Customer value and switching costs in business services: developing exit barriers through strategic value management

Abstract

PurposeThe purpose of this study is to examine the concept of customer value and its role in building switching costs perceptions. The current research develops scales and empirically validates a typology of customer value for business services.Design/methodolgy/approachThrough an extensive literature review, qualitative interviews, and an empirical investigation, the current study identifies three facets of customer value for business services (i.e. economic value, relational value, and core value) and investigates their relationships with buyers' perceptions of switching costs. Structural equation modeling techniques were used to evaluate a measurement model and structural relationships.FindingsThe findings show that economic value and the value obtained from relational and support aspects of a service exert strong positive impact on customers' perceptions of switching costs and thus serve as barriers to exit. Although core service does not seem to have positive impact on switching costs, core value maybe a “hygiene” factor that may promote customers' switching if not properly managed.Research limitations/implicationsThe results of this study are generated from a single industry; additional studies in other industries may strengthen the generalizability of the proposed constructs and framework.Practical implicationsBusiness suppliers need to build exit barriers through co‐creating relational value. Through communications, suppliers may be able to monitor customers' desired value as a proactive action to anticipate changes and to influence positive changes in customer value.Originality/valueThe current study sheds some light on how supplier firms can enhance switching costs, and consequently raise exit barriers by better managing various aspects of customer value perceptions.

The bonding effects of relationship value and switching costs in industrial buyer–seller relationships: An investigation into role differences

“…A buyer-seller relationship can be defined as a non-accidental sequence of market transactions between independent market actors (Kleinaltenkamp & Ehret, 2006). The literature suggests that companies maintain relationship bonds either because "they have to", due to high switching costs, or because "they want to", because of high relationship value (Bendapudi & Berry, 1997;Gilliland & Bello, 2002;Gounaris, 2005;Liu, 2006;de Ruyter, Moorman, & Lemmink, 2001). So far, there is little empirical evidence about the consequences of these two motives on companies' behavioral intentions in relationships.…”

Antecedentes da Retenção de Clientes Pós-Falha e Recuperação de Serviços de Tecnologia da Informação em Ambientes Business-To-Business

“…Os custos de mudança são todos os custos que o cliente terá a partir do momento que este mude de fornecedor. Estes custos podem ser tanto financeiros, quanto de relacionamento (Liu, 2006). Outros estudos como os de Patterson e Smith (2003) e Wathne et al (2001) destacam ainda, que os custos de mudança podem ser as percepções de tempo, recursos financeiro e esforços investidos na relação.…”

“…O custo de mudança é mais um mecanismo que deve ser utilizado de forma a criar relações de longo prazo. A dependência, os custos de reaprender os procedimentos e a perda do relacionamento são aspectos importantes na retenção de clientes em ambientes B2B (Liu, 2006 …”

Is Customer Retention Beneficial for Customers: A Conceptual Background

“…Moreover, it has been explained by Reichheld and Kenny (1990) that the majority of firms focus on customers" current period revenues and costs and pay no attention to potential cash flows over customers" lifetimes. Liu (2006) provides an analysis of monetary and nonmonetary costs incorporated in searching for and finding a new service provider. The salient costs incurred by customers involved financial expense as well as time and effort involved in establishing and maintaining a new service relationship (Zeithaml, 1988).…”