Switching costs and alternatives’ attractiveness as moderators in the relationship between customer engagement and switching intentions

Abstract

Underpinned by social exchange theory, this study examined the influence of customer engagement on switching intentions. Breaking switching costs down to three types, procedural switching costs (PSC), financial switching costs (FSC) and relational switching costs (RSC), it further examined the role played by switching costs in this relationship. It was also the objective of this study to examine the role played by alternatives’ attractiveness, but the testing could not be completed. Data was obtained from retail banking customers by means of online survey tool (N=235) and the hypotheses tested by means of structural equation modelling. CE was found to have a negative influence on switching intentions. This relationship was moderated positively by RSC relating to brand relationship loss. No significant moderating effect was found in relation to the other types of switching costs. Mixed results were obtained regarding the direct effect of the different types of switching costs have on switching intentions. Some were positive, others negative, while others did not have a significant influence. This study confirms strategic importance of customer engagement and building a good brand that customers can relate to and associate with. It further confirms that switching costs should not be seen and treated as a singular cost as the different types of costs have different effects. And finally, it provides insight into which types of switching costs firms can focus on to build or destroy switching barriers.