Microsoft Word 2007 ichrie conference Proceedings Final-Final 06-06-07. doc

 
Figure 1: 
Systems Illustration for a Theory of Consumer Switching 
External Environment
(Market & Economic) 

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2007 Annual International CHRIE Conference & Exposition 
276
 
 
 
 
 
(Adapted and Developed from: Ackoff, 1981; Mabogunje, 1970). 
Two areas of interest in consumer switching to examine are the control and adjustment subsystems. When a 
consumer eventually decides to leave Service Provider A for B, they have several control mechanisms to overcome 
or go through. These mechanisms, we shall refer to as the switching costs. Common examples of switching costs 
would be contracts that bind the service provider and consumer. High switching costs are a deterrent to consumer 
switching. On the other hand, low switching costs allow consumers to switch service providers easily. Many service 
providers have good terms of contract renewal of in terms of rebates, discounts even flexibility. Consumers 
therefore have to get over these other offers, which in real sense are a form of cost to a consumer wishing to switch 
Service Providers. If consumers find the switching costs too high, the consumers will readjust and return to Service 
Provider A (see arrow between (i) and (iii)). If the switching costs are low enough, or it the consumer can overcome 
these control mechanisms, they move on to another service provider: in this study referred to as Service Provider B. 
Several areas of research interest stem from this portion of consumer switching process. For example, it would be 
interesting to examine the kinds of switching control mechanisms or switching costs that are available in the 
hospitality industry, particularly the hotel and lodging sector. One question that might need examination is related to 
the “frequent guest points.” Can these rewards act as switching costs? What about the restaurant industry? What 
strategies can be employed by the restaurant sector to retain customers who otherwise would move to the next 
restaurant? We suggest that research in the future also examines the perception of service and service satisfaction by 
consumers who attempted to leave one service provider but do not overcome the control mechanisms/switching 
costs and had to return “home.” 
Potential 
Switcher 
from 
Provider A 
(i)
Control 
Mechanisms 
of Provider A 
(ii) 
Re-adjustment 
to Provider
A 
(iii)
Leaves 
Service 
Control 
Mechanisms 
Adjustment to 
and Stay with 
Provider B
“Nomadic” 
Consumers 
Return 
Switchers 
External 
Environment 
(Social) 
External Environment 
(Technology) 
External 
Environment 
(Political) 
Does NOT 
stay with 
Provider B