Sample essay proposal marketing relationship marketing

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The retention of customers has become an important component in the customer relationship marketing strategy of organisations. Particularly, consumer retention can be enforced through positive or negative retention strategies and creating switching cost is an effective way of reducing the defection of customers. Switching costs can be considered as the barriers to defection and is the sum of economic, psychological and physical cost which has to be borne by a consumer in order to change from one company to another. From the perspective of the two types of business segments, it is mainly relating to the services industry that has shown a high relevance for customer relationship marketing. In the case of products in, mainly off-the-shelf items organisations are unable to inflict any major switching cost. Moreover according to Srinuan, Annafari and Bohlin, (2011) the organisations which conduct business of the sales of products are not able to develop a relationship marketing mainly because of the transaction cycle involved. Whereas in the case of the services, mainly because of the higher involvement of the customers with the service provider and the continuing nature of the availing of services from organisations, there is high relevance towards developing a relationship management strategy. Within the customer relationship management, the three phases are the customer acquisition, development and retention. According to Zhu, Ao and Dai, (2011) the initial two stages involve a cost to the company in terms of marketing and development of the customer. And it is in the third stage that many of the organisations generate a profit mainly because the customer is retained with the organisation and continues to purchase this product and services from the same company. One of the effective ways of developing customer retention is through the creation of loyalty programs which induces the customers to continuously purchase from an organisation. Most of the loyalty programs developed by organisations are mostly positive nature, in the sense that they are all some form of advanced to the customer for the continued patronising of the organisation. According to Sivapragasam, Aguero and de Silva, (2011) there are positive and negative retention strategies used by business organisations to reduce the level of customer defection. Furthermore it has been found by Xavier and Ypsilanti, (2008) that the negative retention strategies in the form of switching cost developed by an organisation or induced upon the customer by market forces which are outside to the organisation are an effective barrier to switching.

Mobile telecommunications industry

Within the mobile telecommunications industry in the United Kingdom, there are several players and one of them is Three Mobile ( But when evaluating the entire telecommunications market of the United Kingdom, for the past several years it can be seen that many of the organisations have reached a saturation stage, which is evident from their growth or lack of the growth of customer base. Due to the established nature of the market and the levels of competitiveness involved in the United Kingdom mobile telecommunications market, the organisations are not able to create any focused or successful customer acquisition strategy through which they are able to poach the customers of other organisations. Although there are several smaller new players which have entered the market based on a differentiation strategy such as Lyca Mobile, and are aiming for a new customer acquisition mainly through creating defections, they will also reach a stage where saturation occurs in their new customer acquisition. Three Mobile of the United Kingdom is one of the youngest mobile telecommunications suppliers in the United Kingdom and in the initial phases of growth, the main strategy was new customer acquisition. But as mentioned before due to the competitiveness in the market and the levels of non-differentiability between the services provided by different organisations, it has become pertinent for the organisations to undertake positive and negative customer retention strategies in order to reduce the defections to new players and to existing competition. The positive customer retention strategies employed by the organisations in the telecommunications sector are the discounts provided by the organisation to a long-term customer (post-paid customer or contract customer) and several other loyalty schemes. The negative retention strategy is the longevity of the contract between the organisation and the customer.

Switching cost in the mobile telecommunications industry

The essential concept behind the development of positive or negative customer retention is to create switching cost or barriers to defection. In the case of a loyalty program, the customer has a psychological and economic cost in switching to another organisation. In the case of the negative strategy of enforcing a long-term contract, the customer has economic cost of switching by cancelling the contract. There are also psychological costs associated with switching from one service provider to another where there are uncertainties about the services provided by a new organisation. Some of the other forms of switching cost or the barriers to defection are not essentially created by the organisation itself but are due to the inherent competitiveness in the market. There are transactional costs associated with the evaluating and collection of information about the services of a competitive service provider and the learning cost involved in switching to a different technology. There are also technological barriers which involves transactional, psychological and as well as learning cost. Several researchers have identified a typology of switching cost in many industrial segments and most of them can be used in the analysis of the barriers to defection in the mobile telecommunications market.

It is in this context that a research is proposed to be conducted on the effectiveness of switching cost as a barrier to customer defection and consequent improvement in customer retention in the mobile telecommunications market of the United Kingdom. In order to conduct the research, the author has planned an evaluation of the retention strategies developed by Three Mobile of United Kingdom. The proposed dissertation will evaluate the switching cost which a customer has to bear in changing from one service provider to another (from Three Mobile to any other competitor).

Rationale for research

The main rationale for the research is that, even though there are several retention strategies developed by the organisations in the mobile telecommunications industry, the main switching cost to a customer are induced from the outside and is common to all type of organisations and customers. Taking an example the psychological cost involved in switching to a different service provider can be evaluated conceptually as same for most of the customers irrespective of any organisations services. Similar is the case with the economic, transactional, procedural and relational cost of switching even though some organisations try to enforce a comparatively higher level of switching cost in order to retain their core profit-making customers. In a simplistic manner, it can be said that most of the costs associated with switching from one organisation to another is the same for almost all type of customers. Hence there is a level of equality of switching cost for a customer which is mainly arising from the switching costs that are not designed by an organisation. Due to the equality of the switching costs across the organisations, their effectiveness in acting as a significant barrier to defection has to be evaluated.

Aims and objectives of research

The proposed research project intends to analyse the concept of switching cost and effectiveness as a barrier to defection and increased customer retention in the mobile telecommunications market in the United Kingdom. The research will be conducted on the customer retention strategies are mainly the switching cost developed by Three Mobile of the United Kingdom. Apart from the switching cost created by the service provider the market induced cost to the customer in defecting to another service provider will also be evaluated. The objectives of the research are

  1. To critically evaluate the concepts and practices of customer retention employed in the mobile telecommunications industry in the United Kingdom
  2. To analyse the switching cost to a customer of a mobile telecommunications service provider in the United Kingdom.
  3. To evaluate the effectiveness of cost as a barrier to defection and increasing customer retention

Research questions

The proposed research will evaluate the following research questions and try to answer them with the help of a critical evaluation of the research articles and analysis of primary data collected from the customers.

  1. What are the customer retention strategies employed by Three Mobile UK
  2. What are the different types of switching cost to a customer of Three Mobile of the United Kingdom
  3. What is the effectiveness of the different types of switching cost in reducing the defection of customer
  4. How Three Mobile UK can increase in customer retention with the help of barriers to defection created by switching cost

Literature review

The development of a relationship with the customer has become an effective marketing strategy mainly in the case of service-oriented businesses. The development of a long-term relationship is a must for increased retention of profitable customers. Customer relationship marketing has three phases; customer acquisition, customer development and customer retention. It is in the last phase of customer retention that an organisation can reap the profits due to the increased quantity and quality of repeated purchases made by the customer. In order to increase the retention rate of customers especially in the case of services such as telecommunications where the customer has to continuously use the services of a provider, many business organisations develop positive and negative retention strategies. The positive retention strategy can be mainly seen from the loyalty schemes developed by organisations. In the mobile telecommunications industry a loyal customer is awarded with discounts and benefits so that a relationship is developed between the customer and the service provider based on positive attitude formation. But according to Xavier and Ypsilanti, (2008) negative retention strategies are much more effective in reducing the defection of customers mainly because there is a cost involved in changing the service provider. A consumer faces a switching cost between sellers and when an investment specific to his current seller must be duplicated for a new seller (Srinuan, Annafari and Bohlin, 2011).

According to Gupta (2009, page 215) “the different types of switching costs include exit fees, search cost, learning cost, cognitive effort, emotional cost, equipment cost, installation and start-up cost, financial risk, psychological risk and social risk”. Different industries have different type and levels of switching cost and organisations tend to increase the barriers to defection by positive and negative retention strategies. While the positive retention strategy is based on loyalty formation which is an attitudinal and behavioural concept, the negative retention strategies employ the methods of penalising the customer for changing their service provider (Sutherland, 2009). The effectiveness of the switching cost as an increased barrier to defection than that of positive retention strategies have been evaluated by the researchers such as Lewin, Williamson and Cave, (2009). And analysis of the literature on customer retention, barriers to defection and switching cost evaluate that most of the costs associated with switching from one supplier to another is not easily estimable. According to Zhu, Ao and Dai, (2011) many consumers does not realise the costs associated with learning a new technology, installation and start-up of a new system or the risk involved in changing from one supplier to another. One of the direct elements of the switching costs is the exit fees; and in the case of the mobile telecommunications market, the organisations employ a strategy of inducing the customer to take up long-term contracts. A customer who has taken a long-term contract will have to pay an exit fee which is an identifiable and estimable cost to the customer. But the other types of switching cost attacks the risk factors and the learning involved in adapting to a new technology could also be substantial but cannot be easily perceived by the customer (Gupta, 2009). Stork, (2011) have evaluated that some of the barriers to defection cannot be really termed as the switching cost because they cannot be calculated. Taking an example the psychological element of increased risk perception due to the potential reduction in the quality of the service provided by an alternative provider cannot be directly estimated. But the research conducted by Gupta (2009) have somewhat quantified various type of cost based on their quantitative research methodology and have recommended that almost all type of negative retention strategies or the barriers to defection can be calculated. But a further analysis of other research material has not indicated any conclusive proof that the qualitative or perception barriers associated with switching can be easily estimated in a quantitative manner. On this basis it may be said that there is a gap in the available literature on the quantifiable nature or the “quantifiability” of the various types of switching cost to the customer. The proposed research project and will evaluate a method to analyse the switching cost in a quantitative manner and evaluate the effectiveness of the different types of switching cost to the customer of the mobile telecommunications service provider in the United Kingdom.


in this section of the proposal, the researcher will provide a bird’s eye view of the intended methodology of research that will be taken up for the research on the subject of the effectiveness of switching cost as a barrier to defection in the mobile telecommunications market in the United Kingdom.

Research paradigms or philosophy

A discussion on the methodology of conducting a research has to start with an evaluation of the different types of philosophies and the research strategies to be adopted. From the philosophical perspective which is in fact a view adopted by the researcher about the development of the knowledge there are three basic assumptions of concepts developed. In a simple manner it may be said that individuals have different perceptions about the development of knowledge either through a rigid scientific approach or through an interpretation based on the instinct. On the basis of the development of knowledge, a researcher can approach the particular subject based on a positivist, interpretivist or a realist angle. Positivism is based on the assumption that there are universal laws that govern social events and uncovering these laws enables researchers to describe, predict and control social phenomena (Kothari, 2003). On the other hand an interpretivist researcher seeks to understand values, beliefs and meanings of social phenomena based on obtaining an evaluation of the experiences of human beings (Saunders, Lewis and Thornhill, 2007). According to Kothari, (2003) the positivism and interpretivist are directly opposite in nature and in order to realise the potential positive aspects of both the research paradigms and philosophies an alternative methodology of realism has been developed. Realism accept social structures have some form of independent existence that is experienced as external to individuals and also that the social structures are in itself the product of specific social relationships.

The philosophy of research is mainly about the development of knowledge and hence it is hinging up on the mentality of the researcher. The researcher has always adopted a stance that scientific method of reasoning and knowledge development is much more effective and convincing than interpreting the meaning associated with human behaviour. On this basis the researcher plans to adopt a positivist approach in conducting the research on the subject. The positivist research is mainly associated with quantitative nature of the data collection and evaluation. The researcher can also rationalise the adoption of a positivist tangle mainly because the objectives of the research are to evaluate the effectiveness of switching cost and in order to do this a quantitative research approach in collecting data and its analysis must be adopted. On this basis the researcher plans to conduct the proposed study using a positivist frame of mind.

Research approach or strategy

When considering the different research approaches or strategies, which deal with the development of knowledge, but unlike that of the research paradigms of philosophies which is conceptual and a frame of mind of the researcher, the research approach or strategy is the practical elements of the development of the knowledge. A researcher can approach a problem by evaluating the existing theories and structures and analyse the problem is with the help of the data collected and its relationship with the available concept which is called a deductive approach. On the other hand a researcher with an inductive strategy approaches the problem with an open mind without considering a theoretical framework. That deductive approach normally utilises a hypothesis or theory testing methodology and for the present research, as mentioned in the literature review the concept of switching cost has been effectively analyse by the past researchers. Moreover switching cost is not a new theoretical concept which is developed by the researcher and the proposed study is just an extension of the available theoretical and structural concepts. Furthermore it may be said that the researcher is only planning to fill that gap about the quantitative nature of the switching cost and specifically in the mobile telecommunications industry in the United Kingdom or in other words the effectiveness of the different types of switching cost to increasing customer retention or reducing defection for a particular mobile service provider (Three Mobile UK). On this basis the proposed research study will take a deductive approach which will evaluate the concepts and theories about customer retention, barriers to defection and switching cost to a consumer of the mobile service provider in the United Kingdom.

Data collection and analysis

The above two sections under the methodology of research has provided the theoretical and concept and foundations based on which the author plans to conduct the proposed study. But there are several practical aspects which need to be considered in depth such as the collection of data, the sampling and the analysis of data in terms of completing a research study. Before going into the subject the researcher wants to emphasise that the proposed study will be conducted based on a quantitative methodology. The rationale for approaching the research based on a quantitative methodology is based on the philosophical approach of positivism as well as the nature of the variables involved and the objectives of the research. The research will evaluate the different types of switching cost and although as mentioned in the literature review, some of them may be qualitative nature, but the researcher plans to quantify the various types of switching cost and to measure the effectiveness. In order to accurately measure a variable a quantitative methodology is best suited.

Coming to the subject of data collection the two important practical considerations are the development of a data collection methodology from a particular population. As the research approach is quantitative nature, the author plans to develop a questionnaire which will be structured based on the various concepts developed during the literature review about switching cost. As the research is based on Three Mobile UK, the researcher plans to analyse the perceptions of the customers of the company about their usage pattern of the services. Hence the total population of the study can be considered as the entire customer base of the company. But it is impracticable to collect data from the population and it is necessary to develop a sampling approach. As the researcher in all likelihood will not be able to get any personal data of the customers of the company due to the confidentiality, it is planned to adopt a more convenient method of data collection from a sample number of customers of the company. On this basis plan is to approach different individuals on a convenient basis and solicit their responses to the questionnaire. But it is necessary to evaluate the particular customers of Three Mobile and hence there is a need to seek the customers of Three Mobile. Three Mobile has 7 % of the mobile telecommunications market in the United Kingdom and the researcher expects to collect data from at least 25 customers of the company. But when considering the probability of getting 25 customers through a convenient sampling method based on the assumption of 7 % market share (7% of all the individuals who have a mobile phone) the researcher will have to approach at least 350 individuals. Furthermore it is not necessary that all the individuals who are a customer of three Mobile will be interested in providing the data for the research. This is one of the major limitations which have been identified by the researcher as this will take up large amount of resources and time involved in completing the research. In order to reduce the limitations the researcher plans to first approach the friends and colleagues who have taken the services of three Mobile and adopt a chain referral sampling or snowball sampling approach. Snowball sampling is a non-probability sampling technique the existing study subjects recruit future subjects from among their acquaintances. Hence based on the snowball sampling approach, the researcher will first approach the friends and colleagues who are not to be using the services of three Mobile and solicited information regarding their associates who use the same services. Although this is not the perfect sampling approach, the limitations in terms of resources and time frame are forcing the researcher to adopt this method.

When considering their nature of data collection, as mentioned before the researcher plans to develop a structured questionnaire and conduct a survey. The survey is more preferable than an interview and other methods of data collection, mainly because the researcher wants to evaluate the perceptions of the customer with respect to the different types of switching cost. There are different types of switching cost has evaluated before and a qualitative approach through interview will not be suitable for collecting data from 25 customers of the company. Then coming to the data analysis, statistical techniques of correlation analysis and an evaluation of the central tendency values will be conducted on the quantitative data collected. The correlation analysis and central tendency values will provide an estimate of the efficiency of different types of switching cost.

Ethical aspects

Every researcher has an ethical dimension to be considered and for the proposed study, there is an aspect of the confidentiality of the information of the respondents. In order to fulfil the ethical mandates of the University the researcher undertakes that no personal data will be collected other than the general demographic patterns which needs to be used in the evaluation.

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