CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Consumers are not just willing to buy products, but are ready to experience them and some will go so far that they will help companies build them. Therefore, experience is a central element of the life of today’s consumer (Schmitt, 2003). Experience occurs as a result of encountering through things and thus, experience is the stimulation of a single event, for example, marketing before and after purchasing (McLuhan, 2008). Experience includes the whole living element, and usually is caused by directly observing or participating in events, no matter if the events were real, dream-like or virtual. Experience usually is not unprompted but induced.

Experiential marketing is the operator standing on consumer’s point of view of consumers to experience the concept of the purchase, process of the purchase, thoughts of purchase and driving force of the purchase, that is, from a consumer’s senses, feelings, thinking, actions and connections these five aspects define and design the way of thinking about marketing (Schmitt, 2001). It advocates the experience, enables customers to experience and become directly involved as the main body, creating a kind a feeling that satisfy their needs mentally to the greatest extent in order to win customer trust and loyalty so that to promote product sales (Liu, 2006).

Therefore, a well designed experience engages the consumer, becomes memorable and allows for a free interpretation as it is non-partisan (McLuhan, 2008). McLuhan, (2008) attests that the growth of quality, intensity, meaning and value are outcomes of an experience. Positive experiences need to become institutionalized within the system so that all touch points deliver the brand essence (Shaw and Ivens, 2005). This ensures that there is no gap between the brand promise and the brand delivery and attempts to connect consumers with brands in personally relevant and memorable ways and also gives customers an opportunity to engage and interact with brands, products, and services in sensory ways (Ponsonby-Mccabe and Boyle, 2006).

Personal experiences seem to help people connect with a brand and make intelligent and informed purchasing decisions. When done right, it is the most powerful tool to win customer loyalty (Smith and Wheeler, 2002). Kotler and Keller, (2006) stated that emotion, based on consumption, impacts a consumer’s satisfaction judgment. In essence, an outstanding customer experience will certainly lead to customer satisfaction which normally will result in building brand loyalty. Intuitively, brand loyal consumers may be willing to pay more for brand because they perceive some unique value in the brand that no alternative can provide (Xiao, 2004).

In 1992, the Federal Government of Nigeria established the Nigeria Communications Commission (NCC) by decree 75 to regulate the activities of telecommunications services in the country. The need for the establishment of this commission was partly due to the poor performance of NITEL, the nation’s telephone service provider and partly to open up the telecommunications sector and attract private investors.

The poor performance had resulted in the low tele density of 0.04 in Nigeria up till 1999, a situation that was considered one of the lowest in sub-Sahara Africa. With the coming into existence of the commission, there was the liberalization of the telecommunication sector which allows private sector participation leading to the licensing of Global System of Mobile Communication (GSM) operations in 2001. Through this policy, the nation moved from a monopolistic telecommunication market towards a fully liberalized one which allows competition.

The GSM revolution started in Nigeria in August 2001, with the licensing of three mobile operators, MTEL, Econet (now Airtel) and MTN by NCC, and since then the face of information and communications technology in Nigeria has been transformed.

Globacom and Etisalat were later licensed to operate thereby making the GSM operators to be five (5). Since the GSM launch, mobile telephony has rapidly become the most popular method of voice communication in Nigeria, relegating CDMA (Code Division Multiple Access), a much earlier introduced telecommunication platform, to the background.

Nigeria has maintained its lead as Africa’s largest telecom market with active subscribers of 92,006,608 by the end of February, 2012 (Nigerian Communication Commission, 2012), relegating South Africa to second place with 60 million subscribers.

This represents a tele-density of 68.68% up from tele-density of 0.73% in 2001. The explosive growth rate in the market has thrown up intense rivalry among the GSM operators and necessitated the need to engage in marketing activities that would enable them to retain a large chunk of their customers and make them loyal.

This is more so as the market has become saturated and with little opportunity to attract new customers.

The resultant competition has led to the reduction in tariff, introduction of new and innovative products, advertising blitz, rising sales promotion, and innovative customer service (care).

All of these are aimed at both attracting new customers and retaining the existing customers.

The high growth of subscribers resulting in impressive financial performance of the GSM providers has necessitated the need to examine the factors that influence customer loyalty in the market. Therefore, this study examines the effect of experiential marketing on customer loyalty in the Nigerian telecommunication sector.