An investigation of brand equity dimensions and customer retention: A perspective of postpaid telecom subscribers in Lagos State, Nigeria

The concept of brand equity was promoted by David Aaker in the 1980s [Keller, 2003]. Brand equity refers to the value of having a well-known brand name, founded on the belief that the owner of a well-known brand name will be able to generate more revenue stream through brand recognition. There is also a shared idea which describes brand equity in terms of marketing effects distinctively attributable to the brand [Keller, 2003]. Brand equity has been defined as assets and liabilities connected to a name or a symbol [Aaker, 1991]. Marketing literature views the relationship between customers and brands as “brand equity” [Wood, 2000]. According to Aaker [1991], brand equity can be classified into five elements consisting of brand association, perceived quality, brand awareness, brand loyalty, and other proprietary assets (such as patent right and trade mark among others). Brand awareness is related to brand recognition, degree of brand recall, and the probability that a given brand name will come to consumer's mind rapidly than competing brands [Zavattaro et al., 2015]. Brand association relates to the informational nodes connected to the brand and the sense consumers made of the brand [Henry, 2004]. According to Aaker [1991], if these associations are added so that they result in some significance, then the impression created would become a source of brand image. Perceived quality is viewed as consumer's decision about brand's overall superiority or dominance with respect to its anticipated purposes and possibility of substitutes [Aaker and Jacobson, 1994]. Perceived quality is believed to be a form of association necessitating progression towards the prominence or popularity of a distinct aspect of brand's equity [Pappu and Quester, 2008]. The notion of brand loyalty is viewed from wide-ranging facets: behavioral (or purchase) loyalty [Chaudhuri and Holbrook, 2001] and attitudinal loyalty [Moreau et al., 2001]. Other proprietary brand assets related to patents right, trademarks, and channel relationships offer strong competitive advantages to a firm [Aaker, 1991].

Pride and Ferrell [2003] viewed brand equity as a tool resulting in the marketing and financial benefits associated with the brands in the marketplace. According to Simon and Sullivan [1993], brand equity refers to the incremental cash flows attributed to branded products over and above the cash flows that unbranded products will be able to generate. As mentioned earlier, Aaker [1991] delineated brand equity into five elements consisting of brand awareness, perceived quality, brand association, and other proprietary assets. Aaker and Joachimsthaler [2000] highlighted brand loyalty, brand awareness, brand association, and perceived quality as dimensions of brand equity. Keller [2003] categorized brand equity dimensions into: brand knowledge, perceived quality, brand loyalty, and brand image. Dib and Alhaddad [2014] suggested a brand equity framework consist of four elements: brand awareness, brand trust, perceived quality, and brand loyalty. According to Baalbaki [2012], attempts have been made to measure brand equity using two contrasting measurement methodologies: (i) the direct method, which evaluates customer-based brand equity by measuring the real influence of brand knowledge on customer response to diverse marketing influences’ and (ii) the indirect methodology, which evaluates possible sources of customer-based brand equity through customers’ brand knowledge.

Retention of customer is a core issue for business organization that wants to sustain performance and build competitive advantage. Usman and Mahmood [2014] reported that customer retention is a vital factor in firm's marketing activities and a means of sustaining competitive advantage. The process of sustaining business relationship between organization and customer over a long term is labeled as customer retention. Customer retention, according to Payne [2000] can be improved through three approaches: retention rate of customer, customer defection causes, and advancement of customer retention through corrective measures. Petzer et al. [2009] claimed that it is essential for service industry to capture the reasons behind retained customer whether through satisfaction or other indirect approaches for the purposes of resource allocation and strategy development. High brand equity (BE) results in number of benefits such as greater consumer preference and purchase intentions [Kotler and Keller, 2012], higher stock returns [Evelin, 2017], conveys an opportunity for successful brand extensions, resilience against market turbulence, and formation of strong barriers to competitive rivalry [Sasirekha and Sathish, 2017].

In most industries, customers are retained only after the first stage of transactions; consequently, customer retention provides a clue of customers switching and other forms of behavioral tendency towards a brand [Srinivasana et al., 2002]. Customer retention strategy aims to maintain a reasonable percentage of valuable customers by decreasing customer defections (churn) and foster repeat patronage over a long period of time [Keller and Lehmann, 2006]. The rationale for striving towards customer retention, according to Aspinall et al. [2001], is the degree of dissimilarity of customer retention degree among industries and businesses. According to Motshedisi and Geoffrey [2011], customer retention within the service industry revealed that service industries adopt diverse customer retention tactics [Motshedisi and Geoffrey, 2011]. According to Fluss [2010], yearly customer attrition rates range from 7% in businesses that have high exit barriers for example banking and insurance, to roughly 40% in the mobile telecom industry. Some academics have contended that customer attrition is indirectly observed in some companies such as Pay-television subscription, as customers do not totally withdraw from their relationship with the enterprise but rather become inactive or display inconsistent purchasing behavior [Karamura et al., 2005].

Everyone agrees that focusing on customer retention can produce numerous economic benefits [Reichheld, 1996]. For instance, as customer period of relationship with firm extends, the volume of purchases increases and customer referrals rate grow [Keller, 2003]. Also, relationship maintenance costs decrease as both customer and business learn more about each other due to declining customers churn tendency and customer replacement costs [Aaker, 1991]. The benefits of customer retention are well recognized, Healy [1999] reported that long-term customers are more inclined to buy more, offer positive word of mouth communication and are less sensitive to price increment. Also, there is a common belief that customer retention brings more revenue and cheaper to maintain [Keller, 2003].

Research findings concerning the role of a brand in firm's marketing effort endorse the prominence, as well as the existence of strong association between brand awareness, perceived quality, brand association, brand loyalty, and brand equity [Dlacic and Kezman, 2014; Nguyen et al., 2018]. It has also been documented that consumers are favorably disposed to product and service with a strong brand [Aaker, 1991]. Consumer attitude towards a product depends on the capability of the product or service to meet and exceed buyer's expectations, because consumers comprehend product through brand name, brand experience, and benefit embedded in the brand. Hence, customer purchase and usage of any product or service are largely depend on their perception of the product, which is cultivated through the way and manner a product or service has been effectively marketed to create stronger preference for the brand [Rahim, 2016]. Brand perception is affected by the degree of marketing exposure, individual interpretation of the brand and how it impacts on consumer purchase intention [Aaker, 1991]. Researchers maintained that brand choice can be explained by what is known as “the expectancy valued model” in which consumers assign scores on the basis of pleasurable outcome of using or consuming a product or service [Schiffman and Kanuk, 1997]. Therefore, when faced with competing brands, consumers assign scores to these expectancy value parameters to make a choice decision. Shieh and Lai [2017] alluded that it is important for business organizations to comprehend how the brand value is generated in the mind of the customer and how this value transformed into customer loyalty formation. As expressed by Keller and Lehmann [2006)], brands streamline choice decision, serve as cues to customer's previous consumption experience and engender trust. Strong brands are also cherished because they decrease the risks for the consumers and leads to cost saving in decision-making [Aghdaie and Honari, 2014]. Building and sustaining brand is also vital to firm marketing strategy, because resilient brands create strong awareness, brand association, perceived quality, and contribute to the formation of loyalty towards the brand [Kotler and Keller, 2012]. On the basis of the above statement, this study proposes the following hypotheses:

Hypothesis 1: There is no significant relationship between brand equity dimensions (consisting of brand awareness, brand association, perceived quality, and brand loyalty) and customer retention among postpaid telecom subscribers in Lagos State, Nigeria.

This study employed cross sectional survey research design and used empirical analytical approach. The survey approach was adopted because a large number of academics have suggested that it is the most efficient and appropriate approach for conducting behavior, attitude and perception related research [Saunders et al., 2011].

The population of this study consisted of 3,626,649 postpaid subscribers on the network of the four GSM operators in Nigeria (MTN Telecommunications Limited, Airtel Nigeria, Glo Mobile Telecommunication, and 9Mobile—formerly Etisalat). The choice of postpaid subscribers as the focus of attention in this study is justified because of the fact that the postpaid subscribers are willing to make an upfront investment for mobile telecom services and thus, their retention is very fundamental to the profitability and survival of the telecom operators. Statistics on telecom sector report by Nigerian Communications Commission-NCC [2018] revealed that since the introduction of mobile telephone in Nigeria, Lagos state has consistently led the pack in both active voice subscriptions and internet connectivity, which substantiates the choice of Lagos state for our the study.

Sample size formula developed by Cochran 1963 [cited in Abubakari, 2019] was used to compute the sample size. The formula is: n=z2.p,q.N(N−1)err2+p.qn=1.962×0.07×0.93×3626649(3626649−1)0.022+0.07×0,93=672\matrix{{n = {{{z^2}.p,q.N} \over {\left( {N - 1} \right)er{r^2} + p.q}}} \hfill \cr {n = {{{{1.96}^2} \times 0.07 \times 0.93 \times 3626649} \over {\left( {3626649 - 1} \right){{0.02}^2} + 0.07 \times 0,93}} = 672} \hfill \cr } where P

= Sample proportion, q-1 = p,

Using, the formula, a sample size of 672 was arrived at for this study. Although the targeted sample size was 672, a total 376 responses was collected and 368 were valid for data analysis. Three stage sampling approaches were adopted. Purposive sampling approach was adopted in the first stage to identify those subscribers on postpaid payment plan. In the second phase, volunteer sampling procedure was used to ascertain those that are willing to participate in the survey. In the third stage, convenience sampling approach was used to survey respondents that are accessible and favorably disposed to participate in the survey. Participants were enrolled at the sales outlet through referrals and at service center of the four telecom operators within Lagos state, Nigeria for a period of three months.

Based on the documented literature evidence related to the recognition and adoption of the first four elements of Aaker [1991] brand equity dimensions, this study used brand awareness, brand association, perceived quality, and brand loyalty as a measure of brand equity [Brody et al., 2010]. Measures were adapted from previous validated studies. Data for this study were gathered using self-completed structured questionnaire to obtain response from the respondents. Likert scale consisting of five (5) point classification; strongly disagree (1), disagree (2), neutral (3), agree (4), strongly agree (5) was used. To accomplish content validity and reliability, the instrument was given to marketing experts to peruse and their comments were combined to produce the final draft of the questionnaire. Afterwards, the researchers carried out pilot study to further discover ambiguities in the questionnaire. The study variables and sub-dimensions have Cronbach alpha (measure of scale reliability) scores that exceeded α= .7, and so it can be deduced that the survey instrument (questionnaire) has acceptable reliability value [Cooper and Schindler, 2011].

The completed copies of the questionnaire were collated, coded, and analyzed. Hypotheses were tested using Pearson correlation and multiple regression statistical analysis.

There is no significant relationship between brand equity dimensions (consisting of brand awareness, brand association, perceived quality, and brand loyalty) and customer retention among postpaid telecom subscribers in Lagos State, Nigeria.

As shown in Table 1, the descriptive statistics (mean and standard deviation) of brand equity/its dimensions, and customer retention ranged from 3.36 to 3.52 and standard deviations ranged from .655 to .967. As shown in Table 1, inter-correlations among brand equity/dimensions exhibit low, to moderate, and high positive significant correlations among themselves (the correlation ranged from .224 to .746 and p < 0.01). Similarly, there exists a moderate to high positive significant correlation between brand equity/dimensions and customer retention. Specifically, brand awareness and customer retention (r = .554, p < 0.01), perceived quality and customer retention (r = .812, p < 0.01), brand association and customer retention (r = .717, p < 0.01), and brand loyalty and customer retention (r = .603, p < 0.01). Over all, brand equity exhibits high positive correlation with customer retention (r = .887, p < 0.01). The result of hypothesis one corroborates the finding of the study carried out by Dlacic and Kezman [2014], and Mohsan and Nighat [2017] that reported brand awareness, brand association, brand loyalty, and perceived quality as the underlying dimensions of brand equity. Studies carried out by Muhammad et al. [2015], and Nguyen et al. [2018] also documented significant correlation among the four dimensions of brand equity and overall brand equity.

In contemporary turbulent business environment, customer retention presents a major challenge for many companies including telecommunication service companies. Based on this recognition and the implications, it is inevitable that the mobile telecom operators need to think about retention in a more strategic way than simply focusing on subscription renewals rate [Eva et al., 2016]. To build a robust brand, brand awareness is essential in shaping the strength of brand relationships in the mind of the customer to prompts brand choice [Valavi, 2014]. As expressed by Tong and Hawley [2009], brand equity is one of the elements through which firm's shows a strategy of differentiation from competitors and so strong brand equity implies that customers will have high brand-name awareness, uphold a favorable brand image, recognize that the brand is of high quality, and display loyalty towards the brand. As a result of the benefits associated with brand equity, such as improve quality perception, and brand awareness, there is need for telecom operators to leverage on the value of their brands as a customer retention strategy to discern customers, influence brand acuities and promotes risk minimization approach.

Brand equity dimensions (comprising brand awareness, brand association, perceived quality, and brand loyalty) will not significantly influence customer retention among postpaid telecom subscribers in Lagos State, Nigeria.

As shown in Table 2, the regression model reveals the following statistics, F = 661. 016, p = .000, R = .938, R² = .880, and adjusted R² = .878. The ANOVA section in Table 2 also shows that brand equity and its dimensions significantly predicted customer retention, with 88% prediction of customer retention accounted for by brand equity in the Nigerian telecommunications industry. The Coefficient row in Table 2, displayed that all the brand equity dimensions significantly predicted the model's: brand awareness (b = .077, t = 3.502, p = .001), perceived quality (b = .521, t = 22.663, p = .000), brand association (b = .303, t = 13.412, p = .000), and brand loyalty (b = .327, t = 16.607, p = .000). The dimension that contributed most to the model is perceived quality (52%) and the lowest is brand awareness (7.7%). Valavi [2014] claimed that brand awareness is the most important driver of brand choice and consumer purchase decision. Therefore, the observation that brand awareness contributes the least to the prediction of customer retention may be due to the fact that the four telecom firms selected for this study are the top mobile operators in the Nigerian telecommunications industry and have been in operation for almost two decades. So, they are well-established and known among subscribers. The result of hypothesis two endorses the view advocated by Shadi et al. [2016] that brand equity is connected to some aspects of consumer behavior comprising readiness to pay additional price, brand fondness, and choice decision among others. Similarly, it corroborates the view expressed by Anaraki [2013] and Zavattaro et al., [2015] that brand equity dimensions exert influence on the reaction of customers towards a brand; one of which is the tendency to patronize a particular business consistently over a long period of time.

In terms of business, the most valuable customers are the repeated ones. If a company successfully wins the hearts of their customer by adopting effective brand strategies through improved brand awareness, perceived quality, brand association, and loyalty among others, such company will find it easier to retain customers [Peppers and Rogers, 2004]. The notion of customer retention enlarged when most businesses experienced remarkable loss of customers, along with the difficulty and high costs of acquiring new customers [Bird, 2005]. According to the opinion of Athanasopoulou [2009] and Nicholas et al. [2018], nowadays customers have more options to choose from, and so the basis of rivalry has shifted from acquiring new customers to retention. Brand equity through brand awareness, perceived quality, brand association, and brand loyalty give self-confidence to customer when taking an informed choice decision [Valavi, 2014]. High brand equity also offers the product or service hidden worth in term of satisfactory trustworthiness particularly in a situation where it is not feasible for consumers to check or infer quality of a product/service at the point of purchase [Chen and Hsieh, 2011]. As expressed by Keller et al. [1998], brand equity is not managed in the short run but over time, by ensuring brand consistency, shielding the foundations of brand equity, taking an effective suitable decision on how to leverage the brand, and changing or modifying the supporting marketing initiatives such as product features, price, place, and promotion among others. According to Yoo et al. [2000], brand equity can be created, preserved, and extended by strengthening the dimensions of brand equity, which consist of brand awareness, perceived quality, brand loyalty, and brand association; thus marketing effort will be positively related to strong brand equity if it results in a more favorable behavioral tendency towards firm's product and service.

Some years ago, product of high quality reigned, particularly, when demand level surpassed supply [Kotler, 2010]. Contemporary marketplace is ruled by high notch brand; therefore, organization needs to develop superior strategies through branding to sustain performance [Chaudhuri and Holbrook, 2001]. According to the opinion of Aaker [1991], effective brand management is a potent strategy to compete successfully in any form of industry, because without branding, most organizations product and services will be undifferentiated and are likely to trade solely on price. Ojeyinka and Ajayi [2014] maintained that marketing managers can analyze market situation through effective brand management and determine the viability of the target market as a guide towards customer retention [Adjei and Denanyoh, 2014]. To build relationships with subscribers, telecom operators need to develop retention strategies instead of attempting to acquire a new customer which has been found to be costlier [Dawkins and Reichheld, 1990]. Accordingly, measurement of brand equity will continue to be very vital because they echo the strength of the brand and indicate whether the company's brand management is effective or not [Shabbir and Rehman, 2013].

This study contributes to knowledge and business practice; however, it is not free from some limitations. The sample size of this study is relatively small and should be considered when evaluating the results. Therefore, larger sample size is required to enhance the generalization of this study. Another limitation connected to the sample size is the potential presence of biases of the notion of “brand awareness,” and this is because the telecom operators selected are the top players in the mobile telecom industry, which are well-established and known. As a result, the use of negatively worded items is suggested to really test the degree of subscriber's awareness of the telecom brands. Also, since the limited geographical area is covered by this research, this study should be replicated in other areas outside Lagos state. It is envisaged that telecom operator's capability, brand visibility, and subscribers’ habits in each state of the federation may be different and exert influence on consumer perceptions of the telecom brand.