The Effect of Service Customization on Customer Loyalty Towards Mobile Network Operator in Pakistan: The Mediatory Role of Perceived Quality, Value, Customer Satisfaction, and Trust.

Abstract

Companies often engage in product and service customization as part of a differentiation strategy, as it represents a source of competitive advantage. However, its effect on customer relationships as well as contingencies for its effective application is not well understood. In Particular, how it has an impact on the loyalty of a brand or company is still an open question. This paper modified Coelho and Henseler (2012) model to explore the influence of service customization on customer loyalty in the cellular phone operators. We hypothesized that customization increased product quality that would increase perceived value. The increased value would lead to customer satisfaction and ultimately loyalty. Customization also has effects on loyalty by increases in customer trust. Empirical validity was established by conducting a survey using a close_ended questionnaire. Data was collected from 305 respondents and analyzed using confirmatory factor analysis and structured equation modeling. The results suggested customization has a direct but inverse effect on loyalty. Moreover, it has a significant and positive effect on perceived quality as well as customer satisfaction. Perceived quality positively affects perceived values and Customer satisfaction. On focusing on the other channel, we found a negative effect of customization on trust. However trust positively affects loyalty, hence trust plays an inverse role in mediating customization and loyalty nexus. Lastly, customer satisfaction has a positive effect on both loyalty and trust. Customization has both direct and mediated effects on customer loyalty and interacts with the effects of customer satisfaction and customer trust on loyalty. Hence, the finding implies that customization has both direct and mediated effects on customer loyalty and interacts with the effects of customer satisfaction and customer trust on loyalty. This paper fills an important gap in the knowledge of customization outcomes, and clarifies under which circumstances customization is most effective. These results help managers to decide upon resource allocation to enhance customer satisfaction, trust, and loyalty.