Punitive switching costs and behavioral responses in the context of contractual services

Abstract

Purpose Contractual services are characterized by features such as termination fees, long-term commitment, and complex terms. When customers find better deals from other providers, they may want to switch, but contractual obligations prevent them from doing so. Thus, this study aims to draw upon the stimulus-organism-response paradigm and theories of emotion regulation to examine how punitive switching costs (PSCs) can evoke negative emotions (NEs) from customers and, consequently, lead to negative behavioral responses in contractual service settings. Design/methodology/approach This study collected data from 395 customers of telecommunications companies, fitness centers, tutoring firms/centers, and house leasing companies in Taiwan. We tested the hypotheses using partial least squares structural equation modeling via SmartPLS 3.0. Findings The results show that NEs partially mediate the relationship between PSC and customers’ switching intention and negative word-of-mouth. This study also finds alternative attractiveness (AA) and service recovery (SR) do not moderate the PSCs–NEs relationship, but AA does directly influence NEs. Originality/value First, this study contributes to the literature on switching costs by exploring how PSC exerts a detrimental impact on behavioral responses. Second, this study adds to the literature on service failures by identifying the mediating role of NEs in such a relationship.