ASIAN JOURNAL OF MANAGEMENT RESEARCH Online Open Access publishing platform for Management Research

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1 Online Open Access publishing platform for Management Research Copyright by the authors - Licensee IPA- Under Creative Commons license 3.0 Research Article ISSN An empirical study to investigate the relationship between switching barriers and service recovery evaluation Doctoral Research Scholar, ICFAI University Dehradun vgautam78@gmail.com ABSTRACT This study attempts to investigate the relationship between switching barriers and service recovery evaluation in Indian context. Empirical findings of the present study provided quite useful insights. The primary statistical techniques used in the study were correlation analysis, exploratory factor analysis. A total of 347 respondents completed the field survey, and survey was conducted in the Dehradun city of Uttrakhand. It was found in the results of correlation analysis that compensation and promptness constructs had comparatively high correlation coefficient with overall service recovery evaluation in comparison to employee behaviour construct. Another insightful finding of the study provided evidences for significant relationship between service recovery evaluation and positive switching barriers, but at the same time there were no evidences for relationship between service recovery evaluation and negative switching barriers. Keywords: Switching barriers, service recovery evaluation, exploratory factor analysis, correlation analysis, India. 1. Introduction In the present business world, it is imperative for the business organizations to provide the consumers with high quality of goods and services. The term relationship marketing was popularised in the 1980s when the centre of attention of marketers started to switch from customer acquisition to customer retention. The concept was strongly influenced by reengineering theory, which was gaining prominence at that time. Organisations had undergone for reengineering to become structured by focusing on completing tasks and processes rather than functions. The concept of cross-functional teams started coming into picture rather than having the work go from one functional department to another. Traditional marketing is said to use the functional department approach, which is now considered to endow with a functional framework for assessing and developing customer relationships. In the present complicated consumer environment, an alternative model where the focus is on customers and relationships rather than markets and products is nowadays required. Buttle, (1996) mentioned in the study that most of the businesses are trying to provide high quality both in goods and services to generate customer satisfaction leading subsequently to repurchasing, long term customer loyalty, and long term financial benefits to companies. The service recovery paradox states that with a highly effective service recovery, a good or service failure offers an option to accomplish higher satisfaction ratings from customers than if the failure had never happened, means that a good recovery can turn angry and frustrated customers into loyal customers. In fact it can create even more goodwill than if things had gone smoothly in the first place (Magnini et al, 2007). 336

2 Andreassen, (2001) argued that all actions that an organization can take to resolve a service failure are considered service recovery efforts. To develop mechanism for handling the customer complaints, organizations now are spending more time and resources. The growth of the service sector in the world s economy and prevalence of service failure in retail service settings head towards need of better understanding of the role that service recovery will play in today s market. Moreover, service recovery continues to obtain augmented consideration in part due to mounting customer expectations and competitive marketplace responses designed to meet and exceed those expectations (Brown, et al. 1996). Increase in competition insists organizations to improve the quality of services they offer in order to increase the probability of retaining their customers. The relationship between customer satisfaction and loyalty depends on variables such as market regulation, switching costs, brand equity, existence of loyalty programs, proprietary technology, and product differentiation at the industry level (Fornell, 1992). Various researchers have mentioned that these variables and others like number of attractive alternatives in the market may be considered as switching barriers (Fornell, 1992; Jones, Mothersbaugh, and Beatty, 2000; Julander and Soderberg, 2003). In addition, Ranaweera and Prabhu (2003) found that companies might retain their customers by creating switching barriers that should add value to their services. The effect of switching barriers on service recovery evaluation is not probed in the literature. Therefore the present research will look into the research gap and will try to contribute potentially towards managerial implications. 2. The literature review Jones, M., Mothersbaugh, D., and Beatty, S. (2000) concluded in their study that switching barriers are important factors in order to effect the decision of customers to remain with a service provider. Switching barriers make customer defection difficult as well as costly. Authors proposed a contingency model between switching barriers and core-service satisfaction. The findings of the study provided evidence for the proposed model. Findings of the study revealed that under conditions of high switching barriers, impact of core-service satisfaction on repurchase intentions decreased. While switching barriers had no impact on repurchase intentions when satisfaction was high. Finally, impact of switching barriers was found positive on repurchase intentions when satisfaction was low. Eugene, W. Anderson, Claes Fornell, and Donald R. Lehmann, (1994) argued that several organizations that are aggravated in their efforts to recover quality and customer satisfaction began to enquire about the relationship between customer satisfaction and economic returns. They investigated the nature and strength of relationship between customer satisfaction and economic returns. Authors examined that how expectations, quality, and price should affect customer satisfaction, in turn should affect profitability. The study hypotheses were tested by using a national customer satisfaction index and return on investment. The results of the study held a positive impact of quality on customer satisfaction, and in turn profitability. In the end, they concluded that the market s expectations of the quality of a firm s output positively affect customer s overall satisfaction with the firm and these expectations are largely rational, notwithstanding with a small adaptive component. Bernd Stauss and Andreas Schoeler, (2004) propounded that most firms had enormous difficulty calculating the profitability of their complaint management, regardless of the great impact of complaint handling on customer retention and the beneficial usage of complaint information for quality improvements. As a corollary of this knowledge discrepancy 337

3 complaint management is habitually not regarded as a profit centre but as a cost centre. Therefore, it poses a big hurdle in designing methods to address the issue. In the present study, authors presented various types of benefits and costs of implementing complaint management profitability. The underlined propositions related to complaint management profitability calculations were tested empirically among the complaint managers of major German companies in the business-to-consumer market. The empirical results revealed that assumed complaint management profitability knowledge deficit is even higher than expected. Authors calculated complaint management profitability on basis of the repurchase benefit. Gwinner, Kevin P., Dwayne D. Gremler, and Mary Jo Bitner, (1998) investigated the benefits customers receive as a result of engaging long-term relational exchanges with service organizations. Authors categorized consumer relational benefits into three different types of benefits like; confidence, social, and special treatment. Results of the research revealed that consumers perceived confidence benefits more important than the other relational benefits, followed by social and special treatment benefits. In the end of article, authors discussed about management implications for relational strategies and future research implications of the findings of the study. Moon-Koo Kima, Myeong-Cheol Parkb, and Dong-Heon Jeonga, (2004) conducted an empirical study in Korean mobile telecommunication services sector. The study was intended to investigate the effects of different features of service quality and switching barriers on customer satisfaction and customer loyalty. They proposed a structural model for their study and tested the model with structural equation modelling technique. A sample of 350 respondents was collected by field survey approach of data collection in Korea. In the structural model, they found that service quality indicators like; customer support, call quality, value added services had positive and significant impact on customer satisfaction. Also results provided evidences of positive and significant effects of customer satisfaction and switching behaviour on customer loyalty in Korean mobile telecommunication services sector. Chatura Ranaweera, and Jaideep Prabhu, (2003) investigated empirically the combined effect of customer satisfaction and trust on customer retention and positive word of mouth. Authors conducted a large scale survey of fixed line telephone users in the context of United Kingdom. Results of the empirical test provided evidence that both satisfaction and trust have strong positive associations with customer retention and word of mouth. Study also found that the linear effect of satisfaction on retention is much stronger than that of trust. Moreover, as a driver of word of mouth, however, trust is only slightly weaker than satisfaction. In addition, quantitative analysis, supported by qualitative evidence from the survey, suggests that even a satisfying service recovery process might still be insufficient to avert loss of trust. Results of the study demonstrated that the companies require developing strategies that focus on building both satisfaction and trust, and satisfactory service recovery may not be the universal remedy for all service failures. Smith, Amy K. and Ruth N. Bolton, (1998) developed a simple model to address the research questions like: (a) How does a customer s satisfaction with a service failure and recovery encounter affect his/her cumulative satisfaction judgments and repatronage intentions? (b) To what extent do a customer s prior assessments of overall satisfaction and repatronage intentions formed before the service failure and recovery encounter carry over to influence his/her subsequent overall satisfaction and repatronage intentions? (c) Can a highly satisfying service failure and recovery encounter enhance a customer s overall satisfaction with a 338

4 service organization and increase his/her repatronage intentions? This model was operationalized with the data from two experiments conducted in two different service setting: restaurants and hotels. The respondents for the study were made to experience a hypothetical service failure and recovery encounter at an organization they had recently patronized. Answers to these research questions provided insights into whether effective service recovery leads to valuable returns in terms of customer satisfaction and retention in the case of managers. The findings reveal that even though brilliant service recoveries can augment customer satisfaction and amplify repatronage intentions. The impact of negative and positive switching barriers on service recovery evaluation in the Indian service settings is another concern that has not been dealt properly. This is important due to the diverse market circumstances in which firms operate. Some of them function in a very competitive environment, while others don t function in that very competitive environment. These conditions might influence positively or negatively. Therefore, it is indispensable to discern if there is any impact of switching barriers on service recovery evaluation, so companies belonging to different industries can make decisions strategically. 2.1 Objectives of the study The main objective of the present research work is to investigate the relationship between switching barriers and service recovery evaluation. 3. Research methodology The present study is based on primary data. Data was collected from the target respondents through field survey technique. The survey instrument used for the study was questionnaire adapted from the past literature. The studies by Estelami (2000), Julander and Soderberg (2003), Ranaweera and Prabhu (2003) and Colgate and Hedge (2001), were consulted to design survey instrument for the present study. Questionnaire consisted of questions related to service recovery evaluation construct, and switching barriers construct. Since, the questionnaire is proposed to collect data related to complaint issues, so it was imperative to interview only those people who have had bad purchase experience. Because of this reason, the questionnaire consisted of one special question Have you ever been dissatisfied with the product/service you purchased? and all respondents who answered no were not considered for the analysis. The questionnaire was modified to make it suitable for Indian context, and was pilot tested among 57 respondents. Reliability check has been performed to know the suitability of the construct for Indian industries. After ascertaining the suitability of the questionnaire, it was administered by researcher himself to the customer s sample size of 347 respondents selected randomly from the city of Dehradun in state of Uttrakhand, a northern state of India. Since pilot study results were in the favour of the survey instrument, those responses were also included in the sample (See figure 1). 339

5 Figure 1: Sample Classification In the sample collection process, the industry that got maximum complaints was the telecommunication services with a 21% of all complaints followed by banking services with 17% of all complaints, departmental stores with 14%, and insurance services with 13%. The rest of the complaints are divided among industries such as, private general insurance, and government hospital system etc. (See table 1). Table 1: Percentage of complaint per industry Sr. no. Name of Industry Percentage 1 Banking Services 17% 2 Insurance Services 13% 3 Telecommunication Services 21% 4 Departmental Stores 14% 5 Others 35% 4. Data analysis and findings The SPSS software package 17.0 version was used for analyzing the data collected for this study. The Microsoft Excel software package was also used to make some basic computations like calculation of the mean values etc. 340

6 4.1 Reliability analysis To test the reliability of the set of items forming the scale a measure of construct reliability (Cronbach s alpha) was computed. Cronbach s alpha is useful in measuring how well a set of variables or items measure a single, one-dimensional latent construct. The alpha values of 0.70 or greater represent satisfactory reliability of the items measuring the construct (dimension). Cronbach s alpha ranged from 0.82 and 0.89 in the case of service recovery evaluation constructs. Cronbach s alpha ranged from 0.73 and 0.84 for switching barriers constructs. 4.2 Exploratory factor analysis Exploratory factor analysis was performed to see whether the data collected are consistent with the prescribed structure. Principal Component Analysis using varimax rotation with Kaiser Normalization was employed to find the dimensionality of the data set collected. The loadings of the dimensions identified in factor analysis were stable. Each of the variable loaded high on a single factor. Cut-off point was 0.40 to avoid congestion of factor scores. Three factors were extracted using the methods of principal component analysis in case of service recovery evaluation construct by explaining 76% of variance and two factors were extracted in case of switching barriers construct by explaining 67% of variance (See table 2 and 3). Table 2: Factor score matrix for service recovery evaluation Variable Factor 1 Factor 2 Factor 3 Employee Employee Employee Promptness Promptness Promptness Compensation Compensation Compensation Table 3: Factor score matrix for switching barriers Variable Factor 1 Factor 2 Positive Switching Barrier Positive Switching Barrier Positive Switching Barrier Negative Switching Barrier Negative Switching Barrier Negative Switching Barrier Negative Switching Barrier Negative Switching Barrier Relationships between switching barriers and service recovery evaluation In the study, to calculate correlation between switching barriers and service recovery evaluation, average of all variables for each construct was calculated. Then correlation analysis was carried out among all of the constructs (See table 4). 341

7 Table 4: Correlation analysis results Construct Correlation with Service Quality Evaluation (r value) Employee Behaviour 0.612* Promptness 0.774* Compensation 0.793* Positive Switching Barriers 0.476* * Significance at 0.01 level of significance Results of the correlation analysis revealed many important conclusions. It was found in the study that the correlations between overall service recovery evaluation and employee behaviour, promptness, and compensation were significant statistically at 0.01 level of significance. Moreover, it was found that compensation and promptness constructs had comparatively high correlation coefficient with overall service recovery evaluation in comparison to employee behaviour construct. Regarding impact of switching barriers on overall service recovery evaluation, only positive switching barriers emerge to be related with service recovery evaluation. 5.1 Conclusions Empirical findings of the present study provided quite useful insights. It was found in the results of correlation analysis that compensation and promptness constructs had comparatively high correlation coefficient with overall service recovery evaluation in comparison to employee behaviour construct. It means that customers are expecting is to get in touch straight away with the person in charge of handling complaints (authoritative Person), and not to be sent from one person to another or from one place to another to waste time and monetary resources. While talking about Switching Barriers, results of the study found evidences for significant relationship between service recovery evaluation and positive switching barriers, but at the same time there were no evidences for relationship between service recovery evaluation and negative switching barriers. The results of the study can be interpreted as that previous loyalty may have positive impact on the evaluation of service recovery efforts. Whereas in case of negative switching barriers the things were not same. Therefore, it can be considered as an indication that level of negative switching barriers is independent of industry. Means in any two different industries, same service recovery efforts would be evaluated in the same way but with two different levels. 5.2 Scope for future research Future studies can focus on determining new important variables from the customers perspectives at the time of evaluating service recovery efforts. Open ended questions asking about suggestions like; what else the firm could have done to improve the way they handled their complaints? from customers can be included. 6. References 1. Andreassen, T. W., (2001), From disgust to delight: Do customers hold a grudge? Journal of service research, 4(1), p

8 2. Brown, S. W., Cowles, D. L., and Tuten, T. L., (1996), Service recovery: Its value and limitations as a retail strategy, International journal of service industry management, 7(5), pp Buttle, F., (1996), Relationship marketing: Theory and practice, London, Paul Chapman Publishing Ltd. 4. Chatura, Ranaweera, and Jaideep Prabhu., (2003), On the relative importance of customer satisfaction and trust as determinants of customer retention and positive word of mouth, Journal of targeting, measurement and analysis for marketing, 12(1)ABI/INFORM Complete p Colgate, M., and Hedge, R., (2001), An investigation into the switching process in retail banking services, The international journal of bank marketing, 19(4/5), p Estelami, H., (2000), Competitive and procedural determinants of delight and disappointment in consumer complaint outcomes, Journal of service research, 2(3), pp Eugene, W. Anderson, Claes, Fornell, and Donald R. Lehmann., (1994), Customer satisfaction, market share, and profitability: Findings from Sweden, The journal of marketing, 58, pp Fornell, C., (1992), A national customer satisfaction barometer: The Swedish experience, Journal of marketing, 56(1), pp Jones, M., Mothersbaugh, D., and Beatty, S., (2000), Switching barriers and repurchase intentions in services, Journal of retailing, 76(2), pp Julander, C., and Soderberg, R., (2003), Effects of switching barriers on satisfaction, repurchase intentions and attitudinal loyalty, Working paper series in business administration, pp Gwinner, Kevin P., Dwayne D. Gremler, and Mary Jo Bitner., (1998), Relational benefits in services industries: The customer s perspective, Journal of the academy of marketing science, 26(2), pp Moon-Koo Kima, Myeong-Cheol Parkb, and Dong-Heon Jeonga., (2004), The effects of customer satisfaction and switching barrier on customer loyalty in Korean mobile telecommunication services, Telecommunications policy, 28, pp Ranaweera, C., and Prabhu, J., (2003), The influence of satisfaction, trust and switching barriers on customer retention in a continuous purchasing setting, International journal of service industry management, 14(3/4), pp Smith, Amy K. and Ruth N. Bolton, (1998), An experimental investigation of service failure and recovery: Paradox or Peril? Journal of service research, 1(1), pp Stauss, Bernd and Andreas Schoeler., (2004), Complaint management profitability: what do complaint managers know? Managing service quality, 14(2/3), pp

9 16. Vincent P. Magnini, John B. Ford, Edward P. Markowski, and Earl D. Honeycutt Jr., (2007), Service recovery paradox: justifiable theory or smoldering myth? Journal of services marketing, 21(3), pp