1. 1b ANTECEDENTS Taylor and Baker (1994) and Rust and Oliver (1994) identified several factors that precede customer satisfaction and suggested that these factors strongly influence the extent of customer satisfaction. Some of these antecedents include: CLEAR UNDERSTANDING OF CUSTOMER NEEDS AND EXPECTATIONS

The achievement of a strong customer satisfaction is closely related to the understanding customer needs and expectations (William and Bertsch, 1992). According to the Kano Model (2001), customer needs can be divided into: • Basic needs – obvious needs of customers and if not met, he is dissatisfied, however meeting this needs may not be enough for customer satisfaction. Its satisfaction results in “must be quality”. • Expected needs – these are important needs that customers are fully aware of and satisfaction is expected in every purchase; their satisfaction creates “expected quality”. Excitement needs – these are unconscious and unspoken needs of customers. By identifying and satisfying such needs, companies will have added large value to customers and can win loyal customers. This satisfaction creates “attractive quality”. Studies that supported the notion that expectations precede satisfaction include: Anderson, Fornell and Lehmann (1994), who conducted investigation on Swedish firms and reported that there is a positive and significant relationship between expectations and customer satisfaction.

They describe expectation as an accumulation of information about quality from the outside sources (e. g. advertising, word of mouth and general media) and past experiences. Cadotte, Woodruff, and Jenkins (1987) conducted investigation on food restaurant and reported that expectation is significantly correlated with satisfaction. Additionally, expectation is a pre-purchase choice process and form a part of evaluation standards of conceptualizing satisfaction process. Churchill and Suprenant (1982) conducted investigation on durable good (video disc player) and non-durable good (hybrid plant).

For the hybrid plant study, expectation is reported to have a direct impact on satisfaction. Oliver (1981) conducted investigation on retail stores and reported that expectation has direct influence on satisfaction. However, there are other research works that disagree with this finding, examples include: Churchill and Suprenant (1982) in their investigation on video disc player, reported expectation to have no impact on satisfaction. Spreng and Olvshavsky (1993) conducted investigation on cameras and reported that there is no significant relationship between these two variables.

With this aforementioned literature, it is noted that customers purchase services based on their needs and have expectations that the purchased services will meet their needs. Customers in turn assess the service performance in accordance to how well it meets their expectations. Although, customer expectation is not a focus of this study, however satisfaction measurement is useful to understand customer expectations (since most times assessment is done by customers based on past experiences and future beliefs of service performance).

PERCEIVED VALUE Perceived value is defined as “the results or benefits customers receive in relation to total costs (which include the price paid plus other costs associated with the purchase) or the consumers’ overall assessment of what is received relative to what is given” (Holbrook,1994 and Zeithaml, 1988). Additionally, Zeithaml (1988) found out that customers who perceive that they receive value for money are more satisfied than customers who do not perceive they receive value for money. Several studies have shown that perceived value is significant determinant of customer satisfaction (Anderson et al. 1994); Ravald and Gronroos (1996); and McDougall and Levesque, 2000). Turel and Serenko (2006) in their investigation of mobile services in Canada suggested that the degree of perceived value is a key factor affecting customer satisfaction. Past research studies suggested that there are four features, which are key drivers of the customer value of cellular services: network quality, price, customer care, and personal benefits (Booz, Allen & Hamilton, 1995, Danaher & Rust, 1996; Bolton, 1998; Gerpott, 1998; Wilfert, 1999). The network quality refers to excellent indoor and outdoor coverage, voice clarity, and no connection breakdowns. • Price refers to what is paid to obtain access to use the network. • Customer care refers to the quality of the information exchanged between customer and supplier or network provider in response to enquiries and other activities initiated by the network provider, for example presentation of invoices. • Personal benefits refer to the level of perception of the benefits of mobile communications services by individual customers.

It is apparent from this review that one of the factors customers use to determine satisfaction level is the benefits received from a product or service in comparism with what is spent. Perceived value is not a focus of this study (however customer satisfaction evaluation captures perceived value; the assessment shows what consumers value in the service received). The suggested mobile services attributes (features) will be used to assess customer satisfaction in this study. SERVICE QUALITY Another factor that contributes to satisfaction is service quality.

Service quality is defined as “the difference between customer expectations and perceptions of service” or “as the customers’ satisfaction or dissatisfaction formed by their experience of purchase and use of the service” (Gronroos, 1984 and Parasuraman et al. 1988). Oliver (1993) reported that service quality is a casual antecedent of customer satisfaction, due to the fact that service quality is viewed at transactional level and satisfaction is viewed to be an attitude. Dabholkar et al. (1996) and Zeithaml et al. (1996) reported that the service quality divisions are related to overall service quality and or customer satisfaction.

Fornell et al. , (1996) expressed that satisfaction is a consequence of service quality. Hurley and Estelami (1998) argued that there is causal relationship between service quality and satisfaction, and that the perceptions of service quality affect the feelings of satisfaction. There are various classifications of the components of service quality in marketing science. Gronroos (1984) stated that “in service environments, customer satisfaction will be built on a combination of two kinds of quality aspects; technical and functional ”. Technical quality or quality of the output corresponds to traditional quality of control in manufacturing.

It is a matter of properly producing the core benefit of the service. Functional quality or process quality is the way the service is delivered. It is the process in which a customer is a participant and co-producer, and in which the relationship between service provider and customer plays an important role (Wiele et al. , 2002). Technical quality is related to what customer gets (transaction satisfaction); functional quality is related to how the customer gets the result of the interaction (relationship satisfaction). Lewis (1987) suggested that service quality can be classified as essential and subsidiary.

Essential refers to the service offered and subsidiary includes factors such as accessibility, convenience of location, availability, timing and flexibility, as well as interactions with the service provider and other customers. The classification can also be the core (contractual) of the service, and the relational (customer- employee relationship) of the service. The core or the outcome quality, which refers to what is delivered and the relational or process quality, which refers to how it is delivered are the basic elements for most services. (Gronroos, 1985; McDougall and Levesque, 1992; Parasuraman et al. 1991b; Dabholkar et al. , 1996). McDougall and Levesque (2000) in their direct approach investigation on four service firms (dentist clinic, automobile shop, restaurant, and haircut salon) demonstrated that both core and relational service quality classes have significant impact on customer satisfaction. Heskett et al. (1997) conducted studies on several service firms, such as airline, restaurants, etc and reported that service quality, solely defined as relational quality, has consistent effect on satisfaction and is regarded as key factor in delivering customer satisfaction.

Parasuraman et al. (1988) identified five dimensions of service quality (SERVQUAL) that must be present in any service delivery. SERVQUAL helps to identify clearly the impact of quality dimensions on the development of customer perceptions and the resulting customer satisfaction. SERVQUAL include: • Reliability – the ability to perform the promised services dependably and accurately. • Responsiveness – the willingness to help customers and provide prompt service. • Assurance – the knowledge and courtesy of employees as well as their ability to convey trust and confidence. Empathy – the provision of caring, individualized attention to customers, and • Tangibles – the appearance of physical facilities, equipment, personnel and communication materials. The model conceptualizes service quality as a gap between customer’s expectations (E) and the perception of the service providers’ performance (P). According to Parasuraman et al. (1985), “service quality should be measured by subtracting customer’s perception scores from customer expectation scores (Q = P – E)”.

The greater the positive score mark means the greater the positive amount of service quality or the greater the negative score mark, the greater the negative amount of the service quality. Zeithaml et al. (1990) proposed a comprehensive perception of quality assessment and claimed that they are other factors apart from the dimensions of Parasuraman et al. (1988): • Access – how easy it is to come into contact with the supplier. This is where position, opening hours, supplier availability, and other technical facilities belong. Communication – the ability to communicate in an understandable way that is natural to customer. • Credibility – referring to being able to trust the supplier • Courtesy – refers to the supplier’s behaviour, e. g. politeness and kindness Parasuraman et al. (1988), assurance dimension is a combination of the credibility and courtesy dimensions of Zeithaml et al. (1990). Pizam and Ellis (1999) stated that the gap that may exist between the customers’ expected and perceived service quality is a vital determinant of customer satisfaction or dissatisfaction, and not just only a measure of the quality of the service.

Previous studies on mobile telecommunication services, measured services quality by call quality, pricing structure, mobile devices, value-added services, convenience in procedures, and customer support (Kim, 2000; Gerpott et al. , 2001; Lee, Lee, & Freick, 2001). Customers determine satisfaction level of any purchased service by the perceptions of quality received. Therefore, customer satisfaction assessment captures service quality and in this study, the previous factors used to measure service quality (call quality, billing, customer support, etc) of mobile telecoms will be used to assess customer satisfaction.

INTERNAL SATISFACTION Research works have shown the importance and the link of internal (employee) satisfaction to the external (customer) satisfaction. Hill and Alexander (2000) stated that there is a positive relationship between employee satisfaction and customer satisfaction and this is achieved in companies that practice employee motivation and loyalty. They reported that “employees that are more motivated to achieve customer satisfaction tend to be more flexible in their approach to their work, make fewer mistakes and use more initiative”. Fecikova (2004) conducted studies on the index method for ustomer satisfaction measurement with chairs in Slovakia and reported that the satisfaction of internal customers is one of the basic factors to satisfy the external customer. Thus, she suggested that employee motivation and loyalty can be achieved through: • Daily leadership – Top management officials motivate others through their performance. • Top management communicates their expectations to the employees. • Development of competencies – feedback on employees performance, work efforts, opportunity for development and improvement of competencies. • Corporation and employee retention, and • Good working conditions

COMPLAINT MANAGEMENT Albrecht and Zemke (1985) found that of the customers who register complaints, between 54% and 70% will do business again with the company if their complaints are resolved. This figure increases to 95% if the customer feels that the complaint was resolved promptly. Customers who have complained to a company and had their complaints satisfactorily resolved tell an average of five people about the good treatment they received. Hart, et al. , 1990, reported that when the service provider accepts responsibility and resolves the problem when customers complain, the customer becomes “bonded” to the company.

McNeale (1994) found out that about 5% of the dissatisfied customers actually complain to the appropriate companies but easily tell their friends, colleagues and acquaintances about their experiences. Thus, companies ought to be aware or routinely investigate how well or badly their customers are treated. Ovenden (1995) in his book about studies conducted on several companies in the UK, such as wholesaler, manufacturers, etc, argued that companies need to be aware how well or badly its customers are treated and that customers rarely complain and when they do, it might be too late to keep such customers.

Levesque and McDougall (1996) in their case study on retail banking found out that if a service problem or customer complaint is ill or not properly handled, it has a substantial impact on the customer’s attitude towards the service provider. However, the study did not support the notion that good customer complaint management leads to increased customer satisfaction. They reported that “at best, satisfactory problem recovery leads to the same level of customer satisfaction as if a problem had not occurred”.

Nyer (2000) expressed that encouraging customers to complain increased their satisfaction and especially the most dissatisfied customers and stated that “the more a customer complains the greater the increases in satisfaction”. Johnston (2001) reported that complaint management, not only results into increased customer satisfaction, but also leads to operational improvement and improved financial performance. Other suggested antecedents of customer satisfaction include: disconfirmation paradigm (Yi, 1990, and Szymanski and Henard, 2001); performance (Cadotte, et al. 1988, and Bolton and Drew, 1991); affects (Westbrook and Oliver, 1991 and Mano and Oliver, 1993); and equity (Oliver, 1993 and 1997). In summary, the relevance of this sub-section to this study is to: • Better understanding that customers assess service performance based on their past experiences, benefits received, service quality and how well queries and complaints are treated. Thus, customer satisfaction with the mobile services in Nigeria will be assessed based on network quality, billing, validity period and customer care support and the following hypotheses are adopted: ?

Nigerian customers are satisfied with the mobile telecoms industry ? There is a strong relationship between network quality and customer satisfaction ? There is a strong relationship between billing and customer satisfaction ? There is a strong relationship between validity period and customer satisfaction ? There is a strong relationship between customer care support and customer satisfaction ? There is a strong relationship between network quality, billing, validity period, customer care support and customer satisfaction . 1. 1c ASSESSMENT AND BENEFITS Naumann (1995) expressed that the reasons for measuring customer satisfaction may vary among companies, and the success of the measurement depends on if the measurement is incorporated into the firm’s corporate culture or not. However, he suggested five reasons for measuring customer satisfaction or five important roles of customer satisfaction measurement: • To get close to the customer – this will help to understand customers more, their eeds, the attributes that are most important, and their effect on the customer’s decision making, the relative importance of the attributes and the performance evaluation of the firm delivery of each attribute. This process helps to provide enabling communication with customers. • Measure continuous improvement – the important attributes of customers can be incorporated into the internal measurement to evaluate the value-added process in the company.

This process involves comparing performance against internal standards (process control and improvement), and comparing performance against external standards (benchmarking). • To achieve customer-driven improvement – the data collected from customers can be developed into sources of innovations and this can help to achieve customer driven improvement. This requires a comprehensive database and not just records of sales. This process helps to identify opportunities for improvement (quality costing). • To measure competitive strengths and weaknesses – determine customer perceptions of competitive choices and companies. To link customer satisfaction measurement data to internal system The market share is not a guage to measure customer satisfaction; rather it represents quantity of customers. Customer satisfaction is a measure of attitudes and perceptions of the quality and performance of a service (Bhote, 1996). Edvardson and Gustafsson (1999) in their written book about studies conducted on different products and services in Sweden and wrote that customer satisfaction measurement provides significant information for modern management processes and additionally, it provides a warning signal about the future business performance.

Oliver (1999) in his article on the link between consumer satisfaction and loyalty with goods and services, expressed that in the last two decades till date, customer satisfaction measurement represents an important source of revenue for market research firms. Several empirical findings have shown that the application of customer satisfaction measurement often does not accomplish the objectives of the company and the reasons for this shortcoming are; • Many organizations determine criteria for measurement internally without an accurate understanding of customer priorities (Hill, 1996).

This measurement is based on the value defined by organizations and not by the customers, thereby providing wrong information. • Many companies do not measure customer satisfaction as thorough as manufacture component and those who claim to do so, perform it an inadequate way (Hill and Alexander, 2000). • Difficulty in translating the customer satisfaction data into action within the organization (Wiele et al. , 2002) Werth (2002) stated that many companies identify the level of customer satisfaction through; • Number of product or service support problems Number of direct complaints by phone, email, etc • Number of returned products or services and the reason for their return, etc Fecikova (2004) disagreed with this measurement procedure in that it is a measure of customer dissatisfaction (no satisfaction) and may provide wrong information with no possibility for product or service development and innovation. The criteria for measurement should be customer defined so as to collect, analyze the appropriate data and provide relevant information.

Thus, to obtain the right information, efforts should be made to filter out the irrelevant information and concentrate on the valuable dimensions. A convenient tool to achieve this aim is to first conduct a simple pre-study and from this a more effective study can be created. Therefore, for any company to achieve true customer satisfaction, there should be: • Customer-oriented culture • Customer-centered company • Employee empowerment • Process ownership • Team building, and • Partnering with customers and suppliers

He further expressed that the measurement research technique include: • Survey methodologies • Focus groups • Standardized packages • Various computer softwares However, these typical measurement techniques have some problems which include; • Analytical – this involves techniques, formal procedures, systems, etc • Behavioural – involves the attitudes, beliefs, perceptions, motivation, commitment and resulting behaviour of the people involved in the process. • Organizational – involves the organizational tructure, information flows, management style and corporate culture. Hill et al. (2003) expressed that one of the methods to measure customer satisfaction is through the simple frequency statistics of the Microsoft office Excel or that of the Statistical Package for Social Science (SPSS). Fecikova (2004) reported that there are other methods for customer satisfaction measurement and these include; 1. The indicator of customer satisfaction level Hazes (1998) proposed that customer satisfaction could be measured as: ICS = IRCS ? 00 [%] IOCS ICS = increasing customer satisfaction IRCS = the real value of the customer satisfaction index which is used routinely as a tool of customer satisfaction measurement. IOCS = the optimum value of such an index. 2. The index of satisfaction Bhave (2002) proposed that to obtain the index of satisfaction, the satisfaction score is multiplied by the corresponding weighting factor to produce weighting score. The index of satisfaction is the sum of the weighting score.

The overall satisfaction index of any company is the average of every respondent’s individual satisfaction index. 3. ACSM method of customer satisfaction measurement The American Customer Satisfaction Model (ACSM) method is a set of causal equations that link: ? customer expectations ? perceived quality, ? and perceived value to customer satisfaction (ACSI). Fig. 2. 1 The ACSM model of customer satisfaction measurement by Fornell et al. 1996 Several empirical studies done on the assessment of customer satisfaction levels include: Gerpott et al. 2001) investigated the customer satisfaction level of 684 residential customers of mobile operators in Germany using the frequency distribution, the results showed that 28% of the respondents were completely satisfied and 6. 3% were slightly satisfied or not satisfied. Turel and Serenko, 2006, assessed customer satisfaction level of 210 young adult mobile subscribers in Canada by adapting the American Customer Satisfaction Model, the result obtained was 54. 67%. This score was relatively low compared to the 65% obtained by ACSI organization for the USA in 2004.

Fornell (1992) investigated customer satisfaction with 100 corporations in over 30 industries in Sweden and expressed that the benefits of customer satisfaction include the following; highly satisfied customers – • Stay longer (i. e. prevent customer churn) • Purchase more as the company introduces new products and upgrades existing products • Talk favorably about the company and its products or services (helps to improve advertisement) • Pay less attention to competing brands • Less sensitive to price • Offer product or service ideas to the company Cost less to serve than new customers because transactions are routine • Enhances business reputation These benefits make customer satisfaction and its measurement an important marketing construct, which is especially essential to the mobile telecoms industry in which the long-term links between operators and customers are of greater importance to business performance. 2. 1. 1d CONSEQUENCES Several research works have shown that customer satisfaction is positively associated with desirable business outcomes namely; Customer Loyalty, Customer Retention, and Customer Profitability.

Gerpott et al. (2001) reported that these consequences are important goals for telecommunications operators to have superior economic success. CUSTOMER LOYALTY Coyne (1989) stated that customer satisfaction has measurable impact on customer loyalty in that when satisfaction reaches a certain level; on the high side, loyalty increases dramatically; at the same time, when satisfaction falls to a certain point, loyalty reduces equally dramatically. Yi (1990) expressed that the impact of customer satisfaction on customer loyalty by stating that “customer satisfaction influences purchase intentions as well as post-purchase attitude”.

In other word, satisfaction is related to behavioural loyalty, which includes continuing purchases from the same company, word of mouth recommendation, increased scope of relationship. Fornell (1992) found out that there is a positive relationship between customer satisfaction and customer loyalty but this connection is not always a linear relation. This relationship depends on factors such as market regulation, switching costs, brand equity, existence of loyalty programs, proprietary technology, and product differentiation at the industry level.

Jones and Sasser (1995) proposed that link between satisfaction and loyalty can be classified into four different groups: loyalist/apostle (high satisfaction, high loyalty), defector/ terrorist (low satisfaction, low loyalty), mercenary (high satisfaction, low loyalty), and hostage (low satisfaction, high loyalty). Roger Hallowell (1996) confirmed the link between customer loyalty (in the context of behavioural loyalty) and customer satisfaction. Oliver (1999) stated that the relationship between satisfaction and loyalty is that satisfaction is transformed into loyalty with the assistance of a myriad of other factors.

However, this relationship is complex and asymmetric. High levels of satisfaction lead to high levels of attitudinal loyalty. Attitudinal loyalty involves different feelings, which create a customer’s overall attachment to a product, service, or company (Lovelock et al. , 2001). Gerpott et al. (2001) in their study of the German mobile telecommunication found that customer satisfaction is positively related to customer loyalty, and both factors are important paraments in the mobile telecommunications industry.

Turel and Serenko, 2006, in their study of Canadian mobile telecommunications also confirmed this finding. CUSTOMER RETENTION Several research works have shown that there is positive relationship between customer satisfaction and customer retention; customer satisfaction has a direct effect on customer retention (Rust and Subramaman, 1992); customer satisfaction is positively related to customer retention (Anderson and Sullivan, 1993); to retain a customer, it is necessary to satisfy him. Satisfied customer is more likely to return and stay with a ompany than a dissatisfied customer who can decide to go elsewhere (Ovenden, 1995); satisfaction leads to retention and the retention is not simply because of habit, indifference or inertia (Desai and Mahajan, 1998); customer retention is central to the development of business relationships, and these relationships depend on satisfaction (Eriksson and Vaghult, 2000); customer satisfaction is an antecedent of customer retention (Athanassopoulos, 2000); customer satisfaction is a central determinant of customer retention (Gerpott et al. 2001); customer satisfaction is positively related to customer retention and the effect varies by customer size and the customer’s current level of satisfaction (Niraj et al. , 2003). CUSTOMER PROFITABILITY Research studies conducted by Gale (1992) and Fornell (1992) showed that higher customer satisfaction translates into higher than normal market share growth, the ability to charge a higher price, lower transaction costs, and a strong link to improved profitability. Nelson et al. , (1992) also demonstrated that customer satisfaction is related to higher profitability and proved his findings statistically.

Andersson et al. , (1994) found a significant association between customer satisfaction and accounting return on assets. Ittner and Larckner (1996) found that shareholder value is highly elastic with respect to customer satisfaction. Fornell et al. , 1996, found out that customer satisfaction is significantly related to firms’ financial performance. The volume of business conducted with a firm is directly related to customer satisfaction

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