Vol. 3 No.

4 April 2016 ISSN: 2321 – 788X

THEORETICAL FRAMEWORK OF CUSTOMER LOYALTY

TOWARDS MOBILE PHONE SERVICES

K. Lenin John
Research Scholar, BSMED, Bharathiar, University, Coimbatore

Abstract
Over the last few years, the number of mobile phones has increased at an exponential rate
globally. This increase is more pronounced in the developed countries. The reasons for this are
numerous, low acquisition price and availability of the equipment contributes in no small measure to
its widespread usage. Furthermore, the number of mobile phones in the world has already passed
the number of fixed land lines and the revenue from mobiles phones will soon exceed that of fixed
land lines. In the era of improved mobile communication technology, vast amount of changes are
generated in facilitating communication and the transfer of information from business to business,
business to customers, employers to employees among others. Consequently, the utilization of
mobile phones in communication and information transfer leads to providing more and more added
value services (Steenderen, 2002). Despite the various information services provided through mobile
phone services nowadays, detail assessments need to be made in order to understand the needs and
requirements of the mobile phone users. Service quality and customer satisfaction are inarguably the
two core concepts that are at the crux of the marketing theory and practice (Spreng & Mackoy,
1996). In today’s world of intense competition, it is generally believed that the key to sustainable
competitive advantage lies in delivering high quality service that will in turn result in satisfied
customers. The prominence of these two concepts is further manifested by the root of theoretical
and empirical studies on the topic that have emanated over the past few years. Therefore, there is
no doubt about the importance of service quality and customer satisfaction as the ultimate goals of
service providers. To this end therefore, the study seeks to understand the nature of mobile phone
use among respondents at a higher learning institution and investigate their perceptions on the
mobile phone applications in the context of services quality
Keywords: mobile phones, service providers, cellular market, telecommunication, customer
satisfaction, customer loyalty

The growth rate of mobile telecommunication service market is remarkable in India

for the past few years. India’s telecommunication industry particularly for cellular market
is growing at above average growth rate as compared to its competitors. There is a
tremendous growth for mobile service users with a consistent increase of customers for past
few years; moreover, approximate half of the population is using the mobile service in
India. Mobile telecommunication service market is becoming more competitive with the
increase in the number of mobile phone service customers as well as the number of mobile
phone service providers are expected to increase. The exponential growth of mobile
telecommunication service market in context of cellular service users has heightened the
need for investigation of customer satisfaction, trust, and switching cost to model customer
loyalty. Additionally, the competitive mobile telecommunication service market is heading
for maturity stage; where a cellular phone service firm not only has to satisfy its customers
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better with a competitive advantage as well as it has to retain its customers. So far,
however, there has been little discussion about the determination of fact that customer
satisfaction and customer trust are predictors of customer loyalty in mobile
telecommunication service market of India. This paper seeks to address customer trust as
mediator in determining the relationship between customer satisfaction and customer
loyalty.
Furthermore, this study gives an account of the moderating role of switching cost
on relationship of customer satisfaction with customer loyalty in mobile telecommunication
service market of India. Lastly, this study is to present implication of the framework for the
industry so that the mobile phone service providing firms can be benefited through
understanding the predictors of customer loyalty. In the past two decades a number of
researchers have examined the determinents of customer satisfaction for multiple
industries . A considerable amount of literature has been published on customer
satisfaction . Studies of customer satisfaction show the importance of customer satisfaction
for future earnings of the firms. Literature has emerged that offers findings about to
attract a new customer is more costly as compared to retain the current customer as well
as the customer can be retained through satisfaction. Some studies utilized econometric
models to prove that customer satisfaction is also perceived to be associated with profit
and productivity levels. Satisfied customers return to buy more, and help the firm to create
a positive image of the firm through informing other customers. The significance of
customer satisfaction results in development of national consumer satisfaction indexes
(CSIs) as Swedish customer satisfaction barometer is operating since 1989, American
customer satisfaction index since 1994 , Norwegian customer satisfaction barometer since
1996 , and customer satisfaction index model for Turkish mobile phone sector. Several
investigators are still working to develop these indexes for multiple industries of various
countries. However, far too little attention has been paid to the mediating role of customer
trust in determining the relationship between customer satisfaction and customer loyalty in
mobile telecommunication service market of a developing country. Therefore, this study
endeavors to compensate this empirical research gap through investigating the mediating
role of customer trust in context of telecom industry. In addition, no research has been
found that surveyed moderating role of switching cost on the relationship of customer
satisfaction with customer loyalty in mobile telecommunication service market of India;
therefore, this study examines the moderating role of switching cost in determining
customer loyalty in the context of mobile phone service customers in a developing country
like India.
Service Quality
Service quality has been a spotlight to be focused on by researchers and
practitioners for the past several decades. It has a strong effect on business performance,
customer satisfaction, customer loyalty and profitability. Services have unique
characteristics; intangibility, heterogeneity, Perishability and simultaneously production
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and consumption (Zeithaml et al., 2009). Normally, it can be seen how well the level of the
delivered services matches customer’s expectations by using service quality as a
measurement (Santos, 2003). For example, Gronroos (1984) pinpointed perceived service
quality as “the outcome of an evaluation process, where the consumer compares his
expectations with the service he perceives he has received”. Moreover, Parasuraman et al.
(1988) described service quality as “the overall evaluation of a specific service firm that
results from comparing that firm’s performance with the customers’ general expectations
of how firms in that industry should perform”. To survive and increase market share in
fiercely competitive market, service offerings which match with customer preferences are
in need (Verma et al., 1999).
Kekre and Srinivasan (1990) saw that variety of service offerings positively impacts
the company’s share and ROI while Bayus and Putsis (1999) and Gilbert and Matutes (1993)
discovered that high-variety strategy not only develop the company’s reputation but it can
also be an effective approach to expand sales as it can prevent losing a company’s
customers to competitors. Consumers will have a hard time trying to visualize services
because they cannot be seen nor touched (Bateson, 1995). One of the service
communication strategies that were suggested by Berry and Clark to overcome service
intangibility is documentation strategy (Stafford, 1996). Berry and Clark (1986 cited in Staff
ord, 1996) clarified that facts or figures can be used to present the value of the service.
is strategy purposes to assist consumers’ evaluation through providing specific and concrete
information or verbal tangible cue (Stafford, 1996). Stafford (1996) stated further that the
tangibility of service can be increased by using documentation strategy; as a result, it
increases advertising effectiveness by raising purchase intention. E-company that has high
market share finds variety of offerings important which implies that it has a diverse
customer base i.e. more heterogeneous customer base (Stavins, 1995). Different offerings
were described and considered as differences may be price sensitivity, different product
requirements, different supports needed or even different occasions (Porter, 1996).
Providing a high level of service quality is critical in today’s competitive business
environment as it may be used as a differentiation variable, hence a source of competitive
advantage (Boshoff & DuPlessis, 2009). Deng, Lu, Wei and Zhang (2010) describe service
quality as the degree to which the service provider persistently and excellently provides
the overall service. According to Sivados and Prewitt (2000), service quality is the standard
of service delivery. Lee (2010) regards service quality as a form of consumer attitude that is
formed after comparing the expectations with the actual performance provided by the
service provider. Wong and Sohal (2003) identified two categories of quality service -
technical and functional. The technical quality of the service refers to what is done to
provide the service whereas the functional quality relates to how the service is provided. In
the context of mobile phones, the main indicators of service quality are those of navigation
and visual designs, management and customer services, system reliability and ease of
connection (Kuo, Wu and Deng, 2009). To examine the service quality of Korean mobile
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telecommunications, Kim, Park and Jeong (2004) used dimensions, such as reasonability of
prices, quality of mobile devices, variety and design of device types, convenience, ease of
subscribing, staff friendliness, and speed of complaint processing and ease of reporting
complaints. The five dimensions; namely, assurance, empathy, reliability, responsiveness
and tangibles, are considered to be crucial in evaluating service provision (Boshoff & Du
Plessis, 2009).
Service Expected From Mobile Service Provider Network
The clarity of voice and the area coverage are the items to be considered according
to Kim et al. (2004) and Lim et al. (2006). Signal strength and sharpness, network stability,
availability of the network in remote areas, and ease and quickness of reaching other
destinations (e.g. incoming and outgoing calls) are considered in the term of network.
Value-Added Services
As value-added services can be seen as intangible objects such as SMS and MMS,
WAP, GPRS, music, news, games, ring tones etc. Kim et al. (2004) used the variety of the
services, ease of use and how updated and advanced they are to measure how good the
services are. In addition to those mentioned services, these days there are 3G, wifi , edge
etc. available for consumers.
Mobile Device
It is category can be measured by the quality, the variety and the design of the off
ered mobile devices, which were adopted from Kim et al. (2004). Availability of newly-
launched mobile devices, availability and variety of each mobile device model are included
in the aspect of mobile devices.
Customer Service
The success of problem resolution, the courtesy of customer service
representatives, the help provided by call-centers and the provision of consistent advice
are to be evaluated to judge this factor. All of these were utilized by Lim et al. (2006).

Pricing Structure
Kim et al. (2004) took the reasonability of prices, the variety of pricing schemes
and the degree of freedom to choose pricing scheme to consider and measure this factor.
Speaking of price, customers can compare this issue among other mobile service providers.
! is factor can also be measured by customer perception in pricing structure of a mobile
service provider compared with others.
Billing System
It is dimension consists of the provision of accurate billing, the ease of
understanding and resolving billing issues and the billing problem resolution speed, as
advised by Lim et al. (2006). Nowadays, there are online service, counter service
assistance, pay-via-ATM service etc. as choices for consumers in paying the service and
telephone fees.

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Place
Place is where a company tries to make its products/services available and
accessible for consumers (Kotler and Keller, 2005). Freire (2009) added that places are
given their own meanings by consumers. Easy and convenient access to the branch,
decoration and atmosphere, there can be measured concerning quality dimension
Customer Satisfaction
Customer satisfaction is a multidimensional nature and viewed overall satisfaction
as a function of satisfaction with multiple experiences with the service provider. Munnukka
(2005)[39] discovered that price sensitivity is one of the key factors affecting companies
pricing choices. Yet in mobile services sector business, practitioners are facing problems in
pricing decisions as they are short of knowledge on their customers' price sensitivity levels
and dynamics. Mobile service customers differ significantly in their price sensitivity levels;
customers with moderate usage of mobile services are least price sensitive, while intensive
and low-end users are most sensitive to price changes. Important was also the notion that
customer' price perceptions and innovativeness levels were accurate indicators of their
price sensitivity. Customer satisfaction and customer service has been critical factors of the
cellular industry (Assaari & Karia, 2OOO) [40]. Cellular service providers need to ensure
about the technology that provides customer service best in the industry. It is stated that
investment in people and in technology helps in providing best customer service for today
and for the future. One common ground that most carriers and customers agree on is that
good customer service can have a key impact on how a customer views firm’s services and
company. Goodman et al (1995) [41] examined the relationships among levels of
involvement between customers and suppliers, customers evaluations of core and
peripheral factors in their transactions and customers and overall those less involved.
Peripheral aspects, such as supplier responsiveness to customer inquiries, appeared to
influence how customers evaluated a core product as well as their overall satisfaction.
Pakola et al (2003)[42] surveyed and results indicated that price and properties were the
major influential factors affecting the purchase of a new mobile phone, where as
audibility, price and friends were regarded as the most important in choice of the mobile
phone operators.
Customers have certain amount of self-knowledge i.e. telephone features,
connection fee, access cost, mobile-to-mobile phone rates, call rates and free calls which
are related to mobile phone purchasing respondents had to important rate while choosing a
mobile phone service. Many researchers found that customers with prior experience about a
product could be able predict their choices relatively well but tend to overestimate the
importance of a monthly access fee, mobileto-mobile g rates and connection fees.
Customer satisfaction has been proposed as a construct extensively studies in the
literature of customer behaviour (Fornell, 1992; Johnson and Fornell, 1991; McDougall and
Levesque, 2000). It has been perceived as total evaluation of a product or service over a
period as a result of purchase and consumption experience (Anderson et al., 1994; Oliver,
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1999). Oliver (1997) called customer satisfaction a consumer's response to fulfilment which
is a judgment on a product or service or any of its feature's ability to provide an enjoyable
level of fulfilment resulting from consumption. Kotler and Keller (2006) suggested that
customer satisfaction stands for emotional states of pleasure or disappointment which a
person may feel due to comparison between his perception and expectations of a product's
performance. Tarus and Rabach (2013) postulated that a dis-satisfied customer is one
whose expectations exceeded the actual outcome of service interaction whereas a satisfied
or delighted customer is a case of interaction matching or surpassing expectations. Johnson
et al. (2001) reviewed the literature on customer satisfaction and posited two rudimentary
conceptualizations of satisfaction i.e., transaction specific and cumulative satisfaction.
Fornell (1992) referred to cumulative satisfaction as a customer's consumption experience
over a period of time with regard to a particular product or service. Olsen and Johnson's
(2003) definition of satisfaction fall under transaction specific approach where they
considered satisfaction as customers' evaluation of experience of themselves and their
reactions to a service transaction, and episode or encounter.
Given the intense competitive business world and the increase in consumer
awareness, customer satisfaction has become a crucial issue among scholars and
practitioners. Therefore, in order to remain competitive and sustainable, marketers need
to make sure that they satisfy their customers. It has been proven that customer
satisfaction positively influences repurchase intention (Huddleston, Whipple, Mattick & Lee,
2009), it is an important predictor of customer loyalty (Cheng, Chiu, Hu & Chang, 2011),
and it also positively impacts on customer trust (Dabholkar & Sheng, 2012). Scholars such as
Cheng et al. (2011) argue that satisfying a customer is even more important than profit-
making. The authors reasoned that satisfying a customer precedes profit-making; hence, as
long as customers are satisfied, the business will make a profit. Customer satisfaction has
therefore become an important measure of the behaviour of consumers (Cheng et al., 2011)
and a key indicator of business performance (Sandada 2013). Chang (2006) views customer
satisfaction as a post consumption evaluation of a product or a service and defines it as the
ability of an organisation to provide a service performance that exceeds the customer
expectations. Deng, Lu, Wei and Zhang (2010) state that customer experiences cumulative
satisfaction after having a good experience of using the product or service. The authors also
group satisfaction into two types: 1) the transaction specific satisfaction and 2) the general
satisfaction. While the former refers to satisfaction after a given service encounter, the
latter describes the consumers’ overall rating of the service or product based on previous
experiences (Deng et al., 2010). For Hwang and Zhao (2010), customer satisfaction occurs
when there is confirmation and positive disconfirmation of customer expectations. It
implies that customers are satisfied when their expectations are met and when their
expectations are not met but they still feel good about the performance. Choi and Sheel’s
(2012) definition include the output and process aspects of customer satisfaction. The
output definition views customer satisfaction as a cognitive or mental state in which
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consumers feel that they have been adequately or inadequately compensated. Regarding
the process, customer satisfaction occurs when customer experience matches or exceeds
the expectations.
Customer Loyalty
Customer loyalty is a multidimensional concept which consists of behavioural and
attitudinal rudiments (Oliver, 1999; Zeithaml, 2000; Rauyruen and Miller, 2007).
Researchers studied the patterns of buying and took proportion of total purchases into
consideration (Cunningham, 1956; Blattberg and Sen, 1974) while others gave importance
to sequence of purchasing (McConell, 1968; Kahn et al., 1986). Bandopadhyay and Martell
(2007) explored the behavioural perspective and underlined the main assumption of repeat
buying has the capacity of incarcerating a consumer's loyalty towards the brand that holds
interest. Baldinger and Rubinson (1996) suggested that in order to understand brand loyalty
more clearly, the behavioural definition of loyalty needs to be stretched to include
attitudes. The attitudinal perspective of customer loyalty has been explained as a
willingness to retain a relationship with a service provider (Kim et al., 2004; Oliver, 1999).
Tarus and Rabach (2013) pointed that literature has bestowed substantial space to
customer loyalty research. Yang and Peterson (2004) found the task of defining customer
loyalty particularly difficult. The most well accepted and widely quoted definition of
customer loyalty has been given by Oliver (1999) who posited that "a deeply held
commitment to re-buy or re-patronize a preferred product/service consistently in the
future, thereby causing repetitive same-brand or same brandset purchasing, despite
situational influences and marketing efforts have the potential to cause switching
behaviour". More recently, Rai and Srivastava (2013) defined customer loyalty as "a
psychological character formed by sustained satisfaction of the customer coupled with
emotional attachment formed with the service provider that leads to a state of willingly
and consistently being in the relationship with preference, patronage and premium". Firms
give highest priority to customer loyalty as repeat buying of their products and services is
critical in achieving success and profitability in the business (Hallowell, 1996; Oliver, 1997;
Silvestro and Cross, 2000). Onyeaso and Johnson (2006) defined customer loyalty as an
incorporeal strategic strength that will augment performance of an organization whereas
Cooil et al. (2007) considered it as a tactical objective for managers.
Loyalty of customers is considered to be a function of satisfaction and that loyal
customers contribute to company profitability by spending more on company products and
services, via repeat purchasing, and by recommending the organization to other consumers
(Bowen & Chen, 2001: Fecikova, 2004). To further understand the behavior of loyal
customers, recent research has attempted to integrate the concept of customer
commitment (Fullerton, 2005: Zins, 2001). For the most part, these recent studies have
been built upon customer commitment as a key mediator of the relationship between the
customer's evaluations of a firm's performance and the customer's intentions regarding the
future relationship with the firm (Fullerton, 2005).
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Customer loyalty expresses an intended behavior related to the service or the

company. This includes the likelihood of future renewal of service contracts, how likely it is
that the customer changes patronage, how likely the customer is to provide positive word-
of-mouth, or the likelihood of customers providing voice. If real alternatives exist or
switching barriers are low, management discovers the organization’s inability to satisfy its
customers via two feedback mechanisms: exit and voice (Hirschman, 1970). Exit implies
that the customers stop buying the company’s services while voice is customer complaints
expressing the consumers’ dissatisfaction directly to the company. Customers’ exit or
change of patronage will have an impact on the long-term revenue of the company. Effects
caused from changes in the retention rate are exponential (not linear) with regard to
effects on the long-term revenue. Even a marginal reduction/increase in retention rate has
significant effects on future revenue (Andreassen, 1995; Reichel & Sasser, 1990). Three
conceptual perspectives have been suggested to define customer loyalty: the behavioral
perspective, the attitudinal perspective and the composite perspective (Bowen & Chen,
2001: Zins, 2001). The behavioral perspective, “purchase loyalty”, strictly looks at repeat
purchase behavior and is based on the customer's purchase history. The emphasis is on past
-rather than on- future actions. Moreover, no other loyal behavioral actions such as price
tolerance, word of mouth, or complaint behavior can be interpreted (Zins, 2001).
Concentrating on the behavioral aspect of loyalty could overestimate true loyalty (Zins,
2001). The attitudinal perspective, in contrast, allows gain in supplemental understanding
of loyal behavior (Zins, 2001). The customer loyalty is approached as an attitudinal
construct. An Attitude denotes the degree to which a consumer's disposition towards a
service is favorably inclined. This inclination is reflected by activities such as the customers
recommending service providers to other consumers or their commitment to repatronize a
preferred service provider (Gremler & Brown, 1996). Based on a favorable attitude towards
a service provider, customers may develop “preference loyalty” (De Ruyter, Wetzels &
Bloemer, 1998). Lastly, the composite perspective combines attitudinal and behavioral
definitions of loyalty. The composite perspective might be considered as an alternative to
affective loyalty since using both attitude and behavior in a loyalty definition arguably
increases the predictive power of loyalty (Pritchard & Howard, 1997).
Service Quality: The Key Influence in Customer Satisfaction
Ching-chow Yang (2003) stated that customer satisfaction measurement highlights
the strength and the area of improvement in the quality of product. Continuous
improvement is considered one of the important quality activities for a firm to pursue the
best quality for its products. Through the continuous improvement actions, the enterprise
can increase customer satisfaction and raise profits. Woodside et al (1989) found from the
research study that customer judgment of service quality is positively associated with
overall satisfaction with the service encounter. The overall satisfaction varies with the
service quality and customer satisfaction. Overall customer satisfaction with the service
encounter-is associated with behavioural intention to return to the same service provider.
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Now, quality is an important factor in determining the customer satisfaction. Service

quality and customer satisfaction are important concept as a means of creating competitive
advantages and customer loyalty. According to Berry et al (1997), service quality has
become a significant differentiator and the most powerful competitive weapon, which all
the service organizations want to possess Jain & Hundal (2OO6)[69] revealed in their study
that the choice of service provider was affected by facilitating factor followed by coverage,
quality of services, and easy availability of connection and bill payment. Lt was stated that
neighbours choice had affected the respondent’s choice to a great extent. Zeithaml, Berry
and Parasuraman (1996) study shows that companies offering superior service achieve
higher than normal market Share growth. Zeithmal et al (1996) developed a conceptual
framework of the behavioural and financial consequences of service quality. Superior
(inferior) service quality is related to favourable (unfavourable) behaviour intentions.
McCune (1989) suggested that due to increased public desire for improved services with the
dramatic growth in the service industry, companies has led to assess quality of service for
an increased customer satisfaction. Service quality and customer satisfaction are widely
recognized as key influences in the formation of customers purchase intentions in service
environment. From the study of Taylor and Baker (1994) [73], it appears that customer
decision-making which includes the interaction of satisfaction and service quality provided
a better understanding of customer purchase intentions. Rust et al (1999)[74] have
developed the concept of the Return on Service Quality model that looks at investments in
service as a chain of effects with the following characteristics: • Improvement in service
will produce an increased level of customer satisfaction at the process of an attribute level.
 Increased customer satisfaction at the process or attribute level will lead to
increased overall customer satisfaction.
 Higher overall service quality or customer satisfaction will lead to increased
behavioural intention, such as greater repurchase intention and intention to
increase usage.
 Increased behavioural intention will lead to behavioural impact, including
repurchase or customer retention, positive word of mouth and increased usage.
Service is characterized and distinguished by intangibility, inseparability of
production and consumption, heterogeneity and Perishability (Parasuraman et al,
1985). Harvey (1995) identified quality is behavior an attitude- that says, "you will
never settle for anything less that the best in service for your stakeholders,
whether they are customers, the community, your stockholders or colleagues with
whom you work every day." Zeithaml and Berry (1996) has made attempts to
understand the characteristics of services and what providers should possess in
order to project a high quality service articulated by their customers. They made a
conclusion that customers’ provided service quality is a different concept from
their satisfaction level and service quality can be known by measuring the gaps
between customers’ expectations and their performance. Cronin and Taylor (1992),
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however, argue that the conceptualization of service quality as a gap between

expectations and performance is inadequate. According to them, the concept of
satisfaction defined as a gap between expectations and performance of
disconfirmation of expectations. Gronroos (1984) created a service quality model to
illustrate how customers perceive the quality of a given service. It divides
customer’s perception of any particular service into two dimensions:
 Technical quality- what the customer receives.
 Functional quality- how the customer receives the technical outcome.
Customer Satisfaction and Customer Loyalty
Several authors have found a positive correlation between customer satisfaction
and loyalty (Anderson & Sullivan, 1993; Bearden & Teel, 1980; Bolton & Drew, 1991;
Fornell, 1992). Customers may be loyal because of high switching barriers or lack of real
alternatives. Customers may also be loyal due to their satisfaction and thus want to
continue the relationship. History has proven that most barriers to exit are limited with
regard to durability; companies tend to consider customer satisfaction the only viable
strategy in order to keep existing customers. Based on Coyne (1989), there are two critical
thresholds affecting the link between satisfaction and loyalty. On the high side, when
satisfaction reaches a certain level, loyalty increases dramatically; at the same time, when
satisfaction declined to a certain point, loyalty dropped equally dramatically (Oliva, Oliver
& MacMillan, 1992). Managers of the company should realize that having satisfied customers
is not good enough they must have extremely satisfied customers. Moreover, a small
increase in customer satisfaction can results boosted customer loyalty dramatically.
Fornell (1992) pointed that literature of marketing has been consistent in
recognizing customer satisfaction as a vital forebear to loyalty. In the context of service
industry also, customer satisfaction has repeatedly and consistently been identified as a
significant factor in determination of customer loyalty (Boshoff and Gray, 2004; Lam et al.,
2004; Mittal and Lassar, 1998). Studies also pointed that customer satisfaction is the most
researched antecedent of customer loyalty (Eshghi et al., 2007; Seiders et al., 2005; Cooil
et al., 2007); García and Caro, 2009). Studies found a positive relationship between
customer satisfaction and customer loyalty (Anderson and Mittal, 2000; Streukens and
Ruyter, 2004) and revealed that customer satisfaction also impacts the main pointers of
customer loyalty (Kandampully and Suhartanto, 2003; Lin and Wang, 2006; Mittal and
Kamakura, 2001). Lam et al. (2004) opined that satisfaction can affect a customer's
attitude to a degree where he/she not only feels motivated to re-buy but also offer
recommendations to the service provider. Kandampully and Suhartanto (2000) carried out
their study in hotel industry and established significant positive impact of customer
satisfaction on customer loyalty. Zins (2001) also supported these findings and confirmed
customer satisfaction as a significant antecedent of customer loyalty in commercial airline
industry. Yang and Peterson (2004) surveyed online customers and concluded that
improving customer satisfaction can actually lead to customer loyalty. Studies in the
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context of B2B services, who investigated big organizations offering B2B services in USA and
Canada, advocated for the strong positive relationship between customer satisfaction and
customer loyalty (Lam et al., 2004; Murali et al., 2007). Alegre and Cladera (2009) found
strong empirical evidence supporting customer satisfaction as an antecedent of customer
loyalty.
Moderators of Customer Satisfaction - Customer Loyalty Relationship
Tuu et al. (2011) reviewed many studies (Bloemer and de Ruyter, 1998; Mittal and
Kamakura, 2001; Szymanski and Henard, 2001) and asserted that the relationship between
customer satisfaction and customer loyalty can be categorized as a moderate one with
former accounting for only 35.9 percent of variance in latter. It has been argued that
inclusion of other variables in addition to customer satisfaction is called for in order to
uncover the hurdles and reasons of explaining variance in customer loyalty (Seiders et al.,
2005; Cooil et al., 2007; Olsen, 2007). Various studies investigated the possible moderating
effects on the relationship between customer satisfaction and customer loyalty (Chiou et
al., 2002; Evanschitzky and Wunderlich, 2006; Chandrashekaran et al., 2007; Cooil et al.,
2007; Tuu and Olsen, 2009). On the basis of these studies, Tuu et al. (2011) examined the
collective moderating effects of perceived risk, objective knowledge and certainty on the
aforementioned relationship and found that taking these factors along with customer
satisfaction into consideration explained around 50 percent of the variance in customer
loyalty. Following is an account of some moderating variables which have been tested in
varied contexts and were found to be exercising significant moderating influences over the
customer satisfaction - customer loyalty relationship
Switching from one Service Provider to Another
Switching cost is referred as costs that customer relates with the process of
switching from one supplier to another. Switching cost according to a definition is the cost
involved in switching from one service provider to another service provider. Switching cost
is the cost which is born by the customer when switching, it includes time, money, and
psychological cost. Jackson and Bund defined switching cost as “the combination of
financial, psychological and physical costs”. Switching cost is not only the financial cost but
it also comprises the mental effort of the customer when the customer switches from one
brand to another. Economical or financial switching cost can be thought of as a “sunk
cost”, which happens when customer switches the brand. Psychological cost is thought to
be the cost which is linked with the insecurity and risk associated with switching to an
unknown brand. Switching cost is one of the factors that directly influence customer’s
sensitivity to price level; therefore, it bestows some advantages to the firms, with a direct
consequence on customer loyalty. Klemperer (1987) proposed three various types of
switching costs: learning costs which is the effort needed by the customer to reach the
same level of satisfaction with the new product as compared to previous one, contractual
costs are created by planned actions of firms when a firm develops attractive schemes,
such as loyalty benefits or withdrawal penalties, to encourage retention of existing
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subscribers, transaction costs occur when changing providers i.e. starting a new
relationship with a provider and to terminate a relationship. Fornell (1992) posited that the
effect of customer satisfaction on customer loyalty differs in different industries and
industry specific switching costs can be one of the factors that affect this association. Jones
and Sasser (1995) pointed that switching costs may result in inducing fake loyalty instead of
commitment based loyalty as customers are more likely to keep relationship with their
service provider due to sizeable amount of costs involved in switching. Empirical evidences
have been found in support of the moderating role of switching costs in customer
satisfaction - customer loyalty relationship (Jones et al., 2000; Lee et al., 2001; Yang and
Peterson, 2004; Lam et al., 2004; Aydin et al., 2005). Jones et al. (2000) argued that in
case of lower perceived switching costs, an unsatisfied customer is less likely to stay with
his service provider than a satisfied customer whereas the possibility of staying with the
current service provider increases even in the event of dissatisfaction when switching costs
are perceived to be higher.
Lee et al. (2001) studied the effect of switching costs on customer satisfaction -
customer loyalty relationship and found that the relationship weakens when switching costs
heightens as customers are likely to ignore their level of satisfaction while deciding to
continue with their service provider when they estimate the amount of time and efforts in
searching for a new service provider to be higher. Lee (2013) noted that the interaction of
customer satisfaction and perceived switching cost has a positive and significant effect on
customer loyalty which implies that an increase in perceived switching costs leads to
stronger relationship between customer satisfaction and customer loyalty. Studies
empirically investigating the moderating effects of switching costs on the customer
satisfaction - customer loyalty relationship, revealed motley findings (Lee et al., 2001;
Yang and Peterson, 2004; Aydin and Ozer, 2005). Nielson (1996) reasoned that the
contradictory findings in respect of moderating role of switching costs may be attributed to
the contingent influences of various situational elements such as nature of products, forms
of businesses, types of consumers, etc. He et al. (2009) pointed that most of the studies
conceptualized loyalty as a one-dimensional construct collectively measuring repurchase
intention and recommendation leading to possible equivocal fallouts. They employed
canonical correlations to examine the moderating role of switching costs between the three
antecedents and consumer loyalty via four loyalty dimensions, i.e. repurchase intentions,
appreciating behavior, complaining behavior, and price-increase tolerance and found
significant evidence for the moderating effects on repurchase preference and partial
support on account of other three dimensions.

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Conceptual Framework
Tangibility

Responsive
nss

Assurance Service Customer Customer

Quality Satisfaction loyalty

Reliability

Customer Customer
Dissatisfaction Switch Over
Empathy

References
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in the Turkish mobile telecommunication market." European Journal of marketing
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2. Kim, Moon-Koo, Myeong-Cheol Park, and Dong-Heon Jeong. "The effects of
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Analysis for marketing 12.3 (2003): 256-268.
4. Cyr, Dianne, Milena Head, and Alex Ivanov. "Design aesthetics leading to m-loyalty
in mobile commerce." Information & Management 43.8 (2006): 950-963.
5. Chae, Minhee, et al. "Information quality for mobile internet services: A theoretical
model with empirical validation." Electronic markets 12.1 (2002): 38-46.

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