Crafting an effective customer retention strategy: a review of halo effect on customer satisfaction in online auctions

Customer satisfaction is an important factor in purchase decisions (Bennett and Robert, 1969). It affects not only one’s next purchase decision, but also one’s recommendation. The feedback of customer satisfaction/dissatisfaction will be spread much faster on the internet as the effect of the click of mouse is larger than word of mouth. Improving customer satisfaction becomes essential in such highly competitive and fast-paced marketplace, but it can be very costly. In this study, the authors intend to examine a set of satisfaction attributes that contributes to customer satisfaction in online auctions. We are interested in knowing how the individual satisfaction attributes contribute to the overall satisfaction and how each individual attribute affects each other. Specifically, we intend to study how the halo effect affects satisfaction evaluation. With limited budget, auction sites, particularly those small regional and specialist auction sites, and small e-business start-ups have no way to invest on every single satisfaction attribute for service improvement. Therefore, they should focus on a particular or a few aspects that can lift up the customer satisfaction the most and have the largest spillover effect on the satisfaction in other attributes. The managerial implication of this study is significant, which helps the internet intermediary to develop the most effective customer retention strategy. © 2005 Inderscience Enterprises Ltd.