Abstract

Services are becoming driving forces to most economies. This has currently resulted to much attention on innovation for new services offered by firms to satisfy customer needs. Customer satisfaction and their behavioral intention play a critical role in firm’s performance and have been investigated carefully in both business and academic practices. This study examines the effect of service innovation on customer satisfaction in MTN Cameroon. The source of data collection was mainly primary and 300 questionnaires were administered to end users of MTN services in the Buea municipality. This was done to get feedback from customers on how they perceive service innovation. It was a quantitative study, so the researcher adopted descriptive statistics and product moment correlation coefficient to assess the relationship existing between service innovation and customer satisfaction. The findings revealed that, MTN services had greatly improved over the years. The 3G and 4G technology has improved signal quality, network coverage and internet speed. Despite these improvement, customers still expressed some dissatisfaction. Their expectations of being charged a lower cost for services provided by MTN has not been met. Also internet speed provided by MTN’s 4G technology is slow compared to similar services offered by Nextel 3G technology. In order to address these problems, MTN is required to put up the adequate infrastructure required to support the 3G and 4G technology. Poor network coverage is caused by network congestion and at times large building structure could also obstruct and affect the quality of signal. To solve this problem, MTN could build up many more network towers to reduce the number of customers depended on each tower. Also, network antennas planted among buildings should be taller than such buildings. Signal quality could improve if MTN constructs more telephone Exchange. Presently, MTN has a telephone exchange in Douala and Yaounde. If two more could be built in the western and north regions, then signal quality could greatly improve. Also, MTN could encourage customers to get updated phones which are more adapted to capturing better signal quality. This encouragement could come in the form of sensitizations or discounts.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

In todays globalized and competitive market environment, customers have become more demanding towards companies because  of  the  increased  abundance  of  choices  that  they  now  have.  The intense competition has  caused  companies  to  face  pricing pressures and  slower growth rates  (Johnson & Fornell, 1991)  This  has  caused  companies  to  move  beyond  price competition  and  to differentiate themselves by  delivering  high  quality offerings  (Cronin & Taylor, 1992). Within the service  sector,  this  is  about  delivering  excellent  service  quality  that  influences  the customer’s perception of the service offering  (Zeithaml, 1988). It has been argued that service quality with its traditional aspect  of  core  and  relational  quality  are  no  longer  enough  to  be  regarded as  a  competitive  weapon (Kandampully & Duddy, 1999). Core quality (the more tangible/outcome aspects) has become the basic core attribute of the offering, which is expected by customers in general (Kandampully & Duddy, 1999). It is the basic and implicit  aspect  of  the  offering  that  is  promised  to  the  customer,  which  has  to  be  delivered (McDougall & Levesque, 2000). From the customer’s perspective, it is not only “what is offered” that makes a service attractive, but “how it is offered”, referring to relational quality (the more intangible/relational aspects). Customers have thus not only become more critical about the core aspects  of the service, as other firms have similar attributes in their offerings, but also by the way products and services are being offered in terms of customer services and relations (Kandampully & Duddy, 1999).

To remain competitive and survive, service companies  are thus placing  more attention on delivering excellent  service  quality  that  adds  to  or  influences  the  customers  perceived  value  of  the  offering  as  an experience judgment in an attempt to  gain and increase customer  satisfaction as the end evaluation of the offering (Parasuraman  et al.,  1985, 1988; Zeithaml, 1988; Cronin & Taylor, 1992; Oh, 2000). Service quality, perceived customer value and customer satisfaction are thus important concepts within this approach.

Nowadays customers are also comparing new features, options and service concepts between the different offerings. It is argued that increasingly the main differentiator of a service offering is its newness and innovation level, referring to service innovations (Botros, 2012).  According to den Hertog (2000), in practice most service innovations appear to be a mix of changes and adaptations of existing services and that service innovation is a multidimensional phenomenon.

Today, companies face their toughest competition ever. Moving from a product-and-sales philosophy to a holistic marketing philosophy, gives them a better chance of outperforming the competition. The cornerstone of a well-conceived holistic marketing orientation is strong customer relationships. Marketers must connect with customers, informing them, engaging them, and maybe even energizing them in the process (Kotler Keller 2012). Customer centered companies are adept at building customer relationships, not just products and services. They now aim at acquiring skills in market engineering, not just product engineering. A pioneer in customer relationship management techniques is Harrah’s Entertainment whose experiences show that successful marketers are those who carefully manage their customer base.

Organizations also strive to create loyal customers which is at the heart of every business. Marketing experts Don Peppers and Martha Rogers explained that, the only value your company will ever create is the value that comes from potential and actual customers. Businesses succeed by getting, keeping, and growing customers. Customers are the only reason why people build factories, hire employees, schedule meetings, lay fiber-optic lines, or engage in any business activity. Without customers, you don’t have a business (Kotler, Armstrong 2010)

In the competitive business environment of today, generating and maintaining customer satisfaction and brand loyalty amongst consumers is challenging because consumer behavior keeps changing. The behavior of a consumer is dependent on factors which are cultural, social, personal and psychological to the consumer (Rebecca Knight, 2009). This implies that, what makes a consumer satisfied may not be capable of satisfying another consumer especially if their personality differs. These differences in personality places a challenge as to satisfying the need of every customer.

However, what remains common with most consumers is that they are value maximizers to the choices they make. They go for products with the highest perceived value at the lowest possible cost. According to Kotler, customer perceived value is based on the differences the customers get and the cost he or she assumes for different choices. Hence marketers can increase the value of the consumer offering by raising economic, functional or emotional benefits and/or reducing one or more cost (Philip Kotler 2002).

Although the customer centered firm seeks to create high customer satisfaction, it is not the ultimate goal of the organization.  Increasing customer satisfaction by lowering prices or increasing perceived product attributes may result to lower profits meanwhile the purpose of marketing is to generate customer value profitably. With this in mind, marketers are required to make a very delicate balance. Hence marketer must continue to generate more customer value and satisfaction while making profits as well. Also every organization has many stakeholders including employees, dealers, suppliers and stockholders. Spending more to increase customer satisfaction might divert funds from increasing the satisfaction of these stakeholders. Ultimately, every organization must try to deliver a high level of customer satisfaction subject to also delivering acceptable levels of satisfaction to other stakeholders, given its total resources (Nicole Fallon, Dec, 2013).

Customer satisfaction is the extent to which a product’s perceived performance matches the buyer’s expectations (Philip Kotler 2002). If the product’s performance falls short of expectations, then the customer is dissatisfied. If performance matches expectations, the customer is satisfied. If product performance exceeds expectations, the customer is highly satisfied or delighted (Tam, J. L. M. (2000). Outstanding marketing companies go out of their way to keep important customers satisfied. This is because most studies show that, higher level of customer satisfaction leads to greater customer loyalty which in turn results to better company performance. Loyal customers do not only make repeat purchase but also become willing marketing partners and customer evangelist who spread the word about their good experiences to others.

Consumers usually face a broad array of products and services that might satisfy a given need. How do they choose among these many market offerings? Customers form expectations about the value and satisfaction that various market offerings will deliver and buy accordingly. Satisfied customers buy again and tell others about their good experiences. Dissatisfied customers on the other hand often switch to competitors and disparage the product to others (Philip Kotler, 2001) .Usually, consumer expectations result from past buying experiences, friend, marketers’ and competitors’ information and promises. If marketers raise expectations too high, the buyer is likely to be disappointed. If they set expectations too low, it won’t attract enough buyers though it will satisfy those who do buy. Some of today’s most successful companies are raising expectations and delivering performances to match these expectations. An example is the Korean automaker Kia which found success in the United States by launching low-cost, high-quality cars with enough reliability to offer 10-year, 100,000 mile warranties. Thus marketers must be careful to set the right level of expectations. If they set expectations too low, they may satisfy those who buy but fail to attract enough buyers. If they set expectations too high, buyers will be disappointed. It is worth noting that customer value and customer satisfaction are key building blocks for developing and managing customer relationships.

A dissatisfied consumer responds differently. Bad word of mouth often travels farther and faster than good word of mouth. It can quickly damage consumer attitudes about a company and its products. But companies cannot simply rely on dissatisfied customers to volunteer their complaints when they are dissatisfied. Most unhappy customers never tell the company about their problems. Infact, statistics show that 96% of unhappy customers do not compliant, however, 91% of those will simply leave and never come back. Therefore, a company should measure customer satisfaction regularly and should set up systems that encouragecustomers to complain. In this way, the company can learn how well it is doing and how it can improve.

Significant changes are occurring in the way in which companies are relating to their customers. Yesterday big companies focused on mass marketing to all customers at arm’s length. Today, companies are building deeper, more direct and lasting relationships with more carefully selected customers (Djellal & Gallouj, 2010; Durst & Mention, 2013). Few firms’ today still practice true mass marketing where selling is standardizes to every customer who comes along. Most marketers do not care about making relationships with every customer. Instead, they target fewer more profitable customers. A marketing analyst stated that, not all customers are worth your marketing efforts this statement is supported by another marketing expert that, some customers are even more costly to serve than to lose (Schwarz, Durst, & Bodendorf, 2012). Besides choosing customers more selectively, companies are now relating with chosen customers in deeper, more meaningful ways, rather than relying on one way mass media massages only.

1.2 Problem Statement

Customers are the lifeblood of any business. Therefore, meeting their needs and ensuring their satisfaction is imperative. Unless an organization cares about its customers, customers won’t reciprocate in a similar manner (McDougall & Levesque, 2000). Fierce market competition necessitates that organizations constantly improve their relationship with customers. This can translate into efficient customer lifecycle management by evoking a positive experience across the customer journey.

While acquiring new customers is essential, organizations must lay emphasis on retaining existing ones and creating loyal customers who ensure stable business operations. The better the relationship customers share with an organization, the greater their potential to generate revenue for the business. In fact, Garner, 2000, states that 20% of the current customers in an organization generate about 80% of the profits.

Though most organizations are aware of the fact that customers are key to the success of every business, they are still faced with the difficulty of satisfying their customers and creating loyalty amongst them in order to retain them. This is because organizations have not been able to establish a baseline for customer satisfaction that identifies sources of customer dissatisfaction and measures to satisfy it (Kandampully & Duddy, 2012).

Dissatisfied customers are detrimental to organizations so they ought to be handled with care. But unfortunately, most organizations do not know how to identify them and hence cannot handle them. This group of customers will hardly table complaints. Instead, they leave quietly and simply share their bad experiences with other customers. Research shows that, customers turn to tell twice as many persons a bad experience with customer service than a good one (Flint, Woodruff, & Gardial, 2002).

Though maintaining customer satisfaction is hard work, organizations have to continuously do everything possible to make customers satisfied or loyal to their brands even if it will requires the use of extra resources. This is because the benefits of keeping satisfied or loyal customers turns out to be cost effective. By cultivating customer loyalty, businesses are creating an army of strong promoters that can outshine their best marketing efforts. These net promoters can help save huge advertising and marketing costs for enterprises as word-of-mouth is a powerful and cost-effective marketing tool. Moreover, customer retention efforts are cheaper than acquiring new customers. Building loyalty forms a solid customer base helping the business to grow exponentially.

Satisfied customers insulate your business from competitors. According to Barry Schwartz 2009, although the two concepts-innovation and customer satisfaction are not linked automatically, if customer centricity drives the innovative process there should be a clear impact and it should be measurable.

Innovation in services has become a topical issue in the society.  However, analytical and detailed discussion about the nature of service innovations and their emergence is only beginning. This situation is not different in the telecom sector of Cameroon. In today’s globalised and competitive market environment, customers have become more demanding towards  companies in this sector because  of  the  increased  abundance  of  choices  that  they  now  have. This intense competition has caused companies to face pricing pressures and to improve services through innovation.  (Johnson & Fornell, 1991; Fornell, Johnson, Anderson, Cha, & Bryant, 1996).  This  has  led  companies  to  move  beyond  price competition  and  to differentiate themselves by  delivering  high  quality offerings  (Parasuraman, Zeithaml, & Berry, 1985, 1988, 1991; Cronin & Taylor, 1992). Service innovation had been neglected by most organizations in Cameroon. Though it existed in the telecom industry, it was slowed. Over the last decade, last decade, service innovation has increase within this sector. This increase came as a result of high level of competition within firms in the telecom sector and high expectations from customers. In the rapidly changing Telecom environment with its low switching costs, excellent customer service is vital to retaining customers and developing profitable customer relationships (Bolton, 2001). Tools like Net Promoter Score are being adopted to augment traditional measure of customer satisfaction. In the telecom industry there are specific challenges in delivering great service. Different demands and usage patterns from different customer segments. For instance, teenage consumers are focused on voice, text, and ringtone. The young adult segment, on the other hand, are heavy users of mobile social networks, apps, and multi-media messaging. And older consumers and small businesses tend to be heavy voice-only users. Also, there exist different contact channel preferences among different consumers and a different style and language requirements among different segments or geographies. MTN Cameroon have taken these differences into consideration and are becoming more innovative in order to address these differences so that they could satisfy and retain their customers. The most recent innovation in the telecom industry is the 3G and 4G technology. Three (3) was the first UK company to introduce the 3G network. It had as objective to increase network coverage to cover over 97% of rural area, it had to improve signal quality and also to make internet accessible everywhere for everyone. This innovation was successful and remains popular even after the coming of 4G technology.

MTN Cameroon adopted the 3G technology in 2015 and few months later, the 4G network was introduced. It is worth noting that, this innovation came up fifteen years after MTN has been operating on 2G. This study seeks to investigate if the 3G and 4G technology adopted by MTN Cameroon is to fight completion or to improve customer satisfaction. This current study therefore attempts to address the following issues:

1.3 Research Questions

1. To what extent does signal quality and network coverage affect customer satisfaction?
2. What is the effect of perceived value on customer satisfaction?
3. What is the effect of customer services on customer satisfaction?
4. How has service innovation affected customer loyalty?