The moderating effects of switching costs on consumer loyalty : evidence from Hong Kong consumption market

轉換成本對消費者忠誠的調節作用 : 香港消費市場的實證研究

Student thesis: Master's Thesis

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Author(s)

  • Shuk Man CHEUNG

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Awarding Institution
Supervisors/Advisors
Award date2 Oct 2007

Abstract

Consumer loyalty is considered as an important source of competitive advantages and it exerts powerful effects on companies’ performances. Although satisfaction, service quality and service value are identified as potential antecedents of loyalty, their influences among industries vary. One possible reason is the different levels of switching costs suffered by customers when they decide to change service providers. That’s why researchers and managers have been paying increasing attention to the effects of switching costs on consumer loyalty. However, there are still quite a few issues that remain unsolved. In particular, the conceptualization of consumer loyalty is underexplored. It is argued that consumer loyalty can be reflected in behavioral, attitudinal, cognitive and negative forms. To investigate the multiple dimensions of consumer loyalty, factor analysis is conducted and four distinct dimensions of consumer loyalty, comprising of repurchase preference, appreciating behavior, complaining behavior and price increase tolerance, are identified. This confirms that loyalty is a four-dimensional construct, while these dimensions are expected to be affected by switching costs differently. Previous literature generally suggests switching cost is a key moderator in the formation of loyalty but they do not specifically answer “which consumer loyalty dimensions are moderated by switching costs and how?” Thus, the main theme of this dissertation is to develop conceptual frameworks that investigate the moderating effects of switching costs on various loyalty dimensions. To achieve this goal, three conceptual models regarding three types of moderating effects of switching costs on various loyalty dimensions are proposed. In particular, switching costs are expected to moderate the loyalty dimensions through three ways: (1) direct influences of the three primary antecedents, (2) mediating relationships among the three primary antecedents, and (3) influences of price perception. To examine these moderating effects, empirical studies on survey data from twelve service industries in Hong Kong are performed. The analyses results support most of the moderating effects of switching costs on loyalty. Specifically, when switching costs are high, the following results are observed: (i) stronger direct influences of satisfaction, service quality and service value on repurchase preference are observed, based on the subgroup analysis of average Pearson’s correlation; their simultaneous influences on the four loyalty dimensions are also shown to be stronger in the canonical correlation analysis; (ii) weaker mediations of service value and satisfaction are empirically revealed in seven of the twelve mediating relationships between the three primary antecedents and the four loyalty dimensions by using regression analyses; and (iii) results from subgroup analysis on price-driven ratios indicate that the influences of price perception on satisfaction, repurchase preference and complaining behavior are weaker. In summary, this dissertation contributes significantly to both marketing theory and practice. Theoretically, this research develops new insights on the dimensionality of consumer loyalty, identifies various moderating effects of switching costs on loyalty dimensions, and provides a unified framework to examine these effects, where results can be generalized across different services. Practically, the findings provide valuable implications for companies to formulate their service marketing and service management strategies for enhancing customer loyalty in terms of different dimensions, based on the different levels of switching costs. Future researches are recommended to explore the moderating effects of switching costs on loyalty influences, such as its reciprocal effects on satisfaction or direct effects on profits, and also to consider multiple dimensions of switching costs and some possible interaction factors in a consumer loyalty model.

    Research areas

  • Hong Kong, Prices, China, Customer loyalty