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.

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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 long-term 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, 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

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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;

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

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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,

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

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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. 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

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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

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

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•      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?

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

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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.