Satisfaction – loyalty: it’s not that simple

The role of customer satisfaction in generating loyalty to the service firm is frequently reported in the literature. We believe that this is an oversimplified view of a complex relationship. The satisfaction-loyalty effect is not as it appears and firms need to be aware of the moderating effect contextual variables may have on this relationship. Using a national sample of service customers across nine service types (n=509) we examine the effect involvement, relationship benefits, and switching costs have on the relationship between satisfaction and customer loyalty. As would be expected, we find that satisfaction positively predicts customer loyalty. We hypothesize that satisfaction will have a reduced relationship with customer loyalty as perceived switching costs increase, but a stronger association when relationship benefits and perceived involvement increase. Three-way interactions between the main effects of satisfaction, switching costs, relationship benefits and involvement provide new insights into the effect of satisfaction on the customers' decision to remain loyal to the service firm. Of key importance is the finding that when customer involvement is high the negative moderating effect of switching costs on the relationship between satisfaction and loyalty reduces. However, when relationship benefits are high the opposite is true. That is, the negative moderating effect of switching costs on the relationship between satisfaction and loyalty increases. Implications for managers are discussed in terms of situations when managers should focus on improving satisfaction to increase loyalty.