Does a focus change from excessive cost obsession to customer friendliness lead to better performance? Ask Ryan Air.
Customer Value, Satisfaction, Loyalty, and Switching Costs: An Illustration from a Business-to-Business Service Context
by Shun Yin Lam, Venkatesh Shankar, Krishna Erramilli, and Bvsn Murthy
This article was published in Journal of Academy of Marketing Science, 32 (Summer 2004), 293-311.
Although researchers and managers pay increasing attention to customer value, satisfaction, loyalty and switching costs, not much is known about their interrelationships, in particular, in the business-to-business (B2B) context. Prior research has examined the relationships within subsets of these constructs, mainly in business-to-consumer (B2C) environment. We extend prior research by developing a conceptual framework linking all of these constructs in a B2B service setting. We also advance the notion that customer loyalty is best conceptualized as a two-dimensional construct comprising repeat patronage and word-of-mouth recommendation. Based on the cognition-affect-behavior model, we hypothesize that customer satisfaction mediates the relationship between customer value and customer loyalty and that customer satisfaction and loyalty have significant reciprocal effects on each other. We also examine the relative strengths of the drivers of customer loyalty, and explore potential interaction effect of satisfaction and switching costs and the quadratic effect of satisfaction, on loyalty. We test the hypotheses using structural equation modeling on data obtained from a courier service provider in a B2B context. The results support most of our hypotheses and in particular, confirm the mediating role of customer satisfaction. We discuss how the results can help managers enhance customer loyalty.
by Venkatesh Shankar, Amy Smith, and Arvind Rangaswamy
This article was published in the International Journal of Research in Marketing, 20 (2, 2003), 153-175.
In this paper, we address the following questions that are becoming increasingly important to managers in service industries: How are the levels of customer satisfaction and loyalty for the same service different when chosen online versus offline? What are the unique drivers of online customer satisfaction? How is the relationship between customer satisfaction and loyalty in the online environment different from that in the offline environment? We propose a conceptual framework and develop hypotheses about the drivers of customer satisfaction and loyalty, the relationship between satisfaction and loyalty, and the role of the online medium. We test the hypotheses through a simultaneous equation model using two data sets of online and offline customers in the lodging industry.
The results show that whereas the levels of customer satisfaction for a service chosen online is the same as when it is chosen offline, loyalty to the service provider is higher when the service is chosen online than offline. Service encounter satisfaction for a service chosen online is higher when information content at the web site is deeper. In addition, the online medium also strengthens the relationship between overall satisfaction and loyalty, and appears to foster a reciprocal relationship between loyalty and satisfaction, such that satisfaction increases loyalty, which in turn, reinforces satisfaction. These results suggest that, contrary to popular fears, the online medium provides an attractive opportunity for service providers to acquire loyal customers. The results imply that online service providers should not only invest in service quality improvement initiatives, but also maintain web sites that offer a good online experience for their customers. They should also focus directly on loyalty-building initiatives, such as frequent online user reward programs.