University of Education Lahore, Multan Campus

Student Name : Ahmad Madni

Roll No: BSF2005091
Department: BBA
Semester: 8th Morning
Submitted to: Maam Samavia
Topic: What Makes Customers Brand Loyal: A Study on
Telecommunication
Sector of Pakistan
Abstract

Recent research has placed significant emphasis on the concept of loyalty within the services sector,
particularly in the telecommunications industry, where brand loyalty is becoming increasingly
important. Recognizing this, there is a pressing need for the development of a comprehensive brand
loyalty model. This study seeks to address this gap by proposing and testing a model that encompasses
various factors contributing to brand loyalty, namely service quality, satisfaction, trust, and
commitment. Through both pilot and main studies involving a sample of 475 customers of cellular
network providers, the research confirms that service quality holds utmost importance in the mobile
phone network market and exhibits an indirect positive relationship with brand loyalty when
considered alongside satisfaction. Given the competitive nature of the telecommunications sector,
where customer retention is paramount, it is imperative for operators to implement well-designed
customer loyalty programs to safeguard their customer base.

Keywords: Brand loyalty, services sector, service quality, satisfaction, trust, commitment,
telecommunications.
 1. Introduction
1.1. Background

Over the past forty years, brand loyalty has garnered significant attention within marketing literature
and among industry practitioners, being acknowledged as a vital component in establishing and
upholding brand equity (Aaker, 2018). Extensive analyses indicate that fostering brand loyalty can
substantially reduce marketing expenditures, with statistics demonstrating a six-fold lower cost for
customer retention compared to customer acquisition. This underscores the inherent value of brand
loyalty, as evidenced by the tendency of loyal customers to exhibit reduced decision-making
involvement and an increased willingness to pay premium prices for favored brands (Rundle-Theile
& Bennett, 2021; Reichheld, 2022).

In the realm of service-oriented sectors, such as telecommunications, the concept of brand loyalty
assumes even greater significance due to heightened competition and the relative lack of product
differentiation (Santouridis & Trivellas, 2019). Consequently, companies within this dynamic
environment must strive to meet and exceed customer expectations through the delivery of
exceptional services. Notably, brand loyalty has emerged as a focal point within the
telecommunications sector, with numerous international studies exploring its implications across
various markets, including France, South Africa, Turkey, the USA, South Korea, and Greece (Van der
Wal, Pampallis & Bond, 2019)

1.2. Significance

This study aims to elucidate the key determinants of brand loyalty within the telecommunications
sector, particularly focusing on cellular networks in Pakistan. The primary objective is to develop and
validate a comprehensive model delineating the antecedents of brand loyalty in this service-driven
industry. Drawing from prior research and literature, the proposed model incorporates factors such as
service quality, customer satisfaction, trust, and commitment, all of which are posited to influence
brand loyalty significantly. Notably, service quality has been identified as a critical aspect of services
management and marketing, with perceptions of service quality directly impacting customer
retention rates (Clottey, Collier & Stodrick, 2021). Similarly, satisfaction has long been recognized as
a central tenet of marketing strategies, influencing future purchase behavior and fostering brand
affinity. Moreover, emerging research suggests strong links between trust, commitment, and brand
loyalty, with trust fostering positive brand attitudes and commitment engendering long-term loyalty
(Delgado-Bullester & Munura-Aleman, 2022).

1.3. Research Objectives

1. To develop a comprehensive model elucidating the potential antecedents of brand loyalty within
Pakistan's cellular network market.
2. To empirically validate the proposed model by examining the relationships between service
quality, satisfaction, trust, commitment, and brand loyalty (Kumar, 2019).

1.4. Research Questions

1. What are the key determinants influencing brand loyalty within Pakistan's cellular network
market?
2. How do variables such as service quality, customer satisfaction, trust, and commitment contribute
to brand loyalty in this context (Chaudhuri & Holbrook, 2020)?

1.5. Theoretical Implications

This study aims to contribute to the theoretical understanding of brand loyalty dynamics within the
telecommunications sector, providing valuable insights into the factors influencing customer loyalty
in service-oriented industries. By examining the relationships between various antecedents and brand
loyalty, the research seeks to advance theoretical frameworks in marketing and consumer behavior
(Morgan & Hunt, 2019).

1.6. Practical Implications

The findings of this study hold practical implications for cellular network operators in Pakistan,
offering actionable insights into developing effective marketing strategies aimed at fostering stronger
customer relationships and enhancing brand loyalty. Additionally, the research may inform decision-
making processes related to service quality enhancement and customer retention initiatives,
ultimately contributing to the long-term success and competitiveness of telecommunications
companies operating in Pakistan (Rust et al., 2021).

1.7. Contribution
This research contributes to the existing body of knowledge by providing insights into the
determinants of brand loyalty within the dynamic landscape of Pakistan's telecommunications sector.
By focusing on a specific market segment and considering unique contextual factors, the study offers
targeted insights that can aid practitioners and policymakers in devising strategies to enhance brand
loyalty and competitiveness within the Pakistani cellular network market (Kumar & Reinartz, 2018).
 2. LITERATURE REVIEW
2.2. Importance of brand loyalty
Brand loyalty holds significant importance for marketers and consumer researchers. In the context of
services, scholars have also emphasized its significance (Asuncian et al., 2019). Companies with a
loyal customer base tend to enjoy greater market share and higher returns on investment marketing
officials to cultivate and maintain brand loyalty. Anderson argued that a loyal customer base enhances
an organization's bargaining power with suppliers, partners, and channels, thereby positively
impacting shareholder value by reducing future cash flow instability. Dick and Basu highlighted the
role of customer loyalty in fostering positive word-of-mouth communication and resisting competitive
strategies. Oliver (2020) echoed this sentiment, emphasizing the affirmative word-of-mouth
communication associated with customer loyalty. Kotler and Keller (2019) noted that a significant
portion of a company's profits often stems from a small percentage of its most loyal customers,
underscoring the financial benefits of fostering strong connections with customers.

2.3. Services
The literature on loyalty reveals that different markets, including those for consumable goods, durable goods, and
services, employ varying approaches to measure loyalty. Moreover, it highlights the distinct methods used to
measure brand loyalty across goods and services markets. Javalgi and Moberg (2019) suggest that a positive
relationship with service providers increases the likelihood of consumer loyalty to a brand. Additionally,
Lovelock emphasize the growing importance of services in the Australian economy, representing a significant
portion of the Gross National Product (GNP) and total employment. They predict that the majority of new jobs in
Australia and New Zealand over the next decade will be in the services sector.
Furthermore, within the services sector, cellular network providers stand out due to their high market
penetration. As a result, this sector has become essential in light of its widespread usage. Marketers
recognize it as an attractive avenue in which firms strive to act responsibly towards service users.

2.4. Antecedents of brand loyalty

Several factors drive brand loyalty, including perceived risk, inertia, habit, involvement, satisfaction,
and the relationship between product or service providers (Rundle-Theile and Bennet, 2018). Positive
experiences contribute to increased customer satisfaction, trust, relationship commitment, and
continuity.

Aydin and Ozer (2019) identified several antecedents of customer loyalty, emphasizing corporate
image, perceived service quality, trust, and customer switching costs as influential factors. They found
 that trust is particularly crucial for brand loyalty, although perceived service quality and switching
costs also hold significant influence.

2.5. Service Quality

Parasuraman et al. (2019) defined service quality as the comprehensive assessment of a specific
service firm, which arises from comparing the firm's performance with customers' general
expectations regarding how firms within that industry should perform.

Jamal and Anastasiadou (2020) highlighted a limited exploration within the literature concerning the
impact of various aspects of service quality on satisfaction and loyalty. They argued for a positive
correlation between customer satisfaction and brand loyalty. Cody and Hope commented on the
complexity of assessing the service quality construct compared to product quality. They noted that this
assessment is intricately tied to service delivery practices and their subsequent consequences.

2.6. Consumer satisfaction

In much of the literature concerning behavioral intentions, overall satisfaction emerges as a pivotal
factor influencing purchase intentions and, consequently, brand loyalty. Bloamer and Kasper (2020)
assert that customer loyalty serves as a significant manifestation of satisfaction with products or
services received, positioning brand loyalty at the core of strategic marketing efforts. Soloman (2022)
delves into the notion that loyal customers may form habitual purchase behaviors, finding simplicity
and satisfaction in their current brand choices. Many scholars have concurred that satisfaction plays a
crucial role in fostering customer loyalty.

Research by Bontis et al. (2018) highlights the positive impact of customer satisfaction on reputation
within service markets. They find that reputation partially mediates the relationship between
satisfaction and loyalty, as well as between satisfaction and recommendations. Tovikkai and
Jirawattananukool (2019) emphasize the importance of retaining existing consumers over acquiring
new ones, noting that consumers with high purchase frequency are likely satisfied with the products,
thereby contributing to their loyalty.

2.7. Commitment
Kelley et al. (2020) asserted that the organizational commitment of service customers serves as a
significant indicator of the organization's ability to foster customer identification with its goals and
values, thereby retaining customers as active participants in service encounters .

Tax et al. (2021) directed their attention towards complaint handling within the service sector and its
relationship to commitment. They found that many firms believe that adept handling of customer
complaints and grievances contributes to brand commitment and loyalty. Effective complaint
resolution not only enhances customer retention rates but also elevates service quality.

2.8. Trust
Ballester and Aleman (2021) further expounded on the connection between trust and satisfaction,
describing them as interlinked variables that generate consumer commitment, particularly in situations
of high involvement.

Anderson and Narus (2019) argued that trust arises when individuals believe that the actions of
another will result in positive outcomes for themselves. Therefore, to trust a brand, consumers must
perceive quality as a favorable attribute.

2.9. Telecommunication sector

Lin (2020) argued that in competitive and highly segmented markets, retaining existing customers and
attracting new ones is increasingly challenging. Consequently, the creation of brand loyalty has been
proposed as a universal remedy for organizations to navigate the escalating competition in the
marketplace. This principle extends to the telecommunications sector. Gerpott et al. (2021)
emphasized the significance of long-term relationships with customers in the telecommunications
industry, noting that once customers are connected to a particular operator's network, their loyalty
becomes crucial for the company's success in competitive markets.

Negi (2018) described the mobile service industry as experiencing remarkable growth, surpassing
experts' expectations and evolving from a trivial industry to a leading sector providing commoditized
services. The mobile market has matured significantly in most developed countries.

Despite this, service quality remains paramount, encompassing aspects such as assurance, availability,
flexibility, reliability, security, and simplicity. Aydin et al. (2019) conducted research in the GSM
mobile telephony sector, identifying safeguarding the client base as a primary precondition for creating
brand loyalty among customers. Customer satisfaction and trust are essential for ensuring the brand's
longevity.

Similarly, Ilias and Trivellas (2020) investigated critical factors driving customer loyalty in the mobile
telephony sector in Greece, identifying service quality and customer satisfaction as key variables.
These factors have a substantial positive impact on customer loyalty, with customer satisfaction
significantly influencing the perception of service quality. These findings underscore the importance
for cellular network providers to understand the drivers of customer satisfaction and brand loyalty in
formulating effective retention strategies.
2.10. Hypotheses Development
Aydin and Ozer (2019) concluded that service quality serves as a crucial precursor to brand loyalty.
Similarly, Ward and Mullee (2021) found that service quality ranks among the primary concerns for
customers of telecommunications services, providing foundational support for the following
hypotheses:

H1: Improved service quality leads to the creation of brand loyalty.

Drawing from previous research, it is widely acknowledged that enhancing service quality contributes
to increased customer satisfaction. Therefore, the following hypothesis is proposed:

H2: Service quality is positively associated with satisfaction.

Bennet (2021) posited that satisfaction represents an emotional response to the consumption of goods
or services, thereby playing a significant role in shaping brand loyalty within the service sector.
Further supported this notion by advocating a strong correlation between high satisfaction levels and
increased customer loyalty, leading to the formulation of the following hypothesis:

H3: Satisfaction is positively associated with brand loyalty.

Additionally, empirical evidence suggests that customer satisfaction exerts a linearly positive influence
on trust and commitment:

H4: Satisfaction with services fosters commitment to the brand(s).

Moreover, satisfaction and trust are deemed conceptually connected leading to the following
hypothesis:

H5: Satisfaction and trust are conceptually linked.

Figure - 1

Commitment

Brand Loyalty
Service Satisfaction
Quality

Trust

Brand loyalty and its Antecedents Framework

Quester and Lim (2019) posited that the foundation of brand loyalty lies in the commitment to a
particular brand that extends beyond mere repetitive purchases. This perspective gives rise to the
following hypothesis:

H6: Commitment to a preferred brand fosters loyalty to that brand.

Similarly, Matzler et al. (2020) suggested that the establishment and cultivation of brand trust are
crucial for enhancing customer loyalty, aligning with the views expressed by Fournier (2021).
Consequently, the following hypothesis is proposed:

H7: There exists a connection between trust and brand loyalty.

3. Methodology
The research focused on the telecommunications sector of Pakistan, specifically targeting cellular
network providers. The study encompassed all four major mobile network companies operating in
Pakistan: Jazz, Telenor, Zong and PTCL.

A sample of 475 customers from the University of Education Lahore, Multan Campus, was selected
for the study using probability sampling. Simple random sampling technique was employed due to the
availability of all types of cellular network subscribers across most areas of Pakistan. A questionnaire
comprising 31 questions related to brand loyalty, service quality, satisfaction, commitment, and trust
was utilized to collect data. The questionnaire, developed through a review of existing literature,
adopted questions from previous research studies and was tailored to align with the specific objectives
of this study. Respondents provided their responses using a 5-point Likert scale, ranging from
"strongly disagree" to "strongly agree".

Self-administered questionnaires were distributed among the respondents, resulting in 400 completed
questionnaires. Of the 475 distributed questionnaires, 35 were not returned, 13 respondents declined
participation, and 27 were incomplete in some aspects.

4. Results
The primary aim of the pilot study was to assess the reliability of the research instrument utilized. In
order to evaluate the internal consistency of the instrument, the Cronbach's Alpha (reliability test)
was employed, with results above .7 generally considered satisfactory. The reliability statistics
obtained were as follows: overall (.94), brand loyalty (.76), service quality (.83), satisfaction (.88),
commitment (.80), and trust (.86).
Table-1 presents the correlation coefficients among the variables examined in the research. The
correlation coefficients ranged from 0.46 to 0.64, all of which were found to be statistically
significant at the 0.01 level. A correlation coefficient falling within the range of 0 to 0.5 indicates a
weak positive correlation, while coefficients ranging from 0.5 to 0.8 denote a fair positive
correlation.
Table-1
Correlations

Brand loyalty Service Satisfaction Commitment trust

quality

Brand loyalty 1

Service Quality .595 1

Satisfaction .572 .608 1

Commitment .473 .570 .641 1

trust .461 .586 .595 .624 1

All pearson Correlations are significant at the 0.01 level (2-tailed).

H1: Improved service quality leads to the creation of brand loyalty.

The correlation between service quality and brand loyalty is calculated to be .595. This positive
correlation indicates a direct linear relationship between the two variables. Additionally, the positive t-
values (refer to table-3) validate that respondents who express satisfaction with the service quality tend
to exhibit brand loyalty at a comparable level.
H2: Service quality is positively associated with satisfaction.

The correlation coefficient between service quality and satisfaction is recorded at .608, indicating a
robust positive relationship between these variables. The positive and significant t-values, observed at
a level of p<0.01, further confirm the acceptance of this relationship.
H3: Satisfaction is positively associated with brand loyalty.

The correlation statistics between satisfaction and brand loyalty yield a value of .572, signifying a fair
positive correlation between the two variables. The positive and significant t-values at p<0.01 support
the assertion that respondents who lean towards satisfaction are more likely to exhibit brand loyalty,
aligning with the third hypothesis.
H4: Satisfaction with services fosters commitment to the brand(s).
 The correlation between satisfaction and commitment is measured at .641, representing a strong
correlation between these factors. Notably, this correlation stands out as the highest among all
relationships proposed in the framework. Moreover, the t-values are significantly positive at p<0.01,
further substantiating the strong association between satisfaction with services and commitment to the
brand(s).

Table-2
Path R R2 β F P(sign)

Service Quality Brand loyalty .595 .353 .595 217.608 .000*

Service Quality Satisfaction .608 .370 .608 233.939 .000*

Satisfaction Brand loyalty .572 .327 .572 193.739 .000*

Satisfaction Commitment .641 .411 .641 277.33 .000*

Satisfaction Trust .595 .354 .595 217.719 .000*

Commitment Brand loyalty .473 .224 .473 114.568 .000*

Trust Brand loyalty .461 .212 .461 107.189 .000*

*Significance level is 0.01

H5: Satisfaction and trust are conceptually linked.

The correlation result between satisfaction and trust registers at .595, indicating a fair positive
correlation between these constructs. Positive and significant t-values observed at p<0.01 provide
further validation for this relationship. Moreover, these findings underscore the significance of this
connection within the context of the selected study sector.

H6: Commitment to a preferred brand fosters loyalty to that brand.

The correlation level between commitment and brand loyalty is measured at .473, with positive and
significant t-values (p<0.01). However, the results suggest a weak positive relationship, indicating that
commitment holds relatively lower influence on brand loyalty within the studied framework.

H7: There exists a connection between trust and brand loyalty.

Correlation statistics reveal a value of .461 for the relationship between trust and brand loyalty,
indicating a weak positive correlation. Positive and significant t-values at the 0.01 level further
reinforce this connection.
Among the four primary constructs of brand loyalty, service quality emerges as the most influential
factor on brand loyalty. Furthermore, the strongest relationship is observed between satisfaction and
commitment. While all relationships exhibit significance, their values are deemed acceptable within
the context of the study.

Table-3

Mean Standard t-Values P(sign)

Deviation

Brand loyalty 3.4453 .58625 117.53 .000

Service Quality 3.4791 .64785 107.403 .000

Satisfaction 3.5395 .78790 89.846 .000

Commitment 3.3680 .76475 88.081 .000

Trust 3.4925 .76708 91.059 .000

5. Discussion and Conclusions

The aim of this research was to explore the determinants of brand loyalty within the
telecommunications sector, culminating in the development of a comprehensive conceptual model.
Drawing upon existing literature, a theoretical framework (depicted in Figure 1) was formulated and
empirically tested to elucidate the relationships among key constructs such as service quality,
satisfaction, commitment, trust, and brand loyalty.

The findings of the study affirm the validity of the proposed model and associated hypotheses. First
and foremost, the results underscore the pivotal role of enhanced service quality in fostering brand
loyalty. This aligns with previous research within the services industry, notably in the
telecommunications domain, where service quality holds paramount importance. For instance, a
study on Greek cellular networks by Santouridis and Trivellas (2019) corroborated a significant
direct link between service quality and customer loyalty, thus lending credence to Hypothesis 1,
which posits that improved service quality engenders brand loyalty.

Additionally, the study reaffirms the positive association between service quality and satisfaction, as
supported by extant literature. Numerous studies have underscored the dependence of customer
satisfaction on perceived service quality, with satisfaction exerting an indirect influence on both
service quality and brand loyalty. This corroborates Hypotheses 2 and 3, which suggest a positive
relationship between service quality and satisfaction, and between satisfaction and brand loyalty,
respectively.
Furthermore, the results unveil a robust positive relationship between satisfaction and brand loyalty,
underscoring the pivotal role of customer satisfaction as a major precursor to brand loyalty within the
telecommunications sector. This is echoed by previous research, which has consistently identified
customer satisfaction as a key antecedent of brand loyalty in similar markets. Hence, Hypotheses 4
and 5, which propose the associations between satisfaction and commitment, and between
satisfaction and trust, respectively, find empirical support.

Regarding commitment and trust, while their direct impact on brand loyalty may not be as
pronounced, the study reveals significant positive relationships between these constructs. Notably,
commitment to a preferred brand is shown to contribute to brand loyalty, albeit to a lesser extent
compared to other factors. Similarly, trust emerges as a crucial component of brand loyalty, with the
findings corroborating the conceptual link between trust and brand loyalty proposed in Hypotheses 6
and 7, respectively.

In summary, the study underscores the significance of service quality, satisfaction, commitment, and
trust as key determinants of brand loyalty within the telecommunications sector and analogous
markets. Service quality emerges as the most influential factor directly shaping brand loyalty, while
satisfaction and trust exert indirect yet substantial effects on customer loyalty.

6. Limitations and Future Directions

The study is subject to several limitations. It focuses solely on a single product, potentially limiting its
generalizability to other areas. The sample size, drawn from Pakistan's extensive subscriber base of
cellular network connections, was relatively small, with only 400 customers included. This could
introduce bias among respondents. Additionally, the absence of reversal items in the questionnaire
may have affected response accuracy, although this issue was partly mitigated by including repetitive
items for some variables. Exclusion of missing data further reduced the sample size. Future research
should consider incorporating additional antecedents to provide a more comprehensive understanding
of the studied construct.

Future Directions

The study significantly contributes to both theoretical and practical knowledge, particularly within
relationship marketing. By introducing and testing a comprehensive model for brand loyalty in the
telecommunication services sector, it addresses the growing interest in this industry. As managers and
marketers strive to develop customer loyalty and retention strategies, a thorough understanding of the
underlying constructs is essential. Emphasizing the importance of service quality, network providers
must prioritize its implementation to remain competitive in the dynamic market landscape. By
ensuring high service quality and customer satisfaction, firms can foster trust, commitment, and
ultimately, brand loyalty among consumers..
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