Widya-Antecedents Loyalty Mobile Service Turkish

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The analysis of antecedents ofcustomer loyalty in the Turkish

mobile telecommunicationmarket

Serkan Aydin and Gokhan OzerGebze Institute of Technology, Cayirova Kampusu, Gebze Kocaeli, Turkey

Abstract

Purpose Corporate image, perceived service quality, trust and customer switching costs are themajor antecedents of customer loyalty, and loyal customers may buy more, accept higher prices and

have a positive word-of-mouth effect. Also we know that the cost of selling to new customers is muchhigher than the cost of selling to existing customers. Although this fact is apparent to everyone, manycompanies are still losing customers at a formidable rate. In this context the main aim of this paper isto examine the relationships between these factors and customer loyalty, and the relationships amongthese factors in the Turkish GSM sector.

Design/methodology/approach Data was obtained from 1,662 mobile phone users in Turkey viaquestionnaire. The data was analyzed by structural equation modeling (SEM) in order to test all therelationships between variables in the model.

Findings The findings supported the proposed hypotheses, which are consistent with thetheoretical framework. Analysis results showed that perceived service quality is a necessary but notsufficient condition for customer loyalty.

Research limitations/implications In order to generalize the findings from the paper, the modelshould be studied in different sectors. The contribution of this paper is to model all the relationships

between customer loyalty and its antecedents, and to test these relationships simultaneously.

Practical implications In order to better understand customer loyalty, as well as perceivedservice quality, corporate image, perceived switching costs and trust should be taken intoconsideration. Lately, technological change has shifted competition in the GSM sector from price andcore service to value-added services. Therefore, operators should differentiate their services andguarantee their services quality because of this shift in competition.

Originality/value In this paper, the effects of all the factors on customer loyalty are analyzedsimultaneously via SEM.

Keywords Customer loyalty, Telecommunications, Customer services quality, Corporate image, Trust,Turkey

Paper type Research paper

IntroductionA critical issue for the continued success of a firm is its capability to retain its currentcustomers and make them loyal to its brands (Dekimpe et al., 1997, p. 405). Loyalcustomers build businesses by buying more, paying premium prices, and providingnew referrals through positive word of mouth over time (Ganesh et al., 2000, p. 65). Infact, companies in telecommunications are losing 2-4 percent of their customersmonthly; disloyal customers can amount to millions of lost revenue and profit. Forexample:

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Received March 2004Revised July 2004

European Journal of Marketing

Vol. 39 No. 7/8, 2005

pp. 910-925

q Emerald Group Publishing Limited

0309-0566

DOI 10.1108/03090560510601833
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20% of customers of the mobile phone operator Orange defect each year and, on average itcost Orange 256 in 1996 to recruit each new customer, reflecting the cost of introductoryoffers, subsidized phones and advertising. With almost a million customers, therefore,reducing the churn rate from 20% to 10% would bring about annual savings of over 25

million (Palmer, 1998, p. 117).In the same way, studies conducted in the financial services industry show thatincreasing customer retention (or customer loyalty) by 5 percent could lead to 25-75percent profit growth (Chan et al., 2001, p. 5):

Especially in telecommunications services, it is frequently pointed out that once customershave been acquired and connected to the telecommunications network of a particularoperator; their long-term relations with the focal operator are of greater importance to thesuccess of the company in competitive markets than they are in other industry sectors(Gerpott et al., 2001, p. 249).

Oliver (1997, p. 392) defines customer loyalty as:

. . .

a deeply held commitment to rebuy or repatronize a preferred product/serviceconsistently in the future, thereby causing repetitive same-brand or same brand-setpurchasing, despite situational influences and marketing efforts having the potential tocause switching behavior.

Although there are so many different definitions about customer loyalty, there seemsto be two basic approaches stochastic and deterministic loyalty (Odin et al., 2001).

The stochastic approach assumes customer loyalty as a behavior (Ehrenberg, 1988).In this approach it is considered that the preference structure of the customer isreflected in the customers behavior. Some of the operational measures of this approachare shares of purchase, purchasing frequency, etc. On the other hand, the deterministicapproach assumes customer loyalty as an attitude (Fournier and Yao, 1997). It isconsidered that merely describing the actual behavior of the customer does not suffice,

but a proper analysis and description are clearly required for underlying attitudesstructure of the customer. Some of the operational measures in deterministic approachare preference, buying intention, supplier prioritization and recommendationwillingness.

Jacoby and Kyner (1973, p. 2) express customer loyalty by a set of six necessary andcollectively sufficient conditions by integrating two approaches:

[T]hese conditions express that brand loyalty is (1) the biased (i.e., random), (2) behavioralresponse (i.e., purchase), (3) expressed over time, (4) by some decision-making unit, (5) withrespect to one or more alternative brands out of a set of such brands, and (6) is a function ofpsychological (decision making, evaluative) process.

Although there are many antecedent factors affecting brand loyalty, it is impossible to

find a study that has examined the effects of all factors simultaneously and jointly.Therefore, the main objective of this study is to determine the potential antecedents ofcustomer loyalty and to test the relationships among these factors.

It is known that corporate image (Nguyen and Leblanc, 2001), customer switchingcosts (Jones et al., 2002), trust (Lau and Lee, 1999) and service quality (Bolton and Drew,1991) have significant effects on customer loyalty. In this context, the relations amongcustomer loyalty, trust, customer switching costs and service quality are analyzed byusing structural equation modeling.

Antecedents ofcustomer loyalty

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This study designed is as follows. First we present an overview of all of theantecedent factors of customer loyalty and the relationships. Second, the hypothesesand the structural model are proposed. Then the research methodology is described,and finally the findings are discussed from the point of view of theoretical and

managerial implications and future research.

Theoretical backgroundService qualityEven though there is no consensus about conceptualizing and measuring servicequality (Carman, 1990), in this study we assume service quality to be the consumers

judgment about the overall excellence or superiority of a service (Zeithaml, 1988). Inorder to have a better understanding about service quality, we should understandgeneral attributes of services first. The attributes reveal that:

. services are intangible;

. services are heterogeneous, meaning that their performance often varies with

respect to the provider and the customer;. services cannot be placed in a time capsule and thus be tested and re-tested over

time; and

. the production of services is likely to be inseparable from their consumption(Gronroos, 1990).

Because of the attributes of services, the evaluation of service quality is more difficultthan the evaluation of product quality. Also, the evaluation may be connected with theservice delivery process, along with output (Cody and Hope, 1999).

In general, service quality is seen as a critical factor for profitability, and thereby afirms success. Two underlying processes generally explain the contribution of servicequality to profitability. First, service quality is regarded as one of the few means for

service differentiation and competitive advantage that attracts new customers andcontributes to the market share (Venetis and Ghauri, 2000, p. 215).

Second, service quality enhances customers inclination to buy again, to buy more,to buy other services, to become less price-sensitive and to tell others about theirfavorable experiences (Venetis and Ghauri, 2000, p. 215). For example, Bloemer et al.(1998) and Jones et al. (2002), among others, have pointed out that there is a positiverelationship between service quality and repurchase intention, recommendation, andresistance to better alternatives. All these repurchase intention, recommendationand resistance to better alternatives are behavioral intentions and constitutecustomer loyalty. Therefore, it is proposed that service quality has a positive effect oncustomer loyalty.

TrustAnderson and Narus (1990) emphasize that trust occurs when one party believes thatthe other partys actions would result in positive outcomes for itself. Consequently, inorder to trust a brand, customers should perceive quality as being positive.

Trust has been recognized as an important role in affecting relationshipcommitment (Morgan and Hunt, 1994) and so customer loyalty (Gundlach andMurphy, 1993). It appears that if one party trusts another, it is likely to develop someform of positive behavioral intention towards the other party. Accordingly, when a

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customer trusts a brand, this means that he is also likely to form a positive buyingintention towards the brand (Lau and Lee, 1999).

In this context, trust works at preserving relationship investments by cooperatingwith exchange partners, resists attractive short-term alternatives in favor of the

expected long-term benefits of staying with existing partners, and views potentiallyhigh-risk actions as being prudent because of the belief that their partners will not actopportunistically (Morgan and Hunt, 1994). Hence, it is claimed that there is a positiverelationship between trust in a firm and customer loyalty, consistent with the pastresearch (e.g. Chaudhuri and Holbrook, 2001; Lau and Lee, 1999).

Doney and Cannon (1997) suggest that the construction of trust involves acalculative process based on the ability of a party to continue to meet its obligationsand on an estimation of the costs versus rewards of staying in the relationship.Therefore, to trust a brand, customers should not only perceive positive outcomes butalso believe that these positive outcomes will continue in the future. Consequently,service quality should positively affect trust in the operator.

Trust also reflects credibility (Ganesan, 1994, p. 3), and credibility affects thelong-term orientation of a customer by reducing the perception of risk associated withopportunistic behaviors by the firm (Erdem et al., 2002; Ganesan, 1994). Specifically,trust reduces uncertainty in an environment in which consumers feel vulnerable, sincethey know that they can rely on the trusted brand (Chaudhuri and Holbrook, 2001,p. 82). That the customer trusts the operator in the GSM sector reduces uncertaintyassociated with services which were delivered previously or which are yet to bedelivered. Reducing the uncertainty associated with the operator increases relativelythe uncertainty of alternatives and thereby the perceived switching cost.

Corporate imageCorporate image is described as the overall impression made on the minds of the public

about a firm (Barich and Kotler, 1991). Nguyen and Leblanc (2001, p. 228) claim thatcorporate image is related to the physical and behavioral attributes of the firm, such asbusiness name, architecture, variety of products/services, and to the impression ofquality communicated by each person interacting with the firms clients.

Corporate image is the result of a process (MacInnis and Price, 1987). The processstems from ideas, feelings and consumption experiences with a firm that are retrievedfrom memory and transformed into mental images (Yuille and Catchpole, 1977).Therefore, corporate image is the result of an evaluation process. Although a customermay not have enough information about a firm, information obtained from differentsources such as advertisements and word of mouth will influence the process offorming the corporate image.

Fishbein and Ajzen (1975) argue that attitudes are functionally related to behavioral

intentions, which predict behavior. Consequently, corporate image as an attitude mustaffect behavioral intentions such as customer loyalty (Johnson et al., 2001, p. 224).Nguyen and Leblanc (2001) demonstrate that corporate image relates positively withcustomer loyalty in three sectors (telecommunication, retailing and education). Thesame relationship is demonstrated by Kristensen et al. (2000) for Danish postalservices, and by Juhl et al. (2002) for the Danish food retailing sector.

As pointed out above, corporate image stems from all of a consumers consumptionexperiences, and service quality is a function of these consumption experiences. Hence,


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customer perception about service quality directly affects the perception of corporateimage.

Switching costsPorter (1998, p. 10) defines switching costs as one-time costs facing the buyer whenswitching from one suppliers product to anothers. In addition to objectivelymeasurable monetary costs, switching costs may also pertain to the time andpsychological effort involved in facing the uncertainty of dealing with a new serviceprovider (Bloemer et al., 1998, Klemperer, 1987). Hence, switching costs are partlyconsumer-specific (Shy, 2002). For this reason, a switching cost can be seen as a costthat deters customers from demanding a rival firms brand.

Jackson (1985) describes the switching cost as the sum of economic, psychological andphysical costs. The economic or financial switching cost is a sunk cost which appearswhen the customer changes his/her brand, for example the costs of closing an account withone bank and opening another with a competitor, the cost of changing ones long-distance

telephone service (Klemperer, 1987) or the costs of changing ones GSM operator.Procedural switching costs stem from the process of customers purchase decision

making and their implementation of the decision. The buying process (Etzel et al.,1997) contains the following phases:

(1) need recognition;

(2) information search;

(3) evaluation of alternatives;

(4) purchase decision; and

(5) post-purchase behavior.

For example, if a consumer wishes to change their operator, they should evaluate

alternative operators with regard to different criteria, such as coverage area, billing,customer service, value-added service, etc., complete the procedure for purchasing anew GSM line, and finally inform people of the new GSM number.

Psychological cost is perceived as the cost stemming from social bonds (e.g.staff-customer relations, etc.) that appear over the course of time and theuncertainty/risk of the unused brand. The customer perceives high risk regarding abrand he/she has never used (Sharma and Patterson, 2000). Especially in services,where customers prefer a rival service provider, risk exists because service qualitycannot be evaluated before purchasing (Sharma et al., 1997).

A customer who has collected information in order to decrease their anxiety about awrong purchasing decision will use all previous purchase experience. This is calledpost-purchase cognitive dissonance (Etzel et al., 1997). In this process, if the customer

were to switch brand, he/she would compare the switched brand and the previousbrand. Therefore, the better the switched brands performance, the higher thealternatives uncertainty. Hence, customers who want to decrease cognitive dissonanceprefer brands that they have used before (Klemperer, 1995).

Markets with switching costs are generally characterized by consumer lock-in,where it is observed that consumers repeatedly purchase the same brand even aftercompeting brands become cheaper. One important consequence of having consumerlock-in is the ability of firms to charge prices above marginal costs (Shy, 2002, pp. 71-2).

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In the case of a market having switching costs, when customers select from a numberof functionally identical brands, they display brand loyalty and go on buying the samebrand (Klemperer, 1987). In short, ex ante homogeneous products may, after purchase,be differentiated ex post by switching costs (Klemperer, 1987). Moreover, if customers

are sensitive to a products attributes, such as quality, uncertainty will decrease pricesensitivity (Erdem et al., 2002): in other words, the customer behaves loyally.

For these reasons, switching costs are a factor that directly influences customerssensitivity to price level, and so influences customer loyalty (Jones et al., 2002; Bloemeret al., 1998; Burnham et al., 2003; Lee et al., 2001).

Hypotheses and structural modelBased on the results of earlier studies discussed in the previous section, we formulatedthe hypotheses detailed below. Figure 1 presents a proposed model, representing all ofthe hypotheses. Arrows in Figure 1 indicate causal directions.

H1. There will be a positive relationship between perceived service quality and

customer loyalty.

H2. There will be a positive relationship between perceived service quality andtrust in the operator.

H3. There will be a positive relationship between trust in the operator andperceived switching cost.

H4. There will be a positive relationship between trust in the operator andcustomer loyalty.

H5. There will be a positive relationship between corporate image and customerloyalty.

H6. There will be a positive relationship between perceived service quality andcorporate image.

H7. There will be a positive relationship between perceived switching cost andcustomer loyalty.

Figure 1.The proposed model


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H8. There will be a positive relationship between perceived service quality andperceived switching cost.

MethodologyMeasuresAll of the constructs in the model were measured using a multiple-item measurementscale. All measures used a five-point Likert-type response format, with stronglydisagree and strongly agree as the anchors. A list of measurement items wasdeveloped using input from the review of the literature related to our study. All of themeasures were translated from English into Turkish. To ensure content validity, themeasures translated into Turkish were assessed by three academics so thatrespondents would understand the questions correctly. Then the measures weretranslated into English by a different academic, and the original measures werecompared with these measures. The items can be seen in Table I.

To measure customer loyalty (CL), the five-item scale developed by Narayandas

(1996) was adapted to the Turkish GSM sector. Accordingly, the operational measuresin measuring customer loyalty are:

. repurchase intention (next-use);

. resistance to switching to competitors product that is superior to the preferredvendors product; and

. willingness to recommend preferred vendors product to friends and associates.

Perceived switching cost (SC) was assessed by seven items adapted from Burnhamet al. (2003), Guiltinan (1989) and Jones et al. (2002). Operational measures used in thescale are:

. perceived monetary costs;

.

perceived uncertainty costs;. perceived evaluation costs;. perceived learning costs; and

. perceived set-up costs.

Regarding the measure of trust (TR), a five-item scale was developed by using differentbut complementary definitions. The operational measures used in measuring trustwere:

. reliability;

. ethics;

. service quality; and

. cumulative process.

In measuring perceived service quality, instead of the 22-item SERVQUAL instrument,a unidimensional measure (five-item scale) of perceived service quality relating to anevaluation of all the base services was used for reasons of data collection efficiency(Bloemer et al., 1998, p. 441). In the GSM sector, the base services are coverage ofcalling area, value-added services, customer support services, the suppliers services ofthe operator, and services in campaigns.

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Construct Item

Switching costs: GFI 0:94, Cronbachs a 0:674, Bentler-Bonett NFI 0:831. Switching to a new operator causes monetary cost

2. If I switched to a new operator, the service offered by the new operator might not work as

well as expected

3. I am not sure that the billing of a new operator would be better for me

4. To switch to a new operator; I should compare all operators (on account of services,

coverage area, billing, etc.)

5. Even if I have enough information, comparing the operators with each other takes a lot of

energy, time and effort

6. If I switched to a new operator, I could not use some services (MMS, GPRS, WAP, etc.),

until I learned to use them

7. I would be concerned about the people who would dial my previous number and could not

reach me

Customer loyalty: GFI 0:97, Cronbachs a 0:824, Bentler-Bonett NFI 0:97

1. I will go on using this GSM line

2. If I bought a new GSM line, I would prefer this GSM operator

3. I recommend this operator to people

4. I encourage friends who plan to buy a GSM line

5. Even if the other operators billing was cheaper, I would go on using this GSM line

Corporate image: GFI 0:96, Cronbachs a 0:871, Bentler-Bonett NFI 0:971. This company is stable and firmly established

2. This company is innovative and forward-looking

3. This company has a social contribution for society

4. This company is a leading firm in the Turkish GSM sector

5. This company has a positive image

Trust: GFI 0:94, Cronbachs a 0:856, Bentler-Bonett NFI 0:95

1. I trust this company

2. I feel that I can rely on this company to serve well

3. I trust the billing system

4. I believe that I can trust this company will not try to cheat me

5. This company is reliable because it is mainly concerned with the customers interests

Service quality: GFI 0:90, Cronbachs a 0:827, Bentler-Bonett NFI 0:89

1. Given the quality of your operators coverage area, how would you rate the coverage area

for your operator?

2. Given the quality of your operators customer services, how would you rate the customer

services for your operator?

3. Given the quality of your operators adding service (GPRS, WAP etc.), how would you ratethe adding service for your operator?

4. Given the quality of your operators vendor, how would you rate the vendor for your

operator?

5. Given the quality of your operators campaign, how would you rate the campaign for your

operator?

6. When you compare advertisements with services, how would you rate the services for

your operator?

Table I.The items and

unidimensionality,reliability, and

convergent validityindices


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Corporate image was measured by five items developed by Bayol et al. (2001), whichused the scale in analyzing the customer satisfaction index in GSM sector.

Sample and data

Data was collected from mobile phone users in the biggest cities in Turkey (Istanbul,Ankara, Izmit and Bursa). A total of 1,950 mobile phone users were contacted over asix-week period via a questionnaire. A number of questionnaires were eliminated bymeans of examining control questions in the questionnaire form. For this reason, thefinal data set contained 1,662 GSM subscribers.

The samples distribution on GSM operators was consistent with their real marketshare:

. Aria, 10.1 percent;

. Aycell, 7.8 percent;

. Telsim, 32.2 percent; and

. Turkcell, 50.4 percent.

In the same way, consistent with market share, 43.6 percent of subscribers in thesample used a post-paid line, and 56.4 percent of subscribers used a pre-paid line.

Sample characteristics appear to be representative of mobile phone users in Turkey.A total of 37 percent of the sample is female, the mean age of the sample is 29 years, themean monthly mobile phone bill is 34.8 million Turkish lira, and the respondentsmonthly revenue is 884 million Turkish lira.

Non-response biasTo assess the possibility of non-response bias in the collected data set, we performed achi-square difference test. To this end, we used the approximate percentages of each GSMoperator in the market and the percentage of each GSM operator in our sample. Whether

two distributions differed from each other was tested by chi-square test. From the resultof the test (x23 0:1652; p , 0:01), we can state that there is no difference between thetwo distributions. Accordingly, non-response bias may not be a significant problem.

Measure validationConfirmatory factor analysis (CFA) was used for establishing the validity of theconstructs (Ahire et al., 1996). Prior to the reliability analysis, the series mean wasreplaced instead of missing values in the data set.

Unidimensionality is a necessary condition for reliability and construct validation(Mak and Sockel, 2001, p. 271). The unidimensionality of the constructs was analyzedby specifying a measurement model for each construct. According to Joreskog andSorbom (1993), a goodness of fit index (GFI) of 0.90 or above suggests that each of the

constructs is unidimensional. As seen in Table I, the GFI value of the construct is 0.90or above.

Convergent validity is examined by using the Bentler-Bonett normed fit index (NFI)(Bentler and Bonett, 1990). All of the constructs, except perceived switching cost andperceived service quality, have NFI values above 0.90. Perceived service quality has anNFI value of 0.83 and perceived service quality has an NFI value of 0.89. These valuesare close to 0.90. Therefore, convergent validity was achieved for all the constructs inthe study.

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In assessing discriminant validity, CFA was performed on a selected pair of scales,allowing correlation between two constructs. The analysis was rerun with thecorrelation between the two constructs fixed at 1. If the correlation is a free parameterand not this fixed constant, the x2 of the initial model (where correlation is free) should

be much smaller than the latter model (where it is fixed at one). In addition, thedifference between the chi-squares of these two models should be significant whenchecked against the chi-square test statistic at p , 0:01 with degrees of freedom equalto the difference in degrees of freedom between the two models (Gu rsoy et al., 2004). Allof the chi-square difference tests [minimumx2dif1 2; 069:55; p , 0:01]demonstrated that discriminant validity has been achieved.

For reliability, the items were submitted to reliability analysis via Cronbachs alpha.Reliability analysis of five factors is shown in Table I. The reliability values of all thefactors were either close to or greater than 0.70, the threshold Nunnally (1978)recommended for research. The reliability and validity analysis results indicate thatthe scales for the constructs appear to have satisfactory measurement qualities.

Tests of hypothesesStructural equation modeling (SEM) was used to test the hypothesized relationships inthe proposed model shown in Figure 1. The structural equation modeling techniqueenables the simultaneous estimation of multiple regression equations in a singleframework. Notably, all direct and indirect relationships in the model are estimatedsimultaneously, and thus the method allows all the interrelationships among thevariables to be assessed in the same decision context (Oh, 1999, p. 74).

The proposed model was analyzed via the maximum likelihood estimator ofLISREL 8.3 by using the covariance matrix of the measured variables as input. Table IIreports goodness of fit indices, standardized parameter estimates and their t-values forthe structural model. The overall chi-square statistic is significant (x2336 2; 767:69;

p , 0:01), which is expected given the large sample size (Bagozzi and Yi, 1988). Allother goodness of fit indices are within the acceptable ranges (GFI 0:89,AGFI 0:87, SRMR 0:049, CFI 0:92, RMSEA 0:066). All of the fit indicesindicate that the proposed model exhibits a reasonably good fit to the data.

In accordance with the parameter estimates shown in Table II, perceived servicequality is positively and significantly related to customer loyalty (H1: g1 0:14,p , 0:01). In the same way, as proposed in H4, trust has a positive and significanteffect on customer loyalty (H4: b2 0:59, p , 0:01), and as proposed in H7, perceivedswitching costs positively and significantly affect customer loyalty (H7: b4 0:14,p , 0:01). However, although corporate image affects positively customer loyalty (H5:b3 0:07), this effect is not statistically significant. Hence, H5 is rejected.

The analysis results also yield that perceived service quality relates positively and

significantly with trust (H2: g2 0:60, p , 0:01). This finding supports H2. Moreover,the path from perceived service quality to perceived switching cost is significant (H8:g4 0:09, p , 0:05).

Referring to Table II, the findings indicate that trust in the operator relatespositively and significantly with perceived switching cost (H3: b1 0:30, p , 0:01).This result supports H3. In the same way, since the positive relationship betweenperceived service quality and corporate image (H6: g6 0:62, p , 0:01) is significantat p , 0:01, H6 is supported.


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Table II indicates that the model shows a fairly high level of explanatory power forfour endogeneous constructs, with customer loyalty, trust, corporate image andperceived switching cost having SMC values of 0.63, 0.36, 0.38 and 0.13, respectively.

DiscussionIn this study, the relationship between customer loyalty and perceived service quality,perceived switching cost, trust and corporate image is investigated. To this end, thedata was analyzed by path analysis. The results of the path analysis show that all ofthe factors have positive effects on customer loyalty.

The analysis results reveal that trust is the most important determinant ofcustomer loyalty. Even though perceived service quality and perceived switchingcost seemed to have the same level of effect on consumer loyalty, the switchingcost should be considered as a more important factor due to its indirect effect.

For example, the indirect effect of perceived service quality on customer loyaltystems from the positive relations between perceived service quality and suchfactors as trust, corporate image and perceived switching cost. Since these factors

directly affect customer loyalty, we found the indirect effect of perceived servicequality to be 0.43. In the same way, the indirect effect of trust on customer loyaltyis based on the direct effect of perceived switching cost, and its indirect effect wasmeasured as 0.04. As a result, the total effect of trust on customer loyalty is 0.63.This indirect effect is based on the path from trust to perceived switching costand the path from perceived switching cost to customer loyalty. As can be seen inFigure 1, perceived switching costs and corporate image have no indirect effect oncustomer loyalty.

Path Hypothesis Estimate t-Value

Perceived service quality! customer loyalty H1 0.14 5.02*Perceived service quality! trust H2 0.60 19.96*

Trust! perceived switching cost H3 0.30 7.44*Trust! customer loyalty H4 0.59 13.87*Corporate image! customer loyalty H5 0.07 1.83Perceived service quality! corporate image H6 0.62 20.64*Perceived switching cost! customer loyalty H7 0.14 5.88*Perceived service quality! perceived switching cost H8 0.09 2.39**

x2336 2; 767:69GFI 0:89AGFI 0:87SRMR 0:049CFI 0:92RMSEA 0:066SMCcustomer loyalty 0:63

SMCtrust 0:

36SMCcorporate image 0:38SMCperceived switching cost 0:13

Notes: CFI comparative fit index; GFI goodness of fit index; AGFI adjusted goodness of fitindex; SRMR standardized root mean square residual; RMSEA root mean square error ofapproximation; SMC squared multiple correlation; *p , 0:01 (one-tailed test); **p , 0:05

Table II.Summary of results

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Although it is not significant, the analysis results indicate that corporate imageaffects positively customer loyalty. The general experience of marketing professionalsalso verifies that such an effect is valid. The situation can be explained by the generalcharacteristics of Turkish mobile phone market, since the purchasing power of

subscribers is less than in developed countries, and the indirect tax rate in the GSMsector is relatively higher in Turkey. Consequently, the most important factor for thedecision making process of subscribers is services provided by operator compared tocost. The operators image has no significant effect on consumer loyalty in the TurkishGSM sector.

Perceived switching cost is influenced by trust and perceived service quality,whereas perceived service quality affects both perceived switching cost and trust.For this reason, perceived service quality relates both directly (0.09) and indirectly(0.18) to perceived switching cost. As regards trust, it has a direct effect (0.30) onperceived switching cost. These findings indicate that trust is a more crucial factorfor perceived switching costs than perceived service quality.

Generally, as discussed above, the findings show that perceived service quality is a

necessary but not sufficient condition for customer loyalty to emerge and to exist. Inaddition, consistent with prior research, corporate image, perceived switching costsand especially trust should be taken into consideration in developing strategies fordeveloping customer loyalty.

Essentially, the SMC value of customer loyalty in this study is higher than that inprior research (e.g. DeWulf and Odeberken-Schroder, 2003; Bloemer et al., 1998;Chaudhuri and Holbrook, 2001; Nguyen and Leblanc, 2001; Sharma and Patterson,2000; Lee et al., 2001, etc.), since our model includes all these factors effectssimultaneously and jointly. Therefore, our proposed model has a great explanatorypower in comparison to prior research.

Managerial implicationsIn the Turkish GSM market, there are four operator firms. Two of the operators (Ariaand Aycell) are new entrants. On the other hand, it may be concluded from the fall inthe markets growth rate that the GSM market has reached maturity in Turkey.Acquiring new customers is both costly and difficult in terms of marketing for GSMoperators when the number of subscribers has reached its peak level. Hence, it isbecoming an industry-wide belief that the best core marketing strategy for the future isto try to retain existing customers by heightening customer loyalty and customervalue (Kim et al., 2004, p. 146). To this end, operators should decrease theirsubscribers sensitivity to price. It can be said that factors such as trust, perceivedservice quality, perceived switching cost and positive corporate image are veryimportant for GSM operators to establish a loyal customer base and decrease their

sensitivity to price.On the other hand:

. . . bolstered by the rapid development of information and communication technologies (ICT)and high demand from customers, the paradigm of mobile telecommunication services is nowshifting from voice-centered communication to a combination of high-speed datacommunication and multimedia (Kim et al., 2004, p. 145).

This change shifts competition in GSM sector from price and core services (coverage ofcalling area and clarity of sound) to value-added services. For this, the operators should


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differentiate their services and guarantee quality of their services in order to maintaintheir market share.

Due to technological changes and differentiation strategies of firms, servicesbecome more and more complex than ever. As the services provided become more

complex, the learning period for service use becomes longer and the evaluation processbecomes more difficult for customers. Differentiation will increase perceived switchingcost. Accordingly, despite the attempts of the regulator (Telekomunikasyon Kurumu),which focus on minimizing the deterrent to switch operator (switching cost), perceivedswitching cost may be seen as a crucial factor for customer loyalty. In addition,differentiating services and the superior quality standards of these services will notonly increase trust in the operator, but also enable the formation of a positive corporateimage in subscribers minds.

In many European countries new users are tied to contracts extending over a certainperiod of time, during which the subscriber has to maintain the service and pay apre-agreed fixed fee. This contractual bond between the operator and subscribers maycause switching costs. In Turkey, however, new users are tied to contracts extendingover uncertain periods of time. Therefore, operators in Turkey may offer subscriptionswith definite periods of time in order to increase switching costs.

Limitations and future research directionsThis study has some limitations. First, the perceived switching cost was assessed by aseven-item scale. The switching cost consists of different sub dimensions, such aspsychological, financial and procedural. Therefore, these sub dimensions should bemeasured and their effects should be examined. This approach may provide bothempirical and theoretical information.

Second, rival operators attempts to attract new subscribers (such as lower price

level, phone lines without fee, etc.) affect the preference of subscribers. Therefore,subscribers perceptions about these attempts should be assessed, and the direct andindirect effect of these perceptions on customer loyalty and on its antecedents shouldbe studied. Consequently, in order to generalize the findings in the study, mobiletelecommunication services should be compared with other industries.

Finally, Dick and Basu (1994) conceptualize customer loyalty as the strength of therelationship between customers relative attitude towards an entity (brand, firm, store,etc.) and repeat patronage (behavior). According to this approach, customers aredivided into four segments using two levels of behavioral loyalty and two levels ofattitude toward the brand. These groups are true loyal (high behavioral loyalty andhigh relative attitude), hidden loyal (low behavioral loyalty and high relative attitude),spurious loyal (high behavioral loyalty and low relative attitude) and no loyal (low

behavioral loyalty and low relative attitude). With respect to this typology, even ifcustomers may tend to be attitude loyal because of high perceived service quality,perceived switching cost and trust, they may not behave loyally, or although they havelow relative attitude loyalty because of low perceived service quality, perceivedswitching cost and trust, they may behave loyally. Therefore, the effect of perceivedservice quality, switching costs, trust, corporate image and other possible situationalfactors (e.g. attractiveness of alternatives, lack of rival brands, etc.) on both behavioralloyalty and attitude loyalty should be studied in future research.

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