Switching experience, customer satisfaction, and switching costs in the ICT industry

Abstract

Purpose: Stabilizing business in highly competitive and volatile business-to-business (B2B) markets is a strategic imperative for many companies. In such a context, customer retention through the creation of switching barriers (i.e. by increasing switching costs) is a common strategy. The purpose of this paper is to develop a network of relationships among customer switching experience, customer satisfaction, perceived switching costs, and behavioral loyalty intentions. Design/methodology/approach: Survey data were collected from 327 business customers (very small enterprises with fewer than nine employees; customers included physicians, lawyers, tax advisors, consultants, civil engineers, etc.) of an information and communications technology (ICT) company. The research model was tested using partial least square structural equation modeling. Findings: The results show that switching experience negatively influences customer satisfaction and behavioral loyalty intention. Furthermore, the influence of customer satisfaction on behavioral loyalty intentions is partially mediated by financial and relational switching costs. Practical implications: In saturated markets, companies often try to grow by acquiring customers from competitors. This study reveals that this strategy can backfire. The customers that can be most easily acquired may be those that are the most difficult to retain because customers experienced in switching are difficult to satisfy – and low satisfaction means lower perceived financial and relational switching costs and, in turn, lower loyalty. Originality/value: This research contributes to theory and practice by shedding further light on the satisfaction-loyalty link by investigating the often widely neglected role of switching experience. Furthermore, the study seeks to add to the discussion of how to specify the role of switching costs: as a mediator or as a moderator.