Why customers stay: measuring the underlying dimensions of services switching costs and managing their differential strategic outcomes

Although switching costs are increasingly finding their way into models of customer loyalty, a lack of consistency and clarity exists regarding the appropriate conceptualization and measurement of this critical strategic construct. To address this deficiency, the following six dimensions of switching costs were proposed: (1) lost performance costs; (2) uncertainty costs; (3) pre-switching search and evaluation costs; (4) post-switching behavioral and cognitive costs; (5) setup costs; and (6) sunk costs. Support for these six dimensions was obtained across two studies and two service industries (banks and hairstylists). The multidimensional scale (24 items) evidenced reliability, discriminant validity, and convergent validity. In addition, individual dimensions related to various constructs in predictable and sometimes differential ways. For example, while all switching cost dimensions were positively and significantly associated with repurchase intentions in the overall sample, the association was strongest with lost performance costs. Industry differences also emerged both in the mean level of perceptions across switching cost dimensions, as well as in the strength of relationships between switching costs and outcomes such as repurchase intentions. For example, perceptions of setup costs and pre-switching search and evaluation costs were higher for hairstylists than banks and were also more strongly associated with repurchase intentions for hairstylists than banks. Strategic implications and areas for future research are discussed.