The Effects of Customer Satisfaction, Relationship Commitment Dimensions, and Triggers on Customer Retention

The Effects of Customer Satisfaction, Relationship Commitment Dimensions, and Triggers on Customer Retention

October 2005 | Anders Gustafsson, Michael D. Johnson, & Inger Roos
This study examines the effects of customer satisfaction, affective commitment, and calculative commitment on customer retention in telecommunications services. It also explores how situational and reactional triggers moderate the relationship between customer satisfaction and retention. The results show that customer satisfaction, calculative commitment, and prior churn significantly influence retention. Prior churn also moderates the satisfaction-retention relationship. The study contributes to the customer relationship management (CRM) literature by examining the competing effects of customer satisfaction, affective commitment, and calculative commitment on retention, the importance of controlling for heterogeneity or prior loyalty when predicting retention, and the potential for different triggers to moderate the effect of satisfaction on retention. Customer satisfaction is defined as a customer's overall evaluation of the performance of an offering. It has a strong positive effect on customer loyalty intentions across various product and service categories. Satisfaction typically mediates the effects of product quality, service quality, and price or payment equity on loyalty. It also contains a significant affective component, created through repeated product or service usage. In a service context, overall satisfaction is similar to overall evaluations of service quality. Compared with more episode-based or transaction-specific measures of performance, overall evaluations are more likely to influence customer behaviors such as positive word of mouth and repurchase. Affective commitment is a hotter, more emotional factor that develops through the degree of reciprocity or personal involvement a customer has with a company, resulting in higher levels of trust and commitment. Calculative commitment is a colder, more rational economic-based dependence on product benefits due to a lack of choice or switching costs. These two dimensions of relationship commitment drive loyalty. The study uses a combination of survey and longitudinal data from a telecommunications service provider to understand the drivers of retention. It finds that customer satisfaction has a significant influence on customer retention that varies across customers. The study also explores the potential for situational and reactional triggers to moderate the effect of satisfaction on retention. The results suggest that the satisfaction-retention link is weaker for customers in either a situational or a reactional trigger condition. The study concludes that customer relationship managers should include both overall evaluations of performance (e.g., customer satisfaction) and the viability of competitive offerings (e.g., calculative commitment) in periodic surveys used to predict retention. Calculative commitment helps capture the competitive element that is often missing when predicting retention. The actions that CRM managers take depend on which of these factors has the greatest influence on churn. If customer satisfaction is the key driver, retention programs should focus on improving satisfaction. If calculative commitment is the key driver, the emphasis shifts to improving the aspects of the value proposition that are more unique to the offering. The study also emphasizes the need to control for heterogeneity in the satisfaction-retention relationship by including prior churn in the analysis. This enables relationship managers to understand the effects of customer satisfaction and relationship commitment on retention beyond inherent differences in customers' propensities to churn.This study examines the effects of customer satisfaction, affective commitment, and calculative commitment on customer retention in telecommunications services. It also explores how situational and reactional triggers moderate the relationship between customer satisfaction and retention. The results show that customer satisfaction, calculative commitment, and prior churn significantly influence retention. Prior churn also moderates the satisfaction-retention relationship. The study contributes to the customer relationship management (CRM) literature by examining the competing effects of customer satisfaction, affective commitment, and calculative commitment on retention, the importance of controlling for heterogeneity or prior loyalty when predicting retention, and the potential for different triggers to moderate the effect of satisfaction on retention. Customer satisfaction is defined as a customer's overall evaluation of the performance of an offering. It has a strong positive effect on customer loyalty intentions across various product and service categories. Satisfaction typically mediates the effects of product quality, service quality, and price or payment equity on loyalty. It also contains a significant affective component, created through repeated product or service usage. In a service context, overall satisfaction is similar to overall evaluations of service quality. Compared with more episode-based or transaction-specific measures of performance, overall evaluations are more likely to influence customer behaviors such as positive word of mouth and repurchase. Affective commitment is a hotter, more emotional factor that develops through the degree of reciprocity or personal involvement a customer has with a company, resulting in higher levels of trust and commitment. Calculative commitment is a colder, more rational economic-based dependence on product benefits due to a lack of choice or switching costs. These two dimensions of relationship commitment drive loyalty. The study uses a combination of survey and longitudinal data from a telecommunications service provider to understand the drivers of retention. It finds that customer satisfaction has a significant influence on customer retention that varies across customers. The study also explores the potential for situational and reactional triggers to moderate the effect of satisfaction on retention. The results suggest that the satisfaction-retention link is weaker for customers in either a situational or a reactional trigger condition. The study concludes that customer relationship managers should include both overall evaluations of performance (e.g., customer satisfaction) and the viability of competitive offerings (e.g., calculative commitment) in periodic surveys used to predict retention. Calculative commitment helps capture the competitive element that is often missing when predicting retention. The actions that CRM managers take depend on which of these factors has the greatest influence on churn. If customer satisfaction is the key driver, retention programs should focus on improving satisfaction. If calculative commitment is the key driver, the emphasis shifts to improving the aspects of the value proposition that are more unique to the offering. The study also emphasizes the need to control for heterogeneity in the satisfaction-retention relationship by including prior churn in the analysis. This enables relationship managers to understand the effects of customer satisfaction and relationship commitment on retention beyond inherent differences in customers' propensities to churn.
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