The switching costs draw much attention from the managers of service companies and marketing experts as one of the key factors that have an considerable effect on customer loyalty. Switching costs are formally defined as the cost involved in changing ...
The switching costs draw much attention from the managers of service companies and marketing experts as one of the key factors that have an considerable effect on customer loyalty. Switching costs are formally defined as the cost involved in changing from one service provider to another. Switching costs include not only those that can be measured in monetary terms but also the psychological cost of becoming a new customer of a firm, and the time and efforts involved in purchasing new service.
The purpose of this study is to understand the role of switching costs. This study analyses the effects of customer satisfaction, customer value and the switching costs on customer loyalty, and the structural relationship among these factors in service industry. The data was analyzed with reliability analysis, factor analysis, t-test and structural equation model using SPSS and AMOS program.
Hypotheses testified through empirical investigation are follows.
1) Antecedents of switching costs(attractiveness of alternatives, alternative experience and interpersonal relationship) have significant influence on switching cost.
2) Switching costs have significant influence on customer value and satisfaction.
3) Customer value, customer satisfaction and switching costs have significant influence on customer loyalty.
4) Switching costs have a moderating effect on the relationship between the customer satisfaction and customer loyalty.
Empirical findings are as follows.
First, the antecedents of switching costs(attractiveness of alternatives, alternative experience and interpersonal relationship) had the effects on the switching costs. The results showed that interpersonal relationship has positive effects. Alternative experience and Alternative attractiveness have negative effects on switching costs.
Second, switching costs have the positive effects on the customer value and satisfaction. The findings suggest that perceived switching costs can improve customer value and customer satisfaction.
Third, switching costs, customer value and customer satisfaction have the positive effects on customer loyalty. The findings suggest that customer loyalty can be enhanced through improving customer satisfaction, high customer value and offering high switching costs.
Fourth, switching costs have the moderating effects on the relationship between the customer satisfaction on customer loyalty. The effect of customer satisfaction on customer loyalty is less when switching costs are perceived to be high rather than low. Perceived switching costs reduce customer sensitivity to switching behavior according to the level of customer satisfaction.
The study analysis shows that switching costs, it's antecedents, customer value and customer satisfaction influence on customer loyalty. The findings of this research provide integrated theoretical framework of switching costs and it's antecedents. The implications of this study can be summarized as follows.
First, the findings of the study show that the customer value, customer satisfaction, switching costs and it's antecedents are important factors in the service switching process and suggest some strategic implications for controlling the customer's service switching behavior.
Second, switching costs can be used as a strategic tool to deter customer defection with help of a rewarding program to increase the benefits of customer retention.