Are Loyalty Programmes Really Worth in the Mobile Phones Services
Industry?
Karunaratna A.C.
Department of Marketing, Faculty of Management and Finance,
University of Ruhuna, Matara
[email protected]
Wijesundara T.R.
Department of Marketing, Faculty of Management and Finance,
University of Ruhuna, Matara
[email protected]
Abstract
The marketers face a huge challenge on how to retain their existing customers due to
entrance of new competitors both from local and international arena. To retain customers,
their needs, and wants should be successfully satisfied since highly satisfied customer stays
loyal longer. In this context, customer loyalty is recognized as a key factor to retain
customers in long run. In recent years, many companies have introduced loyalty programmes
with the goal of enhancing customer loyalty. Loyalty programmes aim to enhance customer
purchasing, but it is particularly the company’s best customers that are most likely to
subscribe as members. To take advantage of the loyalty program, a customer must become a
member and must identify himself as such at every purchase occasion. A unique trait of a
loyalty program is that customers decide explicitly whether to participate in the program.
The mobile phone service industry plays as one of the major service industries with a higher
growth rate in this decade. The mobile phone is a stronger tool today, which strengthens the
relationships or social bonds among family members, friends, and other interesting parties.
Mobile phone service providers have a challenge how to keep customers loyal in long run.
They attempt to keep customers loyalty through implementing loyalty programmes since most
of customers would prefer to contribute to loyalty programmes since they have opportunity to
be rewarded for their patronage. Therefore, this tool has become more popular among
marketers and use as an effective tool to enhance customer loyalty. This study was focused to
identify the impact of loyalty programmes on customer loyalty implemented by Dialog and
Mobitel for their prepaid packages. The survey method was used as the main research
method. The convenience sampling was used for the study and the sample consisted of 200
respondents. The study was conducted at the end of 2010 in two major provinces such as
Southern and Sabaragamuwa in Sri Lanka. The study attempted to identify the nature of
loyalty programmes, conditions of participation, active contribution, and satisfaction level of
prizes awarded. T- test was used to analyze the data and the study results show a significant
difference in implementation of loyalty programmes of Mobitel and Dialog, while Mobitel
prepaid customers have demonstrated higher level of contribution for loyalty programmes
and exhibited higher level of loyalty.
Key Words: Customer Loyalty, Loyalty Programmes, Mobile Phones Pre-paid Packages,
Mobile Phones Service Providers
Introduction
The current business environment has become so competitive in the midst of immense
increase of customer needs and wants in demand and the huge number of marketers to cater
customer needs at supply. Millions of products under different brands are entered to the
market at each day with the objective of attracting customers‟ mind and heart towards the
brand. To succeed in the market over competitive brands, the companies attempt to develop
customers‟ loyalty. It is noticeable that a highly satisfied customer stays loyal longer, talks
favourably about the company products and services, pays less attention on competing
brands, and less sensitive to price and offers of competing brands (Bowen & Shoemaker,
1998; Kotler & Armstrong, 2005).
The mobile phone industry is recognized as one of the major industries rapidly being
developed with a higher growth rate in this decade. Within the telecommunications industry,
the mobile phone plays a leading role by means of communication to exchange information,
ideas, and connect people with each other. The mobile phone is a stronger tool today, which
strengthens the relationships or social bonds among family members, friends, and other
interesting parties (Wei & Lo, 2006). The mobile phone today is not merely a device used to
communicate through voice messages and written short messages (SMS). It has evolved to
perform more than what it was initially intended to do, and today a mobile phone is more like
a mini computer.
Due to higher demand and profitability, more and more service providers/ operators tend to
enter into the industry and a huge competition has been created. The service operators face a
greater challenge on how to retain their existing customers due to entrance of new
competitors both from local and international arena. Thus, a better approach lies in adopting
technology to leverage a customer-centric approach that focuses the business on retaining
existing customer and seeking their loyalty (Chen & Ching, 2007). Since it is essential to
practice sound strategies to develop customer loyalty in this industry at high velocity, this
study attempts to evaluate the nature and role of loyalty programmes for enhancing customer
loyalty.
Problem of the Study
The interesting feature behind a brand is nothing but the loyalty of customers towards that
brand. Loyalty is defined as repeated purchases of particular product or service during a
certain period of time (Yi & Jeon, 2003). Building a strong brand loyalty is not an easy task,
because loyalty operates in a psychological and competitive context (Chakrapani, 1998).
However, in the case of earning healthy profits in long run, retaining customers is extremely
important (Ahmad & Buttle, 2001; Gerpott et al., 2001; DongBack, Ranganathan & Babad,
2007). To retain, customer loyalty needs to be drawn (Lovelock & Wirtz, 2004; Singh &
Sirdeshmukh, 2000).
In past few years, worldwide mobile phone usage was increased very rapidly. Especially, in
Asian developing countries, such as Sri Lanka, the demand for mobile phone usage has
significantly increased and this emerging trend is dynamically grown up. This is because of
mobile phone is treated as a necessity of life for most of people that contribute to effective
communication. The mobile phone today has strengthened the relationships among people
even in cases where they do not meet physically. Specially, the relationships between
employee and employer and business relationships over personal bonds have become more
familiar and easier as a result of the usage of mobile phone communication. More
importantly, the mobile phone would provide a greater advantage to connect people in
emergency-situations as well.
For the usage of a mobile phone, linking with a service provider is essential and many service
providers facilitate different services and features to satisfy their subscribers. Due to the
higher attraction and demand for the mobile phone service, the number of service providers is
increased daily. Thus, the competition in the mobile telecommunications market has also
grown at an unprecedented rate during past several years. This has created an intensified
competition among them. Therefore, the major challenge faced by the service providers today
is how to keep loyal customers in long run as the means of building strong relationships with
their subscribers. Almost all the service operators utilize effective loyalty programmes to
draw and keep customer loyalty in long run. A loyalty program can be identified as supplier‟s
structural effort to increase customers‟ attitudinal and behavioural commitment to the
supplier‟s market offering (Noordhoff et al., 2004). Therefore, this tool has become more
popular among marketers and use as an effective tool to enhance customer loyalty and
patronage. Most of customers would prefer to contribute to loyalty programmes since they
have opportunity to become the members of the loyalty programmes and be rewarded for
their patronage. Therefore, this tool has become more popular among marketers and use as an
effective tool to enhance customer loyalty and patronage. At the same time, loyalty
programmes are used to discourage customer switching and stimulate them remain with the
existing brand in long run. Price promotions, coupons, and gifts for repeat purchases,
lotteries, and club memberships are a few of among such loyalty programmes. Therefore, in
recent years, many companies have introduced loyalty programmes with the goal of
improving customer loyalty and revenues (Leenheer et al., 2002). As such popular loyalty
programmes in the field of mobile phone telecommunications industry can be identified as
„Mobitel Smart Recharge Bonanza‟ and „Dialog Lord of the Reload‟. Due to this high
preference and applicability, many scholars (Dowling & Uncles, 1997; Kim et al., 2001;
Leenheer et al., 2002 & 2003; Yi & Jeon, 2003; Noordhoff et al., 2004; Lewis, 2004; MeyerWaarden, 2006; Chen & Ching, 2007) have gained interest to scrutinize in this field. Based
on that this study is conducted with the purpose of evaluating the nature of customer loyalty
programmes in the mobile phone telecommunications service industry in Sri Lanka and how
they have contributed to develop the customer loyalty. Therefore, the objective of the study
enumerated as to evaluate the customer loyalty programmes in the mobile phones
telecommunications service industry in Sri Lanka.
Literature Review
Loyalty is defined as repeated purchases of particular product or service during a certain
period of time (Yi & Jeon, 2003). Building a strong brand loyalty is not an easy task, because
loyalty operates in a psychological and competitive context (Chakrapani, 1998). It takes
longer time with huge effort to build a brand loyalty in the customers‟ heart but it will only
take a few seconds to lose. Therefore, the next challenge of marketers would be to develop
customers‟ loyalty towards the brand so that brand would be strongly established in the
market and customers‟ mind set. Over time, the customer may develop a commitment
towards a brand and become brand loyal. Hence, brand loyalty implies consistent repurchase
of a brand, resulting from a positive affection of the consumer towards that brand (Mellens et
al., 1996). Therefore, brand loyalty has become a focal point of interest for marketing
researchers and practitioners (Russell-Bennett et al., 2007).
Based on the definition of brand loyalty presented by Jacoby & Chestnut (1978), Mellens et
al. (1996) identify the measures for brand loyalty as (a) biased, (b) behavioural response, (c)
expressed over time, (d) by some decision-making unit, (e) with respect to one or more
alternative brands out of a set of such brands, and (f) is a function of psychological (decisionmaking evaluative) process. Accordingly, they identify four measures of brand loyalty as
attitudinal measures versus behavioural measures and brand-oriented measures versus
individual-oriented measures.
Oliver (1999) defines the loyalty as “a deeply held commitment to rebuy or repatronize a
preferred product/service consistently in the future, thereby causing repetitive same-brand or
same brand-set purchasing, despite situational influences and marketing efforts having the
potential to cause switching behaviour” (Oliver, 1999; pp: 34).
Richard L. Oliver (1999) investigates what aspect of the consumer satisfaction response has
implications for loyalty and what portion of the loyalty response is due to this satisfaction
component. The analysis concludes that satisfaction is a necessary step in loyalty formation
but becomes less significant as loyalty begins to set through other mechanisms and the
loyalty can not be achieved or pursued as a reasonable goal by many providers because of the
nature of the product category (service) or consumer disinterest. However, he argues that the
satisfaction is not the only component, which contributes to loyalty. Therefore, ultimate
loyalty emerges as a combination of perceived product superiority, personal fortitude, social
bonding, and their synergistic effects. Anyway, satisfaction remains a worthy pursuit among
the consumer marketing community (Oliver, 1999). At the same time, we can not ignore that
some scholars and researcher (Jones & Sasser, 1995) argue that the mere satisfaction is not
enough to keep customers loyal.
In recent years, many companies have introduced loyalty programmes with the goal of
improving customer loyalty and revenues (Leenheer et al., 2002). Loyalty programmes
provide incentives to customers to maintain their relationships and evoke a sense of value in
that they are recognized (i.e., preferential treatment, exclusive offers, elitism, etc.) and
rewarded (i.e., redeemable points, perks, etc.) for participating in the relationship. Such help
shape behavior and later attitudinal preferences towards the product or service, and
consequently build loyalty (Chen & Ching, 2007).
Noordhoff et al. (2004), define a loyalty program as a supplier‟s structural effort to increase
customers‟ attitudinal and behavioural commitment to the supplier‟s market offering. In line
with previous research, Leenheer et al. (2002 and 2003) define a loyalty programme as an
integrated system of marketing actions, which aims to make member customers more loyal.
The loyalty programmes such as price promotions, coupons and gifts for repeat purchases,
lotteries, and club memberships etc. are operated as dynamic incentive schemes by providing
different kinds of benefits to retain customers over time and specially discourage existing
customers‟ brand switching towards competitive offers. In times of severe competition, a
loyalty program, which is often called a reward program, is usually introduced to build
customer loyalty through the planned reward scheme based on a customer‟s purchase history
(Yi & Jeon, 2003).
Under the collective term of a loyalty program, a wide range of programmes operates that
differ on several dimensions. Loyalty programmes differ in the degree to which they give
discounts, have a saving program, and are based on cooperation with other companies. These
programs vary in their rewarding mechanisms and cooperation with other companies. A
customer must become member and identify as such at every purchase, to take advantage of
the loyalty program. It is expected that loyalty programme members show more loyal buying
behaviour compared to two reference groups, namely relative to non-member customers of
the same company, and relative to customers of a company without a loyalty program.
Therefore, it is believed that customers become more loyal if they are members of the loyalty
program. This occurs as the participants are always rewarded for their active contribution of
the loyalty programmes (Leenheer et al., 2002). Most of the loyalty programmes are
organized focusing heavy users to be rewarded them. At the same time, these loyalty
programmes encourage light users to consume the product or service more or increase the
frequency of usage.
The design of the loyalty program might be an important determinant of its successfulness.
Hence, the effectiveness of a loyalty program is likely to depend on its design. Leenheer et al.
(2002) present three types of such designs.
Saving Component
A saving program gives customers saving points, dependent on the monetary amount spent at
the company. A program member can redeem his points for a reward, such as a free product,
after s/he has reached the minimal redeeming threshold.
Price Discounts
Many loyalty programs give price discounts on promoted items. Consumers appreciate these
discounts since they represent direct rewards and are linked to the core product.
Multi-Vendor Structure
Some companies have a loyalty program in cooperation with companies from other industries
with non-overlapping product offerings.
Such loyalty programmes have long been an important element of managing effective
customer relationships in long term. The loyalty programmes, which are designed to offer
different types of rewards for existing customers on cumulative purchasing, are considered as
an explicit attempt to customer retention. These types of programmes encourage customers
for repeated purchases, frequent purchases or purchases in larger volumes while ultimate
objective is customer retention. Therefore, such types of programmes can be identified as
promotions campaigns either short term or long term under promotion strategy in the
marketing mix. The most important characteristic should be considered when developing a
loyalty programme is the attractiveness of the programme and the target group. Because each
of the customers who enjoys with a particular product or service will not perceive the loyalty
programme in the same way as others do. Anyway developing an effective loyalty
programme, which customers are rewarded in an impressive manner, can encourage
customers to make decisions so as to maximize their expected utility over an extended time
horizon (Lewis, 2004).
Reward programs is a promotional tool to develop customer loyalty, offer incentives to
consumers on the basis of cumulative purchases of a given product or service from a firm.
Reward programs have become increasingly common in many industries. Particularly, when
determining what type of reward program should be offered, it should consider reaping
higher benefits for both parties, the company and customers. In the marketplace, we observe
a diverse set of offerings, ranging from cash rewards, firm‟s free products or service, or free
products or service of another firm in a different category. Reward programs are also known
as loyalty programs. However, other types of promotional tools, such as coupons, cash
rebates, and sweepstakes, are not reward programs, because they are redeemed with each
purchase and not directly related to the repeat purchase (Kim et al., 2001).
According to Yi & Jeon, (2003), a loyalty program is a marketing program that is designed to
build customer loyalty by providing incentives to profitable customers. A loyalty program is
often based on several propositions, such as the following:
1. Customers may want more involving relationships with products that they purchase.
2. A proportion of these customers show a tendency to be loyal.
3. They are a profitable group (i.e., 20/80 law).
4. It is possible to reinforce these customers‟ loyalty through the loyalty program.
Typically, researchers measure five types of behaviour during certain time intervals to
operationalize loyalty in a competitive market (Yi & Jeon, 2003).
1. The percentage of customers buying a brand.
2. The number of purchases per buyer.
3. The percentage of customers who continue to buy the brand.
4. The percentage of customers who are 100 percent loyal.
5. The percentage of customers who also buy other brands-duplicate buyers.
Dowling & Uncles (1997) argue that to stand the best chance of success under tough market
conditions, a loyalty programme must enhance the overall value-proposition of the product or
service to help motivate buyers to make the next purchase of a product. Therefore, they
emphasize that it would be wise to fully cost the loyalty programme and compare those costs
such as development, marketing and on-going costs with a realistic assessment of the benefits
of the programme before introducing such a loyalty programme. Further Dowling & Uncles
(1997) state that there is a high tendency towards developing, implementing and measuring
the potential contribution of such loyalty programmes to develop customer loyalty.
Meyer-Waarden (2006) has conducted an empirical study to understand how and why
loyalty-card schemes should influence purchase behaviour and to investigate to what extent
they influence purchase behaviour in a non-contractual retailing context. According to him,
loyalty-card or reward program is one of effective current marketing tools for developing
relationships, stimulating product or service usage, and retaining and creating repeat purchase
behaviour. Thus, loyalty programmes should be based on interactivity and individualization,
and accompanied by techniques of direct marketing, pricing, and communication. They
become a strategic tool for management of the customer relationship and the customers‟
heterogeneousness. One aspect of a loyalty programme adoption decision is the change in
buying behaviour and/or repeat purchasing (attraction, intensity, loyalty). Only if the
individual perceived utilities (financial advantages, privileges, points, relationships etc.) are
judged higher than the costs (joining expenses, personal data offered to the firm, points
collection, repeat purchase obligations, switching costs etc.), customer would accept and
adhere with the programme. Once a customer has adopted a loyalty programme, one might
assume that she would favour repeat purchase behaviour and retention if it provides a higher
level of usefulness. The importance of repeat purchase behaviour, therefore, should relate
positively to programme membership and the magnitude of the gratifications (MeyerWaarden, 2006).
Methodology
The purpose of the study is to evaluate the nature and role of loyalty programmes in the
mobile phones service industry in Sri Lanka. Sri Lankan mobile phones service market
consists of five players namely Dialog, Mobitel, Airtel, Hutch, and Etisalat. The pilot survey
revealed that two players (Dialog and Mobitel) have relatively high market share and
subscription while other three players are comparatively low. Therefore, the study was
conducted to evaluate the loyalty programmes employed by the two major mobile service
providers and those two service providers were named as service provider 1 and 2. Since
those service providers mostly conduct their loyalty programmes on their prepaid packages at
the time of the study was conducted, this study was focused to evaluate such programmes
only in relation to the prepaid packages. As presented by Malhotra & Peterson (2006) the
descriptive research design can be applied for market studies, market share studies, sales
analysis studies, image studies, product usage studies, distribution studies, pricing studies,
and advertising and promotion studies etc. Therefore, descriptive research design was
adopted for this research study. The survey method was used as the main research method.
The population of this study consists of the entire prepaid mobile phone subscribers in Sri
Lanka who use the mobile phones service for their basic use of communications but not for
the use of business purpose. Meanwhile, the mobile phones subscribers whose primary
purpose is business are not covered for this study. The convenience sampling technique was
used for the study and the sample consists of 200 prepaid mobile phone subscribers. When
selecting the sample plan, it was focused to cover two major provinces in Sri Lanka such as
Southern and Sabaragamuwa. The data were collected using a structured questionnaire.
Responses for questions were scaled from strongly disagree (1) to strongly agree (5) with five
point likert type scale. The study was primarily focused to identify the nature of loyalty
programmes conducted by the two major players and evaluated the loyalty programmes in
line with length of time conducted, conditions for participation, active contribution for such
programmes, and satisfaction level of prizes awarded. The collected data were analyzed using
a t –test and presented as a comparison of mean values between the two players.
Results and Discussion
The gathered data were analyzed basically using independent sample t – test and would be
presented as a comparison of mean values between the two players. Further, it would
examine whether there is a significant difference between the mean values of the two players.
The reliability of data is assured by the value of Cronbach‟s Alpa. The Cronbach‟s Alpha
value is reported 0.85 confirming a high reliability of data while each of the items such as
conducting loyalty programmes (0.82), active contribution (0.78), satisfaction level (0.82),
recommend to continue (0.86), and retain (0.81) also reporting a high reliability.
Conducting Loyalty Programmes
Most of service firms attempt to implement loyalty programmes to enhance customer loyalty.
Loyalty programmes are implemented to persuade customers to increase usage volume or
usage frequency and ultimately to retain in long run. Table 01 depicts how mobile subscribers
have conviction towards conducting of loyalty programmes by their respective service
providers. Mobile subscribers were responded for the statement of my service provider offers
me loyalty programmes and rewards me to stay with existing service that I consume. Results
show that subscribers of brand 2 with mean value 4.05 have perceived that higher level of
loyalty programmes conducted by their respective service provider. However, the mobile
customers who have subscribed to brand 2 have perceived relatively low mean value with
2.55 compared to brand 1. Thus, brand 1 subscribers agree with the statement declaring their
respective brand conducts loyalty programmes while brand 2 subscribers are at moderate
level. Thus, a significant difference (p<0.05) of mean values is reported since Brand 2
conducts higher level of loyalty programmes over Brand 1. However, most of advertising
messages communicate that conducting of loyalty programmes is at a higher level in Sri
Lankan mobile phone telecommunications service industry today than ever.
Table 01: Conducting Loyalty Programmes
Mean
Brand 1
2.55
Mean
Brand 2
Mean
Difference
t
Value
Significance
Level
1.50
-13.887
0.000
4.05
(Source: Survey Data, 2010)
Time Sequence of Conducting Loyalty Programmes
It is an interesting feature to know whether the loyalty programmes are conducted on a
continuous basis so that participants have a higher tendency to be rewarded for their
patronage even in upcoming events. The subscribers were asked whether they perceive these
programmes are conducted continuously, once a year, once a month, rarely, or not conducted.
The results are shown in table 02. Accordingly, Brand 2 subscribers confirm that they enjoy
with loyalty programmes conducted by their respective service provider on a continuous
basis. This is confirmed by 91 subscribers out of 100 respondents. However, 60 subscribers
from Brand 1 state they enjoy on continuous basis while 2/5 subscribers declare that they
enjoy them rarely.
Table 02: Time Sequence of Conducting
Loyalty Programmes
Rarely
Total
Continuously
Brand 1
40
60
100
Brand 2
09
91
100
151
200
Total
49
(Source: Survey Data, 2010)
Conditions for Participation
Almost all loyalty programmes are conducted with a number of conditions. Most of
companies apply strict conditions for participation. Therefore, the subscribers responded for
the statement of the conditions for participation for such programmes are strict. Table 03
shows results confirming that mobile subscribers of both Brand 1 and 2 have perceived the
conditions relatively at moderate level. Specially, Brand 2 encourages subscribers to increase
frequency of usage through their loyalty programmes, so that they would be rewarded.
However, if Brand 1 subscribers purchase the products from selected outlets, which are
partners of the loyalty programme, they are entitled to the loyalty programme. But these
outlets are limited and have geographically located in metropolitan area of Colombo, the
capital city, and suburbs. Hence, participation of such loyalty programmes has become less
applicable. It can be identified that mobile subscribers have perceived less strict conditions in
participating loyalty programmes with Brand 2 compared to Brand 1. Accordingly, a
significant difference (p<0.05), represented by 0.53 value, is existed between the two mean
values of Brand 1 and Brand 2.
Table 03: Conditions for Participation
Mean
Mean
Significance Brand 1
Value
Level
Mean
Brand 2
2.97
2.44
0.53
0.000
(Source: Survey Data, 2010)
t
Difference
5.395
Active Contribution
Conducting loyalty programmes do not make sense if active contribution is low. Companies
need to encourage high level of participation to make the loyalty programme succeeded.
Table 04 illustrates the responses of mobile subscribers for the statement of I actively
participate in those loyalty programmes conducted by my service provider. Active
contribution for loyalty programmes by Brand 2 subscribers is very high with mean value
3.98 compared to Brand 1 mean value 2.59. Accordingly, the active participation of Brand 1
mobile subscribers is at the moderate level. However, mobile subscribers of Brand 2 have
relatively high participation for the loyalty programmes conducted. Since, Brand 2 offers
very popular loyalty programmes for their prepaid subscribers, their participation level is
very high. This high level of participation is further stimulated by satisfactory rewards.
Therefore, a very high level of 1.39 significant difference (p<0.05) is existed between the
mean values of Brand 1 and Brand 2 subscribers in participation of such loyalty programmes.
Table 04: Active Contribution for
Loyalty Programmes
Mean
Mean
Significance Brand 1
Value
Level
2.59
0.000
Mean
Brand 2
3.98
1.39
t
Difference
-13.960
(Source: Survey Data, 2010)
Satisfaction of Prizes Awarded
Customers would contribute to loyalty programmes since they are rewarded with different
types of prizes. They would evaluate their prizes or rewards against monetary cost, time cost,
energy cost, and psychic cost. If perceived benefits are higher than costs, they would engage
in higher participation. Table 05 exhibits the mobile phone subscribers‟ responses towards
the prizes awarded for them in participating the loyalty programmes. Thus, the statement was
provided as my satisfaction level for the prizes awarded for those programmes and the
responses were categorized the scale from strongly dissatisfy (1) to strongly satisfy (5). Brand
2 subscribers report high satisfaction level with mean value 3.61 for the prizes awarded when
compared to Brand 1 with mean value of 2.78. Accordingly, while Brand 1 subscribers
exhibit slightly high satisfaction level, Brand 2 subscribers exhibit moderate level satisfaction
for the prizes. Since Brand 2 subscribers display high level of satisfaction for the prizes over
Brand 2, a significant mean difference (p<0.05) is existed between two players.
Table 05: Satisfaction Level of Prizes Awarded
Mean
Mean
Significance Brand 1
Level
2.78
Mean
Brand 2
t
Difference
Value
0.83
-8.756
0.000
3.61
(Source: Survey Data, 2010)
Recommendation to Continue
The interesting feature behind the loyalty programmes is although the different programmes
offer different benefits, apply different conditions etc, the recommendation of conducting
them further by the majority of mobile subscribers. This is confirmed by the results in table
06 which shows the responses for the statement of I recommend conducting of loyalty
programmes on a continuous basis in future as well. Brand 2 subscribers highly recommend
continuing of loyalty programmes with mean value 4.40. Brand 1 subscribers recommend
continuing with mean value 4.04. However, the recommendation to continue the loyalty
programmes also reports a significant difference (p<0.05) of 0.357 mean values between
Brand 1 and Brand 2.
Table 06: Recommendation to Continue
Mean
Mean
Significance Brand 1
Value
Level
4.04
4.40
Mean
Brand 2
0.36
t
Difference
-3.721
0.000
(Source: Survey Data, 2010)
It is obvious that Brand 2 subscribers recommend of continuity of loyalty programmes since
they are pleased with different types of prizes awarded and all the other situations also Brand
2 subscribers have shown higher level of mean value when compared Brand 1. However,
Brand 1 subscribers also recommend continuing such programmes with mean value 4.04
forecasting more benefits in future.
Conclusion and Recommendations
The study was conducted to identify the nature of the loyalty programmes in the prepaid
mobile phone services industry. Five players compete in the Sri Lankan mobile phone service
industry at current. However, as two players play a dominant role in the industry, the mean
values of those two players were evaluated adopting t –test. Since it is required to follow the
research ethics, the researcher prevents from revealing the names of those two players since
this study was conducted as a comparative study. The results of the study have proved that
the most of Sri Lankan mobile phone users enjoy with loyalty programmes and those loyalty
programmes are treated as a major weapon for enhancing their level of loyalty, and thus
retention. Due to this fact, the loyalty programmes such as „Mobitel Smart Recharge
Bonanza‟ and „Dialog Lord of the Reload‟ have been much popular among the mobile phone
users in the Sri Lankan mobile phone services industry. Because of this high popularity and
heavy usage, this study was conducted to identify the nature of loyalty programmes specially
conducted by the major two players in the field. The relevant variables such as conducting
loyalty programmes, frequency of usage, active contribution, satisfaction level, and
recommendation to continue which are important in the case of implementing loyalty
programmes were tested. The results reveal that the conducting loyalty programmes to
enhance customer loyalty is at a higher rate in the Sri Lankan mobile phone
telecommunications service industry today than ever. While service providers employ such
loyalty programmes on continuous basis, they apply some conditions for participation.
Mobile phone subscribers have perceived these conditions as at moderate level. Since mobile
phone users satisfy with the prizes awarded for those loyalty programmes at present, most of
them actively subscribe to these programmes. However, there can be a significant difference
in relation to each variable between two players. While Brand 2 subscribers highly enjoy with
loyalty programmes, Brand 1 subscribers have less opportunity to participate in them. More
importantly, mobile phone subscribers highly recommend continuing those loyalty
programmes as the sign of high level of patronage, which could be assumed in the future in
this industry. This could be considered as a clear signal for the service providers to pay their
attention on implementing loyalty programmes continuously in the future as well and upgrade
the level and prizes awarded to draw mobile phone users‟ interest and enhance their level of
loyalty.
References
Ahmad, R. & Buttle, F. (2001), Customer retention: a potentially potent marketing
management strategy, Journal of Strategic Marketing, 9, 29-45.
Bowen, J. T. & Shoemaker, S. (1998), Loyalty: A Strategic Commitment, CORNELL Hotel
and Restaurant Administration Quarterly, 39 (1), 12-25.
Chakrapani, C. (1998), Customer loyalty and customer value 9 – Modeling customer
retention, http://www.chuckchakrapani.com/articles/PDF/98050081.pdf Assessed on 09th
May 2010.
Chen, J & Ching, R. K.H. (2007), The Effects of Mobile Customer Relationship Management
on Customer Loyalty: Brand Image Does Matter, Proceedings of the 40th Hawaii
International Conference on System Sciences.
DongBack S., Ranganathan, C., & Babad, Y. (2007), Two-level model of customer retention
in the US mobile telecommunications service market, Telecommunications Policy, 32, 182196.
Dowling, G. R. & Uncles, M. (1997), Do Customer Loyalty Programs Really Work?, Sloan
Management Review, 38 (4), 71-82.
Gerpott, T. J., Rams, W., & Schindler, A. (2001), Customer retention, loyalty, and
satisfaction in the German mobile cellular telecommunications market, Telecommunications
Policy, 25, 249-269.
Jacob, J. & Chestnut, R. (1978), Brand Loyalty: Measurement and Management, New York,
Ronald Press.
Jones, T. O., & W. E. S. Jr. (1995), Why Satisfied Customers Defect, Harvard Business
Review, 73, 88-99.
Kim, B., Shi, M., & Srinivasan, K., (2001), Reward Programs and Tacit Collusion, Marketing
Science, 20 (2), 99-120.
Kotler, P. & Armstrong, G. (2005), Principles of Marketing, Eleventh Edition, Prentice-Hall,
New Delhi.
Leenheer, J., Bijmolt, T. H.A., Heerde, H. J. V., & Smidts, A. (2002), Do Loyalty Programs
Enhance Behavioural Loyalty? An Empirical Analysis Accounting for Program Design and
Competitive Effects, Tilburg University.
Leenheer, J., Bijmolt, T. H. A., Heerde, H. J.V., & Smidts A. (2003), Do Loyalty Programs
Enhance Behavioral Loyalty?-A Market-Wide Analysis Accounting for Endogeneity, Tilburg
University.
Lewis, M. (2004), The Influence of Loyalty Programs and Short-Term Promotions on
Customer Retention, Journal of Marketing, 281-292.
Lovelock, C. & Wirtz, J. (2004), Services Marketing: People, Technology, Strategy, Fifth
Edition, Pearson Education, India.
Mellens, M., Dekimpe, M. G. & Steenkamp, J.B.E.M. (1996), A Review of Brand-Loyalty
Measures in Marketing, Journal of Management and Economy, 41 (4), 507-533.
Malhotra, N.K. & Peterson, M. (2006), Basic Marketing Research: A Decision-Making
Approach, Second Edition, Prentice Hall, New Jersey.
Meyer-Waarden, L. (2006), Do loyalty programs self-select the store‟s heaviest purchasers
and modify the purchase behaviour? Noordhoff, C., Pauwels, P., & Odekerken, S. G. (2004),
The effect of customer card programs - A comparative study in Singapore and The
Netherlands, International Journal of Service Industry Management, 15 (4), 351-364.
Oliver, R. (1997), Satisfaction: A Behavioural Perspective on the Consumer, Irwin/McGrawHill, New York.
Oliver, R. (1999), Whence Consumer Loyalty?, Journal of Marketing, 63, 33-44.
Russell-Bennett, R. & McColl-Kennedy, J.R., & Coote, L.V. (2007), Involvement,
satisfaction, and brand loyalty in a small business services setting, Journal of Business
Research, 60 (12), 1253-1260.
Singh, J. & Sirdeshmukh, D. (2000), Agency and Trust Mechanisms in Consumer
Satisfaction and Loyalty Judgements, Journal of the Academy of Marketing Science, 28, 150167.
Wei, R. & Lo, V. (2006), Staying connected while on the move: Cell phone use and social
connectedness, New Media & Society, 8 (1), 53-72.
Yi, Y. & Jeon, H. (2003), Effects of Loyalty Programs on Value Perception, Program
Loyalty, and Brand Loyalty, Journal of the Academy of Marketing Science, Vol. 31 (3), 229240.