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CRM IN MOBILE TELECOM SERVICES:

A STUDY ON THE IMPACT OF SERVICE


QUALITY, SERVICE LOYALTY AND LOYALTY
INDICES ON THE PERFORMANCE OF
SERVICE PROVIDERS

A THESIS

Submitted by

VANI HARIDASAN

in Partial Fulfillment of the Requirements


for the Degree of

DOCTOR OF PHILOSOPHY

SCHOOL OF MANAGEMENT
FACULTY OF ENGINEERING AND TECHNOLOGY
SRM UNIVERSITY, KATTANKULATHUR- 603 203
SEPTEMBER 2012
ii

DECLARATION

I hereby declare that the dissertation entitled CRM IN MOBILE

TELECOM SERVICES: A STUDY ON THE IMPACT OF SERVICE

QUALITY, SERVICE LOYALTY AND LOYALTY INDICES ON THE

PERFORMANCE OF SERVICE PROVIDERS submitted for the Degree

of Doctor of Philosophy is my original work and the dissertation has not

formed the basis for the award of any degree, diploma, associateship or

fellowship of similar other titles. It has not been submitted to any other

University or Institution for the award of any degree or diploma.

Place:

Date: VANI HARIDASAN


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SRM UNIVERSITY, KATTANKULATHUR603 203

BONAFIDE CERTIFICATE

Certified that this thesis titled CRM IN MOBILE TELECOM

SERVICES: A STUDY ON THE IMPACT OF SERVICE

QUALITY, SERVICE LOYALTY AND LOYALTY INDICES ON

THE PERFORMANCE OF SERVICE PROVIDERS is the

bonafide work of Ms. VANI HARIDASAN who carried out the

research under my supervision. Certified further, that to the best of my

knowledge the work reported herein does not form part of any other

thesis or dissertation on the basis of which a degree or award was

conferred on an earlier occasion for this or any other candidate.

Dr. SHANTHI VENKATESH


SUPERVISOR
Assistant Professor (SG) - Marketing
SRM B School, Vadapalani
SRM University
Chennai 600026.
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ACKNOWLEDGEMENT

This thesis work has received support, sacrifice and blessings of several

well-wishers. The foremost among them is my research guide, Dr. Shanthi

Venkatesh (Shanthi Maam). From the day I joined to this day, Shanthi Maam has

been a great, constant and reliable source of advice and guidance. In fact more than a

guide she has ever been a very good mentor. It had been a great learning experience

working with a person whose academic and research standards are exceedingly high

to match. My overwhelming thanks are due to Shanthi Maam, for helping me in

countless number of ways during the course of the research program. I am lost of

words to describe her patience in correcting my thesis and her high level of

commitment to perfection. I profusely thank her for believing in my abilities and

educating me in the art of coherent writing.

I thank Prof. Jayashree Suresh, Dean, School of Management, for her

constant support throughout my research program. Her boundless enthusiasm and

commitment to research is an inspiration to me. I thank her for her critical evaluation

of my work, her invaluable comments on my research topic that helped me in

improving the quality of the thesis. I thank her for the interest she evinced in my

work and grateful to her for her timely help and assistance.

I thank my Doctoral Committee members, Prof. P.T.Srinivasan,

Prof. M. J Xavier, Prof. V. J Siva Kumar and Prof. U. Srinivasa Raghavan for
v

their advice, help and suggestions. They were very keen to provide me with

constructive suggestions to enhance the quality of my thesis.

I am very grateful to the Management of SSN Institutions, who have

kindly sponsored me for my research at SRM University. I am grateful to

Prof. B.Srinivasan, Director, SSN School of Management & Computer

Applications, Prof. R. Balasubramanian, Head of Department, MBA and my

fellow colleagues for providing me with a conducive environment for pursuing

research in my workplace.

I express thanks to the enumerators who collected the data to validate my

hypothesis. I also thank the respondents for their cooperation and patience in filling

the questionnaire.

The greatest gratitude is due for my family that cannot be adequately

expressed in words. I would not have attempted this doctoral study (with tons of

commitment at home) but for their love, support and infinite patience.

Above all, I thank God for his supreme grace and presence.

VANI HARIDASAN
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ABSTRACT

The Indian Telecom Industry has come a long way in achieving its dream

of providing affordable and effective communication services to its customers.

Faced with a growing market and increasing competition, companies in the telecom

business are adopting to the new technological imperatives in order to out-perform

their competitors. One such approach in the adoption of an information technology

(IT) to move towards customers is the Customer Relationship Management (CRM).

CRM efforts aim at improving service quality and service quality is found

to be having a definite impact on customer loyalty. This study aims at understanding

the behavioral aspects that play a greater role in understanding customer loyalty,

improving service quality and thereby enhancing CRM. Data collected from the

residential users of mobile services from Chennai is used for the study.

In order to sustain in the competitive environment, this study provides

insights to the practitioners on the paths that lead to customer loyalty. The path

model uses three constructs, namely the Extended SERVQUAL Scale with seven

dimensions, SERVLOYAL Scale with seven dimensions and Loyalty Indices with 3

dimensions. Using Data Envelopment Analysis (DEA), the study uses the insights

from path model to provide a method to evaluate the effectiveness of CRM practices

of the mobile service providers so that they can refine their strategies to improve

loyal customer base.


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Although Zeithaml et al. (1996) report a strong association between

overall service quality and service loyalty across multiple companies, the findings of

this study clearly portray the quality-loyalty relationship with reference to the Indian

Mobile segment. This underlines the importance of a multidimensional approach to

service loyalty. The path models confirm the relationship between service quality,

service loyalty ad loyalty indices. This study further strengthens (Bloemer et

al,1999) with a clear focus on linking perceived service quality and service loyalty

as a multi-dimensional perspective.

The insight from this study can be used in other service sectors to measure

service quality and service loyalty and develop robust CRM systems that can map

and predict customer loyalty levels.


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TABLE OF CONTENTS

CHAPTER NO. TITLE PAGE NO.

ABSTRACT vi
LIST OF TABLES xvi
LIST OF FIGURES xix
LIST OF SYMBOLS AND ABBREVIATIONS xx

1 INTRODUCTION
1.1 STATEMENT OF THE PROBLEM 7
1.2 OBJECTIVES 9
1.3 HYPOTHESES 9
1.4 DELIVERABLES OF THE STUDY 10
1.5 SCOPE AND LIMITATIONS OF THE STUDY 11
1.6 CHAPTERISATION 11
1.7 SUMMARY 13

2 LITERATURE REVIEW
2.1 INDIAN TELECOM INDUSTRY 14
2.2 CUSTOMER RELATIONSHIP
MANAGEMENT 15
2.3 SERVICE QUALITY 17
2.3.1 Service Quality Definition based on
Functional Quality 17
2.3.2 Positive Relationship between service
quality with customer satisfaction 18
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CHAPTER NO. TITLE PAGE NO.

2.3.3 Positive Relationship between service


quality with customer loyalty and retention 20
2.3.4 Positive Relationship between service
quality with profitability 20
2.3.5 SERVQUAL in Telecom 20
2.3.6 Service Quality Measurement and Models 21
2.3.7 Service Quality Dimensions 24
2.4 SERVICE LOYALTY 25
2.4.1 Defining Service Loyalty 25
2.4.2 Dimensions of Service Loyalty 27
2.5 LOYALTY INDICES 28
2.6 LITERATURE RELATING TO LINKAGE
OF SERVICE QUALITY, SATISFACTION
AND LOYALTY 30
2.7 INSIGHTS AND INADEQUACIES 32
2.8 SUMMARY 34

3 RESEARCH METHODOLOGY
3.1 INTRODUCTION 35
3.2 RESEARCH DESIGN 35
3.2.1 Area of the Study 36
3.2.2 Instrument Development 36
3.2.2.1 Variables considered for the Study 36
3.2.2.2 Demographic Variables 36
3.2.2.3 Extended Service Quality
Dimensions 37
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CHAPTER NO. TITLE PAGE NO.

3.2.2.4 Service Loyalty Dimensions 39


3.2.2.5 Loyalty Indices 42
3.2.3 Sampling Method 43
3.3 PROPOSED CONCEPTUAL MODEL 44
3.4 PRE-TEST 45
3.5 DATA COLLECTION 45
3.6 SUMMARY OF RESEARCH METHODS 45
3.7 DATA EDITING, CATEGORISING
AND CODING 46
3.8 DATA ANALYSIS PROCEDURES 46
3.8.1 Structural Equation Modeling 46
3.8.1.1 Measurement Model 49
3.8.1.2 Structural Model 49
3.8.1.3 Models Goodness-of-Fit
Assessment 49
3.8.1.4 AMOS 52
3.8.2 Multiple Regression 53
3.8.2.1 Measurement of Variables 54
3.8.2.2 Coefficient of Multiple
Determination (R2) 55
3.8.2.3 Interpretation of Regression
Variate 56
3.8.3 Data Envelopment Analysis 56
3.9 PROCESS OF ANALYSIS 61
3.10 SUMMARY 61
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CHAPTER NO. TITLE PAGE NO.

4 THE INDIAN TELECOM INDUSTRY:


STATUS ANALYSIS
4.1 INDIAN TELECOM INDUSTRY
AN OVERVIEW 62
4.1.1 Basic Service Providers 62
4.1.2 Value added Service Providers 63
4.2 THE INDIAN TELECOM INDUSTRY:
HISTORICAL PERSPECTIVE 64
4.3 GROWTH OF THE INDIAN TELECOM
SECTOR 66
4.3.1 Indian Telecom Industry
Pre privatization 66
4.3.2 Indian Telecom Industry
Post Privatization 67
4.4 INDIAN TELECOM INDUSTRY:
A COMPETITIVE ANALYSIS 73
4.4.1 PEST Analysis 74
4.4.2 Michael Porters Five Forces Model 80
4.5 INDIAN MOBILE SECTOR 84
4.6 KEY TRENDS IN INDIAN TELECOM 86
4.7 DETAILS OF MOBILE SERVICE
PROVIDERS CONSIDERED FOR THE STUDY 88
4.7.1 Bharthi Airtel 88
4.7.2 Aircel 89
4.7.3 Idea Cellular 90
4.7.4 Vodafone 90
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CHAPTER NO. TITLE PAGE NO.

4.7.5 BSNL 91
4.7.6 Reliance 91
4.8 SUMMARY 92

5 DATA ANALYSIS
5.1 INTRODUCTION 93
5.2 PROFILE OF THE RESPONDENTS 94
5.2.1 Classification based on Service Provider 95
5.2.2 Classification based on Plan 95
5.2.3 Classification based on Age 96
5.2.4 Classification based on Length of Use 97
5.2.5 Classification based on Monthly Expenditure 97
5.2.6 Classification based on Education 98
5.2.7 Classification based on Occupation 98
5.3 DESCRIPTIVE STATISTICS 99
5.3.1 Mean and Standard Deviation 99
5.3.2 Normality 104
5.4 TEST OF RELIABILITY 104
5.4.1 Service Quality Dimensions 105
5.4.2 Service Loyalty Dimensions 107
5.4.3 Loyalty Indices 108
5.5 FACTOR ANALYSIS 109
5.6 HYPOTHESES TESTING 118
5.6.1 ANOVA 118
5.6.2 Linear Regression 125
5.7 PATH MODEL 135
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CHAPTER NO. TITLE PAGE NO.

5.7.1 Relationship between Service Quality


and Service Loyalty 135
5.7.2 Relationship between Service Quality
and Loyalty Indices 138
5.7.3 Relationship between Service Loyalty
and Loyalty Indices 140
5.8 ASSESSING THE EFFECTIVENESS OF CRM
PRACTICES USING DATA ENVELOPMENT
ANALYSIS 141
5.8.1 Effectiveness of Service Quality on
Service Loyalty 142
5.8.1.1 Behavioural Loyalty 143
5.8.1.2 Attitudinal Loyalty 149
5.8.1.3 Cognitive Loyalty 151
5.8.1.4 Conative Loyalty 152
5.8.1.5 Affective Loyalty 153
5.8.1.6 Trust Loyalty 155
5.8.1.7 Commitment Loyalty 156
5.8.2 Effectiveness of Service Quality on
Loyalty Indices 157
5.8.2.1 Advocacy Loyalty Index (ALI) 157
5.8.2.2 Purchase Loyalty Index (PLI) 159
5.8.2.3 Defection Loyalty Index (DLI) 160
5.8.3 Effectiveness of Service Loyalty on
Loyalty Indices 161
5.8.3.1 Advocacy Loyalty Index (ALI) 161
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CHAPTER NO. TITLE PAGE NO.

5.8.3.2 Purchase Loyalty Index (PLI) 163


5.8.3.3 Defection Loyalty Index (DLI) 164
5.8.4 Summary of Data Envelopment Analysis 165
5.9 SUMMARY 165

6 FINDINGS
6.1 FINDINGS FROM DESCRIPTIVE
STATISTICS 167
6.2 FINDINGS FROM ANOVA 167
6.2.1 Demographics on Service Quality 167
6.2.2 Demographics on Service Loyalty 168
6.2.3 Demographics on Loyalty Indices 168
6.3 FINDINGS FROM LINEAR REGRESSION 169
6.3.1 Relationship between Demographics
and Service Quality 169
6.3.2 Relationship between Demographics
and Service Loyalty 170
6.3.3 Relationship between Demographics
and Loyalty Indices 170
6.3.4 Relationship between Service Quality
and Service Loyalty 170
6.3.5 Relationship between Service Quality
and Loyalty Indices 171
6.3.6 Relationship between Service Loyalty
and Loyalty Indices 171
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CHAPTER NO. TITLE PAGE NO.

6.4 FINDINGS FROM THE PATH MODEL 172


6.5 FINDINGS FROM DATA ENVELOPMENT
ANALYSIS 172
6.5.1 Effectiveness of Service Quality on
Service Loyalty 172
6.5.2 Effectiveness of Service Quality on
Loyalty Indices 173
6.5.3 Effectiveness of Service Loyalty on
Loyalty Indices 174
6.6 SUMMARY 174

7. DISCUSSION
7.1 INSIGHTS FROM LITERATURE AND GAPS 175
7.2 ATTEMPTS BY THIS STUDY TO
FILL THE GAPS 176
7.3 RESEARCH IMPLICATIONS 179
7.4 MANAGERIAL IMPLICATIONS 180
7.5 CONCLUSION 181

REFERENCES 183

APPENDIX I QUESTIONNAIRE 199

PUBLICATIONS BASED ON THIS RESEARCH 203

CURRICULUM VITAE 204


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LIST OF TABLES

TABLE NO. TITLE PAGE NO.

4.1 Important dates and events in the Indian


Telecom Industry 65
4.2 Status of the Indian Telecom Industry in 1993-94 66
5.1 Classification based on Service Providers 95
5.2 Classification based on Plan 96
5.3 Classification based on Age 96
5.4 Classification based on Length of Use 97
5.5 Classification based on Monthly Expenditure 97
5.6 Classification based on Education 98
5.7 Classification based on Occupation 99
5.8 Descriptive Statistics of the Interval Scaled Variables 100
5.9 Cronbachs Alpha for Service Quality dimensions 106
5.10 Cronbachs Alpha of Service Loyalty dimensions 107
5.11 Cronbachs Alpha of Loyalty Indices 108
5.12 KMO and Bartlett's Test Service Quality 109
5.13 Factor Analysis Service Quality Dimensions 110
5.14 KMO and Bartlett's Test Service Loyalty 111
5.15 Factor Analysis Service Loyalty Dimensions 111
5.16 KMO and Bartlett's Test Loyalty Indices 112
5.17 Factor Analysis Loyalty Indices 112
5.18 Confirmatory Factor Analysis Service Quality 114
5.19 Confirmatory Factor Analysis Service Loyalty 114
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TABLE NO. TITLE PAGE NO.

5.20 Confirmatory Factor Analysis Loyalty Indices 114


5.21 One-Way ANOVA Demographic Variables
on Service Quality 119
5.22 One-Way ANOVA Demographic Variables
on Service Loyalty 122
5.23 One-Way ANOVA Demographic Variables
on Loyalty Indices 124
5.24 Relationship between Demographic Variables
and SERVQUAL Dimensions 125
5.25 Relationship between Demographic Variables
and SERVLOYAL Dimensions 127
5.26 Relationship between Demographic Variables
on Loyalty Indices 129
5.27 Relationship between SERVQUAL and SERVLOYAL 130
5.28 Relationship between SERVQUAL and Loyalty Indices 132
5.29 Relationship between SERVLOYAL and Loyalty Indices 134
5.30 Service Provider Details 142
5.31 Input and Output Parameters Behavioural Loyalty 143
5.32 Ratios for Efficiency 144
5.33 Relative Efficiency on Behavioural Loyalty 149
5.34 Input and Output Parameters Attitudinal Loyalty 150
5.35 Relative Efficiency on Attitudinal Loyalty 150
5.36 Input and Output Parameters Cognitive Loyalty 151
5.37 Relative Efficiency on Cognitive Loyalty 152
5.38 Input and Output Parameters Conative Loyalty 153
5.39 Relative Efficiency on Conative Loyalty 154
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TABLE NO. TITLE PAGE NO.

5.40 Input and Output Parameters Affective Loyalty 154


5.41 Relative Efficiency on Affective Loyalty 155
5.42 Input and Output Parameters Trust Loyalty 155
5.43 Relative Efficiency on Trust Loyalty 155
5.44 Input and Output Parameters Commitment Loyalty 156
5.45 Relative Efficiency on Commitment Loyalty 157
5.46 Input and Output Parameters Advocacy Loyalty Index 158
5.47 Relative Efficiency on Advocacy Loyalty 158
5.48 Input and Output Parameters Purchase Loyalty Index 159
5.49 Relative Efficiency on Purchase Loyalty 159
5.50 Input and Output Parameters Defection Loyalty Index 160
5.51 Relative Efficiency on Defection Loyalty 161
5.52 Input and Output Parameters Advocacy Loyalty Index 162
5.53 Relative Efficiency on Advocacy Loyalty 162
5.54 Input and Output Parameters Purchase Loyalty Index 163
5.55 Relative Efficiency on Purchase Loyalty 163
5.56 Input and Output Parameters Defection Loyalty Index 164
5.57 Relative Efficiency on Defection Loyalty 164
5.58 Details of Best Performer on various Dimensions
using Data Envelopment Analysis 165
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LIST OF FIGURES

FIGURE NO. TITLE PAGE NO.

3.1 Conceptual Framework for the Study 44


4.1 Porters Five Forces Model 82
5.1 CFA Service Quality 115
5.2 CFA Service Loyalty 116
5.3 CFA Loyalty Indices 117
5.4 Path Diagram of Service Quality on Service Loyalty 136
5.5 Path Diagram of Service Quality on Loyalty Indices 138
5.6 Path Diagram of Service Loyalty on Loyalty Indices 140
7.1 Conceptual Framework 176
7.2 Model from Observations 178
xx

LIST OF ABBREVIATIONS

TRAI Telecom Regulatory Authority of India


DoT Department of Telecommunications
MoC Ministry of Communications
NTP National Telecom Policy
MTNL Mahanagar Telephone Nigam Limited
VSNL Videsh Sanchar Nigam Limited
GSM Global System for Mobile Communications
CDMA Code Division Multiple Access
WLL Wireless Local Loop
ARPU Average Revenue Per Unit
MoU Minutes of Usage
MVAS Mobile Value Added Services
CRM Customer Relationship Management
SERVQUAL Service Quality
SERVPERF Service Performance
SERVLOYAL Service Loyalty
ALI Advocacy Loyalty Index
PLI Purchase Loyalty Index
DLI Defection Loyalty Index
SEM Structural Equation Model
CFA Confirmatory Factor Analysis
RMSEA Root Mean Square Error of Approximation
RMSR Root Mean Square Residual
GFI Goodness of Fit Index
xxi

CFI Comparative Fit Index


AMOS Analysis of Moment Structures
DEA Data Envelopment Analysis
DMU Decision Making Unit
PEST Political, Economical, Social and
Technological
1

CHAPTER 1

INTRODUCTION

Telecommunications is one of the prime support services needed for the


rapid growth of any developing country. India has emerged as one of the youngest
and fastest growing economies in the world today. One of the sectors that has shown
the signs of profitability and contributed significantly to the country's economy is
the telecom industry. In fact, the Indian telecom market has gained recognition as
one of the most lucrative markets globally. The vast rural market holds a huge
potential to drive the future growth of the telecom companies. Further, the
Government's initiatives for increasing the telecom connectivity in rural areas are
also likely to aid the telecom service providers to extend their services in the
unconnected rural areas.

Telecommunications companies recognize that becoming customer


centric is very important to their long term competitive advantage, as many players
offer similar features. Customer centricity depends on having a single view of the
customer data that gives clear insight into the customer segments, their behavior and
purchasing patterns. Telecom organizations need access to data that is accurate,
reusable, and productive, so that they can create a holistic, real-time view of their
customers.

The history of the Indian Telecom sector goes way back to 1851, when
the first operational landlines were laid by the then British Government in Calcutta.
After India became an independent country in 1947, all foreign telecommunication
companies were nationalized and a monopoly organization was formed by the
Government of India, incorporating Post, Telephone and Telegraphs.
2

Originally, the telecom sector, like most other infrastructure sectors was
owned and controlled by the Government of India. The Department of
Telecommunications (DoT), reporting to the Ministry of Communications (MoC)
became the key body for policy issues and regulation, apart from being the basic
service provider for the entire country. By an act of Parliament, the Telecom
Regulatory Authority of India (TRAI) was formed to be the regulatory agency, to
monitor the activities of the telecom body.

The Telecom Commission was set up with administrative and financial


powers of the Government of India to deal with various aspects of
Telecommunications in the year 1989. The multi-pronged strategies followed by the
Telecom Commission have not only transformed the very structure of this sector but
have also motivated all the partners to contribute in accelerating the growth of the
sector.

India is the second largest country in population and seventh largest in


terms of area. Despite the government making several concentrated efforts through
the Five-year Plans, to provide efficient communication system to the people of the
country, due to increasing population, non-accessibility to remote and village areas
and non-availability of adequate resources, the national tele-density was only 1.1 in
the pre-liberalization period (till 1990), which was far low when compared to the
global average of 12 for the same period.

The world began to witness the changing phase of the telecom industry
of India since 1994, when the Indian Government initiated the New Telecom Policy
(NTP), with a broad objective to enable availability of affordable means of
communication for the citizens of the country. The prime focus of the objectives of
NTP was to increase the tele-density of the country by 15 in 2010. For this the
country required an additional investment of Rs.5000 billion. In order to meet the
investment requirements and to realize the broad objectives of the telecom policy in
a phased manner, it became necessary that the government allowed private players
to operate in the industry. The government also sensed the private participation
imperatives for achieving the same in an efficient manner. Hence it was decided to
3

open the sector for private participation, simultaneously in both basic and mobile
service segments.

The other objectives of NTP 1994 include, creating a modern and


efficient telecommunications infrastructure and transforming the telecommunications
sector to a greater competitive environment in both urban and rural areas. Further,
the NTP 1994 aimed at providing equal opportunities for all players, including the
private players. Thus breaking the barriers to entry, the private sector providers
forayed into the hitherto monopoly telecom sector of India, by first entering the
Cellular Segment in 1994. But, the basic telecom service namely the Fixed-line
Segment was at the hands of the government monopoly service provider DoT, till
1998. The very first private player to begin operations in the fixed-line segment was
Bharti Telecom. The company was given license in 1998 and subsequently began its
operations in the segment in 2002.

The entire process of reform gained further momentum with the


announcement of the New National Telecom Policy of 1999 (NTP 1999). The
government started to issue licenses to multiple players to operate in all the
segments of the industry. It also made provisions to discriminate the service
providing functions and the regulatory functions of DoT, so that exclusive service
providers are created to cater to the specific requirements of different segments of
the population. The most noteworthy achievements of NTP 1999 were as follows:

Creation of the Public Sector Telecom Service Providers

One of the important objectives of NTP 1999, was to separate the service
providing and regulatory functions of DoT. Subsequently, exclusive telecom service
providers were floated to deploy the restructuring strategies in the sector, complying
with the objectives laid down by NTP-1999. The policy separated the service
providing function and policymaking and licensing function of the DoT. A brief note
on the public sector telecom service providers is as follows:
4

The Bharat Sanchar Nigam Limited (BSNL) was floated to function


as the government owned corporate entity to provide telecom services
to the entire country

For the metro cities of Delhi and Mumbai, the Mahanagar Telephone
Nigam Limited (MTNL) became the service provider.

Meanwhile, the international telecom services were entrusted with the


Videsh Sanchar Nigam Limited (VSNL). As a result of the
disinvestment policy adopted by the Government of India, in the late
1990s the company was sold to a private enterprise Panatone
A Tata Group Company.

Entry of Private Players

Subsequent to the announcement made in NTP 1999, the government


started issuing licenses to multiple private service providers to provide services in
each telecom circle. Consequently, the private service providers kick-started their
operations in fixed-line segments in the year 1994 and subsequently, the markets
witnessed private players in mobile segment since 1996.

With the entry of private players in the telecom segment, the sector began
to witness the collapse of monopoly on the whole. Thus, the sector that was hitherto
characterized by monopoly scenario gradually moved into competitive market
structure, with multiple players offering a variety of services.

As a result of privatization of the Indian Telecom industry, the most


excited are the consumers. When there was monopoly, the users were left with no
choice but to accept whatever the monopoly service provider gave to them. But in
the present competitive scenario, consumers are able to exert their preferences as
they are now offered a variety of options to choose from. The telecom market
environment is witnessing brand new challenges both from the perspectives of
service providers and service users.
5

Current Trends in Telecom Industry

According to the Telecom Regulatory Authority of India (TRAI), the


number of telephone subscriber base in the country reached 653.92 million as on
May 31, 2010, an increase of 2.49 per cent from 638.05 million in April 2010. With
this the overall tele-density (telephones per 100 people) has touched 55.38.

According to Business Monitor International, India is currently adding 8-


10 million mobile subscribers every month. It is estimated that by mid 2012, around
half the country's population will own a mobile phone. This would translate into 612
million mobile subscribers, accounting for a tele-density of around 59 per cent by
2012.

Moreover, according to a study conducted by Nokia, the communications


sector is expected to emerge as the single largest component of the country's GDP
with 15.4 per cent by 2014. According to the latest figures made available by the
Voice & Data study, Samsung posted a growth of 21.7 per cent to register revenues
of Rs 5,720 crore in 2010-11 from India, from Rs. 4,700 crore in the previous fiscal.
Nokia on the other hand had a flat growth, with revenues of Rs. 12,929 crore in
2010-11 from India compared to Rs. 12,900 in the previous fiscal. According to
experts, home grown companies like Micromax, Karbonn, Lava, Spice and other
mobile handset firms importing from China have eaten into market share of multi-
national firms on the back of low-cost dual-SIM feature phones.

With the availability of the 3G spectrum, about 275 million Indian


subscribers will use 3G-enabled services, and the number of 3G-enabled handsets
will reach close to 395 million by 2013-end, estimates the latest report by
Evalueserve.

According to a Frost & Sullivan industry analyst, by 2012, fixed line


revenues are expected to touch US$ 12.2 billion while mobile revenues will reach
US$ 39.8 billion in India. Moreover, in an attempt to boost auction of 3G spectrum,
the government has allowed prospective bidders to raise short-term funds from
6

domestic market, which can be refinanced through external commercial borrowings


(ECBs) within 12 months.

The Indian Mobile Sector

Globally in terms of mobile subscriptions, India is the worlds second


largest wireless market after China. At the end of March 2011, the total wireless
subscribers (GSM, CDMA & WLL (F)) base was 812 million. As a result the overall
tele-density rose to 71% by end of March 2011 as against 4 % in March 2001. This
growth of the sector can be clearly attributed to the favorable and improved
regulatory structure, declining handset prices and innovative pre paid tariff structure.

With increasing competition and the need for increasing the subscriber
base in rural markets, the call rates are declining. This has led to decrease in ARPU.
Therefore, in spite of unprecedented growth in the mobile subscriber base, the
operator margins are declining quarter on quarter.

The success of an organization depends on the degree to which they are


oriented towards customers. This requires gaining customer insight in order to
understand and manage the dynamics of customer expectations which forms a part
of the critical success factors of any service provider. In the light of the sharp rise in
the overall tele-density, the growth of this sector is attributed to the favorable and
improved regulatory structure, declining handset prices and innovative pre paid tariff
structure. But with increasing competition and the need for increasing the subscriber
base in rural markets, the call rates are declining. This has led to decrease in ARPU.
Though the Minutes of Usage (MoU) is increasing, however the same is being offset
by the lowering tariffs of operations. This can be attributed to the major subscription
growth that is coming from bottom of the pyramid.

As ARPU declines, the challenges for operators are to increase revenues


by differentiating their offerings and develop alternative streams by offering more
value added services to the existing customers. The decrease in average revenue can
also be attributed to the structure of the Indian Mobility Market which is largely
7

prepaid. This means that most of the subscribers added are from the bottom of
pyramid with low usage resulting in low ARPU.

In terms of market share, 92 % of the subscriber base in India is on pre-


paid connection, with the remaining 8% on post-paid subscriptions. This has also
given rise to opportunities for generating increased revenue, through exploring
potential Mobile Value Added Services (MVAS) like subscription packs of news,
alerts etc and more exclusive roaming services tailored to pre-paid subscribers. With
the assumption that todays Value Added Services becomes tomorrows Core
Services, both these types of services together are referred in this study as Mobile
services.

Thus in launching any of its services, the telecom service providers


should focus it from the perspective of customer orientation.

Todays Indian consumer is transforming rapidly. The consumer is


growing richer, younger, aspiring and specific in his/her needs than ever before.
Consumers now value convenience and choice at par alongside expecting better
value for their hard-earned money. A range of telecom service providers are
attempting to serve the needs of this emerging new-gen of Indian consumers. The
last decade has witnessed a colossal transition in the paradigms with the emergence
of many private players in the telecom domain, some of whom have invested in
Indian operations basically looking at the promising takeaway from the changing
lifestyles of Indian consumers. They have specially tailored their modus operandi to
meet the life-style demands of the upwardly mobile Indian consumers of today. The
bulging purses and liberalized market are making telecom being looked up as the
big thing for India.

1.1 STATEMENT OF THE PROBLEM

The beneficiaries of the competition being consumers, the telecom


players in todays environment are required to design and deploy customer-centric
strategies not only to grab a share in the market but also to sustain in the market in
8

the long-run. The players have realized the importance of constant service-quality
delivery to the customers for long-run sustainability. Customer relationship signifies
identifying the needs of the customers and stretching out ways and means to satisfy
them. To be precise, it means achieving high customer profitabilitycustomer
revenues over and above customer costs, which demands matching customer
expectations with customer satisfaction. The high cost of customer acquisition is
making todays businesses understand the importance of retaining the customers for
long-run sustainability.

Customer Relationship Management (CRM) aims at narrowing the gap


between the company and its customers. In Telecom Sector, CRM plays a vital role
in not only bringing the customers close to the company, but also in identifying the
changing behavioral pattern of the customers. In technology-dynamic markets like
telecom, an efficient CRM system is essential, since the customer attrition is high
due to the presence of close substitutes and near-zero switching costs.

With satisfied customers becoming retained customers and the retained


customers becoming loyal customers, it becomes interesting to study the
effectiveness of customer loyalty through CRM implementation in the Indian
Mobile sector.

This study helps the mobile service providers in determining the service
quality parameters that influence service loyalty parameters which in turn influence
loyalty indices. Previous studies have established the influence of service quality
aspects on the customer loyalty. There are some studies that reflect behavioral
aspects of the customers and the relationship on loyalty. But any such contemporary
management practices when adopted by certain industry sectors need to be
confirmed for its effectiveness.

Thus CRM which is being widely adopted by the mobile service


providers needs to be measured with respect to the degree to which the customers
turn advocates; the degree to which the customers return to the company for
repurchase i.e. in the context of cross selling and up selling and the degree to which
9

the customers show symptoms of defection. Even though some of these aspects have
been explored by previous researchers to a great extent, it is felt that not much
attention has been drawn into measuring the effectiveness of loyalty, particularly for
sustained presence. Hence it is felt that a closer study on this aspect would be
worthwhile. The study further provides useful information and opens up new
avenues for future research.

1.2 OBJECTIVES

The study has the following objectives:

1. To identify customer perceptions of service quality of mobile services


used by them.

2. To analyze the service loyalty dimensions that impact the loyalty


levels of the customers

3. To assess the loyalty indices that provide directives for strengthening


CRM

4. To present a path model for establishing and confirming the


relationship (if any) existing among service quality, service loyalty
and loyalty indices

5. To provide suggestions to the service providers to base their CRM


strategies on the findings of the study.

1.3 HYPOTHESES

H01 : There is no significant relationship between demographic


variables and service quality dimensions.

H02 : There is no significant relationship between demographic


variables and service loyalty dimensions.

H03 : There is no significant relationship between demographic


variables and loyalty indices.
10

H04 : There is no significant relationship between service quality and


service loyalty.

H05 : There is no significant relationship between service quality and


loyalty indices.

H06 : There is no significant relationship between service loyalty and


loyalty indices.

1.4 DELIVERABLES OF THE STUDY

This study would deliver an analytical insight to the strategic policy


options to the competing service providers, industry onlookers and others concerned
with the industry who are involved in the CRM practices. To the academic
researcher, the study would provide a knowledge base to probe further, into new
horizons of research.

The specific deliverables are:

The study would provide insight on the impact of demographic


variables on the service quality, service loyalty and customer loyalty
of the mobile service provider.

The confirmatory factor analysis would give a research insight as to


the influence of each of the latent factors in strengthening the CRM
practices, while the confirmatory path reveals the critical quality
variable(s) to concentrate on in order to improve service loyalty.

The study would suggest strategies for improvement to the various


players to match the expectations and to sustain in the competitive
environment.
11

1.5 SCOPE AND LIMITATIONS OF THE STUDY

The following are the scope and limitations of the study.

The findings of the study can be extended for further research on


varied perspectives and other sectors namely,

Insurance and Banking

Hospitality

Healthcare

and other segments where service quality plays an important role in CRM.

The study is confined only to the GSM and CDMA mobile user
segment and as such the results derived may not be applicable to the
other segments of the industry.

The study limits its applicability to Chennai city and can be extended
only to markets having similar demographic, geographic and socio-
economic characteristics.

The study applies convenience sampling method of data collection,


and the limits that apply to this sampling method of data collection
hold good for this study also.

1.6 CHAPTERISATION

Chapter 1 presents the introductory perspectives and an overview about


the Indian Telecom industry. The chapter includes an introduction to the research
problem, the research objectives and gives the scope and limitation of the study
concepts.
12

Chapter 2 provides a detailed overview on the literature reviewed by the


researcher in order to have an insight into the research studies undertaken in related
areas; to identify the research gaps and also to obtain a sound knowledge about the
methodological issues.

Chapter 3 focuses on the research methodology for the empirical study.


The research design is discussed in terms of the scale development, questionnaire
design, data collection, and participant selection, and sample size design, data
editing, coding and categorizing and analyzing procedures.

Chapter 4 presents a comprehensive note on the path of growth trends


and transitions of the Indian Telecommunication industry. It also covers a detailed
competitive analysis of the Indian Telecom Industry,

Chapter 5 presents the processes and results of the preliminary data


analysis and hypothesis testing are discussed in detail. Profile of participants and
response rate for this study are described. Preliminary data examination includes
descriptive statistics of mean and standard deviation, and normality. Reliability of
the measurement scales are examined, followed by the testing of hypotheses.

Chapter 6 discusses on the findings arising from the research, which will
throw light on the significance of the path models and the findings on the
effectiveness using Data Envelopment Analysis.

Chapter 7 covers the overall conclusions of the dissertation. Conclusions


are drawn about the research problem and the implications for researchers and
practitioners are discussed. Limitations of the study are identified and areas for
further research are suggested.
13

1.7 SUMMARY

This chapter provides the foundation for the thesis. It provides a context
and justification for the study. The research problem and research questions
addressed in the study were introduced. The main purpose of this study is to
investigate ways to strengthen CRM practices by the Mobile Service Providers.
Methodology underlying the purpose of the study was briefly described and
justified. Definitions of the key concepts are also presented. Some delimitations of
the scope are delineated and a chapter structure was provided for the whole thesis.
On these foundations, the thesis proceeds with a detailed description of the research
beginning with the chapter two - Literature Review.
14

CHAPTER 2

LITERATURE REVIEW

This chapter covers a detailed overview of the literature reviewed by the


researcher in order to have an insight into the theoretical framework and
methodological issues related to the study undertaken. For this purpose the
researcher has reviewed research papers and articles published in both International
and National journals and also several popular and focused books which give broad
perspectives on the conceptual framework of the study undertaken. The details of the
literature reviewed by the researcher are arranged chronologically in the following
sections.

2.1 INDIAN TELECOM INDUSTRY

Rekha Jain (1993) reviewed the policy changes in the Indian Telecom
Sector during the initial stages of post liberalization. The author explained that in
response to the business needs of faster, cheaper, and more varied modes of
communication, the telecommunication sector in many countries had undergone
rapid technological and structural changes.

Athreya (1996) described about the significant changes in the Indian


Telecommunications sector during the NTP 1993. He identified three phases of
changes. First, there was a policy vacuum almost up to 1990. Second, there was a
shift in telecommunication policy brought about by a paradigm shift in government
economic policy. Third, difficulties were experienced in implementing the new
policy.

Jain (2001) explained that spectrum auctions had been used with
significant success in many developed countries. He analyzed that while India was
one of the early adopters of spectrum auctions, its success in service provision had
15

been low. The author examined the issues in auction design that contributed to the
delay and reviewed the key elements in the design process namely a coherent
regulatory framework, choice of service areas, flexibility for service area
consolidation, standards and their role, convergence, managing public service
regulation and managing defaults.

2.2 CUSTOMER RELATIONSHIP MANAGEMENT

Sheth and Parvatiyar (1995) focused their work on understanding the


motivations of consumers to engage in relationships. They emphasized that in order
to develop an effective theory of relationship marketing, it is necessary to
understand what motivates consumers to reduce their available market choices and
engage in a relational market behavior by patronizing the same marketer in
subsequent choice situations.

Baker et al (1998) noticed that it is more productive to consider


Relationship Marketing to be a third dimension of the existing Transactional Model
than to develop a separate paradigm. According to the authors, two-dimensional
marketing model is described as reflecting the marketing of products
(dimension one) to market segments (dimension two), facilitated by channels and
supported by promotion and pricing. The third dimension, relationships, is
introduced as a spiral diagram that elevates the customer above the two planes of
products and markets, and in doing so, generates a barrier to entry of predator
sellers.

Joe Peppard (2000) has emphasized that CRM should not be looked from
a narrow perspective. He presented a CRM framework which was based on
incorporating e-business activities, channel management, relationship management
and back office / front-office integration within a customer centric strategy.

Veith Krner et al (2000) developed a conceptual model for CRM in


Business Media. They used a case study to conceptualize the CRM practices in a
financial industry.
16

Russell S. Winer et al (2001), gave a framework for the CRM concepts.


They analyzed the needs for CRM as a strategy and explained in detail the intrinsic
activities involved in CRM practices.

Injazz and Popovitch (2003) emphasized that Customer Relationship


Management (CRM) is a combination of people, processes and technology that
seeks to understand a company's customers. It is an integrated approach to managing
relationships by focusing on customer retention and relationship development.

Payne and Frow (2005) developed a conceptual framework for customer


relationship management (CRM) that helps broaden the understanding of CRM and
its role in enhancing customer value and, as a result, shareholder value. The authors
explored definitional aspects of CRM, and they identified three alternative
perspectives of CRM. The authors emphasized the need for a cross-functional,
process-oriented approach that positions CRM at a strategic level.

Kumar and Reinartz (2006) explained that Customer Relationship


Management (CRM) deals with applying database marketing techniques at the
customer level to develop strong company-to-customer relationship. CRM involves
identifying different types of customers and developing specific strategies for
interacting with each customer. Examples of such strategies are developing better
relationships with profitable customers, locating and enticing with new customers
that will be profitable and finding appropriate strategies for unprofitable customers.

Chieko Minamia and John Dawson (2008) focused on the effects of


customer satisfaction with CRM, customer retention and profit management, and the
effects of CRM technique on performance. CRM is regarded as the integration of
relationship technology (i.e. data consolidating and data mining) with loyalty
schemes. In this analysis a direct effect of CRM implementation on return on equity
(ROE) was supported; however, a negative impact of customization on ROE was
found.
17

Robert Gee (2008), highlighted that organizations must understand what


drives both value and delight for their customers. Adopting a customer centric vision
enables an organization understand their customers, deliver customer delight and
drive for loyalty. Different customers have different requirements and will be
delighted in different ways. Database segmentation and data analysis are critical if
an organization is to generate loyalty from different customer segments. A win-back
strategy is recommended as previous customers are less costly to win-back
compared to the costs of acquiring of new customers.

Hyunchul Ahna et al (2011) points out that as the competition between


mobile telecom operators become severe; it becomes critical for operators to
diversify their business areas. Especially, the mobile operators are turning from
traditional voice communication to mobile value-added services (VAS), which are
new services to generate more average revenue per user (ARPU). That means, cross-
selling is critical for mobile telecom operators to expand their revenues and profits.
In this study, the authors propose a customer classification model, which may be
used for facilitating cross-selling in a mobile telecom market. This model uses the
cumulated data on the existing customers including their demographic data and the
patterns for using old products or services to find new products and services with
high sales potential.

2.3 SERVICE QUALITY

2.3.1 Service Quality Definition based on Functional Quality

According to Berry et al (1988), Service Quality is defined as global


judgement or attitude relating to the superiority of the service. Bitner, Booms and
Tetreauly (1990) defines it as the customer's overall impression of the relative
inferiority /superiority of the organization and its services.

Carman (1990) describes the replication and testing of the SERVQUAL


battery (A. Parasuraman et al; see record 1986-10681-001), which measures the
perceived quality of a service situation. The scale was tested in 4 service settings
different from those of the original test: a dental school patient clinic, a business
18

school placement center, a tire store, and an acute care hospital. Six basic questions
of interest to the retailer were discussed: (1) the number of dimensions and how
generic they are, (2) the extent to which item wording can be changed, (3) service
situations that include multiple service functions, (4) the validity of analyzing
differences between expectations and perception, (5) the point at which expectation
information should be obtained, and (6) the relationship between expectations and
importance.

Asubonteng and Swan (1996) define it as the difference between


customers expectations for service performance prior to the service encounter and
their perceptions of the service received.

These studies primarily focused on functional quality aspects


(i.e., pertaining to service delivery process or how the services are delivered) and
inadequately addressed technical quality aspects (i.e., issues concerning what is
actually delivered). However, researchers in cellular mobile communication
emphasized that technical quality attributes play an important role in forming service
quality perceptions of customers.

2.3.2 Positive Relationship between Service Quality with Customer


Satisfaction

Danaher and Gallagher (1997) used the study of an actual hotel service
delivery process and partitioned into five distinct service encounters; check-in, the
room, the restaurant, the breakfast and check-out and investigated how quality
factors were related to their respective encounters and how cumulative satisfaction
levels impact on each other and over time. Average satisfaction levels for each of the
five encounters were found to be significantly different. Moreover, there was a clear
trend in the cumulative satisfaction results. Check-in resulted in high satisfaction,
the room was not so satisfying and the restaurant rated the worst. Satisfaction scores
rose after the breakfast experience and rose again after check-out.
19

Ko de Ruyter et al (1997) argued that there is a conceptual overlap as


well as distinctions between, the role of expectations and perceptions and the
questions whether service satisfaction is a super ordinate concept to quality or vice
versa. They developed an empirical model which was tested in a health care setting
to determine the nature of the relationship between service quality and service
satisfaction. The results suggest that service quality should be treated as an
antecedent of service satisfaction. It was also found that service satisfaction, in
addition to service quality, is a direct function of disconfirmation and perception.

Christine and Binks (1999) emphasized that within any service there is
scope for considerable variation in the degrees to which both parties become
involved in the relationship; beyond a certain minimum level, customers and service
providers may be more or less participative. However, participative behavior should
yield benefits. Customers who are more willing to share information and develop
closer personal contacts might be expected to benefit in terms of a higher quality of
service provision, because the provider will be more knowledgeable about their
needs and expectations.

Leisen and Vance (2001) emphasized that the successful standardization


of service quality in the telecommunication industry across multiple nations demand,
as a precondition, that the countries in question expose similar service quality
dimensions and that the importance of these dimensions to overall satisfaction with
the service is also similar. The authors investigated if these conditions were met in
the telephone services sector of the telecommunication industry in the USA and
Germany. Confirmatory factor analysis results of various alternative
dimensionalities provided the best support for a five-dimensional conceptualization
in both countries. However, the two countries differ in their respective importance
evaluations of particular service quality dimensions, which make it difficult to
provide a standardized service quality solution.
20

2.3.3 Positive Relationship between Service Quality with Customer


Loyalty and Retention

Ranaweera and Neely (2003) presented a holistic model of customer


retention incorporating service quality perceptions, price perceptions, customer
indifference and inertia. Data from a large-scale postal survey of telephone users in
England showed that perceptions of service quality have a direct linear relationship
with customer retention even in mass services with low customer contact. Price
perceptions and customer indifference too were found to have a direct linear effect
on retention.

2.3.4 Positive Relationship between Service Quality with Profitability

Bloemer et al (1999) et al, argued that the relationship between perceived


service quality and service loyalty is an issue which requires conceptual and
empirical elaboration through replication and extension of current knowledge. The
authors focus on the refinement of a scale for measuring service loyalty dimensions
and the relationships between dimensions of service quality and these service loyalty
dimensions. The results of an empirical study of a large sample of customers from
four different service industries suggest that four dimensions of service loyalty can
be identified: purchase intentions, word-of-mouth communication; price sensitivity;
and complaining behaviour.

2.3.5 SERVQUAL in Telecom

Wang and Lo (2002) identified that service quality, customer satisfaction


and customer value are the most important factors of business success for either
manufacturers or service providers. The authors have paid attention to the
measurement model of service quality in Chinas mobile phone market based on the
well-known SERVQUAL model, but with modification on the basis of focus group
discussions and expert opinions to reflect the specific industry attributes and the
special culture of China. Emphasis is then paid to the study of the dynamic
relationships among service quality, customer value, customer satisfaction and their
21

influences on future behaviors after the key drivers of customer value and customer
satisfaction are identified.

Johnson et al (2002) provided an overview of service quality and


discussed its potential for offering a competitive advantage; to test several research
propositions concerning service quality in the Thai telecommunications industry; the
results indicated that perceptions and expectations of service quality level showed no
significant difference. A post hoc analysis found that the telecommunication
industry received excellent ratings on tangibles, particularly customer service staffs
dress, and low ratings on empathy, particularly service providers interest
differences. Tangibles are an aspect of service quality that is extremely important to
the Thai telecommunication customer.

According to Hannikainen et al, (2002), service quality is capability of a


network to provide services and to fulfill user's expectations. According to Telecom
Authority of India (2007), service quality is an indicator of performance of a
network and of the degree to which the network conforms to the stipulated norms.

2.3.6 Service Quality Measurement and Models

Berry et al (1990) conducted a study on improving customer service


quality. They identified five dimensions that customers use to judge a company's
service; discussed the potential causes of service role ambiguity and identified the
possibilities that arise when a customer experiences a service problem. According to
their study, the principal dimensions that customers use to judge a companys
service are:

Tangibles - The appearance of physical facilities,


equipment, personnel, and communication
materials.

Reliability - The ability to perform the promised service


dependably and accurately.
22

Responsiveness - The willingness to help customers and to


provide prompt service.

Assurance - The knowledge and courtesy of employees and


their ability to convey trust and confidence.

Empathy - The provision of caring, individualized


attention to customers.

Berry and Parasuraman (1992) emphasized that a well designed and


implemented service quality information system raises the possibility that a
company will invest service improvement money in ways that actually improve
service. The five elements of the service quality information system are; (i) measure
service expectations, (ii) emphasize information quality, (iii) capture customers'
words, (iv) link service performance to business results, and (v) reach every
employee.

Carvalho and Leite (1999) extended the Parasuraman Berry - Zeithaml


conjecture to assess the quality of postal services in Brazil. A qualitative stage
yielded a list comprising 39 attribute items. In the quantitative stage the three-
column format of a SERVQUAL questionnaire was employed to permit the
computation of importance weights and tolerance widths for each attribute item.
There was an inverse association between importance and tolerance of service
quality attributes.

Hanjoon Lee et al (2000) explained that service quality is an elusive and


abstract construct to measure, and extra effort is required to establish a valid
measure. The authors investigated the psychometric properties of three different
measurements of health-care service quality as assessed by physicians. The
multitrait-multimethod approach revealed that convergent validity was established
for measures based on the single-item global rating method and multi-item rating
method. Furthermore, discriminant validity for the seven health-care service quality
dimensions measured by the three methods was not well established. The high levels
of inter-dimensional correlations found suggested that the service quality dimensions
may not be separable in a practical sense.
23

Michael K Brady et al (2002) described that service quality be measured


using a performance-only index (SERVPERF) as opposed to the gap-based
SERVQUAL scale. The intent of the research was to examine the ability of the
performance-only measurement approach to capture the variance in consumers'
overall perceptions of service quality. The results of their studies indicate that
service quality is properly modeled as an antecedent of satisfaction.

Parasuraman (2005) used the means-end framework as a theoretical


foundation to conceptualize constructs refines, and tests a multiple-item scale
(E-S-QUAL) for measuring the service quality delivered by Web sites on which
customers shop online. Using two stages of empirical data collection, the study
revealed that two different scales were necessary for capturing electronic service
quality. The basic E-S-QUAL scale developed in the research is a 22-item scale of
four dimensions: efficiency, fulfillment, system availability, and privacy. The
second scale, E-RecS-QUAL, is salient only to customers who had nonroutine
encounters with the sites and contains 11 items in three dimensions: responsiveness,
compensation, and contact.

Mahapatra and Khan (2006) provided a systematic integrated approach


for modeling customer evaluation of service quality applied to technical education.
The authors identified that the quality of service largely relates to human behaviour,
the quality dimensions and items under each dimension of the measuring instrument
widely differ depending on the application to the type of service setting. The
stakeholders in an educational setting range from students to recruiters, with varying
levels of interaction with the system and expectations from the system. Therefore, it
is advisable to identify the minimum number of service items that suit all the
stakeholders before implementing any quality improvement programme. To this end,
EduQUAL, a survey-based model, has been specially developed to suit a technical
education system.

Anita Seth et al (2008) developed a valid and reliable instrument to


measure customer perceived service quality incorporating both service delivery as
well as technical quality aspects. The resulting validated instrument comprised of
24

dimensions including reliability, responsiveness, assurance, empathy, tangibles,


convenience, and customer perceived network quality.

2.3.7 Service Quality Dimensions

Researchers have tried to operationalize service quality from different


perspectives for different service applications. Based on their conceptual / empirical
studies, researchers derived and proposed different service quality dimensions for
various service applications.

Berry et al (1988), identified five dimensions namely, reliability,


responsiveness, assurance, empathy and tangibles. The application areas are telecom
companies, brokerage and insurance companies and banks.

Lehtinen and Lehtinen (1991) identified five dimensions namely,


physical quality, corporate quality, interactive quality, process quality and output
quality. The application areas identified are restaurants, disco and pub restaurants.

Rosen and Karwan (1994) identified six dimensions namely, reliability,


responsiveness, tangibles, access, knowing the customer and assurance. The
application areas are teaching, restaurant, bookstore and health care.

Johnson et al (1995) identified three dimensions namely, input quality,


process quality and output quality. This study was based on bank customers in the
UK.

Siu and Cheung (2001) identified six dimensions namely, personal


interaction, policy, physical appearance, promises, problem solving and
convenience. The study was based on the service quality delivery of a department
store chain.

Alzola and Robaina (2005) identified five dimensions namely, reliability,


design, guarantee, empathy and security. This study was based on Electronic
Commerce B2C. Improvements in service quality can also enhance
25

competitiveness. Several dimensions of competitiveness have become relevant in


India and have been researched across levels.

2.4 SERVICE LOYALTY

2.4.1 Defining Service Loyalty

Service loyalty is the degree to which a customer exhibits repeat


purchasing behavior from a service provider, possesses a positive attitudinal
disposition toward the provider, and considers using only this provider when a need
for this service arises.

This definition suggests service loyalty is a matter of degree, ranging


from the completely loyal customer to one who will never consider using a provider
in the future. According to this definition, an extremely loyal customer is one who
(a) regularly uses a service provider, (b) really likes the organization and thinks very
highly of it, and (c) does not ever consider using another service provider for this
service. Conversely, an extremely non-loyal person (a) will never use the provider
again, (b) has negative feelings toward the organization, and (c) welcomes
suggestions about other providers and is willing to try any other provider. This
three-dimensional definition is consistent with Zeithaml, Berry, and Parasuramans
(1996) operationalization of the loyalty to company factor in their behavioral-
intentions battery. The five items they use to measure loyalty include (1) saying
positive things about the company, (2) recommending the company to someone who
seeks advice, (3) encouraging friends and relatives to do business with the company,
(4) considering the company the first choice to buy services, and (5) doing more
business with the company in the next few years. Thus, in effect, their measure
includes items from all three dimensions of the proposed service loyalty definition
listed above.

Jacoby et al (1978) have explored the psychological meaning of loyalty


in an effort to distinguish it from behavioral (i.e., repeat purchase) definitions. Their
analysis concludes that consistent purchasing as an indicator of loyalty could be
invalid because of happenstance buying or a preference for convenience and that
26

inconsistent purchasing could mask loyalty if consumers were multi-brand loyal.


Because of these possibilities, the authors conclude that it would be unwise to infer
loyalty or disloyalty solely from repetitive purchase patterns without further
analysis.

Czepiel and Gilmore (1987) emphasized that essentially social nature of


service encounters, a short-run phenomenon, provides the occasions in which buyer
and seller negotiate the terms of their exchange relationship, a long-run
phenomenon. Defined as the mutual recognition of special status between exchange
partners, exchange relationships insure efficacy for the buyer, as they mitigate
market volatility for the seller. Understanding how economic exchange is played out
against a background of social exchange can yield actionable insights.

Murray (1991) explored the information needs of service consumers. In


the purchase decision process, search behavior is motivated in part by perceived risk
and the consumer's ability to acquire relevant information with which purchase
uncertainty can be addressed. Marketing theory suggests that consumers use
information sources in a distinctive way to reduce the uncertainty associated with
services.

Dick et al (1994) explained that Customer loyalty is viewed as the


strength of the relationship between an individual's relative attitude and repeat
patronage. The relationship is seen as mediated by social norms and situational
factors. Cognitive, affective, and conative antecedents of relative attitude are
identified as contributing to loyalty, along with motivational, perceptual, and
behavioral consequences.

Kandampully (1998) explained the premise of `quality of service as the


competitive edge in gaining market leadership which has been well recognized both
in academic research and by leading service organizations. However, it has become
increasingly important for organizations to find ways, not only to reach the top, but
to maintain that leadership in an ever increasing competitive market-place. In order
to protect their long-term interest, service organizations are seeking ways to forge
27

and to maintain an on-going relationship with their customers. It is argued that long-
term superiority of a service firm is dictated by the organizations ability to maintain
their relationship with the customer by offering `service loyalty: a demonstration of
the organizations commitment to maintain the service promise. The author argues
that service loyalty precedes customer loyalty. The author emphasizes how a firms
service employees develop the emotional connection with customers which leads to
exceptional service and the ability to exceed customer expectations.

Gustafsson et al (2005) in their study of telecommunications services,


examine the effects of customer satisfaction, affective commitment, and calculative
commitment on retention. The study further examines the potential for situational
and reactional trigger conditions to moderate the satisfaction-retention relationship.
The results support consistent effects of customer satisfaction, calculative
commitment, and prior churn on retention. Prior churn also moderates the
satisfaction-retention relationship.

Recently to evaluate Service Loyalty, a Servloyal construct based on


seven dimensions has been introduced by Sudhahar et al (2006). The authors
emphasize that besides the behavioural and attitudinal dimensions there figure
cognitive, conative, affective, trust and commitment dimensions.

2.4.2 Dimensions of Service Loyalty

A review of the literature suggests the service loyalty construct consists


of three separate dimensions: behavioral loyalty, attitudinal loyalty, and cognitive
loyalty.

Behavioral Loyalty: Early definitions of loyalty focused almost


exclusively on its behavioral dimension. In particular, loyalty was interpreted as a
form of customer behavior (such as repeat purchasing) directed toward a particular
brand over time. Although current thought infers that loyalty includes more than just
a behavioral dimension, some researchers continue to measure loyalty exclusively
on the behavioral dimension.
28

Attitudinal Loyalty: Scholars have questioned the adequacy of using


behavior as the sole indicator of loyalty. Day (1969), in particular, criticized
behavioral conceptualizations of loyalty and argued brand loyalty develops as a
result of a conscious effort to evaluate competing brands. Others have suggested this
attitudinal dimension includes consumers preferences or intentions (e.g., Pritchard
1991). After Days criticism, attitude gained increasing attention as an important
dimension of loyalty. Over time, scholars began to consider customer loyalty as
having two dimensions: behavioral and attitudinal.

Cognitive Loyalty: In additional to the behavioral and attitudinal


dimensions, a few scholars include what has been termed a cognitive form of
loyalty (Lee and Zeiss 1980). Some studies suggest loyalty to a brand or store means
it comes up first in a consumers mind when the need for making a decision as to
what to buy or where to go arises, while others operationalize loyalty as a
customers first choice among alternatives. Similarly, Dwyer, Schurr, and Oh
(1987, p. 19) argue that being committed to a relational exchange virtually precludes
considering other exchange partners)) such customers have not ceased attending to
alternatives, but maintain their awareness of alternatives without constant and
frenetic testing. This suggests alternative organizations are not seriously
considered by truly loyal customers when subsequent purchases are made) a
viewpoint strongly supported by others. That is, a customer who is considered
extremely loyal does not actively seek out or consider other firms from which to
purchase.

2.5 LOYALTY INDICES

Bob E. Hayes (2007) felt while many objective measures of customer


loyalty exist (e.g., defection rate, number of referrals), customer surveys remain a
frequently used way to assess customer loyalty. There are a few reasons for the
popularity of customer survey use in customer experience management. First,
customer surveys allow companies to quickly and easily gauge levels of customer
loyalty. Companies may not have easy access to objective customer loyalty data or
may simply not even gather such data. Second, results from customer surveys can be
29

more easily used to change organizational business process. Customer surveys


commonly include questions about customer loyalty as well as the customer
experience (e.g., product, service, support). Used jointly, both business attribute
items and loyalty indices can be used (e.g., driver analysis, segmentation analysis) to
identify reasons why customers are loyal or disloyal. Finally, objective measures of
customer loyalty provide a backwards look into customer loyalty levels (e.g.,
defection rates, repurchase rates). Customer surveys, however, allow companies to
examine customer loyalty in real-time. Surveys ask about expected levels of loyalty-
related behavior and lets companies look into the future regarding customer
loyalty.

Customers' ratings of a set of loyalty questions suggest that there are


three, very general, loyalty constructs, Advocacy, Purchasing and Defection;

Advocacy Loyalty : reflects the degree to which customers will


advocate of the company

Purchasing Loyalty : reflects the degree to which customers will


increase their purchasing behavior

Defection Loyalty : reflects the degree to which customers will show


symptoms of defecting to competitors

The evidence from previous studies (Bob E. Hayes, 2007) shows that the
Advocacy Loyalty Index (ALI) ,the Purchasing Loyalty Index (PLI) and Defection
Loyalty index (DLI) measure three different types of loyalty. Even though these
types of loyalty are correlated (advocates tend to be purchasers), the relationship
between the ALI and PLI is not perfect, suggesting that these loyalty indices
measure unique constructs. Customer loyalty is not a unidimensional construct, but
rather a multidimensional construct that can help reliability measured. When we say
a customer group has high vs. low loyalty, we need to clarify to which loyalty we
are referring. It is possible that a given customer group can have different levels of
loyalty (e.g., high advocacy, low purchasing). It is clear that a blanket statement
about levels of "customer loyalty" can be ambiguous.
30

2.6 LITERATURE RELATING TO LINKAGE OF SERVICE


QUALITY, SATISFACTION AND LOYALTY

Torsten J. Gerpott et al (2001) have done a study on the relationship


between customer satisfaction (CS), customer retention (CR) and customer loyalty
(CL) in the German Mobile Telecom Market. They developed a two-staged model in
which overall CS has a significant impact on CL which in turn influences a
customer's intention to terminate/extend the contractual relationship with his mobile
cellular network operator (CR). They identified mobile service price and personal
service benefit perceptions as well as (lack of) number portability between various
cellular operators as supply-related variables which has strong effects on CR.
Mobile network operators' perceived customer care performance had no significant
impact on CR.

Chih-Ping-Wei and I-Tang-Chiu (2002) studied on churn prediction in


telecom. The authors emphasized that a mobile service provider wishing to retain its
subscribers needs to be able to predict which of them may be at-risk of changing
services and will make those subscribers the focus of customer retention efforts. In
response to the limitations of existing churn-prediction systems and the
unavailability of customer demographics in the mobile telecommunications provider
investigated, they proposed a churn-prediction technique that predicts churning from
subscriber contractual information and call pattern changes extracted from call
details. The technique is capable of identifying potential churners at the contract
level for a specific prediction time-period.

Moon-Koo Kim et al (2004) had studied the effects of customer


satisfaction and switching barrier on customer loyalty in Korean mobile
telecommunication services. The study was undertaken when the Korean telecom
industry was shifting its strategic focus away from attracting new customers,
towards retaining existing customers through the promotion of customer loyalty.

John Hadden et al (2007) analyzed that a business incurs much higher


charges when attempting to win new customers than to retain existing ones. As a
31

result, much research has been invested into new ways of identifying those
customers who have a high risk of churning. However customer retention efforts
have also been costing organisations large amounts of resource. In response to these
issues, the authors suggested that the next generation of churn management should
focus on accuracy.

Sung Ho (2007) used the customer relationship management perspective


to investigate customer behavior. The authors differentiate between customers
through customer segmentation; tracks customer shifts from segment to segment
over time, discovers customer segment knowledge to build an individual transition
path and a dominant transition path, and then predicts customer segment behavior
patterns.

Koustuv Dasgupta et al (2008) examined the communication patterns of


millions of mobile phone users, to study the underlying social network in a large-
scale communication network. The key purpose is to address the role of social ties in
the formation and growth of groups, or communities, in a mobile network. In
particular, the study focused on the evolution of churners in an operators network
spanning over a period of four months. Based on their findings, they proposed a
spreading activation-based technique that predicts potential churners by examining
the current set of churners and their underlying social network. The efficiency of the
prediction is expressed as a lift curve, which indicates the fraction of all churners
that can be caught when a certain fraction of subscribers were contacted.

Ying-Feng Kuo et al (2009), studied the relationships among service


quality, perceived value, customer satisfaction, and post-purchase intention in
mobile value-added services. The main findings are as follows: (1) service quality
positively influences both perceived value and customer satisfaction; (2) perceived
value positively influences on both customer satisfaction and post-purchase
intention; (3) customer satisfaction positively influences post-purchase intention; (4)
service quality has an indirect positive influence on post-purchase intention through
customer satisfaction or perceived value; (5) among the dimensions of service
quality, customer service and system reliability is most influential on perceived
32

value and customer satisfaction, and the influence of content quality ranks
second; (6) the proposed model is proven with the effectiveness in explaining the
relationships among service quality, perceived value, customer satisfaction, and
post-purchase intention in mobile added-value services.

Fujun et al (2009) proposed and tested an integrative model to examine


the relationship among service quality, value, image, satisfaction, and loyalty in
China. The authors reveal that service quality directly influences both perceived
value and image perceptions, that value and image influence satisfaction, that
corporate image influences value, and that both customer satisfaction and value are
significant determinants of loyalty. Thus, value has both a direct and indirect
(through satisfaction) impact on customer loyalty. Other variables mediate the
impact of both service quality and corporate image on customer loyalty.

2.7 INSIGHTS AND INADEQUACIES

The review of literature has provided insights on the following areas:

1. The impact of privatization of telecom sector on the mobile service


providers and the subsequent penetration into the market has given
rise to cut-throat competition among the mobile service providers.

2. This rising level of competition in turn has forced the mobile service
providers to focus on various customer centric strategies wherein the
service providers concentrate on sustained competitive advantage.

3. Customers on the other hand are well educated, demanding and


willing to spend for better value for money. This and the above
aspects have turned the attention of the service providers to depend
on a technology-driven strategies where there is a need to collect,
maintain, manage and analyse customer details and their purchasing
behaviour which would help them to bundle up offers which would
satisfy a specific need of a specific segment of customer in a specific
33

period of time. This is the Customer Relationship Management, a


contemporary management practice.

4. Though CRM evolved in a very short duration, its application is


widespread in services which involve huge set of customer base.

5. The impact of CRM practices in various countries and on various


industry verticals gives a positive insight as to the level of maturity of
its practices.

6. When deciding to choose a telecommunication service provider,


customers often take into account the service quality, service price
and customer service. While the first two factors can be controlled by
the telecom company, the last factor seems to be the most influential
and the hardest to get right as well. One outcome of good customer
service, which depends on the service quality of the telecom
providers positively results in a certain degree of behavioral attitude
within the customers which in turn grows into loyalty. Thus a loyal
customer may turn advocate to the company; purchase more
frequently, purchase more quantity or purchase more variety of
services or if disloyal switch to competitors.

The literature reviewed above indicates certain inadequacies in the


following areas:

1. While there are individual studies on CRM implementations (Payne


& Frow, Finnegan & Willcocks, Robert Gee), Service Quality
(Danaher and Mattsson,Wang and Lo, Johnson and Sirikit,Gale,
Rudie and Wansley,Zeithaml & Bitner), Relationship between CRM
and Customer Loyalty (Mosad Zineldin, Majumdar, Terblanche and
Boshoff, Gustafsson et al) and Loyalty Indices (Bob E. Hayes), it is
noticed that a study on the linkage especially with the changing
demographic patterns of the customers, if any, arising out of these
concepts seems to be missing. Hence it is felt that such an existing
34

gap can be further explored and studied and the present attempt is
towards such a linkage. It is also a fact that the CRM practices in
Indian Telecom is in the matured stage. Hence such a linkage study
particularly in the telecom industry would be timely to provide
managerial insights in order to further strengthen the CRM practice in
this highly competitive industry.

2. Identifying the influence of service quality dimensions, service


loyalty dimensions on each of the loyalty indices, namely advocacy
loyalty index, purchase loyalty index and defection loyalty index.

3. Even though some of these aspects have been explored by previous


researchers to a great extent, it is felt that not much attention has been
drawn into measuring the effectiveness of loyalty, particularly for
sustained presence.

2.8 SUMMARY

This chapter provides an overview of the literature reviewed by the


researcher. The crux of each material reviewed by the researcher is presented
chronologically. It also includes a section on the insights obtained and inadequacies
present in the literature review, which the present study is aiming to bridge.
35

CHAPTER 3

RESEARCH METHODOLOGY

3.1 INTRODUCTION

Methodology is the key to finding answers to the question that initiates


the research and therefore comprises a very important part of any study. The
research methodology that is chosen has to enhance the reliability and generalization
of the results. It should furthermore be cost effective, efficient and versatile. This
balance can only be obtained by using the appropriate methodology for gathering
data.

As previous research on strengthening of CRM practices by the Indian


mobile service providers through customer loyalty are limited, the current study can
be defined as an early attempt with the aim to develop the body of knowledge
regarding the existing phenomenon.

3.2 RESEARCH DESIGN

The research design adopted for this study was descriptive in nature.
Descriptive research is a type of conclusive research that has its major objective as
the description of something- usually market characteristics or functions (Malhotra,
2006). The current research used a quantitative approach. Quantitative research
methodology seeks to quantify the data and typically applies some form of statistical
analysis (Malhotra, 2006). The benefits of quantitative research are that researchers
rely on large samples to show statistical effect and can generalize the findings from
the sample to the population (Churchill and Iacobucci, 2002).
36

3.2.1 Area of the Study

The data for testing the proposed models were collected among the
resident mobile subscribers in Chennai. Chennai, capital of Tamil Nadu is the fourth
most populous metropolitan area and the fifth most populous city in India. The
population of Chennai is 4.6 million (2011 census).

3.2.2 Instrument Development

The instrument was designed using scales from previous related research.
Since this study attempts to verify the relationships between the constructs,
quantitative research methodology is employed. Instrument is in Appendix I.

Scales for the independent and the dependent variables were adopted
from the extant literature due to their relevance to the study's context and past
measurement reliability.

3.2.2.1 Variables Considered for the Study

In order to comply with the objectives laid down for the study, certain
independent variables were considered for analyzing behavioral pattern of the
mobile subscribers, which are as follows:

Demographic Variables

Extended Service Quality Parameters

Service Loyalty Parameters

Loyalty Indices

3.2.2.2 Demographic Variables

The Demographic Variables considered for the study are:

Age

Length of Use
37

Monthly Expenditure

Education

Occupation

3.2.2.3 Extended Service Quality Dimensions

The service quality aspects of the mobile service providers were analyzed
based on the following dimensions. These dimensions are identified based on the
SERVQUAL Construct. This extended SERVQUAL (Seth et al, 2008) instrument
determines service quality structure by combining both functional as well as
technical quality (i.e., network quality in cellular mobile context) attributes.

Thus the extended SERVQUAL construct has the following seven


dimensions:

Reliability - refers to the ability to perform the promised service dependably and
accurately.

Contact employees perform the service right the first time

The service provider provides the service at the promised time

The customer is kept well-informed about the progress of their complaints

Billing system is accurate and error free

Bills are received on time.

Responsiveness - refers to willingness to help customers and provide prompt service

Contact employees give you prompt service

The customers complaints / queries are taken seriously

The customers complaints are resolved quickly

The service provider is always willing to help you.


38

Assurance - refers to knowledge and courtesy of employees and their ability to


inspire trust and confidence

Contact employees are friendly and polite while handling your


complaints / queries

They have the adequate knowledge of tariffs and plans of service


providers

The behaviour of contact employees instils confidence in you

You feel safe in your transactions with your service provider

Empathy - refers to caring, individualized attention the firm provides its customers

For lodging the complaints service provider is easily accessible

They have your best interests in heart

Contact employees give you individual attention

The employees understand your specific needs

Tangibles - refers to appearance of physical facilities, equipment, personal and


communication materials

Service provider's physical facilities are visually appealing

Contact employees appear neat

Materials associated with the service(such as pamplets etc) are visually


appealing

Convenience- implies flexible and comfortable facilities to suit the customer needs.

They have convenient business hours

Ease of lodging the complaints / queries

Your service provider provides flexibility in the payment of bills

Application formalities are simple


39

Customer Perceived Network Quality - an indicator of network performance in


terms of voice quality, call drop rate, network coverage and network congestion.

Your service provider provides sufficient geographical coverage (on


highways, inside the buildings and basement)

You experience minimum premature termination of calls during


conversation (ie call drops)

You get clear and undisturbed voice

Your call gets connected to the called person during the first attempt
most of the time

You are able to make calls at peak hours

3.2.2.4 Service Loyalty Dimensions

According to (Chaudhuri and Holbrook, 2001; Bandhopadhyay and


Martell, 2007), Service Loyalty has two dimensions, namely, Behavioural Loyalty
and Attitudinal Loyalty. Recently, to evaluate Service Loyalty, a Servloyal construct
(Sudhakar et al, 2006) based on seven dimensions has been introduced. Besides the
behavioural and attitudinal dimensions, there figures cognitive, conative, affective,
trust and commitment dimensions.

The seven dimensions are explained with the items.

Behavioural Loyalty - refers to the customers willingness to continue the


relationship with the provider in the short period. It does not imply a commitment to
the provider, but simply expresses the degree of loyalty in the immediate future.

I will transact with this mobile service provider again for future needs

I will try new services that are provided by the service provider

I will recommend other people to patronize this service provider


40

I will say positive things to other people about the services provided
by the mobile service operator

Attitudinal Loyalty - refers to the predisposition towards the provider deriving from
a psychological process.

I will continue to patronize this mobile service provider / service even


if the service charges are increased moderately

I have strong preference to this service provider

I will continue to use this service provider regardless of changes in


the service

I am likely to pay little more for the services when situation arises

Cognitive Loyalty - is the psychological state of mind which is based on the


information available to the consumer about the service performance which
indicates that one service provider is preferable to its alternatives. Cognition can be
based on prior or vicarious knowledge or on recent experience-based information.
Loyalty at this state of mind is directed toward the brand because of this
"information" (attribute performance levels).

To me, this service provider would rank first among others

I would continue this service for a long period of time

I will deal exclusively with the service provider

The service of the provider reflect a lot about who I am

Conative Loyalty - is the phase of loyalty development which is influenced by


repeated episodes of positive affect toward the service provider. Conation, by
definition, implies a brand-specific commitment to repurchase. Conative loyalty,
then, is a loyalty state that contains what, at first, appears to be the deeply held
commitment to buy. In effect, the consumer desires to repurchase, but similar to any
"good intention," this desire may be an anticipated but unrealized action.
41

I have found this provider better than others

Repeatedly, the performance of this provider is superior to that of its


competitors

Affective Loyalty refers to the state when the customer feels involved with the
service provider. Affective loyalty is the state of mind that is developed as a result of
a liking or attitude toward the service provider on the basis of cumulatively
satisfying usage occasions. This reflects the pleasure dimension of the satisfaction
definition and pleasurable fulfillment. The loyalty exhibited is directed at the degree
of affect (liking) for the service provider.

I like the terms of the service provider

I like the performance and services of the provider

I have a positive attitude toward this provider

I am satisfied with my decision to stay with this provider

Trust loyalty - refers to the state which is developed as a result of the belief on the
competence of the service provider. If the service provider has the required
expertise, to perform his/her activities, carry out his/her obligations or accomplishes
his/her promises, the consumer gets a feeling of security about the service provider.

The employees of the service provider give individual attention

The employees understand my specific needs and go out of their way


to help me

The employees respond caringly when I share my problems

The personnel at the service provider are filled with professionalism


and dedication

Commitment Loyalty - regards the deepest involvement of the customer in the


relationship with the provider. The customers show high degree of continued
association with the service provider.
42

I am committed to the service provider

Even when I get to hear any negative information about the provider,
I would still continue with this service provider

I like switching from one service provider to another

My continued association with the service provider is important to


me.

3.2.2.5 Loyalty Indices

Bob E. Hayes, 2007 identifies key drivers of loyalty for service providers
and introduces new customer loyalty metrics designed to help companies increase
revenue through new and existing customers. The instrument to measure loyalty
indices were used to understand the respondents perception about their level of
agreement with respect to questions, each on a five point Likert Scale (1 Strongly
Disagree and 5 Strongly Agree). He has identified three loyalty indices namely,

Advocacy Loyalty Index (ALI) - reflects the degree to which customers will be
advocates of the company.

Likelihood to choose the service again

Likelihood to recommend

Likelihood to pass on positive feeling about the services

Likelihood to continue purchasing the same products / services

Purchasing Loyalty Index (PLI) - reflects the degree to which customers will
increase their purchasing behavior.

Likelihood to increase frequency of purchasing

Likelihood to purchase different products / services


43

Defection Loyalty Index (DLI) - reflects the degree to which customers will show
symptoms of defecting to competitors.

Likelihood to continue this only as a supplementary connection

Likelihood to switch to a different provider

3.2.3 Sampling Method

Convenience sampling was used because the sampling units were


accessible, easy to measure and required the least time and cost expenditure
(Ko, 1995).. It also takes into account the operational difficulties associated in the
process of data capturing. However, by going through this method of sampling it
was ensured that all units of population were adequately represented. In determining
the sample size the following factors were taken into consideration:

Dispersion of the population

Time taken by the respondents to complete the questionnaire

Resources required completing the survey

Respondents willingness to part with information.

Burns and Bush (1999) believe that sample size affects the accuracy of
results. Sample size also has a direct impact on the appropriateness of the statistical
techniques chosen (Hair et al., 1998). The size of the sample for this research was
designed in accordance with the criterion for applying the analytical technique
chosen. Since this study used Structural Equation Modeling and regression a large
sample was required for this multivariate technique. The sample size was fixed for
around 550, as a small sample size might provide less accurate estimates of the
degree of relationship among the variables due to unstable correlations (Bordens and
Abbott, 1996).

All variables in the study were identified through a review of the relevant
research and literature. External validity refers to the researchers ability to
generalize the results of the study from the sample to the population from which the
44

sample was drawn (Gay, 1987). One of the threats to external validity occurs if the
sample is not representative of the population. The best protection for equal
representation occurs when a sample has been randomly selected (Fink, 1995).
Sampling error refers to chance variation among the means (Gay, 1987) due to
influences not under the control of the researcher. Sampling errors are normally
distributed and can be controlled if a sufficiently large number of subjects are
selected from the population. Sampling error for this study was controlled through
the selection of a sample large enough to be representative of the population.

Measurement error refers to inconsistencies in measurements. The


measurement error was controlled by employing instruments which have been
shown to be reliable and valid. In order to address possible measurement error
reliability tests were employed on the scale items.

3.3 PROPOSED CONCEPTUAL MODEL

In developing the proposed research model, we examine and confirm the


relationship between service quality, service loyalty and loyalty indices which are
multidimensional variables. Also the influence of the demographic variables on each
of service quality, service loyalty and loyalty indices are examined. These
multidimensional variables become the latent factors in strengthening the CRM
implementation by the Indian Mobile Service Providers.

Figure 3.1 Conceptual Frame Work for the Study


45

3.4 PRE-TEST

The purpose of questionnaire pre-testing is to ensure that item wording,


flow of questions, suitability of measurement scales, instructions, and other aspects
of the questionnaire are understandable. Churchill and Iacobucci (2002) stress that;
data collection should never begin without an adequate pre-test of the instrument.
Therefore, although the items used in this study were taken from the extant studies
which had established the measurement, this step was still necessary. It was because
those wordings have different meanings and connotations in different cultural
contexts (Sekaran, 2003). Questionnaire pre-testing can help to rectify any
inadequacies beforehand (Sekaran, 2003). After the questionnaire had been
developed, the same was pre-tested using a pilot study with 50 subscribers in
Chennai. Interviews with respondents indicated that the item wording was clear and
easy to understand. In addition, analyses of descriptive statistics indicated no
skewness or kurtosis. Scale reliability was performed on each measure.

3.5 DATA COLLECTION

The questionnaires including covering letter, were personally distributed


to customers of mobile services, during April-June, 2011. Convenience sampling
method was used to collect the data from customers. Further, the data was
specifically collected from residential mobile customers, who had been using the
services for at least six months. Finally, of the 550 surveys individually
administered, 523 questionnaires were received at a response rate of 95 per cent. On
further filtering, 490 responses were found to be completely filled.

3.6 SUMMARY OF RESEARCH METHODS

The research design utilized is a quantitative research approach in cross-


sectional time frame and the participants being residential mobile subscribers.
Measurement scales used in this study were taken from prior studies. Questionnaires
were pre-tested to confirm the clarity of the contents involved. Data were collected
from residential mobile subscribers in Chennai. The sample size was 550. After the
46

data was collected from the survey, data was processed through several steps to fine-
tune their quality and these steps are discussed in the following sections.

3.7 DATA EDITING, CATEGORISING AND CODING

This section describes briefly three steps to deal with the data before they
were used for analysis. These steps included data editing, coding and categorizing.
Their purpose is to ensure that the data are reasonably good and of assured quality
for the later analysis (Sekaran, 2003). Data editing was firstly conducted to check
the degree of questionnaire completion. This step was initially done at the same time
when the respondents returned the questionnaires. The interviewers checked the
completion of all questions on the spot and asked for further information if any
question was unanswered. A second editing was conducted after the data were
collected.

Then coding was conducted to facilitate the entry of responses and avoid
later confusion (Sekaran, 2003). Finally, data were keyed into the Microsoft Excel
sheet by using actual scores marked by the respondents. There were no missing data.
After the data were entered in the worksheet, analysis of the data would be
conducted by importing the data into the SPSS data editor and into AMOS 19.0. The
procedures for examining the data are described in the following section.

3.8 DATA ANALYSIS PROCEDURES

This section firstly introduces the main multivariate technique adopted to


test the hypothesis involving the constructs in this study. It then outlines the
procedures of analysing the data and statistical techniques employed for the analysis.

3.8.1 Structural Equation Modeling

Structural Equation Modeling (SEM) techniques are considered today to


be a major component of applied multivariate statistical analyses and are used by
biologists, economists, educational researchers, marketing researcher, medical
researchers, and a variety of other social and behavioural scientists. SEM offers
47

researchers a comprehensive method for quantification and testing of theoretical


models. Although the statistical theory that underlies the techniques appeared
decades ago, a considerable number of years passed before SEM received the
widespread attention it holds today.

In its broadest sense, SEM models represent translations of a series of


hypothesized cause-effect relationships between variables into a composite
hypothesis concerning patterns of statistical dependencies (Shipley, 2000). The
relationships are described by parameters that indicate the magnitude of the effect
(direct or indirect) that independent variables (either observed or latent) have on
dependent variables (either observed or latent), by enabling the translation of
hypothesized relationships into testable mathematical models. Once a theory has
been proposed, it can then be tested against empirical data. The process of testing a
proposed theoretical model is commonly referred to as the confirmatory aspect of
SEM (Raykov and Marcoulides, 2000). Another aspect of SEM is the so-called
exploratory mode. This aspect allows for theory development and often involves
repeated applications of the same data in order to explore potential relationships
between variables of interest (either observed or latent).

SEM can also be used to test the plausibility of hypothetical assertions


about potential inter-relationships between constructs and their observed measures
or indicators. Latent variables are hypothesized to be responsible for the outcome of
observed measures. In other words, the score on the explicit questionnaire would be
an indicator of the construct or latent variable. Researchers often use a number of
indicators or observed variables to examine the influences of a theoretical factor or
latent variable. It is generally recommended that researchers use multiple indicators
(preferably more than two) for each latent variable considered in order to obtain a
more complete and reliable picture than that provided by a single indicator (Raykov
and Marcoulides, 2000) because both observed and latent variables can be
independent or dependent in a proposed model.

The main focus of the current research study is the validation of the
hypothesized causal models on the influences of demographic variables, service
48

quality and service loyalty on customer loyalty, using the Structural Equation
Modeling (SEM) technique. SEM is the most appropriate method for the current
research problem due to the following characteristics:

1. Ability to represent unobserved concepts in the causal relationships


as well as accounting for measurement error in the estimation
process. The latent variables in this research were service quality
dimensions namely, reliability, responsiveness, assurance, empathy,
tangibles, convenience and customer perceived network quality;
service loyalty dimensions namely, behavioural, attitudinal,
cognitive, conative, affective, trust and commitment ; loyalty indices
namely, advocacy loyalty index, purchase loyalty index and defection
loyalty index.

2. Estimation of multiple and interrelated cause and effect dependence


relationships.

Of the two major measurement processes in SEM, the first measurement


process is known as measurement model analysis. A measurement model is a sub
model of SEM that: (1) specifies the indicators (observable or measurable variables)
for each construct (unobserved concept or dimension) and (2) assesses the reliability
of each construct for estimating the causal relationships (cause and effect
relationships). The reliability is the degree to which the observed or measured
indicators are consistent in their measurements. The second sub model of SEM is the
structural model, which is basically the set of one or more dependence relationships
linking the hypothesized models constructs. The hypothesized relationships are
translated into a series of structural equations (similar to regression equations) for
each dependent latent construct. In the next stage, SEM estimates series of such
separate, but interdependent structural equations simultaneously.

Anderson and Gerbing (1988) suggest a two-stage approach to causal


modeling using SEM, in which the measurement model is first confirmed and then
the structural model is built. If the measurement model provides an acceptable fit to
49

the data, the structural model then provides an assessment of the extent of
relationships between the hypothesized constructs (Byrne, 1994). We have followed
this two stage approach using the SEM software AMOS 19.0 with maximum
likelihood estimation.

3.8.1.1 Measurement Model

In the measurement model, we can assess the contribution of each scale


item, as well as incorporate how well the scale measures the concept (its reliability)
into the estimation of the relationships between dependent and independent
constructs. This procedure is similar to performing a factor analysis of the scale
items and using the factor scores in the regression.

3.8.1.2 Structural Model

The structural model converts the hypothesized causal paths


(or, proposed relationship between constructs) into a series of structural equations
for each dependent construct. In this process, some dependent constructs become
independent constructs in subsequent relationships, giving rise to an interdependent
nature of the structural model. The extent of the causal effect of an independent
construct on a dependent construct is known from the path coefficient values. The
structural model result provides the estimated path coefficient values and calculated
t value for each path coefficient. The estimated coefficients are checked for
significance by looking at the significance of the statistic.

3.8.1.3 Models Goodness-of-Fit Assessment

The purpose of assessing a models fit is to determine the degree to


which the hypothesized model as a whole is consistent with the empirical data of the
study. The literature offers a wide range of goodness of fit indices. Unfortunately,
the literature is unequivocal as to which represent a good estimation of fit
(Diamantopoulos and Siguaw, 2000). In part this might be due to the fact that some
indices of fit are affected by the sample size, estimation method, model complexity,
violation of the underlying assumptions of multivariate normality and 100-variable
50

independence (Byrne, 1998). As a result, since there is no agreement in the literature


as to which are the best, multiple descriptive indices of fit were used to further
assess the goodness-of-fit of the model. It has been suggested that the assessment of
model adequacy must be based on multiple criteria that take into account theoretical,
statistical, and practical considerations (Byrne, 1998).

Two considerations in the selection of best fit indices were kept in mind.
These involved a reference of most cited indices in the methodological literature on
Confirmatory Factor Analysis CFA and the extent to which these indices are less
affected by sample size, estimation procedures, violations of assumptions or some
combinations of both (Chaudhuri, 1995, Diamantopoulos and Siguaw, 2000, Byrne,
1998). The first measure of fit included in the AMOS output is the chisquare value
2
). The chi-square statistic is the traditional measure for evaluating overall model
fits in covariance structure models and provides a test of perfect fit in which the null
hypothesis is that the model fits the population data perfectly (Diamantopoulos and
2
Siguaw, 2000). A statistically significant causes rejection of the null hypothesis,
implying imperfect model fit and possible rejection of the model. Thus the aim in
confirmatory analysis and Structural Equation Modeling, contrary to conventional
hypothesis testing procedures, is not to reject but to accept the null hypothesis. By
2
consensus, a large value of indicates that the model fit poorly with the population
2
and subsequently small values of correspond to good fit (Joreskog and Sorbom,
1996). Despite its importance in providing a formal significance test of the
2
covariance structure hypothesis, had led to problems of fit. The Chi-square
statistic has been found to be very sensitive to both normality (particularly excessive
kurtosis), and the size of the sample, and it also assumes that the model fits perfectly
well in the population. This last point has an unrealistic impact in the empirical
analysis since the model might fit well the sample but it is very unlikely to happen in
2
the population. For the above reasons, instead of regarding as a test statistic, the
literature considered it as a goodness (or badness)-of-fit measure (Diamantopoulos
and Siguaw, 2000).

Among the common indicators used to judge a good fit of the model to
the population were the Root Mean Square Residual (RMR) and the Root Mean
51

Square Error of Approximation (RMSEA). These indices are based on their


discrepancy function and have been considered as important to supplement an
investigators judgment. RMSEA is recognised as one of the most informative
criteria in covariance structure modeling and considered the first Goodness of Fit -
GFI to be reported in the study (Byrne, 1998). In addition, whenever using
maximum likelihood as a unique method of estimation, RMSEA needs to be
reported because it has been found to yield consistent results across estimation
procedures when the model is well defined (Sugawara and MacCallum, 1993) and
also is not biased by sample size (Widaman and Thomson, 2003).

Furthermore, RMSEA is particularly important when determining the


number of constructs because it decreases when an additional construct reduces the
F (minimal population discrepancy function) substantially, but increases if including
the additional construct only reduces F slightly (McNight, Choudhury and Kacmar,
2003). Values less than 0.05 are considered of as good fit and values as high as 0.08
represent reasonable errors of approximation in the population (MacCallum and
Austin, 2000). It is also recommended to report the 90 percent interval around the
RMSEA values to assess the precision of RMSEA estimates as such information
helps the assessment of model fit (MacCallum, Browne and Sugawara, 1996). A
good precision of the RMSEA value is indicated by a narrow confidence interval
reflecting how well the model fits the population covariance matrix (Byrne, 1998).

The Root Mean Square Residual (RMR) represents the average residual
value derived from the fitting of the variance-covariance matrix for the hypothesised
model to the variance-covariance of the sample data and a value of 0.05 or less is
considered of a good fit (Chaudhuri, 1995). Although, RMR values are highly
regarded, they are difficult to interpret due to their residual susceptibility to the sizes
of the observed variances and covariances (Byrne, 1998).

Additional information regarding the fit of the model was obtained from
the values of the following indices of fit which were first introduced by Joreskog
and Sorbom (1982).
52

Goodness-of-fit index (GFI) is an indicator of the relevant amount of


variances and covariances accounted for by the model and thus shows how closely
the model comes to perfectly reproducing the observed co-variance matrix
(Diamantopoulos and Siguaw, 2000). Acceptable fit is obtained when values of the
GFI are greater than 0.90 (Jreskog and Srbom, 1993). The GFI can be classified as
an absolute index of fit because it basically compares the hypothesised model with
no model at all (Chaudhuri, 1995). Information was collected from incremental or
comparative indices that show the fitness of the default model compared to the
independence model (null model). The incremental indices are considered better
indicators of fit than the absolute indices because they exhibit relative independence
from sample size (Widaman and Thomson, 2003). The study considered two indices
under this category as suggested in the SEM literature (Bentler, 1990, Bentler and
Bonnett, 1980). One is the Bentler-Bonnetts Normed Fit Index (NFI), regarded as
practical choice. The second index, Comparative Fit Index (CFI) is a revised version of
NFI that takes into consideration the size of the sample. The values for both indices
range from 0 to 1 with values close to 1 representing a good fit (Bentler, 1990). A third
Index recommended to be reported among the incremental fit indices is the
Non-normed Fit Index (NNFI) also called Tucker-Lewis Index (TLI) (Byrne, 1998).
Normed and Non-normed fit indices are recognised as very popular adjuncts to more
traditional statistics in Structural Equation Modeling to help assess the quality of a
model (Bentler, 1990).

The final measure of fit is Hoelters (1983) critical N (CN) that is very
different to the previously mentioned indices as it relates to the appropriate size a
sample must have in order to accept the fit of a given model on a statistical basis.
(Hoelter, 1983). A CN value > 200 has been deemed an appropriate sample size
(Hoelter, 1983). However, this cut-off value has been challenged as some considered
higher CN values to yield an adequate fit of the model (Chaudhuri, 1995).

3.8.1.4 AMOS

AMOS is an acronym for analysis of moment structures or, in other


words, the analysis of mean and covariance structures. An interesting aspect of
53

AMOS is that, although developed within the Microsoft Windows interface, the
program allows the researcher to choose from three different modes of model
specification. Using the one approach, AMOS Graphics, one can work directly from
a path diagram; using the others, AMOS VB.NET and AMOS C#, and one can work
directly from equation statements. The choice of which AMOS method to use is
purely arbitrary and bears solely on how comfortable the researcher feels in working
within either a graphical interface or a more traditional programming interface.
AMOS Graphics allows for the estimates to be displayed graphically in a path
diagram.

3.8.2 Multiple Regression

Multiple regression is a dependence technique which is most widely used


to analyze the relationships between a single dependent variable and a set of
independent variables (Hair et al., 1998). This method succeeds in measuring the
joint influence of the explanatory variables on the dependent variable, and, for each
of these explanatory variables, assesses the effect on the outcome variable that is
attributable to that explanatory variable alone (Harraway,1995). It is a statistical tool
that is usually used when both dependent and independent variables are metric (Hair
et al., 1998) according to Pallant (2001), multiple regression is able to provide the
information about the model as a whole (all subscales), and the relative contribution
of each of the variables that make up the model (individual subscales).

The application of multiple regression analysis falls into two broad


categories of research problems: prediction and explanation (Hair et al. 1998). One
basic purpose of regression analysis is to predict the dependent variable with a set of
independent variables. In doing so, multiple regression fulfils one of the two
objectives (Hair et al. 1998). The first objective is to maximize the overall predictive
power of the independent variables as represented in the variate. It is explicitly
designed to make errors of prediction as small as possible using the least squares
criterion for overall smallness. The second objective is to compare two or more sets
of independent variables to assess the predictive power of each variate. The second
purpose of multiple regression analysis is to provide an assessment of the degree and
54

direction (positive or negative) of the linear relationship between independent and


dependent variables by forming the variate of independent variables (Hair et al.
1998). Multiple linear regression analysis can be used to examine the effects of
some independent variables on the dependent variable while controlling (i.e. held
constant) for other independent variables.

In order to calculate statistical predictions, the regression technique seeks


to establish a rectilinear relationship between the variables concerned. Subsequently,
the equation of a straight line is of important value, and is denoted by Y = bX + a
where Y = predicted score; b = slope; X = X intercept and a = Y intercept. The
following equation is therefore used when a number of predictor variables are
employed to predict a criterion variable in multiple linear regression.

Y = a + b1X1 + b2X2 + + bkXk + e

where Y is the predicted value on the dependent variable, a is the Y intercept (the
value of Y when all the X values are 0), X represents the various independent
variables and b is the coefficients assigned to each of the independent variables
during regression (Tabachnick and Fidell 2001).

In this study, multiple regression analysis is the technique used to


examine the relationship between Service Quality Dimensions and the Loyalty
indices; Service Loyalty Dimensions and Loyalty Indices and Service Quality
dimensions and Service Loyalty Dimensions in order to derive a path diagram.

3.8.2.1 Measurement of Variables

An important issue in multiple regression analysis is whether the


measurement of the dependent and independent variables is appropriate for this type
of analysis. Multiple regression analysis accommodates only quantitative
explanatory variables, measured on an interval or continuous scale.
55

3.8.2.2 Coefficient of Multiple Determination (R2)

The coefficient of determination (R2) was used as an estimate of the


predictive power of the regression model. R2 values measure the percentage of the
total variance of the dependent variable about its mean that is explained or
accounted for by the independent variable (Lewis-Beck 1993). It is the squared
product-moment correlation coefficient and its value can vary between 0 and 1.
Thus, the closer this is to 1 the better the fit of the model (i.e. the better the
independent variables are at accounting for or explaining the variation in the
response variable) because if R2 is 1 then the regression model is accounting for all
the variation in the outcome variable. According to Hair et al. (1998), if the
regression model is properly applied and estimated, it can be assumed that the higher
the value of R2, the greater the explanatory power of the regression equation, and
therefore the better the prediction of the dependent variable.

However, there is no hard-and-fast statistical argument for deciding what


level of R2 is high enough. The R2 value can only improve by adding more
variables to the model, even when their contribution is very small or accidental. A
development of the standard R2 is adjusted-R2; this is a measure of fit which take
into account the number of independent variables and the sample size. While the
addition of predictor variables will cause the R2 to rise, the adjusted R2 may fall if
the added predictor variables have little explanatory power and are statistically
insignificant (Hair et al. 1998; Newton and Rudestam 1999). Hence, adjusted R2 is a
less biased measure for the variance explained by the model; therefore, it was used
in this study for the interpretations of explanatory power.

It is to be noted that the predictive power of the regression is directly


influenced by the sample size included in the regression analysis. The higher the
sample size, the lower the R for a given number of independent variables at a given
significance and power levels. This has been taken into consideration in assessing
the overall model fit for the regression equations in this study. A further discussion
on R2 values with special reference to the results of regression analysis obtained in
this study will be presented.
56

3.8.2.3 Interpretation of Regression Variate

After the final model has been derived and the predictive power of the
regression model has been estimated, the final task is to interpret the regression
parameter by evaluating the estimated regression coefficients for their explanation of
the dependent variable. The regression coefficient captures the effect of one variable
while controlling for (i.e. holding constant) the other variables in the model. Two
coefficient values are of interest for interpretation. These are the unstandardised and
standardised regression coefficients, or b and beta, respectively. The unstandardised
regression coefficients (b-coefficients) represent the amount of change in the
dependent variable associated with a one-unit change in that independent variable,
with all other independent variables held constant (Newton and Rudestam 1999).

3.8.3 Data Envelopment Analysis

Data Envelopment Analysis (DEA) is a linear programming based


technique for measuring the relative performance of organisational units where the
presence of multiple inputs and outputs makes comparisons difficult.

There is an increasing concern with measuring and comparing the


efficiency of organisational units such as local authority departments, schools,
hospitals, shops, bank branches and similar instances where there is a relatively
homogeneous set of units.

The usual measure of efficiency, i.e.:

Data Envelopment Analysis (DEA) is an increasingly popular


management tool. DEA is commonly used to evaluate the efficiency of a number of
producers. A typical statistical approach is characterized as a central tendency
approach and it evaluates producers relative to an average producer In contrast, DEA
57

compares each producer with only the "best" producers. By the way, in the DEA
literature, a producer is usually referred to as a decision making unit or DMU.

In DEA, there are a number of producers. The production process for


each producer is to take a set of inputs and produce a set of outputs. Each producer
has a varying level of inputs and gives a varying level of outputs. For instance,
consider a set of banks. Each bank has a certain number of tellers, a certain square
footage of space, and a certain number of managers (the inputs). There are a number
of measures of the output of a bank, including number of checks cashed, number of
loan applications processed, and so on (the outputs). DEA attempts to determine
which of the banks are most efficient, and to point out specific inefficiencies of the
other banks.

A fundamental assumption behind this method is that if a given producer,


A, is capable of producing Y(A) units of output with X(A) inputs, then other
producers should also be able to do the same if they were to operate efficiently.
Similarly, if producer B is capable of producing Y(B) units of output with X(B)
inputs, then other producers should also be capable of the same production schedule.
Producers A, B, and others can then be combined to form a composite producer with
composite inputs and composite outputs. Since this composite producer does not
necessarily exist, it is typically called a virtual producer.

The heart of the analysis lies in finding the "best" virtual producer for
each real producer. If the virtual producer is better than the original producer by
either making more output with the same input or making the same output with less
input then the original producer is inefficient. The subtleties of DEA are introduced
in the various ways that producers A and B can be scaled up or down and combined.

To illustrate how DEA works, consider an example of three banks. Each


bank has exactly 10 tellers (the only input), and we measure a bank based on two
outputs: Checks cashed and Loan applications. The data for these banks is as
follows:
58

# Bank A : 10 tellers, 1000 checks, 20 loan applications

# Bank B : 10 tellers, 400 checks, 50 loan applications

# Bank C : 10 tellers, 200 checks, 150 loan applications

Now, the key to DEA is to determine whether we can create a virtual


bank that is better than one or more of the real banks. Any such dominated bank will
be an inefficient bank.

Consider trying to create a virtual bank that is better than Bank A. Such a
bank would use no more inputs than A (10 tellers), and produce at least as much
output (1000 checks and 20 loans).Clearly, no combination of banks B and C can
possibly do that. Bank A is therefore deemed to be efficient. Bank C is in the same
situation.

However, consider bank B. If we take half of Bank A and combine it


with half of Bank C, then we create a bank that processes 600 checks and 85 loan
applications with just 10 tellers. This dominates B (we would much rather have the
virtual bank we created than bank B). Bank B is therefore inefficient. Another way
to see this is that we can scale down the inputs to B (the tellers) and still have at least
as much output. If we assume (and we do) that inputs are linearly scalable, then we
estimate that we can get by with 6.3 tellers. We do that by taking .34 times bank A
plus .29 times bank B. The result uses 6.3 tellers and produces at least as much as
bank B does. We say that bank B's efficiency rating is .63. Banks A and C have an
efficiency rating of 1.

Using Linear Programming

Data Envelopment Analysis is a linear programming procedure for a


frontier analysis of inputs and outputs. DEA assigns a score of 1 to a unit only when
comparisons with other relevant units do not provide evidence of in efficiency in the
use of any input or output. DEA assigns an efficiency score less than one to
(relatively) inefficient units. A score which is less than one means that the linear
combination of other units from the sample could produce the same vector of
59

outputs using a smaller vector of inputs. The score reflects the radial distance from
the estimated production frontier to the DMU under consideration.

There are a number of equivalent formulations for DEA. The most direct
formulation of the exposition I gave above is as follows:

Let Xi be the vector of inputs into DMU i. Let Yi be the corresponding


vector of outputs. Let X0 be the inputs into a DMU for which we want to determine
its efficiency and Y0 be the outputs. So the X's and the Y 's are the data. The
measure of efficiency for DMU0 is given by the following linear program:

Min

Subject to i Xi 0

i Yi 0

where i is the weight given to DMU i in its efforts to dominate DMU 0 and is the
efficiency of DMU 0. So the 's and are the variables. Since DMU 0 appears on
the left hand side of the equations as well, the optimal cannot possibly be more
than 1. When we solve this linear program, we get a number of things:

1. The efficiency of DMU 0 ( ), with = 1 meaning that the unit is


efficient.

2. The unit's comparables" (those DMU with nonzero ).

3. The goal" inputs (the difference between X0 and iXi)

4. Alternatively, we can keep inputs fixed and get goal outputs


(1/ iYi)

DEA assumes that the inputs and outputs have been correctly identified.
Usually, as the number of inputs and outputs increase, more DMUs tend to get an
efficiency rating of 1 as they become too specialized to be evaluated with respect to
60

other units. On the other hand, if there are too few inputs and outputs, more DMUs
tend to be comparable.

A few of the characteristics that make it powerful are:

DEA can handle multiple input and multiple output models.

It doesn't require an assumption of a functional form relating inputs


to outputs.

DMUs are directly compared against a peer or combination of peers.

Inputs and outputs can have very different units. For example, X1
could be in units of lives saved and X2 could be in units of dollars
without requiring an a priori tradeoff between the two.

The same characteristics that make DEA a powerful tool can also
create problems. An analyst should keep these limitations in mind
when choosing whether or not to use DEA.

Since DEA is an extreme point technique, noise (even symmetrical


noise with zero mean) such as measurement error can cause
significant problems.

DEA is good at estimating "relative" efficiency of a DMU but it


converges very slowly to "absolute" efficiency. In other words, it can
tell you how well you are doing compared to your peers but not
compared to a "theoretical maximum."

Since DEA is a nonparametric technique, statistical hypothesis tests


are difficult and are the focus of ongoing research.

Since a standard formulation of DEA creates a separate linear


program for each DMU, large problems can be computationally
intensive.
61

3.9 PROCESS OF ANALYSIS

The analyses included a profile of the respondents, preliminary data


analyses and hypothesis tests. The response rate and the profile of respondents
would be first provided, followed by the preliminary data analyses. The preliminary
analyses are essential because they can ensure that the multivariate methods chosen
are applied in appropriate situations (Hair et al., 1998). They also lend credibility to
all subsequent analyses and increase accuracy in the results (Sekaran, 2003). The
analytical process in this initial stage would firstly provide descriptive statistics of
the mean and standard deviation, followed by examining the missing data and test
for normality of the data. The normality test was performed at the beginning stage
by using EXCEL software in order to determine whether the variables are normally
distributed.

Preliminary tests includes assessing reliability of measurement scales


analyzed using Cronbachs Alpha to ensure that all the variables are reliable. SEM
and Regression analysis were performed in order to test the relationships of the
dependent variables and independent variables. In this study, simple linear
regression 1was used.

3.10 SUMMARY

This chapter provides a detailed description of the research design used


in the current study. Six hypotheses are developed on the basis of the literature
review provided in the previous chapter. Research methods including scale
development, questionnaire design, data collection and sample size are discussed.
Based on these methods, data are collected for this study to examine the hypotheses
proposed. After the data collection, data editing, coding and categorising are
described. The procedures of data analysis and statistical techniques chosen for the
analyses are also outlined. Structural Equation Modeling, regression analyses would
be employed to test the hypotheses. The reason for using these techniques for the
testing the hypotheses is also justified. The next chapter reports analyses of the data.
62

CHAPTER 4

THE INDIAN TELECOM INDUSTRY: STATUS ANALYSIS

This chapter presents a comprehensive note on the path of growth and


trends and transitions in the Indian Telecommunication scenario. It begins with an
overview of the service providers and the types of services provided by them. The
chapter then moves on to examine the status of the Indian telecom industry by
providing vital figures and statistics on various economic indicators in the telecom
sector pre and post privatization, the role of the private sector, and the government
policies that had initiated the communication revolution in the country. Further it
covers a section to analyze the growth of mobile telecom in India. It also presents a
note on the Mobile Service Providers in Chennai, with a comprehensive picture of
their respective strategic competencies.

4.1 INDIAN TELECOM INDUSTRY AN OVERVIEW

There are two types of service providers in the Indian Telecom Industry:-

1. Basic Service Providers

2. Value added Service Providers

4.1.1 Basic Service Providers

Basic service providers are those who provide mainly voice


communication. The subscribers connection to the telecom network is called a
Direct Exchange Line (DEL) and people use it for voice communication. Basic
services can be differentiated as per call destination into domestic and international.
Domestic calls, both local and long-distance are routed through cables/r46wireless
links. International calls are routed overseas, mainly through satellite links. The
63

international carriers of various nations liaison with one-another to ensure smooth


operations and efficient call transfer. Major global carriers, mainly private operators
from the developed nations, determine international call tariffs. Revenue sharing
agreements exist between various international carriers.

4.1.2 Value added Service Providers

Value added service providers are those who provide services, such as
cellular telephony, paging, e-mail and VSAT network, which provide the subscriber
greater ease of communication and enhance the utility of basic services network.

The following are the various types of services provided by both the
service providers put together:-

Telephone Services

NSD / ISD Services

Computerized Trunk Services

Pay Phones

National & International Leased Lines Circuits

Telex

Telegraph Services (Manual & Automatic)

X-25 based Packet Switched Data Network (INET)

Gateway Packet Switched Data Services (GPSS)

Gateway Electronic Data Interchange Services (GEDIS)

Gateway E-Mail and Store & Forward FAX Service (GEMS-400)

Concert Packet Services (CPS)

Satellite-based Remote Area Business Message Network


64

Electronic Mail

Voice Mail

Audio-Text

Radio Paging

Cellular Mobile Telephone

Public Mobile Radio Trunked Service

Video-Tex

Video Conferencing

V-SAT

Internet

ISDN

INMARSAT Mobile Service

INMARSAT Data Service

Home Country Direct Service

Intelligent Network (IN) Service

4.2 THE INDIAN TELECOM INDUSTRY: HISTORICAL


PERSPECTIVE

The Indian Telecom industry has witnessed several events since the day
on which the first operational landline was laid in 1851. For about 140 years
afterwards nothing much happened in the industry to excite the world around, till the
liberalization initiative in 1991, followed by telecom reforms that lead to the
announcement of the Telecom policy in 1994. The Table 4.1 shows the important
dates in the history of the Indian Telecom Sector.
65

Table 4.1 Important Dates and Events in the Indian Telecom Industry

Year Events
1851 First Telephones in India
1943 Nationalization of telephone companies
1985 DoT was created
1986 Creation of MTNL and VSNL
1991 Telecom equipment liberalized
1994 Licenses for paging
1994 Telecom Policy announced
September 1994 Guidelines for private sector participation in basic
services
November 1994 Cellular licenses issued
January 1995 Issue of tenders for 2nd operator in basic services
August 1995 VSNL launches internet services
January 1996 TRAI formed
February 1996 Supreme court allows multiple players in Basic services
October 1999 New Telecom Policy announced
October 2000 BSNL formed
December 2001 33 Licences to private palyers in Basic services
February 2002 Disinvestment of VSNL
May 2002 Bharti offers ILD Services with sharp cuts in tariffs
September 2002 TRAI decides forbear from regulating cellular tariffs
March 2006 WPC set subscriber thresholds for GSM and CDMA
operators for spectrum allocation
March 2007 9 dinstinct operators had been allocated GSM spectrum.
Out of these, only Bharti has pan-India presence
August 2007 Subscriber thresholds were revised by TRAI as
operators could support more subscribers with lower
spectrum as compared to WPC allocation
January 2008 Govt. of India allocated start-up spectrum to all prior
licenses awaiting spectrum. These include Aircel (14
circles), Idea (2 circles), RComm (14 circles) and
Vodafone (6 circles)
January 2009 TRAI plans to introduce MNP on a pan-India basis
January 2011 MNP implemented
66

4.3 GROWTH OF THE INDIAN TELECOM SECTOR

The study on the growth of the Indian telecom sector is presented under
two heads:

1. Indian Telecom Industry Pre privatization

2. Indian Telecom Industry Post privatization

4.3.1 Indian Telecom Industry Pre privatization

The Indian telecom sector like any other infrastructure sector was owned
and controlled by the Government of India, since independence. The nationalization
of the telecom companies to form Post, Telephone and Telegraphs in 1943 was an
important milestone in the history of Indian telecommunications. There was a
gradual growth during the five-year plans in the sector and the entire sector was
brought under the control of the Department of Telecommunications (DoT) in 1985.

The status of the telecom sector for the period 1993-94, which is stated as
the year of the monopoly reign, is as follows:

Table 4.2 Status of the Indian Telecom Industry in 1993-94

Items Unit Status


Equipped Capacity in 000s 9795.17
DELs* in 000s 8025.6
Waiting List in 000s 2496.8
Registered Demand in 000s 10522.4
Metered Calls In crores 4671.8
Call per DEL in 00s 52.88
Faults Registered (Per hundred stations per
numbers 18.3
month)
* DEL Direct Exchange Lines
67

The telecom policy announced in 1994 significantly changed the Indian


Telecom scenario. The Cellular Service providers broke the monopoly in the sector
initially, with the government issuing licences to private players to take part in
contributing towards linking the country through mobile network.

The sector started experiencing tremendous growth from this period


onwards, not only in terms of number of lines provided, but also in terms of
investments, revenue and employment. This period of transition is analyzed in detail
in the following section.

4.3.2 Indian Telecom Industry Post Privatization

India is perceived to have a special comparative advantage in IT and IT-


enabled services. However, sustaining this advantage depends critically on high
quality infrastructure. The telecom sector has witnessed the impact of major reforms
since 1994, when the government liberalized the sector. The fast expansion of the
telecom network is a consequence of friendlier economic environment created by
positive policy thrust for promoting private investment, including foreign direct
investment in private sector enterprises.

The Indian Government played a major role in effecting the transition in


the telecom sector as an initiator of reforms. When the reformists saw a need for
increased investment in the infrastructure sector for a comprehensive economic
development, they thought it necessary for liberalizing the licensing structure and
enabling the private entry into the sector, thus demonopolising the sector. The two
major policy reform announcements made by the Government of India that lead to
the development of communication infrastructure in the country are:

1. National Telecom Policy (NTP 1994)

2. New National Telecom Policy (NTP 1999)


68

National Telecom Policy (NTP 1994)

The liberalization reforms initiated in 1991, followed by Eighth Plan


(1992-97), objectives to open value added services in the telecom sector for private
sector, necessitated a need for a well-laid operating guidelines for the sector. This
led to the announcement of National telecom Policy (NTP) 1994.This was one of the
major initiatives on the part of the government, in support of the liberalization and
privatization reforms for boosting private entry and foreign investment into the
country. The following were some of the specific objectives of the NTP 1994 based
on the broad objectives of providing affordable and accessible means of
communication for all.

1. To achieve installation of 9.5 million additional Direct Exchange


Lines (DEL) by 1997.

2. To achieve Telephone on Demand by 1997.

3. To achieve a target of 1 PCO (Public Call Office) for 500 units of


population by 1999.

4. Every village to be provided by at least one PCO by 1999.

To focus on the objectives, the following were the policy decisions taken
by the Government of India, on the licensing and operational front.

The basic premise on which competition has been introduced is that


every circle will have one private operator apart from the existing
public sector service providers in the fixed line segment, and two
private operators for cellular. The public sector players had the option
to become the third cellular operator in the future.

The private players were invited to operate in both basic and cellular
telephony. To facilitate licensing, the nation was divided into 20
telecom circles for basic and 21 circles for cellular telephony.
69

As per the terms of license agreement, private operators have to


provide a minimum of 10 percent Direct Exchange Lines (DELs) as
Village Public Telephones (VPTs).

To set up an independent regulatory authority to monitor and regulate


the operations of the players, based on the terms of licensing.

The following were the achievements in the Indian Telecom Sector as a


result of the announcement of NTP 1994:

An independent telecom regulator called TRAI (Telecom Regulatory


Authority of India) was formed in January 1996.

Eight licenses were issued for Cellular services initially in the 4


metro cities in 1994. Subsequently in 1995, 34 licenses were issued
to 14 companies to operate in 18 circles. There were about 13.5 lakh
cellular phones in the country on December 30, 1999.

As on September 1999, the PCOs in the country were at a ratio of


1:453, on all India average bases.

Out of 6 lakh villages in the country 3.4 lakh were provided with
VPTs as on December 1999.

Though NTP 1994 was hailed as an initiator of privatization in the


economy, it was criticized on the following grounds:

It lacked focus, since it sought to achieve a huge task in minimum


period of time and ended up not achieving the targets objected.

There was utter confusion as to licensing in the basic services, with


one bidder dominating the whole scene, subsequently saw the other
players filing a case in the supreme court for recommending multiple
entry.
70

It was also affected by huge resource and finance crunch, due to


improper planning and implementation.

The powers of operation of the regulatory authority were not clearly


defined, so DoT and TRAI ended up in legal disputes to be resolved
by the court.

The above criticisms made it essential for the Indian Government to


announce a new telecom policy with a better framework of licensing, regulatory and
promotional operations to develop the Indian Telecom Sector. This paved way for
the announcement of the New National Telecom Policy (NTP) in 1999. Better
focused objectives of this policy accelerated the pace of growth of telecom network
in the country, after 1999.

New National Telecom Policy (NTP 1999)

The New Telecom Policy (NTP) announced in 1999 modified the NTP
1994 to take into account the far-reaching technological developments taking place
in the telecom sector globally and to implement the Governments resolve to make
India a global IT superpower. NTP 1999 also seeks to solve problems arising out of
the implementation of NTP 1994.

The objectives of the NTP 1999 are

1. Access to telecommunications is of utmost importance for achievement


of the countrys social and economic goals. Availability of affordable and
effective communications for the citizens is at the core of the vision and
goal of the telecom policy.

2. Strive to provide a balance between the provision of universal service to


all uncovered areas, including the rural areas, and the provision of high-
level services capable of meeting the needs of the countrys economy.

3. Encourage development of telecommunication facilities in remote, hilly


and tribal areas of the country.
71

4. Create a modern and efficient telecommunications infrastructure taking


into account the convergence of IT, media, telecom and consumer
electronics and thereby propel India into becoming an IT superpower.

5. Convert PCOs, wherever justified, into Public Teleinfo Centers having


multimedia capability like ISDN services, remote database access,
government and community information systems etc.

6. Transform in a time bound manner, the telecommunications sector to a


greater competitive environment in both urban and rural areas providing
equal opportunities and level playing field for all players.

7. Strengthen research and development efforts in the country and provide


an impetus to build world-class manufacturing capabilities.

8. Achieve efficiency and transparency in spectrum management.

9. Protect defense and security interests of the country.

10. Enable Indian Telecom Companies to become truly global players.

In order to achieve the above objectives, the following targets were fixed:

1. Make available telephone on demand by the year 2002 and sustain it


thereafter so as to achieve a teledensity of 7 by the year 2005 and 15 by
the year 2010.

2. Encourage development of telecom in rural areas making it more


affordable by suitable tariff structure and making rural communication
mandatory for all fixed service providers.

3. Increase rural teledensity from 0.4 (in 1999) to 4 by the year 2010 and
provide reliable transmission media in all rural areas.

4. Achieve telecom coverage of all villages in the country and provide


reliable media to all exchanges by the year 2002.

5. Provide Internet access to all district head quarters by the year 2000.
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6. Provide high speed data and multimedia capability using technologies


including ISDN to al towns with a population greater than 2 lakhs by the
year 2002.

The following are the policy decisions advocated to achieve the above
objectives and targets in a smooth way.

In order to separate the service providing from the policy making


function of the DoT, two separate departments were formed.
Department of Telecom Services (DTS), to provide service and
Department of Telecom Operations (DTO), to take care of operations.
DoT would take care of the policies, treaties and agreements in the
Telecom Sector. DTS and DTO were subsequently corporatised to
form Bharat Sanchar Nigam Limited (BSNL), the presently
functioning government sector service provider.

In the basic services segment, multiple players were permitted to


operate in a telecom circle, as per the Supreme Court
recommendations and also met the investment requirements to
achieve the set objectives.

Telecom Regulatory Authority of India (TRAI) was given


independent powers to act as a price fixer and regulator of licensing
issues.

A separate Telecom Dispute Settlement and Appelliate Tribunal


(TDSAT), was formed to adjudicate any dispute between the service
providers, licensor and the user groups.

Tariff rebalancing measures are taken to make communication


affordable to all. This decision is taken to increase the volume of
traffic and also the revenues.

Opening National long Distance Service (NLDS) and International


Long Distance Service (ILDS) to private players.
73

Creating a provision of Universal Service Fund (USF) under the


Universal service Obligation (USO) for all the service providers to
enable them to meet high costs of providing services to remote / hilly
rural areas.

Implementing Unified Licensing System, whereby a service provider


in the Telecom Sector, is permitted to provide a variety of services
with a single license.

The NTP 1999 is clear in its objectives, comparing to NTP 1994. Built
on these objectives is the phenomenal growth, the Indian Telecom Sector is
witnessing today. The major achievements of NTP 1999 are:

In November 2003, Unified Access Licensing is implemented with a


conversion of 27 out of 31 licenses issued in the basic services, by
adding the country into 23 Service Areas consisting of 19 Telecom
Circle Service / Metro Service Areas for providing Unified Access
Services (UAS).

The Universal Service Fund of Rs.200 crore is distributed in 2003,


for providing additional VPTs ( Village Public Telephones) and also
to improve the quality of service of the existing VPTs in rural and
remote areas.

4.4 INDIAN TELECOM INDUSTRY : A COMPETITIVE ANALYSIS

The Indian Telecom Industry of the 21st century is witnessing


competition due to liberalization, privatization and demopolization initiatives taken
by the Government of India. While liberalization sowed the seeds for competition, it
was privatization followed by disinvestment and demopolisation that led to a
competitive environment in the sector.

Apart from the PSU (Public Sector Unit) service providers, licenses were
given to several private players to provide a variety of communication services to
74

the people. Hence the monopoly in the sector is broken and the users are now given
with a wide variety to choose in almost all the services starting from the basic voice
services, value-added services to data and satellite services.

With the major policy governance as regards the pricing, spectrum usage,
mobility, entry legislations and other licensing issues still at the hands of the
government regulatory body, the competitive environment in the industry needs to
be analyzed to have a clear understanding of the factors influencing the operations of
the players.

In this section, the micro and macro environmental factors are analysed
by the application of PEST analysis and Micael Porters Five Forces Competitive
Advantage Model.

4.4.1 PEST Analysis

The framework for PEST analysis is drawn from the contributions made
by several eminent management practitioners and theorists like Nigel M Healey
(1994), De Avison, Wa Eardley, P Powell (1998), Alistair R. Anderson & Martin
H.Atkins (2001), Judith Broady-Preston & Tim Hayward (2001), James Manktelow
(2004), in their research works on various management issues.

The PEST analysis is primarily a tool used to analyse the business


environment and to understand the market growth or decline. PEST template
encourages proactive thinking rather than relying on habitual or instinctive reactions.
PEST analysis focuses on the understanding of each of the following four factors,
viz.,

P Political Environment

E Economic Environment

S Social Environment

T Technological Environment
75

Analysis of Political Environment: The political environment of the business,


namely the government regulations and legal issues, which govern the operations of
the fim or the industry are analyzed under this template. These include the
ecological issues, current legislation, Government and trading policies, funding,
grants and initiatives, and so on that are prevalent at a particular point of time. With
reference to the Telecom industry, the analysis is be on the TRAI regulatory and
licensing procedures including tariff determination, spectrum allocation, and other
policy issues as imposed and administered by the Government regulatory body from
time to time.

Analysis of Economic Environment: Factors like the purchasing power of the


potential customers, the demand and supply factors that affect the firms operations,
the consumer surplus concept, the cost of capital of the firms operating are some of
the micro economic issues analyzed under this heading. Macro issues like the impact
of economic growth, interest rates, exchange rates, inflation rates etc are also
analyzed with respect to the firm. In the Telecom industry, these may include
demand for and supply of telecom sectors by various user groups, economic growth
of the IT sector and its impact on the Telecom sector and so on.

Analysis of Social Environment: This includes the demographic and cultural


aspects of the market in context. Factors like the demographic and psychographic
profile of the customers, the groups that influence them in their purchase decisions
etc are analyzed under this section. With reference to the Telecom Industry, the
social analysis deals with the analysis of user profiles both demographic and
personality.

Analysis of Technological Environment: This concerns the technological factors


that influence the operations of the business. Factors like R & D activity,
automation, adoption of new technology for hard / soft processes within business etc
are analyzed under this head. Variables like rate of change of technology and
operational feasibilities also form an important part of this analysis. As regards the
telecom industry, this deals with analyzing the technological changes and its
76

significant impact on the industry, since the industry is primarily categorized as a


high-tech industry.

Thus PEST analysis enables better understanding of the present position


and hence provides inputs for analyzing the future potential and directions for a
business. PEST can be effectively used for marketing and business development and
decision-making.

The scan of the Telecom Environment of India provides the following


insights which enabled the researcher to understand the basic micro and macro
environmental factors that influence the operations of the industry on a whole. The
various factors that influence the telecom industry of India are categorized under the
four heads of the PEST and summarized as under:

Summary of PEST analysis on Indian Telecom Industry

Political Factors

The political factors that influence the operations of the telecom players
in India are:

Liberalized FDI : For mobilizing Foreign Direct Investment (FDI)


into the sector, the cap on investment holding is increased from 49%
to 74%, this is a welcome move especially for private players, who
depend on foreign capital.

Tariff Policy: Tariff is determined by the government body and due


to the tariff re-balancing measures adopted by the government; the
Indian voice line users are charged the lowest call-rate in the world,
this is promising wider avenues for development as the economy
primarily comprises of low and middle income groups.

Licensing Policy: Stringent licensing procedure adopted by TRAI,


the government regulatory body, has led to restricting the number of
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operators in the sector. The licensing policies act as an entry barrier


for new entrants aspiring to venture into the sector.

Spectrum Allocation: The limitations on spectrum sharing and


policies pertaining revenue sharing are hampering the smooth flow of
activities for service providers mainly the basic and internet service
providers. The limited resource availability is acting as a barrier to entry.

Economic Factors

The economical factors influencing the industry are as follows:

Growth of Service Industry: The growth of the service sector,


especially IT and its consequent impact on the related sectors like
Business Process Outsourcing (BPO) is promising a huge growth
potential for the Telecom Sector, since telecom forms the life blood
for operations of these sectors.

Favorable investment climate: The decline in interest in favouring


the investment climate to boom. With a promising all-round growth in the
telecom sector, investors see it highly lucrative to invest in the sector.

Demand-Supply Gap: Due to availability of telephone on demand,


the demand-supply gap is getting narrowed over the period from
2000-2004.

Increased Disposable Income: The booming IT sector has created


high-paying jobs, due to which the consumers are left with higher
disposable income.

Earning Sensitivity: 16% of the villages are still unconnected


through communication links, which promises a huge market
potential for the high growth telecom market. But, the earning
sensitivity issues pertaining to providing village telephones restricts
the private players from actively participating in linking the villages
through communication network.
78

Social Factors

The social factors influencing the industry are as follows:

Transforming lifestyles: Due to demopolisation and privatization,


there is transformation in the lifestyle of the people, which is moving
westwards, as a result there is an increasing demand for a developed
urban communication system, especially personal communication
systems like mobile phones.

Changing Demographic Combination: There is an increase in


middle age group (30-40) in the population, which is decision-
making population. This encourages the private players, since the
group primarily comprises of innovators, achievers and makers.

Information revolution: The IT and media boom is delivering


information to the consumers at their doorsteps, due to which the
consumers are adequately enlightened as regards the products and the
competition.

Cultural Values: India is being basically perceived as a country


bound by family values. Generally, it is stated that the share of fixed-
line phones will not be eaten up by the mobile phones in the long-run,
unlike in developed economies of the west, where fixed-line users
migrate to mobile phones.

Technological Factors

The technological factors influencing the industry are as follows:

Capital Intensive: Telecom is a high capital and technology


intensive sector. Huge investments are pumped into technology for
providing and updating a variety of basic and value-added services.
The players are required to keep pace with the developments in the
79

technology for gaining competitive edge. The very fact that the
industry is technology intensive acts as an entry barrier.

Return on Investments (ROI) concerns : The ROI on technology


investments is a matter of concern for the telecom players because the
technology innovations in any form have a very short life. So players
operating on high economies of scale gain in the market, while others
succumb to M&A (Mergers and Acquisition) motives.

Impact of PEST on Indian Telecom Industry

The Indian Telecom Industry post-liberalization is experiencing


transformation on all fronts. In the political front the policies framed by the
government regulatory body are conducive to development of telecom network of
the country. In terms of licensing and other regulatory issues, a more transparent
approach from the part of the regulator is expected to reap huge benefits for the
development of communication infrastructure in the country.

As regards the economic issues confronting the telecom sector, the


liberalized FDI policy has spurred the investment inflow and the existence of
demand-supply gap throws a huge potential and favourable investment opportunities
are luring foreign investors to venture into the telecom market.

The surge in incomes and employment levels and improving standard of


living have changed the perceptions of the people, who have started looking at
telecommunication services as an essential commodity for better living. This has
created a huge demand for telephones especially the personal phones.

With respect to technological issues, the industry is catching up with the


changes taking place in the rest of the world at a fast pace as a result innovations
have a very short life. The investors are thus subjected to earning sensitivity and
ROI issues. Due to highly favourable market condition and a huge growth potential
posed by the sector, more and more investors are venturing into the telecom market,
since it promises a long-term sustainability.
80

On the whole, there is an overall favourable climate as far as the political,


economical, social and technological environment is concerned, despite certain
challenges posed by the regulatory policies and ROI issues.

4.4.2 Michael Porters Five Forces Model

The five forces model is widely accepted as a yardstick for measuring the
industry profitability. It analyzes the various forces influencing the industrys
competitive environment. This is a macro model concentrating on the external forces
like rivalry between firms, bargaining power of the buyer, bargaining power of the
supplier, availability of substitutes and entry barriers. In order to perform this
analysis, the competitive forces in the industry need to be thoroughly understood,
the attractiveness of and growth opportunities within, a new industry need to be
assessed and the effective strategies to raise the profitability, power and competitive
position in an industry need to be developed accordingly.

Following is the detailed description on the components of the Porters


Model.

Bargaining power of the buyers: Buyers/customers are a moderate force in the


industry. By virtue of the market becoming customer centric, the buyers have
bargaining capacity and may demand better product features for the same price.
Thus the buyers behaviour and their bargaining capacity impact the profitability of
a firm. Their behaviour and power is dependent on the availability of alternatives,
market awareness, preferences and so on.

Rivalry between Firms: Rivalry among competitors in the industry is powerful.


Competitors may adopt under cutting and bring down the industry. Hence the rivalry
between firms affects the industry to a major extent. This factor is dependent on
price wars, corporate on price wars, corporate image, adoption of new technology,
value added services, and so on.
81

Bargaining power of Suppliers: Suppliers are again a moderate force in the


industry. But if the supplier is a monopoly, then his powers know no bound. This is
dependent on the level of switching cost and the terms and conditions laid down by
the suppliers.

Availability of Substitutes: A substitute product is a product similar to the relevant


product but is not identical to it. Substitute products are a very weak force in the
industry. Substitute products restrict industry profitability by limiting the selling
price companies in the industry can charge. In the Telecom industry, this is
determined by availability of very close substitutes and low customer loyalty.

Entry Barriers: New entrants are potential competitors. New entrants are a weak
force in the industry. The lesser the entry barriers, easier it is for new companies to
enter the industry and hence, greater the competition in the industry. New entrants
will often attempt to break into the industry with low prices, innovative products, or
new features and benefits. When the barriers are strong, the threat of new entrants is
low.

Applicability of Porters Competitive Model to Indian Telecom Industry

Thanks to privatization and subsequent restructuring of the economy, the


entry of private players in the sector, has made the environment get transformed
from its previous monopoly state to its present competitive state. All the parameters
of the five forces model see their due presence in the Indian Telecom Scenario. An
analysis performed on the competitive scenario of the sector reveals adequately and
precisely the relevance and adaptability to present a picture of the Indian Telecom
Industry of today.

The model analyzes the competitive environment in the Telecom


Industry of India in Figure:
ENTRY BARRIERS
Pricing
Earning Sensitivity Issues
Consolidation
Capital Intensive
Technology Investments
Licensing & Operating Regulations

RIVALRY BETWEEN FIRMS


BUYER POWER
SUPPLIER POWER Price Wars
Spectrum Issues Quick Adapters Availability of alternatives
Infrastructure Issues Economies of Scale Low Switching Costs
Monopoly Supplier Differentiated Services Market Awareness
High Switching Cost Disputes Legal / Operational Standard of Living
Licensing Issues Betting on Technology
Fixed Pricing Corporate Image

AVAIALABILITY OF SUBSTITUTES

Close substitutes
Undifferentiated Pricing
Differentiated Services
Substitute Performance
Low-loyalty levels
VAS Preferences

Figure 4.1 Michael Porters Five Forces Model

82
83

Summary of the Five-Forces impacting Indian Telecom Industry

1. Buyer Power: There are several factors leading to increase in the buyer
bargaining power in the telecom industry. As a result of privatization and
competition, the buyers are provided a variety of alternatives to choose from, which
was unavailable during the pre-privatization period. Due to falling prices the
switching costs are reduced and the development of IT and increasing incomes has
resulted in change in the standard of living of the consumers.

2. Rivalry between firms: As a result of increasing competition, there are


stiff price wars and innovations have a very short life. The firms operating on
economies of scale enjoy a competitive advantage with respect to their earning
sensitivity. Another form of rivalry is the legal and operational disputes that arise
between firms as a way to capture the market. There are a good number of players
who have their corporate image working to their advantage.

3. Supplier Power: The supplier comes in the form of government


regulator, which has impact on the operations of the players. The spectrum sharing
and infrastructure issues are governed by the regulatory body, which is the
monopoly supplier to the telecom industry. As regards the instruments, there are a
few suppliers, and the switching cost is very high. The suppliers follow a uniform
pricing structure and it is fixed pricing in the case of government supplier.

4. Availability of Substitutes: There is availability of close substitutes,


since there is no differentiation in terms of the basic services delivered to the
customers. The differentiation comes in the form of value added services. Since
VAS forms the major differentiator, the players attract the customers of other service
providers; hence there are very low loyalty levels. Due to increasing market
awareness, the customer preferences towards value added services have also
increased.
84

5. Entry Barriers: The entry barriers are in the form of earning sensitivity
issues and technology investments, which make the industry feasible to operate only
for cash-rich companies. The licensing and operating regulations adopted by the
government also form the entry barriers. The picture of consolidation and capital
intensive nature of the industry are the other factors that function as entry barriers
for the new aspirants to the industry.

The competitive analysis of the Indian telecom industry and the


exhaustive insights derived through the application of PEST templates and Porters
Five Forces Models, thus throws light on the external factors that influence the
operations of service providers in the telecom sector.

4.5 INDIAN MOBILE SECTOR

Mobile communications systems revolutionized the way people


communicate, joining together communications and mobility. A long way in a
remarkably short time has been achieved in the history of wireless. Evolution of
wireless access technologies is about to reach its fourth generation (4G). Looking
past, wireless access technologies have followed different evolutionary paths aimed
at unified target: performance and efficiency in high mobile environment. The first
generation (1G) has fulfilled the basic mobile voice, while the second generation
(2G) has introduced capacity and coverage. This is followed by the third generation
(3G), which has quest for data at higher speeds to open the gates for truly mobile
broadband experience, which will be further realized by the fourth generation (4G).

The Fourth generation (4G) will provide access to wide range of


telecommunication services, including advanced mobile services, supported by
mobile and fixed networks, which are increasingly packet based, along with a
support for low to high mobility applications and wide range of data rates, in
accordance with service demands in multiuser environment.
85

The last few years have witnessed a phenomenal growth in the wireless
industry, both in terms of mobile technology and its subscribers. There has been a
clear shift from fixed to mobile cellular telephony, especially since the turn of the
century. By the end of 2010, there were over four times more mobile cellular
subscriptions than fixed telephone lines.

Both the mobile network operators and vendors have felt the importance
of efficient networks with equally efficient design.

Driven by wireless revolution, the Indian telecommunications industry is


one of the fastest growing in the world. Government policies and regulatory
framework implemented by Telecom Regulatory Authority of India (TRAI) have
provided a conducive environment for service providers. This has made the sector
more competitive, while enhancing the accessibility of telecommunication services
at affordable tariffs to the consumers.

According to TRAI's report 'Telecom Sector in India: A Decadal Profile',


the tele-density has increased from 4.3 in March 2002 to 78.1 in February 2012,
wherein the rural areas registered an increase from 1.2 in March 2002 to 38.5 in
February 2012. Also, the share of telecommunication services (excluding postal and
miscellaneous services), as per cent of the total gross domestic product (GDP), has
increased from 0.96 in 2000-01 to 3.78 in 2009 -10.

According to the same report, international comparisons (among 222


countries) show that India has the second largest number of telephone subscribers in
the world accounting for 12 per cent of the world's total telephone subscribers.

Key Statistics

In its recent statement issued, TRAI has revealed that the country's
mobile subscriber base has reached 951.3 million wherein the
operators added 8 million subscribers in March 2012.
86

The overall tele-density in India reached 78.66. The urban tele-


density was recorded to be 169.55, while rural tele-density stood at
39.22.

Total broadband subscriber base increased from 13.54 million in


February 2012 to 13.79 million in March 2012, registering a growth
of 1.86 per cent.

4.6 KEY TRENDS IN INDIAN TELECOM

The wireless segment in India is much larger than the wire line
segment and is growing steadily due to the convenience and utility it
offers.

Wireless services hold a major market share of 94.6 per cent.

The subscriber base of the wire line segment is decreasing due to its
limited usage.

Rural markets are expected to be the next key growth drivers for the
Indian telecom sector, given rural Indias growing population and
disposable income.

The subscriber base in the rural market has improved significantly in


20092010, with rural tele-density at 26.4 per cent as of June 2010.

By 2012, the rural subscriber base is expected to account for nearly


half of the total subscriber base, thereby fuelling sector growth.

Bharti Airtel has the largest market share in the GSM segment. As of
June 2011, Bharti accounted for 25.9 per cent of the GSM market,
followed by Vodafone, with a 20.7 per cent market share.

Private players accounted for approximately 86.4 per cent, while


public sector operators (BSNL and MTNL) accounted for the
remaining share (13.6 per cent).
87

Reliance Communications dominates the Indian CDMA mobile


services segment with a market share of 52.4 per cent as of June
2011.

India is expected to feature among the top 10 broadband markets by


2013.

The total number of Internet subscribers grew from 14.1 million


subscribers in June 2010 to 16.7 million subscribers in June 2011.

BSNL is the biggest player in this market with 9.7 million


subscribers, followed by MTNL, Bharti Airtel, Reliance and Hathway
Cable & Datacom.

Digital subscriber line (DSL) is the most preferred technology among


service providers to provide broadband services. DSL constitutes
86.6 per cent of total broadband subscribers.

In India, growth in the subscriber base, which contributes to healthy


revenue growth, mitigates the reduction in average revenue per user
(ARPU). In addition, high MOUs compensate for declining tariffs.

Operators are reducing operating costs and hiving off infrastructure


elements such as towers into separate entities, thus inviting
significant investments.

Passive infrastructure sharing has benefitted the Indian mobile


industry and its customers, reducing the cost burden of each operator
and speeding the rollout of mobile services.

In recent years, initiatives such as network cost optimisation,


outsourcing of non-core activities, as well as low-cost business
models have been focus areas.

Every telecom service provider is looking beyond basic voice


services by offering a wide range of bundled offerings. For example,
nearly all leading operators, including incumbents, are in the testing
88

phase to launch commercial IPTV services. Indian operators are still


new in terms of offering using existing network infrastructure for
data, voice, video and basic communication services.

Consumers can get all these services from the same telecom operator,
and enterprises can also access virtual private networks (VPNs),
video-conferencing, enterprise solutions, mobility and fixed
telephony.

4.7 DETAILS OF MOBILE SERVICE PROVIDERS CONSIDERED


FOR THE STUDY

This section gives the details of the mobile service providers used for the
study.

4.7.1 Bharti Airtel

Bharti Airtel Limited, commonly known as Airtel, is an Indian


Telecommunications company that operates in 20 countries across South Asia,
Africa and the Channel Islands. It operates a GSM network in all countries,
providing 2G, 3G and 4G services depending upon the country of operation. Airtel is
the world's third-largest mobile telecommunications company with over 261 million
subscribers across 20 countries as of August 2012. It is the largest cellular service
provider in India, with 200 million subscribers as of August 2012. Airtel is the third
largest in-country mobile operator by subscriber base, behind China Mobile and
China Unicom.

Airtel is the largest provider of mobile telephony and second largest


provider of fixed telephony in India, and is also a provider of broadband and
subscription television services. It offers its telecom services under the airtel brand,
and is headed by Sunil Bharti Mittal. Bharti Airtel is the first Indian telecom service
provider to achieve Cisco Gold Certification. It also acts as a carrier for national and
international long distance communication services. The company has a submarine
89

cable landing station at Chennai, which connects the submarine cable connecting
Chennai and Singapore.

It is known for being the first mobile phone company in the world to
outsource all of its business operations except marketing, sales and finance. Its
networkbase stations, microwave links, etc.is maintained by Ericsson, Nokia
Siemens Network and Huawei, business support is provided by IBM and
transmission towers are maintained by another company (Bharti Infratel Ltd. in
India). On May 2012, Bharti Airtel awarded the three year contract to Alcatel-
Lucent for setting up an Internet Protocol across the country. This would help
consumers access internet at faster speed and high qualiy internet browsing on
mobile handsets.

4.7.2 Aircel

Aircel group is an Indian mobile network operator headquartered in


Chennai, that provides wireless voice, messaging and data services in India. It is a
joint venture between Maxis Communications Berhad of Malaysia and Sindya
Securities & Investments Private Limited, whose current shareholders are the Reddy
family of Apollo Hospitals Group of India, with Maxis Communications holding a
majority stake of 74%. Aircel commenced operations in 1999 and today the leading
mobile operator in Tamil Nadu, Assam and North- East.

It is Indias fifth largest GSM mobile service provider & seventh largest
mobile service provider (both GSM and CDMA) with a subscriber base of over
51.83 million, as of January 31, 2011. It has a market share of 6.72% among the
GSM operators in the country. Additionally, Aircel has also obtained permission
from Department of Telecommunications (DoT) to provide International Long
Distance (ILD) and National Long Distance (NLD) telephony services. It also has
the largest service in Tamil Nadu.
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4.7.3 Idea Cellular

In 2000, Tata Cellular was a company providing mobile services in


Andhra Pradesh. When Birla-AT&T brought Maharashtra and Gujarat to the table,
the merger of these two entities was a reality. Thus Birla-Tata-AT&T, popularly
known as Batata, was born and was later rebranded as IDEA.

Then Idea set sights on RPGs operations in Madhya Pradesh which was
successfully acquired, helping Batata have a million subscribers, and the licence to
be the fourth operator in Delhi was clinched.In 2004, Idea (the company had by then
been rechristened) bought over the Escorts groups Escotel gaining Haryana, Uttar
Pradesh (West) and Kerala and licences for three more UP (East), Rajasthan
and Himachal Pradesh. By the end of that year, four million Indians were on the
companys network. In 2005, AT&T sold its investment in Idea, and the year after
Tatas also bid good bye to pursue an independent telecom business. And Idea was
left only with one promoter, the AV Birla group. Rs 2,700 crore adding Punjab and
Karnataka circles. Modis joint venture partner, Telekom Malaysia, invested
Rs 7,000 crore for a 14.99% stake in Idea. Just around then, Ideas subsidiary,
Aditya Birla Telecom sold a 20% stake to US-based Providence Equity Partners for
over Rs 2,0000 crore.

4.7.4 Vodafone

Vodafone India, formerly Vodafone Essar and Hutchison Essar, is the


second largest mobile network operator in India after Airtel. It is based in Mumbai,
Maharashtra and which operates nationally. It has approximately 146.84 million
customers as of November 2011.

On July 2011, Vodafone Group agreed terms for the buy-out of its
partner Essar from its Indian mobile phone business. The UK firm paid $5.46 billion
to its Indian counterpart to take Essar out of its 33% stake in the Indian subsidiary. It
will leave Vodafone owning 74% of the Indian business, while the other 26% will be
owned by Indian investors, in compliance with Indian law. On 11 February, 2007,
91

Vodafone agreed to acquire the controlling interest of 67% held by Li Ka Shing


Holdings in Hutch-Essar for US$11.1 billion, piping Reliance Communications,
Hinduja Group, and Essar Group, which is the owner of the remaining 33%. The
whole company was valued at USD 18.8 billion. The transaction closed on 8 May,
2007. It offers both prepaid and postpaid GSM cellular phone coverage throughout
India with good presence in the metros.

Vodafone India provides 2.75G services based on 900 MHz and 1800
MHz digital GSM technology. Vodafone India launched 3G services in the country
in the January-March quarter of 2011 and plans to spend up to $500 million within
two years on its 3G networks.

4.7.5 BSNL

Bharat Sanchar Nigam Limited (abbreviated BSNL) is an Indian state-


owned telecommunications company headquartered in New Delhi, India. It is the
largest provider of fixed telephony and fourth largest mobile telephony provider in
India, and is also a provider of broadband services. However, in recent years the
company's revenue and market share plunged into heavy losses due to intense
competition in Indian telecommunications sector.

BSNL is India's oldest and largest communication service provider


(CSP). It had a customer base of 95 million as of June 2011. It has footprints
throughout India except for the metropolitan cities of Mumbai and New Delhi,
which are managed by Mahanagar Telephone Nigam (MTNL).

4.7.6 Reliance Communications

Reliance Communications Ltd. (commonly called RCOM) is an Indian


broadband and telecommunications company headquartered in Navi Mumbai, India.
RCOM is the world's 15th largest mobile phone operator with over 150 million
subscribers and India's 2nd largest telecom operator in India, only after Bharti Airtel.
Established on 2004, a subsidiary of the Reliance Group. The company has five
segments: Wireless segment includes wireless operations of the company;
92

broadband segment includes broadband operations of the company; Global segment


include national long distance and international long distance operations of the
company and the wholesale operations of its subsidiaries; Investment segment
includes investment activities of the Group companies, and Other segment consists
of the customer care activities and direct-to-home (DTH) activities.

4.8 SUMMARY

The chapter provided an overview on the Indian telecom industry and


analyses the status of the industry in the pre-privatization and post-privatization
period. It then examined the competitive environment of India, performing PEST
analysis and Porters Five Forces competitive environment analysis. A section on
the study area is also presented.
93

CHAPTER 5

DATA ANALYSIS

5.1 INTRODUCTION

This chapter focuses on the detailed analysis of the data collected and the
statistical results of the study.

The primary purpose of this research is two fold:

The first is to develop path models for establishing and confirming


the relationship (if any) existing among service quality, service
loyalty and loyalty indices.

The second is to assess the current level of effectiveness of CRM


practices of the Mobile Service Providers in order to identify the best
performers among the service providers on the various latent factors
and provide insights to the other service providers so that they can
improve on the factors, using a linear programming based technique
for relative efficiency called Data Envelopment Analysis.

Structural Equation Modeling (SEM) is the main multivariate technique


which combines aspects of regression and factor analysis to estimate series of
interrelated dependence relationships simultaneously (Hair et al., 1998). Simple
linear regression was used to analyze the data. To evaluate the effectiveness of CRM
practices, there are lots of quantitative techniques available. But there is a dearth of
literature focusing on the relative efficiency. One advanced operations research
technique which evaluates the relative efficiency is the Frontier Analysis or Data
Envelopment Analysis (DEA). This study attempts to use Data Envelopment
94

Analysis to assess the effectiveness of Mobile Service Providers, specifically a set of


the providers offering services in Chennai, Tamil Nadu, India. The research has
identified a set of input and output parameters, from the regressions performed on
service quality, service loyalty and loyalty indices, for each of the Service Providers,
from which the efficient frontiers or Decision Making Units (DMUs) are
determined. The overall effectiveness on the usage of CRM practices by the service
providers are measured with respect to the efficient frontier and then analyzed.

5.2 PROFILE OF THE RESPONDENTS

This section provides the response rate obtained in the survey and the
characteristics of the respondents for this study. The questionnaires including
covering letter, were personally distributed to customers of mobile services, during
Apr-Jun, 2011. The sampling for the study was based on Convenience Sampling
Method, taking into account the operational difficulties associated in the process of
data capturing. However, by going through this method of sampling it was ensured
that all units of population were adequately represented. In determining the sample
size the following factors were taken into consideration:

Dispersion of the population

Time taken by the respondents to complete the questionnaire

Resources required for completing the survey

Respondents willingness to part with information.

Further, the data was specifically collected from residential mobile


customers, who had been using the services for at least six months. Finally, of the
550 surveys individually administered, 523 questionnaires were received at a
response rate of 95 per cent. On further filtering, 490 responses were found to be
completely filled. Survey response rate is defined as the percentage of the total
attempted interviews that are completed (Malhotra, 2006). Most of the respondents
(about 60%) were pre-paid, while rest (40%) of the respondents accounted for post-
paid services.
95

The respondents are classified based on their age, monthly expenditure,


educational status and occupation

5.2.1 Classification based on Service Providers

The distribution based on service providers of the respondents was


analyzed with the help of the following table.

Table 5.1 Classification based on Service Providers

No. Name Frequency %


1 Aircel 78 15.9
2 Airtel 99 20.2
3 BSNL 91 18.6
4 Idea 57 11.6
5 Reliance 60 12.2
6 Vodafone 59 12
7 Others 46 9.4

From table 5.1, it is inferred that out of the total sample of 490
respondents using different mobile services, 15.9% used Aircel, 20.2% used Airtel,
18.6% used BSNL, 11.6% used Idea, 12.2% used Reliance, 12% used Vodafone and
9.4% used other service providers like Uninor and Videocon services.

5.2.2 Classification based on Plan

The distribution based on plan of the respondents was analyzed with the
help of the following table.
96

Table 5.2 Classification based on Plan

No. Name Frequency %


1 Prepaid 295 60.2
2 Postpaid 195 39.8

From table 5.2, it is inferred that out of the total sample of 490
respondents using different mobile services, 60.2% used the prepaid plan and 39.8%
used the postpaid plan.

5.2.3 Classification based on Age

The distribution based on age of the respondents was analyzed with the
help of the following table.

Table 5.3 Classification based on Age

Frequenc
No. Name %
y
1 18-20 27 5.5
2 21-30 87 17.8
3 31-40 87 17.8
4 41-50 158 32.2
5 >50 131 26.7

From table 5.3, it is inferred that out of the total sample of 490
respondents using different mobile services, 5.5% belonged to the age group of 18-
20, 17.8% belonged to the age group of 21-30, 17.8% belonged to the age group of
31-40, 32.2% belonged to the age group of 41-50 and 26.7% of the respondents are
aged over 50.
97

5.2.4 Classification based on Length of Use

The distribution based on the length of usage by the respondents was


analyzed with the help of the following table.

Table 5.4 Classification based on Length of Use

No. Name Frequency %


1 < 2 yrs 104 21.2
2 2 3 yrs 105 21.4
3 > 3 yrs 281 57.3

From table 5.4, it is inferred that out of the total sample of 490
respondents using different mobile services, 21.2% respondents are using the
services for less than 2 years, 21.4% respondents are using the services for two to
three years and 57.3 % respondents are using the services for more than 3 years.

5.2.5 Classification based on Monthly Expenditure

The distribution based on monthly expenditure on mobile services was


analyzed with the help of the following table.

Table 5.5 Classification based on Monthly Expenditure

No. Name Frequency %


1 upto 500 155 31.6
2 501-1000 117 23.9
3 1001-2000 80 16.3
4 >2000 138 28.2
98

From table 5.5, it is inferred that out of the total sample of 490
respondents using different mobile services, 31.6 % respondents spend upto Rs. 500,
23.9 % respondents spend between Rs.501 and Rs.1000, 16.3 % respondents spend
between Rs. 1001 and Rs. 2000 and 28.2 % respondents spend more than Rs. 2000.

5.2.6 Classification based on Education

The distribution based on Educational Status of mobile services was


analyzed with the help of the following table.

Table 5.6 Classification based on Education

No. Name Frequency %


1 UG 156 31.8
2 PG 200 40.8
3 Others 134 27.3

From table 5.6, it is inferred that out of the total sample of 490
respondents using different mobile services, 31.8 % respondents are undergraduates,
40.8 % respondents are postgraduates and 27.3 % respondents belong to others
category. The Others category includes school dropouts, uneducated people and
people who have just completed schooling.

5.2.7 Classification based on Occupation

The employment status of the respondents was analyzed with the help of
the following table.
99

Table 5.7 Classification based on Occupation

No. Name Frequency %


1 Business 50 10.2
2 Professionals 94 19.2
3 Educator 28 5.7
4 Home Maker 81 16.5
5 Student 191 39.0
6 Others 46 9.4

From table 5.7, it is inferred that out of the total sample of 490
respondents using different mobile services, 10.2 % respondents are having their
own business, 19.2 % are professionals, 5.7 % are educators, 16.5 % are home
makers, 39 % are students and 9.4% are others.

5.3 DESCRIPTIVE STATISTICS

This section describes the preliminary analysis of the data and discusses
the results obtained in the study. It starts with the descriptive statistics and the test
for normality

5.3.1 Mean and Standard Deviation

To study the central tendency and the dispersion of the variables the
mean and standard deviation were calculated. The results indicated that the
responses of the variables had a good dispersion on the scales. The means of the
variables ranged from 2.94 to 3.78 and standard deviation ranged from 0.652 to
1.15.
Table 5.8 Descriptive Statistics of the Interval Scaled Variables

Construct Measure Variables Mean Std Dev Skew ness Kurtosis


Contact employees perform the service right the first time 3.57 0.846 -0.283 0.066
The company provides services at the promised time 3.51 0.844 -0.240 -0.379
Reliability You are kept well-informed about the progress of your complaints 3.26 0.962 -0.080 -0.615
Billing system is accurate and error free 3.60 0.912 -0.219 -0.478
Bills are received in time 3.71 0.853 -0.053 -0.533
Contact employees gives you prompt service 3.55 0.849 -0.259 -0.357
Your Complaints / queries are taken seriously 3.48 0.924 -0.066 -0.376
Responsiveness
Your complaints are resolved quickly 3.4 0.917 -0.014 -0.298
They are always willing to help you 3.54 0.977 -0.430 -0.165
Contact employees are friendly and polite while handling your complaints / queries 3.7 0.959 -0.165 -0.932
They have the adequate knowledge of tariffs and plans of service providers 3.77 0.841 -0.374 -0.366
Assurance
The behaviour of contact employees instils confidence in you 3.57 0.913 -0.354 0.151
You feel safe in your transactions with your service provider 3.66 0.794 -0.216 0.396
For lodging the complaints service provider is easily accessible 3.23 1.15 -0.451 -0.499
They have your best interests in heart 3.18 0.964 -0.259 0.123
Empathy
Contact employees give you individual attention 3.36 0.962 -0.38 0.149
The employees understand your specific needs 3.42 0.935 -0.272 -0.066
Service provider's physical facilities are visually appealing 3.49 0.993 -0.316 -0.029
Tangibles Contact employees appear neat- 3.35 0.913 -0.251 0.242
Materials associated with the service(such as pamplets etc) are visually appealing 3.53 0.897 -0.092 -0.744

100
Construct Measure Variables Mean Std Dev Skew ness Kurtosis
They have convenient business hours 3.51 0.775 -0.126 0.168
Ease of lodging the complaints / queries 3.46 0.838 -0.061 -0.186
Convenience
Your service provider provides flexibility in the payment of bills 3.21 0.909 -0.043 -0.137
Application formalities are simple 3.54 0.845 -0.229 -0.355
Your service provider provides sufficient geographical coverage
3.57 0.894 -0.068 -0.745
(on highways, inside the buildings and basement)
Customer Perceived You experience minimum premature termination of calls during conversation (ie call drops) 3.44 0.979 -0.118 -0.603
Network Quality You get clear and undisturbed voice 3.57 0.876 -0.256 -0.115
Your call gets connected to the called person during the first attempt most of the time 3.43 1.10 -0.185 -0.462
You are able to make calls at peak hours 3.66 1.077 -0.702 0.069
I will transact with this mobile service provider again for future needs 3.28 0.721 -0.859 0.630
I will try new services that are provided by the service provider 3.17 0.754 -0.654 0.063
Behavioural I will recommend other people to patronize this service provider 3.25 0.804 -0.698 -0.486
I will say positive things to other people about the services provided by the mobile service 0.572
3.34 0.758 -1.018
operator
I will continue to patronize this mobile service provider / service even if the service charges are
3.03 0.987 -0.535 -0.949
increased moderately
Attitudinal I have strong preference to this service provider 3.27 0.811 -0.958 0.328
I will continue to use this service provider regardless of changes in the service 3.26 0.819 -0.806 -0.234
I am likely to pay little more for the services when situation arises 3.05 0.921 -0.439 -1.015

101
Construct Measure Variables Mean Std Dev Skew ness Kurtosis
To me, this service provider would rank first among others 2.94 0.849 -0.343 -0.694
I would continue this service for a long period of time 3.30 0.780 -1.008 0.605
Cognitive
I will deal exclusively with the service provider 3.22 0.846 -0.842 -0.071
The service of the provider reflect a lot about who I am 3 0.841 -0.393 -0.644
I have found this provider better than others 3.24 0.867 -0.751 -0.585
Conative
Repeatedly, the performance of this provider is superior to that of its competitors 3.23 0.817 -0.821 -0.040
I dislike the terms of the service provider 3.44 0.696 -1.123 0.903
I like the performance and services of the provider 3.40 0.686 -1.069 1.197
Affective
I have a negative attitude toward this provider 3.47 0.737 -1.540 2.347
I am satisfied wih my decision to stay with this provider 3.43 0.721 -1.428 2.327
The employees at the providers place give individual attention 3.48 0.674 -1.185 1.113
The employees understand my specific needs and go out of their way to help me 3.36 0.705 -0.863 0.262
Trust
The employees respond caringly when I share my problems 3.44 0.692 -1.175 1.306
The personnel at the service provider are filled with professionalism and dedication 3.50 0.652 -1.091 0.612
I am committed to the service provider 3.38 0.762 -1.173 0.969
Even when I get to hear any negative information about the provider, I would still continue with
3.31 0.770 -0.987 0.549
Commitment this service provider
I like switching from one service provider to another 3.25 0.821 -0.804 -0.200
My continued association with the mobile operator is important to me 3.32 0.780 -1.01 0.480

102
Construct Measure Variables Mean Std Dev Skew ness Kurtosis
Likelihood to choose the service again 3.78 0.854 -0.794 0.113
Likelihood to recommend 3.58 0.959 -0.730 0.356
Advocacy
Likelihood to pass on positive feeling about the services 3.41 0.966 -0.420 0.048
Likelihood to continue purchasing the same products / services 3.48 0.964 -0.611 0.1622
Likelihood to purchase different products / services 3.55 0.849 -0.259 -0.357
Purchase
Likelihood to increase frequency of purchasing 3.48 0.924 -0.066 -0.376
Defection Likelihood to continue this only as a supplementary connection 3.38 0.762 -1.173 -0.969
Likelihood to switch to a different provider 3.31 0.770 -0.987 0.549

103
104

5.3.2 Normality

Normality is the most fundamental assumption in multivariate analysis


which greatly influences the validity of the results (Hair et al., 1998). If the variation
from the normal distribution is sufficiently large, all the statistical tests are invalid
(Hair et al., 1998). Therefore, non-normal variables identified should be handled
before further examination. In this analysis, Skewness and kurtosis values were used
to measure normality of the sixty three interval scaled independent and dependent
variables. If a Skewness or Kurtosis value exceeds +1.00, a non-normal distribution
is identified. In this study, there were 5 items which were not normally distributed [4
items of Affective Loyalty] and [1 item of Cognitive Loyalty]. To improve the
normality of these 5 variables, the data were transformed individually by taking the
square root (Hair et al, 1998).

After transformation, the absolute values of Kurtosis were still larger


than 1.00. For this reason, another transforming method, logarithm was employed
for further improvement. After the second transformation, kurtosis values of all
variables were less than 1.00.

5.4 TEST OF RELIABILITY

Reliability is an assessment of the degree of consistency between


multiple measurements of a variable (Hair et al., 1998). The internal consistency of
measures is an indication of the homogeneity of the items which measures, the same
construct (Sekaran, 2003). Thus to obtain a high reliability of a measure, the items
should be highly correlated with another to independently measure the construct. As
indicated in chapter 3, the scales of the current study were obtained from the extant
studies.

In this analysis, Cronbachs alpha, is used to test reliability of the interval


scaled variables. Cronbachs alpha is the most popular test of inter- item
consistency, which is useful for interval scaled variables (Cronbach, 1946). From the
Cronbach alphas standpoint, the closer the co-efficient alpha is to 1.0, the higher the
105

internal consistency reliability. In general, the cut-off of reliability Cronbach alpha is


0.6 (Nunnally 1978). It means that only the reliabilities 0.60 are acceptable. The
results showed all alpha coefficients ranged from 0.75 to 0.9 indicating good
consistency among the items within each dimension.

Clark and Watson (1995) notes that inter-item correlations which


examine scale internal consistency are sometimes better than the coefficient alpha. A
rule of thumb is that these values should be at least 0.30. The item-to-total
correlations is >0.4. Hence in this research the data has been found reliable on all
three ways.

5.4.1 Service Quality Dimensions

Many studies in the past in this area primarily focused on functional


quality aspects (i.e., pertaining to service delivery process or how the services are
delivered) and inadequately addressed technical quality aspects (i.e., issues
concerning what is actually delivered). However, researchers in cellular mobile
communication (Wang and Lo, 2002; Johnson and Sirikit, 2002), emphasize that
technical quality attributes play an important role in forming service quality
perceptions of customers. In light of this, Seth et al (2008) investigated service
quality structure by combining both functional as well as technical quality
(i.e., network quality in cellular mobile context) attributes. The instrument to
measure service quality was used to understand the respondents perception about
their level of agreement with respect to questions, each on a five point Likert Scale
(1 Strongly Disagree and 5 Strongly Agree).

The reliability of items was assessed by computing the coefficient alpha


(Cronbach, 1951), that measures the internal consistency of the items. The alpha
values for the service quality dimensions range from 0.775 to 0.863 and given in the
table below.
106

Table 5.9 Cronbachs Alpha for Service Quality dimensions

Inter item
Alpha ( ) Item to
Alpha correlations
Construct Items if item total
) (absolute value)
deleted correlations
Highest Lowest
Rel1 0.828 0.598
Rel2 0.818 0.640
Reliability Rel3 0.846 0.827 0.613 0.695 0.429
Rel4 0.791 0.735
Rel5 0.806 0.685
Resp1 0.822 0.722
Resp2 0.846 0.659
Responsiveness 0.863 0.687 0.542
Resp3 0.822 0.717
Resp4 0.809 0.750
Assu1 0.730 0.661
Assurance Assu2 0.799 0.513
0.802 0.617 0.376
Assu3 0.739 0.643
Assu4 0.736 0.659
Emp1 0.792 0.606
Emp2 0.733 0.717
Empathy 0.816 0.639 0.423
Emp3 0.757 0.665
Emp4 0.795 0.580
Tang1 0.654 0.649
Tangibles Tang2 0.775 0.716 0.593 0.560 0.486
Tang3 0.715 0.594
Conv1 0.722 0.590
Conv2 0.695 0.636
Convenience 0.778 0.542 0.361
Conv3 0.714 0.602
Conv4 0.762 0.506
Cupqly1 0.774 0.444
Customer Cupqly2 0.765 0.477
Perceived
Cupqly3 0.781 0.717 0.639 0.607 0.302
Network
Quality Cupqly4 0.705 0.653
Cupqly5 0.731 0.584
107

5.4.2 Service Loyalty Dimensions

The instrument to measure service loyalty was used to understand the


respondents psychological and behavioural intentions towards the service provider,
with respect to questions, each on a four point Likert Scale. A statement is given,
and the endpoints correspond to agree strongly and disagree strongly. Use of the
scales is practical and interesting. Scales with an even number of points do not have
a midpoint and in that sense force a choice.

1 - Disagree strongly

2 - Disagree somewhat

3 - Agree somewhat

4 - Agree strongly

The reliability of items was assessed by computing the coefficient alpha


that measures the internal consistency of the items. The alpha values for the service
quality dimensions range from 0.78 to 0.894

Table 5.10 Cronbachs Alpha of Service Loyalty dimensions

Inter item
Alpha ( ) Item to correlations
Alpha
Construct Items if item total (absolute value)
)
deleted correlations
Highest Lowest
Behloyl1 0.813 0.725
Behavioural Behloyl2 0.852 0.627
0.859 0.725 0.476
Loyalty Behloyl3 0.793 0.769
Behloyl4 0.822 0.701
Attloyl1 0.790 0.708
Attitudinal Attloyl2 0.792 0.706
0.843 0.685 0.497
Loyalty Attloyl3 0.801 0.682
Attloyl4 0.821 0.634
Cogloyl1 0.832 0.702
Cognitive
Cogloyl2 0.843 0.676
Loyalty 0.865 0.852 0.469
Cogloyl3 0.831 0.704
Cogloyl4 0.801 0.776
108

Inter item
Alpha ( ) Item to correlations
Alpha
Construct Items if item total (absolute value)
)
deleted correlations
Highest Lowest
Conative Conloyl1 0.676 0.676
0.806 0.676 0.676
Loyalty Conloyl2 0.676 0.676
Affloyl1 0.735 0.567
Affective Affloyl2 0.725 0.587
0.780 0.721 0.334
Loyalty Affloyl3 0.724 0.589
Affloyl4 0.721 0.594
Truloyl1 0.853 0.765
Truloyl 2 0.849 0.775
Trust Loyalty 0.888 0.715 0.636
Truloyl 3 0.858 0.752
Truloyl 4 0.866 0.731
Commloyl1 0.876 0.735
Commitment Commloyl 2 0.877 0.732
0.894 0.745 0.606
Loyalty Commloyl 3 0.844 0.820
Commloyl 4 0.859 0.781

5.4.3 Loyalty Indices

The reliability of items was assessed by computing the coefficient alpha


(Cronbach, 1951), that measures the internal consistency of the items. The alpha
values for the service quality dimensions range from 0.750 to 0.908

Table 5.11 Cronbachs Alpha of Loyalty Indices

Inter item
Alpha ( ) Item to correlations
Alpha
Construct Items if item total (absolute value)
)
deleted correlations
Highest Lowest
LoyIndx1 0.906 0.711
Advocacy
LoyIndx2 0.856 0.860
Loyalty 0.908 0.810 0.578
LoyIndx3 0.864 0.839
Index
LoyIndx4 0.891 0.766
Purchase LoyIndx5 0.602 0.602
0.750 0.602 0.602
Loyalty Index LoyIndx6 0.602 0.602
Defection LoyIndx7 0.606 0.606
Loyalty 0.754 0.606 0.606
LoyIndx8 0.606 0.606
Index
109

5.5 FACTOR ANALYSIS

After establishing the reliability for the constructs, factor analysis was
carried out to confirm the factors of Service Quality dimensions, Service Loyalty
dimensions and Loyalty Indices. Factor analysis is a method to determine the
dimensionality of a scale. Factor analysis is used to identify clusters of inter-
correlated variables called factor. To check the factorability, either the values of
correlation matrix should be greater than 0.3; values on anti-image correlation
diagonals should be greater than 0.5 or Measures of Sampling Adequacy Bartletts,
significant and KMO should be greater than 0.6.

In this study, Factor analysis using Principal Component Analysis with


Varimax rotation was carried out. Table 5.12 through 5.17 provides the summary
from SPSS output of data for factor analysis.

Before proceeding for the factor analysis, appropriateness of factor


analysis needs to be assessed. This is done by examining sampling adequacy
through Kaiser- Meyer-Olkin (KMO) statistic. The tables provide the SPSS output
of data for factor analysis. KMO value of greater than 0.6 can be considered as
adequate. (Kaiser and Rice, 1974).

Service Quality

Table 5.12 KMO and Bartlett's Test Service Quality

Kaiser-Meyer-Olkin Measure of
.876
Sampling Adequacy.
Approx. Chi- 7404.62
Bartlett's Test of Square 6
Sphericity Df 406
Sig. .000
110

Table 5.13 Factor Analysis Service Quality Dimensions

Components
N/w
Reliability Responsiveness Assurance Convenience Empathy Tangibles
Qlty

Rel4 .835
Rel5 .758
Rel2 .677
Rel1 .643
Rel3 .639
Resp3 .764
Resp1 .749
Resp4 .729
Resp2 .696
Cupeneqlty3 .790
Cupeneqlty4 .752
Cupeneqlty1 .652
Cupeneqlty5 .642
Cupeneqlty2 .614
Assu4 .767
Assu1 .718
Assu3 .679
Assu2 .645
Conv1 .779
Conv3 .779
Conv2 .637
Conv4 .587
Emp2 .657
Emp4 .557
Emp1 .544
Emp3 .522
Tang3 .759
Tang1 .729
Tang2 .727
111

Service Loyalty

Table 5.14 KMO and Bartlett's Test Service Loyalty

Kaiser-Meyer-Olkin Measure of
.849
Sampling Adequacy.
Bartlett's Test of Approx. Chi-
8234.730
Sphericity Square
Df 325
Sig. .000

Table 5.15 Factor Analysis Service Loyalty Dimensions

Commloyl Truloyl Attloyl Behloyl Cogloyly Affloyl Conloyl


commloyl1 .835
commloyl2 .804
commloyl3 .786
commloyl4 .769
Truloyl2 .839
Truloyl1 .833
Truloyl4 .826
Truloyl3 .818
Attloyl1 .808
Attloyl4 .759
Attloyl2 .669
Attloyl3 .635
Behloyl3 .866
Behloyl1 .839
Behloyl4 .807
Behloyl2 .743
cogloyl4 .862
cogloyl1 .799
cogloyl3 .588
cogloyl2 .551
Affloyl1 .878
Affloyl2 .871
Affloyl4 .574
Affloyl3 .549
conloyl1 .828
conloyl3 .811
112

Loyalty Indices

Table 5.16 KMO and Bartlett's Test Loyalty Indices

Kaiser-Meyer-Olkin Measure of
.824
Sampling Adequacy.
Bartlett's Test of Approx. Chi-
2068.275
Sphericity Square
Df 28
Sig. .000

Table 5.17 Factor Analysis Loyalty Indices

Advocacy LI Defection Purchase LI


LI
Loyltyindex3 .899
Loyltyindex2 .871
Loyltyindex4 .825
Loyltyindex1 .810
Loyltyindex7 .880
Loyltyindex8 .854
Loyltyindex6 .881
Loyltyindex5 .831

The items having factor loadings less than 0.5 were eliminated (Hair et
al., 2005). Finally, seven factors comprising twenty-nine items for service quality
and seven factors comprising twenty-six items for service loyalty, all having eigen
values of unity and above were extracted and the results are shown in Table 5.13
and 5.15.

From table 5.17, the items that load on the first factor appear to have a
strong emotional component to them, reflecting the extent to which customers
advocate the company. Consequently, this factor is labeled Advocacy Loyalty Index.
The items that load on the second factor reflect indications or symptoms of
customers defecting to competitors and the items that load on the third factor reflect
113

specific purchasing behaviors. Consequently, the second factor is labeled Defection


Loyalty Index and the third factor as Purchase Loyalty Index. Further, in order to assess
the appropriateness of the data for factor analysis, the communalities derived from the
factor analysis were reviewed. These were all relatively large (greater than 0.5),
suggesting that the data set is appropriate (Stewart, 1981). The individual
dimensions of the proposed instrument explained total variance exceeding 60 per
cent, suggesting the appropriateness of the process.

In this study, Principal Component Analysis with Varimax rotation is


used and the values for factor analysis are given below.

The KMO values are 0.876 for service quality, 0.849 for service loyalty
and 0.824 for loyalty indices. Bartletts Test of Sphericity is significant at 0.000 for
all the constructs. Communalities, which refer to the extracted factors that explains
most of the variance in the variables being analyzed is greater than 0.5. For service
quality, the lowest value of communality is 0.532; for service loyalty it is 0.599 and
for loyalty indices it is 0.715.

A good factor solution is one that explains most variance with few
factors. Realistically it should be between 50-75% of the variance explained. In this
study, the variances explained are as follows:

Service Quality 66.59 %

Service Loyalty 73.80%

Loyalty Indices 79.84%

Confirmatory factor analysis model is run through SPSS Amos 19 and


the key model statistics are shown in Table 5.18 through 5.20.
114

Table 5.18 Confirmatory Factor Analysis Service Quality

Comparative Goodness of Fit Index


Factors
Fit Index (CFI) (GFI)
Reliability .971 .972
Responsiveness .991 .99
Assurance .973 .982
Empathy .935 .951
Tangibles .925 .931
Convenience .966 .981
Customer Perceived N/w
.956 .973
Quality

Table 5.19 Confirmatory Factor Analysis Service Loyalty

Comparative Goodness of
Factors
Fit Index (CFI) Fit Index (GFI)
Commitment Loyalty .956 .948
Trust Loyalty .997 .994
Attitudinal Loyalty .949 .956
Behavioural Loyalty 1.00 .999
Affective Loyalty .911 .918
Cognitive Loyalty .985 .980
Conative Loyalty .943 .952

Table 5.20 Confirmatory Factor Analysis Loyalty Indices

Comparative Goodness of Fit Index


Factors
Fit Index (CFI) (GFI)
Advocacy Loyalty Index .934 .919
Purchase Loyalty Index .962 .951
Defection Loyalty Index .931 .903

From the Confirmatory Factor Analysis, it is inferred that the CFI and
GFI values are greater than 0.91 which confirms the uni dimensionality of the
factors.
115

Further the Confirmatory Factor Analysis of each of the


multidimensional constructs was examined to test if it is statistically fit. The figures
below gives the details of the CFA on each of the constructs, namely, service
quality, service loyalty and loyalty indices.

Figure 5.1 CFA Service Quality


116

Chi-square value for the overall model fit was 1692.327 for 356 degrees
of freedom (p< 0.001). Fit indices for the above model were NFI = 0.918; ; CFI =
0.914; GFI = 0.92, RMSEA = 0.058.

Figure 5.2 CFA Service Loyalty


117

Chi-square value for the overall model fit was 1721.072 for 402 degrees
of freedom (p< 0.001). Fit indices for the above model were NFI = 0.941; CFI =
0.932; GFI = 0.924; RMSEA = 0.054.

Figure 5.3 CFA Loyalty Indices

Chi-square value for the overall model fit was 63.976 for 17 degrees of
freedom (p< 0.001). Fit indices for the above model were NFI = 0.969; CFI = 0.977;
GFI = 0.969; RMSEA = 0.075.
118

5.6 HYPOTHESES TESTING

5.6.1 ANOVA

One way ANOVA is used when only one independent variable and one
dependent variable are considered. It is used in this study to check the influence of
each of the categorical demographic variables - length of use, age, monthly
expenses, education and occupation on service quality dimensions, service loyalty
dimensions and loyalty indices.

An important assumption of one way ANOVA is that of homogeneity


which requires equal variances of the dependent variable across categories of the
independent variable. The Levene's Statistic is performed to test for this assumption.
If Levene's statistic is significant at p<0.05, then it indicates condition of
heterogeneity of variance for that particular independent variable - dependent
variable combination, implying a violation of the homogeneity assumption. In such
a situation, the Brown-Forsythe's F, or the Welch's F must be used to draw
inferences from the ANOVA results instead of the regular ANOVA statistic
(Field, 2005).

H01 = There is no difference in the user perception of Service


Quality with respect to Demographic Variables

The table 5.21 gives the details of the relationship between the
demographic variables and the service quality dimensions. The F Values of Brown-
Forsythe and Welch are given. The LSD Post Hoc results give the details of the
values which are significantly different.
Table 5.21 One-Way ANOVA Demographic Variables on Service Quality

Brown-
Demographic Service Quality Sig. Welch F
Forsyth F LSD Post Hoc Inference
Variables Dimensions Value Value
Value

The subscribers using the service Length of Use has influence on


Length of Use

Reliability 0.013 3.551 3.487 < 2 yrs find the service providers Reliability and Responsiveness only.
more reliable that > 3 yrs
The subscribers using the service
Responsiveness
0.001 7.719 7.958 > 3 yrs find the service providers
are more responsive than < 2yrs
The subscribers whose age is > 50 Age has influence only on
Age

Reliability 0.000 14.056 12.484 find that the service provider is Reliability.
reliable.
The subscribers whose monthly Monthly Expenditure of the
expenses is between Rs.501-1000 respondents influences Reliability,
Reliability 0.000 13.887 15.517 find that the service provider is Responsiveness, Assurance, Empathy,
Monthly Expenses

reliable than the subscribers whose Convenience and Customer Perceived


monthly expenses are > Rs.2000. Network Quality.
The subscribers whose monthly
expenses is >Rs.2000 find that the
Responsiveness service provider is better
0.003 6.215 6.396
responsive than the subscribers
whose monthly expenses are upto
Rs.500 and Rs.501-1000.

119
Service Brown- Welch
Demographic Sig.
Quality Forsyth F LSD Post Hoc Inference
Variables Value
Dimensions F Value Value
The subscribers whose monthly expenses is >
Rs.2000 find that the service provider
Assurance 0.002 5.553 5.659 promises an assured service than the
subscribers whose monthly expenses are upto
Rs.500 and Rs.501-1000.
The subscribers whose monthly expenses are >
Rs.2000 find the empathy of the service
Empathy 0.000 10.800 9.056 provider better than the subscribers whose
monthly expenses are upto Rs.500 and Rs.501-
1000.
The subscribers whose monthly expenses is
between Rs.501-1000 find the service provider
Convenience 0.003 3.553 3.267
convenient than the subscribers whose
monthly expenses are > Rs.2000.
Customer The subscribers whose monthly expenses are >
Perceived Rs.2000 find that the service provider has a
0.000 5.032 5.211
Network good network quality than the subscribers
Quality whose monthly expenses are upto Rs.500.
The subscribers whose education is UG find Education of the
Education

the service provider more reliable that the respondents influences


Reliability 0.000 12.635 12.323 subscribers whose education are PG or others. reliability only

120
121

The rest of the variables were found to be insignificant. Since there are
many variables that are found to be insignificant, the hypothesis H 01 is accepted.

H02 = There is no difference in the user perception of Service Loyalty


with respect to Demographic Variables

The table 5.22 gives the details of the relationship between the
demographic variables and the service loyalty dimensions. The F Values of Brown-
Forsythe and Welch are given. The LSD Post Hoc results give the details of the
values which are significantly different.
Table 5.22 One-Way ANOVA Demographic Variables on Service Loyalty

Brown-
Demographic Service Loyalty Sig Welch F
Forsyth LSD Post Hoc Inference
Variables Dimensions Value Value
F Value
The subscribers using the service for 2-3 yrs are Length of Use has influence on
Length of

Cognitive 0.009 4.079 4.772


more cognitive loyal than < 2 yrs. Cognitive Loyalty, Trust Loyalty
Use

The subscribers using the service < 2yrs are and Commitment Loyalty.
Trust 0.015 3.376 NA
more trust loyal than > 3 yrs.
The subscribers in the age group 21-30 are more Age has influence only on
Age

Commitment 0.004 2.469 NA commitment loyal than the subscribers whose Commitment Loyalty
age is > 50.
The subscribers whose monthly expenses is Monthly Expenses have influence
upto Rs.500 are more attitude loyal than the on Attitudinal Loyalty, Affective
Attitudinal 0.006 2.713 2.888
subscribers whose monthly expenses are > Loyalty, Trust Loyalty and
Rs.2000. Commitment Loyalty
The subscribers whose monthly expenses is
Monthly Expenses

Rs.1001-2000 are more affective loyal than the


Affective 0.001 5.685 4.211
subscribers whose monthly expenses are upto
Rs.500, Rs.501-1000 and > Rs.2000.
The subscribers whose monthly expenses are <
Trust 0.004 10.462 11.648 Rs.500 are more trust loyal than the subscribers
whose monthly expenses are > Rs.500.
Commitment 0.001 5.887 6.391 The subscribers whose monthly expenses are >
Rs.2000 are more commitment loyal than the
subscribers whose monthly expenses are <
Rs.2000.
The subscribers whose education is UG are Education has influence only on
Edu.

Trust 0.034. 3.471 3.364 more trust loyal than the subscribers whose Trust Loyalty
education are PG.

122
123

The rest of the variables were found to be insignificant. Since there are
many variables that are found to be insignificant, the hypothesis H 02 is accepted.

H03 = There is no difference in the user tendency towards Loyalty


with respect to Demographic Variables

The table 5.23 gives the details of the relationship between the
demographic variables and the loyalty indices dimensions. The F Values of Brown-
Forsythe and Welch are given. The LSD Post Hoc results give the details of the
values which are significantly different.
Table 5.23 One-Way ANOVA Demographic Variables on Loyalty Indices

Brown-
Demographic Loyalty Welch F
Sig. Value Forsyth F LSD Post Hoc Inference
Variables Indices Value
Value
The subscribers using the service for > Length of Use has influence
Length of

Purchase 3 yrs exhibit purchase loyalty than on only Purchase Loyalty


Use

0.032 8.156 8.892


Loyalty Index subscribers using the services of the Index
provider < 2 yrs.
The subscribers in the age group 21-30 Age has influence on only
Defection
Age

0.000 2.469 NA exhibit more symptoms of defection Defection Loyalty Index


Loyalty Index
than the subscribers whose age is > 50.
The subscribers whose monthly Monthly Expenses have
Advocacy expenses are > Rs.2000 exhibit more influence on Advocacy
0.001 8.947 8.397
Loyalty Index advocacy than the subscribers whose Loyalty Index, Purchase
monthly expenses are < Rs.2000. Loyalty Index and Defection
Monthly Expenses

The subscribers whose monthly Loyalty Index


Purchase expenses are > Rs.2000 are more
0.000 12.667 12.128
Loyalty Index purchase loyal than the subscribers
whose monthly expenses are < Rs.2000.
The subscribers whose monthly
expenses are > Rs.2000 exhibit more
Defection
0.000 4.402 5.161 symptoms of defection than the
Loyalty Index
subscribers whose monthly expenses
are < Rs.2000.

124
125

The rest of the variables were found to be insignificant. Since there are
many variables that are found to be insignificant, the hypothesis H 03 is accepted.

5.6.2 Linear Regression

The hypotheses H01 to H06 were tested using Linear Regression.


Confirmatory path models were derived to depict the relationship between service
quality on service loyalty, service quality and loyalty indices and service loyalty
and loyalty indices using Structural Equation Modeling.

H01 : There is no significant relationship between demographic


variables and service quality dimensions.

The R value, indicating the strength of relationship between


demographic variables and each of the service quality dimensions is given in the
table below. The coefficient of determination (R 2) is used as an estimate of the
predictive power of the regression model. R2 values measure the percentage of the
total variance of the dependent variable about its mean that is explained or
accounted for by the independent variable (Lewis-Beck 1993).

Table 5.24 Relationship between Demographic Variables and SERVQUAL


Dimensions

R Durbin F Beta Demographic Sig.


Dimension R
Square Watson Values Value Variable values
0.185 Age 0.00
0.126 Mon_Exp 0.002
Reliability 0.382 0.146 1.954 16.583
0.120 Edu 0.049
0.160 Occup 0.020
0.122 Len_use 0.030
Responsiveness 0.223 0.050 1.988 5.088
0.160 Mon_Exp 0.000
Customer
Perceived 0.199 0.040 1.213 3.973 0.138 Mon_Exp 0.002
Network Quality
Assurance 0.203 0.041 1.761 4.155 0.136 Mon_Exp 0.002
Convenience 0.143 0.020 1.748 2.017 0.104 Mon_Exp 0.019
Empathy 0.204 0.041 1.808 4.190 0.167 Mon_Exp 0.000
Tangibles 0.158 0.025 1.955 2.469 0.140 Edu 0.032
126

The Regression Equations are given below.

The abbreviations used are

Demographic Variables

AGE Age

ME Monthly Expenses

EDU Education

OCC Occupation

LEN Length of Use

Service Quality Dimensions

RLY Reliability

RSP Responsiveness

CPN Customer Perceived Network Quality

ASR Assurance

CNV Convenience

EMP Empathy

TNG Tangibles

RLY = 2.155 + 0.185*AGE + 0.126*ME + 0.120*EDU +0.160*OCC+ 0.571

RSP = 2.316 + 0.122*LEN + 0.160*ME + 0.71

CPN =2.640 + 0.138*ME + 0.68

ASR = 2.518 + 0.136*ME + 0.64


127

CNV = 2.004 + 0.104*ME + 0.60

EMP = 2.106 + 0.167*ME + 0.546

TNG = 2.396 + 0.140*EDU + 0.744

The independence of error term was also met because the value of
Durbin-Watson, which was close to 2 (the closer to the value to 2, the better the
independence of error) (Field, 2005). From the table above, it is inferred that the
demographic variable, Monthly Expenditure has significant relationship with most
of the service quality dimensions, Occupational Status has significant relationship
with Reliability and Educational Status has significant relationship with Tangibles.
Hence H01 is accepted for all the other variables.

H02 : There is no significant relationship between demographic


variables and service loyalty dimensions

Table 5.25 Relationship between Demographic Variables and SERVLOYAL


Dimensions

R Durbin F Beta Demographic Sig


Dimension R
Square Watson Value Value Variable values
Commitment
0.195 0.038 1.908 3.819 0.130 Mon_Exp 0.003
Loyalty
Trust Loyalty 0.255 0.065 1.963 6.706 0.197 Mon_Exp 0.000

The Regression Equations are given below.

The abbreviations used are

Demographic Variables

AGE Age
128

ME Monthly Expenses

EDU Education

OCC Occupation

LEN Length of Use

Service Loyalty Dimensions

COL Commitment Loyalty

TRL Trust Loyalty

ATL Attitudinal Loyalty

BHL Behavioural Loyalty

CGL Cognitive Loyalty

AFL Affective Loyalty

CNL Conative Loyalty

COL = 1.759 + 0.130*ME + 0.754

TRL = 0.896 + 0.197*ME + 0.652

From the table above, it is evident that though the Durbin- Watson
values are close to 2, the R values shows that there is not very significant
relationship between Demographic Variables and SERVLOYAL dimensions.
There is only one demographic variable, monthly expenditure which has
significant relationship with commitment loyalty and trust loyalty. Hence H 02 is
accepted for all other variables.
129

H03 : There is no significant relationship between demographic


variables and loyalty indices

Table 5.26 Relationship between Demographic Variables on Loyalty Indices

R Durbin F Beta Demographic Sig.


Dimension R
Square Watson Value Value Variable Value
Advocacy
Loyalty 0.215 0.046 1.881 4.692 0.131 Mon_Exp 0.003
Index
Defection
Loyalty 0.178 0.032 1.812 3.164 0.114 Mon_Exp 0.010
Index
Purchase 0.180 Mon_Exp 0.000
Loyalty 0.302 0.091 1.99 9.717
Index 0.087 Occup 0.002

The Regression Equations are given below.

The terms used for abbreviations are

Demographic Variables

AGE Age

ME Monthly Expenses

EDU Education

OCC Occupation

LEN Length of Use

Loyalty Indices

ALI Advocacy Loyalty Index

DLI Defection Loyalty Index

PLI Purchase Loyalty Index

ALI = 2.697 + 0.131*ME +0.79


130

DLI =2.949 + 0.114*ME +0.52

PLI = 2.366 + 0.180*ME +0.087*OCC +0.74

From the above table, it is inferred that demographic variable Monthly


Expenditure has significant relationship with all the loyalty indices and Occupation
has significant relationship with only the purchase loyalty index. From the R
values, R2 values, Durbin Watson values, it can be inferred that H03 is accepted for
all other variables.

H04 : There is no significant relationship between Service Quality


and Service loyalty

Table 5.27 Relationship between SERVQUAL and SERVLOYAL

R R Durbin F Beta Demographic Sig.


Dimension
value Square Watson Value Value Variable Value
0.135 Reliability 0.001
0.233 Responsiveness 0.000
Commitment
0.427 0.182 1.946 15.331 0.266 N/w Quality 0.000
Loyalty
0.137 Assurance 0.001
0.116 Empathy 0.005
0.115 Reliability 0.007
Trust 0.229 Responsiveness 0.000
0.381 0.145 1.803 11.688
Loyalty 0.201 Assurance 0.000
0.167 Empathy 0.000
0.228 Reliability 0.000
Attitudinal 0.097 N/w Quality 0.021
0.389 0.152 1.819 12.302
Loyalty 0.092 Convenience 0.029
0.267 Empathy 0.000
Behavioural 0.110 Responsiveness 0.014
0.173 0.30 2.056 2.134
Loyalty 0.111 Empathy 0.014
0.117 Responsiveness 0.008
Cognitive 0.157 Convenience 0.000
0.277 0.077 1.805 5.714
Loyalty 0.131 Empathy 0.003
0.135 Tangibles 0.002
Affective 0.131 Reliability 0.015
0.35 0.085 1.86 7.14
Loyalty 0.346 Empathy 0.000
0.180 Responsiveness 0.000
Conative 0.096 N/w Quality 0.029
0.267 0.071 1.740 5.291
Loyalty 0.114 Empathy 0.010
0.128 Tangibles 0.004
131

From the above table, it can be inferred all dimensions of


SERVLOYAL have significant relationship with SERVQUAL dimensions.

The Regression Equations are given below:

The abbreviations are

Service Quality Dimensions

RLY Reliability

RSP Responsiveness

CPN Customer Perceived Network Quality

ASR Assurance

CNV Convenience

EMP Empathy

TNG Tangibles

Service Loyalty Dimensions

COL Commitment Loyalty

TRL Trust Loyalty

ATL Attitudinal Loyalty

BHL Behavioural Loyalty

CGL Cognitive Loyalty

AFL Affective Loyalty

CNL Conative Loyalty

COL = 0.685 + 0.135*RLY + 0.233*RSP + 0.266*CPN + 0.137*ASR +


0.116*EMP + 0.638

TRL = 1.133 + 0.115*RLY + 0.229*RSP + 0.201*ASR +0.167*EMP + 0.531


132

ATL = 1.001 + 0.228*RLY + 0.097*CPN + 0.097*CNV +0.267*EMP + 0.59

BHL = 1.186 + 0.110*RSP + 0.111*EMP +0.57

CGL = 1.275 + 0.117*RSP + 0.157*CNV + 0.131*EMP + 0.135*TNG +0.59

AFL = 1.239 + 0.131*RLY + 0.346*EMP + 0.50

CNL = 1.459 + 0.180*RSP + 0.096*CPN + 0.114*EMP + 0.128*TNG + 0.69

Thus from the R values, R2 values, Durbin Watson values, it can be


inferred that H04 is rejected.

H05 : There is no significant relationship between service quality


and loyalty indices

Table 5.28 Relationship between SERVQUAL and Loyalty Indices

R Durbin F Beta Demographic


Dimension R Sig. Value
Square Watson Value Value Variable
0.190 Reliability 0.000
Advocacy 0.146 Responsiveness 0.000
Loyalty
0.434 0.188 1.829 15.956 0.263 N/w Quality 0.000
Index
(ALI) 0.160 Assurance 0.000
0.188 Empathy 0.000
Defection 0.140 Reliability 0.001
Loyalty 0.150 Responsiveness 0.001
0.285 0.081 1.848 6.073
Index 0.129 N/w Quality 0.003
(DLI) 0.108 Empathy 0.014
0.233 Reliability 0.000
Purchase 0.779 Responsiveness 0.000
Loyalty
0.852 0.727 1.817 183.066 0.107 Assurance 0.000
Index
(PLI) 0.111 Convenience 0.000
0.200 Empathy 0.000
133

From the above table, it can be inferred that all the three loyalty indices
have significant relationship with SERVQUAL dimensions.

The Regression Equations are given below:

The abbreviations are

Service Quality Dimensions

RLY Reliability

RSP Responsiveness

CPN Customer Perceived Network Quality

ASR Assurance

CNV Convenience

EMP Empathy

TNG Tangibles

Loyalty Indices

ALI Advocacy Loyalty Index

DLI Defection Loyalty Index

PLI Purchase Loyalty Index

ALI = 2.79 + 0.190*RLY + 0.146*RSP + 0.263*CPN + 0.160*ASR +


0.188*EMP +0.509

DLI = -1.9 + 0.140*RLY + 0.150*RSP +0.129*CPN + 0.108*EMP + 0.602

PLI = -2.8 + 0.233*RLY + 0.799*RSP +0.107*ASR + 0.111*CNV +


0.200*EMP + 0.52
134

Thus from the R values, R2 values, Durbin Watson values, it can be


inferred that H05 is rejected.

H06 : There is no significant relationship between service loyalty


and loyalty indices

Table 5.29 Relationship between SERVLOYAL and Loyalty Indices

R Durbin Beta Demographic Sig.


Dimension R F Values
Square Watson Value Variable Value
0.135 Commitment 0.000
Advocacy 0.150 Trust 0.000
Loyalty
0.634 0.401 1.801 46.176 0.528 Attitudinal 0.000
Index
(ALI) 0.233 Cognitive 0.000
0.145 Affective 0.000
Defection 0.894 Commitment 0.000
Loyalty
0.907 0.822 1.613 317.601 0.136 Behavioural 0.000
Index
(DLI) 0.047 Conative 0.014

Purchase 0.107 Commitment 0.011


Loyalty 0.276 Trust 0.000
0.386 0.149 1.826 12.054
Index 0.140 Behavioural 0.001
(PLI) 0.185 Conative 0.000

From the above table, it can be inferred that all the three loyalty indices
have significant relationship with SERVLOYAL dimensions.

The Regression Equations are given below:

The abbreviations are

Service Loyalty Dimensions

COL Commitment Loyalty

TRL Trust Loyalty

ATL Attitudinal Loyalty


135

BHL Behavioural Loyalty

CGL Cognitive Loyalty

AFL Affective Loyalty

CNL Conative Loyalty

Loyalty Indices

ALI Advocacy Loyalty Index

DLI Defection Loyalty Index

PLI Purchase Loyalty Index

ALI = 0.135*COL + 0.150*TRL + 0.528*ATL + 0.233*CGL + 0.145*AFL

DLI = 0.894*COL + 0.136*BHL + 0.047*CNL

PLI = 0.107*COL + 0.276*TRL + 0.140*BHL +0.185*CNL

Thus from the R values, R2 values, Durbin Watson values, it can be


inferred that H06 is rejected.

5.7 PATH MODEL

5.7.1 Relationship between Service Quality and Service Loyalty

The path model to examine and confirm the relationship between


Service Quality and Service Loyalty, Service Quality and Loyalty Indices and
Service Loyalty and Loyalty Indices are shown in figure 5.1 through 5.3.
136

Figure 5.4 Path Diagram of Service Quality on Service Loyalty

Chi-square value for the overall model fit was 93.366 for 68 degrees of
freedom (p< 0.001). Fit indices for the above model were NFI = 0.903; NNFI =
0.907; CFI = 0.917; IFI = 0.923; GFI = 0.977; AGFI = 0.978; RMSR = 0.032;
RMSEA = 0.030.
137

Thus, overall the model can be considered to have a high level of fit, as
most of the fit indices show a good fit for the model by Hu and Bentler (1999) and
(1 < 2/df < 5) by Wheaton et al. (1977) Moreover, due to the dependency of the
2 statistic on the sample size, a higher than cut-off value of comparative fit index
(CFI) and a value of the 2/df ratio between 1 and 5 indicate a good fit.

Goodness of fit summary for method = Maximum Likelihood

Chi-square = 93.366 based on 68 degrees of freedom

Probability value for the chi-square statistic is .00000

Fit indices

Bentler-bonett normed fit index = .903

Bentler-bonett non-normed fit index = .907

Comparative fit index (CFI) = .917

Bollen (IFI) fit index = .923

AMOS GFI fit index = .977

AMOS AGFI fit index = .978

Root mean-square residual (RMR) = .032

Root mean-square error of approximation (RMSEA) = .030


138

5.7.2 Relationship between Service Quality and Loyalty Indices

Figure 5.5 Path Diagram of Service Quality on Loyalty Indices

Chi-square value for the overall model fit was 253.868 for 69 degrees
of freedom (p< 0.001). Fit indices for the above model were NFI = 0.918; NNFI =
0.920; CFI = 0.938; IFI = 0.942; GFI = 0.948; AGFI = 0.956; RMSR = 0.046;
RMSEA = 0.047.
139

Thus, overall the model can be considered to have a high level of fit, as
most of the fit indices show a good fit for the model by Hu and Bentler (1999) and
(1 < 2/df < 5) by Wheaton et al. (1977) Moreover, due to the dependency of the
2 statistic on the sample size, a higher than cut-off value of comparative fit index
(CFI) and a value of the 2/df ratio between 1 and 5 indicate a good fit.

Goodness of fit summary for method = Maximum Likelihood

Chi-square = 253.868 based on 69 degrees of freedom

Probability value for the chi-square statistic is .00000

Fit indices

Bentler-bonett normed fit index = .918

Bentler-bonett non-normed fit index = .920

Comparative fit index (CFI) = .938

Bollen (IFI) fit index = .942

AMOS GFI fit index = .948

AMOS AGFI fit index = .956

Root mean-square residual (RMR) = .046

Root mean-square error of approximation (RMSEA) = .048


140

5.7.3 Relationship between Service Loyalty and Loyalty Indices

Figure 5.6 Path Diagram of Service Loyalty on Loyalty Indices

Chi-square value for the overall model fit was 283.623 for 74 degrees
of freedom (p< 0.001). Fit indices for the above model were NFI = 0.903; NNFI =
0.9; CFI = 0.921; IFI = 0.924; GFI = 0.948; AGFI = 0.916; RMSR = 0.030;
RMSEA = 0.042.
141

Thus, overall the model can be considered to have a high level of fit, as
most of the fit indices show a good fit for the model by Hu and Bentler (1999) and
(1 < 2/df < 5) by Wheaton et al. (1977) Moreover, due to the dependency of the
2 statistic on the sample size, a higher than cut-off value of comparative fit index
(CFI) and a value of the 2/df ratio between 1 and 5 indicate a good fit.

Goodness of fit summary for method = Maximum Likelihood

Chi-square = 283.623 based on 74 degrees of freedom

Probability value for the chi-square statistic is .00000

Fit indices

Bentler-bonett normed fit index = .903

Bentler-bonett non-normed fit index = .900

Comparative fit index (CFI) = .921

Bollen (IFI) fit index = .924

AMOS GFI fit index = .948

AMOS AGFI fit index = .916

Root mean-square residual (RMR) = .030

Root mean-square error of approximation (RMSEA) = .042

5.8 ASSESSING THE EFFECTIVENESS OF CRM PRACTICES


USING DATA ENVELOPMENT ANALYSIS

Data Envelopment Analysis (DEA), occasionally called Frontier


Analysis, was first put forward by Charnes, Cooper and Rhodes in 1978. It is a
performance measurement technique which, can be used for evaluating the relative
efficiency of decision-making units (DMU's) in organisations. DEA is concerned
with a number of alternative decision making units (DMU). Each of them is
analyzed separately via a mathematical programming model which checks whether
142

the DMU under consideration could improve its performance by decreasing its
input and increasing its output. The improvement is pursued until the boundary of
the convex hull of the other DMUs is reached. A DMU which cannot improve its
performance is efficient or non-dominated. Otherwise, it is dominated by a convex
combination of other DMUs. Thus, possible improvements for a particular DMU
are indicated, not in an arbitrary direction, but on the basis of the performance of
the more successful and efficient DMUs. Thus, in the case of CRM practices by
the Mobile Service Providers, it is essential to assess the performance of CRM in
the light of three aspects: (1) relationship between Service Quality dimensions and
the Service Loyalty dimensions; (2) relationship between Service Quality and
Loyalty Indices and (3) relationship between Service Loyalty and Loyalty Indices.
To determine the input and output parameters for each of the above, linear
regression is performed on service quality, service loyalty and loyalty indices
constructs. The figure below gives the details of the service providers used in the
study.

Table 5.30 Service Provider Details

No Code Mobile Service Provider


1 SP 1 Aircel
2 SP 2 Airtel
3 SP 3 BSNL
4 SP 4 Idea
5 SP 5 Reliance
6 SP 6 Vodafone
7 SP 7 Others

5.8.1 Effectiveness of Service Quality on Service Loyalty

The predictors from the regression analysis are used as input parameters
and each of the service loyalty dimensions are used as output parameters for the
study. Then the data pertaining to the service quality parameters are taken as input
143

for each of the Service Providers. Data pertaining to 7 Service providers are used
for the study.

5.8.1.1 Behavioural Loyalty

The input parameters are responsiveness and empathy. The output


parameter is behavioural loyalty. These input and output parameters are derived
from the regression analysis.

Table 5.31 Input and Output Parameters Behavioural Loyalty

Mobile Service
Responsiveness Empathy Behavioural
Provider
SP1 3.4135 3.1923 3.1955
SP2 3.4924 3.2904 3.3005
SP3 3.3544 3.1978 3.1291
SP4 3.4781 3.3465 3.2851
SP5 3.6417 3.4583 3.3875
SP6 3.589 3.25 3.3093
SP7 3.6413 3.5326 3.3587

For example, for the Service Provider SP3, Responsiveness averages to


3.3544 and Empathy averages to 3.1978 and the output parameter Behavioural
Loyalty averages to 3.1291.

To compare these service providers and measure their performance a


commonly used method is ratios which takes output measure and divides it by the
corresponding input measure. In this case, we analyze the effectiveness of service
providers by taking inputs and converting them (with varying degrees of
efficiency) into outputs. Hence there are two ratios, i.e., Behavioural Loyalty with
respect to Responsiveness (Eff1) and Behavioural Loyalty with respect to Empathy
(Eff2).
144

Table 5.32 Ratios for Efficiency

Mobile
Network
Service Responsiveness Empathy Behavioural Eff1 % Eff2 %
Qlty
Provider
SP1 3.4135 3.1923 3.5282 3.1955 93.6 100
SP2 3.4924 3.2904 3.5697 3.3005 94.5 100
SP3 3.3544 3.1978 3.5319 3.1291 93.2 97
SP4 3.4781 3.3465 3.4947 3.2851 94.4 98
SP5 3.6417 3.4583 3.4967 3.3875 93 97
SP6 3.589 3.25 3.6542 3.3093 92.2 100
SP7 3.6413 3.5326 3.487 3.3587 92.2 95

The table 5.32 depicts that SP2 and SP4 has the highest value for Eff1
when the behavioural loyalty is measured with respect to responsiveness of the
service provider. But SP1, SP2 and SP6 have highest percentage for Eff2 when
behavioural loyalty is measured with respect to empathy. The other service
providers do not compare so well with these, so are presumably performing less
well. That is, they are relatively less efficient at using their given input resources
(responsiveness and empathy) to produce output (Behavioural Loyalty).

One problem with comparison using ratios is that different ratios can
give a different picture and it is difficult to combine the entire set of ratios into a
single numeric judgement. For instance consider SP1 and SP5; SP1 is (93.6 / 93) =
1.006 times only as efficient as SP5 at the Eff1 but (100 / 97) = 1.03 times as
efficient at the Eff2. To combine these figures into a single judgement is very
difficult. This problem of different ratios giving different pictures would be
especially true if there is an increase in the number of service providers (and/or
increase the number of input/output measures).

Thus it is very difficult to interpret the values corresponding to service


provider SP4 from these ratios. This is where it is essential to get into a better
145

technique called Data Envelopment Analysis which interprets the ratios and
provides the efficient frontier.

In words DEA, in evaluating any number of DMU's, with any number


of inputs and outputs:

requires the inputs and outputs for each DMU to be specified;

defines efficiency for each DMU as a weighted sum of outputs


[total output] divided by a weighted sum of inputs [total input];
where all efficiencies are restricted to lie between zero and one (i.e.
between 0% and 100%).

in calculating the numerical value for the efficiency of a particular


DMU weights are chosen so as maximise its efficiency, thereby
presenting the DMU in the best possible light.

For those who are comfortable with mathematics, the mathematics for
the simple set of mobile service providers example is presented below.

To calculate the efficiency of SP 4 (for instance):

Maximise ESP4
Subject to

ESP1 = (3.1955Wbehloyl )/(3.4135Wresponsiveness + 3.1923Wempathy)


ESP 2 = (3.3005Wbehloyl )/(3.4924Wresponsiveness + 3.2904Wempathy)
ESP 3 = (3.1291Wbehloyl )/(3.3544Wresponsiveness + 3.1978Wempathy)
ESP 4 = (3.2851Wbehloyl )/(3.4781Wresponsiveness + 3.3465Wempathy)
ESP5 = (3.3875Wbehloyl )/(3.6417Wresponsiveness + 3.4583Wempathy)
ESP 6 = (3.3093Wbehloyl )/(3.589Wresponsiveness + 3.25Wempathy)
ESP7 = (3.3587Wbehloyl )/(3.6413Wresponsiveness + 3.5326Wempathy)
0 <= ESP 1 <= 1
0 <= ESP 2 <= 1
146

0 <= ESP 3 <= 1


0 <= ESP 4 <= 1
0 <= ESP 5 <= 1
0 <= ESP 6 <= 1
0 <= ESP 7 <= 1
Wbehloyl>= 0
Wresponsiveness >= 0
Wempathy >= 0

where:

ESP1 to ESP7 is the efficiency of SP 1 to SP 7 respectively


(expressed as a fraction)

Wbehloy is the weight attached to output parameter Behavioural


Loyalty

Wresponsiveness is the weight attached to input parameter


Responsiveness

Wempathy is the weight attached input parameter Empathy

To calculate the efficiency of the other service providers the only step is
to change what is to be maximised (e.g. maximise ESP4 to calculate the efficiency
of SP4). This is exactly the association of non-negative weights with each input
and output measure. The above optimization problem is a nonlinear problem and
hence difficult to solve numerically. In fact it can be converted into a linear
programming problem. To do this we:

algebraically substitute for all efficiency variables, to give an


optimisation problem expressed purely in terms of weights

introduce an additional constraint setting the denominator of the


objective function equal to one (technically this can be done as the
above nonlinear problem has one degree of freedom - multiplying
all the weights by a (positive) scale factor would leave the solution
value unchanged)
147

Thus for SP 4, the corresponding LPP is

Maximise (3.2851Wbehloyl)/ (3.4781Wresponsiveness + 3.3465Wempathy)

Subject to

3.4781Wresponsiveness + 3.3465Wempathy= 1

0 <= (3.1955Wbehloyl)/ (3.4135Wresponsiveness + 3.1923Wempathy) <= 1

0 <= (3.3005Wbehloyl)/ (3.4924Wresponsiveness + 3.2904Wempathy) <= 1

0 <= (3.1291Wbehloyl)/ (3.3544Wresponsiveness + 3.1978Wempathy) <= 1

0 <= (3.2851Wbehloyl)/ (3.4781Wresponsiveness + 3.3465Wempathy) <= 1

0 <= (3.3875Wbehloyl)/ (3.6417Wresponsiveness + 3.4583Wempathy) <= 1

0 <= (3.3093Wbehloyl)/ (3.589Wresponsiveness + 3.25Wempathy) <= 1

0 <= (3.3587Wbehloyl)/ (3.6413Wresponsiveness + 3.5326Wempathy) <= 1

Wbehloyl>= 0

Wresponsiveness >= 0

Wempathy >= 0

The above is a linear program and after rearrangement is as follows:

Maximise 3.2851Wbehloyl
Subject to

3.4781Wresponsiveness + 3.3465Wempathy= 1
(3.1955Wbehloyl) - (3.4135Wresponsiveness + 3.1923Wempathy) <= 0
(3.3005Wbehloyl) - (3.4924Wresponsiveness + 3.2904Wempathy) <= 0
(3.1291Wbehloyl) - (3.3544Wresponsiveness + 3.1978Wempathy) <= 0
(3.2851Wbehloyl) - (3.4781Wresponsiveness + 3.3465Wempathy) <= 0
(3.3875Wbehloyl) - (3.6417Wresponsiveness + 3.4583Wempathy) <= 0
(3.3093Wbehloyl) - (3.589Wresponsiveness + 3.25Wempathy) <= 0
(3.3587Wbehloyl) - (3.6413Wresponsiveness + 3.5326Wempathy) <= 0
Wbehloyl>= 0
Wresponsiveness >= 0
Wempathy >= 0
148

where we have substituted 3.4781Wresponsiveness + 3.3465Wempathy= 1 into the


objective and rearranged the constraints. Once this LP has been solved to generate
optimal values for the weights then the efficiency of the service providers being
optimized optimizing for, SP4 in this case, can be easily calculated using E SP 4 =
(3.2851Wbehloyl)/ (3.4781Wresponsiveness + 3.3465Wempathy). Here that the numerator of
ESP 4 = (3.2851Wbehloyl )/(3.4781Wresponsiveness + 3.3465Wempathy) is known as the
weighted output for SP4 and the denominator is known as the weighted input for
SP4

It is important to note that DEA can only give relative efficiencies -


efficiencies relative to the data considered. It does not, and cannot give absolute
efficiencies. In words, DEA while evaluating any number of decision making
units (DMU's), and with any number of inputs and outputs requires the inputs and
outputs for each DMU to be specified. It defines efficiency for each DMU as a
weighted sum of outputs [total output] divided by a weighted sum of inputs [total
input]; where all efficiencies are restricted to lie between zero and one (i.e.
between 0% and 100%). It uses the numerical value for calculating the efficiency
of a particular DMU. Weights are chosen to maximise its efficiency, thereby
presenting the DMU in the best possible light.

Thus DEA provides the details of the best performing DMU which is
usually 100% efficient. The other DMUs are not performing upto this efficient
frontier. The Table 5.33 gives the DEA Solver Output for the Effect on
Behavioural Loyalty.
149

Effectiveness of SERVQUAL on Behavioural Loyalty

Table 5.33 Relative Efficiency on Behavioural Loyalty

Mobile
Service Responsiv Empath Behavioura Weighte Weighte Efficienc
Working
Provide eness y l d O/p d I/p y
r
SP1 3.413 3.192 3.195 0.995 1 0.995 -0.004
2.41E-
SP2 3.492 3.290 3.300 1.027 1.027 1.000
08
SP3 3.354 3.197 3.129 0.974 0.994 0.9798 -0.02008
SP4 3.478 3.346 3.285 1.023 1.037 0.986 -0.01419
SP5 3.641 3.458 3.387 1.054 1.077 0.9794 -0.02217
SP6 3.589 3.25 3.309 1.030 1.030 1.000 0
SP7 3.6413 3.532 3.358 1.045 1.091 0.958 -0.04562
Weight 0.110 0.195 0.311

From the analysis using DEA, it can be seen that SP2 and SP6 are the
two mobile service providers who are on the efficient frontier as the efficiency is
1.00. The other service providers SP1, SP3, SP4, SP5 and SP7 are less performing.
For instance, SP7 is only 95% efficient when compared to SP2 and SP6. That
means, given the current scenario, SP7 needs to improve by 5% to reach the
efficient provider with respect to Behavioural Loyalty.

5.8.1.2 Attitudinal Loyalty

The input parameters are Reliability, Empathy, Convenience and


Customer Perceived Network Quality and the output parameter is Attitudinal
Loyalty.
150

Table 5.34 Input and Output Parameters Attitudinal Loyalty

Mobile Service Convenie N/w


Reliability Empathy Attitudinal
Provider nce Quality
SP1 3.4718 3.1923 3.359 3.5282 3.1282
SP2 3.6768 3.2904 3.4747 3.5697 3.197
SP3 3.4615 3.1978 3.4066 3.5319 3.1401
SP4 3.4035 3.3465 3.5175 3.4947 3.2018
SP5 3.5367 3.4583 3.4917 3.4967 3.15
SP6 3.4915 3.25 3.4534 3.6542 3.1186
SP7 3.6522 3.5326 3.5163 3.487 3.1413

The attitudinal loyalty depends on the aspects of reliability, empathy,


convenience and good network quality by the service providers. The solver output
is given below.

Effectiveness of SERVQUAL on Behavioural Loyalty

Table 5.35 Relative Efficiency on Attitudinal Loyalty

Mobile
Reliabil Empa Convenie N/w Attitudi Weighted Weight Efficie Worki
Service
ity thy nce Quality nal O/p ed I/p ncy ng
Provider
SP1 3.47 3.19 3.35 3.52 3.12 1.00 1.00 1.00 3E-08
SP2 3.67 3.29 3.47 3.56 3.19 0.97 1.01 0.96 -3E-02
SP3 3.46 3.19 3.40 3.53 3.14 0.99 0.99 1.00 -7E-08
SP4 3.40 3.34 3.51 3.49 3.20 0.97 0.97 0.99 -2E-03
SP5 3.53 3.45 3.49 3.49 3.15 0.99 0.99 1.00 0E+00
SP6 3.49 3.25 3.45 3.65 3.11 1.00 1.03 0.97 -3E-02
SP7 3.65 3.53 3.51 3.48 3.14 0.99 0.99 1.00 0E+00
Weight 0.03 0.05 -0.10 0.29 3.12

From the analysis using DEA, it can be seen that SP1, SP3, SP5 and
SP7 are the mobile service providers who are on the efficient frontier as the
efficiency is 1.00. The other service providers SP2, SP4 and SP6 are less
151

performing. For instance, SP2 is only 96% efficient when compared to SP1, SP3,
SP5 and SP7. That means, given the current scenario, SP2 needs to improve by 4%
to reach the efficient provider with respect to Attitudinal Loyalty.

5.8.1.3 Cognitive Loyalty

The input parameters are Responsiveness, Convenience, Empathy and


Tangibles and the output parameter is Cognitive Loyalty.

Table 5.36 Input and Output Parameters Cognitive Loyalty

Mobile
Service Responsiveness Convenience Empathy Tangibles Cognitive
Provider
SP1 3.4135 3.359 3.1923 3.4103 3.0208
SP2 3.4924 3.4747 3.2904 3.5421 3.3438
SP3 3.3544 3.4066 3.1978 3.3816 3.0625
SP4 3.4781 3.5175 3.3465 3.3392 3.0278
SP5 3.6417 3.4917 3.4583 3.5167 3.5
SP6 3.589 3.4534 3.25 3.5345 4
SP7 3.6413 3.5163 3.5326 3.4928 3.0815

The cognitive loyalty depends on the aspects of responsiveness,


convenience, empathy and tangibles by the service providers. The solver output
which evaluates the effectiveness is given below:
152

Effectiveness of SERVQUAL on Cognitive Loyalty

Table 5.37 Relative Efficiency on Cognitive Loyalty

Mobile
Respons Conve Empat Tangi Cognit Weighted Weighted Effici
Service Working
iveness nience hy bles ive O/p I/p ency
Provider
SP1 3.413 3.359 3.192 3.4103 3.0208 1.000 1.000 1.000 -1E-07
SP2 3.492 3.474 3.290 3.5421 3.3438 0.903 1.136 0.795 -2E-01
SP3 3.354 3.406 3.197 3.3816 3.0625 0.986 1.141 0.865 -2E-01
SP4 3.478 3.517 3.346 3.3392 3.0278 0.998 0.998 1.000 -2E-07
SP5 3.641 3.491 3.458 3.5167 3.5 0.863 0.925 0.933 -6E-02
SP6 3.58 3.453 3.25 3.5345 4 0.755 0.830 0.910 -8E-02
SP7 3.641 3.516 3.532 3.4928 3.0815 0.980 0.990 0.990 -1E-02
Weight -2.493 0.495 1.104 1.26 3.020

From the analysis using DEA, it can be seen that SP1 and SP4 are the
two mobile service providers who are on the efficient frontier as the efficiency is
1.00. The other service providers SP2, SP3, SP5, SP6 and SP7 are less performing.
For instance, SP3 is only 86% efficient when compared to SP1 and SP4. That
means, given the current scenario, SP3 needs to improve by 14% to reach the
efficient provider with respect to Cognitive Loyalty.

5.8.1.4 Conative Loyalty

The input parameters are Responsiveness, Empathy, Tangibles and


customer perceived network and the output parameter is Conative Loyalty

Table 5.38 Input and Output Parameters Conative Loyalty

Mobile
N/w
Service Responsiveness Empathy Tangibles Conative
Quality
Provider
SP1 3.4135 3.1923 3.41 3.5282 3.2308
SP2 3.4924 3.2904 3.54 3.5697 3.3182
SP3 3.3544 3.1978 3.38 3.5319 3.1319
SP4 3.4781 3.3465 3.34 3.4947 3.2632
SP5 3.6417 3.4583 3.52 3.4967 3.275
SP6 3.589 3.25 3.53 3.6542 3.339
SP7 3.6413 3.5326 3.49 3.487 3.087
153

The conative loyalty depends on the aspects of responsiveness,


empathy, tangibles and good network quality by the service providers. To evaluate
the effectiveness, refer to the solver output below:

Effectiveness of SERVQUAL on Conative Loyalty

Table 5.39 Relative Efficiency on Conative Loyalty

Mobile N/w
Respon Emp Tangi Cona Weighte Weighte
Service Qualit Efficiency Working
siveness athy bles tive d O/p d I/p
Provider y
SP1 3.41 3.19 3.41 3.53 3.23 1.000 1.000 1.000 -3E-08
SP2 3.49 3.29 3.54 3.57 3.32 0.974 1.064 0.915 -9E-02
SP3 3.35 3.20 3.38 3.53 3.13 1.032 1.032 1.000 -1E-04
SP4 3.48 3.35 3.34 3.49 3.26 0.990 0.990 1.000 -7E-08
SP5 3.64 3.46 3.52 3.50 3.28 0.987 1.022 0.966 -4E-02
SP6 3.59 3.25 3.53 3.65 3.34 0.968 0.968 1.000 -9E-05
SP7 3.64 3.53 3.49 3.49 3.09 1.047 1.047 1.000 -3E-05
Weight -0.76 0.51 0.55 0.02 3.23

From the analysis using DEA, it can be seen that SP1, SP3, SP4, SP6
and SP7 are the mobile service providers who are on the efficient frontier as the
efficiency is 1.00. The other service providers SP2 and SP5 are less performing.
For instance, SP2 is only 91% efficient when compared to SP1, SP3, SP4, SP6 and
SP7. That means, given the current scenario, SP2 needs to improve by 9% to reach
the efficient provider with respect to Conative Loyalty.

5.8.1.5 Affective Loyalty

The input parameters are Reliability and Empathy and the output
parameter is Affective Loyalty
154

Table 5.40 Input and Output Parameters Affective Loyalty

Mobile Service
Reliability Empathy Affective
Provider
SP1 3.4718 3.1923 3.234
SP2 3.6768 3.2904 3.6111
SP3 3.4615 3.1978 3.4313
SP4 3.4035 3.3465 3.5132
SP5 3.5367 3.4583 3.5458
SP6 3.4915 3.25 3.4322
SP7 3.6522 3.5326 3.2283

The affective loyalty depends on the aspects of reliability and empathy


by the service providers. To evaluate the effectiveness, refer to the solver output
below:

Effectiveness of SERVQUAL on Affective Loyalty

Table 5.41 Relative Efficiency on Affective Loyalty

Mobile
Weighted Weighted
Service Reliability Empathy Affective Efficiency Working
O/p I/p
Provider
SP1 3.47 3.19 3.23 0.94 1.00 0.935 -0.06
SP2 3.68 3.29 3.61 1.04 1.04 1.000 0.00
SP3 3.46 3.20 3.43 0.99 1.00 0.993 -0.01
SP4 3.40 3.35 3.51 1.02 1.02 1.000 0.00
SP5 3.54 3.46 3.55 1.03 1.05 0.974 -0.03
SP6 3.49 3.25 3.43 0.99 1.01 0.981 -0.02
SP7 3.65 3.53 3.23 0.93 1.08 0.864 -0.15
Weight 0.14 0.16 0.29

From the analysis using DEA, it can be seen that SP2 and SP4 are the
mobile service providers who are on the efficient frontier as the efficiency is 1.00.
The other service providers SP1, SP3, SP5, SP6 and SP7 are less performing. For
instance, SP5 is only 97% efficient when compared to SP2 and SP4. That means,
155

given the current scenario, SP4 needs to improve by 3% to reach the efficient
provider with respect to Affective Loyalty.

5.8.1.6 Trust Loyalty

The input parameters are Reliability, Responsiveness, Assurance and


Empathy and the output parameter is Trust Loyalty

Table 5.42 Input and Output Parameters Trust Loyalty

Mobile
Service Reliability Responsiveness Assurance Empathy Trust
Provider
SP1 3.47 3.41 3.56 3.19 3.54
SP2 3.68 3.49 3.74 3.29 3.60
SP3 3.46 3.35 3.55 3.20 3.40
SP4 3.40 3.48 3.75 3.35 3.42
SP5 3.54 3.64 3.84 3.46 3.45
SP6 3.49 3.59 3.66 3.25 3.24
SP7 3.65 3.64 3.73 3.53 3.37

Trust loyalty depends on the aspects of reliability, responsiveness,


assurance and empathy by the service providers. To evaluate the effectiveness,
refer to the solver output below:

Effectiveness of SERVQUAL on Trust Loyalty

Table 5.43 Relative Efficiency on Trust Loyalty

Mobile
Relia Responsi Assura Emp Weighted Weighted
Service Trust Efficiency Working
bility veness nce athy O/p I/p
Provider
SP1 3.47 3.41 3.56 3.19 3.54 1.000 1.000 1.000 -6E-08
SP2 3.68 3.49 3.74 3.29 3.60 1.018 1.133 0.898 -1E-01
SP3 3.46 3.35 3.55 3.20 3.40 0.960 1.021 0.941 -6E-02
SP4 3.40 3.48 3.75 3.35 3.42 0.966 1.138 0.848 -2E-01
SP5 3.54 3.64 3.84 3.46 3.45 0.975 1.101 0.886 -1E-01
SP6 3.49 3.59 3.66 3.25 3.24 0.915 0.974 0.939 -6E-02
SP7 3.65 3.64 3.73 3.53 3.37 0.952 0.952 1.000 7E-08
Weight 0.00 -0.73 1.21 -0.25 0.28
156

From the analysis using DEA, it can be seen that SP1 and SP7 are the
mobile service providers who are on the efficient frontier as the efficiency is 1.00.
The other service providers SP2, SP3, SP4, SP5 and SP6 are less performing. For
instance, SP4 is only 84% efficient when compared to SP1 and SP7. That means,
given the current scenario, SP4 needs to improve by 16% to reach the efficient
provider with respect to Trust Loyalty.

5.8.1.7 Commitment Loyalty

The input parameters are Reliability, Responsiveness, Network Quality,


Empathy and Assurance and the output parameter is Commitment Loyalty

Table 5.44 Input and Output Parameters Commitment Loyalty

Mobile
Service Reliability Responsiveness Empathy Assurance N/w Quality Commitment
Provider
SP1 3.47 3.41 3.19 3.56 3.53 3.32
SP2 3.68 3.49 3.29 3.74 3.57 3.42
SP3 3.46 3.35 3.20 3.55 3.53 3.17
SP4 3.40 3.48 3.35 3.75 3.49 3.29
SP5 3.54 3.64 3.46 3.84 3.50 3.39
SP6 3.49 3.59 3.25 3.66 3.65 3.31
SP7 3.65 3.64 3.53 3.73 3.49 3.36

Commitment loyalty depends on the aspects of reliability,


responsiveness, empathy, convenience and customer perceived network quality by
the service providers. To evaluate the effectiveness, refer to the solver output
below:
157

Effectiveness of SERVQUAL on Commitment Loyalty

Table 5.45 Relative Efficiency on Commitment Loyalty

Mobile
Relia Respon Emp Assur N/w Commit Weighted Weighted Effici Worki
Service
bility siveness athy ance Quality ment O/p I/p ency ng
Provider
SP1 3.47 3.41 3.19 3.56 3.53 3.32 1.00 1.000 1.00 1E-08
SP2 3.68 3.49 3.29 3.74 3.57 3.42 1.03 1.030 1.00 0E+00
SP3 3.46 3.35 3.20 3.55 3.53 3.17 0.95 1.026 0.93 -7E-02
SP4 3.40 3.48 3.35 3.75 3.49 3.29 0.99 1.047 0.94 -6E-02
SP5 3.54 3.64 3.46 3.84 3.50 3.39 1.02 1.019 1.00 -2E-11
SP6 3.49 3.59 3.25 3.66 3.65 3.31 1.00 0.996 1.00 0E+00
SP7 3.65 3.64 3.53 3.73 3.49 3.36 1.01 1.011 1.00 0E+00
Weight -0.05 -0.44 0.29 0.20 0.30 0.30 0.090

From the analysis using DEA, it can be seen that SP1, SP2, SP5, SP6
and SP7 are the mobile service providers who are on the efficient frontier as the
efficiency is 1.00. The other service providers SP3 and SP4 are less performing.
For instance, SP3 is only 93% efficient when compared to SP1, SP2, SP5, SP6 and
SP7. That means, given the current scenario, SP3 needs to improve by 7% to reach
the efficient provider with respect to Commitment Loyalty.

5.8.2 Effectiveness of Service Quality on Loyalty Indices

The predictors from the regression analysis are used as input parameters
and each of the loyalty indices are used as output parameters for the study. The
data pertaining to service quality parameters are taken as input for each of the
Service Providers. Data pertaining to 7 Service providers are used for the study.

5.8.2.1 Advocacy Loyalty Index (ALI)

The input parameters are Reliability, Responsiveness, Empathy,


Assurance and Network Quality and the output parameter is Advocacy Loyalty
158

Table 5.46 Input and Output Parameters Advocacy Loyalty Index

Mobile
Network
Service Reliability Responsiveness Empathy Assurance Advocacy
Qlty
Provider
SP1 3.4718 3.4135 3.1923 3.4103 3.5282 3.4455
SP2 3.6768 3.4924 3.2904 3.5421 3.5697 3.6742
SP3 3.4615 3.3544 3.1978 3.3816 3.5319 3.5165
SP4 3.4035 3.4781 3.3465 3.3392 3.4947 3.5526
SP5 3.5367 3.6417 3.4583 3.5167 3.4967 3.5756
SP6 3.4915 3.589 3.25 3.5345 3.6542 3.7246
SP7 3.6522 3.6413 3.5326 3.4928 3.487 3.4565

Advocacy Loyalty Index (ALI) depends on the aspects of reliability,


responsiveness, empathy, assurance and customer perceived network quality by the
service providers. To evaluate the effectiveness, refer to the solver output below:

Effectiveness of SERVQUAL on Purchase Loyalty Index

Table 5.47 Relative Efficiency on Advocacy Loyalty

Mobile
Effic
Service Relia Responsi Emp Assur Network Advoc Weighte Weighte Wor
ienc
Provide bility veness athy ance Qlty acy d O/p d I/p king
y
r
SP1 3.47 3.41 3.19 3.41 3.53 3.45 0.97 1.00 0.97 -0.03
SP2 3.68 3.49 3.29 3.54 3.57 3.67 1.03 1.03 1.00 0.00
SP3 3.46 3.35 3.20 3.38 3.53 3.52 0.99 0.99 1.00 0.00
SP4 3.40 3.48 3.35 3.34 3.49 3.55 1.00 1.00 1.00 0.00
SP5 3.54 3.64 3.46 3.52 3.50 3.58 1.01 1.01 0.99 -0.01
SP6 3.49 3.59 3.25 3.53 3.65 3.72 1.05 1.05 1.00 0.00
SP7 3.65 3.64 3.53 3.49 3.49 3.46 0.97 0.97 1.00 0.00
Weight -2.33 -2.03 1.77 4.45 -1.37 0.29 0.97 1.00 0.97 -0.03

From the analysis using DEA, it can be seen that SP2, SP3, SP4 and
SP6 and SP7 are the mobile service providers who are on the efficient frontier as
the efficiency is 1.00. The other service providers SP5 are less performing. For
instance, SP5 is only 99% efficient when compared to SP1, SP2, SP3, SP4, SP6
159

and SP7. That means, given the current scenario, SP5 needs to improve by only 1%
to reach the efficient provider with respect to Advocacy Loyalty Index (ALI).

5.8.2.2 Purchase Loyalty Index (PLI)

The input parameters are Reliability, Responsiveness, Assurance,


Empathy and Convenience and the output parameter is Purchase Loyalty Index.

Table 5.48 Input and Output Parameters Purchase Loyalty Index

Mobile
Service Reliability Responsiveness Assurance Empathy Convenience Purchase
Provider
SP1 3.47 3.41 3.56 3.19 3.36 3.41
SP2 3.68 3.49 3.74 3.29 3.47 3.54
SP3 3.46 3.35 3.55 3.20 3.41 3.42
SP4 3.40 3.48 3.75 3.35 3.52 3.46
SP5 3.54 3.64 3.84 3.46 3.49 3.63
SP6 3.49 3.59 3.66 3.25 3.45 3.61
SP7 3.65 3.64 3.73 3.53 3.52 3.70

Purchase Loyalty Index (PLI) depends on the aspects of reliability,


responsiveness, assurance convenience and empathy by the service providers. To
evaluate the effectiveness, refer to the solver output below:

Effectiveness of SERVQUAL on Purchase Loyalty Index

Table 5.49 Relative Efficiency on Purchase Loyalty


Mobile Reli Resp
Assur Empa Conve Purch Weighte Weight
Service abili onsiv Efficiency Working
ance thy nience ase d O/p ed I/p
Provider ty eness
SP1 3.47 3.41 3.56 3.19 3.36 3.41 0.984 1.000 0.984 -0.016
SP2 3.68 3.49 3.74 3.29 3.47 3.54 1.020 1.026 0.995 -0.005
SP3 3.46 3.35 3.55 3.20 3.41 3.42 0.988 0.988 1.000 0.000
SP4 3.40 3.48 3.75 3.35 3.52 3.46 1.000 1.007 0.993 -0.007
SP5 3.54 3.64 3.84 3.46 3.49 3.63 1.046 1.050 0.997 -0.003
SP6 3.49 3.59 3.66 3.25 3.45 3.61 1.042 1.043 0.999 -0.001
SP7 3.65 3.64 3.73 3.53 3.52 3.70 1.067 1.067 1.000 0.000
Weight 0.06 0.25 -0.08 0.01 0.05 0.29
160

From the analysis using DEA, it can be seen that SP3 and SP7 are the
mobile service providers who are on the efficient frontier as the efficiency is 1.00.
The other service providers SP1, SP2, SP4, SP5 and SP6 are less performing. For
instance, SP1 is only 98% efficient when compared to SP3 and SP7. That means,
given the current scenario, SP1 needs to improve by 2% to reach the efficient
provider with respect to Purchase Loyalty Index (PLI).

5.8.2.3 Defection Loyalty Index (DLI)

The input parameters are Reliability, Responsiveness, Empathy and


Customer perceived network quality and the output parameter is Defection Loyalty
Index.

Table 5.50 Input and Output Parameters Defection Loyalty Index

Mobile
Network
Service Reliability Responsiveness Empathy Defection
Qlty
Provider
SP1 3.4718 3.4135 3.1923 3.5282 3.3333
SP2 3.6768 3.4924 3.2904 3.5697 3.4545
SP3 3.4615 3.3544 3.1978 3.5319 3.2418
SP4 3.4035 3.4781 3.3465 3.4947 3.2719
SP5 3.5367 3.6417 3.4583 3.4967 3.425
SP6 3.4915 3.589 3.25 3.6542 3.3136
SP7 3.6522 3.6413 3.5326 3.487 3.4348

Defection Loyalty Index (DLI) depends on the aspects of reliability,


responsiveness, empathy and customer perceived network quality by the service
providers. To evaluate the effectiveness, refer to the solver output below:
161

Effectiveness of SERVQUAL on Defection Loyalty Index

Table 5.51 Relative Efficiency on Defection Loyalty

Mobile Service Res- Network Weighted Weighted


Reliability Empathy Defection Efficiency Working
Provider ponsiveness Qlty O/p I/p
SP1 3.47 3.41 3.19 3.53 3.33 0.89 1.00 0.89 -0.11
SP2 3.68 3.49 3.29 3.57 3.45 0.92 0.98 0.94 -0.06
SP3 3.46 3.35 3.20 3.53 3.24 0.86 1.13 0.77 -0.26
SP4 3.40 3.48 3.35 3.49 3.27 0.87 1.10 0.80 -0.22
SP5 3.54 3.64 3.46 3.50 3.43 0.91 0.91 1.00 0.00
SP6 3.49 3.59 3.25 3.65 3.31 0.88 0.88 1.00 0.00
SP7 3.65 3.64 3.53 3.49 3.43 0.91 0.98 0.94 -0.06
Weight -0.324 -1.903 1.509 1.078 0.266

From the analysis using DEA, it can be seen that SP5 and SP6 are the
mobile service providers who are on the efficient frontier as the efficiency is 1.00.
The other service providers SP1, SP2, SP3, SP4 and SP7 are less performing. For
instance, SP3 is only 77 % efficient when compared to SP5 and SP6. That means,
given the current scenario, SP6 needs to improve by 23 % to reach the efficient
provider with respect to Defection Loyalty Index (DLI).

5.8.3 Effectiveness of Service Loyalty on Loyalty Indices

The predictors from the regression analysis are used as input parameters
and each of the loyalty indices are used as output parameters for the study. The
data pertaining to the service loyalty parameters are taken as input for each of the
Service Providers.

5.8.3.1 Advocacy Loyalty Index (ALI)

The input parameters are Attitudinal Loyalty, Trust Loyalty, Affective


Loyalty, Cognitive Loyalty and Commitment Loyalty and the output parameter is
Advocacy Loyalty Index.
162

Table 5.52 Input and Output Parameters Advocacy Loyalty Index

Mobile
Service Attitudinal Trust Affective Cognitive Commitment Advocacy
Provider
SP1 3.13 3.54 3.23 3.02 3.32 3.45
SP2 3.20 3.60 3.61 3.34 3.42 3.67
SP3 3.14 3.40 3.43 3.06 3.17 3.52
SP4 3.20 3.42 3.51 3.03 3.29 3.55
SP5 3.15 3.45 3.55 3.50 3.39 3.58
SP6 3.12 3.24 3.43 4.00 3.31 3.72
SP7 3.14 3.37 3.23 3.08 3.36 3.46

Advocacy Loyalty Index (ALI) depends on the aspects of service


loyalty dimensions namely, Attitudinal Loyalty, Trust Loyalty, Affective Loyalty,
Cognitive Loyalty and Commitment Loyalty. To evaluate the effectiveness, refer
to the solver output below:

Effectiveness of SERVLOYAL on Advocacy Loyalty Index

Table 5.53 Relative Efficiency on Advocacy Loyalty

Mobile
Weighted Weighted
Service Attitudinal Trust Affective Cognitive Commitment Advocacy Efficiency Working
O/p I/p
Provider
SP1 3.13 3.54 3.23 3.02 3.32 3.45 0.99 1.00 0.99 -0.01
SP2 3.20 3.60 3.61 3.34 3.42 3.67 1.06 1.06 1.00 0.00
SP3 3.14 3.40 3.43 3.06 3.17 3.52 1.01 1.02 1.00 0.00
SP4 3.20 3.42 3.51 3.03 3.29 3.55 1.02 1.03 1.00 0.00
SP5 3.15 3.45 3.55 3.50 3.39 3.58 1.03 1.05 0.98 -0.02
SP6 3.12 3.24 3.43 4.00 3.31 3.72 1.07 1.07 1.00 0.00
SP7 3.14 3.37 3.23 3.08 3.36 3.46 1.00 1.00 1.00 0.00
Weight 0.18 0.06 0.06 0.08 -0.06 0.29

From the analysis using DEA, it can be seen that SP2, SP3, SP4, SP6
and SP7 are the mobile service providers who are on the efficient frontier as the
efficiency is 1.00. The other service providers SP1 and SP5 are less performing.
For instance, SP5 is only 98 % efficient when compared to SP2, SP3, SP4, SP6 and
163

SP7. That means, given the current scenario, SP5 needs to improve by 2 % to reach
the efficient provider with respect to Advocacy Loyalty Index (ALI).

5.8.3.2 Purchase Loyalty Index (PLI)

The input parameters are Behavioural Loyalty, Conative Loyalty, Trust


Loyalty and Commitment Loyalty and the output parameter is Purchase Loyalty Index.

Table 5.54 Input and Output Parameters Purchase Loyalty Index

Mobile Service Provider Commitment Trust Behavioural Conative Purchase


SP1 3.32 3.54 3.20 3.23 3.41
SP2 3.42 3.60 3.30 3.32 3.54
SP3 3.17 3.40 3.13 3.13 3.42
SP4 3.29 3.42 3.29 3.26 3.46
SP5 3.39 3.45 3.39 3.28 3.63
SP6 3.31 3.24 3.31 3.34 3.61
SP7 3.36 3.37 3.36 3.09 3.70

Purchase Loyalty Index (PLI) depends on the aspects of Behavioural


Loyalty, Conative Loyalty, Trust Loyalty and Commitment Loyalty of the
customers. To evaluate the effectiveness, refer to the solver output below.

Effectiveness of SERVLOYAL on Purchase Loyalty Index

Table 5.55 Relative Efficiency on Purchase Loyalty


Mobile Service Weighted Weighted
Commitment Trust Behavioural Conative Purchase Efficiency Working
Provider O/p I/p
SP1 3.32 3.54 3.20 3.23 3.41 0.81 1.00 0.81 -0.19
SP2 3.42 3.60 3.30 3.32 3.54 0.84 1.00 0.84 -0.16
SP3 3.17 3.40 3.13 3.13 3.42 0.81 1.00 0.81 -0.19
SP4 3.29 3.42 3.29 3.26 3.46 0.82 0.98 0.84 -0.16
SP5 3.39 3.45 3.39 3.28 3.63 0.86 0.95 0.91 -0.09
SP6 3.31 3.24 3.31 3.34 3.61 0.85 0.86 1.00 0.00
SP7 3.36 3.37 3.36 3.09 3.70 0.87 0.87 1.00 0.00
Weight -0.89 0.69 0.29 0.17 0.24

From the analysis using DEA, it can be seen that SP6 and SP7 are the
mobile service providers who are on the efficient frontier as the efficiency is 1.00.
For instance, SP1 is only 81 % efficient when compared to SP6 and SP7. That
164

means, given the current scenario, SP5 needs to improve by 19 % to reach the
efficient provider with respect to Purchase Loyalty Index (ALI).

5.8.3.3 Defection Loyalty Index (DLI)

The input parameters are Behavioural Loyalty, Conative Loyalty and


Commitment Loyalty and the output parameter is Defection Loyalty Index.

Table 5.56 Input and Output Parameters Defection Loyalty Index

Mobile Service
Behavioural Conative Commitment Defection
Provider
SP1 3.20 3.23 3.32 3.33
SP2 3.30 3.32 3.42 3.45
SP3 3.13 3.13 3.17 3.24
SP4 3.29 3.26 3.29 3.27
SP5 3.39 3.28 3.39 3.43
SP6 3.31 3.34 3.31 3.31
SP7 3.36 3.09 3.36 3.43

Defection Loyalty Index (DLI) depends on the aspects of Behavioural


Loyalty, Conative Loyalty and Commitment Loyalty of the customers. To evaluate
the effectiveness, refer to the solver output below:

Effectiveness of SERVLOYAL on Defection Loyalty Index

Table 5.57 Relative Efficiency on Defection Loyalty

Mobile
Behavi Weighted Weighted
Service Conative Commitment Defection Efficiency Working
Oural O/p I/p
Provider
SP1 3.20 3.23 3.32 3.33 0.98 1.00 0.98 -0.02
SP2 3.30 3.32 3.42 3.45 1.02 1.03 0.99 -0.01
SP3 3.13 3.13 3.17 3.24 0.95 0.95 1.00 0.00
SP4 3.29 3.26 3.29 3.27 0.96 0.99 0.98 -0.02
SP5 3.39 3.28 3.39 3.43 1.01 1.02 0.99 -0.01
SP6 3.31 3.34 3.31 3.31 0.97 0.99 0.98 -0.02
SP7 3.36 3.09 3.36 3.43 1.01 1.01 1.00 0.00
Weight -0.01 -0.01 0.32 0.29
165

From the analysis using DEA, it can be seen that SP3 and SP7 are the
mobile service providers who are on the efficient frontier as the efficiency is 1.00.
For instance, SP5 is only 99 % efficient when compared to SP3 and SP7. That
means, given the current scenario, SP5 needs to improve by 1 % to reach the
efficient provider with respect to Defection Loyalty Index (ALI).

5.8.4 Summary of Data Envelopment Analysis

Table 5.58 Details of Best Performer on various Dimensions using Data


Envelopment Analysis

SERVICE LOYALTY SERVICE QUALITY


No. Dimensions Best Performers
1 Behavioural Loyalty SP2, SP6
2 Attitudinal Loyalty SP1, SP3, SP5,SP7
3 Cognitive Loyalty SP1, SP4
4 Conative Loyalty SP1, SP3, SP4, SP6, SP7
5 Affective Loyalty SP2, SP4
6 Trust Loyalty SP1, SP7
7 Commitment Loyalty SP1, SP2, SP5, SP6, SP7
LOYALTY INDICES SERVICE QUALITY
No. Dimensions Best Performers
1 Advocacy Loyalty Index (ALI) SP2, SP3, SP4, SP6, SP7
2 Defection Loyalty Index (DLI) SP5, SP6
3 Purchase Loyalty Index (PLI) SP3, SP7
LOYALTY INDICES SERVICE LOYALTY
No. Dimensions Best Performers
1 Advocacy Loyalty Index (ALI) SP2, SP3, SP4,SP6,SP7
2 Defection Loyalty Index (DLI) SP3,SP7
3 Purchase Loyalty Index (PLI) SP6,SP7

5.9 SUMMARY

This chapter discussed the data analysis of the research, namely profile
of the respondents, preliminary data analysis and hypothesis testing. The result
showed a response rate of 95.4%. Most of the respondents (about 60%) were pre-
paid, while rest (40%) of the respondents accounted for post-paid services.
Preliminary analyses of the data tested the data for internal consistency of the
166

constructs identified. Factor Analysis was performed to identify the dimensions of


service quality, service loyalty ad loyalty indices. A confirmatory factor analysis
was performed to check for the unidimensionality of the constructs. Linear
regression was run to test the hypothesis. A Confirmatory path model was derived
and tested for goodness of fit for each of the loyalty indices using Structural
Equation Modeling. To assess the effectiveness of CRM implementation in the
present scenario Data Envelopment Analysis was used to determine the efficient
frontier on each of the dimensions.
167

CHAPTER 6

FINDINGS

6.1 FINDINGS FROM DESCRIPTIVE STATISTICS

About 20 % of the respondents use Airtel; 18.6% use BSNL and


15.9% use Aircel.

The majority of respondents used Prepaid Mobile Services.

The majority of respondents were in the age group of 41-50 years.

The majority of respondents have been using the services of their


mobile service providers for more than 3 years.

More than 50% of respondents were spending less than Rs.1000 in a


month towards mobile services.

Majority of the respondents were Post Graduates and 31.8% were


Under Graduates.

6.2 FINDINGS FROM ANOVA

6.2.1 Demographics on Service Quality

While analyzing the variance in service quality dimensions, it is


observed that significant variance existed in monthly expenses. On investigating
further we observe

Age (more than 50 years), Education (UG), length of use (less than
2 years) and Monthly Expenses (between Rs.501-1000) determined
Reliability dimension.
168

Monthly Expenses (more than Rs.2000) and length of use (more


than 3 years) determined Responsiveness dimension.

Monthly Expenses (more than Rs.2000) determined Assurance,


Empathy and Customer Perceived Network Quality dimensions.

Monthly Expenses (between Rs.501-1000) determined


Convenience.

6.2.2 Demographics on Service Loyalty

While analyzing the variance in service loyalty dimensions, it is


observed that significant variance existed in monthly expenses. On investigating
further we observe

Age (21-30 years) and Monthly Expenses(more than Rs.2000)


determined Commitment Loyalty

Length of Use (less than 2 years), Monthly Expenses (less than


Rs.500) and Education (UG) determined Trust Loyalty.

Monthly Expenses (less than Rs.500) determined Attitudinal


Loyalty

Length of Use (2-3 years) determined Cognitive Loyalty

Monthly Expenses (between Rs.1001 and 2000) determined


Affective Loyalty.

6.2.3 Demographics on Loyalty Indices

While analyzing the variance in loyalty indices, it is observed that


significant variance existed in monthly expenses. On investigating further we
observe

Monthly Expenses (more than Rs.2000) determined Advocacy


Loyalty Index
169

Length of Use (more than 3 years) and Monthly Expenses (more


than Rs.2000) determined Purchase Loyalty Index.

Age (21-30 years) and Monthly Expenses (more than Rs.2000)


determined Defection Loyalty Index

6.3 FINDINGS FROM LINEAR REGRESSION

Linear regression was used to determine the relationship between


demographic variables and Service Quality, Service Loyalty and Loyalty indices;
relationship between Service Quality and Service Loyalty; Service Quality on
Loyalty Indices and Service Loyalty on Loyalty Indices.

6.3.1 Relationship between Demographics and Service Quality

While testing the relationship between Demographics and Service


Quality, it is found that -

Age, Monthly Expenses, Education and Occupation have significant


relationship with Reliability.

Length of Use, Monthly Expenses have significant relationship with


Responsiveness.

Monthly Expenses has significant relationship with Customer


Perceived Network Quality.

Monthly Expenses has significant relationship with Assurance

Monthly Expenses has significant relationship with Convenience

Monthly Expenses has significant relationship with Empathy

Education has significant relationship with Tangibles.


170

6.3.2 Relationship between Demographics and Service Loyalty

While testing the relationship between Demographics and Service


Loyalty, it is found that -

Monthly Expenses has significant relationship with Commitment


Loyalty

Monthly Expenses has significant relationship with Trust Loyalty

6.3.3 Relationship between Demographics and Loyalty Indices

While testing the relationship between Demographics and Loyalty


Indices, it is found that

Monthly Expenses has significant relationship with Advocacy


Loyalty Index

Monthly Expenses and Occupation have significant relationship


with Purchase Loyalty Index

Monthly Expenses has significant relationship with Defection


Loyalty Index.

6.3.4 Relationship between Service Quality and Service Loyalty

In determining the relationship between Service Quality dimensions


and Service Loyalty Dimensions, it is found that

Reliability, Responsiveness, Customer Perceived Network Quality,


Assurance and Empathy have significant relationship with
Commitment Loyalty.

Reliability, Responsiveness, Assurance and Empathy have


significant relationship with Trust Loyalty
171

Reliability, Customer Perceived Network Quality, Convenience and


Empathy have significant relationship with Attitudinal Loyalty

Responsiveness and Empathy have significant relationship with


Behavioural Loyalty

Responsiveness, Convenience, Empathy and Tangibles have


significant relationship with Cognitive Loyalty

Reliability and Empathy have significant relationship with Affective


Loyalty

Responsiveness, Customer Perceived Network Quality, Empathy


and Tangibles have significant relationship with Conative Loyalty

6.3.5 Relationship between Service Quality and Loyalty Indices

In determining the relationship between Service Quality dimensions


and Customer Loyalty Indices, it is found that,

Reliability, Responsiveness, Customer Perceived Network Quality,


Assurance and Empathy have significant relationship with
Advocacy Loyalty Index

Reliability, Responsiveness, Customer Perceived Network Quality


and Empathy have significant relationship with Defection Loyalty
Index

Reliability, Responsiveness, Assurance, Convenience and Empathy


have significant relationship with Purchase Loyalty Index

6.3.6 Relationship between Service Loyalty and Loyalty Indices

In determining the relationship between Service Loyalty dimensions


and Loyalty Indices, it is found that,
172

Commitment loyalty, Trust loyalty, Attitudinal loyalty, Cognitive


loyalty and Affective loyalty have significant relationship with
Advocacy Loyalty Index

Commitment loyalty, Behavioural loyalty and Conative loyalty


have significant relationship with Defection Loyalty Index

Commitment Loyalty, Trust Loyalty, Behavioural Loyalty and


Conative Loyalty have significant relationship with Purchase
Loyalty Index

6.4 FINDINGS FROM THE PATH MODEL

The path models examined and confirmed the path to depict the
relationships between the different dimensions, namely, between service quality
dimensions and service loyalty dimensions; service quality dimensions and loyalty
indices and service loyalty and loyalty indices. All the three path models were
found to be statistically fit with the Fit Indices having values greater than 0.9 and
the RMSEA Values less than 0.06

6.5 FINDINGS FROM DATA ENVELOPMENT ANALYSIS (DEA)

Data Envelopment Analysis was used to examine the current level of


performance of each service provider on each of the dimensions of service loyalty
and loyalty indices.

6.5.1 Effectiveness of Service Quality on Service Loyalty

While examining the performance of Service Providers on Service


Loyalty with Service Quality as the determinants, it is observed that,

Aircel is found to be performing its best on the following


dimensions Attitudinal Loyalty, Cognitive Loyalty, Conative
Loyalty, Trust Loyalty and Commitment Loyalty.
173

Airtel is found to be performing its best on the following


dimensions Behavioural Loyalty, Affective Loyalty and
Commitment Loyalty.

BSNL is found to be performing its best on the following


dimensions Attitudinal Loyalty, Conative Loyalty.

Idea is found to be performing its best on the following dimensions


Cognitive Loyalty, Conative Loyalty and Affective Loyalty.

Reliance is found to be performing its best on the following


dimensions Attitudinal Loyalty and Commitment Loyalty.

Vodafone is found to be performing its best on the following


dimensions Behavioural Loyalty, Conative Loyalty and
Commitment Loyalty.

Others are found to be performing their best on the following


dimensions Attitudinal Loyalty, Conative Loyalty, Trust Loyalty
and Commitment Loyalty.

6.5.2 Effectiveness of Service Quality on Loyalty Indices

While examining the performance of Service Providers on Loyalty


Indices with Service Quality as the determinants, it is observed that,

Airtel is found to be performing its best on the following


dimensions Advocacy Loyalty Index.

BSNL is found to be performing its best on the following


dimensions Advocacy Loyalty Index and Purchase Loyalty Index.

Idea is found to be performing its best on the following dimensions


Advocacy Loyalty Index.

Relaince is found to be performing its best on the following


dimensions Defection Loyalty Index.
174

Vodafone is found to be performing its best on the following


dimensions Advocacy Loyalty Index and Defection Loyalty
Index..

Others are found to be performing their best on the following


dimensions Advocacy Loyalty Index and Purchase Loyalty Index.

6.5.3 Effectiveness of Service Loyalty on Loyalty Indices

While examining the performance of Service Providers on Loyalty


Indices with Service Quality as the determinants, it is observed that,

Airtel is found to be performing its best on the following


dimensions Advocacy Loyalty Index.

BSNL is found to be performing its best on the following


dimensions Advocacy Loyalty Index and Defection Loyalty
Index.

Idea is found to be performing its best on the following dimensions


Advocacy Loyalty Index.

Vodafone is found to be performing its best on the following


dimensions Advocacy Loyalty Index and Purchase Loyalty Index.

Others are found to be performing their best on the following


dimensions Advocacy Loyalty Index, Purchase Loyalty Index and
Defection Loyalty Index.

6.6 SUMMARY

This chapter provided the findings in detail. The findings with respect
to profile of the respondents, descriptive statistics, ANOVA and linear regression
were presented. The findings on the path models as well as the DEA were also
presented. The discussion on the findings and the implications on the research and
the managerial aspects are presented in the next chapter.
175

CHAPTER 7

DISCUSSION

The objective of this chapter is to bring to light:

i. Insights from Literature and Gaps

ii. Attempts by this study to fill these gaps

iii. Research Implications

iv. Managerial Implications

7.1 INSIGHTS FROM LITERATURE AND GAPS

The insights from literature review are as follows:

An extended service quality scale was proposed by Seth et al (2008)


by including technical quality aspects in addition to functional
quality aspects.

To examine the behavioural aspects which play a bigger role in


understanding customer loyalty, a SERVLOYAL scale proposed by
Sudhakar et al (2006) which has seven dimensions is used

In order to assess the loyalty Loyalty Indices, Bob Hayes (2007)


proposed loyalty indices which has three dimensions.. This would
clearly link to the CRM concepts of Positive Word of Mouth, in Up
Selling and Cross Selling and Customer Churn.
176

There are no combined studies to provide a holistic suggestion as to


enhancing CRM by improving service quality and service loyalty.

7.2 ATTEMPTS BY THIS STUDY TO FILL THE GAPS

This study has attempted to further strengthen the current


knowledge on determining the relationship among perceived service
quality, service loyalty and loyalty indices.

This study worked on the underlying premise that one area that
remained relatively underdeveloped, is the relationship between
evaluation of service quality and loyalty of service
customers.(Glemer & Brown,1996). This is in spite of the fact that
loyalty is essential for service business survival (Reichheld, 1993).

This study proposed a conceptual framework to examine the


relationships that exist between service quality, service loyalty and loyalty indices.
Figure 7.1 depicts the conceptual framework proposed in this study.

Figure 7.1 Conceptual Framework


177

From the conceptual framework, the study attempted to test the


following relationships.

Relationship between Demographic Variables and Service Quality

Relationship between Demographic Variables and Service Loyalty

Relationship between Demographic Variables and Loyalty Indices

Relationship between Service Quality and Service Loyalty

Relationship between Service Quality and Loyalty Indices

Relationship between Service Loyalty and Loyalty Indices

Figure 7.2 represents the relationship between demographic variables


with service quality dimensions, service loyalty dimensions and loyalty indices
based on data analysed.
178

Figure 7.2 Model from Observations

Since service quality, service loyalty and loyalty indices are all
multidimensional variables, it can be seen from the observed model that some of
the demographic variables have relationship with some dimensions only. But
Monthly Expenses is the demographic variable which has relationship with most of
the dimensions. The confirmatory path depicted the relationship between service
quality and service loyalty; service quality and loyalty indices and service loyalty
and loyalty indices.

The study establishes that there is a strong linkage between (a) service
quality and service loyalty; (b) service quality and loyalty indices and (c) service
179

loyalty and loyalty indices. Although Zeithaml et al. (1996) report a strong
association between overall service quality and service loyalty across multiple
companies, the findings clearly highlights the quality-loyalty relationship with
reference to the Indian Mobile segment. This underlines the importance of a
multidimensional approach to service loyalty. The findings have a number of
research and managerial implications.

7.3 RESEARCH IMPLICATIONS

This study should be seen as a preliminary attempt at addressing an


issue that has important implications for services marketing theory and practice.
Any preliminary attempt will involve a number of limitations. However,
acknowledgement of these limitations also suggests new directions for future
studies.

In the first place, conceptual models as well as scales for measuring


service quality and loyalty have been developed and refined over the last decade.
Differences in the nature of service setting might require additional dimensions of
service quality (Dabholkar et al., 1996).

With regards to the complaining behaviour part of the loyalty scale, the
incidental nature of service problems may require incident-based measurement
(such as the Critical Incident Technique) rather than service attitude-based
measurement instruments. Further research should also incorporate multiple
measures of the relevant constructs in order to increase the number of items that
are used for the individual service loyalty dimensions. For instance, word-of-
mouth should also be formulated in negative terms.

Moreover, the study focused on service loyalty intentions only and


these intentions are an incomplete proxy for actual behaviour (Keaveney, 1995).
They should be supplemented by behavioural measures in order to develop a
composite index of service loyalty (Dick and Basu, 1994). Therefore, further
research should also take actual (re)actions of consumers to perceived service
180

quality into account. An area that definitely also merits further investigation is the
impact of loyalty on other organisational performance measures, such as
profitability (Storbacka et al., 1994).

Furthermore, the use of multiple time frames allows for an investigation


of the reinforcement effect of behavioural intentions on future service quality
perceptions as well as other outcome variables that determine the strength of
customer-organisation relationships such as commitment, trust and customer value.

Finally, for the purpose of cross-validation, additional exploration of


the service quality-loyalty relationship needs to be extended beyond the settings
reported here to markets in which switching barriers are perceived to be high.

7.4 MANAGERIAL IMPLICATIONS

The findings have several managerial implications as well. The results


enable managers of service firms to nuance the intuitive relationship between
service quality, service loyalty and loyalty indices and have a richer diagnostic
value because both service quality and loyalty are measured at a detailed and
specific level. In addition, information on the service quality-customer loyalty link
may provide actionable benchmarks that individual firms may use to guide their
service policies aimed at securing customer loyalty.

Furthermore, the results have specific indications for the different path
models and service industries' research and budget allocations and personnel
management decisions relating to the improvement of service loyalty on the basis
of service quality.

The study used Data Envelopment Analysis to determine the


effectiveness of the mobile service providers on each of the service loyalty
dimensions where the service quality dimensions are used as the predictors in
regression analysis. Aircel is found to be 100% efficient on most of the service
loyalty dimensions; BSNL is found to be efficient on loyalty indices. But the other
service providers performed well on some of the dimensions. DEA gives relative
181

efficiencies. In this study, DEA was used to analyse the relative efficiencies which
is used to benchmark the service providers on various dimensions. For the other
service providers to improve their performance they need to analyze the input and
output parameters of the best performing service providers.

This study attempts to links many facets of business viz., CRM


approach which is adopted by the telecom industry; comparison of its effectiveness
using a quantitative approach like Data Envelopment Analysis. The output of this
simulated model provides an insight to the industry practitioners an effective
method of evaluating a technology which is being adopted by them. Though this
study concentrates only on seven service providers in Chennai, it can further be
extended with more parameters so that a holistic picture on the latest business
trends which can be analysed and leveraged for further improvements. Indices
based on loyalty may supplement measures of financial performance and market
share with crucial information on the future health of a firm or industry.

Finally, company- and industry-level assessment of the service quality-


customer loyalty link provides useful information to shareholders on the viability
of performance in the future. Especially, when tracked over time, changes in
service loyalty signal changes in the value of customer assets. The identification of
service loyalty as a multi-dimensional construct may help corporate decision
makers in an accurate assessment of service loyalty.

7.5 CONCLUSION

This study focuses on studying the relationship between service quality,


service loyalty and loyalty indices. Though there are many studies on the service
quality and loyalty, the behavioural aspects that influence loyalty had not been paid
much attention with reference to the mobile service providers. With the current
trend on cut throat competition and with low switching cost for the customers, the
mobile service providers are facing challenges in keeping themselves steady in the
competition. On the other hand, the high cost of customer acquisition is making
todays businesses understand the importance of retaining the customers for long-
182

run sustainability. The study uses path models to depict the relationships between
service quality, service loyalty dimensions and loyalty indices.

Results of the study indicate that there exists a relationship between


service quality and service loyalty; service quality and loyalty indices and service
loyalty and loyalty indices. The results of DEA indicate the current set of best
performers on each of the behavioural aspects.

The study concludes by asserting the fact that if the behavioural aspects
are studied and its influence on the loyalty indices are focused by the mobile
service providers, it could improve their overall strength in the competition.
183

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199

APPENDIX I

Questionnaire

Dear Sir/Madam, Good morning/afternoon/evening

Could you please spare a few minutes to participate in our survey. We


are students from SRM University, Chennai and conducting this survey as a part of
our coursework to study the influence of CRM by mobile service operators on
customer satisfaction. We would be extremely grateful for your participation.

1. Which Mobile Service do you use?

BSNL Idea Airtel Aircel Vodafone


Reliance Others

2. What is the plan that you are using?

Prepaid Postpaid

3. How long are you using this mobile service?

< 6 months 6 months 1 yr 1 yr 2 yrs 2 yrs 3 yrs

> 3 yrs

4. Age Group: 18-20 21-30 31-40 41-50


>50

5. Monthly Expenditure per month on Mobile Services

Upto 500 501-1000 1001-2000 2001-3000 >3000

6. Education

Graduate P-Graduate Others

7. Occupation

Business Professionals Educator Home-maker

Student Others
200

Please indicate using a mark for the following questions SA A N DA SDA

5 4 3 2 1
1 Contact employees perform the service right the first time
2 The company provides services at the promised time
You are kept well-informed about the progress of your
3 complaints
4 Billing system is accurate and error free
5 Bills are received in time
6 Contact employees gives you prompt service
7 Your Complaints / queries are taken seriously
8 Your complaints are resolved quickly
9 They are always willing to help you
Contact employees are friendly and polite while handling your
10 complaints / queries
They have the adequate knowledge of tariffs and plans of
11 service providers
12 The behaviour of contact employees instils confidence in you
13 You feel safe in your transactions with your service provider
For lodging the complaints service provider is easily
14 accessible
15 They have your best interests in heart
16 Contact employees give you individual attention
17 The employees understand your specific needs
18 Retailer network of your service provider is easily located
19 Service provider's physical facilities are visually appealing
20 Contact employees appear neat
Materials associated with the service(such as pamplets etc) are
21 visually appealing
22 They have convenient business hours
23 Ease of lodging the complaints / queries
Your service provider provides flexibility in the payment of
24 bills
25 Application formalities are simple
Your service provider provides sufficient geographical
26 coverage (on highways, inside the buildings and basement)
You experience minimum premature termination of calls
27 during conversation (ie call drops)
28 You get clear and undisturbed voice
Your call gets connected to the called person during the first
29 attempt most of the time
30 You are able to make calls at peak hours
201

SA A DA SD
4 3 2 1
I will transact with this mobile service provider again for future
31 needs
32 I will try new services that are provided by the service provider

33 I will recoomend other people to patronize this service provider


I will say positive things to other people about the services
34 provided by the mobile service operator
I will continue to patronize this mobile service provider / service
35 even if the service charges are increased moderately
36 I have strong preference to this service provider
I will continue to use this service provider regardless of changes in
37 the service

38 I am likely to pay little more for the services when situation arises

39 To me, this service provider would rank first among others

40 I would continue this service for a long period of time

41 I will deal exclusively with the service provider

42 The service of the provider reflect a lot about who I am

43 I have found this provider better than others

44 I always find the terms of the provider as inferior


Repeatedly, the performance of this provider is superior to that of
45 its competitors

46 I dislike the terms of the service provider

47 I like the performance and services of the provider

48 I have a negative attitude toward this provider

49 I am satisfied wih my decision to stay with this provider

50 The employees at the providers place give individual attention


The employees understand my specific needs and go out of their
51 way to help me

52 The employees respond caringly when I share my problems


The personnel at the service provider are filled with
53 professionalism and dedication
54 I am committed to the service provider
Even when I get to hear any negative information about the
55 provider, I would still continue with this service provider

56 I like switching from one service provider to another


My continued association with the mobile operator is important to
57 me
202

SA A N DA SDA
5 4 3 2 1
59 There is a likelihood to choose the service again
60 There is a likelihood to recommend
There is a likelihood to pass on positive feeling
61 about the services
There is a likelihood to continue purchasing the
62 same products / services
63 There is a likelihood to increase purchase size
There is a likelihood to increase frequency of
64 purchasing
There is a likelihood to purchase different
65 products / services
There is a likelihood to continue this only as a
66 supplementary connection
There is a likelihood to switch to a different
67 provider

We once again thank you for the opportunity and the time in providing
these details.
203

PUBLICATIONS BASED ON THIS RESEARCH

Refereed Journals

1. Vani Haridasan and Shanthi Venkatesh, "Impact of Service Quality in


Improving the Effectiveness of CRM Practices through Customer Loyalty
A Study on Indian Mobile Sector" , International Journal of
Management(IJM), Volume 3, Issue 1, January- April 2012 , ISSN 0976-
6502, Journal Impact Factor 3.5420

2. Vani Haridasan and Shanthi Venkatesh,"CRM Implementation in Indian


Telecom Industry Evaluating the Effectiveness of Mobile Service
Providers Using Data Envelopment Analysis, International Journal of
Business Research and Management (IJBRM), Volume (2), Issue (3), Sep
Oct 2011, ISSN 2180-2165

Presentations in International Conferences

1. Vani Haridasan and Shanthi Venkatesh, "Influence of Latent Factors in


Strengthening the CRM Practices through Customer Loyalty A Study on
Indian Mobile Sector" at 2011 International Research Conference and
Colloquium, held at Kuala Lumpur, Malaysia. The conference was
organized by Universiti Tun Abdul Razak, Kuala Lumpur, Malaysia jointly
with IIM Indore, 10-11 Oct 2011.
204

CURRICULUM VITAE

VANI HARIDASAN was born in Madurai, Tamilnadu, India, on 25th

October 1974. She obtained B.E. in Electronics and Communications Engineering

from Regional Engineering College, Jaipur (now NIT Jaipur) in 1996 and M.B.A

from Department of Management Studies, Madurai Kamaraj Universty in 1999.

She has 10 years of teaching experience, her area of interest being

Operations Research and subjects in the Operations specialization. She is currently

working as Assistant Professor in the Department of Management, SSN School of

Management & Computer Applications, Chennai, and is a Research Scholar in the

Department of Management Studies, SRM University.

She has published 2 research papers in reputed International Journals.

She has presented one paper in International Research Conference at Kuala

Lumpur, Malayasia. All her papers have been well received by the academia.