Customer perceived value, satisfaction, and loyalty: The role of switching costs

TLDR

Switching costs are employed by firms to deter customers from switching, yet their effectiveness as a loyalty lever is uncertain in highly competitive online markets. The study investigates how switching costs moderate the relationship between customer loyalty and both satisfaction and perceived value. Results show that switching costs strengthen the loyalty–satisfaction and loyalty–perceived‑value links only when satisfaction or perceived value is above average, indicating firms should prioritize these dimensions. © 2004 Wiley Periodicals, Inc.

Abstract

Abstract 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.