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List of tables
Chapter one Introduction
1.1- Background of the study
1.1.2- Current situation of the Ghanaian mobile telecommunication industry
1.2- Problem statement
1.3- Research questions
1.4- Research objectives
1.5- Significance of the study
1.6- Limitations of the research
1.7- Outline of the study
Chapter two 9 Literature review
2.2- Drivers of switching barriers and their benefits to mobile operators
2.3- Switching barriers on developed countries
2.4- Switching barriers in developing countries
2.5- Telecommunications regulation and switching barriers
2.5.1- Why should switching barriers be a regulatory concern?
126.96.36.199- Concerns about the competitive process
188.8.131.52- Concerns about the price level
184.108.40.206 - Concerns about predatory pricing
2.5.2- Regulatory response to switching barriers and challenges to mobile operators
2.6- Customer retention
2.6.1- Switching barriers and customer retention
2.6.3 - Switching barriers
220.127.116.11- Categories of switching barriers
18.104.22.168- Switching costs
22.214.171.124.1- Types of switching costs
126.96.36.199- Attractiveness of alternatives
2.6.2- Satisfaction and customer retention
2.6.3- Trust and customer retention
2.7- Mobile number portability and switching barriers
2.7.1- Mobile number portability and its implementation in Ghana
2.7.2- Drivers for mobile number portability
2.7.3- Effects of mobile number portability on switching barriers
Chapter 3 Research and methodology
3.2- Research design and approach
3.3 - The study area
3.4- Population and sample
3.4.1- The population
3.4.2- The sample size
3.4.3 - Sampling approach
3.4.4 - Selection criteria
3.5- Data collection method
3.5.1. Source of data
3.5.2. Data collection instrument and design
3.5.3- Piloting of data collection instrument
3.5.4 - Data collection procedure, data processing and analysis
188.8.131.52 - Data collection procedure
184.108.40.206- Data processing and analysis
3.6- Validity and reliability of the study
3.6.1- Validity of the study
3.6.2- Reliability of the study
3.7 - Ethical considerations
3.8 - Conclusion
4.2. Response rate
4.3- Profile of respondents
4.4- Research related questions
4.5- Effect of switching cost on subscriber retention
4.6- Effect of switching barriers and overall satisfaction on subscriber retention
Chapter 5 Conclusion and recommendations
5.2- Study findings
5.4- Further research
Table 220.127.116.11.1: Categories of switching cost
Table 2.7.3 Total completed port by networks in
Table 2.7.4 Total completed port by networks in
Table 4.2 Profile of respondents
Table 18.104.22.168 Factors related to learning cost and their relative importance indexes
Table 22.214.171.124 Factors related to search and evaluation costs and their relative importance indexes
Table 126.96.36.199 Factors related to uncertainty costs and their relative importance indexes
Figure 4.4.1: takes time/effort to learn how to use a mobile operator’s services
Figure 4.3.2: If i were to switch, it would not be easy for me to get used to a new mobile operator
Figure 4.5.1: If i were to change my mobile network, I fear that the services I would receive from the new mobile operator might be worse
Figure 4.5.2: Switching to another mobile network would be risky, since I would not know its tariffs, and service quality
Figure 4.6.1: If i were to switch, i would not have time to compare and evaluate the services and tariffs of mobile operators
Figure 4.6.2: If i were to switch, it would take me too much time to collect and analyse information related to competitors
Figure 4.7.1: If i had to change my mobile network, i know of another which is just as good
Figure 4.7.2: Compared to my mobile network, there is no other one with which i could be satisfied
Figure 4.8.3: Effect of switching costs on subscriber retention
Figure 4.8.4: Effect of switching barriers on subscriber retention
Issues of retention have become a very complex and big challenge for mobile network operators. Intensifying competition and growing customer expectations have made it increasingly difficult in recent years for mobile network operators to keep their subscribers and do it profitably. Moreover, after the introduction of mobile number portability by the regulator in 2011, mobile network operators are facing rising subscriber churn because subscribers have now more flexibility to switch mobile networks. As a result, it becomes critical for mobile network operators to improve their retention strategies. A way by which they can achieve that is by focussing or strategizing on the factors that could prevent their subscribers from switching.
Switching barriers refers to any factors that make it costly or difficult for a subscriber to change his/her service provider and this research contributes towards a better understanding of their nature, dimensions and effects on subscriber retention in the Ghanaian mobile telecommunication industry. Two switching barriers were studied namely: switching costs, and attractiveness of alternatives. Regarding the perceived switching costs, three factors were identified namely: Learning cost, search costs, and uncertainty cost. Data was collected through questionnaires from over 400 pre-paid subscribers in Accra. Each research question was measured on a 5-point Likert scale. The findings of the research reveal that switching barriers have a negative effect on subscriber retention in Ghana because subscribers have a low perception of switching costs and a high perception of viable alternatives.
First and foremost, I give thanks to God for his protection throughout the conduct of this research.
I explicitly express my profound gratitude to my father, Mr Leon Olou, my mother Mme Arceline Olou, my sister Christelle Olou and my fiancée, Innocente Hossou-Assogba and Stephane Olou for encouraging me and supporting me since the beginning of this journey. Their words of encouragement and their confidence in my ability gave me the motivation to persist and endure the trailing moments of the journey. No words of thanks can adequately express the depth of my appreciation and love.
I thank my supervisors, Dr. Franklin Asamoa-Baah and Abel Yeboah-Ofori for their guidance, patience and contributions towards the completion of this work. Their supports, understanding, and greatly appreciated criticism and feedback, were invaluable to the completion of this research.
My acknowledgement will not be complete without extending my profound appreciation and thanks to all my lecturers and classmates.
I also thank all persons who in diverse ways contributed to the success of this project.
With the fierce competition in mobile telecommunications industries worldwide, subscriber retention has become a very critical factor in the fight for survival among mobile carriers. The increasing number of players and options in telecommunications markets has forced mobile operators to put more resources into the adoption of subscriber-driven initiatives that seek to understand, attract, retain, and build intimate long-term relationships with their subscribers (Venkata, 2006). The literature available today recognizes the existence of a shift in firms’ strategy towards their customers, which has moved from a transactional to a more relational approach (Jessica Mascareigne, 2009). Firms, especially mobile carriers have come to realise that customer-centricity is the key to success in today’s challenging environment. This is because it is the only way by which firms can establish and engage in a relationship with their customers, which will then enable them to understand their needs and expectations.
Today’s subscribers are increasingly impatient as a result of their over- exposure to ordinary and boring experiences (Strativity Group, 2007). They want more, better, faster, and cheaper products and services that are innovative and personalized (Strativity Group, 2007; Jacada Fusion, 2008). As far as mobile telecommunications are concerned, customers have many choices of where to buy their products and services. Research shows that while older subscribers tends to be more loyal to their mobile operators, younger subscribers are used to shopping around; driven by factors such as best pricing plans, best network performance, and number portability (Jacada Fusion, 2008). The prevalence of competitive alternatives, often at relatively cheap prices, increases the challenge facing mobile operators to satisfy their subscribers (Strativity Group, 2013). In Ghana for instance, customers have a variety of networks to choose from. These include: MTN, Airtel, Tigo, Vodafone, Glo and Expresso. Each of these mobile networks is anxious to separate itself from its competitors in a unique and inimitable way by giving to its subscribers an experience that he/she will not get anywhere else. However, meeting subscriber’s needs and expectations requires mobile operators to be innovative and also invest huge amount in provisioning their networks. When subscribers’ become bored, dissatisfied, or when their expectations are not met, they become potential switchers and migrate their businesses to any alternatives in the market that they perceive will perform better than their current providers. At the same time, competitors are also interested in attracting these potential switchers in order to increase their customer base and revenue.
Regarding the drivers of customer retention, customer satisfaction is generally regarded as the leading factor (Ezlika Mohd, 2003). However, it should be noted that although customer satisfaction has been commonly assumed to be a prerequisite to customer loyalty, it does not automatically predict retention (Ezlika Mohd, 2003). Numerous past studies have established a negative relationship between customer satisfaction and customer retention (Ezlika Mohd, 2003). As a result, studies suggest a combination of factors such as trust and switching barriers, to achieve a better level of customer retention. Trust is conceptualized as existing when one party has confidence in the other party’s reliability and integrity (Jessica Mascareigne, 2009). Trust is a vital element in any type of relationship (Gounaris, 2003). Once it has been established, the probability of each party ending the relationship decreases (Ranaweera C., and Prabhu J., 2003). The more a customer trust a supplier, the highest is the perceived value of the relationship, and the greater the chances that the customer will remain in the relationship.
Switching barriers are factors that make it difficult or costly for customers to switch providers (Jones et al., 2002). Basically, switching barriers are of two kinds namely: financial and/or non-financial. Mobile telecommunications markets are prime examples of markets in which switching barrier are extensively used; and has also, been subjected to both theoretical and empirical research. Switching barriers consist of various categories and components which impacts differ from one industry to another.
Switching barriers are used worldwide; not only in telecommunication industries but also in many other industries such as the banking, fast-food, insurance, airline and health industries. The purpose of using the switching barriers remains the same; however their effects seem to differ according to countries. In the developing countries for instance, many studies found that switching barriers are very high and severe (Laszlo and Nagy, 2007). But after the implementation of mobile number portability, it has been reported that switching costs have decreased. However, it is still a challenge for subscribers in those countries to switch due to factors such as: uncertainty; cancellation of old contract; perceived difficulty; and social-economic variables (such as monthly income) (Laszlo and Nagy, 2007).
In the developed countries however, switching barriers are very low (Jacada Fusion, 2008). This is due to the fact that: first, regulatory authorities intervene by means of competition policy which prevents mobile operators from applying high switching barriers to subscribers. Second, the abundance of similar products and services offered by increasing number of operators (Brick and mortar; and web- based) has made switching between companies easier and to some extent cost free (Strativity Group, 2007).
There are six mobile operators in Ghana namely: MTN, Glo, Tigo, Vodafone, Airtel and Expresso. These operators not only supply the basic mobile voice services but also offer value-added services such as data and multimedia. The regulation of the sector is assured by the National Communication Authority (NCA). According to the 2013 telecommunication data subscription trends released by the NCA (2013), MTN dominates the market with 4,762,030 subscribers. Airtel follows in second position with 1,924,049 subscribers. Tigo comes in third position 1,560,570 subscribers. Glo and Vodafone have 269,615 and 1,298,235 subscribers respectively. Expresso comes in sixth position with 45,520 subscribers.
Glo was the last mobile network to enter the Ghanaian mobile market in 2012. Before its arrival, the market was shared among MTN which had 10,156,112 subscribers (48%); Vodafone, 4,275,521 subscribers (20.2%); TIgo, 3,921,754 subscribers (18.53%); Expresso, 191,779 subscribers (0.88%) and Airtel, 2,625,705 subscribers (12.4%). However, despite the big barriers to entry and challenges faced when entering the Ghanaian mobile market, Glo was able to chip off some of the market share of each of the five mobile networks to build up its subscriber base by means of promotions, advertisements, innovative pricing-plans and bonuses such as: “Biiiiig 5”, “Zero balance bonus”, “Good Day Ghana”, “Glo Gista”. This clearly indicates that mobile network operators in Ghana do not set high switching costs or barriers to prevent their subscribers from switching. As a result, these latter are easily taken away by the attractive offers of the rival firms.
As a regulator, the role of the NCA is to ensure fair competition and protection of the subscribers’ interests. On one hand, the use of switching barriers by mobile operators is harmful to competition in the sense that it prevents competitors from attracting potential switchers, and also acts as barrier to entry. On the other hand, subscribers are forced to stay with their current mobile operator in order to avoid the high costs associated with switching. Although the introduction of mobile number portability by the NCA reduces some elements of switching barriers, it does not eradicate all switching barriers. In order words, there might be some factors that could still prevent subscribers from switching although the process has been rendered easy and cost free.
Customer retention is critical for the growth and profitability of any organization. By retaining their customers, firms ensure that their customers will continuously purchase their products and services. However, as competition increases, it becomes difficult for firms especially mobile network operators to retain their customers. On one hand, the availability of various products and services drives subscribers to think that there is always something better; therefore enhancing their curiosity and expectations (Strativity Group, 2007). Today’s subscribers require that mobile operators not only create innovative experiences, but also that they provide consistently efficient, effective and customized products and services (Strativity Group, 2007). When mobile operators deliver products and services that fail to meet or exceed their subscribers’ expectations, these latter have no other options than to switch to the competitors. From the mobile network operator perspective, customers are the key to the success of his business. One of the biggest challenges faced by mobile network operators is subscriber churn. When a subscriber switches from one mobile network to another, mobile network operators are negatively impacted because they lose revenue, market share, and it also delays their return on investment. Moreover, with the introduction of mobile number portability by the telecommunication regulator namely the National Communication Authority in 2011, mobile network operators face rising subscriber churn. As a matter of fact, it as been already reported by the regulator that three years after the introduction of mobile number portability, over 1,6 million subscribers have successfully ported their numbers. As a result, it becomes critical for mobile network operators to improve their retention strategies. A way by which they can achieve that is by identifying the factors that could prevent their subscribers from switching and strategise on them in order to effectively lower their subscribers churn rate.
The factors that make it difficult for subscribers to change providers are called switching barriers. Switching barriers is a competitive tool, used by mobile network operators in many countries which allow them to not only retain their subscribers but also attract new ones.
This study seeks to answer the following questions:
1. What drives the use of switching barriers by mobile telecommunication operators?
2. What benefits do switching barriers provide to mobile telecommunications operators?
3. What are the challenges encountered by mobile telecommunications operators when using switching barriers?
4. What are the effects of switching barriers on subscriber retention in the Ghanaian mobile telecommunication industry?
The research objectives were:
1. To identify the factors that drive the use of switching barriers by mobile operators. (See page 11)
2. To identify the benefits that switching barriers provide to mobile telecommunication operators. (See page 12)
3. To identify the challenges faced by mobile telecommunication operators when using switching barriers. (See page 16)
4. To evaluate the effect of switching barriers on subscriber retention in the Ghanaian mobile telecommunication industry.
The results of this study will be of tremendous importance to the Ghanaian mobile telecommunication industry. Based on the findings of this research, the telecommunication operators will have a better understanding of the switching barriers and their effects on subscriber retention. This research will also guide them to more efficiently invest their resources in the development of marketing, technological and management strategies.
For academia, this study will also be of great importance since it contributes to the ongoing debate on customer retention, adds to the body of knowledge, and provides the basis for further research.
In addition, the study provides education and awareness to mobile phone users about the use of switching barriers by mobile operators and their potential effects on their decisions to switch.
The results of this study would be of immense importance to the regulator. It would serve as a benchmark to the formulation of new competition policies and also improve on existing ones.
The main constraints of the study were time, financial resources and access to information. The study was conducted within a very limited academic timeframe. Unfortunately, that did not allow the researcher to use a larger sample for the survey. Besides, the financial and material resources needed for a larger sample size were inadequate. Furthermore, access to information was a big challenge; due to the various languages spoken in the country. It was thus, difficult to translate the survey questions and statements into the local dialects. As a result, this limitation in particular accounted for limiting the study to literate participants only, particularly students.
The research consists of five chapters:
- Chapter one: gives a background of the study. It also defines the problem, describes the research questions and objectives, the significance and the limitation of the study.
- Chapter two: critically reviews the literature on switching barriers, putting into consideration their drivers, benefits, and challenges to the mobile operators. Secondly, it also reviews the constituents of switching barriers and how they are put in place by mobile operators. Finally, a review of the effects of switching barriers on customer retention is conducted with focus on the developed and developing countries.
- Chapter three: discusses the study’s methodology approach, the strategies employed by the researcher for the collection of primary and secondary data and concludes with a justification of the defined sample and data collection instrument.
- Chapter four: Presents analyses and discusses the data collected.
- Chapter five: concludes the research and gives all the necessary recommendations and area for future research.
With the very competitive nature of the mobile telecommunication market, and the multiplicity, and variety of products and services, subscribers are constantly searching for the best deals. This ability of subscribers to switch providers, not only affects the offers proposed by these latter, but also jeopardizes their businesses. As a result, mobile operators are redefining their strategy to a more relational approach aimed at catering closely their subscribers (BERC, 2010). In recent years, customer retention has gained increased value amongst telecommunications firms (Jessica Mascareigne , 2009). Extensive research, both descriptive and empirical, exists on the concept of customer retention as well as its measures and instruments (Jessica Mascareigne , 2009). Obviously, a key factor in any customer retention program is satisfaction (Cronin and Taylor, 2006). However, in some very frequent cases where satisfaction alone is not sufficient to retain customer, providers often couple it with other factors such as switching barriers. Due to their important role in customer retention, switching barriers have received a lot of attention in the literature.
The term “switching barriers” is defined as the perceived or real costs that are incurred buy a customer when changing supplier (OECD, 2008). Authors and scholars agree on the effectiveness of switching barriers. However, their views seem to diverge on the types and components of switching barriers. By reviewing the literature, the researcher seeks to identify, analyse, and propose a list of switching barriers that will be applied to the Ghanaian context in order to measure and evaluate how they impact subscriber retention.
The literature review starts with a brief discussion of the drivers for switching barriers followed by their benefits to mobile operators. Then it discusses the switching barriers in developed and developing countries especially their impacts on subscriber retention. Afterwards, the different regulatory responses to switching barriers are highlighted. The relevant literature on customer satisfaction is also presented; which is followed by the presentation of switching barriers and their components. Next the impact of mobile number portability on switching barriers is discussed. Finally, some limitations of past research are highlighted before the chapter is summarised.
The success or failure of a business heavily depends on customer behaviour (Marc Pomp, 2005). In recent years, mobile operators have been facing technological changes, which are mostly driven by end-users wants and needs. On one hand, with the rapid progress of technology, mobile operators went from delivering only voice-communication services to more data-rich services (Paola Mercedes, 2013). On the other hand, the mobile market is almost saturated and access to mobile phones and services have become both inexpensive and ubiquitous (Paola Mercedes, 2013). Moreover, the liberalization of mobile telecommunications markets has been the key driver for its fast growth and evolution.
Differentiating customer experiences has become very complex due to the rising availability of good alternatives, and the customer’s ability to easily move their businesses from one competitor to the other (Strativity Group, 2007). Satisfying customers requires that mobile operators not only create unique experiences, but also provide consistently efficient and effective services (Strativity Group, 2007). At the same time, mobile operators like any other firms, usually focus on cost reduction in their daily activities. As a result, it becomes also costly and difficult for them to meet the expectations of their customers. When mobile operators fail to meet the expectations of their subscribers, these latter become potential switchers and migrate their businesses to any alternatives in the market that they perceive will perform better than their current provider. When subscribers switch mobile networks, the impacts on mobile network operators are devastating and include:
- Loss of initial revenue and earnings
- Loss of increasing revenue
- Loss of free word-of-mouth marketing
- Loss of profit from referrals
- Increasing acquisition cost
- Decrease in market share
- Delay on return on investment
All these factors drive mobile operators to put barriers around their subscribers to prevent them from going to the competitors. This competitive tool also known as “switching barriers”, is very common in mobile telecommunications markets and is often used to reduce subscriber churn. While switching barriers are harmful to subscribers, they are greatly beneficial for mobile operators. Some benefits associated with retaining customers are:
- Increased revenue for the firm.
- Lower customer acquisition costs
- Increased referrals (positive word-of-mouth)
- Discourages subscribers from patronizing competitors
- Customer loyalty
- Renewal and/or continuation of contracts
- Growth of the firm
- Stable profits
- Faster return on investment for the firm
- Survivability of the firm.
The following paragraphs examine the available evidence of subscriber behaviour in telecommunication industries of some developed countries.
A survey conducted by the National Consumer Council in 2006 (OECD, 2008) found that switching is quite limited in the mobile telephony market. According to subscriber responses to Ofcom’s (the telecommunication regulator) surveys, the most important barrier to switch to an alternative is the possibility of getting locked into a contract with a new supplier (OECD, 2008). The second greatest threat to switching is reluctance to leave a known and trusted supplier for one that is completely unknown (OECD, 2008).
The level of switching in Portugal’s fixed and mobile market has been relatively low, due to the high level of satisfaction of subscribers (OECD, 2008). According to a survey conducted by Anacom (the telecommunication regulator), 64% of subscribers interviewed were satisfied with the prices charged by their fixed and mobile network providers. Anacom concluded that this degree of satisfaction reduces the disposition to switch (OECD, 2008).
The results of a questionnaire survey conducted by ACMA (the telecommunication regulator) shows that 72.5% of subscribers mentioned that their service provider mostly met their expectations. The report also shows that the likelihood of subscribers switching service provider was about 14% for the mobile telecommunication market during the period July 2005 to June 2006 (OECD, 2008). The other 86% said they were either “unlikely” or “neither likely nor unlikely” to switch providers.
A US report based on responses to a questionnaire survey in 2005, reveals that 89% of mobile telecommunication subscribers considered early termination fees as a major barrier to switching (OECD, 2008).
The following paragraphs examine the available evidence of subscriber behaviour in telecommunication industries of some developing countries.
In Nigeria, time-constraint and searching costs are the major barriers to switching providers. According to a study conducted by (Joseph Omotayo et al., 2009), it is a hassle for subscribers in Nigeria, to search for a new supplier. According to the study, respondents perceived that something will go wrong in the transition, potentially leaving them without service altogether. Moreover, subscribers in Nigeria perceive a short term gain associated with switching because for them all mobile networks are the same.
Results from a survey conducted by the Hungarian Communications Authority in 2007, reveals that difficulty of switching was reported considerably severe (Laszlo lorincz, 2007). According to the report, three factors constitute the major difficulty in switching; namely: cancellation of the old contract, searching for the relevant offers and uncertainty (Laszlo lorincz , 2007). According to the survey, 36% of subscribers stated that searching for the best deal was difficult because availability of information to calculate the cheapest supplier based on their usage profile was inexistent.
As can be seen, switching barriers are used in both developed and developing countries. The above discussion shows that, subscriber retention is not impacted by the same factors. Depending on the country, a factor may be more relevant that another. It can also be noticed that in developed countries, mobile operators rely more on customer satisfaction to retain their subscribers. This is mostly due to the challenges that they face in using switching barriers; which usually come from regulatory authorities. A different strategy is observed in developing countries where, switching barriers is the first competitive tool used by mobile operators to retain their subscribers. The next section discusses the regulators and policymakers response to switching barriers.
According to Klemperer (1987), switching barriers can make competition more fragile. They can fortify a pre-existing situation of market power, or raise barriers to entry in a market where there are few uncommitted subscribers (Dr Amelia Fletcher, 2003). According to (Dr Amelia Fletcher, 2003), there are three reasons why a regulator should be concerned about the effects of switching barriers.
In circumstances where there is insufficient ex-ante competition and particularly when there are few new customers coming onto the market, switching barriers can harmfully affect the competitiveness of the market (Dr Amelia Fletcher, 2003). This is likely to pose a problem where a small flow of new customers is combined with a minimum efficient level of entry as it is expensive and challenging to win subscribers that are already committed to their current mobile operators and hard to reach critical mass to compete on the market (Dr Amelia Fletcher, 2003).
Switching barriers can increase the price level in a market over time (Dr Amelia Fletcher, 2003). If mobile operators are risk neutral, face no liquidity constraints, and if there is adequate competition before subscribers are locked-in, the higher prices subscribers pay once they are locked in will be reimbursed by lower prices before being locked in (Dr Amelia Fletcher, 2003).
The main challenges faced by mobile operators in using switching barriers, come from the regulators. Regulators around the world have reacted differently to the use of switching barriers. An approach taken by some regulators has been to introduce price regulation (Laszlo lorincz, 2007). Another approach has been the reduction of switching barriers themselves. A study conducted by () in the United States show that the regulator (Federal Communication Commission, FCC) took actions such as:
- Improving transparency: the regulator publish information regarding the operators’ tariffs, number of subscribers, service quality, etc., on his website.
- Requiring operators to offer mobile number portability.
- Prohibiting firms from setting up unnecessary administrative difficulties to switching like not responding to emails, delaying the switching process.
- Requiring firms to publish products and services information in a standardised form.
- Give to subscribers, accurate information, before, during, and after the switching process, with information being presented clearly in an easily assessable format.
As can be seen, several measures have been put in place by the telecommunication regulator in the United States in order to lower the effects of switching barriers.
The National Communication Authority in Ghana has also by ways of policies taken steps towards the reduction of switching costs. Some actions taken by the regulator involve:
- Introduction of mobile number portability.
- Harmonization of short codes for consumer services: the NCA in collaboration with mobile network operators has put in place measures to ensure that common services across all networks use uniform short codes. To this end, all short codes for accessing services including credit recharge, credit balance and call centre enquiries will be uniform for all mobile networks in Ghana. (NCA, 2014)
These two policies contribute significantly to the reduction of subscribers’ switching costs in Ghana. Nevertheless, subscribers might still perceive high switching costs which would be investigated in this research.
In the literature, the terms “switching barriers” and “switching costs” are used interchangeably without any clear differences; and their definitions seem to vary according to authors.
Patterson and Smith (2003) conceptualised switching barriers as: the perception of the magnitude of the additional costs required to terminate a relationship and secure an alternative one. Xuan Zhang (2009) defines switching costs as: a barrier that influences customer’s decision to change service provider. Another definition is offered by Avgeropoulos (2007), who defined switching costs as: the fixed costs faced by buyers in order to switch to substitute products.
Although these definitions describe the nature of switching barriers, they fail to expand on the types of costs incurred by consumers. One may easily think that because of the term “costs”, switching costs are only financial in nature. However, this is not the case as the following definitions show.
According to (Yim et al., 2007), switching costs are the technical, financial, and psychological costs that make it difficult or costly for customers to change brands. Mikaela Carlstrom (2010) adds more to those factors by defining switching costs as the time, money, and effort spent by consumers when changing suppliers.
As can be seen, there are many definitions of switching barriers, making it difficult to give a clear-cut definition of the term. However, this research uses the term “switching barriers” and refers to it as any factor i.e. financial or non-financial that makes it difficult for subscribers to switch from one mobile telecommunication operator to another.
Just like the definitions of switching barriers, there are almost as many components of switching barriers as they are researchers. In other words, the components of switching barriers differ according to the field of study or issues being researched (Ezlika Mohd, 2003). In spite of the disparities among authors, it can be noticed that most of them classify the following three main factors as the major categories of switching barriers: financial costs, relational costs (or interpersonal relationship), and attractiveness of alternatives.
According to (Jones et al., 2002; Syed Haider et al., 2013; Colgate et al., 2007) switching barriers are made up of: switching costs, attractiveness of alternatives and interpersonal relationships. The term “switching costs” refers to the financial and/or non-financial losses incurred by a customer when changing supplier (Moon-Koo Kim et al., 2004). The term “attractiveness of alternatives” refers to the reputation, image, service and products quality, and innovation of the replacing supplier. As mentioned by (Moon-Koo Kim et al., 2004), attractiveness of alternatives is related to services and products differentiation. According to Bendapudi et al. (1997), when a company offers differentiated services and products that are difficult to reproduce, it becomes difficult for customers to find competitors attractive. Alternatively, when a competitor is very innovative and offers products and services that a customer perceives could match its expectations, this latter is very likely to switch. Attractiveness of alternatives is a key factor in the switching decisions of subscribers. The term “Interpersonal relationship” refers to the psychological and social relationships that manifest themselves as care, trust, intimacy and communication and that are built through recurrent interactions between a customer and a company (Moon-Koo Kim et al., 2004). According to (Percy Oake, 2013), companies are not alone in desiring a sustained relationship. Customers also wish to establish develop and continue with a company a relationship that provides value and convenience. (Percy Oake, 2013).
Many researchers built on the study of Jones et al (2003) to identify and classify switching barriers in their field of study. Holloway (2003), in her study of the online retail industry, identifies three categories of switching barriers namely: switching costs, alternative attractiveness, and online relationship quality. Ping Robert (1993) classifies switching barriers as: alternatives attractiveness, investment in a relationship and switching costs. Colgate et al. (2007) in a similar study, divide switching barriers into four categories namely: relational investments, switching costs, service recovery, and attractiveness of alternatives.
An alternative classification of switching barriers is provided by (Burnham Thomas et al., 2003). They classify switching barriers as: Financial switching costs, procedural switching costs, and relational switching costs. Financial switching costs are economic costs arising from loss of accumulated benefits, and monetary costs associated with financial expenditure in starting a new relationship. Examples of financial costs are: initial deposits, initial fees, assets that need to be changed (Ezlika Mohd, 2003). Relational switching costs refer to the emotional or psychological losses encountered by customers when leaving his/her service provider (Burnham Thomas et al., 2003).
A different approach is taken by Claire Dianne (2009) who excluded every factor related to financial costs in their study. According to them, switching barriers consist of: information search costs (finding alternative suppliers and learning about them), perceived risk (the possible risks associated with a new supplier), substitutability (the ability of the new supplier to match the services of the current supplier) and proximity (the level of convenience associated with the new supplier).
Switching barriers have been widely studied, resulting in a wide variety of ways to classify them. The classification of switching barriers used in this research is based on the study of Jones et al. (2002); who classified switching barriers in three categories: switching costs, attractiveness of alternatives and interpersonal relationship. However, some modifications and adaptations are necessary in order to meet the research goal.
The study of Jones et al. (2002) on switching barriers was based on customers of hair salon and banks. In those environments, there is a high interaction between customers and employees. Anytime a customer needs a service from a given firm, he/she goes to the firm and meets a face-to-face with an employee who will then deliver the service to him. Thus by the means of their employees, firms are able to establish an interpersonal relationship and create a bond with their customers. That relationship if strong enough, can act barrier that will prevent customers from switching; which explain why Jones et al. (2002) identified and used it as an important factor of switching barriers. Compared to these markets, there is a considerable lack of “face-to-face” interaction between subscribers and mobile operators. When a subscriber requires a service, the mobile operator delivers it to him/her via its network. Hence, mobile operators provide customer care services which can be used by subscribers to acquire information or complain about a particular service.
Consequently, in this research the only two components of switching barriers are: switching costs (which are the real or perceived costs that are incurred by a subscriber when changing supplier), and attractiveness of alternatives (which refers to the perceived better products and services of competitors). The following sections review the literature on these different categories.
The term “switching costs” has been defined in several ways in the literature. However, the common point of these definitions is that switching costs are the costs that consumers perceive in changing suppliers. These costs are not only financial in nature. They can also be relational, psychological, and procedural. Table 188.8.131.52 shows a compilation of definitions of customer perceived switching costs from the extant literature.
According to Ghazali (2011), there have been only a smaller number of empirical attempts to classify and measure customer perceived switching costs as multifaceted constructs. The first study is the work of Gremler (1995), who examined the influenced of consumer perceived switching costs on consumer loyalty. Gremler proposed a list of 6 switching costs that could influence customer retention in retail bank and dental surgery service settings. These were: habit/inertia, set-up costs, learning costs, contractual costs and continuity costs. However, at the end of the study, he found that only three of the six switching costs initially proposed positively influenced customer retention in retail banking and dental surgery service settings.
The three switching costs are shown in the figure below which is a model proposed by Gremler (1995).
Table 184.108.40.206: Definitions of customer perceived switching costs from the extant literature
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Figure 220.127.116.11: Dimensions of perceived switching costs proposed by Gremler (1995)
The second dimension, called continuity/learning costs refers to the customer perception of time or effort in learning, or getting used to a new product or service. According to Gremler (1995), the complex a firm’s products/services is, the more time/effort customers have to invest in order to learn how to use it. The same way, the more customers have experience with a firm’s products or services, the less they will be inclined to switch because the time and effort spent in learning how to use that product/service has become a sunk cost that will be lost if they switch to a competing product/service. In mobile telecommunications, the only learning cost associated with switching is learning the short codes of the new mobile network. Due to the substantial differences in the services and short codes offered by mobile network operators, there could be considerable learning costs associated with switching from one mobile network to another. Moreover, the longer a subscriber has used the services of a mobile network, the higher his learning costs become. According to Robert Harris (2012) however, subscribers of mobile telecommunication services face little to no learning costs due to the similarities of the services offered by mobile network operators and also the simplicity of the shirt codes. No studies were conducted however to measure the learning costs of subscribers of mobile telecommunication services. As a result, it becomes difficult to predict the effect that learning costs could have on subscribers in Ghana. Therefore, learning cost is retain is this research and its effect on subscriber in Ghana will be evaluated.
The third dimension, called contractual costs, refers to the fine that customers have to pay when breaking their contract with his service provider it ends. Contractual costs often apply to post-paid subscribers and are very popular in developed countries. They are also one of the key barriers used by mobile network operators to prevent their subscribers from switching. To attract new or retain existing customers, and to incentivize them to upgrade their service plans, many mobile network operators subsidize the price of a new smartphone in exchange for a term contract with penalties for early termination. Since this research’s main focus is on pre-paid subscribers, contractual costs will not be taken into account.
Another leading study measuring switching costs as a multidimensional construct is that of Jones et al. (2002). They conducted a study in relation to hair salon and banking clients. They proposed a model consisting of six unique switching costs associated with changing providers. The model is presented figure 18.104.22.168. The first dimension, called performance costs, refers to subscribers’ perception of losing certain benefits and privileges in switching service providers. some examples of these benefits are essentially bonuses which varies according to the mobile network and are very often given after a certain amount of credit bought or after a certain duration of dialled calls.
The second dimension refers to uncertainty costs. These are customer perceptions of the probability of diminished service performance, service quality or convenience when switching to a different service provider. In telecommunications, one of the biggest challenges faced by mobile network operators is customer satisfaction related to the quality of their services. Many studies have shown that quality of service plays a key role in the selection of mobile networks. However, information related to the quality of service of a mobile network can be hard to find and thus can increase the uncertainty of subscribers.
Search and evaluation costs refer to customer perception of time and effort needed in finding and gathering information on any new appropriate service provider when switching. Mobile network operators offer many services with different quality and pricing plans. As a result, it can be time consuming for subscribers to search and evaluate the different mobile networks in the marketplace along with their quality of service and tariffs. For example, in deciding whether to change mobile network, a subscriber can search for alternative mobile networks, the quality of service on these mobile networks, whether there are lower-priced plans and/or subsidized devices available, and whether there are promotional pricing plans available to cover some or all the costs of switching from another mobile network (Robert Harris, 2012). Is subscribers perceive that search costs are high, and will be incurred whether or not they switch, that may be sufficient reason not to undertake the search, making their current mobile network the default. Many studies conducted in the United States show that subscribers in this country face significant search costs due to the multiplicity and variety of services and pricing-plans offered by mobile network operators and also due to the unavailability of information related to the quality of service of mobile networks. As a result, “search costs” is retain in this research and its effect on subscriber retention in Ghana will be evaluated. Behavioural and cognitive costs, on the other hand, are the perceptions of time and effort in learning and understanding a new service provider after the switching has taken place. Set- up costs are also associated with time and effort costs, i.e., to relay the needs and information to a new service provider after the switching. Finally, sunk costs refer to customer perception of all costs already incurred, whether the costs are in terms of time, effort or money, or in establishing and maintaining relations with the current service provider. According to Jones (2002), all previous costs discussed will become sunk after switching has taken place.
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Figure 22.214.171.124: Dimensions of perceived switching costs proposed by Jones et al. (2002)
Burnham et al. (2003) provide another typology of customer perceived switching costs developed and tested using respondents from online credit card company and a long-distance telephone service provider. They proposed a model which somewhat encompasses the types of switching costs discussed earlier by other researcher. The model is presented in figure 126.96.36.199.3.
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Figure 188.8.131.52: Dimensions of perceived switching costs in Burnham et al. (2003)
The term Procedural costs refers to the extent to which switching service providers is associated with the expenditure of time and effort in analysing information to make choices, initiating new relationships and learning to understand and use a new service provider effectively. Financial costs, on the other hand, involve economic cost arising from loss of accumulated benefits and/or monetary cost associated with financial outlay in starting a new relationship (e.g. deposits, initial fees or assets that need to be replaced). Finally, relational costs are emotional or psychological losses encountered by customers with the breaking of bonds with the existing service provider.
The table below provides more categories of switching cost:
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Table 184.108.40.206: categories of switching cost. Source: Sean van Deventer and Harminder Singh (2012)
The influence of switching costs on customer retention has received a lot of attention in the literature. Many studies seem to agree on the direct influence of switching costs on customer switching behaviour. The study of Burnham et al. (2003) on customers of long distance phone providers reveals that switching costs have endowed long-distance carriers with market power (Burnham Thomas et al., 2003). Other studies focussed on the relation between switching costs and customer satisfaction. The study of Jones et al. (2002) for instance, reveals that switching costs only emerge as customers become less satisfied with the service offered by their service providers. This view is shared by Balabanis et al (2006) who state that switching costs moderate the satisfaction and loyalty link only when satisfaction is perceived by customers as below average. Shin et al. (2008), when forecasting the switching behaviour of subscribers in mobile phone service, concluded that switching costs positively affect intention to switch as well as indirectly through their interactions with subscribers’ satisfaction. Caruna (2006) has studied the impact of switching costs on customer loyalty using the category of switching barriers proposed by Burham et al. (2003). An important conclusion was that a better management of switching costs could significantly reduce switching and improve customer loyalty (2006).
Based on the discussions above, the following components of switching costs are retained for this research: (a) learning cost (Klemperer, 1987), search cost (Jones et al., 2002), uncertainty cost (Jones et al., 2002).
The term “Attractiveness of alternatives” has been attributed different labels in the literature, namely: attractiveness of available alternatives (Holloway Betsy, 2003), knowledge of alternatives (Anton et al., 2007), availability, and attractiveness of other providers’ offers (Rosario and Foxall, 2006), and impact of alternative providers (Yanamandram et al. White, 2006).
Jones et al. (2002) define attractiveness of alternatives as the customers’ perceptions of the extent to which viable competing alternatives are available in the marketplace. Ping Robert (1993) defines it as the customer estimation of the likely satisfaction available from an alternative relationship. Shin and Kim (2008) defines attractiveness of alternatives as the reputation, image and service quality of the replacing carrier, which are expected to be higher than those of the existing carrier.
According to social exchange theory, individuals’ commitment to any relationship increases when they are satisfied with the relationship and/or when the available alternatives are not appealing (Burnham Thomas et al., 2003). The most important factor in explaining dependence and power is whether an alternative is perceived to exist (Thibaut and Kelley, 1959). Subscribers are likely to remain with the current mobile operator when they are unaware of other viable alternatives or when they do not perceive existing alternatives as appealing. In other words, the lack of perceived differences by subscribers influences them to stay (Ezlika Mohd, 2003). Many studies have shown that perceived alternative attractiveness is directly and positively associated with exit and negatively with loyalty (Ranaweera, 2003). In other words, the more appealing an alternative is, the higher the probability that customers would switch; and the less attractive an alternative is perceived, the higher the probability that customers will stay. However, according to an empirical study conducted by Thibaut et al (1959), even though there could be a lack of appealing alternatives in the marketplace, subscribers would still defer due to their high level of dissatisfaction (Thibaut and Kelley, 1959). In this scenario, the only reason subscribers would stay is if the current relationship is more attractive than the combination of: attractiveness of alternatives and the costs of switching (Thibaut and Kelley, 1959). In other words, subscribers always base their decisions to switch on their “cost-benefit” analysis relative to competitors in the marketplace (Ezlika Mohd, 2003). Prior research provides empirical evidence on the fact that higher switching costs reduces the customer consideration of other alternatives (Heide and Weiss, 1995), lowers customer effort in searching for alternatives (Heide and Weiss, 1995) and also decreases their propensity to search for alternatives (Zauberman Gal, 2003).
Attractiveness of alternatives is closely linked to firm heterogeneity (Ezlika Mohd, 2003). However, the multiplicity of products and services in a marketplace constitutes in itself a barrier to switching. As products and services increase, the “cost of thinking” of customers also increases. That is, heterogeneity among companies in the same industry requires customers to expend greater time and effort in comparing offerings (Burnham Thomas et al., 2003). As such, large perceived differences among alternatives also lead to customer retention (Ezlika Mohd, 2003).
In mobile telecommunication, several factors could make a mobile operator attractive. They include: price, network coverage, customer service, promotion, service quality, service availability, brand name, etc.
Price plays a vital role in telecommunication market especially for the mobile telecommunication service providers (Kollmann, 2009). It is defined as the money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using a product or service (Kotler and Armstrong, 2003). A mobile operator that offers lower charges would be able to attract more customers and thus, significant number of call minutes might be achieved. According to Kollmann (2009), income from the number of call minutes determine the basic commercial success for the network providers. The success of the telecommunication sector in a market place largely depends on continuing usage and pricing policies, which needs to be considered on several levels (Kollmann, 2009). Prior studies on customer behaviour show that price has a very important and persistent impact on the perception that a customer has towards a product or service. Many empirical studies show that price has a positive impact on brand switching decisions. In other words, where prices are perceived as fair, customers are more likely to repurchase and less likely to switch.
Promotion plays an important role in retaining old customers and attracting new ones. It refers to the sale of a product or service through advertising, publicity or discounting. According to kotler and Armstrong (2003) promotion is an important part for all companies, especially when penetrating new markets and making more or new customers. Rowley (1998) identifies the objectives of any promotional activity as: maintaining or improving market share, creating or improving brand recognition, creating a favourable climate for future sales, informing and educating the market, creating a competitive advantage relative to competitor’s products or market position and improving promotional efficiency. The impact of promotion on switching decisions shows positive results. The studies of Lau et al. Olatokoun and Nyomme, (2012) and Gensch, D.H., (1978) for instance, show that promotion has a positive relationship with switching and retention.
Brand image is a mental picture that reflects the way a brand is perceived, including all the identifying elements, the products or company personality, and the emotions and associations evoked in the customer’s mind (Olatokoun and Nyomme, 2012). It is constituted by a series of pictures and ideas in people’s minds that sum up their knowledge of a brand (Gensch, D.H., 1978). Customers can obtain corporate image from their own experience, words of others, advertising and so on. In general, when the name of a brand is mentioned, the first idea that comes to the customer’s mind is the corporate image associated with it. Therefore, the brand image is mainly determined by corporate reputation, which means that corporate reputation can influence the choice of a customer (Olatokoun and Nyomme, 2012).
Attractiveness of alternatives is thus a key determinant in the decisions of subscribers about whether to stay or defect (Ezlika Mohd, 2003). Many empirical studies have come to the conclusion that attractiveness of alternatives has a perfect positive relationship with exit, and a perfect negative relationship with retention (Ranawere, 2003). In other words, the more attractive the alternatives are, the higher the probability that subscribers churn. Ping Robert (1993), Jones et al. (2002), and Yim et al. (2007) have found a negative effect of attractiveness of alternatives on commitment and repurchase intention. In addition, the result of Syed et al. (Syed Haider et al., 2013) reveals that subscribers switching tendency can be driven by the perception of quality of available alternatives in the market. The results of Capraro et al. (2003) also support the view that knowledge of alternatives has a direct positive influence on defection. Research in social psychology has noticed that presence of alternatives represents a major threat to the stability of any relation (Ezlika Mohd, 2003). As a matter of fact, research conducted on commitment in relationship, reveals that people who perceived an attractive alternative reported less commitment in their relationship (Ezlika Mohd, 2003).
Mobile number portability refers to the ability of subscribers to switch between service providers while retaining their mobile number (Shin and Kim, 2008). It can be found as a standard feature in many telecommunications market. Since it first introduction in Singapore in 1997, many other countries have followed with implementations varying in major and minor details (National Communications Authority, 2012). Mobile number portability brings considerable benefits to subscribers such as: lower prices, greater choice, higher quality, broader social networks, and a large range of services Mobile number portability was introduced in Ghana in July 2011. Its implementation was meant to: enhance subscribers’ experiences, reduce call tariffs, reduce the use of multiple SIMs, and respond to various competitive market factors such as: the number of operators and interconnection function. There are two ways of implementing mobile number portability. The more popular and also the one adopted in Ghana is the receiver-led porting whereby, the new mobile operator takes the initiative on behalf of the switcher by contacting the subscriber’s current service provider for service transfer (Percy Oake, 2013). Mobile number portability in Ghana is free of charge. However, the time taken by the process can be significant.
The impact of mobile number portability on switching barriers has been studied by many scholars, who have measured that impact using the number of ports realized in the first week and year that followed the introduction of mobile number portability. Dong-Hee et al. (2008) investigated the effects of mobile number portability on switching barriers in the United States mobile market. The results of their study show that mobile number portability does not have a significant effect on subscribers’ switching decisions. Switching barriers such as move-in cost and loss cost are strong barriers that still prevent subscribers from switching even after the introduction of mobile number portability. A similar study conducted by Cheong Park et al. (2005) in Korea, show that mobile number portability did lessen the hassles of switching. However, 82% of subscribers still perceive high switching barriers such as contractual cost which are considered to be the biggest deterrent that keeps subscribers from switching. Another study conducted in Turkey by Ayndin Ozer (2005), shows that mobile number portability has indeed a negative effect on switching barriers. According to the study, which was conducted a year after the introduction of mobile number portability, 44% of those who ported their numbers said that they left for better pricing plans, 12% switched because of promotion of sales and 22% switched because coverage or service quality. These results show that mobile number portability have indeed an impact on switching barriers. However, that impact can be negative or positive depending on how deep subscribers are locked-in with their mobile networks.
This chapter presented a discussion of literature associated with switching barriers especially switching costs and attractiveness of alternatives. Switching barriers have been widely studied, and has a variety of definitions and categories. The underlying concept is that switching barriers are a set of factors that make it difficult and/or costly for a customer to switch. The categories and sub-categories of switching barriers selected for the study are:
- Switching costs: refers to the financial and non-financial costs incurred by subscribers when switching. Switching costs comprises several other factors from which four have been selected for the research purpose. These factors are: (a) learning costs, (b) search costs, and (c) uncertainty costs.
- Attractiveness of alternatives: refers to the subscriber perception of the attractiveness of close substitutes in the market. The components of attractiveness of alternatives retain for this study are: (a) price, (b) promotion and (c) brand name.
Although switching barriers are acknowledged by many authors and scholars to be a very efficient competitive tool, they still have a divergent view on the impacts that switching barriers have on customer retention. This is due to the fact that studies have been conducted in different environments and the factors and their impacts on customer retention differ from one market to another.
Switching barriers are a regulatory concern since they reduce competition between existing firms in the market, act as barrier to entry, and fortify dominant firm position. As a result, regulators by means of policies, intervene in such markets to moderate the effect of switching barriers. In developed countries were regulation is intense, it can be seen that mobile operators focus more on subscriber satisfaction that is, they meet subscribers’ expectation and therefore retain them. In developing countries, regulatory authorities introduced mobile number portability to reduce the switching costs incurred by subscribers. Despite that, subscribers still find it difficult to switch due to factors such as: information inadequacies, search costs and uncertainty. Based on the above discussions, the following model is proposed.
This chapter presents the methodology employed to collect and analyse data in order to answer the research questions. The first section discusses the research design and approach. The second section presents the study settings, the population and sample. The third section presents the data collection instrument, data processing and analysis. The forth section presents the ethical considerations, along with the validity and reliability of the research. Finally, some limitations regarding the data collection are presented before the chapter is summarized.
The research design used for this research was a mixed design, which combined both descriptive and explanatory design in order to meet the objectives of the research. Descriptive research was used in order to describe the switching behaviour of respondents, and also access their perception of switching barriers. Explanatory research, which is mainly concerned with establishing causal relationships between variables (Saunders, Lewis and Thornhill, 2007), was used to evaluate and understand the effect of switching barriers on subscriber retention.
A quantitative approach was used for data collection and analysis. As mentioned by (Saunders, Lewis and Thornhill, 2007), a quantitative approach refers to any data collection technique or analysis procedure that generates or uses numerical data. A quantitative approach was chosen in order to empirically explain the effect of switching barriers on subscriber retention. Hence, prior studies such as (Guilinan Joseph, 1989; Bendapudi and Berry, 1997) which also studied switching barriers and their effects on customer retention used the same approach to collect and analysed data.
The study was carried out in Accra. Accra is the capital city of Ghana. Accra covers about 420 and has a population of about 3,835,246. Accra is the most urbanized and modernized city in Ghana. Accra was chosen for the study because the city was within convenient reach of the researcher. in order to cover the City of Accra, the researcher used the 11 sub-metropolitan areas and with the help of a friend who is a Ghanaian, the researcher was able to go into each one of them to distribute the questionnaires.
The population comprised pre-paid subscribers of mobile telecommunication services in Accra. The researcher could not find the exact population size of Pay-as- You-Go subscribers in Accra. As a result the researcher assumed that all citizens of Accra were Pay-as-You-Go subscribers which thus gave a population size of 3,835,246.
A sample size of 400 participants was used for this research. The sample size was derived from Robert Krejcie and Daryle Morgan’s table (Robert and Daryle, 1970), which gives an easy and ready reference for determining sample size from a given population.
Random and purposive sampling techniques were used in selecting respondents. A purposive sampling also known as judgmental or subjective sampling is one in which decisions concerning the individuals to be included in a sample are taken by the researcher. The following section shows the selection criteria used by the researcher.
The respondents had to meet the following criteria in order to be included in the sample:
- Be educated (A level and above);
- Be 20 years or older;
- Be a pre-paid subscriber;
- Be willing to participate.
The researcher decided to ignore the illiterate because of language barriers. Although the illiterate constitute a significant part of the population of Accra, it would have been time-consuming to collect data from them because the researcher did not speak their local language, hence the services of a third-party would have been needed to translate the questions in Twi and the answers in English.
The researcher also decided to use only pre-paid subscribers because very often, in selecting their service plan, majority of people choose pre-paid services due to their conveniences moreover, pre-paid subscribers are very easy to find.
The researcher used primary sources of data. Primary data refers to data freshly gathered. This approach was selected because many studies related to this topic used primary sources of data and hence the secondary data available was specific to other countries, thus irrelevant for the Ghanaian context.
A self-administered questionnaire (Appendix 1) was chosen as the instrument for primary data collection. The researcher chose to use a self-administered questionnaire because:
- It ensures anonymity and confidentiality;
- It allows greater coverage geographically in reaching target respondents;
- It is quicker to code and interpret especially when close ended questions are used;
- It is less biased since all respondents answer the same questions.
The questionnaire was written in English and consisted of 4 sections.
Section A elicited respondents’ demographic characteristics such as age, gender, highest educational qualification, and mobile network. Sections B, C, D E and F contain questions on learning cost, uncertainty cost, Search costs and attractiveness of alternatives and overall satisfaction respectively.
The questionnaire consisted of closed-ended questions as they are quicker and easier to code and analyse. A 5-point Likert scale was used for each research related questions in order to allow respondents, the opportunity to indicate their level of agreement or disagreement with a statement. The 5-point Likert-scale consisted of: “Strongly agree”, “Agree”, “Neutral”, “Disagree”, and “Strongly disagree”.
The questionnaire was pre-tested before distribution. A pre-test was conducted in order to adjust and fine-tune the questionnaire. A total of 20 questionnaires were distributed to 20 staff members of Ghana Technology University College. Valuable feedbacks pertaining to wording ambiguity, question sequencing, scale formatting, and questionnaire length was provided. After piloting the questionnaire, the following adjustments were made: first, the number of pages was reduced from 5 to 3. Secondly, a maximum of 3 questions were asked at each research related questions. Finally, the question related to the salary range of respondents was removed because during the pre-testing no respondent answered it.
The collection of data involved a self-administered online and paper-based questionnaire. The survey was conducted through face-to-face contact with mobile phone users and also via email. Respondents were first informed of the purpose of the research, and assured of anonymity and confidentiality of responses. The paper- based questionnaires were left with the respondents and retrieved 5 days later. Some respondents did not want to answer on the paper-based questionnaire and requested that the questionnaire was sent to them via e-mail. Several strategies were adopted to increase the response rate and encourage participation: (a) The paper-based questionnaire was designed in a neat, A4 format, so that it looked small and less demanding. It also had a title and was decorated with the logo of Ghana Technology University College. Demographic profile questions were placed at the very end of the questionnaire.
Before processing, the data collected were first cleansed. Data cleansing involved checking the correct answering of the questions and separating incorrectly responded questionnaires from correctly responded ones. The cleansed data were then coded and input into the computer for analysis. The 5-point Likert-scale was coded as follow:
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The data analysis was done using Microsoft Excel 2007. The researcher used descriptive statistics to analyse the collected data, which involved the computation of frequencies, percentages, and relative importance index. The 5-point Likert scale questions were transformed into relative importance index. The relative importance index is a technique used to compute the strength of index familiarity, frequencies and agreements of a specific question (Tam C.M., and Deng, Z.M., 2004). The formula to compute the relative importance index is presented below:
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Where n5 = number of respondents for strongly agree; n4 = number of respondents for agree; n3= number of respondents for neutral; n2 = number of respondents for disagree; n1= number of respondents for strongly disagree; N is the total number of respondents.
The relative importance index ranges between 0 and 1 (Tam C.M., and Deng, Z.M.,2004).
Validity refers to the degree to which the research instrument measures what it is supposed to be measuring (Saunders, Lewis and Thornhill, 2007). The researcher mostly focused on content validity, which refers to the accuracy with which an instrument measures the factors under study. Content validity was concerned with how accurately the questions asked tended to elicit the information sought. Questions were based on information gathered during the literature. Content validity was further ensured by giving the questionnaire to my supervisor, who has quite a long experience in research.
Reliability refers to the extent to which the data collection techniques or analysis procedures will yield consistent findings (Saunders, Lewis and Thornhill, 2007). The questionnaires were randomly administered to respondents without biasing. They were informed of the purpose of the study and of the need to respond truthfully. Accurate and careful phrasing of question to avoid ambiguity and leading respondents to a particular answer ensured reliability of the instrument.
To render the study ethical, four ethical considerations were observed namely: self-determination, confidentiality, anonymity, informed consent and honesty.
Subjects were treated as autonomous agents by informing them about the study and allowing them to voluntarily choose to participate or not. Information was also provided about the researcher in the event of further questions and complaints.
In this research, confidentiality was maintained by keeping the collected data confidential and not revealing the subjects’ identities when reporting the data. No identifying information was entered onto the questionnaires, and questionnaires were only numbered after data was collected.
In this research, anonymity was ensured by not asking respondents’ name on the questionnaire.
Respondents were informed of their rights to voluntarily consent or decline to participate and to withdraw participation at any time.
This chapter described the research methodology, including the population, sample, data collection methods and instrument, as well as strategies used to ensure the ethical standards, reliability and validity of the study. The research used a qualitative and descriptive survey design. Questionnaires were administered by the researcher himself by email and also through face-to-face contact to a sample of 385 respondents. The questionnaires had only closed-ended questions. Respondents were asked to give their perception of statements using a 5-point Likert scale which included: strongly agree, agree, neutral, disagree and strongly disagree. The next chapter presents the results obtained after collecting data.
This chapter presents, analyses and discusses the research findings.
Out of the total sample size of 400, 385 mobile phone users responded to the questionnaire; which represents 96.25% of the total sample size.
The sample consisted of 61.55% male and 38% female. Regarding their ages, 62.72% of respondents were within 20 and 45 years. Respondent having 46 years and above accounted for 27.26%.
Respondents have various educational backgrounds. Respondents with First Degree accounted for 58.18% of the total sample. Respondent with Master’s Degree and above accounted for 25.19% while respondents with Diploma accounted for 9.35%.
Regarding their occupation, majority of respondents (67.27%) were employed. 25.19% were students and 3.37% were unemployed.
Regarding the duration of their subscription, more than half of the respondents started using the services of their mobile network more than 6 years ago. 3.11% of respondents had subscribed for less than 6 months while 13.24% of the sample represented those who subscribed for less than a year. The subscriptions that were less than a year could be subscribers who had recently changed their mobile networks, or new customers who subscribed not long ago before the study was undertaken. However, the fact that the majority respondents subscribed for more than 6 years is an indication that loyalty is high in the Ghanaian mobile telecommunication industry.
Table 4.3 shows the demographic data obtained from the study:
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Table 4.3: profile of respondents
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Figure 4.4.1: It takes time/effort to get used to the short codes of a mobile network. Source: Field survey, June 2014.
The above chart shows the perceptions of subscribers regarding learning cost. As can be seen from the chart, 253 respondents (i.e. 194 disagrees and 59 agrees) representing 65.71% of the total sample size, did not perceive any expenditure of time or effort, in getting used to a new mobile operator. 95 respondents representing 24.67% of the total sample size were uncertain or neutral regarding the time it takes to get used to a new mobile network. However, 35 respondents representing 9.09% of the total sample size perceived some expenditure of time and effort in getting used to a new mobile network. These results indicate that learning cost has a negative effect on subscriber retention. In other words, switching from one operator to another is relatively easy because mobile phone users can easily adapt and familiarize themselves with the new mobile network. This result converges with the study of Aaron and Robert (2013) who argued that when products or services of a given type are similar, there are little to no learning costs. The authors also stated that the more significant the differences are across products and services, the longer or more concentrated the effort required to learn how to use a different product or service, the greater the cost of switching between products or services.
Figure 4.4.2: Switching to another mobile network would be risky since i would not know the quality of its services. Source: Field survey, June 2014. The above chart shows the responses given by respondents on the risk that they perceived in switching mobile networks. As shown in the chart, 135 respondents (that is 96 disagreeing and 39 strongly disagreeing) representing 35.06% of the total sample size do not find it risky to switch without information on the quality of the services offered by mobile carriers. 65 respondents representing 16.88% of the total sample size were neutral while 195 respondents representing 50.64% of the total sample size find it risky to switch mobile networks without information on their quality of service. These results show that uncertainty cost has a positive influence on subscriber retention. In order words, a reason why subscribers stay with their mobile networks is because they are uncertain about whether the services of another mobile carrier are better than their current provider. Evaluating the quality of service offered by a mobile carrier before using it can be challenging. Mobile telecommunication services are part of the group of products/services that customers cannot evaluate unless they have purchased them and used them for a while. As a result, it becomes difficult to switch to another mobile operator because the output of that decision will only be known in the future.
Figure 4.4.3: If I were to switch, it would take me too much time to compare the tariffs and services of the competing mobile networks. Source: Field survey, June 2014.
The above chart shows the different responses obtain on the perceived search and evaluation cost. As shown in the above chart, 194 respondents representing 50.38% of the total sample size don’t find it time consuming to search for and compare the pricing plans of the different mobile carriers prior to switch. This could be explained by the fact that information related to mobile operators services and tariffs are available on their websites. As a result, it becomes easier for subscribers who are price-sensitive to compare this information in one place. 94 respondents representing 24.41% of the total sample size were neutral while 97 respondents representing 25.19% of the sample size said it would be time consuming for them to search for such information. These results show that search cost would not be incurred by subscribers if they were to switch. Therefore, search cost has a negative influence on subscriber retention.
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Figure 4.4.4: An attractive promotional offer could make me switch. Source: Field survey, June 2014.
The chart above shows the likelihood that respondents would change their mobile network based on the attractive of promotions offered by competitors. As can be seen from the chart, 180 respondents (that is 147 agrees and 33 strongly disagrees) representing 46.75% of the total sample size were likely to change their mobile networks due to an attractive promotion. 22.33% of respondents were neutral. In other words, they may or may not switch due to an attractive promotion. 119 respondents (that is 44 disagrees and 75 strongly disagrees) representing 30.90% of the total sample size were very unlikely to switch their mobile networks. This is an indication that mobile phone users in Accra are promotion-sensitive; and an attractive promotion would make them switch.
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Figure 4.4.5: The brand of my mobile network plays a major role in my decision to stay. Source: Field survey, June 2014.
As shown in the chart above, 190 respondents representing 49.3% of the total sample size were indecisive as to whether the brand of a mobile network could influence their selections of mobile networks. 97 respondents representing 25.19% of respondents however, agreed that the public image of a mobile network could influence their selections. 98 respondents (that is 62 disagrees and 36 strongly disagrees) representing 25.45% of respondents however disagreed. In conclusion, it can be said that brand image has little to no influence on subscribers switching decision.
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Figure 4.4.6: If i had to change my mobile network, i know of another which is just as good. Source: Field survey, June 2014.
This chart measures the subscribers’ perception of the attractiveness and viability of the competing mobile networks in the marketplace. As can be seen from the chart, 279 respondents representing 72.46% of the total sample size perceive competing mobile carriers as a good replacements to their mobile networks. 60 respondents representing 15.58% of the total sample size were neutral; and 46 respondents, representing 11.94% do not perceive competing mobile carriers as attractive or viable. These results show that subscribers in Ghana perceive viable and better alternatives in the marketplace. That perception has a negative influence on subscriber retention in the sense that it gives them a very good incentive to switch.
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Figure 4.4.7: Compared to my mobile network, there is no other one with which i could be satisfied. Source: Field survey, June 2014.
The chart above shows the perception of respondents regarding the satisfaction that they might get from other mobile networks. As shown on the chart, more than half of respondents (167 disagreeing and 66 strongly disagreeing) perceive that they might as well be satisfied with another mobile network. In other words subscribers perceive competing mobile carriers as attractive and viable. 97 respondents representing 25.19% of the sample size were neutral while 56 respondents representing do not perceive competing mobile carriers as viable.
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Figure 4.4.8: I don’t want to change my mobile network because it offers bonuses that i would not receive elsewhere. Source: Field survey, June 2014.
This chart measures the subscribers’ perception of the viability of the competing mobile networks. It can be seen from the chart that 183 respondents representing 47.53% of the total sample size, were not sure whether the bonuses given on their networks would be the same another one. 94 respondents representing 24.41% of the total sample size said that they would receive such bonuses on another network while 108 respondents representing 28.05% of the total sample size, agree that they would not receive such bonuses. These results show that subscribers have little information on the services and privileges offered by the mobile carriers in the marketplace. As a result, subscribers would rather stay on their mobile networks and enjoy the privileges offered by their mobile carriers than switch to another mobile network and lose those privileges.
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Figure 4.4.9: if i were to switch, i would not rely on the experience of friends in order to determine the quality of service of the mobile network i intend to switch to. Source: field survey, June 2014.
The above chart shows the perception of respondents regarding the influence of their friends’ experience and word-of-mouth in evaluating the quality of service of a mobile network. As can be seen from the chart, 63.11% of respondents (that is 192 disagrees and 51 strongly disagrees) would evaluate the quality of service of a mobile network they intend to switch to, through their friends experiences and satisfaction with that particular mobile network. 29.87% of respondents (that is 17 strongly agrees and 98 agrees) would not use their friends experiences or level of satisfaction in order to evaluate the quality of service of a mobile network. 25 respondents representing 6.49% of the total sample size were neutral. This indicates that mobile phone users in Accra rely on the word-of-mouth of their friends, family members and relatives in order to evaluate the performance of the different networks and make a comparison. This behaviour actually contributes a lot in the reduction of uncertainty cost, which is refers to the doubt surrounding the performance of an untested product or service. However, rely on another customer’s experience with a product or service is not always a good practice. A customer has a good experience with a product or service these latter meet his/her expectations. And expectations vary a lot from one customer to another. Thus customer A having a bad experience with product/service C doesn’t necessarily mean that customer B will also have a bad experience with the same product/service.
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Figure 4.4.10: I don’t see much difference between my mobile operator and the competitors regarding the services that they offer. Source: Field survey, June 2014.
As shown in the above chart, 180 respondents (that is 31 strongly agrees and 149 agrees), which represent 46.75% of the total sample size, do not see much difference between the services offered by their mobile network and the ones offered by the rival firms. The other majority that is 71 respondents which represent 18.44% of the sample size were neutral. In conclusion, these results show that services in the Ghanaian mobile telecommunication industry are not very differentiated.
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Figure 4.4.11. I am reluctant to switch because i worry that the quality of service and convenience i would receive might deteriorate.
This chart shows the subscribers perception of uncertainty costs. As can be seen on the chart, 232 respondents representing 60.25% of the total sample size disagree to the statement that switching their mobile networks would result in a loss of quality and convenience. 85 respondents representing 22.07% of the sample size were neutral while 68 respondents representing 17.66% of the sample size agreed that switching mobile network would result in a loss of service quality and convenience. These results show that uncertainty cost has a negative effect on subscriber retention. In other words, subscribers are somehow sure that if they were to switch, the convenience and quality of service offered on their networks would be the same or better on another one.
This section evaluates the effects of switching barriers on subscriber retention.
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Figure 4.6: Effect of switching barriers on subscriber retention. Source: researcher fields data, 2014.
From the chart above, it can be concluded that switching barriers have a negative effect on subscriber retention because of low switching costs and high attractiveness of alternatives. Switching costs have no influence on switching intentions. In other words, they are not perceived as a barrier to switch to another provider. This result is in contrast with prior research in mobile telecommunication industries (Xuan and Feng, (2009); Syed et al. (2013); Moon-Koo et al. (2004); Laszlo and Nagy (2007); Gerpott et Schindler (2001)) which found that switching costs positively influence switching intentions. This also confirms that switching costs are not a one size fit all retention strategy and their effect vary from one industry to another. The chart also shows that attractiveness of alternatives has a high relative importance index. This indicates that mobile phone users perceive the other networks as attractive. The perception of viable alternatives also has a negative effect on subscriber retention because the more subscribers perceive alternatives as attractive, the more they will be inclined to switch.
This chapter summarises the purpose and objectives of the study, discusses its major findings and conclusions, discuss the implications for management, and makes some recommendation for further research.
The goal of this research was to evaluate the effect of switching barriers on subscriber retention in the Ghanaian mobile telecommunication industry.
The findings of the research show that switching barriers have a negative effect on subscriber retention in the Ghanaian mobile telecommunication industry. In other words, subscribers can easily switch from one mobile network to another without incurring any costs. This result can be explained by the fact that first, the introduction of mobile number portability, which allows mobile phone users to change their mobile network while keeping their same mobile numbers, has reduced consumers switching cost to some great extant. Second, none of the three costs studied in the research namely: search and evaluation cost, learning cost and uncertainty cost are perceived by subscribers as switching costs. However, it was found in the research that in order to reduce or avoid search and evaluation cost, subscribers rely on the word-of-mouth of other subscribers namely friends, relative or family members who use the network they intend to switch to. Thus their decision to switch is influenced by the satisfaction that these subscribers have with the mobile network. This result is in line with the studies of Nitzan and Libai (2011) and Michael Haenlein (2011) who found that social network effects not only impact customer acquisition, but also has a significant influence on customer churn. Third, mobile phone users perceived competing operators as attractive. In other words, customer estimate of the likely satisfaction available from an alternative mobile network is high. As mentioned by Ghazali (2011), attraction towards alternatives in a marketplace strongly and negatively influence the development of loyal customers.
In conclusion, the fact that subscribers do not perceive any switching cost, gives them a very good incentive to switch. It is thus necessary for mobile network operators, to develop other retention strategies that would help them retain their customers and ensure profitability and survivability.
Based on the research findings, the researcher recommends that mobile operators:
1. Develop loyalty programs.
Loyalty programs are rewards given by firms to customers who frequently purchase the firm’s products or service. Loyalty programs give an incentive for subscribers to stay because they will lose all the benefits or rewards gain from their current provider if they switch. Mobile operators could for instance give discount or bonuses to subscribers when they buy a certain amount of credit, give subscribers free air time when they make certain call duration, free international data and text when subscribers reach a certain amount of megabytes or send a certain number of text messages. Firms could also upgrade subscribers phone when these latter have been loyal to the firms and have purchased the firm’s services in a large amount.
2. Measure their customer retention rates.
Buchanan and Gillies (1990) defined customer retention rate as “The percentage of customers at the beginning of the year that still remain at the end of the year. By measuring their customer retention rate, telecommunication firms would be able to monitor their customer base and also the performance of their retention strategies.
3. Build an organizational culture that is centered on subscriber retention.
In order to ensure the success of their retention strategies, managers of telecommunication companies must ensure that their firms actively support retention efforts (Shane Gamble, 2007). Organizational culture is defined as the shared values, beliefs and expectations that members of an organization come to share and which also contribute to the achievement of the organization’s goals and objectives. In order to develop such culture, managers could empower employees to fix problems rapidly for subscribers, and do what is in their best interest. Employees are the face of the organization and by feeling empowered, employees are more likely to become engaged. Engaged employees provide better customer service, they provide better brand experience and they make the organization more customer focused (Blair Entermann, 2006).
4. Reduce the perception that their rivals are appealing:
The study’s findings suggest that mobile network operators should strategically cultivate the perceptions of barriers to switching. In particular, the lack of perception of good alternatives forms a formidable barrier to exit and hence, is a vital factor in customer retention. As previously discussed, the concept of attractiveness of alternatives is closely related to the perception of firm heterogeneity or differentiation in strategy research. A mobile network operator is differentiated when it provides something of value that is not offered by the competitors. Subscribers will perceive few attractive alternatives in the marketplace when the mobile network operator secures enough differential advantage, thereby increasing the possibility of loyalty. Given the highly competitive mobile telecommunication environment, and since mobile network operators have no control over the behaviour of competitors, mobile network operators interested in improving customer retention should make every effort to reduce the perception that alternatives are appealing. This can be achieved through:
- Service differentiation
Mobile operators could provide services of good quality to their customers along with high availability, and reliability. By offering services of better quality, and greater performance, mobile operators ensure that subscribers have a good experience or are satisfied with their services which will then drive them to stay. Prior studies in customer satisfaction in Ghana show that customers are not satisfied with the quality and availability of services offered by their mobile operators. This is an opportunity that mobile operators should seize which will not only retain their customers but also make enable them to attract new ones.
- Differentiating their promotions and advertisements.
Mobile operators could use unique and advertisings and promotions to project the image of their company or services (Ross Beard, 2013). They may use a totally different advertising medium that will differentiate them from their competitors and at the same time, enable them to reach a large number of customers or a particular market segment (Ross Beard, 2013).
- Differentiating their tariffs
Price plays a major role in the decision of customers especially when it comes to buying a product or service. Mobile network operators should position their prices at a level that their subscribers are willing to pay so that it offers them great value (Ross Beard, 2013). It is however difficult to offer services of high quality at charge low costs. Therefore there is a trade-off to be made regarding the quality of services offered and the tariffs charged for them.
Competitive markets work best for subscribers when they are unimpeded in their ability to switch among service providers. Therefore, the regulator should:
1- Conduct an annual study to identify and measure the existence of subscriber switching costs to assess their impact on competition and subscriber welfare in the mobile telecommunication industry.
2- Establish standards for, and publish quality of service information associated with each mobile network, such as dropped call rates and the number of complaints regulators receive about each mobile network.
3- Require mobile network operator to produce accurate coverage maps that clearly convey meaningful information about the quality of their service.
The researcher recommends that further studies should be conducted on post-paid subscribers, as well as how mobile number portability has affected the profitability and viability of operators in the telecommunication industry.
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GHANA TECHNOLOGY UNIVERSITY COLLEGE (GTUC)
Questionnaire for data collection
This questionnaire is designed to help obtain answers to an academic research project. Specifically, the researcher wants to determine the factors that prevent subscribers from switching from one mobile operator to another. Please be assured that all information that you provide will be kept in strict confidence and used with regards to the highest ethical standards. Please attempts to answer all questions by ticking the appropriate boxes. Thank you very much for your time and consideration.
Section A: Your opinion about switching mobile network
Questions 06 to 14 below will look at your opinions about switching from one mobile network to another.
Please, indicate your level of agreement with the following statements:
SA= Strongly Agree, A= Agree, N= Neutral, D=Disagree. SD= Strongly Disagree
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Section B: About you.
Please tell us a little bit about yourself. These questions are necessary for a more meaningful interpretation of our research results.
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