THE IMPACT OF CUSTOMER RELATIONSHIP MARKETING TACTICS ON
CUSTOMER LOYALTY WITHIN MOBILE TELECOMMUNICATION INDUSTRY
A CASE STUDY OF ORANGE TELECOMMUNICATION COMPANY, ELDORET
Abstract
In today’s hyper competitive market, it is very essential for all the companies to have a long term
and profitable relationship with their clients and to reach a maximum level of loyalty. In the
early nineties, relationship marketing has been seen as a very important factor. It became an
integral part of the industry and most importantly in the service sector. Companies use many
tactics to retain their customers. Many of the tactics fail or are ineffective on the customers. As a
result, target customer shows a behavior called switching. This study is aimed at investigating
the relationship of these marketing tactics on trust and satisfaction of customer, which ultimately
increases customer loyalty by focusing on Orange Telecom in Kenya. The three specific
objectives are to: Establish the kind of relationship marketing tactics in Orange mobile; establish
the level of customer loyalty within Orange Telecom;Investigate the impact of relationship
marketing tactics on customer loyalty. This study will be guided by process reengineering theory
which states that organizations should be structured according to complete tasks and processes
rather than functions. The conceptual framework will construct the impact of customer
relationship marketing tactics as independent variable and customer loyalty and retention as
dependant variable. The study area is Eldoret town in Uasin Gishu County a destination with
formidable number of Orange subscribers. The total population will be 300 respondents from
Uasin Gishu County. This population will 250 customers subscribed to Orange network and 50
executives from Orange firm. The 20% of the target population of 300 respondents made a
sample size of 60 respondents. Primary data will be collected through administration of
questionnaires. Questionnaires will be validated through a pilot study of 60 subscribers prior to
the main study. Data analysis will be performed using correlation analysis, factor analysis and
logistic regression analysis and presented using tables, graphs and charts. Major research
contributions will be the to: establish the kind of relationship marketing tactics in practice
positively contribute to customer loyalty and find out different relationship marketing tactics
impact on customer loyalty in Eldoret town. This research project will offer sufficient literature
to the industry players,telecommunication and potential investors in the industry.
Student: ……………………………………... Sign: __________ Date: ____________________
Supervisors
1………………..……………..……… 2………………….…….…………….…………
Sign…………………..Date……..……….…….. Sign………….………Date………….…………
1.0 Introduction
1.1Background to the study
In this competitive business environment, sellers are not only concerned about providing quality
products or services but their major concern is to retain the customer for a long term and
profitable relationship (Tseng,2007). Due to this intense competition in the market, they need to
interact with their customer by looking beyond the traditional strategy of marketing mix. Today’s
market-place demands to achieve certain competitive edge. Therefore, companies are
emphasizing more and more on relationship marketing to create a bond with their customers.
Relationship marketing is becoming an integral part of marketing strategy and thus contributing
towards acquiring strong competitive advantage. Hence, repeat purchase is increasing, thus
benefiting both parties (Andaleeb, 1996). In the last decade of 20th century, relationship
marketing became an important issue for industry and academia (Egan, 2001). The primary goal
of relationship marketing is to increase customer loyalty and to build a strong relationship
between company and customer (Peng and Wang, 2006). Developing relationships in the market
are not very simple, customers and companies can achieve mutual benefits if they do so (Stone et
al., 2000). An unsatisfied customer was switched to another company and relationship tactics
were applied to avoid these behaviors. An effective and customer oriented relationship strategy
may help companies to retain customers for a long time (Tseng, 2007). In the telecommunication
industry, firms are forced to perform their best to maximize customer satisfaction. In this
scenario, relationship marketing plays an important role in satisfying their customers (Gronroos,
2004).There are four major rivals fighting for market share (Safaricom,Essar (Yu),Airtel and
Telcom Orange)
The industry in Kenya has enjoyed astronomical growth. At the end of the second quarter of
2009/2010(Q2 09/10), the four licensed operators had a combined subscriber base of 19.4
million mobile subscribers, a 7.9 per cent increase in the total number of subscribers compared to
the previous quarter and a 11.9 per cent compared to the same quarter of the previous year. At
the end of the quarter the penetration rate of mobile service had risen to 49.7 per 100 inhabitants.
This compares favorably the world average of 49.8 per 100 inhabitants (ITU, world development
index 2009) of 2007 data.( 02.03.10: CCK) The industry has been tipped to become a main
contributor to Kenya’s economic growth in the next five years.A new report by global research
company Pyramid Research released noted demand for telecom services is driving growth of the
sector. “Competitive tariffs and a battle of promotions continue to drive growth,” noted the
report. As Safaricom defends its leadership and Orange and Airtel try to make a bigger push for
increased market share through its new 3G networks and mobile money services, the market is
set to maintain vibrancy. The data and internet market has continued to show a positive trend in
the revenues as well as investments over the years. In 2009 alone the total annual revenues
recorded 7.97 billion Kenya Shillings from 7.59 billion Kenya Shillings in 2008. This represents
a 5.0 per cent increase during the year.(CCK 2010) The total mobile annual revenue grew by
15.9 per cent to reach 84.2 billion Kenya shillings in 2009 compared to 72.6 billion Kenya
shillings in 2008. However, the Average Revenue Per User per month continued to decline to
record 362.20 Kenya shillings in 2009 compared to 376.56 Kenya shillings in 2008. Mobile
voice continued to hold the biggest market share in 2012, dominating 63 per cent of the market
with revenue of $1.1 billion. (GDaily nation May 17,G 2013)
Safaricom
Safaricom was the first operator to launch GSM-based mobile service in Kenya in 1999. It has
more recently launched voice SMS, mobile advertising, missed call alert and SIMEX. Their 3G
network now covers Nairobi, Mombasa, Magadi, Eldoret and Naivasha with 301 3G-enabled
base stations and they have recently acquired a 51% stake in One Communication Ltd to provide
fixed and wireless data services. The majority of its shares are owned by Vodafone Kenya.
Airtel (was Zain)
The second operator in Kenya's mobile market is Zain Kenya which was bought by Bharti in
March 2010. They had 2.09 million subscribers at as at 31 Dec 2009, a reduction of 32 percent
year on year. Bharti's purchase of Zain is likely to see increased price competition among
Kenyan operators as their model works on a lower cost base. They have demonstrated a penchant
for negotiating lower rates from equipment suppliers due to its ability to place bulk orders. Zain
had already started a cost reduction programme before the merger.
Essar Telecom Kenya (known as the brand Yu).
The company won the licence to operate mobile phone services in Kenya in 2003. After winning
the licence, the carrier was engaged in several court cases involving shareholders' disputes and
non-payment of licence fees, so delaying the service launch until 2008. Due to the resulting
tarnished image in Kenya, the company has opted to launch its services under the brand name
Yu. They had 0.87 million subscribers at as 31 Dec 2009, an increase of 1344 percent year on
year.
Telkom Kenya was established as a telecommunications operator under the Companies Act in
April 1999.It provides integrated communications solutions in Kenya. The company, as at June
2011, had a customer base of approximately 2,800,000 customers on GSM, fixed and CDMA
wireless platforms with a country-wide presence. Telkom Kenya's partnership with France
Telecom Group, saw the launch of the Orange brand in Kenya in 2008. Telkom Kenya had been
burdened with high operating costs, over staffing, high debt costs and low cash flow, and
consequently over the last couple of years it could not invest in its infrastructure to cope with
increasing competition. 2007 saw the workforce reduced by 50 percent to bring the loss making
telecom carrier back to profitability. (African telecoms news 2013)
1.2 Statement of research problem
The success and sustainability of any organization in a competitive environment is determined
by its choice of strategy. However most strategies are replicated by competitors and thus a
company must position itself in the minds of the consumer in order to remain competitive. By
the end of 2014, the total number of mobile subscribers is predicted to rise from 24.6 million
mobile subscribers at year-end 2010 to 33.2 million, achieving a penetration rate of 79 percent.
There are also evidences which shows that consumers tend to move to other competitors when
they cannot be satisfied with the service quality. Relationship marketing strategy might be one of
the best ways for service providers to retain customers and building customer loyalty. Many
empirical studies have provided evidences that relationship marketing tactics have impact on
behavioral loyalty which affects customer retention.Orange Telkom has implemented marketing
activities ranging from aggressive sales tactics, telemarketing, direct mail, doorstep selling, radio
advertisements, TV advertisement, and internet promotion with an aim of increasing market
share and achieving customer loyalty. Despite all these efforts ,there is no sufficient data that
shows the impact of these efforts on customer loyalty.
1.3 Objectives of the study
The main purpose of this research is to investigate the impact of customer relationship marketing
tactics on customer loyalty within Orange mobile telecommunication firm.
1.3.1 Specific Research Objectives
Specifically,the study seeks to:
1.Establish the kind of relationship marketing tactics in Orange Telecom
2.Establish the level of customer loyalty within Orange network
1.4.Research Questions
1. What is the impact of customer relationship marketing tactics on customer loyalty within
Orange mobile telecommunication firm?
2. Which relationship marketing tactics are applied by Orange Telecom?
3. What is the level of customer loyalty within Orange Telecom?
1.5 Scope of the Study
This research study will be carried in a selected Orange customer care outlet in Eldoret town,
Uasin Gishu County. This is due to the big number of Orange outlets .This research study will be
carried in June 2013.
1.6 Justification of the Study
There has been insufficient literature on the impact of customer relationship marketing tactics on
customer loyalty and retention within mobile telecommunication industry. This research project
will offer sufficient literature concerning customer retention and maintaining their loyalty.
1.7 Conceptual Framework
Relationship marketing tactics
Source author: 2013
Intervening variables
Source author: 2013
Customer loyalty
Bonuses
On net
tariffs
Data
bundles
Free calls
Repurchas
e
Service
Quality
Price
Perception
Brand
Image
Value
Offers
Customer
trust
Customer
Satisfactio
n
