Customer Measurement Problem 6


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Man at chess boardThe general notion of moderation is that the nature of the relationship between two variables depends on the specific level of some third variable. Making that concrete for the current discussion, it means that the nature of the relationship between satisfaction and staying/leaving behavior will hinge on the level of some other variable(s). For example, consider a dichotomous variable in the cellular phone category: “presence or absence of a multiyear contractual agreement.” The level of this variable can seriously impact the relationship between satisfaction and continuation. In the absence of a contract, we might expect dissatisfaction to result in defection, and high levels of satisfaction to correlate at least somewhat with continuation. However, in the presence of a contract, dissatisfaction may not lead to defection. Most customers are unwilling to incur the stiff penalties of cancellation. The contractual agreement and the presence of switching costs moderate the relationship between satisfaction and continuation behavior.

Many companies fail to consider the important role of such potential moderators, while at the same time many potential moderators exist and plausibly do influence customer behaviors. So what moderating forces should companies consider? What might be influencing the degree to which levels of satisfaction (and other factors) do or don’t translate into subsequent behaviors? A series of key questions can help to start identifying potential moderators for any given situation.

Are there any barriers to switching that restrict customers’ freedom to leave at will? Are there costs to customers if they do choose to switch? Have investments been made that would be lost if a customer decided to switch? Is the general level of customer involvement low in the presence of effectively interchangeable suppliers/products/services, thereby making switching or not switching something that doesn’t matter much? Is there a proliferation of competitive options making switching easy and even desirable? Are there frequent promotions offered by competitors that woo customers away from existing suppliers? Is the nature of the interaction with customers primarily transactional, or is there a relationship element that adds to the degree of bond established between the company and customer? These are just a few considerations that can modify the satisfaction retention relationship.

Thinking through questions like those can help companies identify and take into account specific factors that may be in operation in their particular business contexts. The main point for the problem described here is that companies often blindly believe in a kind of axiomatic 1-to-l mapping of customer measures to behavior. The failure to consider relevant moderating forces can be a prescription for misleading estimated degrees of relationship between customer measures like satisfaction, and customer behaviors like continued purchase. Depending on the specific moderating forces at work, not taking them into account can lead to understated or overstated degrees of relationship.

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