Abstract/Summary

The study examines the relationships between antecedents of customer satisfaction and customer loyalty, and between satisfaction and loyalty itself, in the mobile phone industry in Canada. This industry is highly competitive, with customer loyalty (measured as percentage of a company’s customers that deactivate their service or “churn” each month) a key metric impacting the firm’s financial performance and performance within the public investment market. While research over the past 40 plus years provides support for the existence of the relationships noted previously, there are few studies that empirically prove a causal relationship. As a result, practitioners face the challenge of not always knowing if their investments to improve customer satisfaction are the right investments to drive causal improvements in that metric, or ultimately, in customer loyalty. Mobile service providers spend almost 15% of their revenues on costs associated with retaining customers, and a further 10% replacing those that do leave. A randomized controlled trial (RCT) is conducted as a field study over twelve months with 35,000 mobile phone subscribers, a study design not seen in prior research. Three treatments are designed and applied to a factorized set of treatment groups; these treatments are based on antecedents identified in prior research, and include treatments based on Perception of Value, Perception of Service, and Frustration with Marketing Communications. The study design measures the impact of these treatments on loyalty on a monthly basis throughout the trial, and the impact on customer satisfaction is measured cumulatively at the end of twelve months. Analysis is conducted primarily through linear regression supplemented by logistic and probit regressions, and other statistical techniques as appropriate. The results of the study provide support for the positive relationship between the antecedents employed in the RCT and customer satisfaction but does not establish an ability to causally influence those antecedents - or customer satisfaction - through the use of the treatments. Evidence is found to support a causal relationship between the treatment reducing the frequency of marketing messaging on participant Frustration with Marketing Messaging, and of a causal relationship between the combination of two treatments (reduction in marketing messaging and a monetary discount) on loyalty. A cost/benefit analysis of these treatments and the accompanying benefit of increased loyalty indicates that companies can increase the lifetime value of their customers through broader deployment of the indicated treatments.