Organization part | Grameenphone

Grameenphone in briefGrameenphone Ltd. (GP) is the market leader in the mobile telecommunication industry of Bangladesh. The address of its Head Office is: GP HOUSE, Bashundhara, Baridhara, Dhaka 1229, Bangladesh. GP is a joint venture between Bangladesh and Norway. Major shareholders were Telenor (68%) and Grameen Telecom (32%). In 2008 it went public. Presently the shareholder status of the company is Telenor (61.2%), Grameen Telecom (28.8%), Institute (5%), and Public (5%). Telenor is the state owned telecommunication company of Norway. It has operations in different countries of the world. On the other hand, Grameen Telecom is the sister concern of Grameen Bank, one of the biggest non- government Organizations (NGO) of Bangladesh.Principally GP was established in 1995. But due to government policy, GP did not get permission to start their operation. The license agreement was signed on October 31, 1996. They started the hard work of the developing the infrastructure facilities in the country. GP did not take much time to start its operations. The commercial launch was on March 26, 1997. Bangladesh is a developing country. Per capita income here is very low. Very few people have access to telecommunication. In this situation GP started their operation here. GPs aim was to develop one GSM cellular mobile communications network in Bangladesh in competition with two other GSM operators and one AMPS (Advanced Mobile Phone System) operator. GP aims to provide the best possible technical quality, customer service, and coverage also in the rural areas at the most favorable prices, to as many customers possible in Bangladesh.GP has a dynamic management composed of business people with a profile drive, prepared to take calculative risk. The shareholders of the company are stable, established companies with solid international reputation. They have already made approximately $125 million investment to GP and will reinvest their profit share to GP. The Grameenphone network is designed with latest computer assisted design technology. GP has reached its breakeven point in the year 2000, in the fourth year of its operation. The company made its first net profit of $ 3.7 million during the year ending in December 2000.Grameenphone is the leading Cellular Net Provider in Bangladesh. Grameenphone started their business approximately 11 years. Since then Grameenphone has been operating in the market for a long time. During this time Grameenphone went for different types of mergers as well as acquisitions. They gained success from the very beginning of their operation and were capable enough to hold the success year after year. Grameenphone main competitors are Robi, Banglalink, Airtel, Teletalk and Citycell. One of the strongest sides of Grameenphone is its customers service and relationship.Grameenphone was awarded license to operate as a mobile telecommunication service provider in Bangladesh on 28th of November 1996. It officially launched its network on 26th of March 1997 and went into commercial operation on 15th of April.History of Grameenphone 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. June 1998: GP started its services in the port city of Chittagong, the second largest city in the country. Cell to cell coverage in the DhakaChittagong corridor also enabled GP to introduce its service in a number of other districts along the way. September 1999: GP started its service in the industrial city of Khulna. Once again, a number of other districts came under coverage of GP because of the cell-to-cell coverage between Dhaka and Khulna. Earlier in September 1999, it introduced the EASY prepaid service in the local market. It also introduced the Voice Mail Service (VMS) and the Short Message Service (SMS) and other Value Added Services (VAS). June 2000: Grameenphone started its services in Sylhet, Barisal and Rajshahi, bringing all six divisional headquarters under the coverage of its network. The service in Barisal region was started after the microwave link between Khulna and Chittagong was completed. August 2003: After six years of operation, Grameenphone has more than one million subscribers. November 2005: Grameenphone continues to be the largest mobile phone operator of Bangladesh with more than 5 million subscribers. November 16, 2006: After almost 10 years of operation, Grameenphone has over 10 million subscribers. Grameenphone has built one of the most extensive infrastructures of Bangladesh and is a major contributor to the development of the national economy. December 31, 2007: Grameenphone is one of the largest private sector investments in the country with an accumulated investment of USD $1.7 billion up to December 2007. Grameenphone is also one the largest taxpayers in the country, having contributed nearly BDT 5000 Crore in direct and indirect taxes to the Government Exchequer over the years of which is amount, BDT 1670 Crore was paid in 2005 alone.

GP was also the first operator to introduce the prepaid service in September 1999. In addition to core voice services, Grameenphone offers a number of valueadded services, in each case on both a contract and prepaid basis. It established the first 24hour Call Center, introduced valueadded services such as VMS, SMS, Fax & Data Transmission Services, International Roaming Service, WAP, SMS based PushPull Services, EDGE, personal ring back tone and many other products and services. Grameenphone nearly doubled its subscriber base during the initial years while the growth was much faster during the later years. It ended the inaugural year with 18,000 customers, 30,000 by the end of 1998, 60,000 in 1999, 193,000 in 2000, 471,000 in 2001, 775,000 in 2002, 1.16 million in 2003, 2.4 million in 2004 and 5.5 million in 2005 customers. Currently the customer base of Grameenphone is over 40 million. Grameenphone offers the widest coverage in Bangladesh. The population coverage has increased from approximately 85% in 2005 to above 90% in 2006. Currently the population coverage is 98% (Including voice call and Edge/GPRS). In addition; Grameenphone also offers GPRS in most of the country and EDGE in urban areas.From the very beginning, Grameenphone placed emphasis on providing good aftersales services. In recent years, the focus has been to provide aftersales within a short distance from where the customers live. There are now more than 400 GP Service Center, 20 GPC Franchise, recharge retailers: 105,000+, total retailers: 18000+, distributors: 96, Single hotline which operates 24/7; the country covering all 64 districts. In addition, there are 62 GP Customer Centers in all the divisional cities and they remain open from 8am7pm every day including all holidays.Grameenphone has generated direct and indirect employment for a large number of people over the years. The company presently has more than 6,000 fulltime, parttime and contractual employees. Another 70,000 people are directly dependent on Grameenphone for their livelihood, working for the GP dealers, retailers, scratch card outlets, suppliers, vendors, contractors and others.In addition, the Village Phone Program, also started in 1997, provides a good income earning opportunity to more than 200,000 mostly women Village Phone operators living in rural areas. The Village Phone Program is a unique initiative to provide universal access to telecommunications service in remote, rural areas. Administered by Grameen Telecom Corporation, it enables rural people who normally cannot afford to own a telephone to avail the service while providing the Village Phone operators an opportunity to earn a living.The Village Phone initiative was given the GSM in the Community award at the Global GSM Congress held in Cannes, France in February 2000. Grameenphone was also adjudged the Best Joint Venture Enterprise of the Year at the Bangladesh Business Awards in 2002.Grameenphone considers its employees to be one of its most important assets. GP has an extensive employee benefit scheme in place including Gratuity, Provident Fund, Group Insurance, Family Health Insurance, Transportation Facility, Day Care Centre, and Childrens Education Support, higher Education Support for employees, InHouse Medical Support and other initiatives.

Shareholders of Grameenphone

The shareholders of Grameenphone contribute their unique, indepth experience in both telecommunications and development. The international shareholder brings technological and business management expertise while the local shareholder provides a presence throughout Bangladesh and a deep understanding of its economy. Being a public limited company (PLC), the Board of Directors of Grameenphone has a pivotal role to play in meeting all stakeholders interests. The Board of Directors and the Management Team of Grameenphone are committed to maintaining effective Corporate Governance through a culture of Accountability, Transparency, WellUnderstood Policies and Procedures. The Board of Directors and the Management Team also persevere to maintain compliance of all laws of Bangladesh and all internally documented regulations, policies and procedures. Grameenphone is a truly transparent company that operates at the highest levels of integrity and accountability on a global standard.

TELENORTelenor AS is the leading Telecommunications Company of Norway listed in the Oslo and NASDAQ Stock Exchanges. It owns 55.8% shares of Grameenphone Ltd. Telenor AS have played a pioneering role in development of cellular communications. It has substantial international operations in Mobile Telephony, Satellite Operations and Pay Television Services. In addition to Norway and Bangladesh, Telenor AS owns GSM companies in Denmark, Austria, Hungary, Russia, Ukraine, Montenegro, Thailand, Malaysia and Pakistan.

GRAMEEN TELECOMGrameen Telecom Corporation is a nonprofit company and works in close collaboration with Grameen Bank. The internationally reputed bank for the poor has the most extensive rural banking network and expertise in micro finance. Grameen Telecom, with the help of Grameen Bank, administers the Village Phone Program, through which Grameenphone provides its services to the fast growing rural customers.Grameen Telecoms objectives are to provide easy access to GSM cellular services in rural Bangladesh, creating new opportunities for income generation through self employment by providing villagers with access to modern information and communication based technologies.The top management of Grameenphone Ltd carried out their management roles comprehensively over the years. There has been replacement or changes in the positions but all have worked together to increase the overall performance of the organization. Management Team of Grameenphone comprises of the CEO, Directors and the Divisional Heads of the company.

Mission, Vision, Objectives and StrategiesWe are here to helpThe key to achieve this vision is a mindset where everyone of GP works together, making it easy to buy and use their services. (Grameenphone)Delivering on their promises, being respectful of differences, inspiring people to find new ways, get this right and Telenor will be a driving force in modern communications and customer satisfaction. (Grameenphone)Mission:Leading the industry and exceed customer expectations by providing the best wireless services, making life and business easier

Vision:We exist to help our customers get the full benefit of communications services in their daily lives. We want to make it easy for customers to get what they want, when they want it. We're here to help.Values: Make It Easy Keep Promises Be Inspiring Be RespectfulMake it Easy: GP is practical. They don't over complicate things. Everything they produce should be easy to understand and use. No waste, no jargon because they never forget trying to make customers' lives easier.Keep Promises: Everything GP set out to do should work, or if customers don't get it, they are there to help. Theyre about delivery, not over promising actions not words.Be Inspiring: Always trying to be creative. GP strive to bring energy into the things they do. Everything they produce should look good, modern and fresh. GP are passionate about our business and customers.Be Respectful: GP acknowledge and respect local cultures. GP do not impose one formula worldwide. They want to be a part of local communities wherever they operate. GP believe loyalty has to be earned.

Brand Promise:Go Beyond

THE PEOPLEThe people of Grameenphone are young, dedicated and energetic. All employees are well educated at home or abroad, with an even distribution of males and females and social groups in Bangladesh. They know in their hearts that Grameenphone is more than phones. This sense of purpose gives them the dedication and the drive, producing the biggest coverage and subscriberbase in the country. Grameenphone provides equal employment opportunities and recognizes the talents and energy of its employees.

THE SERVICEGrameenphone believes in service that leads to good business development. Telephony helps people work together, raising their productivity. This gain in productivity is development, which in turn enables them to afford a telephone service, generating good business. Thus development and business go together.

CORPORATE GOVERNANCEIn the fastpaced world of telecommunications, vibrant and dynamic Corporate Governance practices are an essential ingredient to success. Grameenphone believes in the continued improvement of Corporate Governance. This in turn has led the company to commit considerable resources and implement internationally accepted Corporate Standards in its daytoday operations. (Grameenphone)

Organizational Structure

Management ProfileCEO: Vivek Sood. Joining Date: January 7, 2013CFO: Fridtjof Rusten. Joining Date: May 1, 2012CHRO: Quazi Mohammad Shahed. Joining Date: November 1, 2012 CMO: Allan Bonke. Joining Date: August 5, 2012CTO: Tanveer Mohammad CTO. Joining Date: July 1, 2010CCAO: Mahmud Hossain. Joining Date: March 8, 2010

DIVISIONS AT GRAMEENPHONE LTDGrameenphone Ltd. has approximately 6000 employees working at different levels of organizational hierarchy. There are 9 functional departments engaged in managing these employees with the aim to meet organizational objectives. Grameenphone follows a mix of centralized and decentralized decision making processwhere the top management mainly takes all the strategic decisions while the functional managers have flexibility to take decisions by themselves on a day to day basis. At Grameenphone the Managing Director is assisted by 9 Senior Executives who are heading different departments in the strategic decision making process. The departmental names of Grameenphone are given below: Corporate Affairs Division Customer Service Division Finance Division Human Resource Division Information Technology Division Internal Audit Division Internal Control Office Division Marketing Division Network Division Public Relation Division Sales DivisionGrameenphone follows a 3layer management philosophy in Bangladesh. These are Directors, Managers and Officers. The CEO is the top most authority of all the levels. Directors are the departmental heads that are responsible for the activities of their departments. Managers have the authority next to directors. These two layers represent the management level of Grameenphone. Officers are the next persons to stand in the hierarchy list. They are the typical midlevel employees of Grameenphones organizational hierarchy. These officers are responsible for managing the operational activities and operating level employees. (Grameenphone).

Corporate Social Responsibilities (CSR):Grameenphone has always strived to make a difference by increasing the welfare of the country through socially responsible activities. In line with this, Grameenphone has taken a number of following initiatives round the year:

Safe Motherhood & Infant Care Project - More than 1.7 million free primary healthcare services to underprivileged pregnant mothers & their infants Free eye care support for around 28,780 people - 3,458 eye sights restored so far Awareness building on varied national issues- AIDS, National Immunization Day Information boats with digitized livelihood contents and internal access for remote riverine communities Economic freedom for more than 400,000 Village Phone Operators More than 500 Community Information Centers- connecting life and learning Proud sponsor of Bangladesh Special Olympics team Employment opportunity to acid survivors Scholarship for underprivileged meritorious students Blood donation camps for underprivileged Thalassemia patients Establishment of Blood Bank at Bogra for underprivileged patients Emergency relief effort in natural calamities

Industry Analysis:Porter's five forces analysiss a framework for industry analysis and business strategy development formed by Michael E. Porter of Harvard Business School in 1979. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An unattractive industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching pure competition, in which available profits for all firms are driven to normal profit.Three of Porter's five forces refer to competition from external sources. The remainders are internal threats.

Barriers for New Entrants:Higher barrier implies lower competition, again lower barriers for new entrants implies higher competition on the industry. The telecom market is a capital-intensive industry especially when we are talking about the Bangladesh's telecom industry. The total asset for Grameenphone & Banglalink is worth of BDT 109.16 billion & BDT 67.53 billion respectively. The third largest mobile operator Robi is a joint venture of big time investors from Malaysia based Axiata Group Berhad & Japanese NTT Docomo Inc. Most recently, a new venture 'Airtel Bangla' is formed which jointly owned by Indian Bharti Airtel & United Arab Emirate based Warid Telecom. Bharti Airtel is making USD 300 million investment to rapidly expand the operations of Airtel Bangla. (Wallstreet, 2010) Teletalk is a state owned telecom company that has the potential to exploit all the political & legal advantages of the country. All of these big names are actively operating businesses with their strong asset base which implies that, it will take a huge load of capital, innovative technology and profound expertise to groom in this industry which are not easily obtainable. This also reflects the high switching cost for the business operations.

Figure 5: A graphical representation of porters 5 forces. Since the core product is mobile telecom communication, Value Added Services Can play an instrumental role in product differentiation and the practice is already there in the industry. But technological advancement and globalization can be the options for innovative product differentiation efforts through Value Added Services.Moreover, the high switching cost and government regulation on high license charge have made the industry even harder for an entrant's access.

Bargaining Power of the Suppliers:To acquire telecom specific equipments like - high-tech broadband switching equipment, fiber- optic cables, mobile handsets, billing software and many more, the each company of the industry has to depend on the suppliers. All the mobile operators of the country other than Teletalk have the international identity & have experience to work in the global platform. The companies have the opportunity to acquire necessary equipments from their different international chains across the globe. Besides this, the IT industry of the country is growing as well that can be a viable option for alternative software support.Huawei, the Chinese telecom equipment manufacturer is one of the major suppliers of telecom equipment in Bangladesh. Its major clients include Grameenphone, Banglalink, Robi, Citycell, Teletalk and Bangladesh Telecommunications Company Limited. VimpelCom (also known as 'BeeLine') - originated from Russia provides voice and data services through a range of wireless, fixed, and broadband technologies to Djuice (a Strategic Business Unit (SBU) of Grameenphone) and Banglalink in Bangladesh. Grameenphone takes Solar Power Support from ACME Tele Power Ltd. from India.All of these resources ensure abundant supply support to the country's telecom industry. This is why, the bargaining power of suppliers in the industry is low due to greater alternative supply sources.

Bargaining Power of the BuyersAround 40% of the population lives under poverty line that are less likely to purchase cell phone. In the rest of 60% of the population who has the ability is around. Around 46% of the total populations have cell phones and most of the subscribers are most likely to lie in the 60% segment that live above the poverty line. The industry is almost at the peak position in terms of customer generation. Retaining customer is the key challenge of the industry, which is why bargaining power of the customer in this industry, is high. Furthermore, customers are less interested to have new contact numbers, and more importantly low pricing on call rate are establishing stronger position for buyers in the industry.Threat of Alternative Product/Service:The companies like - Bangladesh Telecommunications Company Ltd, People's Telecommunication & Information Services, Rangs Telecom Limited, Jubok Phone, Bijoy Phone Onetel Communications, National Telecom, Westec, Dhaka Telephone Company Limited, Sheba Phone, S.A. Telecom Systems Limited etc. are providing Public Switched Telephone Network or PSTN service to the customers. This PSTN service could be an alternative option for communication. The growing number of substitute products indicates that the existing players have to face threat from these products. But again the mobile telecom service provides greater portability in communication that the substitute cannot provide. This is why at present the threat of substitute in telecom industry is low.

Rivalry among Existing Competitors:The six operators - Grameenphone, Banglalink, Robi, Airtel, Citycell & Teletall are currently running the industry. Grameenphone owning the highest market share, standing in an advantageous position than others. Each company is trying to increase the market share by low call rate, superior network coverage & better Value Added Services. The competition has driven the industry's average revenue per share to a very low mark. Due to this reason, telecom companies are incurring loss in recent days. The main motive of this price competition is to switch customers from the competitors. Considering the intensity of the competition - the rivalry among existing competitor is very high. The later part of the study provides a detailed view on the competitive environment of the country's telecom industry.

SWOT ANALYSIS

STRENGTHSGood Owner Structure Grameenphone has the best owner structure in the telecommunication industry of Bangladesh. Telenor is one of the largest companies, which are operating in different countries around the world. Again, in Bangladesh, Grameen Bank is one of the largest NGO, which has the better communication all over the country. Gonofone is also network base telecommunication organization, which has good reputation in USA. Marubini is called one of the Asian tiger organizations for its expansion of Business.

Market Leader Grameenphone is the first organization in Bangladesh, which have reached to the general people. Though City Cell had started their operation beforehand, but they were unable to reach the general people. So, the people are being used to with Grameenphone. This is a huge advantage of Grameenphone.Network Availability Grameenphone has widest network coverage and a large number of BTS station (Tower) all over Bangladesh. Thats why the company can provide better connectivity in most of the area of the country.

Brand Name of Grameen Image Grameen Bank is well known all over the country because of its appreciable activities in financial sector for poor people in Bangladesh. So, when the name Grameen has been added with this telephone company, the organization gets a huge exposure due to this Grameen image.Financial Soundness Because of effective planning, Grameenphone is able to earn a healthy amount of revenue, which gives them financial soundness.

Skilled Human Resource All the staff, which are related to Grameenphone are skilled and effective in their own job responsibility. The reason behind this is the Human Resource department of Grameenphone follows ethical strategy to recruit new employees.Effective Support Organization Grameenphone have shared the idea from the employees of Bangladesh Railway and Grameen Bank, who are experienced and was able to provide precious guideline for the operation of Grameenphone.Access to the Widest Rural Network through Grameen Bank Through the help of Grameen Bank, this was easier to Grameenphone to reach the rural area of Bangladesh.

High Ethical Standard to keep the quality of service, Grameenphone is strict to follow its ethical standard.

WEAKNESSES

Culture Gap: In Grameenphone management, employees from different country are existed. Suppose, The Managing director is a Norwegian, Director from technical is Indian and many more employees come from different country. Thats why sometimes there may be lack of understanding due to cultural gap.

Different Ideas create problem: In Grameen Phone, this is highly encouraged to apply new strategy for the better performance. Sometimes it creates problem because employees are used to with the previous strategy.

Complicated Pricing Structure: Grameenphone has lots of products. The pricing of these products and their billing policies are different which also difficult for a user to understand.

Incomplete Messages through Promotional Activities Most of the time the advertisement of Grameenphone do no clear the appropriate messages. Not only that, most of them are also so confusing to understand. As a result subscribers get the wrong meaning of what has been said to them.Problem Contained Offers Recently all most all of the new offers of Grameenphone are having some technical problems. Either they are not working at all or part of the services of those offers is disabled. Not only that, Grameenphone is also delaying to solve those problems, which is only raising the dissatisfaction level of its subscribers.Different Departments are not Working Together the interconnection of the department is little bit weak. The reason behind this, there is no exchange program for employees to work between departments.

OPPORTUNITIESEconomic Growth of Bangladesh The economic growth of the country will increase the expansion of telecommunication industry. From 1995 to 2006, there is a huge change in telecommunication sector.

New and Better Interconnect Agreement Grameenphone is going to have agreement with T&T to have better connection from land phone. The organization has agreement with other operators like AKTEL, City Cell or Bangla Link to have better internal connectivity.

Huge Demand for Telecom Services The market of telecommunication is expanding. So, this is easy for Grameenphone to achieve the major portion of expanded market because of its leading position.

Increased Intentional Activities in Bangladesh As international activities increased in the country, people need the connectivity not only in the country, but also outside of the country. So, the market for outside of the country is also expanding.

Declining Prices for Handsets Few years ago the people of low income could not effort mobile phone services due to the high price of handsets. Now the price of handset has decreased and the low-income people want to get connected through mobile phone.

New International Gateway As BTTB has established new gateway to connect internationally, this is easy for mobile phone companies to provide services of ISD call and international roaming.

Flexibility of Mobile Phone Communication through mobile phone is popular because the land phone connection between inter city is costly. Mobile phones are also easier to carry and because of its lower cost and portability, people are getting more dependent on mobile phones than land phones. So there is a chance to achieve more subscribers and more market share.

THREATS

More Rigid Government Regulations Government is becoming restricted for taking away currency from the country. So, Foreign Company are threatened because they may have risk to back their investment to the country. The government also put restriction for the work permit of foreign employee.Upgraded Technology Used by Competitors New mobile phone operator like Bangla Link are establishing their channel with latest technology. Whereas Grameenphone using the stations which are five years old. So, this is the disadvantage for Grameenphone.

Political Instability Political instability is another threat because, with the change of Government, policies are also changed. So, this is difficult for any multinational organization to cope with new policies.

Devaluation of Taka As the investments occurs in foreign currency, thats why the devaluation of Taka decrease profit from financial point of view.

Risky Position of Valuable Resource the organizations have a large number of BTS stations, which are spread, all over the country. Anyone can make damage to these BTS station and this is also difficult to arrange proper security for these stations.

Noncooperation of Government for the Revenue of BTTB Government does not want to provide the better services from BTTB to other operator due to remain competitive.

LITERATURE REVIEW

Definition of Brand:Before reviewing the concept of brand loyalty, the concept of a brand should shortly be defined. Abrand can be defined as a distinguishing name and/or symbol, intended to identify a product or producer. The American Marketing Association define the term a little deeper and state that a brand is ...a customer experience represented by a collection of images and ideas; often, it refers to a symbol such as a name, logo, slogan, and design scheme. Brand recognition and other reactions are created by the accumulation of experiences with the specific product or service, both directly relating to its use, and through the influence of advertising, design, and media commentary. A brand often includes an explicit logo, fonts, color schemes, symbols, sound which may be developed to represent implicit values, ideas, and even personality.Brand is the image of a product in a market. Two different aspects of a brand can be distinguished, the experiential aspect and the psychological aspect. The experiential aspect touches on all previous experiences that an individual has had with the brand before. The psychological aspect refers to the perceived image of a brand, something subjective and symbolic. A companys brand and the image surrounding it can be the main source of its competitive advantage. Therefore it is a valuable strategic asset. It is important to create not only a brand identity, but a brand personality. Otherwise a brand can easily be passed over, especially in these days where information is overflowing all around us. This brand personality should portray something greater than just a set of different product or service attributes that can easily be imitated. A brand needs to be easily identifiable in order to penetrate the minds of consumers and to be re-recognized. To sum it up, a brand is not just a representation of a product or a service; it is a symbol of the company itself, and that is where the core of brand loyalty lies.

Brand loyalty:Customer loyalty to specific brands has been a big focal point of strategic marketing planning over the last years. Strong brand can only exist given that it has a strong supply of brand loyal customers. Today this is considered to be an obvious fact, but this only first surfaced in the early 1980s. Before that time, companies mainly focused on trying to steal customers from their competitors and constantly get more customers. After this fact got the attention that it deserved, the focus shifted towards keeping already existing customers. This has become more and more important strategy since now in the times of countless offers, buyers tend to jump from one brand to the next. As mentioned in the previous chapter, it can cost up to six times as much to gain a new customer compared to what it costs to retain an existing customer. On top of that, showed in his study that depending on the industry, there is a possibility to increase profits by up to 60% after reducing customer migration by a mere 5%. Those two studies contribute to the view that one of the main focuses of marketers in companies should be to create loyalty in order to create customer retention. Below, various aspects of the brand loyalty phenomenon will be discussed.

Brand Loyalty Explanations:Brand loyalty has been defined in many different ways throughout the years. Following are few of the most widely used definitions.

Wolfe and Ferland define brand loyalty as a consumers decision, expressed through intention or behavior, to repurchase a brand on a regular basis. This kind of decision can be made both on conscious as well as unconscious basis. It occurs because the consumer perceives that the brand offers the right product features, image, or level of quality at the right price. defined brand loyalty as ...a favorable attitude toward, and a consistent purchase of, a particular brand. This definition suggests that consumers are loyal when both attitude and behavior are favorable. Jacoby and Chestnut (1978) offered a deeper definition of brand loyalty, stating that brand loyalty is ...a biased, behavioral response, expressed over time, by some decision making unit, with respect to one or more brands out of set of such brands, and is a function of psychological processes. Finally, Oliver (1997) defined loyalty as ...a deeply held commitment to repurchase or repatronize a preferred product or service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts that have the potential to cause switching behavior. What all these definitions have in common is that brand loyalty is not necessarily the actual action of purchasing, but the intention to do so. The definitions also include that the attitude towards the brand must be favorable for loyalty to be created, and there has to be a repetition of purchases.

Forming Brand Loyalty:The usual process of brand loyalty generation is that initially, a consumer makes a trial purchase of a specific product from a given brand. If the product meets the customers expectations and gives satisfaction, the consumer often forms a habit of buying this same product. The consumer is now more willing to buy the product again as well as other products from the same brand, because the brand is now considered safe and it has proven itself to be of sufficient quality.

Consumers who are loyal are committed to a brand, willing to pay a higher price for a certain brand over others, and readily recommend the given brand to other people they know.Kevin Stirtz suggests six steps in order to create brand-loyal customers. The first step involves asking the customers what they want, in the broadest sense of the question. This includes what they want in general, what they are trying to accomplish, what image they are trying to portray, how they want to be served, and so on. The second step is communicating to your customers what they should expect from the brand. It is of no use to try and please everyone and try to be all things. That kind of strategy usually ends up in too many things half-heartedly and satisfying no one. Instead, companies should figure out their core competencies and focus on them, delivering outstanding products and services in a given area. The third step that Stirtz suggests is to create easy ways for the customers to provide feedback. Many companies forget this step. Companies should be creative in finding ways to get customer feedback, and make sure that the customers know about these ways. The fourth step, which is closely related to the third one, is listening to what your customers say. This includes both utilizing the customer feedback, as suggested in the third step, but also other ways people communicate about the brands, such as the Internet. This process needs to be done on a regular basis. The fifth step is a direct continuation of the fourth one, namely acting on these customer feedback and suggestions.