Determinants of customer loyalty in the wireless telecommunications industry

This paper reports the results of research investigating the determinants of the propensity to switch wireless service providers. A model generated from the data rather than from a priori theory is presented, and it is found to uphold the strong relationship between customer satisfaction and customer loyalty exhibited in prior studies. In sharp contrast to the prevailing industry practice of ‘locking in’ customers by means of restrictive contracts, this research suggests that wireless service providers are better off improving customer satisfaction in order to minimize customer defection. This would imply shifting scarce resources to customer retention through improved service, saving costs of expensive customer acquisition campaigns. The paper also proposes two methodological innovations. First, the research employs the ‘Tetrad methodology’ as an exploratory technique prior to building a Structural Equation Model (SEM) making it possible to identify drivers of loyalty—direct or indirect—when it might not be known a priori what these drivers might be. Secondly, the paper proposes an approach to estimating moderator effects on the relationship between satisfaction and customer loyalty.