Research Article
A Study on the Antecedents and Consequences of Switching Costs in Service Firms
Wonkwang University
Published: January 2009 · Vol. 38 No. 5 · pp. 1381-1412
Full Text
Abstract
The customer retention strategy is considered by many service providers as an important source of competitive advantage in low growth market. Enhanced customer loyalty in service firms will lead to greater profitability. A great deal of research has focused on examining the relationship between customer loyalty and its antecedents via switching costs. However, these studies provide little understanding of relationships among variables in service products. Specifically, these studies have not tried to explore antecedents and consequences of switching costs and investigate relationships among variables considering characteristics of service products, even though service products have different features from tangible products. Therefore, it is necessary to investigate the factors which can influence switching costs in service products considering its’ characteristics. Switching costs can be defined as the costs involved in changing from one supplier to another. The domain of switching costs contains both monetary expenses and nonmonetary costs. Furthermore, the domain could include the loss of loyalty benefits as a result of ending the current relationship. The relationship between service providers and customers has to be approached to understand switching behavior in the services industry. Burnham et al.(2003) suggested that personal relationship loss costs are one of switching cost facets. Personal relationship loss costs are the affective losses associated with breaking the bonds of identification that have been formed with the people with whom the customer interacts. Consumers’ familiarity with incumbent provider employees creates a level of comfort that is not immediately available with a new provider. When the bonds of identification between service providers and customers are broke, customers could feel emotional discomfort and in turn, this uncomfortable feeling could be perceived as the costs when they consider switching service providers. Therefore, the personal relationship loss costs could be the critical factor for explaining switching costs in the service industry where interactions between service providers and customers take place frequently. Moreover, the bonds of identification caused by the direct interactions between service providers and customers could influence customers’ perceived switching costs, because customers participate in service production processes due to the inseparability of service products. It is difficult to evaluate the performances of service providers due to the intangibility of service products. Thus, customers perceive the switching costs higher than tangible products and are prone to maintain the relationship with established service providers. The uncertainty costs and searching costs caused by switching service providers could be perceived higher when customers evaluate performances of established service providers positively. Early in the service provider/customer relationship, consumers are often faced with not knowing what to expect of the service. Owing to this intangibility, they perceive services as risky and consequently need to have initial confidence in their service provider. To reduce the uncertainty associated with service encounters, buyers will look for signs or evidence of service quality, and will draw inferences about service quality from their perceptions. Therefore, favorable corporate associations could be concrete cues for evaluating the service performance and facilitate the drawing of more positive evaluation which in turn influences perceived switching costs by increasing psychological uncertainty costs. Moreover, owing to the inseparability which refers to productions and consumptions of service products takes place simultaneously, consumers take part in the process of service provision. Thus, consumers have to participate in service process actively and make an effort to obtain the satisfactory service performance. The customers’ perceived usage convenience of service processes increase learning costs relating switching to new service providers and in turn, influence perceived switching costs, because the services which customers experience are delivered in a way of process and flow. Therefore, this research explores personal identification, corporate associations, and usage convenience as antecedents which affect customers’ perceived switching costs and customer royalty as a consequence and investigates relationships among variables considering characteristics of service products. The results show that customers’ perceived personal identification between sales person and customer has a positive effect on perceived switching costs and behavioral loyalty. Personal identification can be strengthened by the formation of commercial friendship. Customers’ perceived switching costs are affected by corporate attractiveness. The perceived corporate attractiveness which is strengthened by corporate associations has a positive influence on customers’ behavioral loyalty. Corporate ability and social responsibility association influences perceived attractiveness positively. In terms of the relationship between corporate association and perceived switching costs, the corporate ability and social responsibility association has an indirect effect on perceived switching costs through corporate attractiveness. In addition, the usage convenience has a positive effect on perceived switching costs.
