CHAPTER ONE

INTRODUCTION

1.1 Introduction

This study is organized into five distinct chapters. Chapter one introduces the study by looking at

the Background Information, problem statement questions of the research, objectives of the

study, hypotheses of the study, scope of the study, Significance of the study, definition of terms

and organisation of the study. Chapter two deals with a critical analysis of prior related literature.

What prior researchers had written about the said problem, stating out clearly their findings and

the conclusions drawn by them. This is embodied in the Conceptual Framework, the Theoretical

framework and Empirical Framework. Chapter three looks at the methodology of the problem

under study, comprising the Background of study area, the Research Design and Methods of

Data Collection, the Estimation Framework, Techniques of Data Analysis and Validations

ending with the Limitations of the Study. In Chapter four the researcher deals with the

presentation of the findings and the analysis of the data collected, bringing out clearly the

interpretation of the data collected hence, discussion of the results. Finally, chapter five deals

with the summary of the results obtained, drawing conclusions on the results and

recommendations for policy analysis alongside the recommendations for further studies. This

study will end with references followed by appendices.

1.2 Background of the Study

It is clear that customer is the only source of the companies’ present profit and future growth.

And also creating loyal customers is at the heart of every business (Keller and Kotler, 2012).

Customers are central to all marketing activities all over the world. Success and in turn profit is

not unthinkable without customers. Moreover, companies incur millions of dollars to attract

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customers and make them loyal. As the competitive environment becomes more turbulent, the

most important issue the sellers face is no longer to provide excellent, good quality products or

services, but also to keep loyal customers who will contribute long-term profit to organizations

(Tseng, 2007). To compete in such overcrowded and interactive marketplace, marketers are

forced to look beyond the traditional 4Ps of marketing strategy, which are no longer enough to

be implemented for achieving competitive advantage. Therefore, relationship marketing has

become an alternative means for organizations to build strong, ongoing associations with their

customers. As a part of marketing strategy, relationship marketing seek to acquire and retain

customers by providing good quality customer services, and therefore has become one of the

keys to success in acquiring strong competitiveness in the present markets, because of its

implications for access to markets, generation of repeat purchase, creation of exit barriers, and

the view that it benefits all parties (Andaleeb, 1996).

Acquisition and retention of new clients are one of the most significant concerns of business;

the telecommunication service industry is no exception to this. Yankee group, (2001), indicated

that mobile operators approximate seven times higher cost of acquiring new client on

retaining existing clients on an average basis. Normally, mobile operators in dynamic

technological environment find it inexpensive to retain their customer base rather than

simulating strategies to acquire them. While recipient companies concentrate on acquiring

new customers, mature ones try to focus on retention of the existing ones in order to provide

themselves with the opportunity of cross-selling and as such gain competitive advantage (Lin

and Wang 2006). This is strongly backed by the fact that one of the most significant ways of

increasing customer’s value is to keep them for longer period of time. Due to the above stated

fact, in order to retain customers a general problem is posed; which consist of knowing the

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factors that essentially influence customer loyalty to a given company?, It is as a result of the

above stated problem that we deem it necessary to carry out this research.

Relationship marketing has received much attention in both academy and practice areas in the

last few decades. It was during the last decade of the 20 th century that relationship marketing

began to dominate the marketing field (Egan, 2001). During this period relationship marketing

became a major trend in marketing and management business. Relationship marketing is

concerned about building customer loyalty by providing value to all the parties involved in the

relational exchanges (Peng and Wang, 2006), as customer loyalty is the final goal of

relationship marketing. Buyers and sellers in markets achieve mutual benefits through

developing relationships, which are not simple that a customer is 100 per cent loyal to a vendor

(Stone & Woodcock &Machtynger, 2000). There are often switching behaviors occurred in

different stages of a partnership relationship. Relationship marketing tactics are thus approaches

to apply relationship marketing in practice (Tseng, 2007). Effective customer-oriented

relationship marketing tactics may help marketers to acquire customers, keep customers, and

maximize customer profitability, and finally build up customer loyalty.

The telecommunication industry is becoming one of the most important industries in the world.

The telecommunication industry delivers voice communications, data, graphics, and video at

ever increasing speeds. Telecommunication influences the world economy and the

telecommunication industry’s revenue was estimated to be $1.2 trillion in 2006. The

competition is also becoming more and more sharp. In order to obtain sustainable competitive

advantage, telecommunication firms are forced to make innovation and do the best for customer

satisfaction. Due to this, customer relationship marketing plays an important role in

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telecommunication industry. It demands a relationship-oriented strategy in marketing

(Grönroos, 2004).

The telecommunication industry is one of the key industries for all economies and plays a

significant role for socio-economic development. This industry over the past years has

witnessed tremendous growth facilitated by technological advancements. Lives have been

changed from the use of cloud services, social media (Tichafa & Nyoni, 2017), mobile payment,

mobile number portability, the internet, broadband and still there is much more coming in terms

of technological change and investments in 4G and beyond, connected objects, artificial

intelligence, big data analytics, virtual reality and much more (Balaji, 2017). Fierce competition

has forced the telecommunication companies to focus on creating lasting relationships with their

customers so as to get insight on their desires in order to improve their delivery. For the

telecommunication companies to achieve this they have to move from applying the traditional

marketing mix to applying relationship marketing practices (Ali Raza, 2012).

Living as we do in the second decade of the twenty first century, good

telecommunication has become an essential requirement to sustain high performance and

quality of life. In Africa telecommunications has expanded exponentially over the last

decade and will continue to do so during this decade, Cameroon in particular has

experienced a growth of about 34.53% in its teledensity. Ali et al., (2010); 1.53% above

continent’s average Ondiege P. (2010). Mobile phones have become the quintessential means of

communication, not just for social purposes, but also for work. The process of restructuring

Cameroon’s telecommunication sector truly got under way in June 1995, when the authorities

decided thoroughly to reform network industry sectors such as water, electricity and

telecommunications with a view to creating a favorable environment in which to develop their

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infrastructure and services and thus to satisfy increasingly exigent demand. The process took the

form of liberalization, State withdrawal from the sectors concerned and the establishment of a

market structure enabling Cameroon to remain in step with the especially rapid global

developments in the telecommunication sector; indeed, in spite of the investments made, the

coverage rate and quality of service offered had remained largely inadequate.

The Cameroon Telecom sector is passing through a dynamic transitional phase, as it is clearly

undergoing the operation of market forces of demand and supply. The sovereignty of consumers

is quite evident through their revealed preference in favor of economically rational decisions.

Therefore, the task facing the managers in telecom sector is to focus on those activities that

result in meeting or exceeding customer expectations. Moreover, the forces of liberalization

and globalization of telecommunication market have pressurized the companies to maintain

their market share by focusing on retaining their current customer. They are being increasingly

confronted with the challenges to attract their subscribers by providing high quality of services.

With the increase in the cost of acquisition of new customers, cellular mobile companies

continually seek new ways to acquire retain and increase their subscriber base. Thus the ability

to retain existing customer is increasingly crucial in this industry. This is possible only by

effective relationship marketing. It is as a result of the above stated background that we deem it

necessary to carry out our research on the topic: “the effect of relationship marketing on

custome loyalty in Cameroonian telecommunication companies”.

1.3Problem Statement

Cameroon telecommunication environment has now been regulated to increase customer

involvement and flexibility. The presence of intense price competition, interoperability, mobile

number portability and expansion to the rural areas means that customers can easily switch from

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one mobile network operator to another. The switching costs have thus become low making it

very easy to switch from one network to another. Other benefits to the customers apart from the

low switching costs include better quality services, low prices, more alternatives and creative

innovations, hence the need for relationship marketing management.

On the other hand, from the telecommunication companies’ standpoint, such factors mean stiff

competition, customer defection and a decline in average revenue per user (ARPU). Low

switching costs may not necessarily lead to customer defection as customer value and good

corporate image may compel the customers to remain loyal. Moreover customers have a

tendency of maintaining multiple subscriptions thus making switching costs not a direct driver

towards customer loyalty. With these prevailing market conditions, it is important that the

fundamental marketing strategy or strategies should focus on retaining customers by enhancing

customer loyalty and perceived value.

With that being said, the ongoing increase of threat of defecting customers in the cameroon

telecommunication companies has driven such companies to use various tactics often times,

similar or copied tactics, such as free minutes, promotions, and discounted bundled offerings to

sweeten their offerings and lock-in customers. Furthermore, some studies such as that of

Saungweme et al., (2010) show that the one size fits all approach regarding relationship

marketing practice does not always apply to all large and small businesses, small and medium

sized service firms or all economies.

With such a business environment, where little has been documented about relationship

marketing and given all the benefits of relationship marketing it would be ideal to find out

whether these practices can offer some solutions to the prevailing challenges in the

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telecommunications industry. Hence, this will focus in establishing the effect of relationship

marketing on customer loyalty in Cameroonian telecommunication companies.

1.4 Research Questions

1.4.1 Main Question

What is the effect of relationship marketing on customer loyalty in Cameroonian

telecommunication companies?

1.4.2 Specific Questions

a) To what extent does trust affect customer loyalty in telecommunication companies in Fako?

b) How does commitment affect customer loyalty in telecommunication companies in Fako?

c) How does conflict handling affect customer loyalty in telecommunication companies in

Fako?

d) To what extent does communication affects customer loyalty in telecommunication

companies in Fako?

1.5 Objectives of the Study

1.5.1 Main Objectives

The general objective of the study is to investigate the effect of relationship marketing on

customer value creation and loyalty in the telecommunication companies in Cameroon.

1.5.2 Specific Objectives

a) To establish the effect of trust on customer loyalty in telecommunication companies in

Fako.

b) To determine the effect of commitment on customer loyalty in telecommunication

companies in Fako.

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c) To analyze the extent to which conflict handling affects customer loyalty in

telecommunication companies in Fako.

d) To investigate the effect of communication on customer loyalty in telecommunication

companies in Fako.

1.6 Hypothesis of the Study

H1: Trust has a significant and positive effect on customer loyalty in telecommunication

companies in Fako.

H2: Commitment has a significant and positive effect on customer loyalty in telecommunication

companies in Fako.

H3: Conflict handling has a significant and positive effect on customer loyalty in

telecommunication companies in Fako.

H4: Communication has a significant and positive effect on customer loyalty in

telecommunication companies in Fako.

1.7 Scope of the Study

The study focuses on conducting an effect analysis of relationship marketing on customer loyalty

in the telecommunication companies in Cameroon. The study will target the customers of the

major telecommunication companies operating in Cameroon.

The study is conducted in Cameroon specifically in Fako division. This study targeted customer

of MTN, Nexttel and Orange.

This study is carryout within the timeframe specified by the University of Buea

1.8 Significance of the Study

The outcome of this study will give a general understanding on how the trust, commitment,

communication and conflict handling influence the loyalty of the customers in the Cameroon

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telecommunication industry. The study will also recommend other areas of research based on the

findings to fill in the information gap within this area. Apart from contributing to a general body

of knowledge, the findings will act as point of reference for future studies within the RM field.

Results of the study will have utmost importance to the Mobile Network Operators and the

telecommunication regulatory authority especially in regards to policy formulation. The study

will reveal and hence provide information to the management on how to adjust and effectively

institute effective policies and strategies on customer relationship marketing and effective ways

of achieving customer loyalty and customer value creation.

The Telecommunications sector on the other hand will be equipped with relevant information

regarding how relationship marketing influences customer loyalty amongst the Mobile Network

Operators on Cameroon and which dimensions are more important than others.

1.9 Operational Definition of Concepts

Relationship marketing: it is a philosophy of doing business, a strategic orientation that focuses

on keeping and improving current customers rather than on acquiring new customers (Zeithaml

and Bitner, 2003).

Trust: it is partners‘confidence in an exchange partners reliability and integrity (Morgan and

Hunt, 1994).

Commitment: it is an enduring desire to maintain a valued relationship (Morgan and Hunt,

1994).

Conflict: it is the overall level of disagreement between exchange partners (Palmatier, 2008).

Communication is the amount, frequency, and quality of information shared between exchange

parties (Palmatier, 2008).

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Customer loyalty: it is a buyer‘s overall attachment or deep commitment to a product, service,

brand, or organization (Oliver, 1999).

Customer value creation: On the other hand value creation simply means the ability of any

organization to satisfy the needs of the customer on comparatively lower cost at higher benefit

than that offered by competitors. (Holbrook 1996).

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