ABSTRACT
This study investigated the influenced of switching cost on customer retention in hotel operations in Umuahia Abia state. More specifically, the study sought to determine the influence of pricing, inconvenience, core service failure, service encounter failure attraction by competition as an incident of switching cost on customer retention in the study area. Five specific objectives, research questions and hypothesis guided the study. The study collected primary data using a well-structured questionnaire which was distributed to 300 respondents. Two hundred and eighty one (281) questionnaires was dully filled and retrieved. while descriptive statistics were used to analyze demographic variables. Simple regression was used to run the hypothesis on SPSS version 24 among others. The findings reveal that pricing, inconvenience and service encounter failure has a significant relationship with customer retention and therefore concludes that that switching cost to an extent can influence customer retention in hotel operation in study area and thus, recommends that hotel operations should consider their price rate and also make sure that their prices reflect on their services and facilities in other to maintain the loyal customer.
TABLE OF CONTENTS
Title Page
i
Approval Page ii
Declaration
iii
Certification
iv
Dedication
v
Acknowledgements
vi
List of
tables
ix
Abstract
CHAPTER ONE INTRODUCTION
1.1 Background of the Study 1
1.2 Statement of problem 5
1.3 Objectives of the study 5
1.4 Research Questions 5
1.5 Hypothesis of the Study 6
1.6 Significance of the Study 7
1.7 Scope
of the study 8
CHAPTER
TWO REVIEW OF RELATED LITERATURE
2.1 Conceptual Framework 9
2.1.1 Concept of Switching Cost 9
2.1.2 Dimension of Switching Cost
11
2.1.3 Models of Switching Cost 15
2.1.4 Influence of Switching Cost
on Patronage 17
2.1.5 Concept of Customer
Retention 18
2.1.6 Switching Cost and Customer
Retention 22
2.1.7 Customer Retention in Hotel
Operations 23
2.1.8 Factors Affecting Customer Retention 25
2.1.8.1 Service quality 26
2.1.8.2 Physical Surroundings 29
2.1.8.3 Customer Satisfaction 30
2.2 Theoretical Framework 32
2.2.1 The
Theory of Planned Behavior 32
2.2.1.1
Relevance of this Theory to the Study 32
2.2.2 Theory
of Reasoned Action 33
2.2.1.1
Relevance of this Theory to the Study 33
2.3 Empirical Framework 34
2.4 Summary of Review
Literature 35
CHAPTER THREE RESEARCH METHODOLOGY 37
3.1 Research Design 37
3.2 Area of Study 37
3.3 Population for
the Study 38
3.4 Sample and Sampling Techniques 38
3.5 Sampling Technique 38
3.6 Instrument
for Data Collection 38
3.7 Method of Data Collection 39
3.8 Validation of Instrument 39
3.9 Reliability of Instruments 39
3.10 Method of Data Analysis 40
CHAPTER 4 RESULTS AND DISCUSSION
4.1 Results
41
4.1.1 Response rate of the study 41
4.1.2 Demographic
Data of Respondents 42
4.1.3 Analysis
of Research Questions 44
4.2 Inferential
statistics and Hypothesis Testing 57
CHAPTER 5: SUMMARY, CONCLUSION AND RECOMMENDATION
5.1 Summary
64
5.1.1 Restatement
of the Problem 64
5.1.2 Major
Findings 64
5.2 Conclusion 64
5.3 Recommendation 65
References
Appendix
LIST OF TABLES
Table 3.1: Population Frame 38
Table 4.1:
Response rate 41
Table 4.2: Demographic Data of the Respondents 42
Table 4.3: The Influence of Pricing as an Incident of Switching
Cost on Customer
Retention
in the Study Area 44
Table 4.4: The Influence of Inconvenience as an Incident of
Switching Cost on
Customer
retention in the study area 47
Table 4.5: The Influence of Core Service Failure as an Incident of
Switching Cost on
Customer
Retention in the Study Area 49
Table 4.6: The influence of service encounter failure
as an incident of switching
cost on customer retention in
the study area 51
Table 4.7: The influence of attraction by competition
as an incident of switching
cost on customer retention in
the study area? 54
LIST OF FIGURES
Fig 1:
Gender Distribution 41
Fig 2:
Age Distribution 41
Fig 3:
Marital status 42
Fig 4:
Level of Education 43
CHAPTER
ONE
1.0 INTRODUCTION
1.1 Background
of the Study
The
hotel industry in Nigeria has experienced tremendous growth. The industry will
continue to offer copious commercial opportunities for the country and
businesses alike. (Bernama, 2010). In line with the growing number of tourists,
the hotel industry in Nigeria has also stepped up its development and upgrading
programs. In this era, globalization is increasingly important. Information on
factors determining the creation of loyalty among customers becomes an
essential matter. Thus, the same concept applies here where it is imperative
for hotel owner to identify the factors, which influence consumer’s choice in
choosing one hotel over the others, in order for them to be successful in the
new or existing market. To take advantage of such a huge market potential,
firms need to start investigating the factors that produce loyalty by
understanding consumer perception on the hotels.
The
past few years have witnessed growing research attention directed towards the
functions of switching costs (SC) in the cultivation and retention of customers
in service industries (Patterson and Smith, 2003; Whitten and Wakfield, 2006).
Characterized by their latent psychological implications, switching costs can
fill the gap in cases where customer purchasing behaviors may not be adequately
accounted for by established constructs such as satisfaction and loyalty (Jones,
Mothersbaugh and Beatty, 2002). Especially in scenaria where customer
satisfaction is already in place, switching costs can serve as distinguishing
indicators that benchmark high and low satisfaction levels (Klemperer, 1987).
Switching costs can also provide a buffer zone for the enterprise in
compensating for the adverse effects of such factors as high prices, low
customer trust, and short-term fluctuations in service quality.
Furthermore,
the significance of switching costs is consolidated by their inherent linkages
to the re-purchasing behaviors of customers, the realization of which is
crucial to the sustainable development of an enterprise (De Ruyter, Wetzels,
and Bloemer, 1998). In this sense, Yan and Jia (2003) argued that it is better
to fit the nature of an antecedent in terms of its strength in regulating the
mechanism of customer decision-making process, particularly in the service
industries.
The
hotel industry, where a full-fledged competitive environment is in place, has
long been plagued by the considerable degree of product homogeneity in terms of
both hardware and services, especially in the luxury sector (Bailey and Ball,
2006; Ramanathan and Ramanathan, 2011). The core of a hotel product lies in the
experiential values that the customers can perceive, thus posing a challenge to
the establishment and maintenance of a solid brand image of the hotel (Cai and
Hobson, 2004; Jiang, Dev and Rao, 2002). In addition, under the ongoing effects
of industrial clustering and human resource costs, the traditional competitive
advantages enjoyed by some hotels in this sector, such as location and labor
efficiency, are becoming more and more elusive. Furthermore, the popularity of
online purchases has facilitated a platform upon which different hotels can be
more conveniently, if not routinely, scrutinized and cross-referenced.
Although
having different typologies related to it, SC is commonly agreed to be a highly
effective means of explaining human buying behaviour (Lin and Chou, 2004). As
the definition of SC is quite broad, this work finds the definition as made by
Caruna (2003) handy, where switching costs are seen upon as: “one-time costs
facing the buyer of switching from one supplier’s products to another” to be a
fitting description. This view is also shared by Burnham Frels and Mahajan, (2003).
Further,
Klemperer (1987) presented a notable typology which includes three different
SC: learning costs, artificial or contractual costs and transaction costs.
Learning costs are defined as the effort needed by the customer to reach the
same level of reassurance or facility with a new product as they had for an old
one. Artificial or contractual costs are created by deliberate actions of
firms, like frequent flyer programs, and repair-purchase discounts. Transaction
costs occur when starting a new relationship with a provider and occasionally
include the costs necessary to terminate a relationship.
Customer
retention refers to the activities and actions companies and organizations take
to reduce the number of customer defections. The goal of customer retention
programs is to help companies retain as many customers as possible, often
through customer loyalty and customer retention initiatives. It is important to
remember that customer retention begins with the first contact a customer has
with a company and continues throughout the entire lifetime of the
relationship.
While
most companies traditionally spend more money on customer acquisition because
they view it as a quick and effective way of increasing revenue, customer
retention often is faster and, on average, costs up to seven times less than
customer acquisition. Selling to customers with whom you already have a relationship
is often a more effective way of growing revenue because companies do not need
to attract, educate, and convert new ones.
Companies
that shift their focus to customer retention often find it to be a more
efficient process because they are marketing to customers who already have
expressed an interest in the products and are engaged with the brand, making it
easier to capitalize on their experiences with the company. In fact, retention
is a more sustainable business model that is a key to sustainable growth (Jones,
Mothersbaugh and Beatty, 2002).
Customer
retention is one way of how to win your current customers by taking into
consideration their loyalty, attitude and behavior toward what have been given
to them. But it is always hard to measure feelings and words, some consumers
maybe this time they are satisfied, loyal and are giving some good word of
mouth but maybe next time they will be dissatisfied and will not recommend the
brand to others. Those factors that most affect the customer retention have to
be done in a very perfect way so the customer could be delighted by the service
provided and by the service providers themselves. The service quality is what
differentiate the hotel from another, this service is the major thing that any
customer is looking for in every hotel. If the service is not as they are
expected they will not recommend the place to others and they will not come
back again. Therefore, the hotels that are able to provide quality services to
ever demanding customers in a warm and efficient manner, are the ones likely to
obtain long term competitive advantage over their rivals. That is why
throughout the past years top hotels like Kempeniski, Sheraton, Hilton and the
famous four seasons have never faced the problem of fearing the never ending
customer needs, wants, demands, and never ending change of factor appeal.
Customer
retention is all about feelings and attitudes, it is something intangible that
could not be measured as any other tangible things. So, researchers invented
two ways to measure the feelings and the degree of satisfaction of customers
towards any service or intangible products given to them. Hence, there will be
some capabilities for hotels to improve their service quality and all the staff
working there for gaining more customers and for building a strong relationship
with their long term and short term consumers. Therefore, all these have led to
serious challenges on customer retention in hotels. While
current research is on issues of hotel customer loyalty mostly focused on
established branding elaborations, this current
study
intends to present a unique perspective by investigation the influence of
switching costs on customer retention in hotel operation in Abia state.
1.2 STATEMENT
OF PROBLEM
The
level of competition in hotel industry is such that it has become survival of
the fittest. Hotels are seen to be losing their customers to rival organizations
on a regular basis. Thus, retaining customers has seemingly become difficult.
Many anterior studies have investigated the relationship between service
quality and switching behaviour, customer service and switching behaviour, switching
cost and customer retention among others in various industries and fields
globally, but none of such studies has been done particularly in hotel industry
in Umuahia. Thus, there is no empirical evidence to show the direct
relationship between switching cost and customer retention in hotel operation
in Umuahia. These are the motivation for this present study which is aimed at
determining the extent switching cost can influence customer retention in hotel
operation in Abia state.
1.3 OBJECTIVES
OF THE STUDY
The
main objective of this study is to determine the influence of switching cost on
customer retention in hotel operation in Abia state. The specific objectives sought;
i.
To determine the
influence of pricing as an incident of switching cost on customer retention in
the study area;
ii.
To determine the
influence of inconvenience as an incident of switching cost on customer
retention in the study area;
iii.
To determine the
influence of core service failure as an incident of switching cost on customer
retention in the study area;
iv.
To determine the
influence of service encounter failure as an incident of switching cost on
customer retention in the study area;
v.
To determine the
influence of attraction by competition as an incident of switching cost on
customer retention in the study area.
1.4 RESEARCH
QUESTIONS
The following questions were formulated to guide the
study;
1. What
is the influence of pricing as an incident of switching cost on customer
retention in the study area?
2. What
is the influence of inconvenience as an incident of switching cost on customer
retention in the study area?
3. What
is the influence of core service failure as an incident of switching cost on
customer retention in the study area?
4. What
is the influence of service encounter failure as an incident of switching cost
on customer retention in the study area?
5.
What is the influence of
attraction by competition as an incident of switching cost on customer
retention in the study area?
1.5 HYPOTHESIS
OF THE STUDY
The following hypotheses were formulated to focus
the study:
Ho1:
There is no positive relationship between pricing as an incident of switching
cost and customer retention in the study area.
Ho2: There
is no positive relationship between inconvenience as an incident of switching
cost and customer’s retention in the study area.
Ho3: There
is no positive relationship between core service failure as an incident of switching
cost and customer retention in the study area.
Ho4:
There is no positive relationship between service encounter failure as an
incident of switching cost and customer retention in the study area.
Ho5:
There is no positive relationship between attraction by competition as an
incident of switching cost and customer’s retention in the study area.
1.6 SIGNIFICANCE OF THE STUDY
The
findings of this research will be of great importance to hotel owners, management
and hotel consumers/customers and future researchers/students.
Hotel
Owners: A well-designed workplace will lead to
more productive and sustainable employees, customer retention and also provide
maximum productivity with minimum cost to hotel owners.
Management:
The findings of the study will also guide policy and practice on customer
management and its practices across various educational and non-educational
institutions in the country. Service quality management frees up management
time from redressing problem and directs management time and effort to; quality
service, increased production, customer satisfaction etc
Hotel
consumers/customers: Customers can also
benefit when the organization put in effective customer retention practices by
ascertaining the need or value of what the customer want and what they paid
for, quality products and excellent services can help in customer retention
thereby creating rooms and avenue that leads to customer retention.
Students:
To the students, it will serve as a source of reference for future.
Future
researchers: The study will add to existing
empirical literature on switching cost and customer retention.
1.7 Scope of the study
The content scope of this study focuses on
the influence of switching cost on customer retention in hotel operation in
Umuahia, Abia state.
Geographically, the study
will be carried out in Umuahia, Abia state.
In
terms of unit scope, consumers of hotel goods and service will form the unit scope.
Login To Comment