Measuring Customer Relationship Value: The Role of Switching Cost

Posted: 12 Jun 2006

See all articles by Shane S. Dikolli

Shane S. Dikolli

Darden School of Business University of Virginia

William R. Kinney, Jr.

University of Texas at Austin - Department of Accounting

Karen Sedatole

Goizueta Business School

Abstract

Conceptually, customer relationship value depends on customer perceptions of the cost of switching to another supplier. Empirical tests of switching cost effects have been hampered because traditional performance measurement systems and customer satisfaction scores do not reflect switching cost perceptions within comparable market segments across firms. Using unique data systematically collected by market segment from online retail customers, we find that a) our switching cost proxy adds statistically significant explanatory power for both future buyer behaviors at the segment level and future financial performance at the firm level, and b) the positive relation between customer attitudes and future buyer behavior is increasing in switching cost. Our results show that externally generated non-financial data collected periodically across market segments can individually and jointly provide valuable information about segment and consolidated entity performance.

Keywords: Switching cost, non-financial performance measures, leading indicators

JEL Classification: M31, M40, M46, L81

Suggested Citation

Dikolli, Shane Sami and Kinney, William and Sedatole, Karen, Measuring Customer Relationship Value: The Role of Switching Cost. Contemporary Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=907391

Shane Sami Dikolli (Contact Author)

Darden School of Business University of Virginia ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
4342431018 (Phone)

William Kinney

University of Texas at Austin - Department of Accounting ( email )

Austin, TX 78712
United States
512-471-3632 (Phone)
512-471-3904 (Fax)

Karen Sedatole

Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

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