Pull-and-suck effects in Taiwan mobile phone subscribers switching intentions

This paper uses a binary logit model to investigate the factors that influence subscribers to stay or migrate based on the competitive nature of Taiwan's mobile phone industry and subscribers' habit formation regarding service providers. The results show that subscribers' satisfaction, switching costs, and habit strength negatively influence switching intentions, constituting a sucking effect that motivates subscribers to stay with their original providers. Alternative attractiveness, on the other hand, positively influences switching intentions, comprising a pulling effect that encourages subscribers to migrate to other providers. In spite of the promotional benefits offered by new service providers, Taiwanese mobile phone subscribers generally remain with their original providers. For instance, when subscribers perceive that there are no significant influences between service satisfaction and switching costs associated with different providers, what encourages subscribers to stay with their original providers is habit strength. Oftentimes, it is difficult for subscribers with strong habits to be attracted by promotions offered by alternative service providers. Because the concepts of suck-and-pull effects or habit-and-competition forces are infrequently studied, this paper explores these concepts and attempts to fill the void.     

Reducing the level of switching costs in mobile communications: The case of Mobile Number Portability

Switching costs are one of the most important economic forces that affect market competition in mobile communications. Both theoretical and empirical studies have shown that switching costs reduce market competition leading to higher prices, lower product and service quality, and lower customer welfare. Given their negative consequences, national regulatory authorities have designed policies aimed at reducing switching costs and fostering competition. One of the most important of these, in the mobile communications industry, is mobile number portability (MNP). The aim of this paper is to investigate the effect of MNP on switching costs in mobile phone services. First, a hierarchical Bayes model is proposed to measure switching costs at the customer level and to investigate the impact of MNP on them. Second, this study examines the drivers of MNP adoption by customers using a binary logit specification. The results reveal that this regulatory policy has significantly reduced the cost of switching and that MNP adoption partially depends on customer-related variables.     

Regulation and competition in the European mobile communications industry: An examination of the implementation of mobile number portability

Over the past two decades, the mobile communications industry has seen a considerable drop in the consumer switching charges made by service providers in order to promote effective competition and ensure a level playing field for new market entrants. Mobile Number Portability (MNP) is an important regulatory measure taken to reduce switching costs, and it is believed to play an important role in fostering competition in the mobile market. MNP implementation has varied significantly across European Union countries, particularly with respect to porting time and customer fees, both of which are important factors when deciding whether to switch to another provider. The research examines the effects of MNP implementation on competition in the European mobile communications industry. The study findings indicate that subscriber churn rates are negatively affected by both the level of charges levied on subscribers wishing to maintain their current number (porting) when switching mobile providers and the length of time required to switch. The implications of the effectiveness of MNP regulation for competition in the mobile communications industry are discussed.     

ON THE VALUE OF A LARGE CUSTOMER BASE IN MARKETS WITH SWITCHING COSTS*

It is usually acknowledged that firms benefit from a large customer base in markets with switching costs. However, Klemperer [1995] argues that this may not be true if an increase in the size of a firm's customer base induces fierce price competition, making the firm worse off. This paper shows that such an outcome can be obtained under standard assumptions, such as homogeneous goods and uniformly distributed switching costs. In the model, firms have very limited incentives to fight for market shares, and the notion that switching costs make markets less competitive is stronger than previously shown.     

Pricing with Consumer Switching Costs: Evidence from the Credit Card Market

The credit card market is a natural setting for investigating the relationship between pricing and consumer switching costs. I find, using a detailed panel of credit card issuers, that switching costs are an important influence on pricing for commercial banks. The results are stronger for commercial banks with risky customer bases, suggesting that there is a relationship between default and switching costs. Switching costs appear to have almost no influence on pricing for credit unions, a result that is consistent with their status as not–for–profit entities.     

Securing business-to-business relationships: The impact of switching costs

While the relationship marketing literature acknowledges the importance of switching costs for increasing customer retention, little is known about its relevance in industrial markets. In particular, it is unclear whether switching costs, and associated dimensions, impact on behavioral outcomes of buyer–seller relationships in business-to-business (B2B) markets. In order to contribute to theory development in this important area, our research first explores the dimensions of switching costs for the B2B domain and also tests the relative impact of these dimensions on business customers' actual purchase behavior. Results suggest that switching costs in B2B settings are a multi-faceted construct, including (i) procedural, (ii) financial, and (iii) relational switching costs. Moreover, we find relational switching costs to be most important for securing B2B buyer–seller relationships since they impact a customer's (a) share-of-wallet, (b) cross-buying behavior, and (c) actual switching behavior. While procedural switching costs only influence share-of-wallet, financial switching costs solely impact customer's cross-buying behavior. These findings contribute to a better understanding on how to secure B2B buyer–seller relationships.     

Strategic action and customer mobility: Antecedents and consequences of strategic actions in the Korean mobile telecommunication service industry

This paper investigates the sources and consequences of strategic actions in the Korean mobile telecommunication service industry. Based on competitive dynamics research and an organizational learning perspective, it suggests hypotheses and tests them with monthly data on service providers’ competitive and alliance actions, as well as statistics on monthly subscribers during 2002–2007. We show the positive effects of a firm’s own experience, other firms’ strategic actions, and firms’ alliance tendencies on the likelihood of firm-level competitive action and alliance. We also find that negative performance feedback accelerates the mimetic influence of rival firms’ competitive actions and that positive performance feedback strengthens the momentum effect of a firm’s own alliance experience on the likelihood of alliance. Both competitive actions and alliances appear to influence customer mobility across firms in a complex manner. Based on customer mobility data, this study finds that alliances increase market dynamism, that is, customer mobility. It also shows that competitive actions, in general, serve to effectively attract switching customers from rivals. This study partially answers questions regarding the triggers of competitive actions and alliance activities among mobile telecommunication service providers and their performance consequences.     

Multi-dimensional analysis of perceived switching costs

The creation of switching costs for customers is an important aspect of strategic planning in today's competitive environment. These costs enable firms to address variations in customer preferences and competitor influence in attempting to gain their customers' loyalty. Although the recognition of the importance of such switching costs has long existed in a variety of contexts, the conceptualization and measurement of the construct is lacking in clarity and consistency. This study proposes that perceived switching costs (PSC) constitute a higher-order construct made up of six dimensions that reflect the customers' perception of the time, effort, and money involved in the switching process. The study also proposes that each of the six dimensions has a distinctive set of antecedents and outcomes. The test of the model is an empirical study in the Spanish insurance sector. The results confirm the validity of the higher-order formative construct of PSC and provide insights for specific strategies to address the perceptions of various customers with regard to switching costs.     

Do switching costs mediate the relationship between entry timing and performance?

The purpose of this paper is to test the effectiveness of switching costs as an isolating mechanism in the context of the first‐mover advantage theory. Whereas both the literature on switching costs and on pioneering propose this as a mechanism through which firms could obtain sustainable competitive advantage, other authors offer a rationale for thinking that this is not the case. We test our hypotheses in the context of the European mobile telecommunications industry. This is a sector that has been characterized by high rates of growth in the number of subscribers, which could reduce the effectiveness of switching costs from being effective as an isolating mechanism. Our results show that switching costs are an important tool through which first‐mover advantages materialize. Copyright © 2011 John Wiley & Sons, Ltd.     

Managing international supply: The balance between total costs and customer service

Many trading companies have taken a global approach to their supply markets, sourcing from low-cost foreign countries in order to achieve cost reductions. There remains, however, a lack of evidence that sourcing internationally actually leads to improved economic performance. This can be explained by two key challenges in terms of how to achieve a balance between: (1) purchasing and logistics costs, and (2) customer service. The purpose of this paper is to examine the organisation and management of international supply from a total cost perspective, taking into account both purchasing and logistics costs, as well as customer service and agility. Previous research into a number of Norwegian companies that have sourced from China has identified four configurations for managing international supply. This paper utilises the supply management literature and an example of a Norwegian retail and wholesale company to analyse and discuss these configurations and their effects on total costs and customer service. The paper's theoretical contribution is the conceptualisation of a total cost perspective on international supply management and the discussion of such costs in relation to customer service. This contribution may, in turn, aid companies that source from foreign, low-cost countries.     

Predicting Household Switching Behavior and Switching Costs at Depository Institutions

This paper uses new survey data to investigate the covariates of self-reported switching costs and switching behavior by deposit account holders. Factors affecting geographic mobility appear to be most important in explaining the duration of deposit relationships. Both younger and older respondents are more likely than others to be at their first bank ever, suggesting a cohort effect in deposit relationships. Households reporting switching costs, net of the benefits from switching, are less likely than others to have stayed with a bank for prices or customer service, suggesting that switching costs may decrease price sensitivity. Switching costs appear more severe for households with high income or education and for households with very low income or minority ethnicity. These findings imply that banking markets characterized by such households may present greater entry costs for new firms.     

Customer retention: A source of value for serial acquirers

Customer retention, in most cases, is regarded as an indicator of acquisition performance, but factors influencing it have rarely been studied in the serial acquirer context. As a consequence, this paper presents a model of the linkage between serial acquirers and customer retention by drawing on serial acquirer and customer relationship marketing and management literature. The paper proposes that the serial acquirers' focus on retaining acquired firms' business customers per acquisition deals may enhance the post-acquisition value. Furthermore, serial acquirers' acquisition experience (skills), managerial overconfidence/hubris, own customers' behaviour and technological context are identified to impact the customer retention of the acquired firm. Moreover, two dual-purpose variables—acquired firms' customer experience and acquired firms' customer relationships—are proposed to moderate the effects of serial acquirers' acquisition experience (skills), managerial overconfidence/hubris, own customers' behaviour and technological context on acquired firm customer retention and also to autonomously influence acquired firms' customer retention. The implications for serial acquirers and practice are discussed.     

Development and implementation of customer solutions: A study of process dynamics and market shaping

A broad, dynamic network perspective on solution processes remains scarce. This article presents the process of developing and implementing customer solutions and its effects on the wider business environment by investigating customers and suppliers in the global mining industry (Australia, Chile, and Sweden), analyzing the deployment of a new customer solution, and assessing the changes to the competitive environment and focal firms' relationships with other customers and suppliers. It shows that the forces that drive customer and supplier interests and motivation to co-develop customer solutions may change over time, thus redefining the aim and scope of solutions and creating failure risks. Customers present problems; suppliers respond, on the basis of not only the feasibility of the customer-specific solution but also of their evaluation of future solutions in a broader market; then suppliers aim to standardize successful solutions across markets. Customers want close supplier relationships and unique solutions but also like standardized and repeatable solutions, so they can share development costs with competitors and expose the supplier to competition to avoid lock-in effects. From a network perspective, a novel solution can have a market-shaping effect and evoke reactions from other actors who want to enhance their market position. However, these changes are not necessarily deliberate, and the dynamics that market introductions of solutions trigger may be difficult to predict.     

Customer retention,loyalty, and satisfaction in the German mobile cellular telecommunications market

Customer retention (CR), loyalty (CL), and satisfaction (CS) are important (intermediate) goals for telecommunication network operators on their way to superior economic success in the liberalised German market. Therefore, drawing on a sample of 684 residential customers of digital cellular network operators in Germany this study tests hypotheses suggesting that CR, CL, and CS should be treated as differential constructs which are causally inter-linked. LISREL analyses support a two-staged model in which overall CS has a significant impact on CL which in turn influences a customer's intention to terminate/extend the contractual relationship with his mobile cellular network operator (=CR). Mobile service price and personal service benefit perceptions as well as (lack of) number portability between various cellular operators were identified as supply-related variables with the strongest effects on CR. Mobile network operators’ perceived customer care performance had no significant impact on CR. The findings suggest that an important lever for regulators to promote competition in cellular markets is the enforcement of efficient number portability procedures between mobile network operators.     

Estimating Consumer Inertia in Repeated Choices of Smartphones*

For a sample of 9,799 subscribers to a single mobile operator, we observe switching between mobile handsets between July, 2011, and December, 2014. We estimate a discrete choice model in which we account for disutility from switching to different operating systems and brands. Our estimation results indicate the presence of significant inertia in the choice of operating systems and brands. We use our model to simulate market shares in the absence of switching costs and conclude that the market shares of Android and smaller operating systems would increase at the expense of the market share of iOS in such a context.     

Switching Costs in Vertically Related Markets

In the presence of switching costs, firms are ofteninterested in expanding current market shares toexploit their customer base in the future. However, ifthe product is sold by retailers, manufacturers mayface the problem of extracting too much surplus fromthe retailer. If this happens, then the latter has notan incentive to build a subscriber base. This paperwould like to connect two streams in the literature,on switching costs and vertical restraintsrespectively. An upstream–downstream duopoly model ispresented to analyse the mutual incentive for firms toenter into particular trading relationships. Whenswitching costs are high, then integrated structuresare predicted. On the other hand, when lock in effectsare not too relevant, mixed structures withindependent and integrated firms emerge as anequilibrium in growing industries. The results arediscussed with reference to the UK mobiletelecommunications industry.