© Economic Literature, Vol.

XIII (46-54), August 2016 ISSN : 2029-0789(P)

The Impact of Customer Retention Strategies in the Nepalese

GSM Mobile Service Providers: A Case of Pokhara City

Subarna Bir J.B.R.

Abstract
The cellular industry of Nepal has grown by many folds with the influx of more mobile network
providers in the market creating a hyper competition among themselves. Retaining the existing
customers rather than just focusing on the regular market expansion is, therefore, becoming
inevitable for them to sustain. In this realm, this research carried out with the core objective of
identifying and assessing the impact of customer retention strategies adopted by GSM Cellular
Network companies, primarily Ncell & Nepal Telecom within the locality of Pokhara, taking a
sample of 192 network users as respondents within a survey based research design framework,
surfaced some important findings. Five out of the six customer retention strategies so identified:
Service quality, customer care services, price, loyalty enhancement programs and
communications showed an association with the type of network customer use except for other
service facilities which showed no association with the network types. Very few of users from
Pokhara were thinking to switch over to other networks. Internet proved to be the most effective
marketing strategies than other media. Service Quality and loyalty enhancement programs were
found to be the most preferred customer retention strategies by the users of both networks.
Key words: Customer retention strategies, cellular network companies, Service Quality, loyalty
enhancement programs, internet.

1. BACKGROUND
The cellular industry of Nepal is experiencing a phenomenal growth with the mobile
telecommunication penetration rate crossing 100%. As per the Nepal Telecom Authority, MIS
report (2016), the growth rate of mobile telecommunication penetration has reached to 109.65
percent by mid-May, 2016 up from 74.33 percent in mid-October, 2013. This overwhelming
growth has attracted many national and international cellular service providers fueling a fierce
competition in the market. Consequently, cellular companies competing for market supremacy and
profits have also started to focus on customer retention rather than just acquisition and market
expansion. On the flip side, because of such competition among the cellular companies
themselves, it has resulted in the increase in customer benefits, ranging from expanded product
ranges to various tempting promotional offers.

Customer retention programs can be a powerful tool in the arsenal of Customer Relationship
Management. Customer Retention is the activity that a selling organization undertakes in order to
reduce customer defections. Customer retention is more than giving what customers expect but


Mr. J.B.R. is Facutly in Pokhara College of Management. P.U. Pokhara
 The Impact of Customer Retention Strategies in the Nepalese GSM Mobile Service /47

exceeding expectations so that customers become loyal advocates for company’s brands
(Reichheld, 1996).

Fluss (2009) mentions that annual customer attrition rate ranges from seven percent in industries
having high exit barriers such as banking and insurance to almost 40 percent in the mobile phone
industry. It can, thus, be concluded that the customers in cellular industry keep on switching
network providers in expectation of more benefits. Customer retention is an inevitable factor in
determining the success of business such as cellular industry today for of course. In Nepal, cellular
companies today are found to adopt different customer retention strategies in pursuit of continued
relationship with their customers. However, no attempt has been made, either at company level or
academic level, to gauge the effectiveness of those strategies aimed at customer retention. So the
question of how do consumers perceive those strategies appears no less than a riddle to
researchers’ community. Appraisal of the impact made on consumers by these strategies aimed at
customer retention, thus constitutes to be necessary for the sake of customer retention itself.
Otherwise, it may lead either to continuation of customer retention strategies that faintly coincide
with the customer expectations and needs or may also lead to gradual customer defection or
switching over to other network.

Thus it lies in the heart of this study to identify and assess the impact of customer retention
strategies adopted by GSM Cellular Network companies, primarily Ncell & Nepal Telecom within
the locality of Pokhara. Besides it also tries to find out which retention strategies have had the
greatest impact on customer retention. It shall help the cellular companies to identify and focus on
the most important customer retention strategies pertaining to the Nepalese context.

2. LITERATURE REVIEW
Customer Retention
Ramakrishnan (2006) defines customer retention as the marketing goal of preventing customers
from going to the competitor. It is the continuity of the business relations between the customer
and company (Gerpott, Rams and Schindler, 2001). Customer retention is as important as
customer attraction. Lost customers involve high costs. Reichheld and Sasser (1990) assert that it
is five times cheaper to market to retain customer than to acquire new ones. Customer retention
has a direct impact on profitability. A small increase in customer retention could mean a huge
increase in company’s profit. Five percent retention of customer will translate into 35 percent to
95 percent of profits of the organization Reichheld (1996). It is due to this reason that it has
become such a buzz word to companies, especially to marketers.

Exiting Theories on Customer Retention

Mainly, there are four theories regarding customer retention.
The relationship commitment model
Sharma and Patterson (1999) identified communication effectiveness, technical quality, functional
quality and trust as the factors influencing relationship commitment or bonding where the first
three factors have an impact on trust, which in turn positively or negatively influence relationship
commitment. They propose that service quality consists of two components: technical quality and
functional quality. While in cellular telecommunication companies network availability and its
48/ Subarna Bir J.B.R
coverage, clarity of network, easiness of connection are the considerations within technical quality
and this is what is delivered whereas functional quality simply refers to how the service is
delivered. Both of these do affect customer perceived quality and therefore satisfaction.
Therefore, higher the customer perception of technical and functional quality is, higher will be the
trust and customer satisfaction and the relationship commitment (Ibid). The authors argue that the
greater the communication effectiveness is, the stronger is the relationship commitment. (Ibid)

Holistic Approach to Satisfaction, Trust, and Switching Barrier

This theory as proposed by Ranaweera and Prabhu (2003) looks at the combined effects of
satisfaction, trust and switching barriers on customer retention. Independent as well as combined
effects on customer retention are being analyzed in this approach. The authors here proclaims that
the higher is the customer satisfaction the higher is the retention. Firms, therefore, should devote a
lot of efforts on managing and increasing the customer satisfaction (Ranaweera and Prabhu 2003).
Regarding trust, the authors are of the view that satisfaction alone is not sufficient to retain
customer, a trust is to be built in between the customer and the provider which ultimately
decreases the probability of each party ending the relationship. On switching barriers, the authors
argue that the higher the level of perceived switching cost is, the higher is the probability for the
customers to remain.

The Conversion Model

Reichheld (1996) proposes that although satisfaction remains the basis for customer retention, it is
not enough to retain customers, on its own, as satisfied customers may defect. Customer loyalty is
what matters the most, the highest degree of customer commitment to a relationship. Reichheld
(1996), identifies three factors that he believed influences commitment which are; level of
customer involvement in the search process; attraction of alternatives –that is how customers
compare firm’s offers with that of competitor and the extent of ambivalence. If customers perceive
competitors’ offers as having better value they will switch to competitors’ products. The other
factor identified is extent of ambivalence, which is the state when the customer is not completely
converted to the firm’s products, and is dissatisfied with some aspect of the product. They are not
sure of what to do. At this stage customers will either leave or stay. It is time that the firm puts in
place recovery system; one that tracks customer complaints and addresses them immediately. In
retention strategies it is best to learn from the lost customer (reasons for defection) and improve
your offers for the remaining customers (Reichheld, 1996).

Holistic Approach by Ranaweera and Neely (2003)

Ranaweera and Neely (2003) came up with a holistic approach to customer retention and the
factors influencing it: service quality perceptions, price perception, customer indifference and
inertia. The authors support the positive relationship between perceived service quality and
customer repurchase intentions. They concluded that customers may place a greater importance on
quality of the service rather than on the cost of acquiring that service. On price the authors hold
the hypothesis that better the perceived price is, the greater is the level of repurchase intentions.
Ranaweera and Neely (2003) further argue that the higher level of inertia (a non-conscious form of
retention) is, the greater is the level of repurchase intentions. Finally, the authors propose that the
 The Impact of Customer Retention Strategies in the Nepalese GSM Mobile Service /49

higher the level of customer indifference -neither positive nor negative perceptions of services- is,
the greater is the level of repurchase intentions.

Customer satisfaction
Oliver (1992) states that satisfaction is a consumer’s post-purchase evaluation and affective
response to the overall product or service experience. Customer satisfaction is the necessary
foundation for the company to retain the existing customers. The customers who are unsatisfied
with the received services would not be expected to have long run relationships with the company
(Lin & Wu, 2011).

Drivers of customer retention and strategies

Based on the above discussed theories and literature reviews, following customer retention
strategies have been identified as the variables for study:
Service Quality: Network providers should meet or exceed customer expectations on service
quality offered to make it easy for them to retain those customers and it is those delighted
customer who will retain.
Customer Care Services: It is another strategy that involves constant communication with
customers, handling their complaints and queries, rendering prompt help and being visible.
Price: It is the major determinant of customer choice. The price charged on the product determines
it’s affordability as well as the repurchase intention. It should be transparent too.
Other facilities: It includes the product range and convenience being offered as per the customer
needs. It reduces customer search costs and acts as a one stop shop concept. Other services
facilities could be internet access, utility bills payment & banking services, money transfers etc. It
creates value to the existing customer.
Loyalty Enhancement Programs: It refers to the loyalty schemes: a reward to customers for their
patronage. It offers both financial and social benefits to the customers. Examples are bonus
balances, free minutes, free SMS, occasion packages, call loan & tariff incentives etc.
Communication: Through effective communication mechanism and strategies, exiting customers
are communicated about promotional updates and service offers to encourage trails and rebuy
behavior.

3. DATA AND METHODS

The study followed a survey research design and was based solely on the primary data collected
from the Pokhara city. A total of 200 respondents were distributed with self-administered close
ended questionnaires, out of which 192 questionnaires were found useful enough for the study
purpose. Descriptive and inferential statistics were used for presenting and analyzing the collected
data with the help of SPSS 21 and MS-Excel 2013. Chi-square statistic was applied to test the
existence of relationship between variables studied and the network types. Simple random
sampling was used with regard to the type of inferential statistics being used.
50/ Subarna Bir J.B.R
4. RESULTS AND DISCUSSIONS
A greater number of respondents were found using Ncell network that totaled to 44.3% made
evident by the above Table 1. But since there is also a number of subscribers possessing both
Ncell & NTC, the total subscription for Ncell network is 56.3% whereas for NTC is 43.8%.

Table 1: Types of GSM Cellular Network Used by Respondents

Networks Possessed Frequency Percent
NTC 55 28.6
Ncell 85 44.3
Both (NTC & Ncell) 52 27.1
(NTC=29, Ncell=23)
Total 192 100.0

Table 2 shows the users’ customer satisfactions ratings toward their network which reveals that
Ncell users are slightly more satisfied in comparison to those of NTC users as visually indicated
by the Figure 1 also. However, there is no statistically significant relationship between the levels
of satisfaction and the type of network that the customer are using (Chi-square with 4 degree of
freedom = 0.028, p = 1.000).

Table 2: Respondents who are Satisfied with Their Network and the Chi-Square tests.
Networ Customer Ratings Row Test Statistics
k 1 2 3 4 5 Total Chi-Square DF Significanc
Value e
NTC 6 4 19 48 7 84
3.1% 2.1 9.9 25% 3.6 43.8%
% % %
Ncell 6 11 31 54 6 108
3.633 4 0.467
3.1% 5.7 16. 28% 3.1 56.3%
% 1% %
Total 12 15 50 102 13 192
100%
Note: Customer Ratings 1 = Highly Dissatisfied & 5 = Highly Satisfied. Source: Field Survey
2016
 The Impact of Customer Retention Strategies in the Nepalese GSM Mobile Service /51

28
Level of Satisfaction in 30 25
25
Percent
20 16.1
15 9.9
10 5.7 3.6 3.1
3.1 3.1 2.1
5
0
1 2 3 4 5

Customer Ratings
NTC Ncell
Figure 1: Respondents who are Satisfied with Their Network.
The Table 3 below shows the observed frequencies and the calculated expected frequencies for the
various customer retentions strategies so identified and a chi-square value calculated for each of
the six variables. The chi-square test revealed that user’s perception towards their network’s
service quality, customer care service, pricing, loyalty enhancement programs and communication
are associated with the type of network they are using. Since, chi-square statistics is significant at
0.10 level of significance with p = 0.090, it is observed that there exists an association between
service quality and the type of network being used by the customer. Service quality of the network
has an impact on customer retention. In support of this findings, Sharma and Peterson (1999)
found that higher the customer perception of technical and functional quality, the higher the trust
and customer satisfaction and the relationship commitment.
Further, this study also discloses that customer care services offered to the users is associated with
the type of network being adopted by them (Chi-square with 4 degree of freedom = 8.938, p =
0.061 significant at 0.10). Customer care services is critical to the retention process and this is
shown by the fact that customers whose complaints have been effectively resolved are most likely
to be retained by almost 95% than those who complaints are not addressed (Zeithaml et al. ,
1996).
A relationship between the price and the type of network chosen is seen significant as per the test
statistics (p<0.05). Rahman et al., (2010), in a study of the Malaysian telecommunication market,
observed that price/rate is a significant contributor in the decision of mobile users in selecting a
mobile operator. Further, from Table 3 it is seen that statistically there exists a highly significant
relationship between the type of network used and the perception towards the loyalty enhancement
programs offered by them to its users. Loyalty enhancement programs tend to reduce customers’
propensity to switch brands (Kotler, 2009). Another revelation about the study is the existence of a
strong association between the type of network and the efficacy of the network while
communicating various promotional offers & schemes to its users. For any relation to thrive,
communication is critical where the parties need to make a decision on who to communicate with,
the amount and type of information to communication (what) and how often they need to
communicate (Gummerson, 2008).
On the basis of test statistics, it can be argued that apart from these differences, there is
homogeneity in the perceptions as held by the customers among these two GSM mobile operators
in terms of other service facilities such as internet access, banking & utility payment services
being offered.
 52/ Subarna Bir J.B.R
Table 3: Customer Retention Strategies and Chi-Square Test
Customer Customer Ratings Test Statistics
Netw Row
Retention Chi-Square level of
ork f 1 2 3 4 5 Total DF
Strategies Value Significance
NTC Observed 6 8 30 33 7 84
Service Quality Expected 3.5 5.7 26.7 39.8 8.3 84
8.018 4 0.090*
Ncell Observed 2 5 31 58 12 108
Expected 4.5 7.3 34.3 51.2 10.7 108
NTC Observed 6 14 33 26 5 84
Customer Care Expected 4.4 10.5 28.4 35.4 5.3 84
8.938 4 0.061*
Ncell Observed 4 10 32 55 7 108
Expected 5.6 13.5 36.6 45.6 6.8 108
NTC Observed 4 16 27 31 6 84
Pricing Expected 7.4 18.8 29.8 24.5 3.5 84
10.264 4 0.034**
Ncell Observed 13 27 41 25 2 108
Expected 9.6 24.2 38.3 31.5 4.5 108
NTC Observed 4 15 25 35 5 84
Other Service
Expected 2.6 11.4 24.1 38.9 7 84
Facility 5.123 4 0.282
Ncell Observed 2 11 30 54 11 108
Expected 3.4 14.6 30.8 50.1 9.0 108
Loyalty NTC Observed 11 31 29 11 2 84
Enhancement Expected 5.7 16.2 21.4 28.4 12.3 84
71.917 4 0.000**
Program Ncell Observed 2 6 20 54 26 108
Expected 7.3 20.8 27.6 36.6 15.8 108
NTC Observed 7 21 22 29 5 84
Communication Expected 5.3 14.9 20.6 35.4 7.9 84
9.644 4 0.046**
Ncell Observed 5 13 25 52 13 108
Expected 6.8 19.1 26.4 45.6 10.1 108
Note: * Significant at the 0.0 level ** Significant at the 0.05 level
Source: Field Survey 2016
When asked which best methods could be best adopted by the GSM mobile network providers to
maintain an continued relationship with their customers, the majority of the NTC respondents
considered quality of service (92.9%), loyalty enhancement programs (92.9%) and customer care
services (89.3%) as the best methods to retain them whereas in the case of Ncell users it was
loyalty enhancement program (88.9%), then it was price (83.3%) and service quality (81.3%).

Access to information about the products/service plays a central role in customer retention. Some
interesting fact surfaced when customer were asked about where they got information about the
GSM mobile networks different services they used, the majority of the users from either of the
network indicated that they got the information about their network from internet as indicated in
Table 5 even though many respondents got this information from more than one source.

Study found that only a handful of the respondents from either of the network (NTC 14.6%, Ncell
15.7%) were thinking to switch over to other GSM mobile network. However, the network
providers should be vigilant enough to keep these figures from mounting up and prevent the
potential customer defections in future.
 The Impact of Customer Retention Strategies in the Nepalese GSM Mobile Service /53

Table 5: Descriptive Statistics

Preferred Customer Retention Strategies NTC Percent of Ncell Percent of
Total Total
Service Quality 78 92.9 88 81.5
Customer Care Services 75 89.3 70 64.5
Loyalty Enhancement Programs 78 92.9 96 88.9
Price 68 81 90 83.3
Communication of offers & services 61 72.6 67 62
Other Service Facilities 69 82.1 77 71.3
Promotional Information Obtained From
Television/Radio 17 20.7 32 29.6
Internet 40 48.8 39 36.1
Newspaper 14 17.1 25 23.2
Billboards 11 13.4 12 11.1
Total 82 100 108 100
Switch Over to Other Networks
Yes 12 14.6 17 15.7
No 70 85.4 91 84.3
Total 82 100 108 100
Recharge Amount/Week
Below Rs. 100 27 37.5 24 23.5
Rs. 100 – Rs. 200 29 40.3 39 45.1
Above Rs. 200 16 22.2 32 31.4
Total 73 100 102 100
Source: Field Survey 2016
When it came to amount of money recharged per week, a significant customer contribution in line
with Customer Lifetime Value (CLV) was to be seen as majority of respondents from both NTC
as well as Ncell recharged from Rs.100 to Rs 200 per week however the figure was much more
pronounced among Ncell users (45.1%).

5. CONCLUSION
The purpose of this research study was to identify the customer retention strategies that are being
currently employed by the GSM Mobile Service Companies (NTC and Ncell) in Pokhara and to
evaluate the effectiveness of the strategies from the viewpoint of customers. Six independent
variables were examined as customer retention strategies such as service quality, customer care,
pricing, other service facilities, loyalty enhancement programs and communication. Result
indicated that variables such as service quality, customer care services, pricing, loyalty
enhancement programs and communication showed an association with the type of network - NTC
or Ncell- used by the customers. However, homogeneity in the perceptions was observed among
the customers of either of the GSM cellphone networks towards the other facilities so offered.
Provision of quality services, loyalty enhancement programs and customer care service were
considered by the NTC network as an effective customer retention strategies whereas Ncell users
preferred loyalty enhancement programs, price factor and service quality as critical factors that
54/ Subarna Bir J.B.R
affect the quality of company-customer relationship. Results show that the customer satisfaction is
not linked with the type of networks the respondents might be using. Type of network did not
determine the level of customer satisfaction. Besides, customers in trivial number thought of
switching over to other networks signifying that majority of the network users are content and
satisfied in a way or the other with their respective cellular network. Study singled out internet as
the most effective marketing strategies than other media employed by the different network
providers.

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