Measuring Switching Costs and the Determinants of Customer Retention in Internet-Enabled Businesses: A Study of the Online Brokerage Industry

Pei-Yu (Sharon) Chen () and Lorin M. Hitt ()
Additional contact information
Pei-Yu (Sharon) Chen: Graduate School of Industrial Administration, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, Pennsylvania 15213
Lorin M. Hitt: The Wharton School, University of Pennsylvania, 1318 Steinberg Hall-Dietrich Hall, Philadelphia, Pennsylvania 19104

Information Systems Research, 2002, vol. 13, issue 3, 255-274

Abstract: The ability to retain and lock in customers in the face of competition is a major concern for online businesses, especially those that invest heavily in advertising and customer acquisition. In this paper, we develop and implement an approach for measuring the magnitudes of switching costs and brand loyalty for online service providers based on the random utility modeling framework. We then examine how systems usage, service design, and other firm and individual-level factors affect switching and retention. Using data on the online brokerage industry, we find significant variation (as much as a factor of two) in measured switching costs. We find that customer demographic characteristics have little effect on switching, but that systems usage measures and systems quality are associated with reduced switching. We also find that firm characteristics such as product line breadth and quality reduce switching and may also reduce customer attrition. Overall, we conclude that online brokerage firms appear to have different abilities in retaining customers and have considerable control over their switching costs.

Keywords: Switching cost; Electronic markets; Customer retention (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (100)

Downloads: (external link)
http://dx.doi.org/10.1287/isre.13.3.255.78 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:orisre:v:13:y:2002:i:3:p:255-274

Access Statistics for this article

More articles in Information Systems Research from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().