hrm grameen phone

Service quality, customer satisfaction, trust and their relationship with customer loyalty in the context of GrameenPhone

Acknowledgements

It gives me enormous pleasure, honor and a great sense of achievement that I had the

privilege to work in such kind of project. This project paper reflects the inspirations and

efforts of some people. However, firstly, I would like to thank North South University for

enabling me such a great opportunity to work in one of the leading multinationals of the

country and exploring the insights of it. Then I would like to thank our respective faculty

Mr. Nazrul Islam, Faculty School of Business, North South University, for a constant

support, guidance and instruction. Really it would never be possible to complete the

report without his support. Then I would like to thank Mr. Salam and Mr. Ashik Manager

and Deputy Manger respectively of Grameen Phone Recruitment and Selection. Then I

would like to thanks Ms. Farhana Mahmood, Head of Human Capital Management and

Mr. Abid Deputy Head of Human Capital Management, Grameen Phone LTD.

I am also grateful my family members and fellow colleagues for supporting me all the

way.

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Table of Contents

00. Organization Part…………………………………………………………..0-34

01. Introduction………………………………………………………………………1

1.1 Report Background…………………………………………………...1-3

02. Company Profile …………………………………………………………….4-18

03. SWOT Analysis………………………………………………………….....19-28

04. Industry Analysis……………………………………………………………29-35

4.3 Porter’s Models……………………………………………………..31-35

01. Project Part…………………………………………………..…………..36-110

02. Recruitment and Selection………………………………………………..36-56

2.1 Recruitment…………………………………………………………36-53

2.2 Selection…………………………………………………………….53-56

03. HR department of Grameen Phone………………………………………57-70

04. Recruitment and Selection of Grameen Phone………………………..71-105

4.3 Entry Level Manager……………………………………………….73-93

4.4 Management Trainee……………………………………………..94-100

4.5 Mid Level / Senior Management…………………………….….101-102

4.6 Graded Staff……………………………………………………...103-103

4.7 Recruitment & Selection at a glance……………………….…..103-105

05. Recommendation and Conclusion…………………………………..….106-110

02. Appendix…………………………………………………………………....….111

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Service quality, customer satisfaction, trust and their relationship with customer loyalty in the context of GrameenPhone 3


Evaluation of theRecruitment and Selection Process of

Grameen Phone Ltd.

Internship Report

Prepared by:Sharib Nadim0-11-234-030

Prepared for:Nazrul Islam (NzI)

Faculty, School of BusinessNorth South University

Date of submission:August 29, 2006

4


LETTER OF TRANSMITTAL

29th August 2006

ToNazrul IslamFaculty MemberSchool of BusinessNorth South UniversityBanani, Dhaka.

Subject: Submission of BUS-498,(Internship) Report.

Dear Sir:

In the enclosed, I, Sharib Nadim (011-234-030) have prepared a Evaluation report on Recruitment and Selection Process of Grameen Phone, which you have authorized me to prepare and submit by 29th August 2006 as BUS-498 course requirement.

I enjoyed preparing the project though it was challenging to finish within the given time. In preparing this report, I have tried my level best to include all the relevant information related to Recruitment and Selection process at Grameen Phone.

So, I therefore hope that, the report covers the entire requirement you needed and you will find it in proper order.

Sincerely,

____________________Sharib Nadim011-234-030

Website of Grammen Phone (http://www.grameenphone.com)

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http://www.grameenphone.com/


Books, leaflets & Brushier of Grameen Phone.

Carrell, R. Michael. “Personnel Human Resource Management.” Ed. Maxwell

Macmillan International.

Cherrington, David. J. “The Management of Human Resources”.

Hollenbeck & Noe. “Human Resource Management.” Ed. Fourth.

Dowling Peter J, Welch Denice E, & Schuler Randall S; International Human

Resource Management; Managing people in a multinational context; South

Western College Publishing (2nd edition) 1998

David A. Decenzo & Stephen P. Robbins;Human Resource Management;(6th

edition).

Executive Summary

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Human Resource (HR) Management falls under the supervision of Human

Resource department. Before there were two departments under personnel

and Organization-HR & Customer Relations, now it is only HR. At the top of

the ladder is the Director Human Resource. Then the General Manager of

HR, then the Deputy General Manager and under whom the HR department

is divided into four functional divisions-Training fit Development,

Recruitment & Selection, Information & Compensation and Employee

Counseling. Following is just a brief description of how tasks are divided

into these divisions of HR department. Human Resources (HR) Department

is an important department of Administration Division plays very vital role in

the total functioning of GP. Employee recruitment, selection, transfer,

promotion, training, performance appraisal - all these are conducted by HR

division.

The Human Resource Manager currently heads this department. The major

functions of this department are strategic planning and policy formulation

for Compensation, Recruitment, Promotion, Training and developments,

Personnel Services and Security.

All major personnel functions are integrated in the best possible way at

GrameenPhone, which results in its higher productivity. The Human

resource officer monitors the employee staffing and administration

activities. The Training officer supervises Training, development & rotation

activities.

GP has a standard recruitment procedure for all the departments. However, that does not

mean that the recruitment process is inflexible. It can vary whenever deemed necessary by

the departments’ requirements. The same is true for CMD employee recruitment as well.

Vacancies may arise in CMD because of organizational growth, separation, resignation, etc.

Generally HCM is responsible for handling the recruitment process with an involvement of

the HR division. The company follows the Equal Employment Opportunity Act by not being

9


prejudiced against men, women, minorities, etc. GP has a recruitment policy, which is fair

and consistent, and conforms to legal regulations and best agreed practice. It claims to be

non-discriminatory on the grounds of sex, age, race, religion or disability.

Basically the need of recruitment is declared by the HCM. Then with the help of the HR

department HCM conduct the whole recruitment process. This process is shown below.

Introduction

In November 28, 1996, GrameenPhone was offered a cellular license in Bangladesh by

the Ministry of Posts and Telecommunications. March 26, 1997: GrameenPhone launched its

service on the Independence Day of Bangladesh. After eight years of operation, GrameenPhone

has more than 2.8 million subscribers as of March 2005. GrameenPhone so far extended its

network up to 281 Upazilas, out of 460, by setting up 720 base stations across the country with an

investment of more than 270 million US dollars. GrameenPhone is one of the largest private

investors in the country with more than 270 million US dollars investments. To maintain this

phenomenal growth GrameenPhone should strive to retain its existing subscribers and penetrate

other operator’s subscriber. Therefore, there is an emergence of studying the related facets of the

Customer Loyalty in the context of Bangladesh GSM telecommunication system for

GrameenPhone to retain and increase its market share. Hence, in the current study, we intend to

examine whether there are relationships among Service Quality, Customer Satisfaction, Trust,

and Customer Loyalty for GrameenPhone in Bangladesh or not.

Statement of the Problem

Customer satisfaction and trust are positively related with customer loyalty (Bruhn &

Grund, 2000; Chaudhuri & Holbrook, 2002; Gronholdt, Martensen, & kristensen, 2000; Gerpott,

Rams, & Schindler, 2001; Kristensen, Martensen, & Gronholdt, 2000; Lau & Lee, 1999; Sharma,

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2003; Sirdeshmukh, Singh, & Sabol, 2002). In the recent study, Aydin, Ozer, and Arasil (2005)

have investigated the relationship between customer satisfaction and trust with customer loyalty

in the context of Global System for Mobile Telecommunication (GSM) mobile phone service

providers in Turkey. They have utilized customer satisfaction and trust as independent variables

As customer loyalty as dependent variable. Moreover, the study of Aydin et al. (2005) suggested

that overall service quality, corporate image, and attractiveness of the company could be take into

account to investigate further research. In the current study, therefore, the researchers will utilize

the study of Aydin et al. (2005) with an added variable service quality to investigate such

relationship. In another study conducted by Ribbink, Van Riel, Linjander, and Streukens (2004)

noted that the overall service quality need to be considered to investigate such relationship.

There is strong evidence that the service quality is positively related to customer loyalty (Blomer,

& kasper, 1995; Cronin, Brady, & Hult, 2000; Parasuraman & Grewal, 2000; Zeithaml, 1996).

Few other empirical studies suggested that the integrating role is due to service quality being the

outcome of internal organizational policies and practice that leads to customer value, satisfaction,

and more customer loyalty (Cronin et al., 2000; Heskett, Sasser, & Schlesinger, 1997; Storbacka,

Strandvik, & Gronroos, 1994; Zeithaml, 2000). Hence, in the current study, the researchers will

utilize service quality as an added variable to the study of Aydin et al. (2005) to investigate such

relationship in context of GSM mobile phone service providers in Bangladesh.

The problem statement, therefore, is stated as follows: the present study will investigate

the relationship between service quality, customer satisfaction, trust, and customer loyalty in the

context of GrameenPhone in Bangladesh.

Purpose of the Study

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The purpose of this study is to present and test a model that identifies the relationship of

the factors service quality, customer satisfaction, and trust with customer loyalty.

Customer loyalty is considered important because of its positive effect on long-term

profitability. According to Reichheld and colleagues (2000), the high costs of acquiring new

customers can lead to unprofitable customer relationships for up to three years. As a

consequence, it is crucial for telecommunication companies to create a loyal customer base, as

well as to monitor the profitability of each segment (Reinartz & Kumar, 2002).

In conventional service research, as well as in emerging research on technology based

services (Srinivasan, Anderson, & Ponnavolu, 2002; Van Riel et al., 2004; Wolfinbarger & Gilly,

2003), several antecedents of customer loyalty have been proposed. Among those, satisfaction

figures prominently, and is thought to be attributable to customer evaluations of service and

resulting quality perceptions. Next to satisfaction, trust has been brought forward as a

precondition for patronage behavior (Pavlou, 2003) and the development of long-term customer

relationships (Doney & Cannon, 1997; Papadopoulou, Andreou, Kanellis, & Martakos, 2001;

Singh & Sirdeshmukh, 2000).

Further the conceptualization and measurement of Service quality emphasizes the

importance in attracting, satisfying, and retaining customers (Heskett et al., 1997; Schneider &

Bowen, 1998; Storbacka et al., 1994). Moreover, the integrating role of service quality is being

the outcome of internal organisational policies and practices, and fundamental in the service

sequence that leads to customer value, and customer loyalty (Cronin et al., 2000; Heskett et al.,

1997; Storbacka et al., 1994; Zeithaml, Berry, & Parasuraman, 1996).

Similar studies were not conduct before in Bangladesh. Therefore this paper aims to

identify the relationship among the factors such as service quality, customer satisfaction, trust,

and customer loyalty.

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Literature Review

Service Quality

Lehtinen and Lehtinen (1982) defined service quality in terms of physical quality,

interactive quality and corporate (image) quality. Physical quality relates to the tangible aspects

of the service. Interactive quality involves the interactive nature of services and refers to the two-

way flow that occurs between the customer and the service provider, or his/her representative,

including both automated, and animated interactions. Corporate quality refers to the image

attributed to a service provider by its current and potential customers, as well as other publics.

Lewis and Booms' (1983) definition clearly states that service quality is a measure of how well

the service level delivered matches customer expectations and delivering quality service means

conforming to customer expectation on a consistent basis. In some earlier studies, researchers

define service quality as the extent to which a service meets customers' needs or expectations

(Lewis & Mitchell, 1990; Dotchin & Oakland, 1994; Asubonteng, McCleary, & Swan, 1996;

Wisniewski & Donnelly, 1996). Zeithaml (1987) defined that service quality is the consumer's

judgment about an entity's overall excellence or superiority. It is a form of attitude, and results

from a comparison of expectations to perceptions of performance received. Zeithaml, Berry, and

Parasuraman (1990) on the other hand, have chosen to define service quality as the extent of the

discrepancy between customers' expectations or desires and their perceptions. Service quality has

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been also defined as the consumers overall impression of the relative inferiority or superiority of

the organization and services (Zeithaml et al., 1990; Taylor & Baker, 1994).

Christopher, Payne, and Ballantyne (1993) have defined service quality as the ability of

the organization to meet or exceed customer expectations. Service quality is believed to depend

on the gap between expected and perceived performance (Anderson, Fornell, & Lehmann, 1994).

Gitlow, Oppenheim, and Oppenheim (1989) also stated that service quality is the extent to which

the customer or users believe the service surpasses their needs and expectations.

Parasuraman, Zeithaml, and Berry (1988) proposed that service quality is a function of the

differences between expectation and performance along the quality dimensions. Service quality

is also defined as a consumer attitude reflecting the perceived overall superiority and excellence

in the process and outcome of a service provider (Parasuraman et al., 1988). Gronroos (2001)

recently defined service quality as a mixture of three elements: quality of the consumption

process itself, the quality of the outcome of the process; and image of the provider of the service.

Service quality has become an increasingly important factor for success and survival in the

service sectors. Provision of high quality service aids in meeting several requirements such as

customer satisfaction and its consequent loyalty and market share, soliciting new customers,

improved productivity, financial performance and profitability (Collet, Lancier, & Olliver, 1990;

Julian & Ramaseshan, 1994; Lewis, 1989, 1993). For service organization, Service quality has

become an important factor in determining market shares and profitability (Andereson et al.,

1994; Spathis, Kosmidou, & Doumpous, 2002).

Service Quality Dimensions

A conceptual model concerning perceived service quality was proposed by Parasuraman

et al. (1988), and therefore service quality dimensions have become an area of interest in

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marketing research (Bolton & Drew, 1991b; Brown & Swartz, 1989; Carman, 1990; Cronin &

Taylor, 1992, 1994; Parasuraman et al., 1988, 1994; Teas, 1993, 1994; Zeithaml et al., 1996).

One of the important issues related to service quality is the dimensions of service quality, and the

measurement tool, SERVQUAL developed by Parasuraman et al. (1988) has been the starting

point of the controversy in this area. Parasuraman et al. (1988) identify five quality dimensions

that link specific service characteristics to consumer expectations of quality. These five basic

dimensions are reliability, responsiveness, assurance, empathy, and tangibles.

Reliability

Reliability is defined as the ability to perform the promised service dependably and

accurately (Parasuraman et al., 1988). Reliability involves consistency of performance and

dependability. It means that the firm performs the service right first time. It also means that the

firm honors its promises. Specifically it involves accuracy in billing, keeping records correctly,

and performing the service at the designated time (Parasuraman, Zeithaml, & Berry, 1985).

Reliability refers to the extent to which the retail service provides what was promised when it was

promised (Dabholkar, Thorpe, & Rentz, 1996).

Zeithaml et al. (1990) defined reliability as the ability to perform the promised service

dependably and accurately. Reliability refers to an absence of errors, precision of filing, and

precision in transactions (Spathis, Petridou, & Glaveli, 2004). Reliability is the ability to perform

the promised service consistently, dependably, and accurately. Reliability has often been cited as

the most important dimension in assessing the quality of service and is therefore a fundamental

requirement for businesses to compete in the marketplace (Cook, Bowen, Chase, Dasu, Stewart,

& Tansik, 2002).

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Responsiveness

Responsiveness is defined as the willingness to help customers and provide prompt

service (Parasuraman et al., 1988). It concerns the willingness or readiness of employees to

provide services. Responsiveness involves timeliness of service like posting a transaction slip

immediately, returning a phone call quickly, giving prompt service, setting up appointments

quickly. According to Zeithaml et al. (1990), responsiveness refers to the motivation to help

(internal) customers and provide prompt service to them.

Assurance

Parasuraman et al. (1988) defined assurance as the knowledge and courtesy of employees

and their ability to convey trust and confidence. Assurance involves trustworthiness,

believability, honesty. It involves having the customer’s best interests at heart. Contributing to

credibility includes company name; company reputation; personal characteristics of the contact

personnel; how much a hard sell is employed in interactions with the customer (Parasuraman et

al., 1985). According to Bahia and Nantel (2000), assurance represents the friendliness and

courtesy of employees - personalized attention to the customer and the ability of employees to

inspire confidence. Zeithaml et al. (1990) defined assurance as the awareness and good manners

of the employees and their ability to convey trust and confidence to the customers.

Empathy

According to Parasuraman et al. (1988), empathy is defined as caring and individualized

attention provided to customers. Empathy refers to graciousness, respect, consideration, and

friendliness of contact personnel including receptionists, telephone operators, etc. It includes

consideration for the consumers’ property, clean and neat appearance of the contact personnel.

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Tangibles

Tangibles are the physical facilities, equipment, and appearance of personnel in services

(Parasuraman et al., 1988). It includes all the physical evidence of the service like the facilities,

appearance of personnel, tools or equipment used to provide the service, physical representations

of the services (e.g. statements), and even other customers. Tangibles of service are the tangible

facets of the service facility (equipment, signage, employee appearance, etc.) or the man-made

physical environment, popularly known as the “servicescapes” (Sureshchandar, Rajendran, &

Anantharaman, 2003). Bahia and Nantel (2000) stated that tangibles assessed the appearance and

cleanliness of a bank's physical facilities.

However, another well accepted model of service quality is the technical/functional

quality perspective (Arora & Stoner, 1996). Originally conceptualized By Gronos (1983)

technical quality involves what is provided and Functional quality considers how it is provided.

Baker and Lamb (1993) suggested that for evaluating purposes customers tend to rely on the

functional-based dimensions of service quality. Richard and Allway (1993) found that both

technical and functional dimensions explained more of the variation in customer choice behavior

than functional measures alone.

On the contrast of SERVQUAL, more recently, Sureshchandar et al. (2003) identified five

factors of service quality as critical from the customers’ point of view.

Those are:

1. Core service or service product

2. Human element of service delivery

3. Systematization of service delivery: non- human element.

4. Tangibles of service

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5. Social responsibility.

The new operationalized and conceptualized measurement of SERVQUAL finds the

significant result regarding distinctiveness of the constructs of service quality and customer

satisfaction. The construct of service quality is independence and different from customers’ point

of view (Sureschandar, Rajendran, & Anantharaman, 2002). By this it could be easily stated that

the newly defined construct of service quality by Sureshchandar et al. (2003) to some extent

supports the definition given by (Parasuraman et al., 1988). Hence, in this study, the researchers

will utilize the five dimensions of service quality proposed by Parasuraman et al. (1988) to define

the service quality.

Customer Satisfaction

Customer satisfaction is becoming an increasingly salient topic in many firms and in

academic research (Söderlund, 1998). Anderson et al. (1994) affirmed that satisfaction is a post

consumption experience which compares perceived quality with expected quality.

Correspondingly, Oliver (1996) defines satisfaction as an emotional post-consumption response

that may occur as the result of comparing expected and actual performance (disconfirmation), or

it can be an outcome that occurs without comparing expectations

On the other hand, some previous researchers have explained customer satisfaction in

terms of expectation. They defined, if expectations are exceeded by performance; satisfaction is

generated (Churchill & Surprenant, 1982; Bearden & Tell, 1983; LaBarbera & Mazursky, 1983).

Equally, Buswell (1983) identified customer satisfaction as a combination of five key attitudes,

these include, knowledge of staff, communications, expertise of staff, willingness to lend and

branch design. Consequently, Berry, Zeithaml, and Parasuraman (1985) argued that customer

satisfaction can be defined as the attributes of search, experience, and credence. Yi (1990)

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believes customer satisfaction should mean evaluation, symbolizing a type of consuming

experience. Avkiran (1994) recognized customer satisfaction by customer conduct, credibility,

communication, access to teller services.

Simultaneously, according to Anderson and Fornell (1994), customer satisfaction is the

term which may lower the chance of customers being driven away due to the poor quality of

products or services. Fornell (1992) noted that the more satisfied customers are the one that are

greater in their retention although, Anderson and Sullivan (1993) added that satisfied customer

would intend to repeat purchase which would enhance organizations’ profitability. In association

with this Jones and Sasser (1995) acknowledged that completely satisfied customers are those

who are much more loyal than merely satisfied customer.

Spreng, MacKenzie, and Olshavsky (1996), alternatively, defined satisfaction as the

emotional reaction to a product or service experience. Oliver (1997) defined satisfaction as the

customer's fulfillment response. It is a judgment that a product or service feature, or the product

or service itself, provides a pleasurable level of consumption- related fulfillment.

The most common interpretations reflect the notion that satisfaction is a feeling which

results from a process of evaluating what was received against that expected, the purchase

decision itself and the fulfillment to needs or want (Armstrong & Kotler, 1996: Berkowitz, Kerin,

Hartley, & Rudelius, 1999). Kotler (1999) also noted that satisfaction is a function of perceived

performance and expectations which identifies feelings of a person resulting from comparing a

products perceived performance in relation to his or her expectations.

Wong (2000) believes that a customer’s total satisfaction is an emotional perception.

Evaluation is based on the customer’s reaction from using the product or service. Customer

satisfaction then is a total satisfaction that leaves a good perception. The perception of this

wholeness is very similar to the meaning of customer value package brought up by Fredericks

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and Salter (1995). The customer value package includes: price; product quality; service quality;

innovation; and corporate image. Moreover, Martensen, Grùnholdt, and Kristersen (2000) also

discovered that expectation, product quality, and corporate image are three facilitating factors in

ensuring customer satisfaction.

Hackl and Scharitzer (2000) have identified customer satisfaction as economic goals and

have considered customer satisfaction as a prerequisite for customer retention and loyalty, and

obviously that tend to help in realizing economic goals like profitability, market share, return on

investment.

Sureschandar et al. (2002) introduced different approach of customer satisfaction and

defined customer satisfaction as multidimensional construct. According to Bitner and Zeithaml

(2003), satisfaction is the customers’ evaluation of a product or service in terms of whether that

product or service has met their needs and expectations. The researchers reveal that satisfaction

can as well be viewed as contentment, pleasure, delight, and relief. Thus they noted customer

satisfaction as a dynamic and moving target that may evolve over time, influenced by variety of

factors.

Guenzi and Pelloni (2004) use the following definition of satisfaction in their study:

“Overall satisfaction is the consumer’s dissatisfaction or satisfaction with the organization based

on all encounters and experiences with that particular organization” (Bitner & Hubbert, 1993).

Fe and Ikova (2004) added that the perception of the word satisfaction influences the activities

which we conduct to achieve customer satisfaction.

Boselie, Hesselink, and Wiele (2002) defined satisfaction as a positive, affective state

resulting from the appraisal of all aspects of a firm’s working relationship with another firm.

This definition purported that satisfaction (understood as affective) can be contrasted with an

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objective summary assessment of outcomes – thereby forming a target-performance comparison

mechanism. Therefore, the appropriate definition of customer satisfaction for this study would be

the one by Boselie et al. (2002).

Trust

In business studies, trust has been found to be important for building and maintaining

long-term relationships (Geyskens, Steenkamp, Scheer, and Kumar1996; Rousseau, Sitkin, Burt,

& Camerer, 1998; Singh & Sirdeshmukh, 2000). According to Moorman, Zaltman, and

Deshpande (1992), trust is the willingness to rely on an exchange partner in whom one has

confidence. This definition is in accordance with early research (Meyer 1981), which associated

trust with a confidence in the other’s intentions and motives.

Lewicki and Bunker (1995) defined trust three different types of investigations: first, as

an individual characteristic, second, as a characteristic of interpersonal transactions, and finally,

as an institutional phenomenon i.e., business to business or business to consumer context.

Fukuyama (1995) defines trust as the expectation that arises within a community of

regular, honest, and cooperative behavior, based on commonly shared norms, on the part of

members of that community. He further argued that the technological revolution will make trust

ever more important in understanding business behaviors like marketing.

Morgan and Hunt (1994) conceptualized trust as existing when one party has confidence

in a partner’s reliability and integrity. Moreover, the authors also proposed that communication

was an antecedent of trust, along with shared values and lack of opportunistic behavior in

interpretation of the construct in their seminal study of the commitment-trust theory of

relationship marketing.

Anderson and Narus (1990) postulated that, if one party believes that the actions of a third

party will bring positive outcomes to him, trust could be build. Doney and cannon (1997) added

21


that the third party also must have some ability to continue to meet its obligations within the cost-

benefit relationship. Therefore, the customer should not only perceive positive outcomes but also

believe that these positive outcomes will continue in future.

Bhattacharya, Rajiv, Timothy, and Madan (1998) offer a more generalizable and

integrative view of trust that recognizes three key aspects: first, trust is not a simple expectation,

rather it can embody an expectation, second, the degree of trust is related, statistically, to the

magnitude of this expectancy, and finally, the strength of the trust will be related to the

uncertainty, or precision, the individual has in his trust. Gwinner, Gremler, and Bitner (1998)

suggested trust as a relational benefit. More specifically, they proposed trust as a confidence

benefit rated highly by customers in long-term relational exchanges with service firms.

According to Lau and Lee (1999), as one party trusts another and develop positive

behavioral intentions towards the other, when customers trusts brands they also form positive

buying intentions towards those brands. Trust is sometimes conceived of having two

components, performance, or credibility trust and benevolence trust, as Ganesan (1994) pointed

out in a business-to-business context.

On continuation of the previous definitions, Garbarino and Johnson (1999) demonstrated

trust as a driver of customer behavioral intentions building long-term relationship with the service

provider. According to Chatura, Ranaweera, and Prabhu (2003), customer’s trust can be viewed

in his/her service provide reliability, deeds and tasks which undertaken for the benefit of

customers.

Therefore, the appropriate definition of trust for this study would be the one that would

encompass the trust in individual, business-to-business, and business-to-customer levels in

commitment-trust theory of relationship marketing. Hence, the current study will use the

definition of Morgan and Hunt (1994) to define trust.

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Customer Loyalty

The importance of loyalty has been widely recognized in the marketing literature (Oliver,

1999; Samuelson & Sandvik, 1997; Howard & Sheth, 1969). According to Duffy (2003), loyalty

is the feeling that a customer has about a brand which ultimately generates positive and

measurable financial results. Soderlund (1998) drew on the concept of loyalty as the extent to

which the customer intends to purchase again from the supplier who has created a certain level of

satisfaction. Loyalty, in one or more of the forms noted above, creates increased profit through

enhanced revenues, reduced costs to acquire customers (Sharp & Sharp, 1997), lower customer-

price sensitivity (Krisnamurthi & Raj, 1991), and decreased costs to serve customers familiar

with a firm's service delivery system (Reicheld & Sasser, 1990).

Customer loyalty represents the repeat purchase and referring the company to other

customers (Heskett, 1994). Improvements in retention and increasing in the share of the

company are the obvious economic benefit of customer loyalty. According to Feick and Lee

(2001), customer loyalty has been measured as the long term choice probability for a brand or as

a minimum differential needed for switching. Loyal customers are less likely to switch because

of price and they make more purchases than similar non-loyal customers (Reichheld & Sasser,

1990). Oliver (1997) viewed customer loyalty as a deeply held commitment to rebuy or

repatronize a preferred product or service consistently in the future, despite situational influences

and marketing efforts having the potential to cause switching behavior.

Customer loyalty reduces marketing costs and that the relative costs of customer retention

are substantially less than those of acquisition (Fornell & Wernerfelt, 1987). Hallowel (1996)

23


characterize customer loyalty as the relationship a customer maintains with the seller after the

first transaction.

Customer loyalty is often referred to as a purchase behavior (Griffin, 1996). On the other

hand, customer loyalty is approached as an attitudinal construct. Attitude denotes the degree to

which a consumer’s disposition towards a service is favorably inclined (Azjen & Fishbein, 1980).

In addition to attitude, it has been argued that loyalty may also be based on cognition (Lee &

Zeiss, 1980). In its cognitive sense, customer loyalty is frequently operationalised as a conscious

evaluation of the price/quality ratio or the willingness to pay a premium price, or alternatively

price indifference (Fornell, 1992; Zeithaml et al., 1996).

Jacoby and Kyner (1973) elaborated that the definition of loyalty includes six necessary

conditions – that loyalty is the biased (that is, nonrandom), behavioural (that is, purchase)

response, expressed over time, by some decision-making unit (a person or group of persons), with

respect to one or more alternative brands out of a set of such brands, and is a function of

psychological processes (decision-making, evaluative).

On the contrary, Oliver (1999) argues that customer loyalty is a condition of strong

involvement in the repurchase, or reuse, of a product or brand. This involvement is strong

enough to overcome the situational and competitive influences which might drive a variety

seekers or a switching behavior. This condition of customer loyalty is reached through four

sequential stages: cognitively loyal (direct or indirect knowledge about the brand), affective

loyalty (repeated confirmations of his expectations), conative loyalty (high involvement that is a

motivating force), and action loyalty (‘desire to overcome’ every possible obstacle that might

come in the way of the decision to buy the brand to which the person is loyal).

On the word of Gremler and Brown (1996) customer loyalty is noted by the degree to

which a customer exhibits repeat purchasing behavior from a service provider, possesses a

24


positive attitudinal disposition towards the provider, and considers using only those providers

when a need for the service arises. Correspondingly, Kandampully (2000) stated that a loyal

customer is a customer who repurchases from the same service provider whenever possible, and

who continues to recommend or maintains a positive attitude towards the service provider. In

relation with this, Pong and Yee (2001) is defined as the willingness of customer to consistently

re-patronize the same service provider/service company that may be the first choice among

alternatives, thereby complying with actual behavioral outcomes and attaching with favorable

attitude and cognition, regardless of any situational influences and marketing efforts made to

induce switching behavior.

Zeithaml (2000) affirmed that loyalty is repeated transactions (or percentage of total

transactions in the category, or total expenditures in the category) and can sometimes be

measured quite simply with observational techniques. Furthermore, a briefer and more specific

definition is provided by Anderson and Srinivasan (2003), who define loyalty in contest of

electronic business as the customer’s favorable attitude toward an electronic business, resulting in

repeat purchasing behavior. Loyalty deals with specific behaviors related to repurchasing the

service or product (Durvasula, Lynoski, Mehta, & Tang, 2004).

Wong (2004) suggested customer loyalty as a key mediating variable in explaining

customer retention (Pritchard & Howard, 1997) which is concerned with the likelihood of a

customer returning, making business referrals, providing strong word-of-mouth, as well as

providing references and publicity (Bowen & Shoemaker, 1998).

Pearson (1996) defines customer loyalty in term of those customers who hold favorable

attitudes toward the company, commit to repurchase the product/service, and recommend the

product/service to others. Hence, the researchers of the current study will use the definition of

Pearson (1996) to define customer loyalty.

25


Relationship between Service Quality and Customer Loyalty

The relationship between service quality and customer preference loyalty has been

examined numerous times (Boulding, Kalra, Staelin, & Zeithaml, 1993; Cronin & Taylor, 1992).

Cronin and Taylor (1992) focused on the element of repurchasing and willingness to recommend.

Boulding et al. (1993) found a positive relationship between service quality, repurchase intention

and willingness to recommend.

Additional empirical evidence was provided by Fornell (1992) and Selnes (1993),

demonstrating the effects of performance quality on loyalty mediated by satisfaction, although

other studies have proved the direct effect of perceived quality on loyalty. In a study of the

relationship between attribute-level-performance of service quality, overall satisfaction and

repurchasing intensions, in addition to its impact on satisfaction, attribute service performance

were also found to have a direct impact on repurchasing intensions. Similar results on the direct

link between quality and loyalty were obtained by Boulding et al. (1993).

No matter how customer loyalty is defined, in order to gain it, any operator needs to

increase subscriber offered service quality (Anderson & Sullivan, 1993; Brady & Robertson,

2001; Kristensen et al., 2000; Fornell et al., 1996; Oliver, 1980). Earlier literature provides

evidence that service quality has an integrating role between the organisation and its customers.

This integrating role is due to service quality being the outcome of internal organisational policies

and practices, and fundamental in the service sequence that leads to customer value, satisfaction,

and loyalty (Cronin et al., 2000; Heskett et al., 1997; Storbacka et al., 1994; Zeithaml et al.,

1996).

26


As noted in the previous section, there is evidence to support a link between service

quality and customer loyalty (Cronin et al., 2000; Bloemer, Ruyter, & Wetzels, 1999;

Parasuraman and Grewal, 2000; Zeithaml et al., 1996). More specifically, direct and significant

paths have been demonstrated between service quality and customer loyalty (Butcher et al.,

2001). Moreover, the precise loyalty implication of service quality has been tested in call centers

(Dean, 2002) that indicate a positive link between these two measured constructs.

Recent research has indicated a positive and significant relationship between a customer’s

perception of service quality and that customer’s loyalty (expressed as willingness to recommend

the company and intentions to repurchase) (Parasuraman et al., 1988; Zeithaml et al., 1996;

Cronin & Taylor, 1992; Danaher & Rust, 1996; Bitner, 1990; Patterson, 1995).

Dick and Basu (1994) also view perceived service quality as a cognitive antecedent of

customer loyalty because service quality will influence the purchasing intension. There is a

consensus amongst practitioners and academics that customer satisfaction and service quality are

prerequisites of loyalty (Cronin & Taylor, 1992; Gremler & Brown, 1997). Similarly

McAlexander (1994) found that patient satisfaction and service quality have a significant effect

on future purchase intentions. Likewise, with regards to loyalty, perceive service quality has

been identified as key antecedent in telecommunication as well as in other service industry

(Lewis, 1993).

Relationship between Customer Satisfaction and Customer Loyalty

During past decades, customer satisfaction has frequently been advanced to account for

customer loyalty (Oliver & Linda, 1981; LaBarbera, & Mazursky, 1983; Anderson & Fornell,

1994; Oliver, 1996; Jones & Suh, 2000). In a number of cases a positive link has been observed

between customer satisfaction and loyalty (Anderson & Sullivan, 1993; Fornell, 1992; Rust &

27


Zahorik, 1993; Taylor & Baker, 1994). Indeed, this link is fundamental to the marketing concept,

which holds that satisfying customer needs and wants is the key to repeat purchase (Kotler,

Armstrong, & Cunningham, 2002). There is a common assumption in the literature that

satisfaction is likely to increase loyalty as there is a link between these two variables (Bolton,

1998; Oliver, 1980; Page & Eddy, 1999; Patterson, Johnson, & Spreng, 1997). For instance,

studies conducted by Cronin and Taylor, (1992) in service sectors found that customer

satisfaction has a significant positive effect on purchase intentions in all four sectors.

Pragmatic research findings offer robust evidence of positive relationship between

customer satisfaction and behavioural intentions (Oliver, 1999; Bitner & Hubert, 1994). The

disconfirmation-of-expectation paradigm (Oliver, 1980) argues that customer loyalty (e.g.

Repurchase intentions, willingness to provide positive word-of-mouth) is a function of customer

satisfaction. Similarly, Anderson and Sullivan, (1993) found that stated repurchase intentions are

strongly related to stated satisfaction across product categories. Researchers in the professional

services area have also suggested that customers of business services tend to remain with the

same provider if continually satisfied (Davidow & Uttal, 1989; Woodside, Wilson, & Milner,

1992)

In general, past research has demonstrated that satisfaction is strongly associated with re-

purchase intentions (Bitner, 1990; Cronin & Taylor, 1992; Dabholkar & Thorpe, 1994; Fornell,

1992; Patterson, 1995). Hart and Johnson (1999) have added that one of the conditions of true

customer loyalty is total satisfaction. They argue that the presence of satisfaction reflects a

relationship commitment and loyalty.

Further support for a view that the effects of customer satisfaction on loyalty are different

depending on the level of satisfaction is offered by Jones and Sasser (1995). Basically, they

28


stated that the relationship is non-linear, and that the relationship is subject to different patterns

depending on the product in question. That is to say, when the number of alternatives of a service

is high, the satisfaction-loyalty link is strong. Thus, it may be assumed that the form of the

relationship between customer satisfaction and loyalty is different at different levels of

satisfaction.

On the contrary, there is little evidence that the theory has been tested in call centers. An

exception is the study by de Ruyter and Wetzels (2000), which tested the impact of customers’

repurchase behaviors on customers’ satisfaction and trust, using a sample from the mobile

telecommunications industry. They found that both customer satisfaction and trust were

significantly related to the customers’ repurchase intention to call again, suggesting that

customers’ responses to service encounters lead to dimensions of loyalty.

In a recent study, next to trust, satisfaction has been brought forward as a precondition for

the development of long-term customer loyalty (Pavlou, 2003). For instance, in a recent work on

online settings, a positive link has been observed between customer satisfaction and loyalty.

Preference and favorable attitudes presume customer satisfaction, which is generally considered

as a major driver of loyalty (Cho, Im, Hiltz, & Fjermestad, 2002; Gummerus, Liljander, Pura, &

Van, 2004).

As a consequence, there is a consensus amongst practitioners and academics that customer

satisfaction and service quality are prerequisites of loyalty (Cronin & Taylor, 1992; Gremler &

Brown, 1997). Hence, it can be concluded that there is a positive relationship between customer

satisfaction and customer loyalty. Conversely, it may be assumed that the form of the

relationship between customer satisfaction and loyalty is different at different levels of

satisfaction.

29


The Relationship between Trust and Customer Loyalty

A number of researchers have advocated that trust is fundamental in developing customer

loyalty (Moorman et al., 1992; Morgan and Hunt, 1994). Those who are not willing to trust a

vendor in a competitive marketplace are unlikely to be loyal. The importance of trust in

explaining loyalty is also supported by numerous authors such as Lim, and Razzaque (1997),

Garbarino and Johnson (1999), Chaudhuri and Holbrook (2001), Singh and Sirdeshmukh (2000),

and Sirdeshmukh et al. (2002).

Chow and Holden (1997) studied the relationship between trust and loyal buying behavior

and found positive impact of trust in explaining to customer loyalty. Moreover, they found that

trust is a significant antecedent to not only attitude toward the product, but also to buyers’ loyalty.

Swan, Bowers, and Richardson (1999) found that trust positively affects favorable

customer attitudes, purchase intentions, and purchase behaviors. Based on a review of the

concept of trust within marketing channels, Geyskens, Steenkamp, and Kumar (1998) developed

a casual model of antecedents and consequences of trust and found strong support for trust as a

mediator in explaining customer loyalty.

Trust is sometimes conceived of having two components, performance, or credibility trust

and benevolence trust, as Ganesan (1994) pointed out in a business-to-business context.

Numerous authors have also suggested the existence of an effect for credibility trust on loyalty

(Chaudhuri & Holbroook, 2001; Garbarino and Johnson, 1999). Recently, however, Singh and

Sirdeshmukh (2000) and Sirdeshmukh et al. (2002) have argued strongly for a component of trust

that may contribute to explaining loyalty.

30


In a recent study, for example, Corbitt, Thanasankit, and Yi (2003) suggests a strong

positive effect of trust on loyalty to telecommunications firms. Dwayne, Pedro Simo˜es Coelho,

and Alexandra Macha´s (2004) further elaborated that in a business-to-consumer context, the

components of trust may be strong in determining loyalty.

Research Questions

This study proposes to investigate the following research questions:

1. Is there any significant relationship between service quality and customer loyalty in the

context of GrameenPhone in Bangladesh?

2. Is there any significant relationship between customer satisfaction and customer loyalty in

the context of GrameenPhone in Bangladesh?

3. Is there any significant relationship between trust and customer loyalty in the context of

GrameenPhone in Bangladesh?

Hypotheses

The hypotheses derived from the research questions are:

1. There is a significant relationship between service quality and customer loyalty in the

context of GrameenPhone in Bangladesh.

2. There is a significant relationship between customer satisfaction and customer loyalty in

the context of GrameenPhone in Bangladesh.

3. There is a significant relationship between trust and customer loyalty in the context of

GrameenPhone in Bangladesh.

31


Development of Conceptual Framework

The conceptual framework for the proposed study is presented below:

Figure1: Conceptual Framework of Research Variable and their Relationships.

Operational Definition

Table 2: Operational Definition of Measured Variables

Measured Variables Operational Definitions

Service quality Will be operationally defined by Parasuraman et al.

(1988).

Customer Satisfaction Will be operationally defined by Boselie et al. (2002).

Trust Will be operationally defined by Morgan and Hunt (1994).

Customer Loyalty Will be operationally defined by Pearson (1996).

32

Service Quality

Customer Satisfaction

Trust

Customer Loyalty


Research Methodology

Research Design

The representation of the proposed framework (figure 1) depicted the pattern and structure

of relationships among the set of measured variables. The research questions and hypotheses

clearly support this model. Hence, the purpose of the study is to measure correlations among

variables.

The present study will investigate the relationship between service quality, customer

satisfaction, trust, and customer loyalty within the context of GrameenPhone in Bangladesh.

Research that studies the relationship between two or more variables is also referred to as a

correlational study (Cooper & Schindler, 2003). That is why a correlational research design has

been selected in order to find out the appropriate answers to the research questions and to test the

hypotheses. The model (Figure 1) also suggests this type of design. Here customer service

quality, Customer satisfaction, trust are being considered as independent variables and customer

loyalty is being considered as a dependent variable. The research will use a correlational study to

establish the existence of relationships between the measured variables. In this research, the

researchers intend to identify whether any relationships exists between these measured variables

or not. A Correlational study provides a measure of the degree between two or more variables.

Therefore, the present study will be characterized as a correlational study.

33


Research Approach

To investigate research questions, the researchers will gather information from the post-

paid subscribers of GrameenPhone by either performing a survey over the phone or will gather

their required information when these customers visit the GrameenPhone service center during

the data collection period of this study. All the participants will receive complete explanations

for the context of the research focus by the researchers. All participation will be voluntary. If the

participants want to withdraw, they will be free to do so at any time.

Sampling Method

The study will be conducted only in Dhaka city due to time and budget constraints. The

population would be all the post-paid subscribers of GrameenPhone in Dhaka city. Post-paid

subscribers were chosen as they have more interaction with the company and are getting billed on

a monthly basis for their subscription. The sample frame will be chosen randomly.

First of all, as the customer listing could be drawn, probability sampling technique would

be appropriate to draw a sample from the sampling frame. In this regard, for the current study a

simple random sampling method would be utilized. Cooper and Schindler (2003) stated that in

this type of probability sampling method each population element is known and has an equal

chance of selection. Many researchers also followed the similar sampling method in their

respective studies for instances (Ranaweera & Prabhu, 2003; Andreas, 2001; Sharma& Patterson,

2000).

34


Survey Instrument

To gather data, the researchers will use questionnaires. The questionnaire survey is the

most effective method for this study to collect the data for the following reasons-

Respondents anonymity can be maintained

The researchers will conduct survey on 320 respondents. A questionnaire survey will be

the most appropriate for the current study.

The postal system of the country is very slow. Hence, mail survey will be time

consuming for this study.

The Internet facility is not widespread in our country. Therefore, online survey will also

be inappropriate for the study.

The data gathered through questionnaire is easy to put in quantitative analysis.

It takes less time to fill up a questionnaire. Therefore, the customers will not be reluctant

in providing accurate data.

A Structured questionnaire will be used in this study to collect data from customers. The

researchers will utilize four different sets of questionnaires to measure the variables. In the

questionnaire, there will be four sections which are service quality, customer satisfaction, trust,

and finally customer loyalty.

Service quality will be measured by using 22 items (Section I, question 1 to 22) developed

by Parasuraman et al. (1988). Questions from 1 to 5 measures the reliability of the service, 6 to 9

determine the empathy, 10 to 12 determine responsiveness, 13 to 17 measures the assurance and

the questions from 18 to 22 determine the tangibility of the organization. This scale was used by

Parasuraman et al. (1988), Carman (1990), Babakus and Boller (1992), Cronin and Taylor

35


(1992), Teas (1993), and Lam and Woo (1997), and has reported the reliability of this variable

exceeded 0.80.

Customer satisfaction will be measured by using 8 items (Section II, question 1 to 8)

developed by Boselie et al. (2002). This scale was used by Boselie et al. (2002) and has reported

of the reliabilities of the items are above 0.70.

Trust will be measured by using 5 items (Section III, question 1 to 5) developed by

Morgan and Hunt (1994). This scale was used by Lau and Lee (1999) and Doney and Cannon

(1997) has reported reliabilities of the items to be above 0.86.

The customer loyalty will be measured by using 12 items (Section IV, question 1 to 12)

developed by Pearson (1996). This scale was used by Souchon, Thirkell, and Too (2002) and has

reported that the reliabilities of the items are above 0.90.

However, for all of these constructs, items are adopted in the context of GrameenPhone in

Bangladesh for the sake of simplicity to measure appropriately, which are developed by the

previous researchers. For all of these variables, the previous researchers have used 5 points

Likert scale starting from 1 for strongly disagree to 5 for strongly agree. Therefore, the

researchers of present study will also use 5 point Likert scale to measure all these variables.

Pilot Test of Questionnaires

According to Cooper and Schindler (2003), a pilot test is conducted to detect weakness in

design and instrument and to provide proxy data for selection of probability samples. The

researchers will conduct a pretest to evaluate all aspects of the questionnaire, including clarity,

bias, question content, wording, sequence, form, layout, question layout, difficulty of the question

and relevance to research variable. Moreover, through pre-testing, the researchers will also

determine the reliability and validity of the questionnaires.

36


The researchers intends to conduct a pretest to evaluate the questionnaire for clarity, bias,

ambiguous and relevance to the organizational setting of GrameenPhone. According to cooper and

Schindler (2001), a group size of pilot testing may vary from 25-100 respondents. Therefore, the

researchers will select 50 customers from a convenient place to conduct the pilot survey. The

researchers will use only 50 respondents in the pilot survey because of time limitations.

Data Collection

To collect data from the primary sources, the researchers will use the questionnaire survey

method. This method is commonly used in consumer surveys to collect data from primary

sources. That means the questionnaire will be distributed among the customers through the

researchers’ friends and relatives (Lau & Ng, 2001). Numerous reasons accounted for the choice

of this research method. First, it allows large amounts of information to be obtained at a

relatively low cost. Second, more accurate responses are obtained because interviewer bias is

avoided. Finally, the number of non-usable questionnaires is reduced because the personal

contacts tend to make respondents more cooperative in completing the questionnaires.

Data Analysis Procedure

First of all, Pearson’s Correlational analysis will be used to find out whether any

relationship exists between the independent and dependent variables. A Correlational analysis is

the statistical tool that can be used to describe the degree to which one variable is linearly related

to another (Levin & Rubin, 1998).

The proposed study is a correlational study therefore after collecting the data the

researchers will use a correlational matrix to identify whether the relationships exist between the

measured variables or not. The researchers are interested in finding out whether the conceptually

37


newer measured variables add anything to the dependent variables compared to older variables.

Stevens (1996) stated that if an investigator wishes to determine whether some conceptually

newer measures add anything to the dependent variables compared to older, it is appropriate to

use stepwise regression. Moreover, the effort to screen out redundant variables during the

model building process and to provide a model in which all variables, individually and

collectively, provide a meaningful contribution toward the explanation of the response variable

(dependent variable) can be accomplished by using a stepwise regression analysis option

(Mendenhall, Reinmuth, & Beaver, 1989).

Hence, stepwise regression will be the most effective tool to analyze the data to find out

whether the conceptually newer measured variables add anything to the dependent variables

compared to older variables.

For the current study, the Statistical Package for Social Science (SPSS) software version

10.0 will be utilized by the researchers as a statistical data analysis tool as it offers greater

feasibility in data analysis and visualization.

Limitations of the Study

There will be numbers of limitations in this study. The sample population will be limited

in terms of size and composition. First, data collection is restricted within Dhaka city only, which

may fail to represent the factual scenario of the relationship between measured variables.

Second, the researchers are only considering the post-paid subscribers of the companies and thus,

are not including the pre-paid subscribers. Finally, there are many other factors which can

influence customer loyalty such as overall corporate image of the company, switching cost, but

the researchers will not consider those because of the simplicity of the research.

38


Significance of the Study

The present study is noteworthy in various aspects. First of all, a previous study was

conducted on some of the measured variables (service quality, customer satisfaction, trust, and

customer loyalty) in Turkey (Aydin et al., 2005). It was not used in the developing countries like

Bangladesh. Furthermore, Ribbink et al. (2004) conducted a research, which attempted to

discover the relationship between service quality and the customer loyalty in Australia. The

proposed study investigates whether correlations exist between service quality, customer

satisfaction, trust, and customer loyalty in GrameenPhone in Bangladesh market. This research

attempts to identify the determinants of customer loyalty towards mobile phone service

organization, GrameenPhone in Bangladesh. This research will reveal whether consumers make

repurchase decisions based on simple heuristic factors such as customer satisfaction, trust, and

service quality. A further issue will be addressed by this study, what are the factors driving

consumer loyalty towards the mobile phone service organization GrameenPhone in Bangladesh.

Hence, the present study will enhance the limited research on the effect of service quality,

customer satisfaction, trust, on customer loyalty towards mobile phone service organization

GrameenPhone in Bangladesh.

The present study will aid the GrameenPhone management to enhance better

understanding about the existing customer needs and wants and always recalls the 20/80 rule

(which is 20% customers bring 80% revenue for the company). Therefore, from the company’s

perspective they would come up with new ways to satisfy the existing customers for example

improving service quality (which is another measured variable in this study). In addition to it,

39


ultimately it will push the customer for repeat purchase, to become regular users i.e., to become

the loyal customer for GrameenPhone.

Research Timeline

2005 September Research Proposal Writing

2005 September Literature Review

2005 September Development of conceptual frame work

2005 October Data collection procedure

2005 October Data analysis and interpretation of the findings

2005 November Final redraft of complete manuscript.

2005 November Submission of research paper

40


Results

Reliability Coefficient and Descriptive Statistics

The reliability coefficients, means and standard deviations of all the constructs in the current

study are displayed in Table 1. The coefficient alphas for the different constructs were computed

using the reliability procedure in SPSS (version 10.0). Nunnally (1978) suggested that for early

stages of any research the reliability of .50-.60 is sufficient. The reliabilities of all the constructs

in this study found to be above the standard set by Nunnally (1978).

Table 3Reliability Coefficient and Descriptive Statistics of Service quality (Reliability,Responsiveness, Assurance, Empathy, and Tangibility), Switching cost, Trust, Customersatisfaction, and Customer loyalty

Scales No of Items Alpha M SD

Reliability 5 .75 4.14 .4957

Responsiveness

3 .69 4.03 .5719

Assurance 5 .68 4.12 .4303

Empathy 4 .75 3.86 .5842

Tangibility 5 .77 4.13 .5023

Customer Satisfaction 8 .78 3.99 .45

Trust 5 .66 4.10 .51

Customer Loyalty 12 .81 4.03 .43

41


N=100

Mean scores have been computed by equally weighting the mean scores of all the items.

On a five-point scale, the mean score for reliability is 4.14 (sd = .49). The mean score for

responsiveness is 4.03 (sd = .57). The mean score for assurance is 4.12 (sd = .43). The mean

score for empathy is 3.86 (sd = .58). The mean score for tangibility is 4.13 (sd = .50). The mean

scores of service quality of GrameenPhone range from 3.86- 4.14 indicating that consumers’

perception about the service quality of GrameenPhone. The mean score for customer satisfaction

is 3.99 (sd = 0.45). It implies that the customers of GrameenPhone are highly satisfied with their

service. The mean score for trust is 4.10 (sd = 0.51). It indicates that the current customers of

GrameenPhone highly trust the company. The mean score for customer loyalty is 4.03 (sd =

0.43). It suggests that these customers are very much loyal with GrameenPhone.

Correlations

Correlation is a bivariate measure of association (strength) of the relationship between two

variables. It varies from 0 (random relationship) to 1 (perfect linear relationship) or

-1 (perfect negative linear relationship). A correlation analysis was conducted on all variables to

explore the relationship between them. The bivariate correlation procedure was subject to a two

tailed of statistical significance at two different levels highly significant (p<.01) and significant

(p<.05).

42


Table 4Correlation Matrix for Service quality (Reliability, Responsiveness, Assurance, Empathy, and Tangibility), Switching cost, Trust, Customer satisfaction, and Customer loyalty

N=100** Correlation is significant at the 0.01 level (2-tailed).

The result of correlation analysis for all the variables is shown in Table 3. It examines the

correlations among reliability, responsiveness, assurance, empathy, tangibility, trust, customer

satisfaction, and customer loyalty of GrameenPhone. The variables, significantly correlated with

Reliability were Customer Loyalty (r = .68, p< .01) showing a strong positive relationship at a

level of .01. Trust (r = .35, p< .01) showing weak but positive relationship at a level of .01.

Customer Satisfaction (r=.57, p< .01), Tangibility (r= .50, p<.01), Assurance (r=.63, p<.01),

REL EMP RES ASU TAN C_S TRU C_L

REL - .57** .50** .63** .50** .57** .35** .68**

EMP - - .65** .60** .59** .60** .32** .68**

RES - - - .67** .66** .53** .38** .59**

ASU - - - - .79** .72** .55** .71**

TAN - - - - - .64** .52** .66**

C_S - - - - - - .39** .76**

TRU - - - - - - - .47**

C_L - - - - - - - -

43


Responsiveness (r= .50, p<.01) and Empathy (r= .57, p<.01) all of the five variables showing a

moderate positive relationship at a level of p<.01 showing high statistical significance. Empathy

was significantly and positively correlated with Customer Loyalty (r = .68, p< .01) and Customer

Satisfaction (r = .60, p< .01) both showing a moderate positive relationship at a level of .01.

Trust (r= .32, p<.01) showing a weak but positive relationship at a level of .01. Responsiveness

was found to have a moderately positive relationship with Customer Satisfaction (r = .53, p< .01)

and Customer Loyalty (r = .60, p< .01) at a level of .01. The variables, significantly correlated

with Assurance were Customer Satisfaction (r = .73, p< .01), and Customer Loyalty (r = .71,

p<.01) both showing a strong positive relationship at a level of .01. In the case Trust was

significantly correlated with Customer Satisfaction (r = .39, p< .01) showing a weak positive

relationship at a level of .01, Customer Loyalty (r =.47, p < .01) and Assurance (r= .55, p<.01)

both showing a moderate relationship at a level of .01. Customer Satisfaction, and Loyalty were

found to have strong positive relationship (r = .76, p< .01) at a level of .01. Tangibility seems

to have moderate positive relationship with both Customer Satisfaction (r =

64, p< .01), and Customer Loyalty (r = .66, p< .01).

Regression Analysis

Multiple regression can establish that a set of independent variables explains a proportion of the

variance in a dependent variable at a significant level (significance test of R2), and can establish

the relative predictive importance of the independent variables (comparing beta weights).

Therefore a Multiple regression analysis was performed to identify the

relationship between Service quality (Reliability, Responsiveness, Assurance,

44


Empathy, Tangibility), Trust and Customer Satisfaction and Loyalty in

GrameenPhone.

Table 5Stepwise Regression on Customer Loyalty

*p<.05, **p<.01, ***p<.001.

Table 5 showing a step wise regression, depicts that in GrameenPhone, Customer Satisfaction

(p<.001), Reliability (p<.001) and Empathy (p<.001) all three showing 99.9% confidence level

Variable B SE B β R² ∆ R

Step 1Customer Satisfaction .725 .063 .757***

.572

Step 2Customer Satisfaction

Reliability.525.320

.069

.063.548***.366***

.662 .09


ReliabilityEmpathy

.427

.243

.190

.071

.064

.055

.445***

.278***

.255***

.699 .037


ReliabilityEmpathy

Trust

.391

.223

.181

.121

.071

.063

.054

.051

.408***

.255***

.244***.145**

.716 .017

45


and Trust (p<.01) showing confidence level at 90%, were found to be significantly associated

with Customer Loyalty. In the first step Customer Satisfaction was found to explain 57%

variation in Customer Loyalty. In the second step, Reliability and Customer Satisfaction were

found to explain 66% variation, therefore Reliability alone is explaining 9% variation in

Customer Loyalty. In the third step Customer Satisfaction, Empathy and Reliability were found to

explain 70% variation, therefore Empathy alone is explaining 3.7% variation in Customer

Loyalty. Finally in the last step Customer Satisfaction, Reliability, Empathy and Trust were found

to explain 71.6% variation, there fore Trust alone is explaining 1.7% variation in Customer

Loyalty. As we can see that Tangibility, Responsiveness and Assurance were excluded from the

regression table as they do not explain significant amount of variation in Customer Loyalty.

Comparison with a Similar Report:

Another similar study on GrameenPhone by Masood Parvez ;A relational Study on

Servive Quality, Switching Cost, Trust, Customer Satisfaction and Customer

Loyalty in the context of GrameedPhone was studies to compare. In his research he

included one more variance that is Switching Cost. The regression table has been provided below:

46


Here we can see a step wise regression done by a similar report on Customer Loyal. Here we see

that the regression was completed in two steps, all the other variables were excluded as they did

not explain significant amount of variation in Customer Loyalty. In our research Empathy and

Reliability is explaining about 13% variation in customer loyalty where as in the similar study it

got excluded. In the above regression table we can see Responsiveness and Trust explains around

32% variation in Customer Loyalty but they did not have Customer Satisfaction as their

independent variable which in our study explained the highest amount of variation in Customer

Loyalty. They have also taken into account Switching Cost, which could have been a deciding

factor for subscribers. This is due to the fact that recently the government of Bangladesh has

added heavy tax on sim-cards and therefore, switching cost could be a deciding factor for many

subscribers.

Assessment of Hypothesis

Hypothesis 1:

Ho: r ≠ 0H1: r > 0

(r = Correlation Coefficient)

There is a significant relationship between Service Quality (Reliability, Responsiveness,

Assurance, Empathy, and Tangibles) and Customer Loyalty in GrameenPhone.

The result of correlation analysis depicts that the significantly correlated variable Reliability with

Customer Loyalty is (r= .68, p< .01). Responsiveness is found to be significantly and positively

correlated with Customer Loyalty (r = .59, p< .01) and it has a moderate positive relation. The

correlation between Assurance and Customer Loyalty (r = .71, p< .01) is showing a positive

47


moderate relationship. Empathy was significantly and positively correlated with Customer

Loyalty (r = .57, p< .01) and it has a moderate positive relation. Tangibility was significantly and

positively correlated with customer loyalty (r = .66, p< .01). So the result of correlation analysis

provided support for hypothesis 1.

The result of stepwise regression depicts that in GrameenPhone Reliability (p<.001), was found

to be statistically significantly related with Customer Loyalty. Responsiveness,

Assurance, Tangibility failed to enter into the regression equation which indicates that they are

not significantly associated with Customer Loyalty. Reliability explained about 7% of the

Customer Loyalty. So the result of stepwise regression analysis provided partial support for

hypothesis 1.

Hypothesis 2:

Ho: r ≠ 0H1: r > 0


There is a significant relationship between Customer Satisfaction and customer Loyalty in

GrameenPhone. The result of correlation analysis depicts that the significantly correlated variable

between Customer Satisfaction and Customer Loyalty is (r = .76, p< .01) showing strong positive

relationship. The result of stepwise regression depicts that in GrameenPhone Customer

Satisfaction (p<.001), was found to be statistically significantly related with Customer Loyalty.

Customer Satisfaction explained about 57% variation in Customer Loyalty. So the result of

correlation and stepwise regression analysis provided complete support for hypothesis 2.

Hypothesis 3:

Ho: r ≠ 0

48


H1: r > 0


There is a significant relationship between trust and customer loyalty in the context of

GrameenPhone in Bangladesh. The variable, Trust significantly correlated with Customer

Loyalty (r = .35, p< .01) showing that there could be positive statistical relationship. With P-

value less than .01, Trust is showing 90% confidence level. The R square is 0.716 for Trust i.e.

Trust is explaining 17% variation in Customer Loyalty. So the result of correlation and stepwise

regression analysis provided complete support for hypothesis 3.

Recommendation

After analyzing the study variables in the context of GrameenPhone, the

following could be recommended:

From the result of regression it was found that Reliability, Empathy, Customer

Satisfaction and Trust are significantly related with the Customer Loyalty.

Therefore, these issues should be most valuable for GrameenPhone and they

should try to maintain if not improve on these fields. Although all the

variables have has an impact on Customer Loyalty, these four are most

valuable for its subscribers. So to ensure better reliability GrameenPhone

should keep their promises and this will generate more loyal customers. The

customer care department and activation authorities should emphasize more

on the responsiveness because if the subscribers find the employees’ late

response to their problems it may make them dissatisfied. Assurance need to

be given some extra care because in telecommunication service, customers

49


seek for confirmation that his/her problem is going to be performed as

promised. Especially in case of post paid customers, who need to be assured

about uninterrupted service. If bills are paid on due date, line should be

connected within a very short time, any kind of discrepancy can affect

customer satisfaction as well as the trust of the subscribers on the company.

Beside the described issues, there are other things that GrameenPhone

should take under consideration. For example to increase the number of user,

the call rate and connection fee should be reduced. Thus, GrameenPhone can

attract the potential subscribers. The reduction of the call rate will increase

the number of actual subscribers and also the usage.

One of GrameenPhone’s strongest points is their customer’s satisfaction

level; it seems that even though there are some discrepancies, the

subscribers are thoroughly satisfied with GrameenPhone. This could be due

to the fact that recently the government has put tax on sim-cards. The

switching cost has increased dramatically and so subscribers are more loyal

to their existing mobile phone operators thus making it easier for

GrameenPhone to retain its customer base. But this will also mean, it will be

tougher for GrameenPhone to induce more subscribers, so GrameenPhone

should try to provide more packages which make their product look more

attractive.

Conclusions

50


In the context of service oriented organization customer satisfaction and

service quality have great importance in the service marketing to ensure the

customer loyalty. Therefore, from this study GrameenPhone can get the

indications on which of the issues they have to pay more attention to hold the

market share, to raise it and to increase the usages.

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Appendix

Research Questionnaire

Survey on GrameenPhone

Purpose of this study is purely academic in nature and the data collected will not be used for any other purpose other than this. All information you declare in this survey will remain

confidential.

What is your name: _________________________

Gender: Male Female

Contact No. ______________

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Section I. Following are some items that ask your opinions about the provided service quality of

“GrameenPhone”. Please circle one number per statement using the following scale:

1. GrameenPhone keeps its promise 1 2 3 4 5

2. GrameenPhone shows sincere interest in solving service problems 1 2 3 4 5

3. GrameenPhone performs the service right the first time 1 2 3 4 5

4. GrameenPhone provides the services at the time it promises to do so 1 2 3 4 5

5. GrameenPhone provides accurate information 1 2 3 4 5

6. GrameenPhone keeps its customers best interest at heart 1 2 3 4 5

7. The employees of GrameenPhone give individual attention 1 2 3 4 5

8. The employees of GrameenPhone give personal attention 1 2 3 4 5

9. GrameenPhone understands customers specific needs 1 2 3 4 5

10. The employees of GrameenPhone give prompt service 1 2 3 4 5

11. GrameenPhone is always willing to help 1 2 3 4 5

12. The employees of GrameenPhone are never too busy to respond to

customer requests 1 2 3 4 5

13. GrameenPhone inspires confidence in customers 1 2 3 4 5

14. The employees of GrameenPhone are consistently courteous 1 2 3 4 5

15. The employees of GrameenPhone have the knowledge

to answer questions 1 2 3 4 5

16. The employees of GrameenPhone make customer feel safe

in service transaction 1 2 3 4 5

17. The employees of GrameenPhone are able to handle customers 1 2 3 4 5

18. The employees of GrameenPhone are neat in their appearance 1 2 3 4 5

19. The equipment of GrameenPhone is up to date 1 2 3 4 5

20. The physical facilities of GrameenPhone are visually appealing 1 2 3 4 5

21. The materials of GrameenPhone are visually appealing 1 2 3 4 5

22. GrameenPhone operates services at a convenient time 1 2 3 4 5

Section II. Following are some questions which assess your satisfaction level of GrameenPhone.

Please circle one number per statement below using the following scale:

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1= Strongly Disagree 2= Disagree 3= Uncertain

4=Agree 5= Strongly Agree


23. GrameenPhone employee’s have the right attitude 1 2 3 4 5

24. GrameenPhone employee’s have enough knowledge 1 2 3 4 5

25. Important appointments are confirmed and documented in GrameenPhone 1 2 3 4 5

26. The invoicing process is good in this organization 1 2 3 4 5

27. GrameenPhone develops the right solution for my problem 1 2 3 4 5

28. From GrameenPhone you get value for your money 1 2 3 4 5

29. Your complaint has been solved rapidly by GrameenPhone 1 2 3 4 5

30. Your complaint has been solved with satisfaction by GrameenPhone 1 2 3 4 5

Section III. Following are some items, which assess your satisfaction at work. Please circle one

number per statement below using the following scale:

31. I trust GrameenPhone 1 2 3 4 5

32. I feel that I can rely on GrameenPhone to serve well 1 2 3 4 5

33. I trust the billing system of GrameenPhone 1 2 3 4 5

34. I believe that I can trust GrameenPhone not cheat me 1 2 3 4 5

35. GrameenPhone is reliable because it is mainly

concerned with customer interest 1 2 3 4 5

Section IV. Following are some questions which assess your loyalty level of GrameenPhone.

Please circle one number per statement below using the following scale:

On my present job, this is how I feel about:

36. I really care about the fate of this organization 1 2 3 4 5

37. I am willing to put in extra effort to get connection from GrameenPhone 1 2 3 4 5

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38. I am proud to tell others that I am a subscriber of GrameenPhone 1 2 3 4 5

39. For me, GrameenPhone is the best option 1 2 3 4 5

40. As long as the service quality is similar I could just as well be buying

from a different store 1 2 3 4 5

41. I am taking this service on a regular basis 1 2 3 4 5

42. This organization stimulates me to take the service repeatedly 1 2 3 4 5

43. I expect to stay with this organization for a long period of time. 1 2 3 4 5

44. As a consumer of this organization, I feel that I am prepared to pay

more for higher quality service 1 2 3 4 5

45. I would recommend this organization to others 1 2 3 4 5

46. I am taking the service for a number of years 1 2 3 4 5

47. I will not take the service from any other organization 1 2 3 4 5

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SPSS (version 10.0) Outputs

72


Regression

73

hrm grameen phone

Documents

north south

internal organisational

human capital

human resource

provide prompt

dependent

promised service

service quality