Online loyalty and its interaction with switching barriers
Introduction
The online retail market is a very important channel of choice for customers worldwide. According to a report by the Boston Consulting Group (2012), the internet economy of the G20 countries is expected to grow at more than 10 percent annually for the next five years and contribute US $4.2 trillion to the combined GDP of these countries in 2016. Thus, it is not surprising that there is a huge interest in enhancing the understanding of factors involved in building online customer retention. Out of these, switching barriers (SBs) have emerged as one of the most important factors for online retailers to consider.
Unlike the physical brick and mortar shops, where there is a greater opportunity for building relationships (Bansal et al., 2004), retaining customers online is considered more difficult due to the non-personal and transaction-based nature of the interactions. Varadarajan et al. (2008) notes that the relative ease of switching online accentuates the importance of building and maintaining SBs. However, the findings emerging from empirical research on online switching behaviour is quite mixed. For example, Jones et al. (2000) found that switching barriers were important factors influencing customers repurchase intentions under certain circumstances. On the other hand, Holloway (2003) concluded that switching costs (one of the categories of SBs) are unimportant and negligible.
Even though the concept of SBs has been discussed quite extensively in marketing literature with commendable attempts to explore the influence of SBs in the online market environment (Balabanis et al., 2006, Goode and Harris, 2007, Holloway, 2003, Li et al., 2007, Tsai and Huang, 2007, Yang and Peterson, 2004), there is still a lack of consensus in terms of its definition, categories and even measurement of the constructs. Furthermore very little effort was made to identify and measure SBs specific to the online services sector. In view of this, it was considered important to examine consumer switching behaviour from an online services sector perspective from both academic and practical perspectives. There is also a widespread assumption that switching barriers are almost negligible in the online shopping context (Bakos, 1997). The popularity of online shopping is supposed to have created a level playing field where ‘competitors are just one click away’. While most retailers acknowledge that having a loyal online customer base is important and beneficial, a large number of online retailers lack a knowledge of the strategies required to retain customers and develop loyalty (Wilcox and Gurau, 2003). This indicates that developing loyalty is not as straightforward as some studies have suggested.
This paper attempts to integrate past studies into a theoretical framework for understanding and to classify customer switching behaviour, which is conceptualised in this paper as the interaction between SBs and the four-stages of loyalty based on Oliver׳s (1997) model. It is expected to contribute to a clearer understanding of the role of switching barriers and the link to online customer loyalty.
Section snippets
Customer loyalty
Marketing practitioners and academics alike have emphasised that the most important goal of marketers is to generate customers who are committed repeat-purchasers – in other words, customers who are loyal. This is crucial for the success of a firm because loyal customers enhance the firm׳s profitability (Reichheld and Teal, 1996), market share (Chaudhuri and Holbrook, 2001) and increase shareholder value (Sindell, 2000). Oliver (1999) described customer loyalty as the overall attachment and
Switching barriers
The concept of SBs has been discussed quite extensively in marketing literature. However, there is a lack of consensus in terms of its definition, categories and even measurement of the constructs (Balabanis et al., 2006, Goode and Harris, 2007, Holloway, 2003, Li et al., 2007, Tsai and Huang, 2007, Yang and Peterson, 2004). A synthesis of past empirical research of SBs in the online environment context is provided in Table 1.
It is obvious from the table that there are almost as many
Perceived switching costs
Porter (1980) defines switching costs as the “one-time costs facing the buyer of switching from one supplier׳s product to another׳s”. There is some confusion between the terms ‘switching costs’ and ‘switching barriers’ (Balabanis et al., 2006), with some authors using the terms interchangeably (e.g. Mathwick, 2002) (see Table 1). Goode and Harris (2007, p. 157) pointed out that there are “subtle differences between switching barriers and costs” but failed to describe any clear differences.
Discussion and avenues for future research
Despite the growing volume of research related to the concept of switching costs and barriers, the SBs that online customers face and their actual impact on them remain largely misunderstood. Previous research has shown that satisfaction may not be the best predictor of customer loyalty and that the presence (or lack) of switching barriers may be the reason a customer stays with (or leaves) a firm.
Oliver׳s four-stage loyalty model was further expanded to include online switching (refer to Fig. 1
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