The Effects of Inertia and Switching Barriers on Satisfaction-Retention Relationship: A Case of Financial Service Industries
Author
Abstract
atisfaction has been regularly viewed as a prerequisite for loyalty and customer retention. However, satisfaction does not always result in customer retention, and it is equally obvious that dissatisfaction does not necessarily result in switching. The relationship between satisfaction and customer retention has been found to vary under different contingent conditions. In this study, we consider how the effect of satisfaction on customer retention varies with differing levels of switching costs, alternative attractiveness, and relationship inertia. Therefore, we examine the relationship between satisfaction and customer retention by incorporating the two-way and three-way moderating effects of switching barriers.
With a sample of 470 customers of banks in Taiwan, we used a hierarchical regression to test our hypotheses. All of our hypotheses except for Hypotheses 6 were supported. Satisfaction, switching costs and relationship inertia would positively affect customer retention but alternative attractiveness would negatively affect customer retention. In addition, both of switching barriers and relationship inertia would moderate this satisfaction-customer retention relationship. Switching costs may trap customers to stay with the focal service provider as captive loyalty even if they feel unsatisfied, yet alternative attractiveness strengthens the importance of satisfaction to keep customers to stay. In addition, customers with high inertia will remain with focal service providers even though they are dissatisfied with their service performance. In other words, satisfaction has a reduced effect on customer retention as switching costs and inertia increase and alternative attractiveness decreases.
There is also potential for three-way moderating effects among these variables. This possibility arises from the fact that customers have different combinations of switching costs, alternative attractiveness and relationship inertia. Thus, we deploy two three-way interaction terms (relationship inertia(superscript *) switching costs(superscript *) satisfaction, and (relationship inertia(superscript *) alternative attractiveness (superscript *) satisfaction) to test the moderating effect of relationship inertia on the relationships among satisfaction, both switching barriers and retention. Three-way interactions yield additional insight into the role of satisfaction in customer retention and the results of the two-way moderating relationships. The results show that relationship inertia not only independently has a positive relationship with retention, previously proposed as spurious loyalty, but also plays a role as an important moderator. Relationship inertia has asymmetric influences on the moderating effects of switching costs and alternative attractiveness in the satisfaction-retention relationship. Relationship inertia strengthens the moderating effect of switching cost on the satisfaction-retention link, nevertheless has no significant effect on the moderator role of alternative attractiveness. In short, as relationship inertia increased, switching costs have a more positive moderating effect on satisfaction-customer retention relationship.
Key Words
Customer satisfaction, Customer retention, Switching barriers, Inertia, Financial service industries
