Service Quality and Customer Loyalty at Hong Kong Cable Television Limited
Abstract
A highly competitive business environment requires firm focus on ways of drawing loyal consumers and improving industry position. Literature provides that service quality affect customer loyalty by enabling the business firm to create venues and means of establishing and developing a committed relationship between the firm and its consumers. To determine the application of this theory, the investigation looked into the case of HKCTV to determine the extent of impact of service quality on customer loyalty and the impact on the business firm.
Keywords: service quality, customer loyalty, equipment, reliability, credibility, competence, trustworthiness, courtesy, customer care, communication
Acknowledgement
The researcher’s sincerest gratitude is extended to all the people that helped in the completion of this investigative report especially to my supervisor and the academic staff that provided guidance in the completion of the study and my peers and colleagues who were supportive during the difficult times in the investigative process.
Table of Contents
Abstract
Acknowledgement
Table of Contents
1.0 Introduction
1.1 Background Outline
1.2 Rationale of the Research
1.3 Aims and Objectives
1.4 Significance of the Study
1. 5 Scope and Limitations
2.0 Literature Review
2.1 Dimensions of Customer Loyalty
2.2 Benefits of Customer Loyalty
2.3 Ways of Achieving Customer Loyalty
2.4 Service Quality and Customer Loyalty
3.0 Research Methodology
3.1 Overview
3.2 Methods
3.3 Approach
3.4 Sample Participants
4.0 Data Collection
4.1 Survey
4.2 Interview
4.3 Ethical Considerations
4.4 Data Processing
5.0 Results, Discussion and Presentation
5.1 Results
5.2 Analysis
5.3 Project Outcome
6.0 Conclusion
6.1 Summary
6.2 Conclusion and Implications of the Study
Bibliography
1.0 Introduction 1.1 Background Outline
Television operators industry in Hong Kong is facing a shift in competitive positions of the two largest cable television companies. In the past years, Hong Kong Cable Television (HKCTV) is the dominant cable television programming operator in Hong Kong controlling around 50 percent of the market. In late 2007, Pacific Cyber Century Works (PCCW) through its Internet protocol television (IPTV) or broadband television showed aggressive competitive stand to close the gap in the market share with HKCTV. Based on the performance of these closely competing firms, the firms tied with a 48 percent market share as 2007 ended. The fast uptake of IPTV in Hong Kong is expected to increase the lead of PCCW by as much as 5 percent with PCCW gaining a 51 percent market share and HKCTV retaining a 46 percent market share in 2008. Forecasts shows that based on current performance trends, PCCW would increase its market share to 54 percent leaving HKCTV with a 43 percent market share by 2012. (CableLabs 2007) This means the greater challenge for HKCTV to enhance its marketing strategy to maintain its market base and draw new consumers because of the close competition with PCCW for dominant position in the market. The competition is occurring in different areas including pricing as well as programming, technological innovation, and customer service that constitute quality of service. PCCW offers a lower price when compared to HKCTV so that the latter needs to bank of service quality to provide value acceptable to consumers as commensurate with the price they pay for cable television as and to provide a value that would distinguish cable television offered by HKCTV with IPTV offered by PCCW. With the present stringent competition that would determine competitive positions in the next years, it becomes all the more important for HKCTV to assess its current internal competencies and external influences to determine areas for improvement that meets the current and emerging demands of consumers. To maintain its dominant position, HKCTV needs to build on a loyal customer base through service quality.
1.2 Rationale of the Research
Determining the position of business firms in terms of service quality has important implication on the degree of customer loyalty. Service quality should be critically aligned with the competitive environment and the expectations of the target market. Reliability, responsiveness, assurance and empathy are business values that foster patronage and profitability. Likewise, corporate branding or imaging is increasingly becoming a vital point of success for companies. As such, the company that recognises the value of service quality not only ensures customer loyalty but also stands out in an increasingly competitive business environment. Since customer loyalty has a strategic purpose, the manner that modern organisation like Hong Kong Cable Television combat the challenges of maintaining high levels of service quality is also crucial.
1.3 Aims and Objectives
The aim of the investigative project is to determine the correlation between service quality of a company and customer loyalty to support strategic decision-making to develop a customer base, expand the market, ensure competitiveness, and increase profit. To achieve this general aim, this paper seeks to address the following specific objectives:
1. To determine concepts and theories explaining the nature and extent of the relationship between service quality and customer satisfaction;
2. To determine the importance of service quality in increasing loyalty among the customer base of Hong Kong Cable Television;
3. To demonstrate the impact of services quality in maintaining loyalty among the existing customers of HKCTV;
4. To evaluate the quality of service at HKCTV that influence customer loyalty; and
5. To analyse the level of customer loyalty among the customers of HKCTV based on the eight determinants of loyalty that also comprise the independent variables of the study.
1.4 Significance of the Study
The results of the study provides information and insight into the role played by service quality in developing customer loyalty at HKCTV, especially in the context of the fierce competition with IPTV making it crucial for HKCTV to focus on building brand loyalty to prevent switching by focusing on quality enhancing activities. The study also benefits other service industries by providing an understanding of the impact of service quality on customer loyalty and the components of customer loyalty greatly influenced by service quality. Results support strategic decision-making on service quality areas to prioritize to maximize loyalty among the customers of service firms.
1. 5 Scope and Limitations
The study focuses on the relationship between service quality and customer satisfaction, with customer satisfaction comprising the dependent variable and the determinants of service quality as the independent variables. By focusing on this relationship, an in-depth understanding of the correlation is achieved.
The empirical investigation is limited only to Hong Kong Cable Television, the dominant cable television service provider in Hong Kong challenged by Internet protocol television (IPTV) by another company Pacific Cyber Century Works (PCCW). Focusing on this single company enables the investigation to derive insight from this fierce competitive context so that a decision could mean the loss or maintenance of the company’s dominant position. The competitive context also supports the importance of service quality in achieving customer loyalty.
2.0 Literature Review
According to Lowenstein (1997), every business gains advantage by adopting the development of customer loyalty as its strategic purpose. It has a constructive effect on company culture, development and bottom line because all action serves the purpose of gaining loyal customers. This makes it important for business firms to understand customer loyalty and the factors that support the achievement of this strategic purpose. Chow and Holden (1997) explain the concept of customer loyalty as about establishing and maintaining behaviour influencing and long-term relationship with customers.
2.1 Dimensions of Customer Loyalty
Customer loyalty has two dimensions. One is attitudinal loyalty and the other is behavioural loyalty.
Shankar, Smith and Rangaswamy (2000) explained attitudinal loyalty as the higher level of commitment of consumers exhibited in the long-term that develops from loyalty-building activities that extend beyond repeat purchases. Attitudinal loyalty means that customers actually align with the values of the company or brand equity and repeat purchases is just one expression of this. Liddy (2000) considers attitudinal loyalty as a key competitive measure since this reflects the extent that customers exhibit particular key behaviours including repeat purchases. Service firms need to focus on marketing stimuli that develop cognitive or emotional attachment on the part of consumers with the service, brand or company. Baloglu (2002) purported four factors measuring attitudinal loyalty, which includes commitment, emotional attachment, trust, and switching cost so that meeting these measures involves investment in these factors.
Building customer loyalty gives rise to the role of relationship marketing in building customer commitment based on factors that goes beyond the service itself (Bowen & Shoemaker 1998). It is also crucial for business firms to understand commitment, which is defined as the enduring willingness of customers to sustain a relationship with the company based on value (Moorman Zaltman & Deshpande 1999) to constitute the basis of the emotional attachment (Mattila 2001) to the service, the brand, and the company. Kumar, Hibbard & Stern (1994) stressed that emotional attachment is a more accurate predictor of consumer decisions in the future when compared to the other cognitive factors. Business firms need to focus on activities and value offerings able to stimulate emotional attachment.
Schultz and Bailey (2000) explained behavioural loyalty in terms of the intentions of customers to demand the service again, willingness to recommend the company and its services to their social network, and insensitivity with the prices of the service. This concept is important because it considers the link between providing value to customers and service brand. Behavioural loyalty is important because it has three dimensions. One is cooperation defined as business firms working together with customers to meet common goals (Morgan & Hunt, 1994) or the voluntary desire of customers to support goal achievement of the firm (Bowen & Shoemaker 1998). Another is voluntary partnership or mouth referrals done by customers on their own will (Bowen & Shoemaker 1998). This is achieved when customer feel that they are active contributors to the success of the company (Anderson & Narus 1990). Last is the provision of value that should always be equal or higher than the price. This is important in decreasing the sensitivity of consumers to price or the primary consideration of price as the determinant of repeat demand of the service. (Mooney 2002) By providing high value services, consumers develop the perception that the price they pay for the service equivocates or is less than the value gained. This supports behavioural loyalty because price is not a strong factor in determining a customer loyalty. This is important in firms competing based in differentiation and not on price or firms whose operations do not fit the economies of scale concept. As such, firms need to use value creation to decrease price sensitivity.
Attitudinal and behavioural loyalty focuses on the different aspects of customer loyalty with the former covering the cognitive basis of loyalty and the latter the observable or physical aspect of loyalty. This means the importance of integrating both dimensions in developing loyalty-building activities and assessing the degree of customer loyalty achieved by business firms.
2.2 Benefits of Customer Loyalty
Investing in activities that develop customer loyalty affords many benefits to business firms. Chow and Holden (1997) explained that achieving customer loyalty enables the business firm to maintain a customer base, or a group of consumers that regularly engage in services of the company. In addition, customer loyalty also supports the enhancement of brand equity since the pool of regular customers recognises the brand of the company and attaches high value to it. Brand equity then supports the competitiveness of the firms since brand recognition and a customer base are determinants of the extent of competitiveness. Moreover, another benefit of customer loyalty is cost-savings since having a customer base allows the firm to save on the cost of having to draw new customers frequently. The customer base of the firm constitutes its regular and dependable market that contributes to the continuous revenue generation of the company at a lower cost to the company when compared to the cost involved in having to encourage potential customers to try the service and drawing these customers to engage in the service on a regular basis.
Ducques and Gaske (1997) explained that customer loyalty also supports cost-effective marketing since loyal customers are easier to convince to try new service features. In addition, customer loyalty also becomes less sensitive to future increases in price. Moreover, building customer loyalty also makes customers less sensitive to possible future increases in price. Apart from these, loyal customers are also willing referrals that further expands the pool of loyal customers of the company. This lessens marketing cost because of the free and voluntary advertisement of the company and its services based on word of mouth flowing through the social networks of the company.
Peppers (1993) propounded that customer loyalty enhances the present and future value of customers of the firm by focusing business activities on strategies that targets the creation and enhancement of value to consumers
through improvements in customer relationship management, the quality of products and services, and other areas of value enhancement. The key to the development of a mutually beneficial relationship is the awareness of the preferences of the customers as well as the present and potential needs or wants of customers in relation to the different aspects of the business. Developing good relations with customers by meeting their needs is important to prevent turnover that leads to the decrease in profits.
Bowen and Shoemaker (1998) explained another benefit of customer loyalty as steady cash flow for the company. Loyal customers are willing to pay even if competitors offer a lower price or the company increases the cost of its services. Loyal customers are also long-term partners giving the company a stable market in the long-term. By developing a loyal customer base at present, the company ensures its future market, especially with the potential of market expansion through the voluntary advertising of loyal consumers.
Chow and Holden (1997) further explained that a loyal customer base also benefits the company through lesser issues with customers since loyal customers extend greater understanding of any mistakes or errors on the part of the company. This is because loyal customers feel a part of the operations of the business firm or empathise with the company making them perceive errors or mistakes as inevitable to business operations. In addition, when the business firm applies the practice or have a mechanism that allows front line employees to correct mistakes right there and then, loyal customers could even become more loyal. New customers also appreciate this practice and could become loyal customers.
Peppers (1993) added that customer loyalty also reflects and builds employee loyalty. In turn, loyal employees can save the company money in a number of ways. The company can save on investments in attracting, hiring or training of new employees because loyal employees are likely to exercise effective and excellent customer service. In addition, the company also retains its pool of trained employees who have gained valuable knowledge of the company’s market. Employee loyalty also supports the continuous learning and improvement in employee performance and customer relationship management leading to further value creation for consumers, in terms of positive and accommodating attitudes towards customers. This means that customer loyalty affects employee loyalty and the other way around so that a cycle of improvement occurs in the organisation through the development of customer loyalty.
Chow and Holden (1997) further explained that loyal customers have an understanding of the processes and systems of the company through their long and engaging relationship with the company. This means that loyal customers have an understanding of the difficulties, issues or problems experienced by the company and they are likely to express these to the company for purposes of supporting improvement in the company.
Establishing the benefits of developing customer loyalty then necessitates the determination of the ways of achieving this goal.
2.3 Ways of Achieving Customer Loyalty
Developing customer loyalty is a process that commences with the establishment of a relationship with consumers based on the values of emotions, empathy and trust. Business firms should focus on creating valuable relationships with customers that extend beyond collecting payments for service delivery. Every point of interaction with customers constitutes a potential point of positive connection. On the part of customers, engaging the services of the company is also a way of developing values. This makes customer service program, which is the venue for interaction with customers, and important aspect of customer loyalty. Employees servicing customer at the point of service delivery and after service delivery have to recognise the value of positive interactions with customers. (Lowenstein 1997; Bowen & Shoemaker 1998)
The next step in the process is developing an understanding of the needs and wants of customers and an appreciation of emotional intelligence, which is the ability to perceive and assess one’s emotions and the emotions of the people around them. This knowledge and skill then allows the company to understand the needs and wants of its customers resulting to responsive services and service delivery processes. This highlights the importance of training employees to develop emotional intelligence so they can interact effectively with customers. Training program can also enable employees to determine ways of changing their attitude and behaviour so they know how to react to customers and to respond to customer in a controlled as well as proactive manner to have a controlled environment that fosters positive interaction with customers. By knowing ways of controlling points of positive interaction with customers, the company can succeed in enhancing the nature and extent of relationship it has with customers from positive first impressions to sustained relationship with the company. (Lowenstein 1997; Bowen & Shoemaker 1998)
The last step in the process is influencing the behaviour of customers to achieve improved results. Behaviour modifications are crucial in the development of customer loyalty. This is because positive changes in behaviour are learned. The company has to introduce means of influencing the behaviour of customers to engage the services of the company regularly in the long-term. Achieving this involves incentives and motivational activities such as an excellent customer service, customised service, or discounts and coupon promotions to draw customers and make them develop a deep appreciation and recognition of the value of the service, the brands, and the company. When customers become motivated, they exhibit attitudes and behaviour that constitute lessons for employees on activities or program that work for the different groups of customers and suggest changes in the other areas to ensure the same positive results. By taking cue from the responses and actions of customers, the company can determine what activities to retain and the programs to improve. (Lowenstein 1997; Bowen & Shoemaker 1998)
The process occurs in a cycle so that business firms constantly establish and re-establish relationships with current and new customers, learn and update knowledge on customers, and carefully influence behaviour to achieve and expand a loyal customer base. (Lowenstein 1997)
Service quality encompasses the benefits of customer loyalty and the means of achieving customer loyalty. This is because service quality is a broad term that covers not only the service itself but also the aspects surrounding the system such as the manner of service delivery, after service delivery, and sustained quality for repeat service engagement. (Kotler 1997)
2.4 Service Quality and Customer Loyalty
The competitive environment requires customer orientation from business firms (Kotler 1997). This is because the identification and fulfilment of the precise needs of customers results to enhanced customer retention (Day 1994). It is common for business firms to invest highly on customer retention and customer loyalty. The returns of the investment are invaluable given the fierce competitive environment that many business firms and industries face. Achieving customer loyalty could be through improvements in service quality.
Service quality refers to the judgment of consumers over the firm’s excellence or superiority. Service quality is an aspect of attitude that results from the comparison of the expectations and perceptions of performance of the firm relative to that of a competitor firm (Parasuraman et al. 1988). This implies that service quality is a concept that encompasses not only the nature and value of the service itself but also the value of the service and service delivery on the part of consumers.
Due to the importance of service quality as a determinant of customer retention and loyalty, conceptualising and measuring service quality generated an ongoing discussion in studies on service management, marketing, and improvement that place emphasis on the salience of service quality in drawing, satisfying, and retaining consumers (Heskett et al. 1997; Schneider et al. 1998; Storbacka et al. 1994). Service quality plays the role of integrating the efforts of the company in the areas of firm service policies or practices in the sequence of service production and delivery to lead to value creation for consumers, satisfaction in service delivery, and customer loyalty (Storbacka et al. 1994; Zeithaml et al. 1996; Heskett et al. 1997; Cronin et al. 2000). Integration role establishes the link between service quality and customer loyalty.
Measurements of service quality coincide with its components. Measuring service quality involves looking at various variables including: a) tangibles which represents whether the physical facilities, equipment and appearance of the personnel related with the service; b) is reliability which deals with the ability to perform the promised service properly at the first time; c) competence whereby consumers can measure service quality by the knowledge and skills possessed by personnel and their ability to convey both trust and confidence; d) credibility and e) trustworthiness concerned with whether the company always delivers what it promises to the consumers; f) empathy which measures whether the company provides its customers with individualized attention; g) courtesy that deals about customers’ perception on the service provided; and h) communication that delivers the information which the company circulates to the customers about the service offered (Proctor, 2000). These components of service quality that also comprise measures of service quality serve as the means of determining the extent of service quality of a business firm. The higher the degree of achievement of these factors indicates better service quality and better service quality then supports the retention of customers that also amounts to customer loyalty, although customer loyalty involves cognitive factors other than mere retention of customers or non-switching.
3.0 Research Methodology 3.1 Overview
Investigating service quality and customer loyalty of Hong Kong Cable Television Limited involves the determination of the relationship of the independent variable customer loyalty with a group of independent variables, which are tangibles, reliability, competence, credibility, trustworthiness, empathy, courtesy, and communication. The research would determine whether customer loyalty has a relationship with these variables and if so determine the extent of relationship and draw explanations for the extent of relationship or if not to find reasons for the lack of or weak relationship between an independent and the dependent variable.
Data requirements for the investigation involve secondary and primary data. Secondary data constitute information derived for a different and original purpose contained in books, journal studies, articles, papers and reports. Primary data comes from the first hand data collection made for the purpose of this study. Primary data collection in the study includes a survey of the customers of Hong Kong Cable Television Limited and interviews with selected respondents. The survey would determine the perspectives of the company’s customers on the firm’s service quality and the degree of satisfaction as well as the degree of customer loyalty while the interviews would provide explanations for the perceptions and assessment of the company’s customers on service quality and the extent of customer loyalty.
3.2 Methods
On one hand, the secondary sources of data will come from the company’s annual report, published articles, business journals, research papers, and related studies on quality of service and customer loyalty. On the other hand, primary research involved using the survey strategy, which allowed the gathering of a large amount of data from a sizeable population in an economic way (Saunders et al. 2003). The interview method provides a means of collecting insights or descriptions of experiences of the respondents on a given phenomenon or situation with answers expressed in words and analysed to derive insight and meaning (Saunders et al. 2003).
3.3 Approach
The study combines qualitative and quantitative approach. The qualitative approach is used to derive accounts and/or descriptions from people that can provide first hand information on the situation or phenomenon being studied (Saunders et al. 2003). The purpose of this approach is to draw in-depth information on a particular phenomenon to derive explanations, interpretations, and generalisations. The study uses qualitative approach to derive accounts and/or descriptions from the customers or subscribers of Hong Kong Cable Television Limited with regard to service quality that affects the extent of their loyalty to the company’s services and the company itself. The quantitative approach is used to draw measurable or quantifiable information on the phenomenon subject of the study (Saunders et al. 2003). This reason for gathering measurable data is to determine the relationship between or among variables through descriptive statistics (i.e. frequencies and comparative data) expressed in the tables and graphs. In the study, quantifiable data is collected to determine the existence of a relationship between customer loyalty and the eight determinants of service quality as well as to determine the extent of the relationship. Information would provide insight into the aspects of service quality that affects customer loyalty the most.
3.4 Sample Participants
Towards the end of 2007, Hong Kong Cable Television had 882,000 subscribers. Of these subscribers, 300 respondents were selected to take part in the survey. Targeting 300 survey respondents provides acceptable representation of the subscribers of HKCTV. The selection of the respondents was through random sampling. This sampling method was applied by using the telephone directory listing to look for respondents. Numbers are assigned to the alphabetically listed phone book and then numbers are drawn through random number software. The number picked would correspond to a name in each page of the phonebook. The numbers would be called to ask whether they have cable subscription and whether they are using HKCTV services. If the answer is yes, they would be asked whether they want to participate in a survey. They will be mailed the questionnaire. The questionnaires were then mailed to the subscribers including a letter explaining the purpose of the study and the participation required from them. The mail includes a stamped and addressed envelope to be used in sending back the answered questionnaires.
The interview follows the completion of the survey. This is necessary to learn about the demographic characteristics of the respondent and identify the respondents that purposively represent the different communities or geographic locations in Hong Kong and income groups. In case, there are too many for each group, representatives were selected randomly to ensure proportional representation. They were contacted through telephone for scheduling of the interview at a latter data or for the immediate completion of the interview depending on the preference of the respondents.
4.0 Data Collection 4.1 Survey
The survey method applied in collecting primary data. Survey comprises a descriptive and non-experimental data collection method intended to draw information from a large sample. The survey method allowed the investigation to derive precise and impartial data to support conclusions and generalisations. This applies in studies requiring the determination and investigation of links or relationships between or among variables (Saunders et al. 2003). In the current study, the dependent variable is customer loyalty and the independent variables are the measures of service quality.
However, there are advantages and disadvantages in using the survey method so that, the disadvantages should be addressed to justify the method and ensure the reliability and validity of the data collection process. An advantage is the ability to establish a relationship among variables but a concurrent disadvantage is the failure of the method to indicate the direction of the relationship (Salant & Dillman 1994). In the current study, combining the quantitative and qualitative approaches led to the determination not only of the existence of a relationship but also the direction of the relationship and the explanation for this. Another advantage is the ability of the survey to draw data from many respondents but a related disadvantage is the heavy reliance of the method on self-reported data (Salant & Dillman 1994) by the respondents making it imperative for the researcher to apply ways of ensuring the willingness of the respondents to participate and freely share information to support research validity. In the study, respondents were contacted beforehand to seek their willingness to cooperate in the data collection process by explaining to them the purpose of the study and the need for their participation in the data collection process to ensure that answers given can validly support conclusions. In addition, combining survey with interview method also allows the company to derive explanations for answers. Still another advantage is the ability of the data collection method to derive a wide range of experiences and opinions on the subject of the study but this also involves the concurrent disadvantage of requiring a tedious process (Salant & Dillman 1994). The current study worked through a timetable that allotted sufficient time for data collection especially because of the need to draw willing customers and wait for replies to the questionnaire.
The survey used a questionnaire, as shown below, composed of two parts. The first part of questionnaire contained demographic information while the second part involved the survey proper. The questionnaire was administered to the customers of Hong Kong Cable Television Limited. In addition, another primary data collection method is interview with selected survey respondents conducted to derive insight on the responses.
Survey Questionnaire
Instructions: Please place an answer on the line or place a check on the line provided following your selected answer.
I. Demographic Data
1. Name (optional): ________________________________________________
2. Age:
25 and below_____ 26-35_____ 36-45_____
46-55_____ 56 and above_____
3. Gender:
Male_____ Female_____
4. Family Income Level:
below 10,000_____ 10,001-20,000_____ 21,001-30,000_____
30,001-40,000_____ 40,001-50,000_____ above 50,000_____
5. Type of Subscription: _____________________________________________
6. Years as a Cable Service Consumer of HKCTV
Less than 1 year_____ 1-5 years_____ 6-10 years_____ 10-15 years
7. Frequency of Viewing:
24 hours_____ most of the day_____ half of the day_____
a couple of hours a day_____
8. Favourite Cable Television Channels:
_______________________________ _______________________________
_______________________________ _______________________________
_______________________________ _______________________________
II. Service Quality
Instructions: Place a mark on the box representing your rating of the services and service delivery of HKCTV
Very Low
Low
Moderate
High
Very High
1.equipment & facilities (cable connection and utility services)
2. reliability of service
3. competence of personnel and staff
4. credibility of the company to delivery cable services
5. trustworthiness of the company in service delivery
6. customer service
7. courtesy of service personnel
8. effective communication and information sharing to consumers about existing and future services and service features
III. Customer Loyalty
Yes
No
1. Do you consider yourself a loyal customer of HKCTV?
2. Do you see yourself as a subscriber of HKCTV in the next ten years?
3. Would you refer HKCTV to people in your social circle?
4. Would you pay for quality service from HKCTV?
5. Would you switch to another cable company in the future?
4.2 Interview
The other data collection process is interview that allows investigations to capture the experiences, ideas and opinions of respondents. This operates on the assumption that the perspectives of participants provide meaning and can be expressed explicitly. There are two ways of conducting interviews, in a structured or unstructured manner through an in-depth interview. A structured interview is a rigid method of data collection that limits the possible answers to the questions by making respondents choose answers from a given set of choices. An in-depth interview involves the flexible derivation of answers to open questions giving the participants room to give their answers and provide explanations. Research practice led to the development of a semi-structured interview that combines both elements of the structured and unstructured interviews by using closed and open-ended questions. (Saunders et al. 2003) The current study used the unstructured interview by posting closed questions since the data collection process also used a survey method using a structured questionnaire. The combination of the structured survey and the unstructured interview then provided the study with comparable data as well as explanations of the relationship between the variables subject of the study.
The interview questions, shown below, were intended to determine the extent of loyalty of the customers of HKCTV. The first question directly asks the respondents on whether they perceive themselves as loyal to HKCTV or not. The next four questions are intended to support the answers of the respondent by focusing on the factors that constitute consequences or comprise determinants of customer loyalty. The answers of the respondents to these questions would determine not only the extent of loyalty but also the areas in which loyalty is expressed or observed. The interview questions would support the answers in the survey questionnaire.
Interview Questions
1. How would you describe HKCTV as a company?
2. How would you describe the services of HKCTV?
3. How would you rate HKCTV services compared to other cable companies and similar services?
4. What issues or problems do you have with the services, service features and service delivery of HKCTV?
5. What recommendations do you have on the solutions to these issues or problems?
4.3 Ethical Considerations
The ethical considerations arising in the investigation covers the consent of the respondents to the data collection process and the confidentiality of the information given by the respondents. This could raise concerns on the part of the respondents. In order to allay this concern, the questionnaire includes a letter explaining how their information was obtained, the extent of information obtained on them, the researcher, the purpose of the study, the participation expected from them, and an assurance that personal information obtained would be kept in confidence and used only for the purposes of the study. Answering and mailing back the questionnaires indicates consent and voluntary participation to the data collection process. In addition, protecting the confidentiality of identities of the respondents and the information given would also be assured the respondents during the interview process. These steps are necessary to ensure that the respondents knowingly and willingly extend their cooperation and participation to the research process.
4.4 Data Processing
The method of data analysis for the qualitative data is deriving and interpreting meaning and deriving implications in relation to the aim and objectives of the study. Results and analysis are presented in text discussions and graphs or charts to facilitate readability. In relation to the quantitative data, correlation analysis determines the existence of a relationship between the dependent and the various independent variables.
5.0 Results, Discussion and Presentation
Out of the 1,000 questionnaires sent through email and mail, with 230 questionnaires sent through email and 70 questionnaires sent through the post, only 180 returned mostly through email. The data presented below then constitutes the answers provided by the 180 respondents. Based on the demographic characteristics of the respondents, 14 interviewees were selected to represent the different communities or geographic locations and income groups.
5.1 Results
Demographic information shows that most of the respondents belonged to the 36-45 and 46-55 age groups representing the adult working population and households. More than half of the respondents were males and the remaining are females indicating that cable subscription are take out mostly by the male members of the family usually the head of the family or the primary male breadwinners. Majority of the respondents belonged to the middle-income groups or the middle class and most of the remaining percentage represented the upper income groups. The type of subscription taken usually involve regular or basic cable services but there are also some that also engage in premium cable services. However, cable services are sustained in the long-term with many respondents continuing subscription in a span of 5 to 10 years. The frequency of viewing, for the entire household, ranges from half of the day to most of the day. Favourite channels provide sports, news, movies, and segment programs.
Figure 1 below shows the answers of the respondents on the survey questions measuring the service quality of HKCTV. The graph shows distinct commonalities in the answers of the respondents in some service quality variables as well as differences in perception in relation to the other measures of service quality. Customers of HKCTV gave competence, trustworthiness, reliability and credibility with the highest ratings in this order so that competence is the service quality feature considered by HKTVC customers as the highest contributor to the quality of its services. Equipment and facilities also received a high rating but there are also a significant number of respondents placing a low and very low rating on this service quality measure.
There is a lesser degree of agreement on the service quality measures of customer service, courtesy and effective communication since majority of the respondents gave a moderate rating and the rest of the rating are almost equally divided into the other extreme ends of the rating. This implies that these areas of service quality do not appeal to customers in a positive way as the other measures.
Figure 2 below shows the extent of loyalty of HKCTV customers. Although the issue of loyalty was asked directly in the questionnaire, other consequences or determinants of customer loyalty were also considered to support the determination of the extent of loyalty of HKCTV consumers. Most of the respondents perceive themselves as loyal customers of HKCTV but there are also a number of respondents that thinking differently so that this could be due to the lack of a solid connection with the company and its services to view themselves as loyal customers even if they have been subscribers for a number of years. Of the four consequences or determinants of customer loyalty, referral received the highest agreement, followed by retention or continuity of subscription, then by insensitivity to price, and lastly by switching.
Customers think positively about the services of the company to refer this to their social circle. Most of the respondents are also middle class indicating the capacity to pay for cable services provided the price matches the value of service quality. Switching received the lowest number of agreement although majority of the respondents did not think they would switch to another service or company in the future. This could be because of the number of respondents that have not developed loyalty to the company or it could be that even with perceptions of loyalty to the company, customers would consider better service quality in the future even if this is offered by another company.
Figure 3 below compares the ratings of the customers, considering themselves as loyal and not loyal to the HKCTV, of the eight measures of service quality. The graph was derived by assigning values to the ratings as follows: 1-very low, 2-low, 3-moderate, 4-high, and 5-very high. This means that higher average ratings for the customer groups would yield a higher value while lower ratings for the customer groups would result in lower values. Higher values then mean higher service quality and lower values means lower service quality.
The reddish blocks in the table represent the ratings of the respondents that do not consider themselves loyal to HKCTV while the bluish blocks represents the ratings of the respondents who do not perceive themselves as loyal to HKCTV and its services. It can be observed that the reddish blocks are higher than the bluish blocks indicating higher ratings given to most of the determinants of service quality. This coincides with the high rating for five of the measurements of service quality, which are competence, trustworthiness, reliability, credibility and equipment and facilities, presented in Figure 1 above. This means that for these measures of service quality, there is a difference in the ratings of customers perceiving themselves as loyal and not loyal to the cable company, with loyal customers giving a higher rating for these determinants of service quality as compared to the lower ratings of respondents who do not consider themselves loyal to the company.
Figure 4 below shows the correlation between customer loyalty and the eight measures of service quality. The values of the Pearson Correlation signify the existence of a relationship and the direction of the relationship. The value of Pearson Correlation ranges from -1 to +1, with -1 indicating perfect negative correlation while a value of +1 shows a perfect positive correlation. A value 0 indicates lack of correlation. All the values of the Pearson Correlation between the dependent variable customer loyalty and the eight independent variables representing the measures of the study constitute positive values, which mean there is a positive relationship between customer loyalty and the measures of service quality. This further implies that the measures of service quality have a positive effect on customer loyalty. However, there are differences in the correlation values. The closer the value to +1, the stronger the correlation of positive correlation between the variables so that the closer the value to -1, the stronger the negative correlation of the variables. In case of values very close to 0, the weaker the positive or negative correlation. In the given case, the highest Pearson Correlation values expressed the relationship between customer loyalty and the equipment, reliability, competence, credibility and trustworthiness. This coincides with Figure 1 below indicating that these measures of service quality have strong effects on customer loyalty. In addition, the service quality variables of customer care, courtesy and communication influence customer loyalty in a positive manner but of a lesser strength when compared to the other five measures of service quality.
The significance of the values (2-tailed) also known as the p-value is understood in relation the threshold valie of 0.01. If the p-value is greater then 0.01, then the correlation values are statistically significant and if the p-value is less than the 0.01, then the correlation values are not statistically significant. The results showed that all the significance values are.000, minute values that is not 0 and less than 0.01. As such, all the correlation values are statistically significant to support the positive relationship between the variables indicating the impact of service quality on customer loyalty.
The interview results provided explanations for the relationship between the measures of service quality and customer loyalty. A common description of the HKCTV, as a company, is as a popular cable company that has been in existence for the past three decades. Another description is as a company with a wide-range of scope especially in the fringe communities. This means that the company has been able to establish its presence in the Hong Kong market even with just 15 years of operation as HKCTV. The services of HKCTV were described strongly as great and reliable, and weakly as regular service comparable with its competitors. The diversity of the answers could be due to the different types of subscriptions of the company as well as their previous experiences with other cable companies or negative experiences with the services or service features of the company.
In comparing HKCTV with other cable companies, there were also differences in opinion although most of the respondents expressed that the company and its services were at par with the performance of other cable companies. There were respondents that recognised some aspects of the services of other companies as better but not necessarily as better as a whole when compared to the overall services of HKCTV. This means that a number of respondents consider some aspects of the services of other cable companies as superior but this does not necessarily mean that they would shift to the competitor company. Overall, the specific aspects of the service need to be of high quality as well as the entirety of the service.
Common issues or problems raised by the interview respondents included the price when compared to other cable companies as well as customer relationship in terms of information sharing and other frontline dealings with customers. Some of the respondents expressed that they were not aware of free additional service features and promotional activities only towards the end of the period or after the offers have already lapsed. Some of the respondents also cited slightly lower prices offered by other cable companies but these decided to stick with the company because of lesser geographic scope of the other cable companies. Recommended solutions included lowering price, maintaining the price but increasing service features, and/or providing more information to customers on additional service features and promotional activities.
5.2 Analysis
Results confirm the literature explaining the relationship between service quality and customer loyalty. The relationship exists because service quality links the improved efforts of the company in developing activities that support customer loyalty as the outcome. Service quality also motivates the company to adopt customer-oriented operations allowing the company to learn more about the needs of the market as bases of improvements in existing services and the development of new services. As such, service quality makes business firms more responsive to the changing market demand, allowing them to ensure customer satisfaction, retention and eventually customer loyalty.
Based on the survey and interview data from the customers of HKCTV, service quality is crucial in increasing customer loyalty among HKCTV customers through the different determinants or measures of service quality. All the eight measures of service quality positively contribute to the development of customer loyalty. Results showed that majority of the customers of HKCTV consider themselves as loyal to the company and its services but there are also sizable number of people that do not consider themselves as loyal to the company and its services. This could be explained by the varied impact of the eight measures of service quality on customer loyalty with equipment, reliability, competence, credibility and trustworthiness having stronger influence on the development of customer loyalty when compared to the weaker influence of customer care, communication, and courtesy. The interview showed some respondents citing customer care and relationship building with customers as problematic. As such, even if many customers have a positive experience with the services of the company in terms of the different aspects, there are also customers that are not content with some aspects of the quality of the services of HKCTV. As such, discontent in some aspects of service quality could be the reason for some customers not considering themselves as loyal to the company. These are the areas requiring improvement in the services, service features, and service delivery in the company.
Thus, HKCTV has been able to direct service quality to influence customer loyalty that explains its retention of a customer base in the long-term. However, there are areas for improvement requiring immediate attention.
5.3 Project Outcome
The research project has been able to derive secondary and primary data describing the relationship between service quality and customer loyalty, providing an explanation of the link between service quality and customer quality, and covering the extent of service quality and customer loyalty among the customers of HKCTV.
The project also affirmed theoretical principles on the link between service quality and customer loyalty, through empirical results from the case of HKCTV.
6.0 Conclusion 6.1 Summary
Customer loyalty is an important aspect of business because it is crucial to the establishment of a market based and improved competitiveness. Investing in customer loyalty offers a number of benefits including the maintenance of a customer base, enhancement of brand equity, cost savings in marketing activities, decreased price sensitivity, voluntary referral of customers to their social circle, improved products and services as well as better competencies, and value enhancement. Investing in customer loyalty also allows the business firm to gain an understanding of the processes and systems of the company on the part of customers and understanding of customer needs on the part of the consumer. When this happens, a relationship between the company and its customers emerges resulting to positive cognitive results on the part of the consumers resulting to customer loyalty.
Testing this theoretical relationship was made by looking at the case of HKCTV, a cable company in Hong Kong experiencing changes in its market and competitive environment. The objective was to determine the relationship between service quality and customer loyalty by considering the relationship between the customer loyalty as the dependent variable and the eight measures of service quality as the independent variables. Two types of data was derived, secondary and primary data. Secondary data pertained to data found in books, journal studies, articles, papers and reports while primary data comes from the survey and interview with respondents who are customers of HKCTV. The investigative approach combines quantitative and qualitative data, with the quantitative data pertaining to measurable information especially from the survey while the qualitative data refers to the accounts or descriptions of the respondents regarding service quality and customer loyalty through the interview. The survey involved a structured questionnaire sent to the customers through main and the interview was made through phone. Three hundred customers were sent a questionnaire but only 180 returned the answered questionnaires. Fourteen respondents were selected from the respondents for the phone interview with these respondents representing the geographic and demographic market of the cable company,
Results showed that the service quality of HKCTV is high because of its ability to draw customers to become loyal clients but there remain areas for improvement. Service quality is determined by eight measures, which are equipment, reliability, competence, credibility, trustworthiness, customer care, courtesy and communication. All these measures positively and significantly influence customer loyalty as shown by majority of customers perceiving themselves as loyal customers. However, these measures have differing impact of customer loyalty with the first five measures influencing customers more strongly as compared to the last three measures. The first five measures then comprise the areas of service quality that effectively influence customer loyalty but could still be improved to ensure greater customer commitment to the company and its services. The other three measures of service quality constitute the areas requiring improvement especially since the issues and concerns mentioned by the respondents fell under these three measures especially poor relationship building and communications.
6.2 Conclusion and Implications of the Study
Hong Kong Cable Television Limited (HKCTV) has succeeded fairly well in establishing a consumer base in its fifteen years of operation. However, its market and the competitive atmosphere are changing with the emergence of IPTV or broadband television offered by its closest competitor Pacific Cyber Century Works (PCCW). This alternative broadband service offered a unique value to consumers and together with the popularity of broadband service led to the fast uptake of IPTV in Hong Kong. Although, the two companies operates using two different methods, with one providing cable television and the other offering broadband television, these service became close competitors in the contemporary television connection services in Hong Kong. The competition hinges on the ability of the companies to draw more consumers and establishment a bigger market share that is not likely to switch. Although HKCTV remains as the leading television service provider in terms of the number of subscribers, the difference between the market of HKCTV and PCCW is decreasing at a very fast rate leading to the need for the company to consider areas for improvement. Since service quality enhances market base and firm competitiveness, this is an area for improvement especially the measures of service quality that only moderately influenced customer loyalty.
The results of the investigation implies that business firms operating in a highly competitive environment have to focus on service quality, especially all the different measures to ensure commitment on the part of customers and by maintaining the value offering of continued improvement in service quality would lead to customer loyalty. This is especially true in the service industry where quality is a strong determinant of the extent of consumer attitude and behaviour towards the company, its brands, and its services.
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