Essay on Customer Loyalty

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Journal of Business Research 59 (2006) 214 – 224

Bases of e-store loyalty: Perceived switching barriers and satisfaction
George Balabanis a,*, Nina Reynolds b,1, Antonis Simintiras b,2 b Cass Business School, City University, 106 Bunhill Row, London EC1Y 8TZ, UK School of Business and Economics, Swansea University, Singleton Park, Swansea, SA2 8PP, UK Received 1 June 2004; received in revised form 1 April 2005; accepted 1 June 2005

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Abstract Loyalty, its antecedents, and its consequences have been considered extensively. Store loyalty, in particular e-store loyalty, has not, however, received the same level of attention despite the increase in the number of organisations that sell directly over the Internet. This paper focuses on two antecedents of e-store loyalty, perceived switching barriers and satisfaction, and the way in which they interact. It found that customers do not consider themselves loyal to the e-store they frequent despite being largely satisfied, that the impact of switching barriers varies at different levels of customer satisfaction, and that what customers consider to be a switching barrier differs at different levels of customer satisfaction. D 2005 Elsevier Inc. All rights reserved.
Keywords: E-store loyalty; Switching barriers; Satisfaction

1. Introduction In the first quarter of 2002, US retail e-commerce sales were up 19% from the same period in 2001 and accounted for $9,849 million or 1.3% of all sales (US Department of Commerce, 2002). Repeat buys now account for over half of e-tailers’ sales (CyberAtlas, June 12, 2002), and research has shown that online shoppers do not engage in extensive searches (Johnson et al., 2004). Indeed, Forrester.com Internet consultants (2000) reports that customers are significantly more likely to repurchase products from their e-stores than from traditional retail outlets; that is, e-stores are ‘‘sticky’’ (Reichheld and Schefter, 2000). Overall, the dominant e-shopping developments are that (a) the percentage of total retail sales accounted for by e-commerce is likely to continue growing and (b) the majority of e-tailers seem to

* Corresponding author. Tel.: +44 207 0400226; fax: +44 207 0408880. E-mail addresses: g.balabanis@city.ac.uk (G. Balabanis), n.l.reynolds@swansea.ac.uk (N. Reynolds), a.c.simintiras@swansea.ac.uk (A. Simintiras). 1 Tel.: +44 1792 295601; fax: +44 1792 295626. 2 Tel.: +44 1792 295740; fax: +44 1792 295626. 0148-2963/$ - see front matter D 2005 Elsevier Inc. All rights reserved. doi:10.1016/j.jbusres.2005.06.001

enjoy more customer loyalty than do their bricks and mortar competitors (Forrester.com, 2000). Nevertheless, the cost of acquiring new customers online means that loyalty becomes an economic necessity for the estore (Reichheld and Schefter, 2000). While financial drivers result in more efficient systems resulting in a fall in customer acquisition costs (CyberAtlas, June 12, 2002), ‘‘for most, . . . average customer acquisition cost is higher than the average lifetime value of . . . customers’’ (Hoffman and Novak, 2000, p. 179). In addition to customer acquisition costs, retaining and winning back lost customers requires a variety of ongoing costs (Griffin and Lowenstein, 2001a,b) such as marketing expenditures that help to build value equity (i.e., quality and convenience), brand equity (e.g., awareness and image), and relationship equity (e.g., loyalty or rewards programs) (Rust et al., 2000). Customer acquisition/retention costs remaining greater than the revenue generated from the customer, would clearly lead to the financial ruin of the organization concerned. This imbalance can be overcome only by (a) reducing the cost of acquiring (or winning back) and retaining customers, (b) increasing the lifetime value for its customers, or (c) combination of both. While an increase in marketing efficiency can help to decrease the costs associated with

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