Source:
Information Systems Research, Volume 13, Issue 3, p.255-276 (2002)
Keywords:
Switching Cost;
Electronic Markets;
Customer Retention
Abstract:
The ability to retain and lock in customers in the face of competition is a major concern for
online businesses, especially those that invest heavily in advertising and customer acquisition.
In this paper, we develop and implement an approach for measuring the magnitudes
of switching costs and brand loyalty for online service providers based on the random utility
modeling framework. We then examine how systems usage, service design, and other firmand
individual-level factors affect switching and retention. Using data on the online brokerage
industry, we find significant variation (as much as a factor of two) in measured switching
costs. We find that customer demographic characteristics have little effect on switching, but
that systems usage measures and systems quality are associated with reduced switching. We
also find that firm characteristics such as product line breadth and quality reduce switching
and may also reduce customer attrition. Overall, we conclude that online brokerage firms
appear to have different abilities in retaining customers and have considerable control over
their switching costs.
Notes:
Both the published version and an earlier conference version (ICIS 2000) are posted below.