“Switching is easy”—Service firm communications to encourage customer switching

For several service industries, customer acquisition is challenged because of matured markets. Winning new customers typically means encouraging the competitors׳ customers to switch. This article analyzes “Switching is easy”-messages of retail banks. In their marketing communication, UK banks focus on several aspects to decrease perceived switching costs of their competitor customers. However, many facets stay unmentioned such as stress-related dimensions of switching a relationship. The study therefore contributes to service research by outlining how service firms focus on to decrease perceived switching costs of bank customers to acquire them from competitors.     

Unprofitable customers and their management

The widespread use of customer relationship management (CRM) applications has provided companies with increasingly detailed insights into the profitability of their individual-level customer relationships. Historically, this information has primarily been used to identify the most profitable customers and to define ways for serving them in an optimal manner. Nowadays, however, companies have become more aware of unprofitable clients, and the fact that these relationships can account for a substantial share of their total customer base. Drawn from a series of research projects conducted by us over the last few years, we herein propose a six-step approach for dealing with such unprofitable customers, a framework we refer to as the ABCs of Unprofitable Customer Management: Avoid their acquisition in the first place, Bear in mind potential rescue operations, Catch the possibility of abandonment, Draw up a cost-benefit analysis, Ensure familiarity with your environment, and Facilitate biting the bullet. We also provide a series of recommendations regarding how best to break up with customers, in order to ensure that firms can separate themselves from unprofitable accounts in the least painful way.     

Eleven Misconceptions about Customer Relationship Management

Higher buying rates and lower service costs make long–term customers more profitable and firms increasingly focus their marketing efforts on customer relationship management (CRM). However, they are often disappointed by the performance of CRM projects. These disappointing results are caused by managerial misconceptions about CRM and customer behaviour. This article focuses on 11 of these misconceptions to help managers make well–considered CRM–related decisions and raise the success rate of CRM projects.     

Mitigating customers’ negative responses to physical presence reduction

Building on the social exchange theory and presumption of a firm's multi-channel strategy as a customer relationship management initiative, three experimental studies show that: (1) reducing physical presence negatively affects customers’ perceived relationship investment and trust and increases their switching intention; (2) to mitigate these negative effects, firms should engage in strategic decisions that benefit customers and are perceived as highly strategic. This research offers new insights suggesting that customers’ appraisals of firms’ strategic decisions influence their switching intention through the sequential operations of perceived relationship investment and trust. These findings are consistent for both services and retail contexts, highlighting the importance of firms engaging in strategies that are deemed to be unfavorable in the eyes of their customers to be perceived as highly committed to maintaining relationships with their customers.     

Tie-in contracts with downstream competition

A tie-in contract has frequently come under scrutiny for its role as an exclusionary device. A firm that is a monopolist in a primary market can utilize such contracts to exclude a more efficient rival in a secondary market. When the firms sell through competing retailers, the leveraging firm may offer tie-in contracts to the retailers inducing them to purchase both primary and secondary products entirely from it such that the rival is excluded. We examine whether such tie-in contracts are profitable for an incumbent firm under different conditions of (i) the ability to commit to prices by the upstream firms and (ii) downstream competition among the retailers. We show that when retailers compete in prices, then regardless of whether the entrant is able to commit to its own prices, an exclusionary tie-in strategy is profitable (not profitable) for the incumbent when it is able (unable) to commit to prices. However, when retailers compete in quantities, the entrant’s commitment ability does matter. Specifically, an exclusionary tie-in strategy (i) may be unprofitable for an incumbent when both upstream firms are able to commit to their prices, depending on the degree of cost advantage of the entrant; (ii) is always profitable when it alone can commit to its price; and (iii) is unprofitable when both upstream firms cannot commit to their prices. Our results extend to situations where the products are complementary or substitutes and where the retailers may be asymmetric in nature.     

Managerial Firms,Entry, and Switching Costs

Empirical evidence shows that switching costs are important in many industries. We analyze the welfare effects of entry into markets with switching costs when firms can be run by managers and the entrant may be partially foreign-owned. We find that with profit-maximizing firms, the welfare effect of entry depends crucially on the ownership of the entrant firm. We also show that entry is less likely with managerial firms than it is with profit-maximizing firms. In the latter case, entry always reduces welfare if the share of the entrant firm owned by foreign investors is high. However, with managerial firms, entry always increases welfare.     

Multinational risk and performance outcomes: Effects of knowledge intensity and industry context

A multinational presence can diversify corporate business activities and provide access to diverse overseas resources. This can enhance operational flexibility and create new business propositions that increase responsiveness to global market changes. Establishing an international corporate structure may also require irreversible investments and impose maintenance and processing costs that contravene the implied resilience and agility benefits. We distinguish between downside risk and upside potential as the relevant outcome measures to assess the implied advantages of multinationality. Consistent with the rationales of the OLI paradigm, we argue that multinational reach particularly in knowledge-based industries can reduce downside risk and enhance upside potential. These results introduce more nuances to the ongoing debate about multinational risk and performance effects. Based on a large cross-sectional dataset, we find that flexibility and responsiveness thrives on a multinational presence among firms operating in information-driven knowledge businesses. In contrast, internationalizing firms in capital-based network services display adverse risk effects.     

The double-edged sword: The positive and negative effects of switching costs on customer exit and revenge

What happens when customers have to deal with switching costs after a service failure and a poor recovery? This study seeks to address this question by proposing and testing an integrative model that incorporates customers' negative emotions as mediators between switching costs and behavioral outcomes (i.e., loyalty and revenge). The model distinguishes positive from negative switching costs, and inward from outward negative emotions. Analysis of survey data from 280 real customers who actually experienced a service failure and poor recovery with a major telecommunications firm reveals that customers react to switching costs strongly, emotionally, and sub-optimally. In contrast to most findings in the service literature, the results indicate that negative switching costs generate both exit and desire for revenge. Paradoxically, positive switching costs generate both loyalty and an even higher level of desire for revenge. These findings have important implications for the service industry.     

How to date your clients in the 21st century: Challenges in managing customer relationships in today's world

Since its first entry into the literature discussion in the 1980s, customer relationship management (CRM) has found its way into nearly every company. Concepts like personalization, loyalty programs, and customer valuation are used regularly to interact with and prioritize customers. Unsurprisingly, this more widespread use has changed our understanding of CRM substantially and as a consequence, the field has seen a remarkable transformation in the past 3 decades. Yet, the CRM strategies implemented by many firms today are frequently still fundamentally based on an understanding of CRM from the early days. The purpose of this article is to outline the origins of CRM and to present the main wisdoms that firms believed to be true about customers 3 decades ago. I then discuss the key insights that academics and managers have obtained in recent years that increasingly challenge those wisdoms. The article ends with an outlook of CRM in years to come and presents some of the major challenges practitioners and researchers will have to deal with in the near future.     

Customer perceived value,satisfaction, and loyalty: The role of switching costs

It is a marketplace reality that marketing managers sometimes inflict switching costs on their customers, to inhibit them from defecting to new suppliers. In a competitive setting, such as the Internet market, where competition may be only one click away, has the potential of switching costs as an exit barrier and a binding ingredient of customer loyalty become altered? To address that issue, this article examines the moderating effects of switching costs on customer loyalty through both satisfaction and perceived‐value measures. The results, evoked from a Web‐based survey of online service users, indicate that companies that strive for customer loyalty should focus primarily on satisfaction and perceived value. The moderating effects of switching costs on the association of customer loyalty and customer satisfaction and perceived value are significant only when the level of customer satisfaction or perceived value is above average. In light of the major findings, the article sets forth strategic implications for customer loyalty in the setting of electronic commerce. © 2004 Wiley Periodicals, Inc.     

物流企业CRM与数据挖掘技术

客户关系管理（CRM）不仅是一种管理理念,也是一种旨在改善企业与客户之间关系的新型管理机制,还是一种管理软件和技术。推行客户关系管理是物流企业获得顾客、增强市场竞争力的重要途径。有效的客户关系管理离不开客户数据分析,而数据挖掘则是进行客户数据分析的基本技术和方法。数据挖掘技术为物流企业CRM的成功提供了有力的技术保障。     

Will the frog change into a prince? Predicting future customer profitability

More and more companies have customer databases that enable them to analyze customer profitability over time. These companies often seek to determine the most important customers as indicated by their current or historical profitability and focus attention on them. Focusing on profitable customers can result in more efficient use of marketing resources, but this approach neglects the fact that customers can evolve over time. Some customers begin as low-profit customers but eventually develop into high-profit customers. Others may start out as high-profit customers but become unprofitable over time. Previous efforts to predict future profitability have been relatively unsuccessful, with relatively simple, naïve models often performing just as well as or better than more sophisticated ones. Our paper presents a new approach to predicting customer profitability in future periods that performs significantly better than naïve models. We estimate the models on data from a high-tech company in a business-to-business context and validate the models' predictive ability on a holdout sample.We show that a model based on simulation of customer futures provides large improvements over naïve extrapolation of average profits. By using the simulation model to select customers, ROI from marketing efforts is projected to increase by 58%.     

Reputation and product tampering in service industries

This theoretical paper aims to identify the role of trust and reputation between consumers and firms when there is product tampering or other types of product liability. When product tampering occurs, trust implicitly built towards brand or corporation by consumers or customers can be dissipated. This article assesses the impact of quality uncertainty and measurement costs on the trust relationship between consumers and corporations. The ideas are also applied to the case of bank runs. Preliminary findings indicate that in cases where the trust between consumer and firms is strong, and there are high measurement costs and uncertainty, the reputational relationship between customers and firms can experience strong repercussions.     

Unlocking the transformative potential of customer data in retailing

Retailers collect, process, and use large amounts of data about customers: what they buy, how they buy, when they buy – and when customer loyalty cards are used – who buys the product or service. The use of customer data within the customer relationship management (CRM) framework has largely remained one sided. The potential of customer data for the benefit of the customer’s well-being still needs to be addressed. Reverse use of customer data, i.e. the process of firms converting customer data into information that is meaningful for the customers, extends attention toward using customer data for the benefit of the customer. In addition, selling goods to customers retailers can revise customer data into relevant and meaningful information that can support their well-being. Consequently, the purpose of this study is to identify and illustrate the transformative potential of the reverse use of customer data in retailing. This is achieved by reviewing literature on CRM, S-D logic, and transformative consumer research, and conducting a case study of a food retailer using point-of-sale data to provide customers with information about the healthfulness of their food purchases. Anonymous customer feedback data is collected and analyzed, and as a result, the transformative potential of customer data is reflected through five themes: self-monitoring, enhanced diet, food literacy, peace of mind, and beyond food healthfulness. These themes illustrate customers’ well-being outcomes resulting from reverse use of customer data.     

Competing with loyalty: How to design successful customer loyalty reward programs

For industries with low switching costs, customer loyalty programs (LPs) have potential to drive differentiation and sustain a competitive advantage. However, incentives provided through LPs also have a potential to escalate into costly price wars. In this article, we discuss how to design successful customer loyalty reward programs that bring value to participants and that cannot be emulated by competitors easily. We focus on three distinct aspects of improvement: personalization, reward types, and additional services. Through personalization, companies can leverage the knowledge they already have on their customers to tailor offers that they find relevant and appealing. For the reward structure, we argue in favor of a certain degree of opacity. We also encourage loyalty programs to consider giveaways that are unique and difficult to imitate and to use all the information they have available to provide rewards that fit with each customers’ idiosyncratic situation or preference. Finally, competitive LPs should look beyond offers and rewards. In addition to purchases, LPs can reward participants for other desirable behaviors; they can also provide additional services that impose minimal costs on firms, but bring value to customers.     

Brave New World? On AI and the Management of Customer Relationships

In light of the emerging discourse on AI systems' effect on society, whose perception swings widely between utopian and dystopian, we conduct herein a critical analysis of how artificial intelligence (AI) affects the essential nature of customer relationship management (CRM). To do so, we survey the AI capabilities that will transform CRM into AI-CRM and examine how the transformation will influence customer acquisition, development, and retention. We highlight in particular how AI-CRM's improving ability to predict customer lifetime value will generate an inexorable rise in implementing adapted treatment of customers, leading to greater customer prioritization and service discrimination in markets. We further consider the consequences for firms and the challenges to regulators.     

Designing a Predictive Performance Measurement and Control System to Maximize Customer Relationship Management Success

Customer Relationship Management (CRM) performance measurement is reviewed with two main intentions: (a) to encourage theoretical and empirical research and (b) to provide a useful predictive measurement system that is easy to implement. Special emphasis is placed on Balanced Scorecard methodologies as measurement systems to both evaluate and predict CRM performance. The use of a Balanced Scorecard (BSC) methodology to design CRM predictive performance measurement and control systems (PMCS) may provide several benefits to firms since (a) it reduces the risk and the uncertainty associated with the decision-making processes related to a CRM strategy and (b) it provides a strategic resource to the development of competitive advantages. The article concludes by proposing an holistic measuring system in the CRM field, including accountable, leading, repeatable, and linked metrics over the following areas and dimensions: strategy (business orientation, business atmosphere, and competitive strategy); resources (financial, human, and technological), business processes (integration and innovation); products and services (superiority and product/company synergy), customers (prospective and current); and external factors (competition and market).     

Where is the Security Blanket? Developing Social Media Marketing Capability as a Shield from Perceived Cybersecurity Risk

Although cybersecurity is important for any organization, firms have little understanding of the ramifications of perceived cybersecurity risk and how marketers can avert its negative marketing outcomes. The inability of firms to prevent massive data breaches in the recent past has heightened cybersecurity risk perceptions of customers and cybersecurity-related marketing challenges and opportunities. This study links cybersecurity risk with firm risk through firm reputation by developing a conceptual framework grounded in perceived risk theory in conjunction with dynamic capabilities and social network theoretical perspectives. Our findings show that social media marketing capabilities enable firms in mitigating the adverse impact of cybersecurity risk in declining firm reputation and value. Thus, this study provides significant implications for marketing theory and practice.     

A theoretical analysis of endogenous and exogenous switching costs

This paper studies the relation between endogenous and exogenous switching costs. A firm can determine the size of endogenous switching costs, but not the size of exogenous switching costs. This paper develops a game theoretical model to investigate whether these two types of switching costs complement or substitute each other in a firm’s strategy. Our analysis uncovers a substituting relationship, i.e., the equilibrium size of endogenous switching costs should be higher in markets with lower exogenous switching costs. In the equilibrium, the endogenous switching costs cause profit losses to competing firms; the amount of profit loss decreases with the size of exogenous switching costs.     

Investigating Customer Resistance to Change in Transaction Relationship with an Internet Vendor

Many academics and practitioners have reiterated the importance of online customer retention to ensure long‐term profitability. Consequently, a number of studies have identified various means of customer retention. These studies lay significant emphasis on creating customer loyalty. However, retaining customers, especially in the context of Internet shopping, is very difficult because of the low costs in comparison and switching. Most of the loyalty programs have also shown disappointing results. This study suggests that by tapping on an individual customer's inclination to resist changes in a transaction relationship, an Internet vendor can achieve customer retention. Using status quo bias theory, this study examines customer resistance to change (CRC) as a means of retaining customers in a transaction relationship with the Internet vendor. The empirical study of an Internet bookstore reveals that trust, relative attractiveness, and switching costs together influence CRC. The empirical results also show that CRC and switching costs have positive effects on willingness to pay more. Implications for theory and practice are discussed.