Analysis of Indosat M3 Retention Program in Affecting Customer Loyalty Essay Example

Analysis of Indosat M3 Retention Program in Affecting Customer Loyalty Essay Example Analysis of Indosat M3 Retention Program in Affecting Customer Loyalty Essay Analysis of Indosat M3 Retention Program in Affecting Customer Loyalty Essay Business Research Method Analysis of Indosat M3 Retention Program in Affecting Customer Loyalty Forewords Cellular business today is becoming an industry that people cannot ignore, it is grows fast and so many go into this business. Fast growth and dynamic market in cellular business makes this business challenging when one player in cellular business wants to keep their customers’ loyalty. They must use their creativities to create the effective programs to maintain their customers’ loyalty. For those reasons, the researchers want to reveal about the effective way or programs to maintain their customers’ loyalty especially for young Indosat M3 users. In this market happen dynamic changes of customers because they search for the cheapest price from cellular provider. In order to measure the effectiveness of the current programs, we execute a research through primary data by spread questionnaire and hold interviews and secondary data by surfing at Indosat M3 website. We will use casual method for this research because the problem is clearly defined. Chapter 1: Introduction 1. 1Background Playing in the mobile industry today is very exciting because of its very high growth potential. If counted, the 220 million population of Indonesia today there are about 28 million new mobile numbers in circulation, or about 13 percent, the market is still wide open. Of that amount, Telkomsel had close to 15 million, 9. 3 million, Indosat, and Excelcomindo approximately 4. 5 million. At the end of this year, the number likely will penetrate 30 million, seeing current market share of incoming operators. Growth of subscribers each arrier is very high, above 60 percent, due to programs that provide ease and grace to prospective customers. Moreover, the expansion of service coverage or coverage by all operators create isolated regions into the open. This opens new opportunities and increase customer traffic or SMS conversations. Program Sinyal Kuat from Indosat involved to stimulate people to enjoy its services, because the possibility of a drop ca lls more and more numerous now. Various programs ease the customer makes total audience of mobile operator services also grew, not only in GSM, but also in CDMA. Kartu AS from Telkomsel is the prima donna as the number of customers rose rapidly, approaching half a million new subscribers every month. Excelcomindo Pratama, which since the early known to be very careful to win the market thus its growth is not too fast, now launch Kartu Jempol and Kartu Bebas. Meanwhile, Indosat launched Voucher SMS IM3, absorbing many new subscribers each day on average to 40,000 new customers. Indosat is growing rapidly this year that could have the number of subscribers will keep rising. The growth of Indonesian cellular has reach the highest point in the world, up 74. percent in 2003, said the ITU (International Telecommunication Union) and GS Research However, compared to countries with relatively equal financial ability of its citizens, Indonesia cellular penetration is still comparatively low. Indonesia, with income per capita (938 U. S. dollars a year) up close to China (955 dollars) and Philippines (976 dollars), it turns out our penetration is lower. In fact, cellular growth in China is only 60. 1 percent and the Philippines 64. 4 percent, while Singapore only grew 18. 2 percent and Malaysia 33. 8 percent. Data from ITU, JP Morgan, and GS Research Report issued recently mentioned, our cellular penetration by the end of 2003 only 9 percent. This means that customers only 9 percent of the total population 220 million, while Chinas 20 percent (population 1. 3 billion people), and the Philippines 2 percent. Do not compare with Singapore, which was 79. 8 percent, 42. 6 percent of Malaysia, or Thailand’s 26 percent, 104. 6 percent, and even Hong Kong. India had more bad from Indonesia, for cell penetration is only 2. 6 percent, but with rapid growth, together with Indonesia. If the calculated end of 2003 cellular subscribers in Indonesia only 18. 3 million and the end of this year may just pass the 30 million, then its growth has been more than 63 percent. Do you really mobile in Indonesia grow by 60 percent or more? If calculated from the number of cards sold, the number of subscribers should now have to break the 30 million. The figures fail to penetrate because of the churn; people just stopped subscribing a number of very much. Indosat M3 is one of mobile phone provider that experiences increasing levels of churn rate. During the last three years, IM3 is facing a constant increase on its churn rate; this case is walking in line with the declining levels of consumer loyalty. Due to more tight competition, PT Indosat need to review their marketing strategies through the promotion mix which would impact on the formation and increase customer loyalty. That matter, which encourage this research, namely on the impact of promotions on consumer loyalty IM3 prepaid cards. Dedi Suherman, General Manager of Technology Planning in Telkomsel said that the number of mobile consumers in Indonesia is most likely having more than one card. But at least, if the calculated number of people were still above 100 millions, he added. Churn occurs primarily because the initial price of the current GSM prepaid cards is very low, almost equal in value to the balance they contain. Because its cheap, people treat as the prime card calling cards (calling cards), low pulse exhaust, buy a new card again. If not for a particular purpose, people throw its inaugural card because the card is the second card number did not have time to rub off on their owners. Moreover, intense competition makes the mobile providers generate strategies to win the market by intensify their promotion. Various promotional strategies undertaken by various operators is making such bad consumer behavior, consumers often replace his prepaid card thus affecting the decrease in prepaid card loyalty. Hasnul Suhaimi (47), President Director of PT Indosat Mobile Commerce view, the trend will churn remains high, if mobile operators market by offering cheaper packages. The more sales made, large volume, a higher churn rate. We seemed to chase shadows, because the sales work is ongoing, but no additional amounts of customers, said the man born in Bukittinggi is 23 April 57. According to Hasnul, the growth of cellular subscribers in Indonesia healthier if growing around 9 million this year, 10 million in next year, 11 million in next year, so hopefully in the year 2006 will be 50 million subscribers. If growing more than that number, which happened just chasing, he said. Moreover, intense competition makes the mobile phone providers generate strategies to win the market by intensify their promotion. Various promotional strategies undertaken by various operators is making such bad consumer behavior, consumers often replace his prepaid card thus affecting the decrease in prepaid card loyalty. Dedi Suherman, General Manager of Technology Planning in Telkomsel said that the number of mobile consumers in Indonesia are most likely have more than one card. But at least, if the calculated number of people were still above 100 millions, he added. Mobile provider is experiencing increasing levels of churn rate is issued by Indosat IM3. During the last three years IM3 is facing a constant increase in its churn rate, this case is walking in line with the declining levels of consumer loyalty. Due to the intense competition, PT Indosat need to review their marketing strategies through the promotion mix which would impact on the formation and increase customer loyalty. That matter, which encourage this research, namely on the impact of promotions on consumer loyalty IM3 prepaid cards. According to Kompas newspaper, high growth customers due to the emergence of cheap offerings from all operators. If this policy continues, will eventually be able to drop the mobile industry itself. If during the course of this card so valued around Rp 25,000 plus credits are sold at a price they contain, are now valued card hardly anymore, except the credits. But what could be promoted to operators is not entirely true; for example, called the initial price of Rp 50,000, including 50,000 credits, pulse fact, filled only worth Rp 35,000. Who are the customers who can test it? Hasnul Suhaimi said, the operator cannot entry the market for granted, because there are some things to consider. Production tools that are available should be enough, for example, HLR (home location register), MSC (mobile switching center), customer activation, IN (intelligent network) and whether the market can absorb them. Could have filled the market with sales of 50,000 cards a day early, but the number itself also will be out. He is one of the few who really understood the problem of mobile marketing. Previously he had been a commercial director at PT Telkomsel, PT Indosat still have when the shares are then sold to PT Telkom. He served as Commercial Director of Telkomsel precisely when Indonesia was hit by a recession, when investors away from this country. However, with the introduction of prepaid cards Simpati Telkomsel customers precisely when it grew rapidly, the debts could be repaid faster. And, now reaching 52 percent of Telkomsels cellular market share, while about 32 percent of Indosat. He also implemented his tricks in Indosat which affects a rapid growth. The number of subscribers increased from 5. 96 million at the end of 2003 to around 9. million in the last week of October. Of the 3. 5 million new customers until the third quarter of this year, about 60 percent to 70 percent is completely new customers, existing customers that make the remaining two cards. Although, he said, the data suggest that the number of sales the previous four months together with the number of customers who churn the current month. This phenomenon applies to all operators, although recognized several parties, the pr ogram always managed to create customer loyalty card. However, with the executable programs, plus the fact that in the last three months of this year customers will retain the card, the number of customers who churn will decline. This is because the holiday occurs during the prime card sales spike, while that period lasted until December of this year. Hasnul have the program create loyal customers by giving a bonus in the form of credits. If a customer purchases a prime costing Rp 25 000 with a value of Rp 25 000 pulses are also, on day 33 when he bought a voucher valued at Rp 25 000 will get bonus credits worth Rp 10 000. According to observers, in the first month that has occurred generally churn as much as 10 percent, continuing the same amount to six months ahead. Thats why Hasnul to bid, charging voucher worth it on days the owner will get 66 bonus credits worth Rp 15,000. Hopefully when its three months the number has been steadily used, Indosat card will be used permanently, he said. Churn can actually be prevented if all operators agree not to sell their SIM Card for less than Rp 25,000, with the hope of recharging their credits will be more cheaper than buying prime cards. Today everybody knows that in balance of establishment–customer relation, customers had gained big advantage. In order to continue long-term relationships with customers understanding them, meeting their expectations, being different from rivals are important. This situation is especially vital in similar goods and services offering establishments. For gaining advantage and being unique, offering suitable goods and services, meeting even over meeting expectations and desires of customers are needed. Customer loyalty topic had changed the ways of looking of establishments to customers. Now, establishments are trying to satisfy, make loyal their customers. Loyal customers mean financial and spiritually inputs to establishments. It is generally known that especially on tourism sector there are few researches on customer loyalty. In this context, author believes that this research will have a positive input to the related literature. 1. 2Problem Identification The problem could be identified by analyzing the symptoms that come from broad analysis in the market which are; aMany teenagers tend to change their Sim Card several times Many new mobile providers come with their cheap products cIM3 has too many retention programs The problem could be identified by analyzing the symptoms that come from broad analysis in the market. Based on global review, the most commonly known drivers of customer churn are the following: 1. Equipment envy Customers want the very latest handset with the most advanced features, the most attractive case and the most entertaining services. 2. Pr icing plans Annual tariff pricing contracts predominate in immature markets. When pre-paid options come on the scene, customers migrate to the more flexible plans; particularly those willing to pay a premium for privacy and freedom, those with credit problems, or those too young to sign contracts. 3. Customer service and billing With ties to mobile providers already tenuous, the slightest hassle over billing or service levels sends customers running into the arms of the competition. 4. Network performance More pertinent to newer market participants with developing infrastructures, customers will walk away from a contract when they discover major gaps in so-called blanket coverage. Although not yet introduced in all geographies, number portability, the ability to migrate your phone number across carriers, further increases customer churn rates. Recent number portability studies reveal that churn could be increased by a factor of 1. 6. Since phone numbers are often carrier specific, switching carriers entails changing numbers and business customers are slower to incur the added costs associated with reprinting materials and informing clients. 1. 3Research Limitation This research narrowly targeted to the market of the Indosat M3 customers that the writers observed to the young women and men in age of 17 to 23 years old who study in Institut Teknologi Bandung. In getting the right people to fill the questionnaires, we first held observation through students in Institut Teknologi Bandung to know the amount of Indosat M3 customers. 1. 4Research Questions This research is coped with highlighted explanation which are mostly talk about the area in; 1. How big is people awareness to retention programs? 2. What is the most important aspect in a provider to make people loyal? . What kind of programs that the customers like the most? (direct or indirect) 4. What kind of Indosat M3’s feature those customers prefer to use? 1. 5Research Objectives The objective of this project was to learn about the relationship between Indosat M3 current retention program in affecting its customer loyalty. We explored how effective Indosat M3 overcame price war to fi ght against increasing churn rate through retention programs. In the end, we are going to conclude which programs best suits Indosat M3 target market (teenagers age 17-23 years old). Chapter 2: Literature Review 2. 1Company Profile PT Indosat Tbk was established by the Government on November 10, 1967 as a foreign investment company to provide international telecommunications services in Indonesia and began commercial operations in September 1969 to build, transfer and operate an International Telecommunications Satellite Organization, or Intelsat, earth station in Indonesia to access Intelsat’s Indian Ocean Region satellites for a period of 20 years. As a global consortium of international satellite communications organizations, Intelsat wns and operates a number of telecommunications satellites. Following regulatory changes in the Indonesian telecommunications industry in 1999 and 2000, Indosat began implementing a strategy designed to transform from being Indonesia’s primary international telecommunications provider into a leading, fully integrated telecommunications network and service provider in Indonesia. In 2000, the Government’s intro duction of the Telecommunications Law, which encourages industry liberalization, directly impacted our business. In 2001, as part of the Government’s initiative to restructure the telecommunications industry, we entered into an agreement with Telkom to eliminate our respective crossshareholdings in several operating subsidiaries, including: our acquisition of Telkom’s 22. 5% ownership interest in Satelindo; Telkom’s acquisition of our 35. 0% ownership interest in Telkomsel; and our acquisition of Telkom’s 37. 2% ownership interest in Lintasarta and the purchase of Lintasarta’s convertible bonds held by Telkom. Subsequent to the agreement with Telkom, we acquired an effective 45. % ownership interest in Satelindo, through our acquisition of PT Bimagraha Telekomindo, or Bimagraha, in 2001 and acquired the remaining 25. 0% ownership interest in Satelindo from DeTe Asia in June 2002. To strengthen Satelindo’s capital structure and remove certain restrictive covenants arising from Satelindo’s indebtedness, we made an additional capital contribution to Satelindo totaling US$75. 0 million in July 2002. In August 2002, we entered the domestic telecommunications sector by obtaining a license to provide local fixed network services in the Jakarta and Surabaya areas. We deployed approximately 13,000 lines in those areas to provide local fixed telephone services and announced our strategic objective to become a leading fully integrated telecommunications network and service provider in Indonesia. In 2002, the Government divested 517. 5 million shares, representing approximately 50. 0% of our outstanding Series B shares at the time, in two stages. In May 2002, the Government sold 8. 1% of our outstanding shares through an accelerated global tender. In December 2002, the Government divested 41. 9% of our outstanding Series B shares to a former subsidiary of STT. As of March 31, 2009, the Government owned 14. 29% of our outstanding shares, including the one Series A share, and ICLM and ICLS owned approximately 65. 0% of our outstanding Series B shares. ICLM and ICLS are owned by Qtel. The remaining 20. 71% of our outstanding Series B shares is owned by public shareholders as of March 31, 2009. See â€Å"Item 6: Directors, Senior Management and Employees- Share Ownership. † On November 20, 2003, we merged with Satelindo, Bimagraha and IM3 and all assets and liabilities of such legacy subsidiaries were transferred to us on such date. Since entering the Indonesian cellular market through our acquisition of Satelindo and establishment of IM3 and the subsequent integration of such companies in 2003, cellular services have become the largest contributor to our operating revenues. On June 22, 2008, Qtel purchased all of the issued and outstanding shares of capital stock of each of ICLM and ICLS, pursuant to a Share Purchase Agreement dated June 6, 2008 between Qtel and STT, a company incorporated in Singapore. Pursuant to the Share Purchase Agreement, Qtel, through its subsidiary, Qatar South East Asia Holding S. P. C. acquired the capital stock of ICLM and ICLS from Asia Mobile Holdings Pte. Ltd. , or AMH, a company incorporated in Singapore, which is 75. 0% indirectly owned by STT Communications Ltd. and 25. 0% indirectly owned by Qtel. Following this acquisition, a change of control occurred in Indosat and Qtel, and its wholly owned subsidiaries, ICLS and Qatar South East Asia Holding S. P. C. , conducted a mandato ry tender offer to acquire up to 1,314,466,775 Series B Shares, representing approximately 24. 19% of our total issued and outstanding Series B Shares (including Series B Shares represented by ADSs), at a purchase price of the U. S. dollar equivalent of Rp369,400 per ADS and Rp7,388 per Series B Share, net to the seller in cash (without interest and subject to any required withholding of taxes). Following settlement of the tender offer on March 5, 2009, Qtel and its subsidiaries hold approximately 65. 0% of our outstanding share capital. 2. 2Theory and Previous Research 1. The Concept of Loyalty According to (ICLP 2006), customer loyalty can be defined as the totality of feelings or attitudes that would incline a customer to consider the re-purchase of a particular product, service or brand or re-visit a particular company, shop or website. Not much different, according to Kotler, Bowen, and Makens (1999), customer loyalty is how likely customers are to return and their willingness to perform partnership activities for the organization. Partnership activities include the customer’s willingness to spend more while on a property, give positive referrals to others and tell the management when problems occur. In addition, the term customer used in this research analysis refers to the end user of the company. In Chu’s opinion (2009), â€Å"Loyalty is a positive attitude and is related to the level of re-purchasing commitment he or she possesses toward a brand in the future†. Barnes says â€Å"The long term success of the a particular brand is not based on the number of consumer who purchase it only once, but on the number who become repeat purchase†. In this case it can be concluded that consumers who are loyal can not be measured by how many he bought, but on how many the customer make a repeat purchase, including recommend someone to buy (Robert, Varki Bordie, 2003 p. 188). According to Robert, Varkie Bordie (2003) the success of the companys ultimate goal to establish relationships with its customers is to establish a strong loyalty. A strong indicator of loyalty is: 1. Say positive Things, is to say positive things about products that have been consumed 2. Recommend friend, is to recommend products that have been consumed to a friend. 3. Continue purchasing, is the purchases made by the continual improvement of products which have been consumed. So, the loyal customer Dengan demikian pelanggan yang loyal adalah â€Å"Pelanggan yang memiliki cirri-ciri antara lain melakukan pembelian secara berulang terhardap badan usaha yang sama, memberitahukan kepada orang lain tentang kepuasan-kepuasan yang didapat dari badan usaha tersebut, dan menunjukan kekebalan terhadap tawaran-tawaran dri badan usahan pesaing. (Griffin, 2005, p. 127). According Lovelovk (1991), which says that the level of customer loyalty towards a particular brand of goods or services depends on several factors, namely the amount to move to the brand of goods or other services, there is the same quality, quantity or service from jenisbarang or replacement services,  of the risk of cha nges in costs due to replacement of goods or services and changes in the level of satisfaction gained from a new brand compared with the previous experience of the brand has ever used. (P37). According to Griffin (2005), states that each customer buys, the customer moves through the buying cycle. Pemmbeli will move malalui first five steps. First, realize that both the product and make an initial purchase. Then, the buyer moves through two stages of attitude formation, which one called evauasi post-purchase and others called the decision to buy back.   When a decision has been approved to buy back, repurchase Klima steps will follow, thus forming a circle repurchase recurrent several times, or several hundred times, during the intertwined relationship between the customer and the company and its products and services. The five steps are: 1. Consciousness, the first step towards dimula loyalty with customer awareness of products. At this stage companies are starting to form a share of mind required for positioning into the minds of prospective customers that the companys product or service superior to competitors. Consciousness can arise in various ways such as competitors ads. Consciousness can arise in various ways such as conventional advertising (radio, TV, and newspapers), iklann on the web and word of mouth communications. 2. Initial purchase, the purchase represents the first important step in maintaining loyalty. First purchase of a purchase of the experiment, companies can instill a positive or negative impression to the customers with products or services provided. Ii After the first purchase made the company the opportunity to begin to cultivate loyal customers. 3. Post-purchase evaluation, conducted after the purchase, the customer is consciously or unconsciously, will evaluate the transaction. 4. The decision to buy back, is the most important attitude for loyalty. In short, no repeat sales, there is no loyalty. The motivation to buy back from dri higher positive attitude shown towards ytertentu product or service. The decision to buy back is often the next step that occurs naturally when a customer has elah a strong emotional bond with a particular product. 5. Buyers returned. To be considered truly loyal, customers should continue to buy back from the same company. A true loyal customers and competitors refused to return from the same company whenever it needed items. That is the kind of customers should be approached yag, serviced and maintained. Similarly, in defining customer loyalty, Griffin (quoted in Shoemaker and Lewis, 1998) urged that two factors are critical for loyalty to grow. The first factor is customer’s emotional attachment toward one certain product or service. The second factor is customer’s repeat purchase. However, as concluded by Backman Crompton (1991), brand loyalty encompassed more than repeat use. Nevertheless, repeatance of use from customer is important when it comes to costs. In business, acquiring the lowest cost is the most important thing. In marketing, keeping existing customers is considerably less expensive than acquiring new ones (ICLP 2006). Reichheld and Sasser (1990) claimed that only a 5% improvement in customer retention can lead to an increase in profitability between 25% and 85%, depending upon industry sector. Therefore increased customer loyalty has a direct relationship with increased profitability. 2. The Factors that affect Loyalty According to Mardalis (2005), factors that affect loyalty can be defined as : Customer satisfaction Kotler defined customer satisfaction as a feeling like it or not a person to a product after the customer to compare these products with the expectation of achievement. According to Kotler (1999, p. 42) is a good feeling of satisfaction or disappointment suffered by someone who is a nd the results of comparing the performance of a product that someone connected with the expectations for the products. Customers will feel dissatisfied if the performance given by the companys lower than what is expected of the customer, otherwise the customer will be satisfied if the given companys performance as expected by the customer. The high satisfaction will create an emotional appeal to the product or service, who can create high customer loyalty. Loyalty from the peanggan to teteap conduct transactions with the company a period to come, as measured by high tingkay loyalty among customers. Musanto (2004) says factors that affect the customer loyalty is : 1. Reability 2. Company’s ability to produce good stuff. 3. Response to and remedy of problems 4. Was the response and the way in responding to customers complaints 5. Sales experience 6. Relationships between customers and employees. 7. Convenience of acquisition 8. All forms of comfort and convenience provided by the company to customers The Quality of Services According to Shellyana and Basu (2002), one of important factor that can make the customer satisfied is the quality of services. Marketers can improve the quality of services to develop loyalty pelanggannya. Produk low quality customers will bear the risk of being unfaithful. If the quality of attention, even strengthened by an intensive advertising, customer loyalty will be more easily obtained. Menjdi promotion of quality and key factors for creating long-term customer loyalty. Some research shows that customers will become loyal to the products high quality products if the products is offered at competitive rates. The statement was similar to Marconi (1993), quality of service depends on heavily subjective in terms of subscribers, but in general the quality of these services adhere to SERVQUAL, which is identifying five things determine the quality of service (in Gefen, 2002), namely: 1. Tangible. Associated with the occurrence of physical transactions 2. Reliability. Products in accordance with the order and delivered on time 3. Responsiveness. Related to the ability of service providers in assisting customers if a problem occurs. 4. Assurance. The services or products providers ability to convince the ustomers that they are capable. 5. Empathy. The ability to make the customers feel Image Kotler (2000, p. 553) defines the image of sebagai seperangkat beliefs, ideas and impressions a person has to an object.   Following that he said the attitude and actions of a person against an object is conditioned by citr object.   Kotler (2002) also adds that the brand image is a requirement of a str ong brand. Simamora (2002) says that the image is the perception of relatively consistent in the long term (Enduring perception). So it is not easy to form the image, so that when formed will be difficult to change it. The image must be clearly established and has advantages when compare with its competitors. Meanwhile, Marconi (1993) mentions that the factors that influence loyalty are as follows The value (price and quality), pemuggunaan a brand in a long time will lead on loyalty, so the company should be responsible for maintaining the brand. Please note, the reduction of the quality standards of a brand will disappoint customers the most loyal customers even though, begiu also with price changes. Therefore, the employer must control the quality of the brand and its price. Image (either from its personality and reputation of the brand). The image of the company and the brand begins with awareness. Based on research conducted there is a correlation between awareness and market share, so it can be concluded there is also a relationship between brand image with a market share. Items will have a good image can generate customer loyalty to the brand. Convenience and ease to get branded. In a stressful situation and market demand which requires the existence of convenience, the company is required to provide the product is convenient and easy to obtain. The satisfaction felt by customers Services, with good service quality offered by a brand can affect customer loyalty to the brand. Guarantees and warranties provided by the brand. According to Griffin (2005), a loyal customer is one who: 1. Perform regular repeat purchases 2. Antarlini buy products and services 3. Refer products to others 4. Showed resistance to the pull of the competition Meanwhile, according to Giddens (2002) holds a loyal customer following characteristics: 1. A commitment to the brand. 2. Dare to pay more on the brand when compared to other brands. 3. Would recommend the brand to others. . In buying back the products do not consider. 5. Always follow information related to the brand. 6. Customers can become a kind of spokesperson for the brand and the customer is always to develop a relationship with the brand. In a competitive market rate is high enough, the company began to compete to provide satisfaction to its customers so that customers have a high loyalty to what is offered by the company. According to Jones and Sasser (1994, p 745) suggests that customer loyalty is an endogenous variable caused by a combination of satisfaction so that loyalty is a function of satisfaction pelangggan. If the relationship between customer satisfaction and loyalty is positive, then the high satisfaction will increase customer loyalty (Musanto, 2004, p. 130) 3. Customer Retention Customer retention is about to make sure the existing customers keep buying from a company. It is important for an organization to increase the numbers of loyal customers because based on a research that attracting a new customer costs 6 times more than retaining an existing customer (Sportjournal. com n. d. ). Based on the research (Perpustakaan Institut Teknologi Telkom 2009) there are 4 significant variables that affect customer loyalty. The first variable is Price. Price becomes very important for a company to survive in a competitive industry. Most likely, customer will choose to use products or services provided with lower price. Well set price can become a uniqueness for a company compared to other competitors. Next variable is switching barriers, it is any impediment to a customer’s changing of product or services. When the switching barriers increase, the level of customer loyalty also increases. Things that could affect switching barriers include added value from the product or services they provide. Customer satisfaction is also important, it is a measure of how products and services supplied by a company meet or surpass customer expectation. By having a customer service which always open 24 hours or placed them on a strategic places where many customer could easily reach them and a high quality product with terrific wide coverage signal could be the reason why customer satisfaction could increase customer loyalty. Last but not least, company’s image is the last variable that influence customer loyalty. Company image refers to how a corporation is perceived; it is a generally accepted image of what a company stands for. By having a positive image of course it can attract many customers. Based on those four significant variable which affect the Customer loyalty, a retention program was provided to increase customer loyalty that can suppress the higher churn rate. Beside that, there’s also a theory about customer retention program. The objective of this retention program is to maintain customer to use this product continuously. Every business should have a customer loyalty program because it costs five times as much money to find a new customer than it does to get a current customer to come back (Frey, n. d). According to Frey (n. d. , there are four types of successful customer loyalty programs: A Membership Program. Membership programs are one of the best ways to keep customers coming back. Most programs provide special incentives to members as part of their membership. A Rewards Program. Rewards programs provide gifts and perk that are earned according to the amount of business your customer s do. Create a Community. Every human has a deep inner need to belong to a community. Belonging gives us security and helps us to understand our place in life. Create Intertwined Business Processes. This is not just a traditional customer loyalty program but, its the bsolute best to guarantee that customers will keep coming back. Lowenstein (200-) in his writing states: ‘Theres one last thing to remember about the tree growth-customer loyalty analogy, which applies equally to CRM- and to all areas of customer management: It takes a long time, and a lot of effort, for a tree to grow and mature, but it can be cut down very quickly or slowly decay without nourishment. Keeping the tree healthy and protected, from the bark to the heartwood, is in every suppliers best interest. ’ 2. 3Hypothesis Chapter 3: Methodology 3. 1Research Location This research is located in ITB. The research location which are taken to gather the answer from the respondents which are the IM3 customers in age 17 to 23 years old were gathered by web-based questioner. The researchers choose that interval age because the target market of Indosat M3 is for teenagers. 3. 2Sampling Methodology Survey research is used in this study. To get data, researchers are using the questionnaire. In addition, document survey through internet is used to support the literature review. The respondents in this study are Indosat M3 users, which in group teenagers from age 17 to 23 years old. This study used statistic tool REGRESSSION in data processing. The survey method is simple random, because the limited time, resources, and the fastest way to gather information. The objects of this research are students of Institut Teknologi Bandung because it represents the requirement of our sample. 3. 3Population and Sample 3. 3. 1Population The population for the questioner focused to young Indosat M3 users which the target market fo Indosat M3 in age between 17 to 23 who lived in Bandung, especially in ITB. 3. 3. 2Sample The samples are decided by the researchers based on the population. The researchers use 35 samples from ITB student to fill the web-based questioner. The requirement to do the sampling is minimum 30 samples, so the researchers have fulfilled the minimum requirement. 3. 4Research Design The researchers collect data from young users of Indosat M3 who being the target from this research. The researchers do the data collection in ITB. [pic] 3. 5Gathering Data Methods The techniques of data gathering are the ways that are used to obtain data. The techniques which are used to collect data based on questioner. It is a collection of data through the distribution of a written list of the question that are associated with the variables that to be given to the customers. The researchers used web-based questioner to gather all of the data from the respondents. The questioner contains 10 questions and the researchers offer the knowledge about the four IM3 retention programs. The researchers spread 35 questioners to young IM3 users in ITB. 3. 6Data Analysis Plan 1. The data are gathered by using quantitative method by spreading questioner to ITB by web-based questioner. 2. Make the coding from the categorical scale data that have been tabulated in order to make easier on the data collection. 3. The researchers use the validity analysis to test the question in questioner whether the question necessary or not. Then, the researchers use the reliability analysis to test whether the question consistent or not. The researchers use split-half method to analyze the reliability. 4. Make the hypothesis for the research. 5. The researchers use the regression analyze by using SPSS software. 3. 7Timeline |Week |Description | |WEEK 1 |Brainstorming to collect the issue to be research and select the main topic. |WEEK 2 |Making background of this research, making the problem statement, define the objective, | | |methodology and sampling method. | |WEEK 3 |Arrange the questioner design, and make the web-based questioner. | |WEEK 4 |Spreading the questioner to the target market in ITB and collect data. | |WEEK 5 |Spreading the questioner to the target market in ITB and collect data and coding the data. |WEEK 6 |Coding data, analyze data using SPSS. | |WEEK 7 |Completing, interpreting and making the final report. | Chapter 4: Data Analysis and Discussion 4. 1Validity and Reliability Analysis To measure the validity and reliability of the questioner, the researchers just using the certain number of the questioner that related with the objective research. Therefore, the research just measure number 5, 6, 7 and 8 that explain the variable for each categories. This research uses 35 respondents to obtain the result. Based on the research to the target market, the researchers get the result: |Number of Respondents |Question number | | |5 |6 |7 |8 | | |A | |0,6 ? x lt; 1 |High Validity | |0,5 ? lt; 0,6 |Medium Validity | |0,3 ? x lt; 0,5 |Low Validity | |x lt; 0,3 |Invalid | The result from the analysis is: |Question Number |Validity Coefficient |Categories | |5 |A |0. 364618278 |High Validity | |   |B |0. 22917498 |Medium Validity | |   |C |0. 607464215 |High Validity | |6 |A |0. 421016851 |Low Validity | |   |B |0. 530451195 |Medium Validity | |   |C |0. 484852521 |Low Validity | |7 A |0. 542754703 |Medium Validity | |   |B |0. 573716203 |Medium Validity | |   |C |0. 573716203 |Medium Validity | |8 |A |0. 359680642 |Low Validity | |   |B |0. 40248017 |Low Validity | |   |C |0. 398274811 |Low Validity | All of the requirement questions for analyze the objective have already valid so the researchers did not revise the question er and go to the reliability analysis. 4. 2Stastitical Analysis The researchers use the Split-half method to measure the reliability of the questioner. The questions are divided into 2 parts with same amount, as follows: Part 1 | | | | | | |5a |5c |6b |7a |7c | |Pearson Correlation |VAR00005 |1. 000 |. 483 |. 283 |. 303 |. 093 | | |VAR00001 |. 483 |1. 000 |. 017 |. 85 |000 | | |VAR00002 |. 283 |. 017 |1. 000 |. 251 |-. 033 | | |VAR00003 |. 303 |. 285 |. 251 |1. 000 |-. 138 | | |VAR00004 |. 093 |. 000 |-. 033 |-. 138 |1. 000 | |Sig. (1-failed) |VAR00005 |. |. 002 |. 050 |. 38 |. 297 | | |VAR00001 |. 002 |. |. 461 |. 048 |. 500 | | |VAR00002 |. 050 |. 461 |. |. 073 |. 425 | | |VAR00003 |. 038 |. 048 |. 073 |. |. 214 | | |VAR00004 |. 297 |. 500 |. 425 |. 214 |. |N |VAR00005 |35 |35 |35 |35 |35 | | |VAR00001 |35 |35 |35 |35 |35 | | |VAR00002 |35 |35 |35 |35 |35 | | |VAR00003 |35 |35 |35 |35 |35 | | |VAR00004 |35 |35 |35 |35 |35 | For the measurement of the correlation strength between t he variables, there are the criteria: ? Correlation value is between 0 to 1 ? The value of correlation determines the strength of the relationship between variables. There are the standards of correlation value: o 0 – 0,25 : weak correlation (almost none) o gt;0,25 – 0,5: moderate correlation gt;0,5 – 0,75: strong correlation o gt;0,75 – 1: very strong correlation ? Correlation can be positive or negative. Positive correlation shows a same direction relationship between variables, which mean if the value of variable 1 big then variable 2 will have bigger value. Negative correlation have opposite relationship from the positive one between the variables, which mean if the value of variable 1 big then variable 2 will have a smaller value. ? If the value of correlation is 1, then the correlation is perfect correlation. Perfect correlation means all variable have a perfect linear relationship in other word variable 1 affect variable 2 perfectly. In this case a hypothetical test is unnecessary to observe the significant level of the variable’ relationship anymore. ? Significance relationship between the variables can be analyze with this requirement: o If the probabilities or significance lt; 0,05, relationship between variable is significant o If the probabilities or significance gt; 0,05, relationship between variable is not significant o In special case the significance number 0,05 is replaced with 0,01 if the result from the SPSS marked with star (*). From the calculation with SPSS the correlation number between the dependent and independent variable can be determine. Correlation number between var5 and Program Voucher SMS M3 is 0,483 which mean the correlation is moderate and positive correlation shows that the relationship is when the var5 increasing the same goes on Program Voucher SMS M3. Correlation number between var5 and Program IM3 semua MURAH! is 0,283 which mean a moderate correlation same as var5 and Program Voucher SMS M3. Correlation number from var5 and Program IM3 Ce eS-an, SMS dan Telpon Gratis Puas Abis relationship is 0,303 is moderate correlation same as before. Last var5 and Program Balckberry Prepaid correlation number is 0,093 means weak correlation and still the number is positive means the variables goes in a same direction. The significance level between the variable can be determined from probability number (sig) in correlation table from SPSS. Var5 and Program Voucher SMS M3 probability number is 0,002 which mean the variable relationship is strong, in a same direction, and significant same goes as the relationship between var5 and Program IM3 semua MURAH! (probability number is 0,05) also between var5 and Program IM3 Ce eS-an, SMS dan Telpon Gratis Puas Abis (probability number is 0,038). For relationship between var5 and Program Balckberry Prepaid which is the probability number is 0,297 means that the relationship is weak, not in a same direction and insignificant. |Model |R |R square |Adjusted R square |Std error of the estimate | |1 |. 578a |. 334 |. 245 |. 20503 | R Square will be used to calculate how much the frequency of independent variable affect the dependent variable. R number can be mentioned as determination coefficient. From the table above the determination coefficient is 0,334 or 33,4%. This number means about 33,4% amount of var5 can be explained by using Program Voucher SMS M3, Program IM3 semua MURAH! , Program IM3 Ce eS-an, SMS dan Telpon Gratis Puas Abis, and Program Balckberry Prepaid. In other word the effect of the independent variable to dependent variable is about 33,4%. The rest of it which is 66,6% (100%-66,6%) must be explained through another factors which is outside from this regression model. The formula for calculate the other factors is error = 1-r2 or 1-0,334. To test whether the regression model is correct or not, the model need to be tested its linearity relationship between the independent variables. Number that will be used is: |model |Sum of Squares |df |Mean square |F |Sig. | |1 Regression |. 632 |4 |. 158 |3. 757 |. 0. 14a | | Residual |1. 261 |30 |. 042 | | | | Total |1. 1893 |34 | | | | The hypothesis: H0 : there is no linear relationship among the 4 variables IM3 products with the awareness H1 : there is a linear relationship among the 4 variables IM3 products with the awareness The testing conducted by using the significant number or Sig with the following provisions: If the significant number of research lt; 0,05; H0 rejected and H1 accepted If the significant number of research gt; 0,05; H0 accepted and H1 rejected. Based on the calculation obtained the significant number 0,014. The result 0,014 lt; 0,05, so H0 rejected and H1 accepted. It means there is a linear relationship among the 4 variables IM3 products with the awareness. From the analysis, because there is the linear relationship among those variables, so all 4 IM3 products indeed influence the awareness. The conclusion is the regression model above have corrected and proper. Conclusion From the analysis above, the researchers can make the conclusion as follows: The correlation number among 4 variables IM3 products with the awareness is 0,578. The influence of 4 variables to the awareness is 0,334 or 33,4% The another factors outside the regression model is 0,666 or 66,6% Chapter 5: Conclusion answering research question gt; and recommendation References http://korananakindonesia. wordpress. com/2010/03/27/pemakai-telepon-seluler-indonesia-terbesar-ke-6-di-dunia/ PT. Indosat Tbk Company Logo Discussion Group: Ali Zainal Abidin (19008174) Galih Pandikar (19008156) Livia Ardelia Gentha (19008089) Rani Fevadiana Bokslag (19008117)