A cross-cultural study of switching barriers and propensity to stay with service providers

Abstract

This study examines the important and often underestimated role that switching barriers play in the propensity to stay with service providers. Three service types (with different structural characteristics) were studied across two diverse cultures—Australia (Western, individualistic culture) and Thailand (Eastern, collectivist culture). Six potential switching barriers are examined: search costs; loss of social bonds; setup costs; functional risk; attractiveness of alternatives; and loss of special treatment benefits. The results from a series of multiple regression analyses show switching costs capture a substantial amount of the explained variance in the dependent variable, propensity to stay with a focal service provider. Furthermore we demonstrate using interaction terms that these switching costs appear to be universal across west–east cultures. However, significant variations were found across industries. Next, using a hierarchical regression procedure, we add a satisfaction variable into each model. The incremental gain in R 2 is significant in each industry. Nonetheless the significant impact of switching barriers gives rise to the identification of a new type of service loyalty, which we term “captive loyalty.”