Customer Retention Online: the Influence of Switching Barriers

EXTENDED ABSTRACT - Organized service recovery policies and programs are important tools to firms in their efforts to maintain satisfied and loyal customers. For this reason, service failure and recovery issues have been the focus of much research throughout the last decade. During this time we have achieved considerable understanding of this increasingly important issue. However, despite the insights gained and the consensus reached, we still have a somewhat limited understanding of the topic (Tax, Brown, & Chandrashekaran, 1998). In particular, the service recovery literature generally assumes a somewhat restricted view of the service failure/recovery encounter. Research tends to examine a given failure, consumer reactions (attitudinal and behavioral) to that failure, the company’s attempt at a recovery, and post-recovery consumer outcomes, particularly consumer intentions to remain with the firm. Such research largely ignores a number of relevant variablesCexisting outside of the failure/recovery encounterCthat serve to encourage (or discourage) the consumer’s desire to stay (or leave) the failing company in question. Further, research on this topic in an online setting is practically non-existent (for an exception see Holloway and Beatty 2003).

Citation:

Betsy B. Holloway and Sharon E. Beatty (2005) ,"Customer Retention Online: the Influence of Switching Barriers", in AP - Asia Pacific Advances in Consumer Research Volume 6, eds. Yong-Uon Ha and Youjae Yi, Duluth, MN : Association for Consumer Research, Pages: 104.

Asia Pacific Advances in Consumer Research Volume 6, 2005      Page 104

CUSTOMER RETENTION ONLINE: THE INFLUENCE OF SWITCHING BARRIERS

Betsy B. Holloway, Samford University, U.S.A.

Sharon E. Beatty, University of Alabama, U.S.A.

EXTENDED ABSTRACT -

Organized service recovery policies and programs are important tools to firms in their efforts to maintain satisfied and loyal customers. For this reason, service failure and recovery issues have been the focus of much research throughout the last decade. During this time we have achieved considerable understanding of this increasingly important issue. However, despite the insights gained and the consensus reached, we still have a somewhat limited understanding of the topic (Tax, Brown, & Chandrashekaran, 1998). In particular, the service recovery literature generally assumes a somewhat restricted view of the service failure/recovery encounter. Research tends to examine a given failure, consumer reactions (attitudinal and behavioral) to that failure, the company’s attempt at a recovery, and post-recovery consumer outcomes, particularly consumer intentions to remain with the firm. Such research largely ignores a number of relevant variablesCexisting outside of the failure/recovery encounterCthat serve to encourage (or discourage) the consumer’s desire to stay (or leave) the failing company in question. Further, research on this topic in an online setting is practically non-existent (for an exception see Holloway and Beatty 2003).

Therefore, this research undertakes a holistic examination of the service failure/recovery process by incorporating the role of switching barriers. Further, the study is conducted in an online setting in order to extend this research to a context of growing relevance. We believe this represents the first attempt not only to conceptualize and measure online switching barriers, but also to examine their influence in the service failure/recovery process. Service failuresBas well as ineffective recovery effortsBhave long been regarded as a common reason for switching behavior. When a service failure occurs and a poor or insufficient recovery is attempted, the consumer is very likely to consider alternative service providers. However, it stands to reason that the consumer may choose to remain with the firm or even to "change" the firm via complaint behavior if enough barriers to switching existCdespite the consumer’s dissatisfaction with the recovery effort and increased distrust of the firm.

Switching barriers are defined as any factor that makes it more difficult or costly for consumers to change providers. Building on the research of Jones, Mothersbaugh, and Beatty (2000), the online switching barriers examined here include ongoing relationship quality, perceived switching costs, and the attractiveness of available alternatives. Because of the additional costs and burdens they incur in the switching process, we hypothesize that these barriers will reduce the likelihood of customer switching following a service failure encounter even when other factors, such as dissatisfaction and distrust, may encourage such switching. Therefore, our research examines the direct effects of these barriers on intention to remain with the firm as well as their moderating influence on the relationships between recovery satisfaction -> intention to remain, and post-recovery trust -> intention to remain following an online service failure/recovery encounter and weak recovery effort.

This research was conducted in the context of two types of online B2C (i.e., business to consumer) operationsCretailers that operate only online and retailers that operate both online and offline via traditional stores and/or catalogue. This research involves a web-based survey and incorporates a role-playing technique (e.g., Mohr & Bitner 1995), in which respondents are asked to imagine themselves in the role of a customer, experiencing a hypothetical scenario involving an online service failure encounter followed by a weak recovery effort. All proposed constructs in this research are drawn from existing literature and scale items were adapted for the online context of the study. A total of 516 adult U.S. Internet shoppers were recruited by students from marketing classes to participate. The students were extensively trained before their recruitment occurred. All survey participants were pre-qualified as having purchased at least one physical product (i.e., involving the delivery of physical merchandise) on the Internet within the past 2 years.

The properties of all constructs (reliability and validity) were assessed using structural equation analysis (LISREL 8.3), and all proposed hypotheses are tested using regression and moderated regression analysis. The results highlight the influential role of ongoing relationship quality in the online service recovery process for both groups of companies. Ongoing relationship quality had a significant moderating effect for both groups of companies, as well as a direct effect on intention to remain in the offline/online group. The other switching barrier that influenced respondents’ reactions to the service recovery scenario was the attractiveness of available alternatives variable. This barrier also influenced intention to remain for both groups of companies, although its influence was stronger in the offline/online group than in the online only group. The third proposed switching barrier, perceived switching costs, appeared to have no effect on the dependent variable for both groups of companies.

The results of this study offer a number of meaningful implications for research and practice alike. In particular, the results clearly support the idea that switching barriersCvariables that exist outside of the failure/recovery encounterCinfluence the consumer’s intention to stay (or leave) following an online service failure/recovery encounter. Ongoing relationship quality and the attractiveness of available alternatives have a number of direct and moderating effects across the two groups, thereby supporting the notion that these barriers directly and indirectly foster online customer retention. Further, the proposed switching barriers appear to have a stronger influence following a service failure/recovery encounter in the offline/online setting than in the online only companies. This suggests a strategic advantage for those companies operating in both the offline and online channels over their online-only competitors in regards to more effectively retaining customers. In conclusion, research results here imply that switching barriers should be a key variable for inclusion in future service failure/recovery research, regardless of the context.

REFERENCES

Holloway, Betsy B. and Sharon E. Beatty (2003), "Service Failure in Online Retailing: A Recovery Opportunity," Journal of Service Research, 6 (1), 92-106.

Jones, Michael A., David L. Mothersbaugh and Sharon E. Beatty (2000), "Switching Barriers and Repurchase Intentions in Services," Journal of Retailing 76 (2), 259-74.

Mohr, Lois A., and Mary Jo Bitner (1995), "The Role of Employee Efforts in Satisfaction with Service Transactions," Journal of Business Research, 32 (3), 239-52.

Tax, Stephen S., Stephen W. Brown, and Murali Chandrashekaran (1998), "Customer Evaluations of Service Complaint Experiences: Implications for Relationship Marketing," Journal of Marketing, 62 (April), 60-77.

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