The Telecoms Industry
In the study by Lai, Griffin and Babin (2009) entitled “How quality, value, image, and satisfaction create loyalty at a Chinese telecom,” the researchers used an integrative model to assess the relationship between multiple variables related to consumers’ experience of telecoms in China. The researchers conducted a survey of 118 Chinese telecommunications customers and found that service quality has a direct impact on value perception. Value and customer satisfaction, moreover, were found to determine the extent to which the customer would be loyal to the firm. Corporate image perceptions were also found to impact customer satisfaction. The researchers were able to conclude that customer satisfaction and service quality do make a substantial difference in determining whether customers will be retained or not.

Kim, Park and Jeong (2004) examined how a Korean telecommunications company focused on retaining customers in their article entitled “The effects of customer satisfaction and switching barrier on customer loyalty in Korean mobile telecommunication services.” The researchers found that customer satisfaction played the most significant part in determining customer loyalty. Factors that had a significant impact on customer satisfaction were call quality, value-added services, and customer support. Service quality and customer services determined customer satisfaction the most. Cost (price of services) was the primary reason for switching to a new carrier, however. If one carrier offered the same services at a lower cost, customers were more likely to switch. However, if a telecoms operator developed an interpersonal relationship with customers, customers would feel more loyal to the company and would not switch even if the other company offered better incentives. This study showed that building a relationship with customers can help to improve customer loyalty.

Khatibi, Ismail and Thyagarajan (2002) in their article entitled “What drives customer loyalty: An analysis from the telecommunications industry” look at the main telecoms provider in Malaysia, Digital line II Service offered by Telekom Malaysia Berhad (TMB). They use the SERVQUAL tools advocated by Parasuraman et al. to measure the service quality and satisfaction in the Digital line II Service. The researchers found a “significant relationship between customer satisfaction and the implementation of service quality” (Khatibi et al., 2002, p. 34). The researchers also arrived at conclusions regarding SERVQUAL: they concluded that it is reliable in three ways—1) when it comes to having a fault-reporting center, 2) when it comes to response time, and 3) when it comes to restoration time. Each of these three elements affected customer satisfaction. Customers who were left waiting longer before service was restored, for instance, had less inclination to be loyal to the company. The study’s findings contradict earlier research on the topic of the relationship between customer satisfaction and customer loyalty, which suggested that there was no significant relationship. Khatibi et al. (2002) showed the contrary—i.e., that in the telecoms industry in Malaysia there is a direct link between customer satisfaction and customer loyalty. The reason for this is that customers want fast, stable, and responsive telecoms services—and if a company cannot provide such reliability, customers will look elsewhere for it.

Lee’s (2013) article “Major moderators influencing the relationships of service quality, customer satisfaction and customer loyalty” looks at how service quality, customer satisfaction and customer loyalty go together in the telecoms industry. The researcher used reliability analysis, factor analysis, and hierarchical regression analysis and found that service quality impacted customer satisfaction which impacted customer loyalty. In other words, if the telecoms operator is able to deliver quality service, the customer is going to be satisfied and loyal to the company. Lee discusses the five dimensions of SERVQUAL introduced by Parasuraman et al (1988)—reliability, responsiveness, assurance, empathy, and tangibles—and shows that the Parasuraman model was confirmed in later research. However, Lee (2013) also points out that Cronin and Taylor (1992) and Teas (1993) “argued that performance measures as perceived quality is superior to the ‘perceptions-minus-expectations’ measures” (p. 2). The question that remains for some is whether service quality is an antecedent to customer satisfaction. The hypotheses of Lee were...…they expect and their perception of service alters their view of the company. Because of these subtle distinctions in terms of how service is defined and the variables that are used to construct the definition of service, there is a need for a better understanding of what is precisely being measured and why.

Controversy Among Scholars

The researchers are all in agreement among the variables that are interrelated in terms of customer service, customer satisfaction, customer loyalty and trust. All of the studies showed a link between service quality, customer satisfaction and customer loyalty except the study by Boohene and Agyapong (2011) and their study can be considered an outlier given the nation (Ghana) and the fact that Vodafone is the major telecoms operator there. In countries where there is some choice, the relationship between the three variables is stronger. This contrasts sharply with the findings in the study by Chu et al. (2012), which showed that in the banking industry, for example, where there are numerous competitors in the industry that can compete in terms of service quality customers have more options and are more likely to base their customer loyalty decisions on service factors since there are no major obstacles to switching services. In a country where options are limited like in Ghana, service may be poor and satisfaction may be poor but customer loyalty is not going to be affected because building out a telecoms infrastructure requires a great deal of capital and few companies can enter into the industry to compete; in other words, the high barrier to entry works in Vodafone’s favor in that case.

Some studies defined customer service more precisely than others and other studies focused on extra variables to show that they could also be considered as factors in a decision to switch to a different provider—such as cost (price of service) and whether or not there were additional options. The main controversy in the past has been about whether customer satisfaction actually predicts customer loyalty or…