Evaluation of the Recruitment and Selection Process of Grameen Phone Ltd.

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Evaluation of the Recruitment and Selection Process of Grameen Phone Ltd.


In November 28, 1996, GrameenPhone was offered a cellular license in Bangladesh by the Ministry of Posts and Telecommunications. March 26, 1997: GrameenPhone launched its service on the Independence Day of Bangladesh. After eight years of operation, GrameenPhone has more than 2.8 million subscribers as of March 2005. GrameenPhone so far extended its network up to 281 Upazilas, out of 460, by setting up 720 base stations across the country with an investment of more than 270 million US dollars. GrameenPhone is one of the largest private investors in the country with more than 270 million US dollars investments. To maintain this phenomenal growth GrameenPhone should strive to retain its existing subscribers and penetrate other operator’s subscriber. Therefore, there is an emergence of studying the related facets of the Customer Loyalty in the context of Bangladesh GSM telecommunication system for GrameenPhone to retain and increase its market share. Hence, in the current study, we intend to examine whether there are relationships among Service Quality, Customer Satisfaction, Trust, and Customer Loyalty for GrameenPhone in Bangladesh or not.

Statement of the Problem:

Customer satisfaction and trust are positively related with customer loyalty (Bruhn & Grund, 2000; Chaudhuri & Holbrook, 2002; Gronholdt, Martensen, & kristensen, 2000; Gerpott, Rams, & Schindler, 2001; Kristensen, Martensen, & Gronholdt, 2000; Lau & Lee, 1999; Sharma, 2003; Sirdeshmukh, Singh, & Sabol, 2002). In the recent study, Aydin, Ozer, and Arasil (2005) have investigated the relationship between customer satisfaction and trust with customer loyalty in the context of Global System for Mobile Telecommunication (GSM) mobile phone service providers in Turkey. They have utilized customer satisfaction and trust as independent variables As customer loyalty as dependent variable. Moreover, the study of Aydin et al. (2005) suggested that overall service quality, corporate image, and attractiveness of the company could be take into account to investigate further research. In the current study, therefore, the researchers will utilize the study of Aydin et al. (2005) with an added variable service quality to investigate such relationship. In another study conducted by Ribbink, Van Riel, Linjander, and Streukens (2004) noted that the overall service quality need to be considered to investigate such relationship. There is strong evidence that the service quality is positively related to customer loyalty (Blomer, & kasper, 1995; Cronin, Brady, & Hult, 2000; Parasuraman & Grewal, 2000; Zeithaml, 1996). Few other empirical studies suggested that the integrating role is due to service quality being the outcome of internal organizational policies and practice that leads to customer value, satisfaction, and more customer loyalty (Cronin et al., 2000; Heskett, Sasser, & Schlesinger, 1997; Storbacka, Strandvik, & Gronroos, 1994; Zeithaml, 2000). Hence, in the current study, the researchers will utilize service quality as an added variable to the study of Aydin et al. (2005) to investigate such relationship in context of GSM mobile phone service providers in Bangladesh.

The problem statement, therefore, is stated as follows: the present study will investigate the relationship between service quality, customer satisfaction, trust, and customer loyalty in the context of GrameenPhone in Bangladesh.

Purpose of the Study:

The purpose of this study is to present and test a model that identifies the relationship of the factors service quality, customer satisfaction, and trust with customer loyalty.

Customer loyalty is considered important because of its positive effect on long-term profitability. According to Reichheld and colleagues (2000), the high costs of acquiring new customers can lead to unprofitable customer relationships for up to three years. As a consequence, it is crucial for telecommunication companies to create a loyal customer base, as well as to monitor the profitability of each segment (Reinartz & Kumar, 2002).

In conventional service research, as well as in emerging research on technology based services (Srinivasan, Anderson, & Ponnavolu, 2002; Van Riel et al., 2004; Wolfinbarger & Gilly, 2003), several antecedents of customer loyalty have been proposed. Among those, satisfaction figures prominently, and is thought to be attributable to customer evaluations of service and resulting quality perceptions. Next to satisfaction, trust has been brought forward as a precondition for patronage behavior (Pavlou, 2003) and the development of long-term customer relationships (Doney & Cannon, 1997; Papadopoulou, Andreou, Kanellis, & Martakos, 2001; Singh & Sirdeshmukh, 2000).

Further the conceptualization and measurement of Service quality emphasizes the importance in attracting, satisfying, and retaining customers (Heskett et al., 1997; Schneider & Bowen, 1998; Storbacka et al., 1994). Moreover, the integrating role of service quality is being the outcome of internal organisational policies and practices, and fundamental in the service sequence that leads to customer value, and customer loyalty (Cronin et al., 2000; Heskett et al., 1997; Storbacka et al., 1994; Zeithaml, Berry, & Parasuraman, 1996).

Similar studies were not conduct before in Bangladesh. Therefore this paper aims to identify the relationship among the factors such as service quality, customer satisfaction, trust, and customer loyalty.

Literature Review:

Service Quality

Lehtinen and Lehtinen (1982) defined service quality in terms of physical quality, interactive quality and corporate (image) quality. Physical quality relates to the tangible aspects of the service. Interactive quality involves the interactive nature of services and refers to the two-way flow that occurs between the customer and the service provider, or his/her representative, including both automated, and animated interactions. Corporate quality refers to the image attributed to a service provider by its current and potential customers, as well as other publics. Lewis and Booms’ (1983) definition clearly states that service quality is a measure of how well the service level delivered matches customer expectations and delivering quality service means conforming to customer expectation on a consistent basis. In some earlier studies, researchers define service quality as the extent to which a service meets customers’ needs or expectations (Lewis & Mitchell, 1990; Dotchin & Oakland, 1994; Asubonteng, McCleary, & Swan, 1996; Wisniewski & Donnelly, 1996). Zeithaml (1987) defined that service quality is the consumer’s judgment about an entity’s overall excellence or superiority. It is a form of attitude, and results from a comparison of expectations to perceptions of performance received. Zeithaml, Berry, and Parasuraman (1990) on the other hand, have chosen to define service quality as the extent of the discrepancy between customers’ expectations or desires and their perceptions. Service quality has been also defined as the consumers overall impression of the relative inferiority or superiority of the organization and services (Zeithaml et al., 1990; Taylor & Baker, 1994).

Christopher, Payne, and Ballantyne (1993) have defined service quality as the ability of the organization to meet or exceed customer expectations. Service quality is believed to depend on the gap between expected and perceived performance (Anderson, Fornell, & Lehmann, 1994). Gitlow, Oppenheim, and Oppenheim (1989) also stated that service quality is the extent to which the customer or users believe the service surpasses their needs and expectations.

Parasuraman, Zeithaml, and Berry (1988) proposed that service quality is a function of the differences between expectation and performance along the quality dimensions. Service quality is also defined as a consumer attitude reflecting the perceived overall superiority and excellence in the process and outcome of a service provider (Parasuraman et al.,1988). Gronroos (2001) recently defined service quality as a mixture of three elements: quality of the consumption process itself, the quality of the outcome of the process; and image of the provider of the service.

Service quality has become an increasingly important factor for success and survival in the service sectors. Provision of high quality service aids in meeting several requirements such as customer satisfaction and its consequent loyalty and market share, soliciting new customers, improved productivity, financial performance and profitability (Collet, Lancier, & Olliver, 1990; Julian & Ramaseshan, 1994; Lewis, 1989, 1993). For service organization, Service quality has become an important factor in determining market shares and profitability (Andereson et al., 1994; Spathis, Kosmidou, & Doumpous, 2002).

Service Quality Dimensions

A conceptual model concerning perceived service quality was proposed by Parasuraman et al. (1988), and therefore service quality dimensions have become an area of interest in marketing research (Bolton & Drew, 1991b; Brown & Swartz, 1989; Carman, 1990; Cronin & Taylor, 1992, 1994; Parasuraman et al., 1988, 1994; Teas, 1993, 1994; Zeithaml et al., 1996). One of the important issues related to service quality is the dimensions of service quality, and the measurement tool, SERVQUAL developed by Parasuraman et al. (1988) has been the starting point of the controversy in this area. Parasuraman et al. (1988) identify five quality dimensions that link specific service characteristics to consumer expectations of quality. These five basic dimensions are reliability, responsiveness, assurance, empathy, and tangibles.


Reliability is defined as the ability to perform the promised service dependably and accurately (Parasuraman et al., 1988). Reliability involves consistency of performance and dependability. It means that the firm performs the service right first time. It also means that the firm honors its promises. Specifically it involves accuracy in billing, keeping records correctly, and performing the service at the designated time (Parasuraman, Zeithaml, & Berry, 1985). Reliability refers to the extent to which the retail service provides what was promised when it was promised (Dabholkar, Thorpe, & Rentz, 1996).

Zeithaml et al. (1990) defined reliability as the ability to perform the promised service dependably and accurately. Reliability refers to an absence of errors, precision of filing, and precision in transactions (Spathis, Petridou, & Glaveli, 2004). Reliability is the ability to perform the promised service consistently, dependably, and accurately. Reliability has often been cited as the most important dimension in assessing the quality of service and is therefore a fundamental requirement for businesses to compete in the marketplace (Cook, Bowen, Chase, Dasu, Stewart, & Tansik, 2002).


Responsiveness is defined as the willingness to help customers and provide prompt service (Parasuraman et al., 1988). It concerns the willingness or readiness of employees to provide services. Responsiveness involves timeliness of service like posting a transaction slip immediately, returning a phone call quickly, giving prompt service, setting up appointments quickly. According to Zeithaml et al. (1990), responsiveness refers to the motivation to help (internal) customers and provide prompt service to them.


Parasuraman et al. (1988) defined assurance as the knowledge and courtesy of employees and their ability to convey trust and confidence. Assurance involves trustworthiness, believability, honesty. It involves having the customer’s best interests at heart. Contributing to credibility includes company name; company reputation; personal characteristics of the contact personnel; how much a hard sell is employed in interactions with the customer (Parasuraman et al., 1985). According to Bahia and Nantel (2000), assurance represents the friendliness and courtesy of employees – personalized attention to the customer and the ability of employees to inspire confidence. Zeithaml et al. (1990) defined assurance as the awareness and good manners of the employees and their ability to convey trust and confidence to the customers.


According to Parasuraman et al. (1988), empathy is defined as caring and individualized attention provided to customers. Empathy refers to graciousness, respect, consideration, and friendliness of contact personnel including receptionists, telephone operators, etc. It includes consideration for the consumers’ property, clean and neat appearance of the contact personnel.


Tangibles are the physical facilities, equipment, and appearance of personnel in services (Parasuraman et al., 1988). It includes all the physical evidence of the service like the facilities, appearance of personnel, tools or equipment used to provide the service, physical representations of the services (e.g. statements), and even other customers. Tangibles of service are the tangible facets of the service facility (equipment, signage, employee appearance, etc.) or the man-made physical environment, popularly known as the “servicescapes” (Sureshchandar, Rajendran, & Anantharaman, 2003). Bahia and Nantel (2000) stated that tangibles assessed the appearance and cleanliness of a bank’s physical facilities.

However, another well accepted model of service quality is the technical/functional quality perspective (Arora & Stoner, 1996). Originally conceptualized By Gronos (1983) technical quality involves what is provided and Functional quality considers how it is provided. Baker and Lamb (1993) suggested that for evaluating purposes customers tend to rely on the functional-based dimensions of service quality. Richard and Allway (1993) found that both technical and functional dimensions explained more of the variation in customer choice behavior than functional measures alone.

On the contrast of SERVQUAL, more recently, Sureshchandar etal.(2003) identified five factors of service quality as critical from the customers’ point of view.

Those are:

1. Core service or service product

2. Human element of service delivery

3. Systematization of service delivery: non- human element.

4. Tangibles of service

Social responsibility:

The new operationalized and conceptualized measurement of SERVQUAL finds the significant result regarding distinctiveness of the constructs of service quality and customer satisfaction. The construct of service quality is independence and different from customers’ point of view (Sureschandar, Rajendran, & Anantharaman, 2002). By this it could be easily stated that the newly defined construct of service quality by Sureshchandar et al. (2003) to some extent supports the definition given by (Parasuraman et al., 1988). Hence, in this study, the researchers will utilize the five dimensions of service quality proposed by Parasuraman et al. (1988) to define the service quality.

Customer Satisfaction

Customer satisfaction is becoming an increasingly salient topic in many firms and in academic research (Söderlund, 1998). Anderson et al. (1994) affirmed that satisfaction is a post consumption experience which compares perceived quality with expected quality. Correspondingly, Oliver (1996) defines satisfaction as an emotional post-consumption response that may occur as the result of comparing expected and actual performance (disconfirmation), or it can be an outcome that occurs without comparing expectations

On the other hand, some previous researchers have explained customer satisfaction in terms of expectation. They defined, if expectations are exceeded by performance; satisfaction is generated (Churchill & Surprenant, 1982; Bearden & Tell, 1983; LaBarbera & Mazursky, 1983). Equally, Buswell (1983) identified customer satisfaction as a combination of five key attitudes, these include, knowledge of staff, communications, expertise of staff, willingness to lend and branch design. Consequently, Berry, Zeithaml, and Parasuraman (1985) argued that customer satisfaction can be defined as the attributes of search, experience, and credence. Yi (1990) believes customer satisfaction should mean evaluation, symbolizing a type of consuming experience. Avkiran (1994) recognized customer satisfaction by customer conduct, credibility, communication, access to teller services.

Simultaneously, according to Anderson and Fornell (1994), customer satisfaction is the term which may lower the chance of customers being driven away due to the poor quality of products or services. Fornell (1992) noted that the more satisfied customers are the one that are greater in their retention although, Anderson and Sullivan (1993) added that satisfied customer would intend to repeat purchase which would enhance organizations’ profitability. In association with this Jones and Sasser (1995) acknowledged that completely satisfied customers are those who are much more loyal than merely satisfied customer.

Spreng, MacKenzie, and Olshavsky (1996), alternatively, defined satisfaction as the emotional reaction to a product or service experience. Oliver (1997) defined satisfaction as the customer’s fulfillment response. It is a judgment that a product or service feature, or the product or service itself, provides a pleasurable level of consumption- related fulfillment.

The most common interpretations reflect the notion that satisfaction is a feeling which results from a process of evaluating what was received against that expected, the purchase decision itself and the fulfillment to needs or want (Armstrong & Kotler, 1996: Berkowitz, Kerin, Hartley, & Rudelius, 1999). Kotler (1999) also noted that satisfaction is a function of perceived performance and expectations which identifies feelings of a person resulting from comparing a products perceived performance in relation to his or her expectations.

Wong (2000) believes that a customer’s total satisfaction is an emotional perception. Evaluation is based on the customer’s reaction from using the product or service. Customer satisfaction then is a total satisfaction that leaves a good perception. The perception of this wholeness is very similar to the meaning of customer value package brought up by Fredericks and Salter (1995). The customer value package includes: price; product quality; service quality; innovation; and corporate image. Moreover, Martensen, Grùnholdt, and Kristersen (2000) also discovered that expectation, product quality, and corporate image are three facilitating factors in ensuring customer satisfaction.

Hackl and Scharitzer (2000) have identified customer satisfaction as economic goals and have considered customer satisfaction as a prerequisite for customer retention and loyalty, and obviously that tend to help in realizing economic goals like profitability, market share, return on investment.

Sureschandar et al. (2002) introduced different approach of customer satisfaction and defined customer satisfaction as multidimensional construct. According to Bitner and Zeithaml (2003), satisfaction is the customers’ evaluation of a product or service in terms of whether that product or service has met their needs and expectations. The researchers reveal that satisfaction can as well be viewed as contentment, pleasure, delight, and relief. Thus they noted customer satisfaction as a dynamic and moving target that may evolve over time, influenced by variety of factors.

Guenzi and Pelloni (2004) use the following definition of satisfaction in their study: “Overall satisfaction is the consumer’s dissatisfaction or satisfaction with the organization based on all encounters and experiences with that particular organization” (Bitner & Hubbert, 1993). Fe and Ikova (2004) added that the perception of the word satisfaction influences the activities which we conduct to achieve customer satisfaction.

Boselie, Hesselink, and Wiele (2002) defined satisfaction as a positive, affective state resulting from the appraisal of all aspects of a firm’s working relationship with another firm. This definition purported that satisfaction (understood as affective) can be contrasted with an objective summary assessment of outcomes – thereby forming a target-performance comparison mechanism. Therefore, the appropriate definition of customer satisfaction for this study would be the one by Boselie et al. (2002).


In business studies, trust has been found to be important for building and maintaining long-term relationships (Geyskens, Steenkamp, Scheer, and Kumar1996; Rousseau, Sitkin, Burt, & Camerer, 1998; Singh & Sirdeshmukh, 2000). According to Moorman, Zaltman, and Deshpande (1992), trust is the willingness to rely on an exchange partner in whom one has confidence. This definition is in accordance with early research (Meyer 1981), which associated trust with a confidence in the other’s intentions and motives.

Lewicki and Bunker (1995) defined trust three different types of investigations: first, as an individual characteristic, second, as a characteristic of interpersonal transactions, and finally, as an institutional phenomenon i.e., business to business or business to consumer context.

Fukuyama (1995) defines trust as the expectation that arises within a community of regular, honest, and cooperative behavior, based on commonly shared norms, on the part of members of that community. He further argued that the technological revolution will make trust ever more important in understanding business behaviors like marketing.

Morgan and Hunt (1994) conceptualized trust as existing when one party has confidence in a partner’s reliability and integrity. Moreover, the authors also proposed that communication was an antecedent of trust, along with shared values and lack of opportunistic behavior in interpretation of the construct in their seminal study of the commitment-trust theory of relationship marketing.

Anderson and Narus (1990) postulated that, if one party believes that the actions of a third party will bring positive outcomes to him, trust could be build. Doney and cannon (1997) added that the third party also must have some ability to continue to meet its obligations within the cost-benefit relationship. Therefore, the customer should not only perceive positive outcomes but also believe that these positive outcomes will continue in future.

Bhattacharya, Rajiv, Timothy, and Madan (1998) offer a more generalizable and integrative view of trust that recognizes three key aspects: first, trust is not a simple expectation, rather it can embodyan expectation, second, the degree of trust is related, statistically, to the magnitude of this expectancy, and finally, the strength of the trust will be related to the uncertainty, or precision, the individual has in his trust. Gwinner, Gremler, and Bitner (1998) suggested trust as a relational benefit. More specifically, they proposed trust as a confidence benefit rated highly by customers in long-term relational exchanges with service firms.

According to Lau and Lee (1999), as one party trusts another and develop positive behavioral intentions towards the other, when customers trusts brands they also form positive buying intentions towards those brands. Trust is sometimes conceived of having two components, performance, or credibility trust and benevolence trust, as Ganesan (1994) pointed out in a business-to-business context.

On continuation of the previous definitions, Garbarino and Johnson (1999) demonstrated trust as a driver of customer behavioral intentions building long-term relationship with the service provider. According to Chatura, Ranaweera, and Prabhu (2003), customer’s trust can be viewed in his/her service provide reliability, deeds and tasks which undertaken for the benefit of customers.

Therefore, the appropriate definition of trust for this study would be the one that would encompass the trust in individual, business-to-business, and business-to-customer levels in commitment-trust theory of relationship marketing. Hence, the current study will use the definition of Morgan and Hunt (1994) to define trust.

Customer Loyalty

The importance of loyalty has been widely recognized in the marketing literature (Oliver, 1999; Samuelson & Sandvik, 1997; Howard & Sheth, 1969). According to Duffy (2003), loyalty is the feeling that a customer has about a brand which ultimately generates positive and measurable financial results. Soderlund (1998) drew on the concept of loyalty as the extent to which the customer intends to purchase again from the supplier who has created a certain level of satisfaction. Loyalty, in one or more of the forms noted above, creates increased profit through enhanced revenues, reduced costs to acquire customers (Sharp & Sharp, 1997), lower customer-price sensitivity (Krisnamurthi & Raj, 1991), and decreased costs to serve customers familiar with a firm’s service delivery system (Reicheld & Sasser, 1990).

Customer loyalty represents the repeat purchase and referring the company to other customers (Heskett, 1994). Improvements in retention and increasing in the share of the company are the obvious economic benefit of customer loyalty. According to Feick and Lee (2001), customer loyalty has been measured as the long term choice probability for a brand or as a minimum differential needed for switching. Loyal customers are less likely to switch because of price and they make more purchases than similar non-loyal customers (Reichheld & Sasser, 1990). Oliver (1997) viewed customer loyalty as a deeply held commitment to rebuy or repatronize a preferred product or service consistently in the future, despite situational influences and marketing efforts having the potential to cause switching behavior.

Customer loyalty reduces marketing costs and that the relative costs of customer retention are substantially less than those of acquisition (Fornell & Wernerfelt, 1987). Hallowel (1996) characterize customer loyalty as the relationship a customer maintains with the seller after the first transaction.

Customer loyalty is often referred to as a purchase behavior (Griffin, 1996). On the other hand, customer loyalty is approached as an attitudinal construct. Attitude denotes the degree to which a consumer’s disposition towards a service is favorably inclined (Azjen & Fishbein, 1980). In addition to attitude, it has been argued that loyalty may also be based on cognition (Lee & Zeiss, 1980). In its cognitive sense, customer loyalty is frequently operationalised as a conscious evaluation of the price/quality ratio or the willingness to pay a premium price, or alternatively price indifference (Fornell, 1992; Zeithaml et al., 1996).

Jacoby and Kyner (1973) elaborated that the definition of loyalty includes six necessary conditions – that loyalty is the biased (that is, nonrandom), behavioural (that is, purchase) response, expressed over time, by some decision-making unit (a person or group of persons), with respect to one or more alternative brands out of a set of such brands, and is a function of psychological processes (decision-making, evaluative).

On the contrary, Oliver (1999) argues that customer loyalty is a condition of strong involvement in the repurchase, or reuse, of a product or brand. This involvement is strong enough to overcome the situational and competitive influences which might drive a variety seekers or a switching behavior. This condition of customer loyalty is reached through four sequential stages: cognitively loyal (direct or indirect knowledge about the brand), affective loyalty (repeated confirmations of his expectations), conative loyalty (high involvement that is a motivating force), and action loyalty (‘desire to overcome’ every possible obstacle that might come in the way of the decision to buy the brand to which the person is loyal).

On the word of Gremler and Brown (1996) customer loyalty is noted by the degree to which a customer exhibits repeat purchasing behavior from a service provider, possesses a positive attitudinal disposition towards the provider, and considers using only those providers when a need for the service arises. Correspondingly, Kandampully (2000) stated that a loyal customer is a customer who repurchases from the same service provider whenever possible, and who continues to recommend or maintains a positive attitude towards the service provider. In relation with this, Pong and Yee (2001) is defined as the willingness of customer to consistently re-patronize the same service provider/service company that may be the first choice among alternatives, thereby complying with actual behavioral outcomes and attaching with favorable attitude and cognition, regardless of any situational influences and marketing efforts made to induce switching behavior.

Zeithaml (2000) affirmed that loyalty is repeated transactions (or percentage of total transactions in the category, or total expenditures in the category) and can sometimes be measured quite simply with observational techniques. Furthermore, a briefer and more specific definition is provided by Anderson and Srinivasan (2003), who define loyalty in contest of electronic business as the customer’s favorable attitude toward an electronic business, resulting in repeat purchasing behavior. Loyalty deals with specific behaviors related to repurchasing the service or product (Durvasula, Lynoski, Mehta, & Tang, 2004).

Wong (2004) suggested customer loyalty as a key mediating variable in explaining customer retention (Pritchard & Howard, 1997) which is concerned with the likelihood of a customer returning, making business referrals, providing strong word-of-mouth, as well as providing references and publicity (Bowen & Shoemaker, 1998).

Pearson (1996) defines customer loyalty in term of those customers who hold favorable attitudes toward the company, commit to repurchase the product/service, and recommend the product/service to others. Hence, the researchers of the current study will use the definition of Pearson (1996) to define customer loyalty.

Relationship between Service Quality and Customer Loyalty

The relationship between service quality and customer preference loyalty has been examined numerous times (Boulding, Kalra, Staelin, & Zeithaml, 1993; Cronin & Taylor, 1992). Cronin and Taylor (1992) focused on the element of repurchasing and willingness to recommend. Boulding et al. (1993) found a positive relationship between service quality, repurchase intention and willingness to recommend.

Additional empirical evidence was provided by Fornell (1992) and Selnes (1993), demonstrating the effects of performance quality on loyalty mediated by satisfaction, although other studies have proved the direct effect of perceived quality on loyalty. In a study of the relationship between attribute-level-performance of service quality, overall satisfaction and repurchasing intensions, in addition to its impact on satisfaction, attribute service performance were also found to have a direct impact on repurchasing intensions. Similar results on the direct link between quality and loyalty were obtained by Boulding et al. (1993).

No matter how customer loyalty is defined, in order to gain it, any operator needs to increase subscriber offered service quality (Anderson & Sullivan, 1993; Brady & Robertson, 2001; Kristensen et al., 2000; Fornell et al., 1996; Oliver, 1980). Earlier literature provides evidence that service quality has an integrating role between the organisation and its customers. This integrating role is due to service quality being the outcome of internal organisational policies and practices, and fundamental in the service sequence that leads to customer value, satisfaction, and loyalty (Cronin et al., 2000; Heskett et al., 1997; Storbacka et al., 1994; Zeithaml et al., 1996).

As noted in the previous section, there is evidence to support a link between service quality and customer loyalty (Cronin et al., 2000; Bloemer, Ruyter, & Wetzels, 1999; Parasuraman and Grewal, 2000; Zeithaml et al., 1996). More specifically, direct and significant paths have been demonstrated between service quality and customer loyalty (Butcher et al., 2001). Moreover, the precise loyalty implication of service quality has been tested in call centers (Dean, 2002) that indicate a positive link between these two measured constructs.

Recent research has indicated a positive and significant relationship between a customer’s perception of service quality and that customer’s loyalty (expressed as willingness to recommend the company and intentions to repurchase) (Parasuraman et al., 1988; Zeithaml et al., 1996; Cronin & Taylor, 1992; Danaher & Rust, 1996; Bitner, 1990; Patterson, 1995).

Dick and Basu (1994) also view perceived service quality as a cognitive antecedent of customer loyalty because service quality will influence the purchasing intension. There is a consensus amongst practitioners and academics that customer satisfaction and service quality are prerequisites of loyalty (Cronin & Taylor, 1992; Gremler & Brown, 1997). Similarly McAlexander (1994) found that patient satisfaction and service quality have a significant effect on future purchase intentions. Likewise, with regards to loyalty, perceive service quality has been identified as key antecedent in telecommunication as well as in other service industry (Lewis, 1993).

Relationship between Customer Satisfaction and Customer Loyalty

During past decades, customer satisfaction has frequently been advanced to account for customer loyalty (Oliver & Linda, 1981; LaBarbera, & Mazursky, 1983; Anderson & Fornell, 1994; Oliver, 1996; Jones & Suh, 2000). In a number of cases a positive link has been observed between customer satisfaction and loyalty (Anderson & Sullivan, 1993; Fornell, 1992; Rust & Zahorik, 1993; Taylor & Baker, 1994). Indeed, this link is fundamental to the marketing concept, which holds that satisfying customer needs and wants is the key to repeat purchase (Kotler, Armstrong, & Cunningham, 2002). There is a common assumption in the literature that satisfaction is likely to increase loyalty as there is a link between these two variables (Bolton, 1998; Oliver, 1980; Page & Eddy, 1999; Patterson, Johnson, & Spreng, 1997). For instance, studies conducted by Cronin and Taylor, (1992) in service sectors found that customer satisfaction has a significant positive effect on purchase intentions in all four sectors.

Pragmatic research findings offer robust evidence of positive relationship between customer satisfaction and behavioural intentions (Oliver, 1999; Bitner & Hubert, 1994). The disconfirmation-of-expectation paradigm (Oliver, 1980) argues that customer loyalty (e.g. Repurchase intentions, willingness to provide positive word-of-mouth) is a function of customer satisfaction. Similarly, Anderson and Sullivan, (1993) found that stated repurchase intentions are strongly related to stated satisfaction across product categories. Researchers in the professional services area have also suggested that customers of business services tend to remain with the same provider if continually satisfied (Davidow & Uttal, 1989; Woodside, Wilson, & Milner, 1992)

In general, past research has demonstrated that satisfaction is strongly associated with re-purchase intentions (Bitner, 1990; Cronin & Taylor, 1992; Dabholkar & Thorpe, 1994; Fornell, 1992; Patterson, 1995). Hart and Johnson (1999) have added that one of the conditions of true customer loyalty is total satisfaction. They argue that the presence of satisfaction reflects a relationship commitment and loyalty.

Further support for a view that the effects of customer satisfaction on loyalty are different depending on the level of satisfaction is offered by Jones and Sasser (1995). Basically, they stated that the relationship is non-linear, and that the relationship is subject to different patterns depending on the product in question. That is to say, when the number of alternatives of a service is high, the satisfaction-loyalty link is strong. Thus, it may be assumed that the form of the relationship between customer satisfaction and loyalty is different at different levels of satisfaction.

On the contrary, there is little evidence that the theory has been tested in call centers. An exception is the study by de Ruyter and Wetzels (2000), which tested the impact of customers’ repurchase behaviors on customers’ satisfaction and trust, using a sample from the mobile telecommunications industry. They found that both customer satisfaction and trust were significantly related to the customers’ repurchase intention to call again, suggesting that customers’ responses to service encounters lead to dimensions of loyalty.

In a recent study, next to trust, satisfaction has been brought forward as a precondition for the development of long-term customer loyalty (Pavlou, 2003). For instance, in a recent work on online settings, a positive link has been observed between customer satisfaction and loyalty. Preference and favorable attitudes presume customer satisfaction, which is generally considered as a major driver of loyalty (Cho, Im, Hiltz, & Fjermestad, 2002; Gummerus, Liljander, Pura, & Van, 2004).

As a consequence, there is a consensus amongst practitioners and academics that customer satisfaction and service quality are prerequisites of loyalty (Cronin & Taylor, 1992; Gremler & Brown, 1997). Hence, it can be concluded that there is a positive relationship between customer satisfaction and customer loyalty. Conversely, it may be assumed that the form of the relationship between customer satisfaction and loyalty is different at different levels of satisfaction.

The Relationship between Trust and Customer Loyalty

A number of researchers have advocated that trust is fundamental in developing customer loyalty (Moorman et al., 1992; Morgan and Hunt, 1994). Those who are not willing to trust a vendor in a competitive marketplace are unlikely to be loyal. The importance of trust in explaining loyalty is also supported by numerous authors such as Lim, and Razzaque (1997), Garbarino and Johnson (1999), Chaudhuri and Holbrook (2001), Singh and Sirdeshmukh (2000), and Sirdeshmukh et al. (2002).

Chow and Holden (1997) studied the relationship between trust and loyal buying behavior and found positive impact of trust in explaining to customer loyalty. Moreover, they found that trust is a significant antecedent to not only attitude toward the product, but also to buyers’ loyalty.

Swan, Bowers, and Richardson (1999) found that trust positively affects favorable customer attitudes, purchase intentions, and purchase behaviors. Based on a review of the concept of trust within marketing channels, Geyskens, Steenkamp, and Kumar (1998) developed a casual model of antecedents and consequences of trust and found strong support for trust as a mediator in explaining customer loyalty.

Trust is sometimes conceived of having two components, performance, or credibility trust and benevolence trust, as Ganesan (1994) pointed out in a business-to-business context. Numerous authors have also suggested the existence of an effect for credibility trust on loyalty (Chaudhuri & Holbroook, 2001; Garbarino and Johnson, 1999). Recently, however, Singh and Sirdeshmukh (2000) and Sirdeshmukh et al. (2002) have argued strongly for a component of trust that may contribute to explaining loyalty.

In a recent study, for example, Corbitt, Thanasankit, and Yi (2003) suggests a strong positive effect of trust on loyalty to telecommunications firms. Dwayne, Pedro Simo˜es Coelho, and Alexandra Macha´s (2004) further elaborated that in a business-to-consumer context, the components of trust may be strong in determining loyalty.

Research Questions:

This study proposes to investigate the following research questions:

  1. Is there any significant relationship between service quality and customer loyalty in the context of GrameenPhone in Bangladesh?
  2. Is there any significant relationship between customer satisfaction and customer loyalty in the context of GrameenPhone in Bangladesh?
  3. Is there any significant relationship between trust and customer loyalty in the context of GrameenPhone in Bangladesh?


The hypotheses derived from the research questions are:

  1. There is a significant relationship between service quality and customer loyalty in the context of GrameenPhone in Bangladesh.
  2. There is a significant relationship between customer satisfaction and customer loyalty in the context of GrameenPhone in Bangladesh.
  3. There is a significant relationship between trust and customer loyalty in the context of GrameenPhone in Bangladesh.

Development of Conceptual Framework;

The conceptual framework for the proposed study is presented below:


Figure1: Conceptual Framework of Research Variable and their Relationships.

Operational Definition:

Table 2: Operational Definition of Measured Variables

Measured Variables Operational Definitions
Service quality Will be operationally defined by Parasuraman et al. (1988).
Customer Satisfaction Will be operationally defined by Boselie et al. (2002).
Trust Will be operationally defined by Morgan and Hunt (1994).
Customer Loyalty Will be operationally defined by Pearson (1996).

Research Methodology:

Research Design

The representation of the proposed framework (figure 1) depicted the pattern and structure of relationships among the set of measured variables. The research questions and hypotheses clearly support this model. Hence, the purpose of the study is to measure correlations among variables.

The present study will investigate the relationship between service quality, customer satisfaction, trust, and customer loyalty within the context of GrameenPhone in Bangladesh. Research that studies the relationship between two or more variables is also referred to as a correlational study (Cooper & Schindler, 2003). That is why a correlational research design has been selected in order to find out the appropriate answers to the research questions and to test the hypotheses. The model (Figure 1) also suggests this type of design. Here customer service quality, Customer satisfaction, trust are being considered as independent variables and customer loyalty is being considered as a dependent variable. The research will use a correlational study to establish the existence of relationships between the measured variables. In this research, the researchers intend to identify whether any relationships exists between these measured variables or not. A Correlational study provides a measure of the degree between two or more variables. Therefore, the present study will be characterized as a correlational study.

Research Approach

To investigate research questions, the researchers will gather information from the post-paid subscribers of GrameenPhone by either performing a survey over the phone or will gather their required information when these customers visit the GrameenPhone service center during the data collection period of this study. All the participants will receive complete explanations for the context of the research focus by the researchers. All participation will be voluntary. If the participants want to withdraw, they will be free to do so at any time.

Sampling Method

The study will be conducted only in Dhaka city due to time and budget constraints. The population would be all the post-paid subscribers of GrameenPhone in Dhaka city. Post-paid subscribers were chosen as they have more interaction with the company and are getting billed on a monthly basis for their subscription. The sample frame will be chosen randomly.

First of all, as the customer listing could be drawn, probability sampling technique would be appropriate to draw a sample from the sampling frame. In this regard, for the current study a simple random sampling method would be utilized. Cooper and Schindler (2003) stated that in this type of probability sampling method each population element is known and has an equal chance of selection. Many researchers also followed the similar sampling method in their respective studies for instances (Ranaweera & Prabhu, 2003; Andreas, 2001; Sharma& Patterson, 2000).

Survey Instrument

To gather data, the researchers will use questionnaires. The questionnaire survey is the most effective method for this study to collect the data for the following reasons-

  • Respondents anonymity can be maintained
  • The researchers will conduct survey on 320 respondents. A questionnaire survey will be the most appropriate for the current study.
  • The postal system of the country is very slow. Hence, mail survey will be time consuming for this study.
  • The Internet facility is not widespread in our country. Therefore, online survey will also be inappropriate for the study.
  • The data gathered through questionnaire is easy to put in quantitative analysis.
  • It takes less time to fill up a questionnaire. Therefore, the customers will not be reluctant in providing accurate data.

A Structured questionnaire will be used in this study to collect data from customers. The researchers will utilize four different sets of questionnaires to measure the variables. In the questionnaire, there will be four sections which are service quality, customer satisfaction, trust, and finally customer loyalty.

Service quality will be measured by using 22 items (Section I, question 1 to 22) developed by Parasuraman et al. (1988). Questions from 1 to 5 measures the reliability of the service, 6 to 9 determine the empathy, 10 to 12 determine responsiveness, 13 to 17 measures the assurance and the questions from 18 to 22 determine the tangibility of the organization. This scale was used by Parasuraman et al. (1988), Carman (1990), Babakus and Boller (1992), Cronin and Taylor (1992), Teas (1993), and Lam and Woo (1997), and has reported the reliability of this variable exceeded 0.80.

Customer satisfaction will be measured by using 8 items (Section II, question 1 to 8) developed by Boselie et al. (2002). This scale was used by Boselie et al. (2002) and has reported of the reliabilities of the items are above 0.70.

Trust will be measured by using 5 items (Section III, question 1 to 5) developed by Morgan and Hunt (1994). This scale was used by Lau and Lee (1999) and Doney and Cannon (1997) has reported reliabilities of the items to be above 0.86.

The customer loyalty will be measured by using 12 items (Section IV, question 1 to 12) developed by Pearson (1996). This scale was used by Souchon, Thirkell, and Too (2002) and has reported that the reliabilities of the items are above 0.90.

However, for all of these constructs, items are adopted in the context of GrameenPhone in Bangladesh for the sake of simplicity to measure appropriately, which are developed by the previous researchers. For all of these variables, the previous researchers have used 5 points Likert scale starting from 1 for strongly disagree to 5 for strongly agree. Therefore, the researchers of present study will also use 5 point Likert scale to measure all these variables.

Pilot Test of Questionnaires

According to Cooper and Schindler (2003), a pilot test is conducted to detect weakness in design and instrument and to provide proxy data for selection of probability samples. The researchers will conduct a pretest to evaluate all aspects of the questionnaire, including clarity, bias, question content, wording, sequence, form, layout, question layout, difficulty of the question and relevance to research variable. Moreover, through pre-testing, the researchers will also determine the reliability and validity of the questionnaires.

The researchers intends to conduct a pretest to evaluate the questionnaire for clarity, bias, ambiguous and relevance to the organizational setting of GrameenPhone. According to cooper and Schindler (2001), a group size of pilot testing may vary from 25-100 respondents. Therefore, the researchers will select 50 customers from a convenient place to conduct the pilot survey. The researchers will use only 50 respondents in the pilot survey because of time limitations.

Data Collection

To collect data from the primary sources, the researchers will use the questionnaire survey method. This method is commonly used in consumer surveys to collect data from primary sources. That means the questionnaire will be distributed among the customers through the researchers’ friends and relatives (Lau & Ng, 2001). Numerous reasons accounted for the choice of this research method. First, it allows large amounts of information to be obtained at a relatively low cost. Second, more accurate responses are obtained because interviewer bias is avoided. Finally, the number of non-usable questionnaires is reduced because the personal contacts tend to make respondents more cooperative in completing the questionnaires.

Data Analysis Procedure

First of all, Pearson’s Correlational analysis will be used to find out whether any relationship exists between the independent and dependent variables. A Correlational analysis is the statistical tool that can be used to describe the degree to which one variable is linearly related to another (Levin & Rubin, 1998).

The proposed study is a correlational study therefore after collecting the data the researchers will use a correlational matrix to identify whether the relationships exist between the measured variables or not. The researchers are interested in finding out whether the conceptually newer measured variables add anything to the dependent variables compared to older variables. Stevens (1996) stated that if an investigator wishes to determine whether some conceptually newer measures add anything to the dependent variables compared to older, it is appropriate to use stepwise regression. Moreover, the effort to screen out redundant variables during the model building process and to provide a model in which all variables, individually and collectively, provide a meaningful contribution toward the explanation of the response variable (dependent variable) can be accomplished by using a stepwise regression analysis option (Mendenhall, Reinmuth, & Beaver, 1989).

Hence, stepwise regression will be the most effective tool to analyze the data to find out whether the conceptually newer measured variables add anything to the dependent variables compared to older variables.

For the current study, the Statistical Package for Social Science (SPSS) software version 10.0 will be utilized by the researchers as a statistical data analysis tool as it offers greater feasibility in data analysis and visualization.

Limitations of the Study:

There will be numbers of limitations in this study. The sample population will be limited in terms of size and composition. First, data collection is restricted within Dhaka city only, which may fail to represent the factual scenario of the relationship between measured variables. Second, the researchers are only considering the post-paid subscribers of the companies and thus, are not including the pre-paid subscribers. Finally, there are many other factors which can influence customer loyalty such as overall corporate image of the company, switching cost, but the researchers will not consider those because of the simplicity of the research.

Significance of the Study;

The present study is noteworthy in various aspects. First of all, a previous study was conducted on some of the measured variables (service quality, customer satisfaction, trust, and customer loyalty) in Turkey (Aydin et al., 2005). It was not used in the developing countries like Bangladesh. Furthermore, Ribbink et al. (2004) conducted a research, which attempted to discover the relationship between service quality and the customer loyalty in Australia. The proposed study investigates whether correlations exist between service quality, customer satisfaction, trust, and customer loyalty in GrameenPhone in Bangladesh market. This research attempts to identify the determinants of customer loyalty towards mobile phone service organization, GrameenPhone in Bangladesh. This research will reveal whether consumers make repurchase decisions based on simple heuristic factors such as customer satisfaction, trust, and service quality. A further issue will be addressed by this study, what are the factors driving consumer loyalty towards the mobile phone service organization GrameenPhone in Bangladesh. Hence, the present study will enhance the limited research on the effect of service quality, customer satisfaction, trust, on customer loyalty towards mobile phone service organization GrameenPhone in Bangladesh.

The present study will aid the GrameenPhone management to enhance better understanding about the existing customer needs and wants and always recalls the 20/80 rule (which is 20% customers bring 80% revenue for the company). Therefore, from the company’s perspective they would come up with new ways to satisfy the existing customers for example improving service quality (which is another measured variable in this study). In addition to it, ultimately it will push the customer for repeat purchase, to become regular users i.e., to become the loyal customer for GrameenPhone.

Research Timeline;

2005 September Research Proposal Writing

2005 September Literature Review

2005 September Development of conceptual frame work

2005 October Data collection procedure

2005 October Data analysis and interpretation of the findings

2005 November Final redraft of complete manuscript.

2005 November Submission of research paper


Reliability Coefficient and Descriptive Statistics

The reliability coefficients, means and standard deviations of all the constructs in the current study are displayed in Table 1. The coefficient alphas for the different constructs were computed using the reliability procedure in SPSS (version 10.0). Nunnally (1978) suggested that for early stages of any research the reliability of .50-.60 is sufficient. The reliabilities of all the constructs in this study found to be above the standard set by Nunnally (1978).

Reliability Coefficient and Descriptive Statistics of Service quality (Reliability,

Responsiveness, Assurance, Empathy, and Tangibility), Switching cost, Trust, Customer satisfaction, and Customer loyalty

Scales No of Items Alpha M SD
Reliability 5 .75 4.14 .4957
Responsiveness 3 .69 4.03 .5719
Assurance 5 .68 4.12 .4303
Empathy 4 .75 3.86 .5842
Tangibility 5 .77 4.13 .5023
Customer Satisfaction 8 .78 3.99 .45
Trust 5 .66 4.10 .51
Customer Loyalty 12 .81 4.03 .43


Mean scores have been computed by equally weighting the mean scores of all the items.

On a five-point scale, the mean score for reliability is 4.14 (sd = .49). The mean score for responsiveness is 4.03 (sd = .57). The mean score for assurance is 4.12 (sd = .43). The mean score for empathy is 3.86 (sd = .58). The mean score for tangibility is 4.13 (sd = .50). The mean scores of service quality of GrameenPhone range from 3.86- 4.14 indicating that consumers’ perception about the service quality of GrameenPhone. The mean score for customer satisfaction is 3.99 (sd = 0.45). It implies that the customers of GrameenPhone are highly satisfied with their service. The mean score for trust is 4.10 (sd = 0.51). It indicates that the current customers of GrameenPhone highly trust the company. The mean score for customer loyalty is 4.03 (sd = 0.43). It suggests that these customers are very much loyal with GrameenPhone.


Correlation is a bivariate measure of association (strength) of the relationship between two variables. It varies from 0 (random relationship) to 1 (perfect linear relationship) or

-1 (perfect negative linear relationship). A correlation analysis was conducted on all variables to explore the relationship between them. The bivariate correlation procedure was subject to a two tailed of statistical significance at two different levels highly significant (p<.01) and significant (p<.05).

Correlation Matrix for Service quality (Reliability, Responsiveness, Assurance, Empathy, and Tangibility), Switching cost, Trust, Customer satisfaction, and Customer loyalty

REL .57** .50** .63** .50** .57** .35** .68**
EMP .65** .60** .59** .60** .32** .68**
RES .67** .66** .53** .38** .59**
ASU .79** .72** .55** .71**
TAN .64** .52** .66**
C_S .39** .76**
TRU .47**


** Correlation is significant at the 0.01 level (2-tailed).

The result of correlation analysis for all the variables is shown in Table 3. It examines the

correlations among reliability, responsiveness, assurance, empathy, tangibility, trust, customer satisfaction, and customer loyalty of GrameenPhone. The variables, significantly correlated with Reliability were Customer Loyalty (r = .68, p< .01) showing a strong positive relationship at a level of .01. Trust (r = .35, p< .01) showing weak but positive relationship at a level of .01. Customer Satisfaction (r=.57, p< .01), Tangibility (r= .50, p<.01), Assurance (r=.63, p<.01), Responsiveness (r= .50, p<.01) and Empathy (r= .57, p<.01) all of the five variables showing a moderate positive relationship at a level of p<.01 showing high statistical significance. Empathy was significantly and positively correlated with Customer Loyalty (r = .68, p< .01) and Customer Satisfaction (r = .60, p< .01) both showing a moderate positive relationship at a level of .01. Trust (r= .32, p<.01) showing a weak but positive relationship at a level of .01. Responsiveness was found to have a moderately positive relationship with Customer Satisfaction (r = .53, p< .01) and Customer Loyalty (r = .60, p< .01) at a level of .01. The variables, significantly correlated with Assurance were Customer Satisfaction (r = .73, p< .01), and Customer Loyalty (r = .71, p<.01) both showing a strong positive relationship at a level of .01. In the case Trust was significantly correlated with Customer Satisfaction (r = .39, p< .01) showing a weak positive relationship at a level of .01, Customer Loyalty (r =.47, p < .01) and Assurance (r= .55, p<.01) both showing a moderate relationship at a level of .01. Customer Satisfaction, and Loyalty were found to have strong positive relationship (r = .76, p< .01) at a level of .01. Tangibility seems to have moderate positive relationship with both Customer Satisfaction (r = 64, p< .01), and Customer Loyalty (r = .66, p< .01).

Regression Analysis

Multiple regression can establish that a set of independent variables explains a proportion of the variance in a dependent variable at a significant level (significance test of R2), and can establish the relative predictive importance of the independent variables (comparing beta weights). Therefore a Multiple regression analysis was performed to identify the relationship between Service quality (Reliability, Responsiveness, Assurance, Empathy, Tangibility), Trust and Customer Satisfaction and Loyalty in GrameenPhone.

Stepwise Regression on Customer Loyalty

Variable B SE B ? ? R
Step 1

Customer Satisfa