Organization part | Grameenphone

Grameenphone in brief
Grameenphone

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

telecommunication

awarded

service

license

provider

in

to

operate

as

Bangladesh

on

mobile
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

investment

of

USD

in

the

$1.7

country
billion

up

with
to

an

accumulated

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
international

in

both

telecommunications

shareholder

brings

and

development.

technological

and

The

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, Well
Understood 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.

TELENOR
Telenor 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 TELECOM
Grameen 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 Strategies

We are here to help
The 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:
R Make It Easy
R Keep Promises
R Be Inspiring
R Be Respectful
Make 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 PEOPLE
The 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 SERVICE
Grameenphone 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 GOVERNANCE
In 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 Profile
CEO: Vivek Sood. Joining Date: January 7, 2013
CFO: Fridtjof Rusten. Joining Date: May 1, 2012
CHRO: Quazi Mohammad Shahed. Joining Date: November 1, 2012
CMO: Allan Bonke. Joining Date: August 5, 2012
CTO: Tanveer Mohammad CTO. Joining Date: July 1, 2010
CCAO: Mahmud Hossain. Joining Date: March 8, 2010

DIVISIONS AT GRAMEENPHONE LTD

Grameenphone 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 Division

Grameenphone

follows

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 mid
level 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

technologies

to

range

Djuice

(a

of

wireless,

Strategic

fixed,

Business

and
Unit

broadband
(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 Buyers
Around 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
STRENGTHS

Good 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.

OPPORTUNITIES
Economic 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 samebrand 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.