Why customers stay loyal to service providers that mistreat them Tuesday, 15 March 2016
Why do some customers stay loyal to their service provider, even if it regularly fails to deliver on its promises? PhD graduate Irene Consiglio of Rotterdam School of Management, Erasmus University (RSM) discovered that people with low self-esteem are hesitant to switch brands, even when their provider’s service quality is really low. Offering short-term contracts with lower commitments can help those consumers, and can be beneficial for companies to attract new customers too.
Not getting the service you paid for, such as a properly functioning internet connection, can be particularly stressful to customers. When service disruptions happen often and are poorly communicated by the provider, customers can start feeling exploited, powerless and angry, says researcher Irene Consiglio.
At first sight it would make perfect sense to just ditch the brand at the earliest possible moment and spring for a better offer elsewhere. But in her research, Consiglio found that, even when the costs and efforts for switching to a new provider are low, people with low self-esteem are unlikely to accept interesting offers made by other brands. People with high self-esteem on the other hand will more easily purchase a new subscription with another provider that offers better options, she found.
Consiglio says this difference in switching behaviour can be explained by the anxiety and stress low self-esteem customers feel after service failures. It makes them wary of engaging in new relationships with other brands. But Consiglio’s research also shows that even unsatisfied customers with low self-esteem will switch if only the new provider offers contracts that come with lower commitment, such as shorter contract times or better possibilities to opt-out at any time.
The researcher argues that offering those low-commitment contracts would be beneficial for both clients and companies. Customers with low self-esteem will feel less trapped in their current bad relationship and end this relationship more easily. At the same time, low-commitment contracts will also allow companies to draw away dissatisfied customers from other providers. And that is an interesting proposition in saturated markets like internet services, where every percentage of market share is fiercely fought for.
Rotterdam School of Management, Erasmus University (RSM) is one of Europe’s leading business schools, and ranked among the top three for research. RSM provides ground-breaking research and education furthering excellence in all aspects of management and is based in the international port city of Rotterdam – a vital nexus of business, logistics and trade. RSM’s primary focus is on developing business leaders with international careers who carry their innovative mindset into a sustainable future thanks to a first-class range of bachelor, master, MBA, PhD and executive programmes. RSM also has offices in Chengdu, China, and Taipei, Taiwan. www.rsm.nl
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