An Empirical Examination of Customer Retention in Mobile

Telecommunication Services in Australia

Hassan Shakil Bhatti, Ahmad Abareshi and Siddhi Pittayachawan

School of Business IT and Logistics, RMIT University, 445 Swanston Street, Melbourne, Australia

Keywords: Service Quality, Customer Satisfaction, Customer Retention, UTAUT2, ECT, Customer Experience.

Abstract: The service quality has an impact on customer satisfaction and retention. From Telecommunication annual

reports it has been investigated that there are service quality issues due to high complaints in Australia and it

can affect end customers and businesses (TIO, 2013, ACMA, 2013). Factors such as behavioural intention

which leads to customer intention to repurchase the service are measured through the Unified Theory of

Acceptance and Use of Technology (UTAUT2), Marketing Mix Theory and Expectation Confirmation

Theory (ECT). Similarly, researchers have studied the habit, hedonic motivation, customer satisfaction,

customer experience, marketing mix factors relationship by empirical testing. There has been very little

research in the area of customer retention in mobile telecommunication services. Drawing upon theories of

marketing mix, ECT and UTAUT2, this study aims to determine what factors affect customer retention in

mobile telecommunication services in Australia. Data gathering will be done through online surveys from

Australian consumers. Quantitative data analysis techniques, structural equation modelling (SEM) will be

used for data analysis. This study will contribute to the customer retention literature through a theoretical

framework that shows how the customer retention can be generated in mobile telecommunication services.

Additionally, this study will help businesses to have understanding of how to retain their customers which

will result in higher business revenues.

1 INTRODUCTION

The service quality has an impact on customer

satisfaction and retention. Higher complaint rates in

telecommunication annual reports (ACMA, 2013;

TIO, 2013; TIO, 2014) have revealed that there are

service quality issues in this sector in Australia. The

current complaints’ trend can affect mobile customers

and service providers’ businesses. According to

Morgan (2014) there are 16 million mobile phone

customers in Australia. According to Australian

Communication Media Authority (ACMA), mobile

users are as follow;

Table 1: Percentage of Mobile Phone Users (Morgan,

2014).

Mobile

Operators

Telstra Optus Vodafone Others

Market

Percentage

40% 24.8% 20.9% 15.3%

The Telecommunication report TIO (2010) states

that service quality of many telecommunication

operators is very poor due to high number of

complaints, bad customer experiences and customer

satisfaction issue. Service providers are doing service

upgrades and expansions in order to meet these

market challenges. Service providers need to provide

better data services and they need to upgrade

technology from 3G (3rd Generation) to 4G (4th

Generation) mobile technology for provisioning of

faster data services. During the roll-out of network

and services, lack of proper planning leads to poor

customer service to clients (Hopewell, 2014, news,

2012; Taylor, 2013). This can contribute to poor

voice and data services. TIO invoiced Telstra for

$15,273,136 during 2013 for complaint handling fees

(TIO, 2013). Moreover, BigPond was charged an

additional $3,039847 for TIO complaint handling

fees. Optus was invoiced a total of $4,084,414 in

complaint handling fees, AAPT $563,547 and iiNet

just $137,906 (TIO, 2010). Vodafone Hutchison

Australia (VHA) has reported 216,000 customers

leaving the network in the first three months of 2013

(Taylor, 2013). Similarly, Optus had 9.59 million

mobile customers in March 2014, this number

dropped by 160,000 to 9.43 million at the end of first

quarter (News, 2014).

Bhatti, H., Abareshi, A. and Pittayachawan, S.

An Empirical Examination of Customer Retention in Mobile Telecommunication Services in Australia.

DOI: 10.5220/0005951900720077

In Proceedings of the 13th International Joint Conference on e-Business and Telecommunications (ICETE 2016) - Volume 2: ICE-B, pages 72-77

ISBN: 978-989-758-196-0

Hence, TIO and (Australian Communication and

Media Authority) ACMA reports can help in

concluding the difference between customer

expectation and service provider performance. From

TIO and ACMA reports (ACMA, 2013; TIO, 2012;

TIO, 2013), the breakdown of most prominent

complaints are network faults including voice calls,

data and billing issues comprises of 52 percent of

complaints. The remaining 47 percent of complaints

are related to contract issues and VAS (Value added

services). The service failure in service industry is

predictable due to the human involvement in the

service delivery process, which eventually creates

vitality for service providers to obtain complaints

from angry or dissatisfied customers, in order to,

retain them by provisioning of quick recovery option

(Kaur and Sharma, 2015). In today’s cutthroat

competitive environment, negligence in customer

service or service quality can lead to business loss,

which is not affordable in terms of cost of acquiring

new customers. It is important to formulate proactive

strategies to retain customers by determining the

antecedents behind customer complaining behaviour

(Karatepe, 2006; Kaur and Sharma, 2015). This

behaviour is developed with experience and direct or

indirect interaction with service (Meyer and

Schwager, 2007). Customer experience is a term that

explains customer collective incident with service

provider and it also helps to determine the durability

of relationship of that customer with service provider

(Islam and Rima, 2013). This research study attempts

to find out the factors that have a significance

influence on customer retention in telecommunica

tion services.

The current study seeks to develop a framework

to assist business using this extended UTAUT2 model

to improve customer retention in mobile

telecommunication services.

To achieve this objective, the primary question is

formulated:

What are the key factors that influence customer

retention in mobile telecommunication services in

Australia?

Sub-questions are:

1. To what extent do these factors affect customer

retention?

2. What is the influence of age, gender and

experience as a moderating factor between

antecedents and dependent variable in the extended

Unified Theory of Acceptance and Use of

Technology model?

The next section will discuss the literature review.

2 LITERATURE REVIEW

This section reviews prior literature on customer

retention and behavioural intention. Table 2 shows a

summary of this literature review. Customer

acquisition which is acquiring a new customer is most

costly when compared to retaining existing customers

(Edward and Sahadev, 2011). Moreover, customers

can be devoted customers if companies can offer

someone who can understand their journey and needs.

The consequent increase in business revenue is

directly related to customer retention (Edward and

Sahadev, 2011; Santouridis and Trivellas, 2010).

Table 2: A Summary of Previous Literature on Customer

Retention.

Dependant

Variable

Author(s)/Year

Theory Used

Behavioural

Intention

(BI)

(Abubakar and Ahmed,

2013, Chomley, 2014, De

Canniere et al., 2009,

Escobar-Rodríguez and

Carvajal-Trujillo, 2013, Ha

and Jang, 2009, Kuo and

Yen, 2009, Lopez-Nicolas

et al., 2008, Venkatesh et

al., 2012, Wu et al., 2008)

Theory of Planned

Behaviour (TPB),

Technology

Acceptance Model

(TAM), Social

Influence, Social

Impact, Theory of

Reasoned Action

(TRA), Trust

Transference, Theory,

Unified Theory of

Acceptance and Use of

Technology (UTAUT,

UTAUT2)

Customer

Loyalty

(Chang and Chong, 2011,

Chou et al., 2014, Deng et

al., 2010, Liu, Guo et al.,

2011, Olsen, 2002, Van

Vuuren et al., 2013)

TAM, TRA, UTAUT,

Expectation

Confirmation Theory

(ECT)

Intention to

Revisit

(Venkatesh et al.

2003,Venkatesh et al. 2012,

Ghalandhari 2012, Fong

andWong 2015)

TRA, TAM, UTAUT

and UTAUT2

Customer

Retention

(Chatura and Jaideep, 2003,

Edward and Sahadev, 2011,

Kassim, 2006, Ray and

Chiagouris, 2009, Roberts-

Lombard, 2009)

TRA, TAM, Social

Influence and TPB

Continuance

Intention

(Lee, 2010, Liang et al.,

2011, Limayem et al., 2007,

Roca et al., 2006,

Vatanasombut et al., 2008,

Wangpipatwong et al.,

2008, Zhao et al., 2012,

Zhou, 2013)

TRA, TAM, TPB,

ECT and Social

Support

2.1 Customer Retention

Customer retention is discussed as the factor which

helps in maintaining the business relationship

between a supplier and a customer (Gerpott et al.,

2001). This is further discussed in different ways. The

An Empirical Examination of Customer Retention in Mobile Telecommunication Services in Australia

first one is argued as the customer’s extension of

contract with service provider over a period of time.

The second one is emphasized on intention of

customer to repurchase the service in future from

service provider. Moreover, it is further observed that

customer refraining from terminating or leaving the

contract also refers to customer retention (Gerpott et

al., 2001).

It has been argued by Reichheld et al., (1989) that

reducing the defection rate by 5% will generate 85%

profit. In addition to this, more loyal customers are

less likely to switch their service providers due to

billing and pricing factors. Moreover, loyal customers

or retained customers also tend to recommend the

business to other friends, family and social circle

through positive word of mouth (Reichheld et al.,

1989; Santouridis and Trivellas, 2010).

The study will focus on customer retention with

the main focus on factors influencing retention in

telecommunication industry. While the direct effect

of service quality, trust and perceived value on

customer retention has been the main focus of many

previous studies (Zhou, 2013; Zhou and Lu, 2011),

other factors such as social influence, habit, hedonic

motivation, marketing mix factors, and customer

satisfaction relationship and its effect on customer

retention has not been explored with adequate

empirical and theoretical support (Liu et al., 2011).

This study will determine the factors which can

impact the customer retention.

In different studies, relationships among

marketing mix factors, habit, switching barriers,

social influence, customer experience and

behavioural intention which lead to customer loyalty,

continuance usage and relationship commitment have

been examined (Lee et al., 2008; Yadav et al., 2016).

But less attention has been given to customer

retention in the telecommunication service industry.

There is no empirical study to date that has

investigated these factors in a single framework of

study as all the above mentioned studies investigated

relationship with customer retention in a different

framework. Therefore, very little investigation has

been done to identify factors impacting on customer

retention. This study will help to develop a

comprehensive model which will focus on technical

service quality and customer behavioural issues

which can help businesses improve customer

retention. It will also examine retention with the help

of associated factors in the context of

telecommunication mobile services in Australia.

2.2 Behavioural Intention

The main variable of concern for this study is

behavioural intention to determine customer

retention. Previous studies, such as (Abubakar and

Ahmed, 2013; Mandal and McQueen, 2012;

Venkatesh et al., 2012) determined that behavioural

intention is the most significant measure of actual

behaviour. A further study explains that increasing

customer retention, minimising the rate of customer

defections are primary keys to the capability of a

service provider to make profits (Tsai and Huang,

2007). In addition, behavioural intentions are linked

with service provider’s capability to attain new

customers. Therefore, behavioural intention plays a

vital role in customers’ decision to repurchase the

service.

3 THEORETICAL FRAMEWORK

The theoretical framework for this study is based on

the concepts of selected marketing-mix product,

place, promotion, physical evidence, process and

price along with SERVQUAL model which measures

service quality for customer experience, Unified

Theory of Technology Acceptance (UTAUT 2) and

Expectation Confirmation Theory (ECT). The

following section will discuss the detail of these

theories. The marketing mix concept is one of the

core concepts of marketing theory. McCarthy (1960)

explained the concept of basic marketing mix 4P’s

(product, price, promotion and place) in service

industry. These theories were used for the following

reasons: first, these theoretical approaches and this

model will help to investigate customer retention in

mobile telecommunication services as other studies

focus on customers’ intentions to adopt the mobile

technology such as internet, 3rd and 4th generation

mobile service. Secondly, many studies have utilised

different theoretical approaches to study consumer

attitudes in the marketing, e-commerce and e-service

contexts (Lin and Hsieh, 2011; Straub et al., 2004),

yet marketing mix and expectation confirmation

theory has yet to be used to study customer retention

in the mobile service context. These theoretical

approaches have assisted to identify eleven possible

factors and their relationships that influence customer

retention in mobile telecommunication services.

3.1 Proposed Model and Hypotheses

Based on UTAUT 2 model, marketing mix theory,

expectation confirmation theory and previous studies

ICE-B 2016 - International Conference on e-Business

(Venkatesh et al., 2003), the following conceptual

model is proposed. The previous studies (Anaman,

2010) developed customer experience model and

factors affecting customer experience. The

phenomenon of customer retention in light of

customer experience is not very well investigated in

recent studies (Maklan and Klaus, 2011). There is no

single framework which is used to test UTAUT with

customer retention and the factors affecting customer

retention with customer experience. Thus, in this

study age, gender and experience will act as a

moderating factor. Accordingly, this study model has

integrated these constructs along with other

constructs such as customer experience, customer

satisfaction, selected marketing mix factors such as

product price value, behavioural intention, and

UTAUT 2 model factors in order to evaluate

customer retention. The above discussion would lead

to the following conceptual framework and

hypotheses mentioned in Figure 1. There is positive

relationship between the factors is mentioned in

below Figure 1 as hypotheses.

Figure 1: Conceptual Model and Hypothesis.

4 RESEARCH METHODOLOGY

The main drive of the research follows the deductive

method of reasoning. This helps in order to validate

and cover previously agreed hypotheses on

behavioural intention that are very relevant to a

customer purchase intention. This is an essential

characteristic of the positivist paradigm. The

positivist methodology is based on experiments,

hypothesis testing, validity, verifications and

quantitative methods of study. Research questions are

derived from a literature review. The research

instrument for the instrument development process

adopts Churchill’s procedure (Churchill Jr, 1979).

The survey questions are based on existing literature

from previous studies.

This research will focus on all the impacts,

whether technical or behavioural, which can

influence customer retention. In order to achieve the

research objective, a quantitative method will be

employed by utilizing a questionnaire. In this study,

participants will be recruited from all states in

Australia by using marketing company’s databases. It

strengthens the result that can be obtained from a

certain population. The sample size for the main study

is around 2000 (Uma and Roger, 2003). The

conceptual model of this study will be tested using

structural equation modelling (SEM). The SEM

analysis will be used to test the hypothesised

relationships among the factors.

5 CONCLUSION AND FUTURE

WORK

In this study, the underline antecedents of customer

retention will be identified. These antecedents are

based on UTAUT theory, such as behavioural

intention, customer experience, customer

satisfaction, habit, hedonic motivation, social

influence, performance expectancy, effort expectancy

and marketing mix factors. The proposed framework

will be empirically tested from data collection.

Hence, after data analysis, it will be concluded how

these factors affect customer retention in mobile

telecommunication services in Australia. It will help

to decrease customer complaints and improve

customer experience by implementing the

implications derived from this study. It will lead

service providers to improve competitive advantage

and customer retention.

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An Empirical Examination of Customer Retention in Mobile Telecommunication Services in Australia