The interplay of costs, trust and loyalty in a service industry in transition: The moderating effect of smartphone adoption

• The relationships between perceived costs, trust and customer loyalty are analysed.
• Perceived costs have an indirect effect on loyalty, mediated by trust.
• Smartphone ownership has a positive effect on customer trust towards telecom operators.
• The effect of trust on loyalty is significant and consistent across smartphone owners and non-owners.
• Maintaining consumers’ trust continues to be important to retain their loyalty.

The importance of loyalty in service industries is widely recognized, and previous studies show consumer trust and perceived costs affect loyalty. The interplay of costs, trust and loyalty has also been shown for the telecommunications industry, but the recent smartphone revolution challenges existing theorizing. As consumers with smartphones collect and share more data including location information, increasing privacy and security risks make consumer trust even more important. Moreover, consumers with smartphones spend less on voice calling and text messages since they switch to over-the-top services, which changes the relationship that consumers have with their mobile operator. This paper studies the impact of perceived costs and trust in operators on the loyalty that consumers express towards their operator. We analyse a representative sample of 549 Dutch consumers, of which 25% own a smartphone. The effect of trust on loyalty is significant and consistent across smartphone owners and non-owners. Perceived costs have an indirect effect on loyalty, mediated by trust, but this indirect effect is fully moderated by smartphone ownership. Practical implication is that maintaining consumers’ trust continues to be important to retain their loyalty, and especially smartphone owners should be offered tariffs that consumers consider fair.