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.

► The findings confirm the multi-dimensional and formative conceptualization of the PSC construct.
► Different sets or different intensities of antecedents and outcomes exist for each first-order dimension.
► The study reflects the heterogeneous nature of the PSC concept and the fact that causality can be either positive or negative.
► ‘Positive’ switching costs favor the three loyalty-related outcomes (affective, cognitive and behavioral).