The Moderating Effect of Switching Costs on the Customer Satisfaction-retention Link - Retail Intern

The Moderating Effect of Switching Costs on the Customer Satisfaction-retention Link - Retail Intern

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The Moderating Effect of Switching Costs on the Customer Satisfaction-retention Link: Retail Internet Banking Service in Hong Kong IBIMA BUSINESS REVIEW Volume 2, 2009 20 The Moderating Effect of Switching Costs on the Customer Satisfaction-retention Link: Retail Internet Banking Service in Hong Kong Chi-Bo Wong, Hong Kong Shue Yan University, Hong Kong, cbwong@hksyu.edu Joseph M. Mula, University of Southern Queensland, Australia, mula@usq.edu.au Abstract The objective of this research was to develop a model that examines the direct effects of customer satisfaction and switching costs on customer retention as well as the moderating effect of switching costs on the relationship between customer satisfaction and customer retention in the segments of basic and advanced Internet banking users. This empirical research was conducted within the context of the retail Internet banking industry in Hong Kong. An online questionnaire was employed as the means of data collection. This research confirms the significant positive effects of customer satisfaction and switching costs on customer retention in both segments of basic and advanced Internet banking users. It is interesting that switching costs play a significant moderating effect on the customer satisfaction-retention link only for the segment of basic Internet banking users. For the segment of advanced Internet banking users, the moderating effect of switching costs does not significantly affect satisfaction-retention link. Keywords: Customer retention, Customer satisfaction, Switching costs, Moderating effect. 1. Introduction The utilization of Internet banking services continues to show healthy growth in Hong Kong. There were 4.9 million personal and 307,000 business Internet banking accounts at the end of 2007, compared with 3.8 million and 234,000 respectively in 2006 (Hong Kong Monetary Authority, 2008). Internet banking allows customers to access banking services 24 hours a day, 7 days a week. Like ATMs, Internet banking empowers customers to choose when and where they conduct their banking services. Empirical results indicated that the Internet banking customers are more satisfied with their banks than non-Internet banking customers (Mols, 1998). The ACNielsen (2002) research found that customer satisfaction with Internet banking was high across the Asia pacific. Only 4 percent of Internet banking customers in Singapore, and 6 percent in Hong Kong, were dissatisfied with their Internet banks, while in South Korea and China 8 percent were dissatisfied with their Internet banks, and for Taiwan the figure was 12 percent. The consumer movement from traditional branch banking to Internet banking has meant that new strategies to attract new customers and retain existing ones become critical (Karjaluoto, 2002). Reichheld (1996) found that a five percent increase in customer loyalty produces an eighty-five percent increase in profitability in the banking industry. Viewed in this light, it is postulated
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This note was uploaded on 04/21/2011 for the course BUSINESS AAF001-1 taught by Professor Dr.tony during the Spring '11 term at University of Bedfordshire.

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The Moderating Effect of Switching Costs on the Customer Satisfaction-retention Link - Retail Intern

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