Customer value and switching costs in business services: developing exit barriers through strategic value management

Abstract

PurposeThe purpose of this study is to examine the concept of customer value and its role in building switching costs perceptions. The current research develops scales and empirically validates a typology of customer value for business services.Design/methodolgy/approachThrough an extensive literature review, qualitative interviews, and an empirical investigation, the current study identifies three facets of customer value for business services (i.e. economic value, relational value, and core value) and investigates their relationships with buyers' perceptions of switching costs. Structural equation modeling techniques were used to evaluate a measurement model and structural relationships.FindingsThe findings show that economic value and the value obtained from relational and support aspects of a service exert strong positive impact on customers' perceptions of switching costs and thus serve as barriers to exit. Although core service does not seem to have positive impact on switching costs, core value maybe a “hygiene” factor that may promote customers' switching if not properly managed.Research limitations/implicationsThe results of this study are generated from a single industry; additional studies in other industries may strengthen the generalizability of the proposed constructs and framework.Practical implicationsBusiness suppliers need to build exit barriers through co‐creating relational value. Through communications, suppliers may be able to monitor customers' desired value as a proactive action to anticipate changes and to influence positive changes in customer value.Originality/valueThe current study sheds some light on how supplier firms can enhance switching costs, and consequently raise exit barriers by better managing various aspects of customer value perceptions.