Interactions and consequences of inertia and switching costs

Richard Lee · Larry Neale

78 citations0/0 files storedJournal of Services Marketing

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Customer Service Quality and Loyalty Consumer Market Behavior and Pricing Customer churn and segmentation

Abstract

Purpose Service research typically relates switching costs to customer loyalty, and portrays them as effective switching deterrents that engender harmful word‐of‐mouth (WOM). Rather than to customer loyalty, this paper aims to relate switching costs to consumer inertia, and show that while switching costs may result in customer retention, they can engender positive and negative WOM. This depends on whether the inertia stems from satisfaction or indifference. Design/methodology/approach A mall‐intercept survey investigated 518 customers' perceptions of their mobile phone service providers. Structural equation modelling fitted the data to the conceptual model. Findings Switching costs deterred switching and engendered negative WOM, but only with low‐inertia customers. With high‐inertia customers, retention and WOM behaviours depended on whether the inertia stemmed from satisfaction or indifference. Satisfied customers with high switching costs tended to stay, gave more positive and less negative WOM. With indifferent customers, switching costs were unrelated to retention or WOM behaviours. Research limitations/implications While they may be perceived negatively, switching costs can engender PWOM. Hence, research should not consider switching costs alone without considering the context that produces them. Practical implications Service providers should segment their customers into low‐inertia, high‐inertia/satisfied and high‐inertia/indifferent, and target each segment differently. By converting customers into the high‐inertia/satisfied segment, service providers can make the best use of switching costs – not only in the traditional sense as a barrier to defection, but also as a way of generating positive WOM. Originality/value This study is the first to consider the role of inertia with switching costs, positive WOM, and negative WOM. The findings suggest that past studies portraying switching costs as negative impediments that evoke only negative WOM might be misleading.

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References

1981Evaluating Structural Equation Models with Unobservable Variables and Measurement Error 2003Common method biases in behavioral research: A critical review of the literature and recommended remedies.1979Review of Psychometric theory (2nd ed.).1980Attribution Theory and Research 2003Consumer Switching Costs: A Typology, Antecedents, and Consequences 2004Customer Value, Satisfaction, Loyalty, and Switching Costs: An Illustration From a Business-to-Business Service Context 1979Reliability: A Review of Psychometric Basics and Recent Marketing Practices 2000Switching barriers and repurchase intentions in services

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2017Inertia in services: causes and consequences for switching 2018Consumer loyalty toward smartphone brands: The determining roles of deliberate inertia and cognitive lock-in 2018The impact of switching costs on customer complaint behavior and service recovery evaluation 2020Interrogating and redefining the concept of consumer inertia 2017Consumers’ switching motivations and intention in the case of bank mergers: a cross-cultural study

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