Why do we stay loyal with a certain company? Either because we want to or because we have to. But why is this the case? One reason is the attractiveness of alternatives, that is, how much consumers like competitors. Our recent paper published in the Journal of Service Theory and Practice goes beyond customer satisfaction and proposes a dual model of service switching to explain customer loyalty in a mobile Internet setting. The dual model, which includes barriers and inducements of switching, is based on the “mooring” and “pull” concepts in migration literature.
Study on Customer Loyalty among Mobile Internet Subscribers
Results of an empirical study show that first, customer satisfaction and switching barriers (i.e., a focal firm’s marketing innovation initiatives, switching costs, inertia, and local network effects) are positively related to customer loyalty. To a certain extent, this is not very surprising as happy customers are – of course – more willing to continue a relationship with a firm than unhappy customers are. Likewise, additional benefits and high switching costs (e.g., losing the accumulated the reward points when switching from Verizon Wireless to AT&T) matter. However, interestingly, switching barriers has a stronger influence on customer loyalty compared with customer satisfaction. This is because in the competitive market where consumers are continually incentivized to switch mobile service providers (e.g., pay for the early termination fee), they tend to be more demanding, difficult to satisfy, and less loyal than ever before. Without the glue of switching barriers, even a well-designed customer satisfaction program will fail to achieve its retention goal.
Second, switching inducements (i.e., competitors’ marketing innovation initiatives, alternative attractiveness, variety-seeking tendencies, and consumers’ susceptibility to social reference group influence) is negatively related to customer loyalty. Interestingly, we found that switching barriers have a significant moderating effect on the switching inducements-loyalty link but not on the satisfaction-loyalty link. These findings suggest that switching barriers plays a “buffer” role in offsetting the adverse impact of high switching inducements on loyalty, rather than a “protective” role in reducing the sensitivity of (dis)loyalty to (dis)satisfaction when negative incidents occur. From this, we can infer that switching barriers are more effective in insulating satisfied customers from the inducements of switching (e.g., lower prices, better service quality and quicker delivery) rather than discouraging dissatisfied customers from switching to alternatives.
Our study contributes to the service switching literature by empirically validating multidimensional scales of switching barriers and inducements from a nuanced perspective and specifying them as reflective-formative type II models. Our study highlights the emerging importance of marketing innovation initiatives (from a focal service provider and competitors), local network effects, and consumers’ susceptibility to social reference group influence in determining the loyalty of mobile Internet subscribers. These attributes impact switching process and costs, but have received scant attention in the service switching literature. To the best of our knowledge, this study is among the first to use opposing dimensions to measure switching barriers and its counterpart. Hence, it illustrates how the two contrasting mechanisms can coexist in the minds of mobile Internet subscribers.
This posting was written by Stephanie Chuah
Chuah, S. H. W., Chuah, S. H. W., Rauschnabel, P. A., Rauschnabel, P. A., Marimuthu, M., Marimuthu, M., … & Nguyen, B. (2017). Why do satisfied customers defect? A closer look at the simultaneous effects of switching barriers and inducements on customer loyalty. Journal of Service Theory and Practice, 27(3), 616-641.