THE EFFECT OF INNOVATION ON CUSTOMER SATISFACTION TO ENTERPRISES IN KENYA (Repaired)

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THE EFFECT OF INNOVATION ON CUSTOMER SATISFACTION TO
ENTERPRISES IN KENYA
A CASE STUDY OF SAFARICOM LIMITED COMPANY
BOR, BRIAN KIPROTICH
BBM/11/11/12
A Research Project Submitted to the Department of Business in
Partial Fulfillment of the Requirements for the Award of the Degree
of Bachelor of Business Management
MARIST INTERNATIONAL UNIVERSITY COLLEGE
A CONSTITUENT COLLEGE OF THE CATHOLIC UNIVERSITY OF
EASTERN AFRICA
NAIROBI-KENYA
APRIL, 2016

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DECLARATION
I, the undersigned, declare that this project is a product of my original work and has not been
presented to any other institution of higher learning for academic credit.
SIGNATURE........................................ DATE.................................................
BRIAN KIPROTICH BOR
BBM/11/11/12
This project has been submitted with my approval as the University College supervisor.
SIGNATURE...................................... DATE.................................................
MRS. LILLIAN MULWA KUNUSIA
It has been accepted by the Head of the Department of Business.
SIGNATURE...................................... DATE...................................................
DR. DORCAS OGUTU

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DEDICATION
This research project is dedicated to my family and friends, who have continuously encouraged,
prayed and stood by me whenever I thought it was not possible.

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ACKNOWLEDGEMENTS
First and foremost, I would like to acknowledge God, for His never ending grace and mercies
upon me throughout the entire time I was carrying out my studies. My sincere thanks also go to
Mrs. Lillian, my supervisor, for her continuous counsel and support, whose advice contributed to
this research project. I would also like to acknowledge my family, especially my dad, Mr. Philip
Bor, for his encouragement and financial support throughout my studies. Finally, I would also
like to thank all the respondents who took part in this research project and friends, for without
whom this work would not be possible.

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Table of Contents
DECLARATION……………………………………………………………................................ii
DEDICATION…………………………………………………………………………………...iii
ACKNOWLEDGEMENTS……………………………………………………………………...iv
ABSTRACT……………………………………………………………………………………..xi
CHAPTER ONE ............................................................................................................................. 1
INTRODUCTION .......................................................................................................................... 1
1.0 Introduction........................................................................................................................... 1
1.1 Background of the study. ...................................................................................................... 1
1.2 Statement of the problem ..................................................................................................... 3
1.3 Objectives of the Study......................................................................................................... 4
1.4 Research Questions ............................................................................................................... 5
1.5 Significance of the Study ...................................................................................................... 5
1.6 Conceptual Framework ......................................................................................................... 6
1.7 Scope of the Study................................................................................................................. 7
1.8 Delimitations and Limitations of the Study .......................................................................... 8
1.9 Definition of terms .............................................................................................................. 11
CHAPTER TWO .......................................................................................................................... 12
THEORETICAL REVIEW........................................................................................................... 12

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2.0 Introduction......................................................................................................................... 12
2.1 Theoretical Review ............................................................................................................. 12
2.1.1 Incremental Innovation .................................................................................................... 14
2.1.2 Radical Innovation........................................................................................................ 14
2.1.1.1 Customer Satisfaction Theories................................................................................. 15
2.1.1.1.1 Assimilation Theory ............................................................................................... 15
2.1.1.1.2 Contrast Theory ...................................................................................................... 16
2.1.1.1.3 Assimilation-Contrast Theory ................................................................................ 17
2.1.1.1.4 Negativity Theory................................................................................................... 17
2.2 Brief History of Safaricom Limited Company.................................................................... 18
2.3 Main innovations by Safaricom Limited Company ............................................................ 19
2.3.1 The Flashback Service.................................................................................................. 19
2.3.2 The Electronic Cash Service......................................................................................... 19
2.3.3 The Other Services ...................................................................................................... 20
2.4 Summary and gaps in the study........................................................................................... 20
CHAPTER THREE ...................................................................................................................... 23
RESEARCH DESIGN AND METHODOLOGY ........................................................................ 23
3.0 Introduction......................................................................................................................... 23
3.1 Research Design.................................................................................................................. 23
3.2 Study Design ....................................................................................................................... 23

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3.3 Target Population................................................................................................................ 24
3.4 Sampling Design ................................................................................................................. 25
3.5 Data Collection Procedures................................................................................................. 26
3.6 Data Analysis and Presentation........................................................................................... 27
CHAPTER FOUR......................................................................................................................... 28
RESEARCH FINDINGS AND DISCUSSIONS.......................................................................... 28
4.1 Introduction......................................................................................................................... 28
4.2 Response Rates.................................................................................................................... 28
4.3 Demographic Distribution................................................................................................... 28
4.3.1 Gender Distribution.......................................................................................................... 29
4.3.2 Age Distribution ........................................................................................................... 30
4.3.3 Income Earning Distribution ........................................................................................ 31
4.3.4 Mobile Service Distribution ......................................................................................... 33
4.4 Customer satisfaction level to innovative services offered ................................................. 36
4.5 Customer-product innovation perception............................................................................ 40
4.6 Electronic Cash Service presence ....................................................................................... 45
4.7 Overall effect of Innovation to customer satisfaction ......................................................... 51
CHAPTER FIVE .......................................................................................................................... 54
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS................................................. 54
5.1 Introduction......................................................................................................................... 54

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5.2 Summary of the findings..................................................................................................... 54
5.3 Conclusions ......................................................................................................................... 55
5.4 Recommendations ............................................................................................................... 56
5.5 Suggestions for further research.......................................................................................... 57
REFERENCES ............................................................................................................................. 58
APPENDIX................................................................................................................................... 61
RESEARCH QUESTIONNAIRE ................................................................................................ 61

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LIST OF FIGURES
Figure 1: conceptual framework ..................................................................................................... 7
Figure 2: Respondents gender distribution ................................................................................... 29
Figure 3: Age distribution............................................................................................................. 31
Figure 4:Income distribution......................................................................................................... 32
Figure 5: Income distribution pie chart......................................................................................... 32
Figure 6:Mobile service distribution............................................................................................. 34
Figure 7:Actual representation of mobile service distribution ..................................................... 35
Figure 8: Safaricom user's response 1........................................................................................... 36
Figure 9:Airtel User's Response 1................................................................................................. 38
Figure 10:Multiple line user's response 1 ..................................................................................... 39
Figure 11: Safaricom user's response 2......................................................................................... 41
Figure 12: Airtel user's response 2 ................................................................................................ 42
Figure 13: Multiple user's response 2 ........................................................................................... 44
Figure 14:Safaricoms user's response 3 ........................................................................................ 46
Figure 15: AIrtel user's response 3................................................................................................ 48
Figure 16: Multiple line user's response 3 .................................................................................... 49
Figure 17: General mobile user's response to effect of innovation to customer satisfaction........ 51

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LIST OF TABLES
Table 1: summary of customers satisfaction theories ................................................................... 21
Table 2: target population............................................................................................................. 25
Table 3: age distribution ............................................................................................................... 30
Table 4: Mobile service distribution ............................................................................................. 33
Table 5: actual representation of mobile service distribution....................................................... 35
Table 6: safaricom user's response to customer satisfaction......................................................... 37
Table 7: airtel user's response to customer satisfaction............................................................... 38
Table 8:multiple user's response to customer satisfaction ............................................................ 40
Table 9: safaricom user's response to customer-product innovation............................................ 42
Table 10:Airtel user's response to customer product innovation.................................................. 43
Table 11: multiple line user's response to customer-product innovation...................................... 45
Table 12:safaricom user's response to mobile banking................................................................. 47
Table 13:airtel user's response to mobile banking ........................................................................ 49
Table 14: multiple line user's response to mobile banking ........................................................... 50
Table 15:general mobile user response to effect of innovation to customer satisfaction ............. 53

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ABSTRACT
Innovation is defined as something original, and as a consequence something new, that "breaks"
into the market. The purpose of this study was to analyze innovation, finding out whether
enterprises, especially in the telecommunication sector meet the customer's needs as well as their
expectations. The specific objectives of the study were to investigate whether the electronic cash
service offered by Safaricom met the customer's needs and expectations; to establish whether
customers were satisfied with the flashback service being offered at Safaricom, and to also find
out whether or not the other innovative products and services offered by Safaricom were tailored
to the customer's needs. The research study was carried out randomly among various mobile
service users, whom mainly consisted of respondents who subscribed to the service provider
company, Safaricom Limited. The study was of main benefit to the enterprise management so as
to improve their innovative management process of organization and also on the quality of
products and services they offer. The study used descriptive research design because it helped
facilitate a general understanding and interpretations of the problems in focus. The target
population was 32 respondents who were selected through random sampling. Data was collected
using self-administered questionnaires which had both open ended and closed ended questions.
Data was respectively analyzed using descriptive statistics using SPSS and presented in pie
charts, bar graphs and tables. The following are the key findings: One is that it was important to
note many mobile service users were not satisfied in terms of affordability, the network coverage
,electronic cash service charges among other reasons. The second finding was that a small
number of the mobile users were satisfied with the customer care response, application
convenience, future-forward services, and finally some other mobile users had differing
responses in terms of overall expense comparison to other mobile service providers and
unsolicited SMS messages on promotions as well as electronic cash service fraud. In reality,
innovation should not necessarily be viewed to be 'invention', as innovation refers to improving
already existing ideas and processes, rather than coming up with new ones. Therefore, the
innovative products and services provided by telecommunication companies should be customer-
centered, as the customer should be viewed by enterprises as the main element for a product's
success.

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LIST OF ABBREVIATIONS
ATM Automated Teller Machines
GSM Global System for Mobile communication
KPTC Kenya Post and Telecommunication Corporation
NSE Nairobi Securities Exchange
R&D: Research and development
SMEs Small and Medium Enterprises
SMS Short Message Service
SPSS Statistical Package for Social Sciences
WI-FI Wireless Fidelity connection

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CHAPTER ONE
INTRODUCTION
1.0 Introduction
This chapter consists of the background of the study, statement of the study, the objective of the
study, The research questions formulated from the above objectives, significance of the study,
the conceptual framework, the scope of the study and, finally, definition of terms.
1.1 Background of the study.
There has been a lot of talk in the business circles around the words: innovation and customer
satisfaction since time immemorial. But, what does innovation and customer satisfaction really
mean to us today, as far management is concerned.
Innovation from a business stand-point refers to the process of inception and conception of a new
idea, device or, a new process (system). This process is accomplished through more effective
products, processes, services, technologies, or ideas that are readily available to markets,
governments and the society at large.
Frankelius,(2009) The term innovation is defined as something original, and as a consequence,
something new, that "breaks into" the market or society. While a novel device is often described
as an innovation, in economics, management science, and other fields of practice and analysis
innovation is generally considered to be a process that brings together various novel ideas in a
way they have an impact on society.

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In reality, innovation differs from invention, in that innovation refers to the 'betterment' or
improving of the already existing ideas and processes, other than coming up with new ones.
Whereas, invention refers more directly to the actual creation of the idea or method itself. Other
scholars also differ innovation to improvement, on the notion that innovation is doing something
different, rather than doing something better.
On the other hand, customer satisfaction is another term that is frequently used in the marketing
field. It is usually defined as a measure of how products and services supplied by a company
meets or surpasses a customer's expectations
Gitman and Carl,(2005) Customer satisfaction is defined as "the number of customers, or
percentage of total customers, whose reported experience with the firm, its products, or its
services (ratings) exceed specified satisfaction goals." It is also viewed as a key performance
indicator within businesses, and is often part of the Balanced Scorecard.
In a competitive marketplace where businesses compete for customers, customer satisfaction is
seen as a key differentiator and, has increasingly become a key element of business strategy.
In the past, many organizations recognized the importance of innovation but treated it as a
phenomenon that 'just happened', classically being relegated at arms length of a "R&D
department". The view was that innovation was not something that needed direct engagement or
scrutiny at the executive level, and that it was not amendable to management. Today, this is not
the case.
Nowadays, many companies allocate a huge amount of time, money and resources into product
development and, implementation of research and development strategies but, fail to include the
main element (the customer).

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Therefore, this study seeks to help find out: whether the product or service is meeting customer's
expectations; whether the product or service is standard or tailored (customized) to customer's
needs and expectations and finally, whether the customer is generally satisfied or dissatisfied
with the product purchased or service offered by service provider (Safaricom Limited company).
1.2 Statement of the problem
Today, innovation is receiving increased attention in the development debate. Far from being a
concern of advanced countries alone, the ability to introduce new technologies and organizations
is now seen in developing economies as a crucial element in the process of industrialization and
modernization.
For example, In Europe, the return on investments on technology and process development
depends not only on the overall framework conditions for innovation and entrepreneurship but,
also on effective business models. However, many European enterprises, whether large, small or
medium-sized, products are produced for the sake of doing so, not taking into consideration, the
customer's needs and wants.
In relation to this study, the biggest questions facing every executive from time-to-time, in any
given organization are:
a.)How can we get there from here?
b.)How can we increase the market share, revenues, or profits?
c.)What are the best ways of reducing costs, employee turnover and bureaucracy?

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Hagedoorn and Shakenraad,(1991) From the statement of the problem as is the case locally lies
with the executive, in that they are only focused more on making profits for the organization,
rather than reducing costs. In other situations, some senior executives may misinterpret the
concept, 'innovation' as a research and development function only, which is not the case. In a real
situation, innovation should be taught and understood as an entire value chain - right from
research and development, to engineering, manufacturing, distribution, sales, marketing, and,
even facility utilization and investment strategy.
Hagedoorn and Shakenraad ,(1992) Another issue prominent in relation to the study is that few
entrepreneurs view change of technology as an expensive venture, and a huge waste of time,
effort and, resources . It is in this light, sensitizing business owners would be the viable option,
in that it erases the pre-conceptions of what entrepreneurs thought innovation to be, and implants
a new mentality all together.
Finally, the other issue in relation to this study is about the products produced locally in Kenya.
The problem in this lies with enterprises, in terms of producing products (are they standardized
or customized). This presents a real problem as the products or services being produced are
supposed to be customer-centered rather, than on the organization's requirements.
Therefore, it is from the above that this study is based as far as the terms 'innovation' and
'customer satisfaction' is concerned.
1.3 Objectives of the Study
In relation to this study, the researcher intends to achieve the following objectives:

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1. To investigate if the electronic cash service being offered at Safaricom is meeting the
customers needs and expectations.
2. To establish whether customers are satisfied with the flashback service being offered at
Safaricom.
3. To find out whether the other products or services being offered by Safaricom are tailored to
the customer's needs or not.
1.4 Research Questions
In relation to the above stated objectives that this study is based upon, we are able to formulate
the following research questions:
1. Is the electronic cash service being offered at Safaricom meeting the customer's needs and
expectations?
2. Is the flashback or any other services being offered at Safaricom customized to the customer's
needs and wants?
3. Are customer's really satisfied with all the other products or services being offered at
Safaricom?
1.5 Significance of the Study
The main need to carrying out this study is to investigate as to whether enterprises are really
meeting the customer's needs as well as customer expectations are concerned. Using the case
study company Safaricom, this research will seek to find out as to whether their products and
services really meet customer needs and expectations. Another importance is to study product
differentiation i.e. how do the products and services offered by Safaricom differ to that from its

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telecommunication rivals e.g. Airtel, Orange and Yu, in terms of affordability, availability,
quality and, the range of services the company offers.
From the customers' perspective, this research seeks to look at Safaricom and all it has achieved
since the company's inception in terms of meeting the customer's needs and expectations.
Despite the company offering a range of services such like the flashback service and electronic
cash service (M-PESA), the study seeks to find out if their products are able to stand out from its
competitors' in the market.
On the other hand, are Safaricom's services able to compete on a quality, quantity and price-basis
over its rival's services. Firstly, through this that the company is able to know whether its
actually doing well or vice-versa. Secondly, the company can also get to know whether their
products are consumer budget-friendly and available to the general public or not. Finally,
Safaricom will also be able to assess the overall effect their products have to the general public (
Safaricom mobile subscribers) as far as innovation and customer satisfaction is concerned.

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1.6 Conceptual Framework
INDEPENDENT VARIABLES DEPENDENT VARIABLE
INNOVATION
Figure 1: conceptual framework
1.7 Scope of the Study
The scope according to research is defined as the range of view, outlook or application a study
intends to take over the course of a given time or period. Since, it will be unrealistic to focus on
ELECTRONIC
CASH SERVICE
e.g. M-PESA
FLASHBACK
SERVICE
e.g. SMS
OTHER SERVICES
e.g. internet
connectivity, bonga
-points(call points)
CUSTOMER
SATISFACTION
- Customer retention
- Profits
- Good feedback

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all enterprises in Kenya, this research will be skewed towards the telecommunication company,
Safaricom Limited. Despite having several other telecommunication enterprises in the market,
Safaricom has continuously thrived and grown over the years. The main reason to choosing
Safaricom, as a case study besides all other telecommunication companies like Airtel and
Orange, is because it has continuously and consistently had a competitive advantage over its
rivals. In relation to the study, Safaricom's success is heavily attributed to the innovative ideas
and services they continuously embrace and perfect timing into the market.
Therefore, the scope of this research will focus the consumers from different social classes, in
this case financially i.e. high, medium and, low income earners, as it seeks to explore whether
Safaricom offers services that are customized to the needs of their customers, and are they
meeting and satisfying the customer's expectations of the millions of people subscribed to their
network.
1.8 Delimitations and Limitations of the Study
Simon,(2011) Delimitations are those characteristics that limit the scope and define the
boundaries of your study. The characteristics that act as a guide in the carrying out of this study,
are the independent variable and, the dependent variable. As relates to this research, our
independent variable in this case is innovation, while customer satisfaction is the dependent
variable. Also in relation to the above variables, we are able to formulate the objectives and
research questions. Using the case study, Safaricom Limited will act as a reference in the
investigation and giving the appropriate answers to the formulated objectives and research
questions which we as researchers will have control over.

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On the other hand, Simon,(2011) Limitations are defined as the weaknesses in your study and are
out of your control. Limitations that will prevalently occur in the course of this research will be:
finances - in terms of acquiring money for paying anonymous people taking part in the research
process. Another limitation is time - in terms of the time period it will take to collect research
data from target population to this study e.g. it may take one month or three months. Distance
may also prove to be a problem - in terms of how far will we will be able to collect research data
required to carry out this study.
Climatic change in weather may also prove problematic during carrying out research. As far as
weather change is concerned, constant change in climate may prevent a study from taking place
e.g. heavy rains may cause floods.
Bias on information may also prevent accuracy in data collection. A person may deliberately edit
out information on account of insecurity and difference in traditional beliefs. Finally, Hostility
from target population. People may refuse or avoid to engage in the data collection process if
they detect a hint of hostility in the questions being asked. They may also refuse to engage in this
process on the ground that the researcher is an outsider.
Innovation and customer satisfaction in the Kenyan market has not been dully studied. This
made secondary data very scarce in the Kenyan context.
The population of the study was limited to three areas: Galleria Shopping Mall at Bomas, AGC
Good Shepherd church at Ngong and, the Lang'ata residential area, all in the Nairobi area. This
means that the results of this study cannot be used accurately in any other setting. This was as a
result of limited resources available including time and financial constraints. Due to the nature of
the study, it was not possible to accurately define the effect of innovation to customer

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satisfaction on a large scale. The fact that the data was collected over such a short period of time,
the results realized in this research paper may not be replicable in the case of industry change.
In this study the method used for data collection was a questionnaire which in realistic view was
a constraint as it did not entirely capture the perceptions people had on innovation and customer
satisfaction from all other mobile service providers.

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1.9 Definition of terms
Bureaucracy: administrative or social system that relies on rules, regulations and procedures.
Customer satisfaction: measure of how products and services meets or surpasses customer
expectations.
Employee Turnover: rate at which employees come in and go out of an organization.
Enterprise: an organization involved in trade of goods or services to consumers.
Entrepreneur: persons who develop, organize and manage a business venture.
Entrepreneurship: willingness and capacity to develop, organize and manage a business.
Innovation: a new idea, device or a process.
Market share: the portion of a market controlled by a particular company or product.
Market: advertise or promote something.
Profits: obtaining a financial advantage or benefit, especially from an investment.
Raw materials: inputs used in the creation of a new or improved product.
Revenue: income, especially when a company or organization and of a substantial nature.

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CHAPTER TWO
THEORETICAL REVIEW
2.0 Introduction
This chapter consists of a theoretical review of the study, brief write-up on the history of
Safaricom Limited company, introduction of the main innovations offered by the company,
Safaricom and, finally, a summary and gaps to be filled by the study.
2.1 Theoretical Review
In relation to the independent and dependent variables, we will be referring to our case study,
Safaricom Limited, investigating whether the electronic cash service is meeting the customers
needs, establishing whether the customers are satisfied with the flashback service and, finally,
finding out whether the customer is satisfied with all the other products and services like internet
connectivity and awarding of call points (Bonga points).
From a business perspective, an enterprise cannot exist or operate in a vacuum i.e. any given
business, no matter the product or service, they need customers to secure their survival in a
competitive market. Thus, it is important for us to define and understand the two terms -
innovation and customer satisfaction from a theoretical stand-point.
Baregheh.et-al(2009) Innovation from a theoretical view, involves a comprehensive process
which starts with the development of a new idea, and continues throughout the phases required to
produce and deliver a new good, service, or process that is capable of altering economic
conditions by fulfilling customers' needs.

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As is the case locally, Safaricom Limited company is the leading telecommunications company
in Kenya. Known for their products and services like the electronic cash service (e.g.M-PESA),
withdrawing and sending of cash has stretched the boundaries of mobile banking.
Ailin and Lindgren,(2008) Innovation can be manifested in a variety of shapes - new products,
new business models, enhanced customer answers, a better product, process, channel or service
offering.
Locally, more customers today prefer to purchase smart-phones to previous phones due to
enhanced features like social media e.g. facebook, twitter etc., High definition camera and
video, music, internet connectivity. Therefore, the product being offered, the smart-phone, is
available for purchase at all Safaricom shop outlets all over Nairobi.
Various theories to this regard were put forward to measure innovation and technological
transformation: competence-enhancing vs. competence-destroying (Gatignon.et-al,(2002)),
architectural and generational (Gatignon.et-al,(2002)), disruptive (Gatignon.et-al,(2002)), core
and peripheral (Gatignon.et-al,(2002)), and modular (Baldwin and Clark,(2000); Schling,(2002);
Gatignon.et-al,(2002), continuous and discontinuous (Leifer,(2002); Tidd,(2003)), sustaining and
disruptive technology.
Nonetheless, the proceeding categorization was a little confusing and the differentiations
between the various categories were often difficult with different authors using different labels to
refer or describe the same phenomenon (Gatgnon.et-al,(2002); Garcia and Calantone,(2002)).
Innovation was in this case, misunderstood by many authors which sparked a lot of debates on
what it actually was and was not. For the purpose of our research, following Garcia and

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Calantone,(2002), we will use the radical and incremental terminology to differentiate between
the types of innovation.
2.1.1 Incremental Innovation
Theoretically, incremental innovation is progressive by definition which involves a gradual
addition of marginal changes to existing products and the extension of current designs. This type
of innovation is said to enhance the features of dominant designs, as well as strengthen the power
of large firms. In addition, it also uses current technology to improve already existing
capabilities, and as such endangers adaptability, securing a progressive creation of profits.
In relation to the case study's goods and services, incremental innovation claims that it can make
products more recognizable and more appealing in the market. In addition, this type of
innovation claims to not only lead to a surge in output, but also an increased rise in consumer
fulfillment, and improvements in terms of overall returns to the firm.
2.1.2 Radical Innovation
The term radical as described by many scholars in relation to innovation as the type of
innovation which brought new major changes to existing technologies and was built on diverse
engineering and scientific standards. This involved ground-breaking development, which in-turn
lead to the creation of new market infrastructures, and consequently, new organizations and
consumers.
This type of innovation claimed to illustrate the ability of the firm to pioneer novel goods,
services and processes, encompassing new radical technologies that greatly improved the

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satisfaction of existing customers, or introduce completely new products to satisfy the previously
unrecognized needs.
2.1.1.1 CustomerSatisfactionTheories
On the other hand, consistency theories suggest that when the expectations, and the actual
product performance do not match, the consumer will tend to feel some degree of tension. In
order to relieve this tension, the consumer will need to make adjustments either in expectation or
in the perception of the product's actual performance. Four theoretical approaches have been
advanced under the umbrella of the consistency theory: Assimilation Theory; Contrast Theory;
Assimilation-Contrast Theory; and the Negativity Theory.
2.1.1.1.1 AssimilationTheory
This consistency theory is based on Festinger's dissonance theory. The Dissonance theory
posited that some consumers made some kind of cognitive comparison between expectations
about the product and the perceived product performance. This view of the consumer post-usage
evaluation was introduced into the satisfaction literature in the form of the assimilation theory.
According to the scholar Anderson, consumers seek to avoid dissonance by adjusting perceptions
about a given product to bring it more in line with expectations. Consumers can also reduce
tension resulting from discrepancies between expectations and product performance either by
distorting expectations so that they coincide with perceived product performance or by raising
the level of satisfaction through minimizing the relative importance of the disconfirmation
experienced.

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Payton et-al,(2003) argued that the assimilation theory had a number of shortcomings. Firstly,
the approach assumed that there was a relationship between expectation and satisfaction, but did
not specify how disconfirmation of an expectation led to either satisfaction or dissatisfaction.
Secondly, the theory also assumed that consumers were motivated enough to adjust either their
expectations or perceptions about the performance of a product.
2.1.1.1.2 ContrastTheory
The contrast theory was first introduced in 1987 by Hovland, Harvey and Sherif. Dawes and a
number of other scholars defined this theory as the tendency to magnify the discrepancies
between one's own attitude and that represented by opinion statements.
This theory presented an alternative view of the consumer post-usage evaluation process as
presented in assimilation theory, in that it led to results in opposite predictions for effects of
expectation on satisfaction. While assimilation posits that consumers seek to minimize
discrepancies between expectation and performance, contrast theory holds that the surprise effect
leads to the discrepancy being magnified or exaggerated.
According to this theory, any discrepancy of experience from expectations are exaggerated in the
direction of the discrepancy. For example, if Safaricom raises its expectations in its advertising,
and the customer's experience is only slightly less than promised, the product or service will be
rejected as totally un-satisfactory. Conversely, under-promising in advertising and over-
delivering will cause positive disconfirmation to also be exaggerated.

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2.1.1.1.3 Assimilation-ContrastTheory
The Assimilation-contrast was later introduced in 1973 by Anderson in the context of post-
exposure product performance based on Sherif's and Hovland's discussion of assimilation and
contast effect.
This consistency theory suggested that if performance was within the customer's latitude(range)
of acceptance, even though it fell short of expectation, the discrepancy would be disregarded -
assimilation would operate and the performance would be deemed as acceptable. Thus, if
performance fell within the latitude of rejection, contrast would prevail and the difference would
be exaggerated leading the produce or service to be deemed also un-acceptable.
This theory was a combination of both the assimilation and the contrast theories. This paradigm
held that satisfaction was a function of magnitude of discrepancy between the expected and
perceived performance. As with assimilation theory, the consumers tend to assimilate or adjust
differences in perceptions about product performance bringing it in line with prior expectations,
but only if the discrepancy was relatively small.
2.1.1.1.4 NegativityTheory
This consistency theory was developed by Carlsmith and Aronson in 1963. It suggested that any
discrepancy of performance from expectations would disrupt the individual, producing 'negative
energy'.
The Negative theory has its foundations in the disconfirmation process. It stated that when
expectations are strongly held, consumers tend to respond negatively to any disconfirmation.
Accordingly dissatisfaction will only occur if the perceived performance is said to be less than its
expectations or if the perceived performance exceeds expectations.

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Therefore, if any discrepancy of performance from expectation disrupts the consumer, he or she
is likely to project 'negative energy'. Thus, affective feelings towards a product or service will
inversely relate to the magnitude of the discrepancy.
2.2 Brief History of Safaricom Limited Company
The telecommunication company, Safaricom as we introduced earlier as the case study, is said to
be the leading mobile operator despite competition from other mobile operators like Airtel,
Orange and Yu. Safaricom limited, like any other company has a beginning. It did not just 'crop
up' and grow over night as it has a history.
Safaricom limited company was started in 1993, as a department of the former state-owned
telecommunications operate, formerly known as the Kenya Post and Telecommunication
Corporation(KPTC).
In 1997, Safaricom limited was later incorporated as a private limited liability company with
40% ownership held by Vodafone Kenya Limited. Later on, in 2002, it was then converted to a
public company while, the company held 35% of the shares, and 25% of which would later be
auctioned off in 2008, on the Nairobi's Securities Exchange(NSE).
Since then, Safaricom has introduced a number of services to Kenya and has been a leading
player in the mobile market and the national economy at large. Some of these innovative services
were: The flashback service, the electronic cash service, among other services.

19
2.3 Main innovations by Safaricom Limited Company
2.3.1 TheFlashbackService
As a result of the limited income of most of Safaricom's customers at that time, network
congestion emerges from a practice called 'flashing'. Flashing is the practice of calling another
mobile user, but disconnecting before the connected call is answered.
It provides as a method for mobile users to alert someone that they wish to be called, but either
cannot or will not pay for the call. This method is cost-free for the users, but costly in terms of
network bandwidth. In response to this reason, Safaricom introduced the flashback service which
gave every subscriber five free short messages(SMS)with a single pre-defined message stating
"Please call me. Thank you!".
Although, these messages could be annoying when sent just for fun. These messages were very
useful when one was in trouble and there was no use for airtime. This service gave parents
during that time, the more reason to get mobile phones for their children without the real need of
getting them airtime. However, these messages could only be sent to Safaricom subscribers, due
to some feuds with Airtel, which was earlier named as KencCell, Safaricom's main competitor
then.
2.3.2 TheElectronicCashService
Later on, Safaricom developed and launched an innovative service which spread nationwide, as a
mobile service known as 'M-PESA', which allows Kenyans to transfer money via the use of
SMS. This service does not require users to have bank accounts, an important aspect, living in a
country like Kenya today.

20
With M-PESA, the user can buy digital funds at any M-PESA agent, and send that electronic
cash to any other mobile user, anywhere in the country. By using this service, he or she can
redeem it for conventional cash at any M-PESA agent situated nearby. Any mobile device
enabled with the sim-card kit is able to access this electronic cash service.
2.3.3 TheOther Services
Safaricom limited, together with many other companies later on came up with different services
for use by the public ranging from weather updates to market prices and even entertainment
updates. This then prompted the company to come up with plans to provide WI-FI(Wireless
Fidelity)connection in large malls, small and medium enterprises(SMEs)and the various
government agencies in Kenya.
Safaricom was the first company in East Africa to possess 3G internet technology, with the
recent success of the 4G connectivity though they lacked the proper broadcast spectrum for this
service. The company had various internet frequency bandwidth's varied from GSM(Global
System for Mobile communication) to 3G with bandwidth strength's of 900,1800 and 2100 MHz.
Today, Safaricom is not only the leading telecommunication company in Kenya but, a brand
name that is still much in a tussle to stay relevant, as it continues to bring about more newer
products than the last, making it a 'power-house' among its adversaries.
2.4 Summary and gaps in the study
In summary, what stands out from all the previously stated theories - innovation and customer
satisfaction is the development of the product or service. The choice between incremental or
radical innovation depends on two factors: consumer's expectation and the perceived
performance of the product or service.

21
The consistency theories openly suggest that if the consumer's expectations and the actual
product performance do not match, the consumer will tend to feel some degree of tension
towards the purchasing the offered product. With this in mind, entrepreneurs should strive to
investigate what the customer actually expects in a product so as to avoid cases of customer
dissatisfaction.
Table 1: Summary of Customer Satisfaction Theories
THEORY PRODUCT/SERVICE
EXPERIENCE
EFFECT OF PERCEIVED
PRODUCT/SERVICE
MODERATING
CONDITIONS
EFFECT
Contrast
-Positive confirmation.
-Negative disconfirmation.
-Performance enhanced.
-Performance lowered.
Assimilation-
Contrast
-Small confirmation or
disconfirmation.
-Large confirmation or
disconfirmation.
-Performance assimilated
towards expectations.
-Performance contrasted
against expectations.
-Purchase is ego-
involved.
-Performance
difference
exaggerated.
Assimilation
-Negative disconfirmation. -Performance modified to fit
expectations.
-Purchase made
under conditions
of ambiguity.
-Less
modification.

22
Negativity
-Either confirmation or
disconfirmation.
-Performance lowered. -Purchase is ego-
involved, high
commitment &
interest.
-More
modification.
Source: Research Data, 2014
Since innovation is still relatively a new field, it is yet to be fully explored as far research is
concerned. Some of the gaps as regards to this study that are yet to be filled and explored further
are: bridging the gap between technology and business strategy; organization policy and
innovation etc. among other topics that have some potential for research in the management
field.

23
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.0 Introduction
This chapter consists of the research design, the study design, target population, the sampling
design, and the data collection method to be used in the study.
3.1 Research Design
Burns and Grove,(2003:195) defines a research design as "a blueprint for conducting a study
with maximum control over factors that may interfere with the validity of the findings".
Polit et-al,(2001:167) defines a research design as "the researcher's overall for answering the
research question or testing the research hypothesis".
The study focuses on intends to strike a balance between the independent and dependent
variables i.e. innovation and customer satisfaction through coming up with answers for the
formulated objectives and research questions in relation to the research. Thus, it is only through
this that we are able to understand the effect Safaricom's innovative products and services has on
its customer's, if their customer's are actually satisfied, and whether the products are tailor-made
to the customer's expectations.
3.2 Study Design
Study design refers to the specific plan to conducting a study in research. In relation to this
study, the researcher focussed on the independent and dependent variables: innovation and
customer satisfaction, where the research design will be based on the formulated objectives. It is

24
only through these objectives that the researcher was able to formulate a framework to
investigating the issues as underlined in this study.
This research focussed on the investigation of the following issues as far as the research design is
concerned:
a.) To investigate whether the electronic cash service being offered by Safaricom meeting the
customer's wants and expectations.
b.) To establish whether customers are still satisfied with the flashback service being offered at
Safaricom.
c.) To also explore whether Safaricom's all the other products and services are tailor-made to the
customer's needs or not.
Although, not all these questions can be answered all at once, this research sought to get some
feedback from people coming from different social classes as well as different backgrounds.
3.3 Target Population
Burns and Grove,(2003:213) describes population as all the elements that meet the criteria for
inclusion in the study. Burns and Grove,(2003:234) goes on to define the eligibility criteria as
"the list of characteristics that are required for the membership in the target population".
The criteria that was chosen for inclusion into this study was income earning, which plays a big
deal in consumer's spending, investment and saving habits. As is the case locally in Kenya, it
would be unrealistic to include 40 million people to take part in the study. Therefore, it is only

25
proper we define the number of respondents to a specific number to represent the rest of the
population.
Therefore, the target population in relation to this study focussed on a few respondents within
three income earning levels: high, middle and low, to represent the rest of the population residing
in Nairobi.
Thus, the target population that engaged in this research consisted a total of 32 respondents
which composed of 84.4% which was quite higher than 75%, making it a sufficient population
size for this study. This is shown in the table below.
Table 2: Target population
POPULATION RESPONSE POPULATION PERCENTAGE
Questionnaires filled 27 84.4
Questionnaires not filled 5 15.6
Total 32 100
Source: Research data, 2016
3.4 Sampling Design
Burns and Grove, (2003:31) refers to sampling as a process of selecting a group of people, events
or behavior with which to conduct a study. Polit et-al,(2001:234) confirms that in the sampling

26
portion that represents the whole population is selected. Sampling is closely related to the
generalizing of the findings.
Sampling design describes the means of selecting a subset of units from a target population for
the purpose of collecting information. The main units that were chosen in carrying out this
research were the independent and dependent variables i.e. innovation and customer satisfaction
which carry the whole research.
The sampling design that was used in carrying out research was random sampling technique,
whereby the sample size realized was 30% which was quite sufficient in carrying out the
research. Mugenda, Mugenda,(2003). The calculation below shows how the sample size was
achieved after elaborate calculation was done (n=30).
n = 32
1+32(0.05)2
n = 30
3.5 Data Collection Procedures
Burns and Grove,(2003:373) Data gathering is the precise, systematic gathering of information
relevant to the research sub-problems, using methods such as interviews, participant observation,
focus group discussions, narratives and case histories.."

27
The data collection chosen by the researcher in relation to the above sampling design was
through the use of questionnaires. These questionnaires were personally administered to the
respondents. The questionnaire administered was aimed at giving answers to the research
questions stated through the use of open and close-ended questions.
3.6 Data Analysis and Presentation
The data collected from the study were quantitative. This comprised of the summations of the
results compiled from administered questionnaires collected from the field, using charts, bar
graphs, and frequencies where necessary and conclusions through content analysis as to whether
or not innovative products and services are tailor-made to the customer's preference and satisfied
with the services being offered. Descriptive statistics tool, mean and mode were used to analyze
the data and give meaningful results. The SPSS system was used in the analysis of data.

28
CHAPTER FOUR
RESEARCH FINDINGS AND DISCUSSIONS
4.1 Introduction
This chapter delves into the analysis of data collected based on the specific objectives of this
research paper, effect of innovation to customer satisfaction, and to a large extent how it applies
to the telecommunication industry in Kenya. This analysis is presented in the form of tables
,charts of frequencies and percentages.
4.2 Response Rates
For this paper, 32 questionnaires were handed out manually to respondents. All the
questionnaires were returned. Out of the 32, 27 questionnaires were recovered for the purpose of
this research. 3 of the 5 questionnaires left consisted of errors (spoilt), while the remaining 2
presented no information at all. The response return rate was 84.4%. Thus it can be noted it was
quite high.
4.3 Demographic Distribution
For the purpose of this research it was important to notice the different demographic
backgrounds of the respondents. The sample was broken down into several categories: Gender,
Age, Income and to an extent which mobile service provider they subscribe to.

29
4.3.1 Gender Distribution
The research sought to know the gender of the respondent taking part in the study, to distinguish
the exact number of males to females engaging in answering the questionnaire administered by
the researcher.
Of the 27 valid responses 7(26%) were female and the remaining 20(74%) were male .The
research strained for gender balance amongst the respondents. The chart below is a
representation of the distribution between the two genders.
Figure 2: Respondents gender distribution
74%
26%
Respondent Gender Distribution
Male Female

30
4.3.2 AgeDistribution
The researcher sought to know the respondents age-group taking part in the study, to give a
realistic tally of all within a given age-group to get varied perspectives as possible of the study
The respondents aged between 20-25 represented 33%, those of 25-30 represented 37%.
Respondents between the age of 30-35 made up of 19% of the populating, while those aged
between 35-40 was 0% and, finally respondents aged between 40 and above made up 11%. This
was represented by the table and pie chart on pages 30 and 31..
Table 3: Age Distribution
Age
Age Frequency Percentage
20-25 9 33
25-30 10 37
30-35 5 19
35-40 0 0
Above 40 3 11
Total 27 100

31
Figure 3: Age Distribution
The high number of respondents between the ages 25-30,may be explained by the study carried
out in a residential area, a church and a mall. This age-group represents respondents who have
transitioned from college into the work industry or searching for a job at 25 after 16 years in
primary, secondary and college or university education.
4.3.3 IncomeEarningDistribution
The researcher also sought to inquire the respondent's income earning level so as to get different
perspectives from all the three social classes: high, middle and low income earners. The main
aim of the study was to investigate spending and investment habits among the respondents in the
case of innovation and customer satisfaction. This is clearly represented in the figures in the next
page, page 32.
33%
37%
19%
0%
11%
Age Distribution
20-25 25-30 30-35 35-40 Above 40

32
Figure 4:Income distribution
Figure 5: Income distribution pie chart
The high number of respondents as shown in the bar graph and pie chart representing income
frequency and distribution were the low income earners by 48%, followed by the middle income
earners by 45%, and, finally high income earners who comprised of 7%. It should be accurately
said that this study was done on a smaller scale and should not be taken to be accurate.
High Middle Low
Series1 2 12 13
0
5
10
15
Population
(Respondents) Income Distribution Frequency
7%
45%
48%
Income Distribution
High
Middle
Low

33
4.3.4 Mobile Service Distribution
The research questionnaire sought to find out what mobile service provider the respondent
subscribed to so as to find out whether the customer was satisfied with the innovative services
they were being offered. This distribution is represented in the table and figure in pages 33, and
34.
Table 4: Mobile service distribution
Mobile Service
Mobile Service Frequency Percentage
Safaricom 25 64
Airtel 8 20
Orange 3 8
Other 3 8
Total 39 100

34
Figure 6:Mobile service distribution
A large number of respondents as shown by the above table and figure at the rate of 67% from
the initial target population of 84.4% subscribe to the mobile provider, Safaricom, followed by
Airtel(20%), Orange(8%) and finally, Others(8%). Although Safaricom had the highest
percentage from all other mobile service providers, it was noticed that a good number of
respondents owned more than two mobile phone lines belonging to different mobile service
providers. This brought in some complexity in knowing where customer's loyalty was in terms of
innovation, and whether they were satisfied with the mobile services they already receive. This
situation is represented by the diagram and table on page 35.
25
8
3 3
0
5
10
15
20
25
30
Safaricom Airtel Orange Other
Mobile Service Distribution
Frequency

35
Figure 7:Actual representation of mobile service distribution
Table 5: actual representation of mobile service distribution
Mobile Service Distribution
Mobile Service Frequency Percentage
Safaricom only 18 67
Airtel only 2 7
Multiple mobile lines 7 26
Total 27 100
After the study was refined, it was still found that the mobile service provider, Safaricom still
held a large market with large percentage rate of 67%, followed by Airtel(7%), and finally those
respondents who owned multiple mobile lines comprised of 26%. Thus, this was the actual
representation that was used in relation to the study carried out by the researcher.
67%7%
26%
Actual Mobile Service Distribution
Safaricom only Airtel only Multiple mobile lines

36
4.4 Customer satisfaction level to innovative services offered
The main objective of this section was to distinguish whether the respondent was satisfied with
the services offered by the mobile service provider that they subscribe to. The findings in this
section were linked to the actual presentation of data as represented in the Table 5 on the
previous page, page 35.
The tables and figures below represent the responses given by the respondents depicting the
customer satisfaction levels to the innovative services offered by the various mobile service
provider classifications in this study.
Figure 8: Safaricom User's Response 1
According to the response rate in figure 8, 77.8% of the respondents gave a positive response,
while the other remaining 22.3% gave a negative response. From the positive perspective, many
of the respondents felt that the M-Pesa innovation platform made some difference and served
their current needs. Others responded by saying that the M-Pesa innovation created some
0 2 4 6 8 10 12 14 16
Yes
No
Yes No
Frequency 14 4
SafaricomUser's Response

37
convenience in terms of carrying out transactions on day-to-day basis. Other respondents were
satisfied with mobile service provider, Safaricom for their good customer care policy. The
others said Safaricom was a true and honest reflection of what innovation is supposed to be.
Another respondent commented that they were satisfied with variety of services, and added that
the financial link was a plus in terms of mobile banking and making transactions. Another
responded saying that they were satisfied with Safaricom because they are always offering new
products and exciting promotional competitions. Another respondent commented that they were
satisfied with the improved network and the fact they are able to call anytime, anywhere and any
place whenever they want. The final respondent said that they were satisfied with Safaricom
because their applications were user friendly.
From a negative point of view, the remaining respondents were disappointed by the ever
recurring charge a customer gets after subscribing to a mobile service. The remaining
respondents said that the services were too expensive while, the others had no specific reason or
comment. The above responses can be summed up by the table below.
Table 6: Safaricom User's response to customer satisfaction
Safaricom User's Response
Response Frequency Percentage
Yes 14 77.8
No 4 22.3
Total 18 100.1

38
Figure 9:Airtel User's Response 1
According to the response rate in figure 9 above, the positive and negative response given by the
respondents subscribed to the mobile service provider reported 50%. From a positive view, the
first respondent commented that he had no complaints, as the services he received met his
current needs while, the second respondent was dissatisfied because of slow internet services
and poor customer service. The above responses can be summed up by the table below.
Table 7: Airtel User's response to customer satisfaction
Airtel User's Response
Yes 1 50
No 1 50
Total 2 100
0 0.2 0.4 0.6 0.8 1 1.2
Yes
No
Yes No
Frequency 1 1
Airtel User'sResponse

39
Figure 10:Multiple line User's response 1
The response rate as represented by figure 10 above, presented a positive return rate of 100%
from all the 7 respondents who subscribed to more than two mobile service providers. The first
respondent commented that he could do his banking while on mobile, as well as surf the internet
and stream videos on Youtube easily. The second respondent commented that the mobile
providers come up with new and innovative products to improve customer value and satisfaction,
increasing their profits through diversification of the products they offer. The third respondent
commented that the mobile service providers were doing just enough in her opinion. Another
respondent commented that mobile services he subscribed to were fast and efficient. Another
responded by saying that the mobile services provided suited his lifestyle. The final two
respondents commented that the mobile services they received were flexible and convenient,
0 2 4 6 8
Yes
No
Multiple mobile line User's Response
Frequency

40
while the other felt they could do more with what the mobile service providers and, that they
were friendly in terms of price. The above responses can be summed up by the table below.
Table 8:Multiple line User's response to customer satisfaction
Multiple line Users Response
Yes 7 100
No 0 0
Total 7 100
4.5 Customer-product innovation perception
This research section sought to investigate whether the innovative products and services offered
by service providers were customized to the respondents needs or not. The findings that were
achieved in this section are all linked to the Table 5, Page 35.
The tables and figures below represent the response given by respondents depicting customer-
product perception of innovative products offered by the various mobile service provider
classifications in this study.

41
Figure 11: Safaricom User's response 2
According to the response rate represented in figure 11 on page 41, a high positive return rate
was encountered of about 88.9%, while the negative response rate realized was 11.2% which was
quite low. From a positive perspective, most respondents concurred that mobile service provider,
Safaricom's innovative products and services were customized to their personal needs while, the
other respondents refuted this claim saying that it was made to suit the general public's needs.
Some of the positive reasons that the respondents gave were that the service provider provided
various options to choose from. Others commented saying that the innovative products and
services like M-Pesa and internet bundle choice was wide according to affordability. While
others also concurred by saying because the services were user friendly and functional according
to their current needs. Other respondents also concurred saying it was fast, reliable and
convenient as they were able to pay bills as well as manage their bank accounts and
0 5 10 15 20
Yes
No
Yes No
Frequency 16 2

42
communicate effectively at the touch of a button. These responses can be all summed up by the
table below.
Table 9: Safaricom User's response to Customer-product innovation
Safaricom User's Response
Yes 16 88.9
No 2 11.2
Total 18 100.1
Figure 12: Airtel User's response 2
0 0.2 0.4 0.6 0.8 1 1.2
Yes
No
Yes No
Series1 1 1

43
According to the response rate represented by figure 12 on page.42, an even return rate was
realized from a positive and negative perspective which were both 50% from both respondents
who were subscribed to the mobile service provider, Airtel. One respondent concurred that the
mobile service provider, Airtel's innovative products and services was customized to his needs as
they were cost effective, while the other respondent refuted this claim saying that the products
and services were generalized to the general public's needs and thus was not customized to his
current needs as a customer. Both of these responses can be summed up by the table below on
page 42.
Table 10:Airtel user's response to customer-product innovation
Airtel Users Response
Yes 1 50
No 1 50
Total 2 100

44
Figure 13: Multiple User's response 2
According to the response rate represented in figure 13 above, page 44, a high positive return
rate of 57.2%, while a sufficient negative return rate of 42.9% was realized from respondents
who subscribed to more than two mobile service providers like Safaricom, Airtel, Orange and
others as explained earlier in page 33. Some of the respondents concurred to this section
commenting that the various mobile service providers they subscribed to gave solutions to their
lifestyle choices in terms of the various innovative products and services offered to them. Other
respondents also concurred that the innovative products were customized to their needs as they
were able to pay their bills easily, send mail in real time as well as transact business on their cell
phones. The remaining respondents refuted that the various mobile service providers 'hurt' the
low-income earners with tailor-made services since they are not necessarily affordable. While
0 1 2 3 4 5
Yes
No
Yes No
Frequency 4 3
Multiple mobile line User's
Response

45
other respondents viewed themselves as diverse human beings as they felt the innovative
products cannot really satisfy their needs as individuals have different tastes and preferences.
All the above responses can be summed up by the table below.
Table 11: Multiple line user's response to customer-product innovation
Yes 4 57.2
No 3 42.9
Total 7 100.1
4.6 Electronic Cash Service presence
This section sought to explore whether the respondent was satisfied or not with the mobile
services offered by the various mobile service providers available. All the findings that were
achieved in this section were all linked to the table 5, that was presented previously on page 35.

46
The tables and figures below represent the responses given by the respondents depicting the
customer satisfaction levels to the innovative mobile banking services as offered by the various
mobile service provider classifications in this study.
Figure 14:Safaricom User's response 3
According to the response rates represented in figure 14 above, a high positive return rate of
72.3% and a relatively sufficient negative return rate of 27.8%. Thus, the finding in this section
affirmed a great number of respondents subscribed to the mobile service provider, Safaricom
were satisfied with the mobile banking services being offered to them hence, proving that the
mobile banking presence was quite high.
From a positive perspective, many respondents concurred saying that they were satisfied with the
mobile banking services provided by Safaricom such as M-Shwari, which allows a customer to
0 2 4 6 8 10 12 14
Yes
No
Yes No
Frequency 13 5

47
borrow money in form of a loan or mortgage at any given time. This opinion was viewed by
many to be convenient, fast, reliable, efficient, accessible and available to the customer 24 hours,
7 days in a week. Other respondents concurred saying that through the link creation between
bank account and mobile service provider, Safaricom made business transactions to be quite easy
and stress-free for the customer. The other 27.8% refuted this claim saying that there was limited
access to mobile banking, others were not accustomed to mobile banking, while other
respondents felt that there should never be limits when it comes to mobile banking. The above
responses were all be summed up in the table below.
Table 12:Safaricom User's response to mobile banking
Safaricom Users Response
Yes 13 72.3
No 5 27.8
Total 18 100.1

48
Figure 15: Airtel User's response 3
According to the response rate represented in figure, figure 15 above, an even return rate for the
positive as 50% while, the negative was also 50%. Thus, the finding amongst the two
respondents who were subscribed to the mobile service provider, Airtel was split in term of
opinions . The first respondent was a student was receptive to mobile banking idea while, the
second respondent refuted he was not satisfied with the mobile service provider, Airtel as their
mobile banking services are not spread all over the country. Thus, this implied a relatively low
mobile banking presence despite, the recent mobile banking service introduced by Airtel known
as Airtel money. The above responses can all be summed up by the table in the next page, page
48.
0 0.2 0.4 0.6 0.8 1 1.2
Yes
No
Yes No
Series1 1 1

49
Table 13: Airtel User's response to mobile banking
Airtel Users Response
Yes 1 50
No 1 50
Total 2 100
Figure 16: Multiple line user's response 3
According to the response rate represented in figure 16 above, a significantly high positive
return rate of 57.2%, as well as a relatively high negative return rate of 42.9% is encountered in
0 1 2 3 4 5
Yes
No
Yes No
Frequency 4 3
Multiple mobile line User'sResponse

50
the course of the study. This implied that mobile banking presence amongst the respondents was
quite high as the respondents had a wide range of innovative mobile banking products and
services to choose from the various mobile service providers as highlighted in the study. A good
number of respondents within this classification concurred that they were satisfied as they had a
wide range of mobile banking services to choose from the different mobile service providers.
The echoed their different opinions, some said the were able carry out transactions easily without
having to stand in long queue's to deposit money at the bank or at ATM's. While, the other
respondents had some reservations with mobile banking, as some feared that the service was
biased and lacked flexibility, others feared they would lose money through fraudulent money
mobile banking schemes, while others were not accustomed to the idea as they have never used
the service before. All the above responses can be summed up by the table below.
Table 14: multiple line user's response to mobile banking
Yes 4 57.2
No 3 42.9
Total 7 100.1

51
4.7 Overall effect of Innovation to customer satisfaction
In relation to the study an overview was needed so as to conclude the research as concerns to the
main themes highlighted. The researcher in this case wanted to give a general overall effect of
innovation in terms of whether mobile service providers have done enough to meet the
customer's needs and wants.
The figure below and table on pages 51 and 53, represents the general response from all the
respondents depicting whether the mobile service providers have done enough in terms of
meeting the customer's needs and wants as well as their expectations.
Figure 17: General mobile user response to effect of innovation to customer satisfaction
41%
52%
7%
General Mobile User Response
Yes
No
Both

52
According to the response rate represented in figure 4.16 above, a high negative return rate of
51.9% and a positive response rate of 40.8%, while the remaining 7.5% comprised of those
respondents who were 'on the fence' on the matter as they answered both, yes and no. Thus, this
implied that most mobile users were not fully satisfied with their mobile service provider's
services in terms of affordability, network coverage, electronic banking charges, among other
reasons given by the respondents. On the other hand, a relatively good number of mobile user's
were satisfied with the mobile service provider's customer care response, application
convenience(Mobile banking), new and future-forward products and services, among other
positive reasons. The remaining 7.5% were on the fence with differing positive and negative
responses in terms of expense comparison to the other mobile service providers and unsolicited
SMS messages on promotions.
From a negative view point, many respondents aired their views saying that the mobile service
providers should not just be content with the innovative services and products they are offering
but, should always create room for improvement in terms of network coverage and quality.
Others responded by saying that mobile service providers should consider the different social
classes of people by revising of cost of using any given mobile subscriber. Although convenient,
some respondents had complaints with mobile banking application like M-Pesa, whose
transaction charges were higher than those of ATM charges. Other respondents complained that
sometimes it was hard to get customer care service centre on phone, which was most frustrating
to the customer. While others aired their views saying that the mobile service provider they were
subscribed to was dormant hence, the customer have no much product or service options to
choose from. Others felt that mobile service providers like Orange, should strive to be aggressive

53
in marketing their products like Orange money to eliminate the monopoly situation in the
telecommunication industry in Kenya.
On the other hand, some mobile subscribers concurred with the statement saying that their needs
were addressed anytime they would communicate their queries to customer care service, while
others had no complaints as long as their current needs were met and that it completed their
lifestyle.
The above responses can all be summed up in the following table, Table 15 below, page 53 .
Table 15:general mobile user response to effect of innovation to customer satisfaction
General Mobile User Response
Yes 11 40.8
No 14 51.9
Both 2 7.5
Total 27 100.2

54
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
This chapter consists of a summary of the findings, conclusions, recommendations encountered
during the study, as well as some suggestions for further research in this field .
5.2 Summary of the findings
The research at hand sought to find out the effect of innovation to customer satisfaction to
enterprises, and especially in the telecommunication industry in Kenya. Written questionnaires
were the tool used in the survey of the study population. In 2015, Kenya had an estimated
population of 47.8 million, thus a representative sample of 27 were selected and interviewed for
the study. Of the 27 respondents 20 were male and 7 were female.
The study showed that the respondents, all from different backgrounds and social classes were
subscribed to various mobile service providers. With 67% of the population subscribed to the
mobile service provider, Safaricom, it was noted that 72.3% of the respondents were satisfied
with the electronic cash services provided such as M-Shwari, which allowed a customer to
borrow money in form of a loan or mortgage at any given time. The respondents viewed the
mobile banking service M-Pesa as fast, convenient, reliable, accessible and available to the
customer 24 hours, 7 days in a week.
It was also found out that 88.9% of the respondents concurred that the innovative products and
services being offered were customized to their needs. They responded by saying that the
innovative services were user friendly and functional according to their current needs as they are

55
able to pay bills as well as manage their bank accounts and communicate effectively at the touch
of a button.
The research also noticed that 77.8% of the respondents who owned Safaricom mobile lines were
satisfied with the various innovative services and products they received. They responded using
the electronic cash service, M-Pesa. They commented that they were satisfied with variety of
services, and added that the financial link was a plus in terms of mobile banking and making
transactions.
5.3 Conclusions
It was important to realize that there were three mobile service provider classifications:
Safaricom users, Airtel users and, Multiple mobile line user's. The multiple mobile line user
classification in this study represented the respondents who subscribed to more than one mobile
service provider. This situation brought in some complexities in knowing where the respondent's
loyalty lay amongst the various mobile service providers like Safaricom, Airtel, Orange etc. thus,
a general opinion was needed on an overall effect of innovation to customer satisfaction to the
study.
After the study it was realized that most mobile users were not fully satisfied with their mobile
service provider's services in terms of affordability, network coverage, electronic banking
charges, among other reasons given by the respondents. On the other hand, a relatively good
number of mobile user's were satisfied with the mobile service provider's customer care
response, application convenience(Mobile banking), new and future-forward products and
services, among other positive reasons. The remaining respondents were on the fence with

56
differing positive and negative responses in terms of expense comparison to the other mobile
service providers and unsolicited SMS messages on promotions as shown by the figure 4.16 .
5.4 Recommendations
From a business perspective, the telecommunication companies should carry out surveys on
customer preferences, tastes and likes as innovation needs approval from the customer for it to
serve its purpose.
In reality, innovation differs from invention, in that innovation refers to the 'betterment' or
improving of the already existing ideas and processes, other than coming up with new ones.
Whereas, invention refers more directly to the actual creation of the idea or method itself. Other
scholars also differ innovation to improvement, on the notion that innovation is doing something
different, rather than doing something better.
Ailin and Lindgren,(2008) Innovation can be manifested in a variety of shapes - new products,
new business models, enhanced customer answers, a better product, process, channel or service
offering.
Locally, more customers today prefer to purchase smart-phones to previous phones due to
enhanced features like social media e.g. facebook, twitter etc., High definition camera and
video, music, internet connectivity.
Therefore, the innovative products and services provided by telecommunication companies
should be customer-centered as the customer is the main element for a product's success. These
enterprises should be in a position to realize that if the customer is not 'happy' or if the innovative

57
product does not meet his or her expectations, the product being offered will not sell hence,
excess product surplus as well as minimal demand for the product or service.
5.5 Suggestions for further research
The study recommends that further research to be carried out on the effect of innovation to
customer satisfaction. This is because many customers tastes and preferences differ from one to
another. For example some customers may prefer an Iphone to an android mobile device. Thus,
this would create a basis for study showing why a customer would prefer one product to another
in agreement to Ailin and Lindgren(2008), who stated that Innovation can be manifested in a
variety of shapes - new products, new business models, enhanced customer answers, a better
product, process, channel or service offering.
While carrying out the study it was hard to find the challenges the telecommunication companies
faced when it came to provision of their services in Kenya. Innovation in the context of the
Kenyan market were not covered, as there was very little content from a local perspective. There
is a great research opportunity in the field, such as the effect of innovation to brand awareness in
the telecommunication industry.

58
REFERENCES
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Research Policy, 14:3-22
Anderson, R.E.(1973)"Consumer dissatisfaction: The effect of disconfirmed expectancy on
Perceived Product Performance", Journal of Marketing Research, 10 February:38-44
Bahregheh, A., Rowley, J. and Sambrook, S.(2009)"Towards a multidisplinary definition of
Innovation", Management Decision, 47(8),1323-1339
Cardozo, R.(1965)"An experimental Study of Customer Effort, Expectation and Satisfaction",
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Carlsmith, J. and Aronson, E.(1963)"Some Hedonic Consequences of the Confirmation and
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156
Christensen, C.M and Rosenbloom, R.(1995) Explaining the attacker's advantage: technological
paradigms, organizational dynamics and the value network. Research Policy, 24,233-257
Christensen, C.M.(1997)The Innovators Dilemma: when new technologies cause great firms to
fail, Havard Business School Press, Boston, Massachusetts
Dominic White (17 February 2007)"Investigation into Vodafone's mystery partner in
Kenya".Telegraph.co.uk
Farris, Paul W.; Neil T. Bendle; Philip E. Pfeifer; David J. Reibstein(2010) Marketing Metrics;
The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey.
Pearson Education Inc.

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Frankelius, P(2009), Questioning two myths in Innovation Literature, Journal of High
Technology Management Research. Vol.20, No.1, pp 40-51.
Gatignon, Hubert, Michael L. Tushman, Wendy Smith, and Philip Anderson(2002)"A Structural
Approach to Assessing Innovation: Construct Development of Innovation Locus, Type, and
Characteristics," Management Science, 48,9,1103-1122
Gitman, Lawrence J.; Carl D. McDaniel(2005) The Future of Business: The Essentials. Mason,
Ohio: South-Western
Hagedoorn, J. and Shakenraad, J. (1991)Inter-Firm Partnerships For Generic Technologies: The
Case of New Materials. Technovation 11, 429-444
Hagedoorn, J. and Shakenraad, J.(1992) Leading Companies and Networks of Strategic
Alliances in Information Technologies. Research Policy 21, 163-181
Hovland, C.O. Harvey and M.Sherif(1957)"Assimilation and contrast effects in reaction to
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York City: Meril
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Mugenda, O.M and Mugenda A.G (2003) Research Methods: Quantitative and Qualitative
approaches. Nairobi, Acts Press.

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Olson, J. and Dover, P.(1979)"Disconfirmation of consumer expectations through product trial",
Journal of Applied Psychology: Vol.64, pp.179-189
Peyton, R.M, Pitts, S., and Kamery, H.R.(2003)."Consumer Satisfaction/Dissatisfaction(CS/D):
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61
APPENDIX
RESEARCH QUESTIONNAIRE
I would like to thank you for going out of your busy schedule to take part in these exercise. I am
a college student carrying out a research on the effects of innovation on customer satisfaction. I
hereby want to assure you the respondent, that all data being collected through this questionnaire
is confidential and purely for academic purposes. Therefore, I kindly ask that you tick in the
boxes and answer the following questions below as honest as you possibly feel. Finally, I would
also like to request that you do not write your name on this questionnaire for confidentiality
reasons.
a.) Demographic Distribution
1.What is your gender?
Male
Female
2.Which of the following age brackets do you fall under?
20-25
25-30
30-35
35-40
40-55
3. What is your income earning level?
High income
Middle income
Low income

62
b) Mobile Service Distribution
4.Which of the following mobile providers below are you subscribed to?
Safaricom
Airtel
Orange
Other
c) Customer satisfaction level to innovative services offered
5.a)From a customer's point of view, are you satisfied with the innovative products and services
that your mobile provider is offering?
Yes
No
b.) Reason for your answer above.
............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
...........................................................................................................................................

63
d)Customer-product innovation perception
6.a)Are the innovative products and services being offered by the mobile provider you subscribe
to tailor-made or customized to your needs as a customer?
Yes
No
b.)Reason for your answer above.
..............................................................................................................................................
............................................................................................................................................
.............................................................................................................................................
...........................................................................................................................................
e) Electronic Cash Service presence
7.a.)With the growth in mobile banking today, are you satisfied with banking services offered by
your mobile provider?
Yes
No
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................

64
f) Overall effect of innovation to customer satisfaction.
8.a.)Finally, do you think that your mobile provider has done enough in terms of customer
satisfaction and meeting your needs and expectations as a customer?
Yes
No
.................................................................................................................................................
............................................................................................................................................
............................................................................................................................................
............................................................................................................................................
END

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