Why Customers Feel Locked Into Relationship Crm Study

Topics: Interpersonal relationship, Service provider, Service Pages: 17 (5258 words) Published: September 17, 2013
Why Customers Feel Locked into Relationships:
Using Qualitative Research to Uncover the Lock-in Factors

TABLE OF CONTENTS

Abstract2
Introduction/Synopsis3
Methodology7
Data Collection8
Implications for Managers13
Limitations & Further Research15
Conclusion17

Abstract

The objective of this research is to explore the factors leading to the customer locking in relationship with the service using qualitative research techniques. We further intend to expand on the broad categories identified, in the secondary research, namely relational benefits of staying, switching barriers, obligatory factors, and personality factors, creating subcategories within each category. The research would also aim to evaluate the positive and negative aspects of their relationships and the customer satisfaction levels against the same. A long term relationship is highly beneficial to the firm. The company stands to gain from such a long term relationship making higher profits, since it is widely known that the cost of customer retention is lower than acquiring a new customer. Also, a long-term customer is has been known to be instrumental in acquiring new ones. The four broad categories of lock‑in factors are relational benefits of staying, switching barriers, obligatory factors, and personality factors. All the categories appear across both positive and negative relationships, although interesting differences in category prevalence between positive and negative relationships are insightful and discussed. In the majority of service relationships, participants mention multiple factors in regard to lock‑in, rather than just one factor or category. Researchers in marketing have paid little attention to obligatory factors and personality factors and yet these factors are present in the data in a substantial way and occur in conjunction with the more well-studied factors.

Introduction

Do you know why your customers stay? Many service providers assume that the reasons are satisfaction and switching costs. While these are strong factors, our research shows that, in most service relationships, obligatory and personality factors also hold customers ‘locked in’ to the relationship. The term “locked-in” to a service relationship refers to a customer who feels bound to the relationship and feels that he or she is unable or unwilling to leave the service provider. The customer may feel locked in for either positive or negative reasons, and this lock-in may well be self-imposed rather than just contractual. The reasons for switching service providers are usually associated with dissatisfaction with the service or competitor firms drawing the customer away. In contrast, the reasons for staying in a service relationship are usually assumed to be limited to satisfaction with the core service or switching costs. Our research challenges that assumption. We conducted qualitative interviews with customers who felt locked into both positive and negative relationships. We uncovered four broad categories of lock-in factors: relational benefits/satisfaction, switching costs, obligatory factors, and personality factors. In the majority of these “locked-in” relationships, the participants mentioned multiple factors that they felt locked them in, rather than one factor or category. Participants talked about service relationships where they felt they “could not easily leave or break up with” the provider. Each participant talked about one positive and one negative relationship. Different service provider types, from small local businesses to large corporations were discussed. The majority of the relationships were personal relationships, in which the provider and customer know each other and have a history of shared interaction (as opposed to interacting with the company, but not knowing anyone in particular). Relational benefits/satisfaction were mentioned in 93% of the relationships, switching costs in 82% of the...

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