When in the early 90s the internet became a mass medium, the service industry recognized the potential of this new media. Quickly, several online service providers like Yahoo or AOL were established. These new internet companies tried to take advantage of being the first mover, by acquiring new customers. In the beginning this was fine, since more and more people obtained access and became potential costumers. Following a typical situation of excess demand and hence, the established online service provider could afford to focus more on gaining new customers than on retaining existing ones. However, this picture turned completely the more popular the internet became and the more new start-ups saw their opportunities to penetrate the e-commerce arena. This led to a shift from excess demand to excess supply in the online service industry. Consequently, the situation of increased competition was followed by a loss of market share and lower profit margins and the strategy of steadily acquiring new customers became ever harder to pursue, so that the companies had to rethink their. In order to stay competitive the companies have to focus more on the retention of existing customers rather than on searching for new ones. This situation is comparable to the offline service industry. The offline service industry also experienced decades of prospering growth and now faces a situation of a saturated market. The acquiring of new customers has become extremely difficult and costly and retaining existing ones has become harder and harder due to an increased customer willingness to switch the service provider.
With respect to today’s rapidly changing economy, it becomes increasingly important for managers in both the offline and online service industry to explicitly identify the reasons that drive customers to switch their service provider. Additionally, it is also extremely important for the online industry, whether they can build on the experiences made in the offline service industry or whether these experiences and approaches are not valid in the internet world. Each of these facets will be illuminated, focusing the analysis on the following core question:
Is the customer switching behaviour substantially different in the online service industry as compared to the offline industry? [...]
Table of Contents
1. INTRODUCTION:
2. THE OFFLINE SERVICE INDUSTRY
2.1 SWITCHING BEHAVIOUR IN THE OFFLINE SERVICE INDUSTRY
2.1.1 Factors influencing switching
2.1.2 Switching barriers
2.2 RELATIONSHIP MARKETING (OFFLINE)
3. THE ONLINE SERVICE INDUSTRY
3.1 SWITCHING BEHAVIOUR
4. OFFLINE AND ONLINE SWITCHING BEHAVIOUR: SIMILARITIES AND DIFFERENCES
4.1 SIMILARITIES IN SWITCHING BEHAVIOUR: ONLINE AND OFFLINE
4.1.1 Factors influencing switching behaviour (Similarities: online and offline)
4.1.2 Switching barriers (offline and online)
4.2.1 Factors influencing switching behaviour (Differences: online and offline)
4.2.2 Switching barriers (online and offline)
5. FUTURE OUTLOOK
5.1 OUTLOOK FOR THE OFFLINE SERVICE INDUSTRY
5.2 OUTLOOK FOR THE ONLINE SERVICE INDUSTRY
6. CONCLUSION
Objectives and Topics
The core objective of this work is to investigate whether customer switching behavior in the online service industry differs significantly from that in the traditional offline sector, providing managers with insights into customer retention strategies. The analysis focuses on identifying key drivers of switching and the effectiveness of various retention mechanisms across both environments.
- Analysis of factors influencing customer switching behavior.
- Evaluation of switching barriers and their effectiveness in offline versus online contexts.
- The role of trust and relationship marketing in customer retention.
- Comparison of consumer behavior patterns between traditional and digital marketplaces.
Excerpt from the Book
1. Introduction:
When in the early 90s the internet became a mass medium, the service industry recognized the potential of this new media. Quickly, several online service providers like Yahoo or AOL were established. These new internet companies tried to take advantage of being the first mover, by acquiring new customers. In the beginning this was fine, since more and more people obtained access and became potential costumers. Following a typical situation of excess demand and hence, the established online service provider could afford to focus more on gaining new customers than on retaining existing ones.
However, this picture turned completely the more popular the internet became and the more new start-ups saw their opportunities to penetrate the e-commerce arena. This led to a shift from excess demand to excess supply in the online service industry. Consequently, the situation of increased competition was followed by a loss of market share and lower profit margins and the strategy of steadily acquiring new customers became ever harder to pursue, so that the companies had to rethink their. In order to stay competitive the companies have to focus more on the retention of existing customers rather than on searching for new ones.
Summary of Chapters
1. INTRODUCTION: This chapter contextualizes the rise of the internet as a service medium and highlights the strategic shift from customer acquisition to retention due to increased competition.
2. THE OFFLINE SERVICE INDUSTRY: This section details the factors driving customer switching in traditional sectors, such as service quality and price, and explores relationship marketing as a tool for retention.
3. THE ONLINE SERVICE INDUSTRY: This chapter identifies the specific characteristics of online switchers, including the role of information seeking and experience, as well as the importance of e-loyalty.
4. OFFLINE AND ONLINE SWITCHING BEHAVIOUR: SIMILARITIES AND DIFFERENCES: This core comparative section reveals that while fundamental drivers like convenience remain consistent, the role of trust and the effectiveness of traditional switching barriers differ significantly between industries.
5. FUTURE OUTLOOK: The final analysis provides strategic recommendations for both offline and online providers, emphasizing the necessity of trust-building and careful application of switching barriers.
6. CONCLUSION: This chapter synthesizes the study's findings, affirming that despite technological advancements, fundamental human values and behaviors regarding service remain largely unchanged.
Keywords
Switching behavior, Online service industry, Offline service industry, Customer retention, Service quality, E-loyalty, Switching barriers, Relationship marketing, Trust, Customer satisfaction, Consumer behavior, Competitive advantage, Market saturation, Service encounter, Information search
Frequently Asked Questions
What is the main focus of this research?
The work examines customer switching behavior within the service industry, specifically comparing traditional offline business models with the digital online environment to understand how and why customers choose to leave a service provider.
What are the primary themes discussed in the paper?
Key themes include the drivers of switching behavior (such as price and service failure), the concept of switching barriers, the strategic importance of relationship marketing, and the role of e-loyalty in the internet age.
What is the core research question?
The study asks whether customer switching behavior is substantially different in the online service industry compared to the traditional offline industry.
Which methodology is used to conduct this research?
The paper employs a qualitative literature-based approach, synthesizing existing academic studies and theories—such as Keaveney's switching factors and Jones's barrier models—to compare industry practices.
What does the main body cover?
The main body systematically analyzes switching behavior in offline and online industries, provides a comparative analysis of similarities and differences, and offers future outlooks for both sectors.
Which keywords characterize this study?
The study is characterized by terms such as switching behavior, customer retention, e-loyalty, service quality, and relationship marketing.
How does the author define the role of "trust" in the online versus offline industry?
The author argues that trust is significantly more critical in the online industry because the distance between the customer and provider is greater and personal interaction is limited compared to the offline world.
Why do traditional switching barriers lose their effectiveness in the online industry?
Barriers like perceived switching costs and limited alternatives lose strength online because the internet allows consumers to find and compare competitive offerings instantly and at almost zero cost, eliminating geographical constraints.
- Quote paper
- Felix Hettlage (Author), 2002, Switching Behaviour in the Offline and Online Service Industry, Munich, GRIN Verlag, https://www.grin.com/document/10977
