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One effort to build a generalisable model of customer switching behaviour was undertaken by
Susan Keaveney (1995). Using a technique where people remembered critical incidents, the
author asked respondents about their reasons for switching across 25 types of services in a six
month time period. A critical incident was defined as an event or interaction or series of
interactions between a customer and a service firm that caused that customer to switch to
another service provider. All responses were coded and then categorised by a panel of experts
into eight groups describing their reasons for switching, as shown in Table 1.

Keaveney¶s research has made two major contributions to the literature on switching
behaviour. First of all, it was generalisable across multiple markets rather than a single study.
Secondly, the research provided not just a qualitative picture of a switching behaviour in
services markets, but gave benchmarks regarding a proportion of consumers who were likely
to switch service providers for specified reasons. The findings indicated that µcore service
failure¶ was the most common cause of switching, and µinvoluntary switching¶ the least
reported reason for switching. However, the key limitation in the Keaveney research was that
it asked people to focus on specific incidents or interactions with the service provider that
resulted in switching. This is likely to bias respondents towards more µservice provider
problems¶ and away from other factors influencing switching, such as customer moving or
personal reasons (these were eliminated from the Keaveney study).c

While much academic research focuses on customer satisfaction, a side stream of research
calls for an exploration of those for whom these efforts have failed, namely customers who
have left the company. It is thought that those (former) customers of a brand can illuminate
the reasons for customer defection.

Intuitively, it is assumed that people who terminated a relationship with a company were
dissatisfied or disappointed with the company¶s offering, and this can be remedied. It is a
widely shared belief in the industry that if the company can just fix those mistakes, then it can
achieve almost a zero defection rate. This has led to a rise in customer retention marketing
efforts.

However, research into the antecedents of customer defection showed that not all of the
customers who left a company did so because of dissatisfaction due to failure of a good or
service. Reichheld reported ³Y



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and Lassar (1998) found that one third of current customers who said they were satisfied with
the service provider also expressed an intention to switch. Further, academic studies into the
reasons for customer defection (e.g. Schneider, 1973; Keaveney, 1995; Colgate , 1996)
found that some groups of customers left their service providers for reasons that were beyond
the control of the service provider and the customer, such as the customer moving house.

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This paper analyzes consumer switching behaviors from the perspectives of consumer
psychology and interactions with the society, such as consumer's emotional intelligence,
relationship involvement and personality traits. We survey life insurance policyholders in
Taiwan and Hong Kong. Our results show that when service failures are more serious,
consumers with higher emotional intelligence exhibit lower intention to switch than those with
lower emotional intelligence. Similarly, the more serious the service failures, the more the
consumers with internal locus-of-control orientation exhibit intention to change their existing
consumption than those with external locus-of-control orientation. Further for more serious the
service failures, the higher the relationship involvement with customers, the more their intention
to switch is reduced. The unique contribution of this paper is that it combines multivariate
statistical analysis and a non-linear neural fuzzy network model structure to verify the collected
data. The paper concludes with a discussion of management implications and recommendations
for future studies.

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Agency theory is viewed as an arguably innovative and promising framework with a

creative potential for improving academic understanding of switching behavior due to a
number of reasons. First, the use of agency theory will emphasize switching costs and
introduce a new categorization of such costs which is an integral part of any useful
theorization of switching behavior. A part of this switching cost conceptualization will
include investigating and providing evidence on new sources of these costs. A second
motivation for aiming to build this conceptual link between agency theory and switching
behavior is that this link should be expected to explicitly address the relationship between
switching behavior and untapped issues in this context; namely; information utilities,
risk attitudes of buyers and marketers, and moral hazard. A third reason for this research
pursuit is that an agency theory analysis of switching behavior ought to highlight
important aspects of buyer behavior in switching situations comprising information
search and processing, negotiations and bargaining, monitoring and exchange of values in
the form of incentives and customer utilities. Finally, the proposed agency-based
framework should be expected to allow for broader cross-cultural, cross-context (Service
vs. Manufacturing) and cross-industry empirical testing and verification of several
controversies of switching behavior.
[



Aeithaml, Berry & Parasuraman (1996) offer a conceptual model of service quality. This

service quality affects particular behaviors that indicate whether customers will remain loyal to

or leave an organization. The framework consists of numerous components: 1. Decreasing

customer defection leads to organizational profitability. 2. Retaining current customers is more

cost effective than attracting new ones. 3. Customer defections should be a fundamental

component of incentive programs. 4. Advertising is necessary to replace lost customers. 5.

Advertising, promotion, and sales costs are expenses required for attracting new customers. 6.

At the beginning of the relationship, there is a period of time where customers are non-profitable.

It can take approximately four years to recover the sales costs invested in obtaining a new

customer. 7. Customer assessments of service quality that are high lead to positive behavioral

intentions, which strengthen the relationship between the individual and the organization.

Conversely, assessments of service quality that are low lead to customer behavioral intentions

that are unfavorable and result in a weakened relationship. Therefore behavioral intentions are

indicators of whether customers will stay with or leave an organization.


 
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. Properly identifying disloyal customers and understanding why they left can be valuable tools

for implementation of a customer retention program. Strategies must be implemented to

overcome non-loyal purchasing behavior (Weinstein et al., 1999e). As soon as an organization

acquires a new customer, retention efforts should be set in place. The organization should try to

learn what the customer¶s needs are, make sure to provide fast response, make sure that the

customer feels cared for, and resolve any complaints quickly (Weinstein et al., 1999f). There are

many ways to build loyalty to increase favorable behavioral intentions. Organizations could

send sales people to work at the offices of their best customers, participate in their customer¶s

events, interview the customer¶s customers, have a retreat with major customers to share best

practices, invite customers to participate in training seminars, develop a preferred customer

pricing strategy, reward customers for referring new business, develop a three to five year
business plan with customers, and even partner with key accounts on industry research projects

(Weinstein et al., 1999g).

Customer retention branches off into many other significant areas such as value-added services,

supply chain relationships, use of information systems to service customers better, and very

importantly perceived and expected performance.

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