Switching Costs

It is a marketplace reality that marketing managers sometimes inflict switching costs on their customers, to inhibit them from defecting to new suppliers. In a competitive setting, such as the Internet market, where competition may be only one click away, has the potential of switching costs as an exit barrier and a binding ingredient of customer loyalty become altered? To address that issue, this article examines the moderating effects of switching costs on customer loyalty through both satisfaction and perceived-value measures. The results, evoked from a Web-based survey of online service users, indicate that companies that strive for customer loyalty should focus primarily on satisfaction and perceived value. The moderating effects of switching costs on the association of customer loyalty and customer satisfaction and perceived value are significant only when the level of customer satisfaction or perceived value is above average. In light of the major findings, the article sets forth strategic implications for customer loyalty in the setting of electronic commerce. © 2004 Wiley Periodicals, Inc.

This study investigated business-to-business (B2B) repeated purchase intent and its relationships with customer value and customer satisfaction. Additionally, it explored the link between willingness to purchase again, switching costs and product returns management. Modern customers are more likely to switch suppliers; however, previous research suggests that this behaviour can be attenuated by a robust returns management experience. The purpose of this study was to provide a revised model of B2B repeated purchase intent that integrates the concept of product returns management and switching costs with existing B2B customer repurchase intent models.The authors reveal the complex relationship between returns management and repeated purchase intent. Specifically, the authors’ results indicate that the effect of product returns on repurchase intent is opposite to the effect of customer value, depending on the value of customer value. The authors’ findings indicate that even when switching costs are low, firms can positively impact the intent to purchase again in the future if they increase the level of customer satisfaction. In addition, the authors’ findings indicate that in the context of B2B a high/low level of customer satisfaction does not trigger a positive effect of managing product returns on repurchase intent.

Purpose - This paper aims to simultaneously examine the moderator effects of switching costs, classified by type (relational, procedural, and financial) and direction (positive and negative), on the relationships between customer-perceived value, trust, and loyalty.
Design - This study reports on quantitative data from a survey of two service contexts which vary in their degree of customer-employee contact and customization. Three hundred and sixty usable questionnaires were collected, and the data was analysed using multi-group structural equation modelling.
Findings - The results demonstrate that switching costs moderate, in different ways, the relationships between customer loyalty, trust, and perceived value. Moreover, the strength of the moderator effects vary according to service type.
Research limitations/implications - This study provides new insights into understanding the moderating role of switching costs; thus, it reduces inconsistencies about the direction and the strength of the moderator effect of switching costs in loyalty frameworks.
Practical implications - This study helps managers choose the most effective loyalty strategy for specific service industries and perceptions of switching costs, and to look beyond their service boundaries in order to cross-fertilize strategies for handling switching costs.
Originality/value - No empirical study to date has simultaneously examined the moderator effect of switching costs, classified by type and direction, on the relationships between customer-perceived value, trust, and customer loyalty across two different service contexts in a single framework.
Keywords switching costs, customer loyalty, trust, perceived value, moderator effects, services.

Research question: The purpose of this study is to explore the financial effect of four types of team name changes, three of which have not been previously studied. We do so in the context of development leagues where rebranding occurs with considerable frequency, thus affecting a great number of sport managers.
Research methods: The effect of rebranding on club revenue was derived by combining the results of two analyses. The first used an economic demand equation to examine the attendance variations of 475 Minor League Baseball teams in 244 cities in the United States and Canada between 1980 and 2011 that engaged in one (or more) of four different types of name changes. The second examined changes in merchandise sales after a rebranding effort.
Results and Findings: The results indicate that development teams fail to derive financial gains from adopting the names of their major league parent clubs. Instead, teams that abandon unique local names see large attendance decreases suggesting that local names generate greater brand awareness and brand image than their major league counterparts. The largest merchandise gains are generated by teams that adopt new, local names.
Implications: These findings further our understanding of the outcomes of brand management and rebranding efforts by acknowledging that former and future names have varying levels of brand equity that have real effects on consumer purchasing behaviors and subsequent financial gains and losses.

We advance the literature on dynamic oligopoly pricing models in the presence of switching costs by additionally modeling the strategic pricing role of the retailer within the distribution channel. In doing this, we study the relative dynamic pricing implications of how current retail and wholesale prices for a brand must optimally take into account, respectively, past versus future demand for the brand. Using scanner data from the cola market, we find that while the retailer exploits the benefit of inertial demand by appropriately increasing the retail profit margin, the cost of investing is borne entirely by the manufacturers. We use simulation studies to show how the retailer will lose its ability to leverage the benefits of inertial demand as consumers become more price sensitive. We also show that when inertia of the more price sensitive customer segment increases, the aggregate welfare of consumers, retailer and manufacturers may all increase.

Professional baseball operates a tiered system of talent development facilitated by alliances between Minor League Baseball (MiLB) clubs and higher status Major League Baseball (MLB) parent teams. This study applies management theory to advance the literature on MiLB demand modeling by proposing and testing a new set of demand determinants based on interorganizational alliance principles. Team executives at the AA level should be alert to the high cost of switching team alliances and of changing to a parent club in closer geographical proximity.  At the AAA level, affiliation with a winning MLB club exerts a positive effect on AAA demand.

We study the strategic impacts of behavioral price discrimination (BPD) on manufacturers and retailers in a distribution channel when there are switching costs in consumer demand. Unlike previous empirical studies of behavioral price discrimination, which rely only on differences in price elasticity across customers, our pricing model allows the firm strategies to additionally account for differences in price elasticity across time (due to switching costs). We estimate a dynamic pricing model using empirical data from the cola category and, through a series of counterfactuals, we find that the retailer should simply outsource the data analytics and customization of coupons to manufacturers and improve its profit beyond what it can achieve by proactively couponing on its own. We further find that serving as an information broker to sell its customer database to manufacturers can be a vital source of profit to the retailer. In contrast, manufacturers end up worse off, illustrating that customer information is a potent source of channel power to the retailer. Finally, we show that simply using customers’ most recent purchase information can significantly impact firms’ profits. BPD based on this information is easy to implement and of low cost to manufacturers and retailers.

This study investigates the relationship among customer satisfaction, customer trust, switching cost, and
customer loyalty in mobile telecommunication service market of Pakistan. Built on the review of pertinent
literature a research framework is developed based on the mediation of customer trust and moderation of
switching cost on the relationship of customer satisfaction with customer loyalty. The data were collected
from 515 customers in mobile telecommunication service market of Pakistan through convenience
sampling. Correlation matrix and ordinary least squares regression analyses are used to determine the
relationship among the variables. The findings confirm the framework that customer trust partially
mediates the relationship of customer satisfaction with customer loyalty. Switching cost has no moderating
effect in determining the relationship of customer satisfaction with customer trust and customer loyalty in
mobile telecommunication service market of Pakistan. This study addresses the importance of customer
satisfaction, customer loyalty, customer trust, and switching cost for the mobile telecommunication service
firms. The findings suggest that the firms should enhance customer satisfaction in order to gain customer
trust and customer loyalty. The significant relationships between the variables suggest that the research
framework is applicable to the firms of mobile telecommunication service market of Pakistan. Further, this
is probably among the first studies which look at mobile telecommunication service market of Pakistan in
context of customer satisfaction, customer trust, customer loyalty, and switching cost. The most obvious
finding to emerge from this study is that customer satisfaction and customer trust are the key determinants
in predicting customer loyalty.

Obtaining sustainable competitive advantage, or at least surviving, is related to protect a firm's customer base and create loyalty. Both theoretical and empirical studies show that customer satisfaction is the key element for obtaining customer loyalty. However, customer satisfaction alone is not sufficient. Maintenance of the relationship between customer and brand in the long term requires not only customer satisfaction but also forming trust and additional costs, which deter the customer from rivals' brands. In this context, the aim of this study is to analyze the model, which includes the relationships among customer satisfaction, loyalty, switching costs and trust. To this end, the data were obtained from 1662 GSM users through a questionnaire. The findings, obtained from data by analyzing structural equation modeling, show that (1) the hypothesized model of customer switching cost is reliable and valid (convergent and discriminant) and (2) the general model, which is customer loyalty, satisfaction, switching cost and trust factors, resulted in statistically significant relations, as expected, along with high explanatory power.

In two correlational studies, we investigated the relationship between symptoms of mental fatigue connected with the ordinary daily activity of undergraduate students and the performance level in tasks engaging executive and attentional processes. We found that mild or moderate levels of fatigue are associated with only a few impairments in cognitive functioning, which suggests that the consequences of such a level of fatigue can be easily compensated by protection strategies adopted by participants. A notable exception was a significant positive correlation between the level of fatigue and higher accuracy switch cost in the Plus-minus task. Our participants also reported an increase in fatigue symptoms after performing several cognitive tasks and this change was larger for those who were more engaged in a sustained attention task. In a follow-up experiment, we investigated the effects of fatigue induced by the time on sustained attention task on switching task performance and reported symptoms of cognitive and executive fatigue. We confirmed that the level of accuracy switch cost is significantly higher in the participants who performed the sustained attention task than in the participants from the control group. We pointed out some possible practical implications of studies on the relationship between fatigue and cognition for such activities as driving a car.

This paper deals with network competition and provides empirical analysis of market concentration, network and call externalities, access pricing, price discrimination and switching costs in Serbian mobile phone telecommunications market. It is shown that network externalities governed the expansion of this market until 2008. Upon entry of VIP incumbents didn't engage in predatory behaviour towards entrant aiming to benefit from locked-in users. The policy of mobile phone number portability reduced on-net prices and substantially increased consumer's surplus. In contrast to some previous research, this policy was pro-competitive in Serbia. We have also determined that users of the network with the largest market share benefit the most from call externalities. Finally, one network does not price discriminate between outgoing and incoming roaming calls, which implies that users of this network have higher level pecuniary externalities in roaming compared to users of price discriminating networks. Mrežne eksternalije u telekomunikacionoj industriji: analiza srpskog tržišta Apstrakt: Rad se bavi mrežnom konkurencijom i empirijski analizira tržišnu koncentraciju, mrežne i eksternalije dolaznih poziva, interkonekciju, diskriminaciju cena i troškove prelaska na srpskom tržištu telekomunikacija.

Ao longo das últimas décadas, o marketing tem se pautado cada vez mais por serviços. Nessa lógica, os relacionamentos despontam como importante componente do desempenho organizacional. O marketing de relacionamento ganha assim, cada vez mais destaque, uma vez que aplicá-lo adequadamente possibilita aumentar a lealdade dos clientes e, consequentemente, a rentabilidade da empresa. Esse relacionamento pode gerar aos clientes custos de mudança de fornecedor. Há ainda algumas iniciativas de empresas que executam programas de marketing de relacionamento que criam custos de mudança. Esses programas, muitas vezes, criam uma lealdade artificial, sem respaldo de um relacionamento sólido, da qual o cliente pode tornar-se um refém. O presente artigo analisa as influências do custo de mudança no relacionamento e na lealdade e, por meio da revisão da literatura existente, propõe um modelo que sistematiza esses conceitos. Os custos de mudança devem afetar negativamente o relacionamento, como já verificado em estudos anteriores . A partir dessa premissa, são sugeridos um modelo de relação entre as variáveis e algumas proposições teóricas para serem verificadas empiricamente em estudos futuros.

Technological and business-model related developments have continued to push the view that services and not software packages are the upcoming commodities within IT. This can be seen in the wide-spread adoption of Service Oriented Architecture (SOA) as the de-facto standard for new systems, and the radical increase in Software as a Service and other Cloud Computing based technologies as the businessmodels of choice for IT procurement. This" turn-to-services" brings with it promises of a better fit between IT supply and the changing demands of customers, and an increased competition between interoperable services in the market. Public Sector IT Procurement (PSITP) has yet to see mainstream adoption of these new business-models, yet the promises of reduced price and increased fit are still there. This paper builds on the assumptions that high switching cost is a factor that reduces the competition on the market for PSITP Frendell, 1995). The paper presents a design science approach towards studying PSITP switching costs. A model for estimating switching cost is developed and a roadmap for demonstrating and evaluating the model is presented.

There are two types of switching costs when users change their mobile operator. The first stems from price discrimination when the network charges a lower price for on-net than for off-net calls. If the majority of the switching user's contacts are in their current network, this imposes an obstacle to changing the network, since in the new network they would have to pay a higher price for off-net calls. The other switching cost results from the switching user having to inform all their contacts about their new number in the other network. Mobile phone number portability (NP) reduces this switching cost. This paper's aim is to determine pro-competitive regulatory policies for the post-paid and prepaid market segments. This distinction is important since the post-paid market dominates in developed countries, while in less developed countries the prepaid market dominates. There are two operators in our model, the incumbent and a new entrant. In the post-paid market, NP reduces the level of market concentration. In the prepaid market, NP has no impact on the convergence of market shares, and the reduction of access charges (the fee for terminating calls in the rival network) turns out to be a pro-competitive regulatory policy. There is no need for asymmetric access regulation where the incumbent pays higher access charges than the new entrant.

Today, customer loyalty is the key to business success. By increased customers’ loyalty, market share and profitability level of enterprises will rise. Market perception along with planning and adopting appropriate strategies for making customers loyal and enhancing their rate of loyalty leads to long-term benefits for the enterprises. Given the importance of the issue, the goal of this study was to identify and prioritize the factors affecting loyalty to a banking brand from perspective of Keshavarzi (Agricultural) Bank customers in Shahin Dej, Iran. This was an applied research based on a survey approach. The statistical population incorporated all Keshavarzi Bank customers of Shahin Dej in 2017, and given the limitation of the research population, only 382 people were selected as the sample. The results suggested that customer satisfaction, transfer cost, and organizational image affected the loyalty of Keshavarzi Bank customers. Furthermore, customer satisfaction impacted the organizational image, service quality impacted customer satisfaction, and service quality exerted an effect on the perceived value.

This paper reviews theoretical models of network competition in telecommunications. We will discuss two alternative approaches. The first approach assumes Hoteling’s horizontal differentiation and the second approach is based on switching costs. We will first analyse spatial competition with linear prices and continue with price discrimination between onnet and off-net calls. Price discrimination can also be used to deter entry to the market. We will also deal with the regulator’s optimal choice of access price, which should be designed to induce entry of new firms. Furthermore, pricing of roaming services and the switching cost approach to network competition will be considered. Finally, we will illustrate the theoretical results with data from the Serbian mobile and fixed telephony market.

This research examines the relationship between customer satisfaction and customer loyalty in an
industrial context. The purpose of the research is to understand and explain better the antecedents of
customer loyalty as well as an under-studied moderating effect, namely, switching costs. Toward this
end, the extant literature is drawn upon to establish a conceptual model as well as seven hypotheses
which are subsequently empirically tested using especially collected data from the European animal
feed industry. Significant support is found for the model and hypotheses, suggesting important
theoretical as well as managerial implications for establishing greater customer loyalty in an industrial
context.

The popularity of loyalty programs worldwide shows that this is one of the most efficient marketing tools in highly competitive markets to retain customers. The saturation of loyalty schemes themselves can lead to a fierce competition between firms to gain wider penetration for their cards. The experience of the  customers regarding adoption of loyalty programs can affect their attitude towards the different attributes of the programs. We found that more experienced customers evaluate the importance ofthe soft attributes of the loyalty schemes higher.

Public sector IT procurement has received limited interest from the research community, despite the vastness and importance of the phenomena. Following contemporary developments in a "turn-to-services", with more and more of the total IT environment being supplied through cloud-based delivery models, this paper explores the potential in using switching costs as an approach for studying public sector IT procurement. Through presenting and contrasting two theoretical models for switching cost estimation, this paper discusses the use of switching costs as a perspective in the study of public sector IT procurement of cloud-based services. As the results show, switching costs is a valuable way ahead, and the paper lists some design implications for research into the field.