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Three dimensional modelling of customer satisfaction, retention and loyalty for measuring quality of service

by V Pezeshki
()

Abstract

The aim of this thesis is to propose a model that explains the relationship between customer satisfaction, retention and loyalty based on service quality attributes. The three elements of satisfaction, retention and loyalty towards products represent ongoing challenges for the corporate financial performance. Customer behaviour analysis (known as business intelligence or customer relationship management or customer experience management) has become a major factor in the corporate decision making and strategic planning processes. Prevailing logic dictates that by improving service attributes one should expect better customer satisfaction levels. Consequently, improved satisfaction levels should increase the probability of customer retention and degree of loyalty. Substantial research work has been dedicated to explain the importance of customer behaviour measurement for industry. However, there is little evidence that there has been an overall integrating empirical research that relates the three elements of satisfaction, retention and loyalty with respect to service quality attributes. Empirical data collected from the UK mobile telecommunication for this research shows that such an objective model that is capable of capturing this three dimensional relationship will contribute towards more robust decision making and better strategic planning. The proposed thesis extracts the data about key service attributes from a combination of literature review, surveys, and interviews from the UK mobile telecommunication industry. Responses were analysed using multiple regression, regression analysis with dummy variables, logistic regression, logistic regression with dummy variables and structural equation modelling (SEM) to test variables and their interrelationships. This study makes a step forward and contributes to the body of knowledge as it: (a) highlights the role of service attribute performance towards customer satisfaction, consequently identifies attributes that affect satisfaction and dissatisfaction of customers, (b) maps the relationship between attribute importance and attribute performance, (c) optimise resource allocation process using importance-performance analysis (IPA), (d) classifies customers with respect to the role and length of relationship they have with the company (switching probability), and (e) describes the interrelationship between customer satisfaction, retention and loyalty. The novelty of the research lies in: (a) establishment of a framework that links service attribute performance to customer satisfaction and then to customer future intentions (customer retention and customer loyalty), and (b) provision of a model that could assist key decision makers in prudent usage of resources for maximum profitability. This dissertation presents a novel approach methodology and modelling construct for customer behaviour analysis. For proof of concept it presents a case study in the mobile telecommunication industry. It is worth noting that in this research work Customer Retention is interpreted as probability of switching between service providers. Customer Loyalty is interpreted as referral (word-of-mouth) activity by existing customers.

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