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Role of switching costs in the service quality, perceived value, customer satisfaction and customer retention linkage
Manoj Edward
School of Management Studies, Cochin University of Science and Technology, Cochin, India, and

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Received November 2010 Revised November 2010 Accepted March 2011

Sunil Sahadev
School of Management, University of Shefeld, Shefeld, UK
Abstract
Purpose The study attempts to chart out the role of switching costs in the interrelationships between perceived value, perceived service quality, customer satisfaction, and customer retention. The mediating role of switching costs as well as its direct impact is explored among customers of mobile telephone service providers in India. Design/methodology/approach The conceptual model is developed based on the existing literature and then the model is validated through the analysis of data collected from customers of mobile services in India. Findings The mediating role of switching costs is found to have adequate statistical support and the other direct linkages are also found to be valid. The ndings suggest that service rms may benet from pursuing a combined strategy of increasing customer satisfaction and switching costs both independently and in tandem, depending upon the product-market characteristics. Originality/value The study extends the knowledge about customer retention by bringing in switching costs as a part of the network of relationship involving perceived value, perceived service quality, and customer satisfaction. Keywords Switching costs, Customer retention, Perceived service quality, Perceived value Paper type Research paper

Introduction The high cost of customer acquisition compared to the lower cost of serving repeat customers, and the consequent increase in protability, is an important reason why rms are advised to increase levels of customer retention (CR). Perceived service quality (SQ), perceived value (PV), and customer satisfaction (CS) have traditionally been associated with CR (Bloemer et al., 1999; Sirdeshmuk et al., 2002). The role of switching costs (SC) in inuencing CR has been also well established (Heide and Weiss, 1995; Bansal and Taylor, 1999). While the direct effect of SC on CR has been the main focus of many studies, its mediating effect in tandem with the positive effects of SQ, CS, and PV has not been explored with adequate empirical and theoretical support (Aydin and Ozer, 2005; Hellier et al., 2002). We argue that SC can inuence CR, both independently and in tandem with some of the antecedents of CR like SQ, PV, and CS. The interrelationship between SC and these variables has not been adequately

Asia Pacic Journal of Marketing and Logistics Vol. 23 No. 3, 2011 pp. 327-345 q Emerald Group Publishing Limited 1355-5855 DOI 10.1108/13555851111143240

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addressed in the existing literature. In this paper, we attempt to build a model incorporating these interrelationships in a single framework. The focus of this study is the role of SC in its relationship with CS, PV, and SQ in inuencing CR. While each of these variables may have independent effects on CR, it is also likely that the effect of one may in fact complement the effect of the other. Further, increasing the levels of SQ, PV, and CS may increase SC, and through it create an additional effect on CR. Some research studies in fact hints at ways of managing SC in tandem with increasing levels of SQ, PV, and CS (Burnham et al., 2003; Jones et al., 2007; Ranaweera and Prabhu, 2003). In particular, studies suggest multiple ways in which SC can be managed for both CR and customer acquisition. Different studies have indicated the positive association of SC with SQ, PV, and CS (Aydin et al., 2005; Jones et al., 2002). Present empirical evidence suggests that SC can inuence CR in two ways: (1) its direct positive effect; and (2) its moderating role on the effect of CS, SQ, and PV on CR. Several studies, however, have failed to detect this second moderating role of SC (Lam et al., 2004; Burnham et al., 2003). Most of the studies view the effect of SC as a lock in strategy (Dwyer et al., 1987) and thereby expects it to create mostly a passive loyalty and bets on voice over exit even if the customer becomes dissatised (Burnham et al., 2003). That is, SC often act independent of the levels of CS (Bansal and Taylor, 1999; Jones et al., 2000), and helps in gaining retention, especially when CS levels drops. As Burnham et al. (2003) argue, this is often a restricted view of SC overlooking its real potential, and further contend that SC can consciously be set up by rms by increasing the benets and value provided. According to them, in this way SC acquires a better ethical and moral perspective, salvaging it from the negative connotation often attributed to it, solely as a means for customer entrapment. With better satisfying performance from the current service provider and with the increase in the perceived sacrice involved in switching, perceived SC may increase and can consequently act as a further switching barrier. That is, SC acted upon in tandem with increase in PV and CS may in fact complement the effect of these antecedents on CR. Given the evidence that CS alone explains only a small part for the reasons for retention there are needs for searching other drivers aside from CS to increase retention levels (Szymanski and Henard, 2001), SC as another driver, and its role in the relationship between CS and CR will better explain the loyalty observed in the customer. This also suggests managing SC in the same way a rm can manage its satisfaction levels. To effectively manage SC, rms need to assess how customer perceives various SC and how it relates to other antecedents inuencing retention. The study also tests a few important relationships that have already been empirically studied in several other contexts. These relationships concern the linkages between SQ, PV, CS, and CR. we also examine how SQ, PV, and CS relate to each other in the presence of SC on their effect on CR. This becomes signicant because of the particular nature of the consumption context studied. A low contact, continuous purchase context like mobile phone service consumption, in the rapidly changing telecommunication industry, with the increase in automation and growing levels of competition, may continuously alter customer attitude towards providers and their services. This in turn may affect the way SQ, PV, and CS are perceived and the manner in which each effects CR. By studying

the interrelationships between these variables, we seek to shed more light on their relative importance on retention, especially in a rapidly growing and dynamic industry of mobile telecommunication services. Conceptual framework and hypotheses development We develop the conceptual model based on the principles of social exchange theory. According to Blau (1964) social exchange involves voluntary actions of individuals that are motivated by the return they are expected to bring from others. Thus, the level of inclination that individuals show to remain in an exchange relationship is proportional to the satisfaction that they achieve from the existing relationship. Patterson (2004) justies the use of social exchange theory as a foundation to explain the concept of SC in a service encounter. Thus, in our model, CS is posited as driving CR. Further SQ and PV are presented as leading to greater levels of CS being indicators of rewards from the relationship. In this context SC are presented as emanating from the perception of rewards that the consumer perceives from the exchange relationship. The conceptual framework to be tested is shown in Figure 1. For dening the key constructs used in our conceptual framework, we review the literature and in the next stage, we put forth the theoretical support and empirical evidence suggesting the hypothesis framed in the framework. The review starts with SC as its interrelationships with other related variables on the impact on CR is the focal point of the study. Switching costs SC can be dened as the costs (both monetary and non-monetary) involved in changing from one supplier to the other (Heide and Weiss, 1995). However, multiple conceptualizations exist for SC, and this is reected in the diversity of dimensions used to capture the construct. This include dimensions like psychological, physical and economic (Jackson, 1985); continuity costs, learning costs, and sunk costs (Guiltinan, 1989). Further, Burnham et al. (2003) attempted a more comprehensive categorization of SC in terms of procedural, nancial, and relational costs.
H8 Service quality H3 H6 H7 H1 H9 Customer satisfaction Notes: CS, customer satisfaction; PV, perceived value; SC, switching costs; SQ, perceived service quality; CR, customer retention Perceived value H11 Switching costs H2 H4 Customer retention

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H10

Figure 1. Model 1

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Despite the multiple conceptualizations and typologies, SC can broadly be categorized as economical and psychological. Even the economic risk cost identied within the procedural dimension of SC by Burnham et al. (2003) refers to the psychological costs due to perceived risk from the uncertainty of trying new. Psychological SC, such as uncertainty related or risk perceived or loss in relational investments and social bonds or the many other procedural costs (related to time, search, evaluation, and set up) have been found to have a major impact on switching barrier (Burnham et al., 2003; Jones et al., 2002; Wan-Ling Hu and Ing-San, 2006). Even the sunk costs primarily economic in nature though economically not very relevant, becomes psychologically important in evaluating the perceived SC ( Jones et al., 2002). Further, these psychological costs span the entire switching process and beyond, making SC more than just a one time cost (Wan-Ling Hu and Ing-San, 2006). This is because customers may consider even the post switching behavioral and cognitive dissonance costs while switching and can therefore be considered as part of SC (Klemperer, 1995). SC is also consumer specic and its nature varies depending upon the industry structure and product characteristics (Shy, 2002; Gummesson, 1995). In the particular context of mobile telecommunication services, SC stems mainly from search and evaluation costs, and the economic and performance risk associated with trying a new provider (Bloemer et al., 1999; Klemperer, 1995). Instead of being objective and monetarily measurable, such costs are mostly psychological in nature. Service quality, perceived value, customer satisfaction and customer retention SQ dened as a consumers judgment about a products overall excellence (Zeithaml, 1988) is conceptualized as the consumers evaluation based on the comparison between customer expectations against perceived performance (Parasuraman et al., 1988; Bolton and Drew, 1991). SQ evaluation takes place at different levels ranging from more concrete evaluation at specic attribute levels to more abstract level of evaluation, linking to a perception of an overall perceived quality. However, often it is seen that a pure performance based measure is used as a proxy for SQ in several research studies especially if the research focus is on assessing the impact of SQ on other variables. In this study, a service specic SQ, is used based on the customer perception on the key service performance measures related to cellular service usage. PV is viewed as the customers overall assessment of the utility of a product based on the perception of what is received and what is given (Zeithaml, 1988). Dodds et al. (1991) further reinforce this trade off notion and argue that buyers perceptions of value represent a tradeoff between the quality and benets they receive in the product relative to the sacrice they perceive in paying the price. CS is dened as an affective state with positive feelings (Cronin et al., 2000) resulting from an evaluation of the overall consumption experiences. Past studies have also used a more transaction specic measure of service satisfaction (Boulding et al., 1993; Andreassen, 2000). The Transaction specic satisfaction covers customers specic satisfaction experiences towards each transactions with the provider, whereas cumulative satisfaction refers to overall customer rating based on all encounters and experiences (Johnson and Fornell, 1991). In fact, cumulative satisfaction can be viewed as a function of all previous transaction specic satisfactions. Cumulative CS,

an evaluation based on the overall consumption experiences (viewed some times as cumulative of various transaction specic satisfactions) with a product or service over time (Fornell et al., 1996; Johnson and Fornell, 1991; Anderson et al., 1994), is found to be more fundamental and useful than transaction-specic consumer satisfaction in predicting consumer behaviors (Rust and Oliver, 1994). CR indicates customers intention to repurchase a service from the service provider (Morgan and Hunt, 1994). In this study, we use CR as a measure of customers intention to stay loyal with the service provider especially in the context of SC. Relationships linking to switching costs Switching costs service quality, perceived value, satisfaction, and customer retention Research identies that SC can be perceived positively and negatively by the customer. Jones et al. (2007) view that depending upon the sources of constraints which eventually creates the SC, its inuences may be viewed differently by the customer, and contend that certain SCs may be viewed positively by the customer if they arise out of positive constraints. We contend that many of the procedural related SCs in the Burnham et al. (2003) classication, including the economic risk perceived (arising out of uncertainty of trying new) are of psychological nature and can be inuenced in part through providing benets and highly satisfying experience to customer. With higher level of SQ and satisfaction experienced, the provider heterogeneity, as perceived by the customer increases (Parasuraman et al., 1988). This in turn can further increase the uncertainty and the perception of risk surrounding the anticipated performance from an unknown or untested service provider (Guiltinan, 1989). According to post-purchase cognitive dissonance, the customer who has collected information in order to decrease their anxiety about making a wrong purchase decision will use all past purchase experience (Etzel et al., 1997). The main source of customers information for evaluation of alternatives is theirs or others experience. In this process, if customer switches the brand, they will compare the switched brand with the previous brand. Therefore, better the switched brands performance, in terms of its perceived quality and value, higher the uncertainty of the alternative. Hence, customers who want to decrease cognitive dissonance prefer brands they have used before (Klemperer, 1995). That is, with better satisfying performance from the current service provider and with the increase in the perceived sacrice involved in switching, perceived SC may increase and can consequently act as a further switching barrier. For instance, Jones et al. (2002) identied a positive association between SQ and switching cost related to lost performance cost. This relationship has also been supported by other studies, for instance Chen and Hitt (2002) have empirically supported the relationship between quality and SC in the context of internet brokerages, and Chang and Chen (2008) found empirical evidence to link customer interface quality with SC in the context of internet uses. Opportunity cost analysis also suggests that CS has a positive causal effect on the expected disadvantage or cost in switching service suppliers. That is, higher the level of customers overall satisfaction with service, ceteris paribus, the larger the opportunity cost or satisfaction foregone the customer can expect to incur in switching suppliers (Hellier et al., 2002). The direct effect of CS on SC can be argued based on the higher levels of usage that results from CS. Bolton and Lemon (1999) have shown

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that satisfaction leads to greater usage of services. Greater levels of usage could lead to several antecedents of SC like relational attachment with the service provider, greater trust in the service provider, etc. In contrast to this view, Hauser et al. (1994) have suggested the possibility of SC leading to customer dissatisfaction. However, based on the overwhelming impact of the increased usage rate caused due to CS, a direct linkage between CS and SC can be proposed. The nancial aspect of SC described by Burnham et al. (2003) can be directly linked to the PV for the service as PV is often dened as the outcome of a cost-benet comparison process. Studies have also directly linked elements related to PV to SC. When customers PV or their satisfaction is high, customers chance of getting a better service from another provider is not likely to be high. For instance, Yang and Peterson (2004) suggests that switching barriers can take effect if managers focus on improving CS and PV to a higher level. In their study on on-line brokerages Chen and Hitt (2002) found that PV attributes like larger portfolio of services, possibility for personalization, etc. increased the SC of internet brokerages. Pae and Hyun (2006) found a similar result in the case of operating systems. Based on the existing literature and the above discussions, the following hypotheses are proposed: H1. CS has a positive effect on the perceived SC. H2. PV has a positive effect on the perceived SC. H3. SQ has a positive effect on SC. Switching costs and customer retention The primary role of SC, as far as rms are concerned, is to induce some sort of loyalty, be it a committed, or a passive one, in customers (Dwyer et al., 1987; Heide and Weiss, 1995). Moreover, switching to a new provider often involves effort, time, and money, which acts as a psychological barrier to switch for a customer (Gremler and Brown, 1996). The direct positive effect of SC on CR has been conrmed in many empirical studies ( Jones et al., 2000; Ranaweera and Prabhu, 2003; Bansal and Taylor, 1999). In line with the existing research, we hypothesize that: H4. SC has a positive effect on the CR. Mediating role of switching costs Testing the mediating role of SC is another major focus area of this research. In addition to its direct impact, CS can also have an indirect positive impact on repurchase intention (Hellier et al., 2002). As SC is the only intervening variable between CS and CR in the full Model 1, we aim to test the mediating role of SC in the effect of CS to CR. To date, no prior studies have examined the mediating role of SC in the CS, CR relationship: H5. SC mediates partially the relationship between CS and CR in such a way that the greater the CS, the greater the SC and the greater the CR. Relationships linking SQ, PV, CS, and CR As the relationships between SQ, PV, CS, and CR are also part of the model. We examine how they are related to each other in the presence of SC. Many studies

have conrmed these relationships. Only a brief review is given in this section. Perceived quality as an antecedent to CS has been tested and conrmed by many studies (Anderson et al., 1994; Fornell et al., 1996; Spreng and Mackoy, 1996). SQ can also have a direct impact on CR (Bloemer et al., 1999; Jones et al., 2002). The link between value and quality may not be straightforward, still, as value is also what consumers want from the product, in many cases, quality of the product and the benets it offers often become customer value drivers (Bolton and Drew, 1991; Zeithaml, 1988). Many studies support this association (Dodds et al., 1991; Oh, 1999). Firms delivering high value services (quality services at reasonable prices) satisfy customer needs better (Heskett et al., 1997). Many empirical studies have also conrmed this relationship (Anderson and Mittal, 2000; Walter et al., 2000) for many product categories, where the cognitive evaluation part dominates the consumption experience, PV can also directly affect behavioral intention, even without much perceptible change in satisfaction levels (Batra et al., 1995). Several studies have shown PV can have a signicant inuence on CR (Sirdeshmuk et al., 2002; Chang and Wildt, 1994). Similarly, various studies have also veried the positive effects of CS on CR (Bloemer et al., 1999; Oliver, 1993; Zeithaml et al., 1996, Heskett et al., 1997; Mittal and Kamakura, 2001). Many empirical studies also conrm a partial mediating role for CS in the effect of PV and SQ to behavioral intention (Sirdeshmuk et al., 2002, Chang and Wildt, 1994; Cronin et al., 2000). The theoretical framework hierarchically linking cognition, affect, intention, and behavior gives support to this mediating role of CS (Oliver, 1993). Based on the existing literature and the above discussions the following hypotheses are proposed: H6. H7. H8. H9. H10. H11. H12A. SQ contributes positively to PV. SQ contributes positively to CS. SQ positively affects CR. PV has a positive effect on CS. PV has a positive effect on CR. CS positively affects CR. CS mediates totally or partially the relationship between PV and CL (retention) in such a way that the greater the PV, the greater the CS and the greater the CR. CS mediates totally or partially the relationship between SQ and CR (retention) in such a way that the greater the SQ, the greater the CS and the greater the CR.

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H12B.

Empirical study The empirical study comprised of two parts: (1) a qualitative phase, which involved conducting in-depth interviews with the users, managers and dealers of mobile phone services in India; and (2) a quantitative phase that comprised of the main survey.

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The rst phase the qualitative phase basically gave an overall idea about the market, components of SQ and also gave a broad qualitative support for the framework to be developed. The phase comprised of in-depth interviews with users of mobile phone services and managers and dealers of mobile phone services. The interviews were conducted by one of the authors, in a major city in South India. A total of 15 mobile phone users were contacted and they represented adequately all the mobile phone services providers as well as the different demographic proles. Users contacted comprised of both switchers (who have tried more than one cellular service rm) and non-switchers. Each interview lasted for more than one hour. A series of one to one discussions were also made with ve dealers and ve managers of different mobile phone services in the same city to gain useful insights of this industry based on their specialized knowledge of the industry. This phase helped us to identify the key switching cost barriers, relevant perceived SQ aspects and CR and consumer confusion measures relevant for the specic context of the study. The qualitative phase also helped in developing the relevant scale items for each construct used in the study. Based on the insights developed in the depth interviews as well as based on the literature review we developed a questionnaire. For this, we included only items that were found to be very essential for the construct measured to reduce the size of questionnaire for data collection efciency. Size of the questionnaire was reduced to enable a free intercept onsite survey of customers at various convenient locations suitable for data collection purpose. The data were collected from 220 mobile phone users in one of the big cities in the southern part of India through a questionnaire. The Indian telecommunication market is witnessing tremendous change as India witnesses a steady growth and consumers are provided with a plethora of choices. This is in part due to what Shukla (2006), considers as the consumer oriented culture emerging in India. Few questionnaires were eliminated because they were incomplete or showed high level of error in response indicated by some control questions. This elimination reduced the usable questionnaires to 200. The demographic and the usage prole of a nationwide sample survey of mobile users in India by a leading syndicated marketing research agency were used as a guideline for selecting the respondents. This, to some extent, ensured that the sample has adequate representation of respondents based on their demographic, usage type (pre paid, post paid), type of operators and usage level. Measurement scales All measures used in this study were adapted from the literature and modied based on the qualitative interviews conducted to suit the mobile phone service usage context. In this study, instead of directly using part of SEVQUAL model or two-dimensional Gronroos (2000) model, a six-item scale incorporating core aspects of the service provision that have the highest potential to inuence the overall perceived SQ was used. Such an approach helped us to gain more unidimensionality for the constructs (Bloemer et al., 1999) and contributed to data collection efciency. The inputs obtained from the interviews conducted with the end-users and dealers enabled us to understand the dominant aspects of SQ evaluation among users of mobile phone services. These were mostly related to call quality/clarity, network coverage, etc. These facets were found adequate to capture the most critical part of SQ evaluation and also

to represent an overall assessment of the standard of the service delivered in the cellular service market. In the literature of SQ in the cellular service sector this dimension is referred to as core services and is considered distinct from the value added services (service plan options, rage of extra services offer like billing options) (Lee et al., 2001). Thus, a six-item scale was developed that captured the core service performance dimensions. As identied from the qualitative interviews, in the context of the study, SC largely stems from the procedural effort needed to evaluate new service providers on various parameters, and steps needed to complete the procedure of shifting to a new provider. Another relevant SC component identied in this context was the anxiety and perceived risk due to the concern whether the new service provider will serve better or not. Further, number portability constraint also was detected act as a signicant SC for many customers. Based on these insights, the scale for SC was formed by four items adapted from (Ping, 1993; Jones et al., 2000) but modied based on the qualitative interviews. The scale measures an overall switching cost perceived due to procedural, economic, uncertainty, and evaluation cost specic to context of the research - similar to done by (Heide and Weiss, 1995; Jones et al., 2000). In this study context, we used a cumulative satisfaction measure, rather than a transaction specic measure of service satisfaction. A three item CS scale was adapted based on Oliver and Swan (1989) and Westbrook and Oliver (1991) to assess respondents general satisfaction. For this study, we conceptualized PV in terms of get (benet) and gives (sacrice) components (Woodruff, 1997; Slater, 1997; Zeithaml, 1988). Based on this conceptualization, the PV scale was adapted from McDougall and Levesque (2000). For measuring the CR dimension reecting the propensity of a customer to stay with the service provider we use a scale adapted from Morgan and Hunt (1994). Analysis results We rst assessed the measurement model followed by the hypothesis testing according to the guidelines suggested by Anderson and Gerbing (1988). We conducted exploratory and conrmatory factor analysis (CFA) to test for the convergent validity of the items used for each constructs. In arriving at the nal set of items for each construct, we deleted measures from the initial battery of items based on the following statistical and theoretical grounds. Based on CFA results we identied items that loaded less than 0.5 for deletion. Applying these guidelines, two items from SQ scale and one item from SC scale were dropped from the original pool of items. We also veried that the deletion of these items would not change or harm the intended meaning of the constructs. Therefore, one item under SC though lower than 0.5 in loading was retained based on the theoretical ground that it reect closely the construct intended to measure. When the resultant pool of items for PSQ, CS, PV, SC, and CL were subjected to an exploratory factor analysis with principal factor as extraction method followed by varimax rotation, ve factors emerged corresponded to how we had initially measured these constructs. This demonstrated the construct validity and the unidimensionality for the measures (Straub, 1989). The mean, SD, reliability coefcients, and inter-construct correlations are shown in Table I. With this knowledge, we performed a CFA on this ve-factor model. The t indices generated suggested a good model t (x 2 111.11.6, df 80 p 0.012 x 2/df 1.389,

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RMR 0.048). The result of the CFA with factor loadings and t-values are shown in Table III. The table indicates that all factor loadings were greater than the recommended cut-off value of 0.4 and were statistically signicant (Nunnally and Bernstein, 1994) thus providing evidence for convergent validity. However, out of the ve factors, two factors (SQ and SC) showed AVE lower than the recommended level of 0.5 indicating lower convergent validity. The AVE for SQ was lower than the shared variance between SQ and PV indicating a threat to discriminant validity. For the other constructs and especially for SC, the shared variance between the constructs was lower than the respective AVE indicating discriminant validity. For the specic cases, additional analysis for discriminant validity as suggested by Anderson and Gerbing (1988) was conducted. In this method, pairs of constructs are tested with rst unrestricted correlation between the pairs and then constraining the correlation between pairs tested in measurement models to 1. In these specic cases, the constrained model showed a lower t than the free model and this suggests adequate discrimination between factors. In addition, the construct reliability exceeded the required 0.6 indicating reliability for all the constructs (Fornell and Larcker, 1981; Bagozzi and Yi, 1998; Hair et al., 1995). So, with the knowledge of unidimensionality of the constructs conrmed through an exploratory factor analysis, and the relatively high signicant factor loadings in CFA results indicating the evidence of convergent and discriminant validity, it was decided to carry out the analysis retaining these constructs as such. Tables II and III shows the average variance explained and the results of the discriminant validity tests, respectively. Table IV shows the items used in the measurement model and the factor loadings. The hypothesized relationships shown in the proposed model (shown in Figure 1) were tested through a path analyses procedure implemented using AMOS 4. Using this method, all the direct and indirect relationships in the model are estimated simultaneously and thus allowing us to examine all the interrelationships among the variables proposed in a single framework (Oh, 1999). All the t indices indicate that the proposed model exhibits a reasonably good t to the data. The path coefcients are
SQ SQ SC PV CS CL 1 0.093 0.620 0.777 0.462 SC 1 0.101 0.227 0.388 PV CS CL Mean 3.65 3.39 3.41 3.74 3.60 SD 0.68 0.76 0.71 0.76 0.97 Reliability 0.70 0.65 0.84 0.91 0.90

Table I. Mean, SD, reliability, and correlation of constructs

1 0.681 0.489

1 0.570

SQ SQ SC PV CS CL 0.38 0.008 0.384 0.603 0.214

SC 0.39 0.011 0.051 0.150

PV

CS

CL

Table II. Average variance explained

0.64 0.463 0.489

0.77 0.324

0.74

x2
SQ-PV SQ-CS SQ-SC SQ-CL SC-PV SC-CL SC-CS PV-CL PV-CS CS-CL 59.4 61.7 91.08 69.74 93.49 65.46 93.2 58.37 56.94 63.3

df 1 1 1 1 1 1 1 1 1 1

p 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

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Table III. Discriminant validity tests

Construct scale items SQ (strongly agree-strongly disagree) The service providers call quality/ clarity is very good This service providers network service performance (felt by the ease in getting and making calls) is very good I can rely on this service provider for getting good service This service provider has a very good network coverage PV (strongly agree-strongly disagree) Comparing what I pay to the service I receive I think my service provider provides me good value This providers service is a better value for money The provider charges a reasonable price for the service they provide SC (strongly agree-strongly disagree) Changing to another mobile service provider would mean a lot of time and effort from my part It is costly for me to switch to a new mobile service provider In general it would be a hassle in switching to a new mobile service provider CS (strongly agree-strongly disagree) Overall I am happy with my current service provider I feel good about my decision to choose my current service provider Overall, how much satised are you with your mobile service providers service CR/loyalty intention (strongly agree-strongly disagree) What is the chance of you continuing with your current service provider within next six months What is the chance of you continuing with your current service provider within next one year What is the chance of you continuing with your current service provider within next two years

Loading 0.629 0.539 0.682 0.546 0.727 0.878 0.789 0.478 0.697 0.663 0.904 0.777 0.953 0.859 0.945 0.770

t-value 6.073 7.194 6.136 11.09 10.37 4.851 5.317 14.45 21.633 16.91 13.11

Notes: Measurement model t details x 2 111.11.6, df 80, p 0.012, x 2/df 1.389, RMR 0.048, GFI 0.930, NFI 0.920, TLI 0.968, CFI 0.976, RMSEA 0.044; denotes loading xed to 1

Table IV. CFA results

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shown in Table V. As the focal point of the analyses, the interrelationship of SC with other variables and their impact on CR, i.e. the paths to and from SC are presented rst. Among the paths to SC, it is found that CS has a positive effect on SC (H1) whereas the effect of SQ and PV on SC was not signicant. However, both PV and SQ appears to have an indirect effect on SC through CS. SC in turn has a positive effect on affects CR (supports H4). Similarly, CS and PV also have direct signicant positive effect on CR (supports H10 and H11).The same direct effect was not seen in the case of SQ. In accordance with many other studies, the results also indicate that SQ has a positive effect on PV and CS (supports H6 and H7), PV has a positive direct effect on CS (supports H9). To test the mediating role of SC and CS we tested different models (Models 2 and 3) shown in Figures 2 and 3 which were compared with the original full Model 1. Specically, Model 2 that excludes SC is compared with Model 1 (the full model) to test the mediating role of SC. As shown in Table V comparing these models, we found support for all the mediating conditions set by Barron and Kenny (1986). In this case, we found that: . SC and CS have a positive direct effect on CR (Model 1). . CS has a positive effect on SC (Model 1). Further, in the Model 3, in the absence of SC, CS has a positive effect on CR (Model 2) which is considerably higher than its effect on CR in the presence of SC (Model 1). Based on the ndings we can conclude that the relationship between CS and CR is partially mediated by SC, and therefore support H5. Next, for testing the mediating role of CS with SQ and PV, Model 3 that does not include CS was compared with the original Model 1. In this case also we found
Construct path SQ to PV SQ to CS PV to CS SQ to SC PV to SC CS to SC SQ to CR PV to CR CS to CR SC to CR Fit indices x 2/df RMR GFI CFI TLI Model 1 0.620 * * 0.577 * * 0.323 * * 20.11 20.06 0.44 * 0.061 0.206 * 0.317 * 0.289 * 1.455 0.04 0.924 0.973 0.965 Model 2 0.615 * * 0.578 0.321 Model 3 0.615 * * 0.033 0.082 0.244 * 0.322 * * 0.336 * * 1.474 0.05 0.941 0.971 0.961 R2 0.385 0.668 0.08 0.422

0.190 0.440 1.358 0.04 0.939 0.985 0.981

Table V. Path analyses results

Note: *p , 0.05 and * *p , 0.001

Service quality

Customer retention

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Figure 2. Model 2

Customer satisfaction

Service quality

Customer retention Switching cost

Perceived value

Figure 3. Model 3

that all the mediating conditions set by Barron and Kenny (1986) are satised for the effects of PV and SQ on CR. In Model 3, as seen from Table II: . PV and SQ have got a positive effect on CR in the absence of CS (Model 3). . PV has a signicant positive effect on CR (Model 1). . Also, CS has a positive effect on CR (Model 1). . The direct effect of PV on CR is reduced in the presence of CS (Model 1) as compared to its effect on CR in Model 3. This shows that the relationship between PV and CR is partially mediated by CS (H12 A). Furthermore, as noted in Model 1, the estimate for the path from the SQ to CR is not signicant at the 0.05 level, whereas the same estimate, in the absence of CS, in Model 2, is signicant at the same level. Therefore, we conclude that the relationship between SQ and CR is totally mediated by CS thus supporting H12B. Discussion and managerial implication Our study provides insights into the interrelationships between switching cost, CS, perceived quality, PV and CR constructs. In contrast to previous studies in which relationships linking SC to CS, customer value and SQ are separately analyzed (Aydin and Ozer, 2005; Jones et al., 2002), this study examines their combined impact on SC and the mediating effect of SC on CR in single model. The results reveal that switching cost can have an independent effect as well as a mediating effect on CR through CS. The indirect direct effect of CS on CR though SC may be more due to calculative commitment, whereas the direct effect of CS on CR may

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be more from affective commitment (Bansal et al., 2004). This nding extends previous studies on SC treating it as a factor aiding CR independent of CS (Heide and Weiss, 1995; Bansal and Taylor, 1999). Contrary to expectation, the direct relationships of SQ and PV to SC were not found signicant, possibly because the link between these variables and SC are completely mediated through CS. This may be also because of the particular context in which these relationships are tested- mobile cellular service industry. In such low contact mass service setting CS is the strongest driver of CR (Ranaweera and Prabhu, 2003). However, both SQ and PV has indirect effect on switching cost perception through CS. This study also supports a few other important relationships that have already been empirically studied in the past in several other contexts. These relationships concern the linkages between perceived SQ, consumer value, and CS and consumer retention. The nature of relationships among the three important antecedents to CR indicate the key role of CS in mediating totally for perceived quality and partially for PV in their effect to CR. The study thus endorses the signicance of these well known relationships in an altogether different context the mobile cellular service market in India. The results from this study are signicant from the point of view of the practitioner as they describe the impact of certain controllable variables on CR. The study points to the multiple ways in which CS can impact the level of CR. Taken together, the ndings suggest that service rms may benet from pursuing a combined strategy of increasing CS and SC both independently and in tandem, depending upon the product-market characteristics. The Switching cost perceptions should be managed like CS. By achieving CS through better service features and value provisions rms can set up SC, further aiding CR. This has an important management implication, especially in the cellular service market where new entrants give attractive promotional offers for capturing existing customers of other service providers. This is a situation where even satised customers consider switching to the new provider. Firms should seek and deploy specic satisfaction building initiatives aimed at increasing SC under such conditions. Limitations and future research Our study has some limitations. First, the data are taken from a single industry and that too, in a low contact, business to consumer mass service delivery context like cellular service. SC considered in such contexts is likely to be different from other industry contexts. This limits the generalizability of our results to other contexts. Regarding sample size, we have used suitable sample control measures for adequate sample representation. Still a larger sample size used in the path analysis may truly reect many of the effects studied in this research. We have also not controlled for the effect of key demographic and usage variables while developing the model. Future studies could deploy methods that could overcome these limitations. Another limitation is that we have used only a limited set of measures for reasons of model parsimony and data collection efciency. Though, perceived SQ and SC have multiple dimensions, we have focused only on selected measures of these dimensions, based mainly on their relevance to the context studied. Further studies could also look at the relationships concerned with consumer satisfaction and SC in more detail. For instance, which of the transaction specic satisfactions contribute

most to the switching cost perceptions? Future studies could also explore these relationships in different product/market contexts where the nature of SC is likely to different.
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