1.1 Title
Customer switching behaviour among Mobile network Operators in Zimbabwe: A comparison of Econet Wireless Limited and NetOne.
1.2 Background
Econet Wireless Zimbabwe has dominated the mobile telephone industry in Zimbabwe and provides the widest range of services and network coverage. This dominance has however been challenged in the last two years with NetOne experiencing higher growth in number of active subscribers than Econet Wireless Zimbabwe during the period. This study seeks to find out the factors behind the switching behaviour of customers of the two networks.
The mobile networks industry in Zimbabwe has three companies Econet Wireless, NetOne and Telecel. The two larger companies Econet Wireless and NetOne control 84.56% of the market and with Telecel’s subscriber base continually declining since 2014 the race for new customers is mainly between Econet and NetOne (POTRAZ, 2015). While Econet’s wider range of services and network coverage would suggest that they should have an advantage. However this has not been the case as NetOne has been growing much faster. NetOne registered 606,352 new customers during the first nine months of 2015 while Econet Wireless’ subscriber base grew by only 227,934 (POTRAZ, 2015).
In Zimbabwe, there are no financial costs associated with switching mobile networks except for the cost of a new SIM card which costs only one dollar. This makes it very affordable for individuals to switch networks whenever they are not satisfied. The low cost of SIM cards has resulted in many people having more than one SIM card from different network providers which they may not be using at the same time. Currently, 35% of the subscribed mobile phone lines in the country are inactive (POTRAZ, 2015). Sometimes individuals tend to have more than one phone or use lines from different networks interchangeably. Switching behaviour among such customers may therefore manifest itself in usage patterns and expenditure on services from a particular provider.
While the tariffs for voice calls are fixed by POTRAZ, the mobile networks in Zimbabwe charge different tariffs for other value added services and data. The networks are all competing by introducing various promotions for both data and voice services. All the networks have also introduced mobile money transfer products taking away Econet Wireless’ advantage as the originator of the service in the country. Econet Wireless is still the largest network and holds 53.9% of market share compared to NetOne’s 30.7%. This however represents a drop in market share of 1.9% for Econet Wireless and a gain of 4% for NetOne (POTRAZ, 2015). With the other mobile operator Telecel experiencing a drop in market share of 2.1% it appears that some of Econet Wireless’ customers are switching to NetOne. This should be a cause for concern at Econet Wireless considering that they are the largest network and have made a bigger investment than their rivals.
Recent trends have seen new customers preferring NetOne over Econet Wireless despite their wider range of services and coverage. Trends also suggest that some customers may be switching from Econet Wireless to NetOne. This study therefore seeks to understand customer switching behaviour among mobile network customers in Zimbabwe with a focus on comparing NetOne and Econet Wireless Zimbabwe.
1.3 Statement of the problem
There are three (3) registered GSM Mobile Network Operators in Zimbabwe, namely, Econet Wireless Limited, NetOne and Telecel in their order of market share and size. Econet Wireless Zimbabwe has of late been losing ground to NetOne in the competition for customers. Latest figures show that while the country’s mobile penetration rate increased by 0.7% in the second quarter of 2015 , Econet Wireless Zimbabwe’s subscriber base increased by only 0.2% (POTRAZ, 2015). During the same period, their closest rival, NetOne grew its subscriber base by 6.6%. That is, during the second quarter of 2015 Econet Wireless Zimbabwe’s subscriber base increased by 14,202 while NetOne gained 209,452 new subscribers. This pattern was also evident in the last quarter of 2014 when Econet Wireless Zimbabwe lost 20,519 customers while NetOne gained 486,959 customers (POTRAZ, 2014). The statistics show a change in the trend whereby Econet Wireless Zimbabwe had always been the market leader and growing faster than competitors. Figure 1 shows the number of new subscribers recorded in each quarter from 2013 and 2015 Econet and NetOne as well as the total for the entire sector.
Figure 1 : Growth in number of subscribers 2013-2015
Figure 1 shows that of late NetOne is experiencing high growth, even outperforming the national total. During the fourth quarter of 2014 the total number of active subscribers in the country increased by 394,864 which is less than the number of new active subscribers who joined NetOne. It therefore appears that some of NetOne’s new customers are switching from Econet Wireless Zimbabwe to NetOne. The situation is a cause for concern at Econet Wireless Zimbabwe considering that they still have the largest network coverage in the country and would expect to be performing better than their rivals. Despite offering the widest range of services, Econet continues to lose market share to NetOne. An understanding of the reasons why customers tend to switch mobile networks will help Econet Wireless Zimbabwe to understand the trend it is experiencing and come up with solutions. This study therefore seeks to establish the reasons why Econet subscribers would switch from their network to another or reduce their use of the service provider’s services.
1.4 Objectives
- To investigate how the active subscribers’ use of Econet Wireless Zimbabwe’s services has changed over the last 2 years
- To find out how often mobile subscribers in Zimbabwe switch networks
- To establish the factors which can make active subscribers reduce their use of a particular mobile network service provider
- To identify factors which consumers describe as major in considering a switch in service between mobile network service providers
- To establish strategies to alleviate or reduce customer switching behaviour.
1.5 Research Questions
- How has the use of Econet Wireless Zimbabwe and NetOne services changed over the last three years?
- How often do Zimbabwean active subscribers switch networks?
- Why do active subscribers reduce their use of a mobile network?
- Why do customers switch mobile networks?
- What strategies can mobile network operators implement to reduce switching behaviour from their network?
1.6 Significance of the study
To mobile network operators
Operators may gain insight into the factors which lead customer switching and formulate effective customer retention strategies using the findings of the study. The findings of the study may also be useful to mobile networks by revealing the reasons why customers may reduce their use of a network’s and thereby form a basis for initiatives to increase revenue.
To marketers
The findings of the study may also be useful to marketers of technological services in general as they will shed light on the switching behaviour of consumers of such services and creates a platform for improved marketing strategies.
To consumers
The findings of the study may assist consumers to get better service if they can drive mobile networks to be more responsive to their subscribers’ needs and preferences.
To the academic world
The study will contribute to the body of knowledge regarding churn in mobile networks and also form a basis for further research on customer behaviour in mobile networks.
To the researcher
The study will enable the researcher to develop skills in designing and carrying out a research study and also contributes to fulfilling the requirements of the Master of Business Administration degree.
1.7 Scope of the research
The research will be carried out among subscribers of Econet Wireless Zimbabwe since it is the one which is experiencing loss of customers to competitors at an alarming rate. Considering that 33% of the population use more than one network, the study will also be able to establish customer perceptions of NetOne from Econet subscribers who are also subscribers of NetOne. Mobile subscribers will be able to participate regardless of their geographical location as long as they have an active Econet Wireless Zimbabwe line. The study will concern itself with the patterns of use and factors which would make subscribers switch to a competitor. Customer switching behaviour during 2014 and 2015 will be considered for the study. The study will be carried out between 1st March and 31st March 2016.
- Assumptions of the study
The researcher made the following assumptions:
- Mobile operators operate in a homogenous environment in which they face the same challenges and have access to the same opportunities.
- Mobile operators have the capacity to absorb more subscribers than they presently have.
- The sample will be truly representative of the population.
- The data collected during surveys and interviews will be accurate and will not affect the quality of the findings.
- Subscribers will be prepared to cooperate with the researcher and give honest responses.
1.9 Conceptual framework
Figure 2 : Conceptual Framework
1.9.1 Switching Intentions
Customer defection occurs when customers switch between service providers in the service environment (Garland, 2002). Colgate and Hedge (2001) found that defection can either be partial or total. Total defection is normally easily pointed out due to its magnitude. Usually, partial defection which is a loss of a portion of the customer’s business is harder to detect than total defection (Siddiqui, 2011). It is estimated that of all defecting customers, 35 percent defect due to “uncontrollable external factors” and the rest of the defections is caused by “controllable internal factors” relating to the organization’s customer relations (Antón, Camarero and Carrero, 2007). Price, product problems, low service quality, problem resolution, merger and location/expediency are listed as controllable factors (Trubik and Smith, 2000). Customers can be retained by better policies for these factors. Purposes are themselves shaped by attitudes, subjective standards and apparent interactive control (Simons, 2013). Although, relationship quality is an important driver of switching intentions, switching costs and attractiveness of switching are its significant determinants (Wieringa and Verhoef, 2007).
1.9.2 Pricing
Price has always been one of the most important valuation criteria (Siddiqui, 2011). The choice of product or service depending on the price is a criterion that has been heavily evaluated. Within the Telecommunication business studies have shown that customers are sensitive to the price, and often they get tempted by lower prices from the competitors. The temptation might occur while being exposed to marketing campaigns (Roos & Gustafsson 2007). Price has been a high influence on switching decisions. Customers focus heavily on price and that is the one criterion that often is the first to compare among providers (Roos, Edvardsson, and Gusrafsson, 2004). According to Kotler and Armstrong (2010) price is one the important factors which play a vital role in brand switching. If service providers charge sensible prices and give the better services then it will create customer satisfaction and very few consumers will switch to another brand, because price fairness is an extremely significant concern that leads toward satisfaction (Roos and Gustafsson, 2007). That means price has a positive impact on brand switching. If service providers charge high prices then more consumers will switch to another brand (Kotler and Armstrong, 2010).
1.9.3 Service quality
Service quality is defined as approach which can be known as the services received by customers as compared to expectations regarding it (Parasuraman et al., 1988). Guatam and Chandhok (2011) suggest those customers’ expectations and perceived performance have a direct relationship with perceived service quality. Mobile phone operations are becoming more and more complex and together with the ever rising consumer expectations and demands this adds to the challenges faced by operators in the industry (Guatam and Chandhok, 2011). When customer satisfaction increases this has been shown to have a positive effect on companies’ market share, which leads to improved profits, positive recommendation and lower marketing expenditures (Lin and Wang, 2006). This will also have huge impact on the corporate image and survival of the business (Karmarkar, 2004). Because the market has a clear preference for goods and services of high quality, measurable benefits in profits, cost savings, and market share can be achieved through high quality service performance (Doyle and Stern, 2006).
1.9.4 Switching costs
Switching costs are costs that are incurred by buyers for terminating transaction relationships and initiating a new relation. Porter (1980) defined switching cost as a onetime cost facing a buyer wishing to switch from one service provider to another. Jackson (1985), however, defined switching cost as the psychological, physical and economic costs a customer faces in changing a supplier. Jackson’s definition reflects the multi-dimensional nature of switching cost, especially in relation to the telecommunication industry. In the telecommunication sector there are a number of critical costs that must be considered when switching. These includes the costs of informing others of the change (friends, colleagues and business associates), the cost of acquiring new lines, cost associated with breaking long standing relationships with a service provider, cost of learning any new procedures in dealing with the new service provider and cost of finding new service provider with comparable or higher value than the existing firm.
1.9.5 Brand Loyalty
Lin and Wang (2006) suggest that brand loyalty has become a crucial factor for marketers and consumer researchers. An organization which has a large number of loyal customers will achieve higher market share and realise high profits (Jensen and Hansen, 2006). Jensen and Hansen (2006) went on to suggest that customers who are loyal to a brand will promote the company through positive word of mouth and will not be enticed by competitors’ marketing strategies. Gumersson (1987) argues that long-term relationships with customers are especially important in services, where relationships with customers can be more expensive to establish. This should not be taken to mean that short-term sales are not desirable. In fact, they may be very profitable. However, if close and long-term relationships can be achieved, this will lead to increased profitability for the company and reduced costs and make market entry or share gain difficult for competitors (Lin and Wang, 2006).
1.9.6 Switching behaviour
Roos, Edvardsson, and Gusrafsson’s (2004) study found that that a customer’s switch from a particular brand could be either total or partial. Whether the switching becomes total or partial depends on the intensity of the factor which dives the customer to switch. The more intense the factor is the more likely it is for the customer to make a total switch (Han, Back and Barrett, 2009). Switching determinants can help to understand the reasons why customers switch from one service provider to another. These are the reasons for the switching that is declared from the customers point of view. Price is one of the more common switching determinants (Roos, Edvardsson, and Gusrafsson, 2004). Companies who manage to gain an understanding of their customers’ switching determinants are in a better position to come up with a strategy for gaining customer loyalty. Whenever a customer is not satisfied with one of the determinants they are likely to switch (Han, Back and Barrett, 2009).
1.10 Limitations
Some of the mobile numbers drawn for the sample may not be reachable for various reasons. The researcher will randomly draw more numbers so that members of the sample who cannot be contacted may be replaced.
The fact that the study is funded by the researcher limits the resources available and this may affect the scope of the study. The questionnaires will all be administered by phone which therefore removes travelling costs.
Some of the respondents may be worried about confidentiality of their contributions. The researcher will explain the nature of the study to all respondents and emphasise that their responses will be confidential and for academic use only.
The study will be conducted within a limited time frame and this may affect the scope of the study. The researcher will work extra hours and during weekends to ensure all the research objectives are covered.
1.11 Methods
1.11.1 Research approach
The research will be quantitative in nature. Quantitative research is a study involving the use and analyses of numerical data using statistical techniques (Aliaga and Gunderson, 2000). The study will collected data on the factors behind subscribers’ tendency to switch networks and data will be summarized in terms of percentages and proportions, making the quantitative approach appropriate.
1.11.2 Research design
A descriptive research design will be used. A cross-sectional survey will used for data collection, meaning that data will be collected from all respondents during the same time period to enable valid comparisons and generalisations to be made from the individuals’ responses. The study seeks to make a descriptive study of customer switching behaviour and establish why Econet Wireless Zimbabwe customers would consider switching to another network. Descriptive research design is suitable because the research will be carried out on one specific organisation, (Muganda, 2010). A survey will enable the researcher to collect data which is not available from other sources. Key informant interviews will also be conducted with Econet Wireless Zimbabwe’s Customer Service Manager to establish the reasons which were advanced by customers who had indicated that they are leaving the network.
1.11.3 Study population
The study population consists of all active Econet Wireless Zimbabwe subscribers in Zimbabwe. The population is 6,633,260 according to the list of subscribers obtained from Econet Wireless Zimbabwe.
1.11.4 Sample size
A sample size of 384 will be used for the study. The sample size is based on Krejcie and Morgan’s (1970) calculation of sample size whereby for a population of 6,633,260 the sample size is 384 at a confidence level of 95%.
1.11.5 Sampling procedure
The researcher has obtained an electronic list of subscriber numbers from Econet Wireless Zimbabwe. The list will be numbered sequentially from 1 to 6,633,260. Simple random sampling will be used to select the participants for the study. Random numbers between 1 and 6,633,260 will be generated and the corresponding subscriber numbers recorded until 384 different subscriber numbers have been compiled. The subscribers with the selected numbers will participate in the study.
1.11.6 Data collection Instruments
The study will make use of a questionnaire to collect data for analysis. The questionnaire will ensure that the same information is collected from each respondent. Closed questions will be used to make it possible to group the responses for statistical analysis. An interview guide will also be used in order to collect information from the customer service manager.
1.12 Data collection procedure
1.12.1 Questionnaires
The researcher will contact the selected participants for the survey and inform them about the purpose and structure of the study and invite them to participate in the study. After their consent the researcher will then schedule an appointment to administer the questionnaire over the phone at the participant’s convenience. On the agreed day the researcher will call the respondents and ask the questionnaire items while recording their responses.
1.12.2 Interviews
The researcher will contact the customer service managers and inform them about the purpose and structure of the study and invite them to participate in the study. After obtaining their consent the researcher will then schedule an appointment to interview them in person. On the agreed day the researcher will meet respondents and ask the interview questions while recording their responses.
1.12.3 Data analysis
Data will be analysed using SPSS20 and Microsoft Excel software. Data will first of all be collated and coded in preparation for statistical analysis. Data will then be presented using descriptive statistics, graphs and tables.
1.12.4 Research plan:
Prior to conducting the research, the researcher will have to take into consideration any logistical issues related with data collection. Attention here will be given to drafting the research questions and compiling the questionnaire. Once that is available, a pilot study will be conducted to test the feasibility of the study. This is to be conducted with 50 research participants comprising of network subscribers and management officials of network providers. Any necessary adjustments shall be considered once results are established from findings of pilot study followed by actual research study. Administering of the questionnaire shall be done with assistance of research enumerators to reach the number of target research population as specified.
1.13 Definition of terms
Mobile Network Operator
A provider of services wireless communications that owns or controls all the elements necessary to sell and deliver services to an end user including radio spectrum allocation, wireless network infrastructure, back haul infrastructure, billing, customer care, provisioning computer systems and marketing and repair organisations.
Active subscriber
A subscriber who has used the network at least once in the last three months for making or receiving a call or carrying out a non-voice activity such as sending or receiving an SMS or accessing the Internet.
1.13.1 Budget
| Expenditures | Cost (estimated) |
| Transport | $40 |
| Internet services | $30 |
| Printing | $160 |
| Communication (telephone interview) | $200 |
| Total cost (estimated) | $ 430 |
1.13.2 Time schedule
The study will consider customer switching behavior between period covering from 2014 and 2015. The period is seen as the stable enough to research generalized conclusions however reference may be made to other years. The research shall be conducted between 1st to the 31st of March 2016.
1.14 Conclusion
The research proposal was discussed, described and outlined in this chapter. The full Chapter 1 will take you in further into the context as outlined in this research proposal and the route intended for this research project.
Writing the background to the study
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