Interactions and consequences of inertia and switching costs

Abstract

Purpose

Service research typically relates switching costs to customer loyalty, and portrays them as effective switching deterrents that engender harmful word‐of‐mouth (WOM). Rather than to customer loyalty, this paper aims to relate switching costs to consumer inertia, and show that while switching costs may result in customer retention, they can engender positive and negative WOM. This depends on whether the inertia stems from satisfaction or indifference.

Design/methodology/approach

A mall‐intercept survey investigated 518 customers' perceptions of their mobile phone service providers. Structural equation modelling fitted the data to the conceptual model.

Findings

Switching costs deterred switching and engendered negative WOM, but only with low‐inertia customers. With high‐inertia customers, retention and WOM behaviours depended on whether the inertia stemmed from satisfaction or indifference. Satisfied customers with high switching costs tended to stay, gave more positive and less negative WOM. With indifferent customers, switching costs were unrelated to retention or WOM behaviours.

Research limitations/implications

While they may be perceived negatively, switching costs can engender PWOM. Hence, research should not consider switching costs alone without considering the context that produces them.

Practical implications

Service providers should segment their customers into low‐inertia, high‐inertia/satisfied and high‐inertia/indifferent, and target each segment differently. By converting customers into the high‐inertia/satisfied segment, service providers can make the best use of switching costs – not only in the traditional sense as a barrier to defection, but also as a way of generating positive WOM.

Originality/value

This study is the first to consider the role of inertia with switching costs, positive WOM, and negative WOM. The findings suggest that past studies portraying switching costs as negative impediments that evoke only negative WOM might be misleading.

Citation

Lee, R. and Neale, L. (2012), "Interactions and consequences of inertia and switching costs", Journal of Services Marketing, Vol. 26 No. 5, pp. 365-374. https://doi.org/10.1108/08876041211245281