Investigating Customer Resistance

to Change in Transaction Relationship

with an Internet Vendor
Hee-Woong Kim
Yonsei University

Sumeet Gupta
Shri Shankaracarya Institute of Technology and Management

ABSTRACT

Many academics and practitioners have reiterated the importance of online customer retention to
ensure long-term profitability. Consequently, a number of studies have identified various means of
customer retention. These studies lay significant emphasis on creating customer loyalty. However,
retaining customers, especially in the context of Internet shopping, is very difficult because of the
low costs in comparison and switching. Most of the loyalty programs have also shown disappointing
results. This study suggests that by tapping on an individual customer’s inclination to resist changes
in a transaction relationship, an Internet vendor can achieve customer retention. Using status quo
bias theory, this study examines customer resistance to change (CRC) as a means of retaining
customers in a transaction relationship with the Internet vendor. The empirical study of an Internet
bookstore reveals that trust, relative attractiveness, and switching costs together influence CRC. The
empirical results also show that CRC and switching costs have positive effects on willingness to pay
more. Implications for theory and practice are discussed.  C 2012 Wiley Periodicals, Inc.

A number of academics (e.g., Cyer, 2008; Dowling & Un- necessary that online vendors look for other means to
cles, 1997; Mithas, Ramasubbu, Krishnan, & Fornell, retain customers.
2007; Reichheld & Schefter, 2000) and practitioners Online customer retention, which reflects an Inter-
have reiterated the importance of retaining customers. net vendor’s viewpoint, implies that customers main-
Reichheld and Schefter (2000) found that increasing tain transaction relationships with the vendor. If an
customer retention rates by 5% increases the profits by Internet vendor can tap on customers’ characteristics
25% to 95% as the cost of acquiring a customer is five that incline them toward resisting changes in transac-
times as high as the cost of retaining customer (Reich- tion relationship, the vendor could retain its customers.
held & Sasser, 1990). The importance of retaining cus- Oreg (2003) describes an individual’s dispositional in-
tomers increases particularly in e-commerce because clination to resist changes as resistance to change.
of the low costs in comparison and switching (Chen & Clearly, if an Internet vendor can identify factors which
Hitt, 2002). Many online vendors have therefore im- increase customer resistance to change (CRC), it can
plemented various loyalty strategies (i.e., value-added plan strategies to increase this resistance to change and
services and loyalty points) to retain their customers. thus retain its customers. A few studies (Dick & Basu,
However, Dowling and Uncles (1997) reveal that the 1994; Kyle, Graefe, Manning, & Bacon, 2004; Pritchard,
degree of customer loyalty online is very low. Only Havitz, & Howard, 1999; Taylor & Hunter, 2003) dis-
about 10% of buyers are 100% loyal to a particular cuss the relationship between loyalty and CRC. Few
brand (Dowling & Uncles, 1997). In online grocery, for empirical studies, however, discuss how to increase
instance, 75% of customers are relationship-averse bar- CRC by identifying its antecedents and how to use CRC
gain hunters (Reichheld & Schefter, 2000). It has been as a means of retaining customers. Furthermore, liter-
observed that over 50% of customers stop visiting a ature lacks theoretical foundations that explain CRC
website completely before their third anniversary of (Lapointe & Rivard, 2005).
using the website (Reichheld & Schefter, 2000). It is Therefore, the objective of this study is to examine
difficult for an Internet vendor to achieve loyalty from online customer retention in terms of CRC in trans-
its customers because it requires customers to develop action relationship with an Internet vendor. The con-
emotional attachment to the vendor. Therefore, it is sequence of achieving CRC in transaction relationship

Psychology & Marketing, Vol. 29(4): 257–269 (April 2012)

View this article online at wileyonlinelibrary.com/journal/mar

C 2012 Wiley Periodicals, Inc. DOI: 10.1002/mar.20519

257
with a vendor is that the vendor can enjoy price pre- to choose alternatives based on their rational assess-
mium (i.e., customer’s willingness to pay more) through ment. Three main factors contribute to status quo bias
customer’s attachment to the vendor (Ganesh, Arnold, in terms of rational decision making: comparison with
& Reynolds, 2000; Srinivasan, Anderson, & Ponnavolu, alternatives, transition costs, and uncertainty and risk
2002). Specifically, this study seeks to answer the fol- (Samuelson & Zeckhauser, 1988). First, rationality re-
lowing questions: (1) what are the antecedents of CRC quires customers to compare alternatives across Inter-
in transaction relationship with an online vendor? and net vendors (i.e., comparison with alternatives). Online
(2) how CRC can influence an individual customer’s customers can easily compare alternatives because of
willingness to pay more? This study uses status quo low search costs. If there were no better alternative
bias theory (Samuelson & Zeckhauser, 1988) to con- than the current vendor, the comparison results would
ceptualize CRC in online context. This study intends require rational customers to maintain status quo and
to contribute to the electronic commerce literature by thus maintain the transaction relationship with the
advancing the theoretical understanding of CRC for on- current vendor. Second, transition from the status quo
line customer retention. It also aims to offer practical to an alternative may require additional monetary and
suggestions to Internet vendors for increasing customer nonmonetary costs. Such transition costs would result
retention. in a customer preferring to stay with the status quo op-
The paper is organized as follows. In the next sec- tion rather than making a switch, leading to status quo
tion, literature review on CRC and status quo bias the- bias. Third, uncertainty costs associated with the new
ory is discussed. This is followed by research model and alternative can also result in status quo bias. People
hypothesis. Then research methodology and data anal- experience negative psychological reactions to uncer-
ysis and results are presented. In the last two sections, tainty associated with the new situation, which biases
findings and limitations of this study as well as the them toward the status quo.
implications of the findings to theory and practice are The cognitive misperception of loss aversion also
discussed. explains status quo bias (Samuelson & Zeckhauser,
1988). Loss aversion is a psychological principle that
has been observed in human decision making (Kah-
neman, Knetsch, & Thaler, 1991), according to which
CONCEPTUAL AND THEORETICAL losses loom larger than gains. In other words, individ-
BACKGROUND uals have strong preference for avoiding losses than
acquiring gains.
CRC and Status Quo Bias Theory The next category of status quo bias is explained
on the basis of psychological commitment. Three main
Resistance to change is defined as an individual’s ten- factors contribute to psychological commitment: sunk
dency to resist or avoid making changes, to devalue costs, regret avoidance, and efforts to feel in control
change generally, and to be averse to change across (Samuelson & Zeckhauser, 1988). First, sunk costs re-
diverse contexts and types of change (Oreg, 2003). Re- fer to previous commitments, which cause reluctance
sistance to change has also been conceptualized as any to switch to a new alternative. People tend to cut their
conduct that seeks to keep the status quo, or the per- losses by maintaining their status quo choices if there
sistence to avoid change (De Val & Fuentes, 2003). Fol- are sunk costs and investments in the previous decision
lowing Oreg (2003), this study defines CRC as an indi- or in a relationship with the current vendor. Second,
vidual customer’s tendency to resist or avoid switching people feel stronger regret for bad outcomes resulting
from current vendor to another vendor for transactions. from new action taken than for similar bad outcomes re-
This study adopts status quo bias theory in explain- sulting from inaction (Samuelson & Zeckhauser, 1988).
ing CRC. As De Val and Fuentes (2003) conceptualize People thus tend to avoid regrettable actions and prefer
resistance to change in terms of status quo, status quo the status quo when they are satisfied with it. Third,
bias theory is suitable as the theoretical foundation for efforts to feel in control stem from individuals’ desire
explaining CRC. Status quo bias theory explains the to direct or determine their own situations (Samuelson
causes of people’s preference for the status quo (i.e., & Zeckhauser, 1988). This desire can result in status
maintaining one’s current situation or previous deci- quo bias because individuals do not want to lose control
sion) (Samuelson & Zeckhauser, 1988). In a transaction by switching to another uncertain transaction relation-
relationship with a vendor, customers also may have a ship with a new vendor.
status quo alternative, i.e., maintaining the transac- This study identifies four factors corresponding to
tion relationship with the current vendor. Status quo the causes of status quo bias (see Table 1) as the
bias theory can thus form the theoretical foundation antecedents of CRC: relative attractiveness, switching
for a model of CRC in transaction relationships with a costs, satisfaction, and trust. This study will discuss
vendor. how the factors correspond to the causes of status quo
Samuelson and Zeckhauser (1988) explain status bias and how they lead to CRC in transaction relation-
quo bias in terms of rational decision making, cognitive ship with an Internet vendor through either dedication-
misperceptions, and psychological commitment. In ra- based relationship development or constraint-based re-
tional decision making, rationality requires customers lationship development in the following section.

258 INVESTIGATING ONLINE CUSTOMER’S RESISTANCE TO CHANGE

Psychology & Marketing DOI: 10.1002/mar
Table 1. Causes of Status Quo Bias.
Cause of Status Quo Bias Corresponding Factor

Rational decision making Comparison with alternatives Relative attractiveness

Transition costs Switching costs (transition costs)
Uncertainty and risk Switching costs (uncertainty costs)
Cognitive misperception Loss aversion Switching costs (loss costs)
Psychological commitment Sunk costs Switching costs (sunk costs)
Regret avoidance Satisfaction
Control Trust

CRC and Other Similar Constructs Havitz, & Howard, 1999). It is also known that loy-
alty leads to resistance to change (i.e., resistance to
There are several constructs (e.g., commitment and loy- counter persuasion) (Dick & Basu, 1994). While loyal
alty) that are similar to CRC. Therefore, it is essen- customers are naturally resistant to change; it is also
tial to distinguish CRC from these similar constructs. possible that they will be resistant to change without
The differences among them can be explained by cus- being loyal (Choi, Kim, Kim, & Kim, 2006).
tomers’ motivation for maintaining relationship with
an Internet vendor. Bendapudi and Berry (1997) ex-
plain that customers maintain relationship with a ser-
Research Model and Hypothesis
vice provider either because of constraint (i.e., “have to”
stay in the relationship) or because of dedication (i.e., Based on the conceptual and theoretical background
“want to” stay in the relationship). While customers and the four identified factors corresponding to the
in constraint-based relationships preserve the relation- causes of status quo bias, the research model is pro-
ships because of exit costs, customers in dedication- posed (Figure 1). Satisfaction, trust, and relative attrac-
based relationships desire continuance. Internet ven- tiveness influence CRC through dedication-based rela-
dors could foster CRC by putting efforts for dedication- tionship development. Switching costs influence CRC
based relationship development and constraint-based through constraint-based relationship development. As
relationship development. a consequence of online customer retention (i.e., CRC),
Commitment, which is defined as an enduring de- this study examines individual customer’s willingness
sire to maintain a relationship (Morgan & Hunt, 1994), to pay more and examines the effect of CRC on their
would represent relationship maintenance resulting willingness to pay more.
from dedication-based relationship development. How-
ever, CRC may result either from dedication-based or
from constraint-based relationship. Although commit- Antecedents of CRC
ted customers should be resistant to change in a trans-
action relationship with the focal vendor, customers Following Spreng, MacKenzie, and Olshavsky (1996),
with CRC need not necessarily be committed customers customer satisfaction is defined as an affective state
(i.e., maintaining dedication-based relationships with resulting from emotional reaction to transaction expe-
the vendor). Some customers could have CRC in the rience with an Internet vendor. Customer satisfaction
transaction relationship because of several constraints. is a well-known antecedent of customer loyalty (Cyer,
Previous studies (e.g., Anderson & Srinivasan, 2003; 2008; Geyskens et al., 1999). Customers are dedicated
Dick & Basu, 1994; Srinivasan, Anderson, & Pon- to a relationship with the vendor when they are sat-
navolu, 2002) consider customer loyalty as having both isfied through dedication-based relationship develop-
a behavioral aspect (e.g., “repeat purchase”) and a ment. According to the regret avoidance perspective of
psychological aspect (e.g., “favorable attitude” and “a status quo bias theory, a customer would feel stronger
deeply held commitment”) because loyalty with only a regret for unexpected outcomes resulting from switch-
behavioral aspect could be spurious. This is the reason ing than for similar unexpected outcomes resulting
why many studies and firms have considered the devel- from staying with the current vendor (Samuelson &
opment of customer loyalty as a means for dedication- Zeckhauser, 1988). According to Lazarus (1991), de-
based relationship development to achieve customer re- pending on the feelings generated, behavioral inten-
tention. Similar to commitment, loyalty results from tions emerge to activate plans for avoiding undesirable
dedication-based relationship development. CRC, on outcomes or increasing/maintaining positive outcomes
the other hand, results from either dedication-based (i.e., satisfaction) (Bagozzi, 1992). Thus, an individual
or constraint-based relationship development. In addi- who perceives satisfaction with the transaction rela-
tion, CRC does not guarantee word-of-mouth promo- tionship with the current Internet vendor would want
tion and willingness to pay more, whereas loyalty leads to maintain transaction relationship with the current
to these beneficial consequences (Dick & Basu, 1994; vendor for avoiding regrettable outcomes.
Srinivasan, Anderson, & Ponnavolu, 2002). It is known
that resistance to change increases loyalty (Pritchard, H1: Satisfaction has a positive effect on CRC.

KIM AND GUPTA 259

Psychology & Marketing DOI: 10.1002/mar
 Figure 1. Research model.

From the perspective of dedication-based relation- to control the exchange environment. Pavlou and Fy-
ship development, an Internet vendor can also consider genson (2006) further explained that trust takes a role
developing its trustworthiness (Cyer, 2008; Li & Lee, of control belief. Since trust belief affects a customer’s
1994). Customers develop trust in an Internet vendor perception of the ability to control, a customer would
based on the perception of trustworthiness of the ven- desire to maintain a transaction relationship with the
dor (McKnight, Choudhury, & Kacmar, 2002). Because current vendor if (s)he trusts in the vendor. A number
Internet shopping is characterized by uncertainty and of studies (e.g., Chen & Dibb, 2010; Oh et al., 2009)
risks, trust in an Internet vendor helps customers pre- report that trust significantly influences customer at-
fer conducting transaction with the same vendor. Trust titude toward online purchases. Resistance to change
as a social phenomenon has been studied in various can be considered as an attitude that signifies the re-
disciplines. Trust has been conceptualized and oper- sistance that a customer has toward switching from the
ationalized as a set of beliefs about the competence, store. Therefore, trust positively influences customer’s
benevolence, and integrity of Internet vendors (Dinev & resistance to change.
Hart, 2006; Gefen, 2004; Kim, Xu, & Koh, 2004; Pavlou
& Fygenson, 2006). This study conceptualizes trust as H2: Trust has a positive effect on CRC.
a set of beliefs about the trustworthiness of an Internet
vendor. Again from the perspective of dedication-based rela-
From the psychological commitment perspective of tionship development, an Internet vendor can also con-
status quo bias, the desire to feel in control results sider enhancing its attractiveness compared to other
in status quo bias (Samuelson & Zeckhauser, 1988). competitors (i.e., relative attractiveness). This study de-
Under conditions of high uncertainty and risk, online fines relative attractiveness as the customer perception
customers may place more importance on gaining con- of the attractiveness of shopping with the current on-
trol in the transaction, allowing prospects of control line vendor in comparison with other online vendors.
rather than of gains (i.e., monetary saving) to determine Similarly, alternative attractiveness is defined as cus-
their behavior (Klemperer, 1995). Ajzen (2002) also ex- tomer perceptions regarding the extent to which viable
plained that the behavioral intentions of people are af- alternatives are available in the market (Jones, Moth-
fected by their perceived behavioral control. Perceived ersbaugh, & Beatty, 2000). While relative attractive-
behavioral control refers to beliefs about the presence of ness takes the current vendor as the reference point,
internal control (e.g., personal knowledge) or external alternative attractiveness takes other vendors as the
control factors (e.g., cooperation of others) that allow reference point. When Internet transactions with a ven-
the behavior (Ajzen, 2002). Koller (1988) regarded trust dor are relatively more attractive than other vendors,
belief as a perception of control over the exchange envi- customers may want to stay in the relationship with
ronment in which transactions occur. Gefen (2004) also the vendor through dedication-based relationship de-
posited that trust perception caters to the human desire velopment (Sung and Choi, 2010). From the rational

260 INVESTIGATING ONLINE CUSTOMER’S RESISTANCE TO CHANGE

Psychology & Marketing DOI: 10.1002/mar
decision-making perspective of status quo bias, rela- According to the social exchange theory (Blau, 1964),
tive attractiveness represents the comparison of cur- it may be argued that trust is built when the trustee
rent vendor with other alternative vendors. Customers behaves in a manner that is acceptable and is in accor-
would want to maintain transaction relationship with dance with the trustor’s expectations. Customers gen-
the current vendor if there were no better alternative erally expect satisfaction from their transactions with
than the current vendor (Samuelson & Zeckhauser, a vendor, so following the social exchange theory, if
1988). the expectation is met, satisfaction can lead to trust.
Previous studies (Kim, Xu, & Koh, 2004; Lee, Kang, &
H3: Relative attractiveness has a positive effect McKnight, 2007) have supported the relationship be-
on CRC. tween trust and satisfaction. Trust brings comfort to
the minds of customers in transactions with an In-
ternet vendor by reducing risk and the perception of
From the perspective of constraint-based relation-
uncertainty (Cho, 2006). The psychological costs (e.g.,
ship development, Internet vendors can consider de-
emotional discomfort) of switching to another vendor
veloping customer switching costs because these costs
thus increases as customers perceive trust in the cur-
would inhibit customers from switching away to other
rent vendor. In addition, trust development requires
vendors (Tsai, Huang, Jaw, & Chen, 2006). Wang (2010)
exchanges with an Internet vendor and the relevant in-
argue that under high switching costs, perceived value
vestment of time and effort by customers. The relevant
and corporate image have less strong influence on cus-
investment of time and effort may increase switching
tomer loyalty. Following Chen and Hitt (2002), this
costs, especially in terms of lost benefit costs and sunk
study defines switching costs as a customer’s subjec-
costs (Jones, Mothersbaugh, & Beatty, 2000). There-
tive perception of disutility associated with the pro-
fore, trust in the current vendor would influence the
cess of switching from one vendor to another. Switch-
perception of costs in switching from the current ven-
ing costs consist of several subtypes of switching costs
dor. Furthermore, customers perceive relative attrac-
such as psychological costs, procedural costs, and loss
tiveness in Internet transactions with the current ven-
costs (Burnham, Frels, & Mahajan, 2003; Jones, Moth-
dor when they perceive that the current vendor pro-
ersbaugh, & Beatty, 2002). Psychological costs mean
vides greater benefits as compared to alternative ven-
those costs involving psychological or emotional discom-
dors. If customers switch from the current vendor to
fort due to the switching (Burnham, Frels, & Mahajan,
alternative vendors, they would lose the benefits they
2003). Procedural costs involve the expenditure of time,
have enjoyed in Internet transactions with the current
effort, and economic resources incurred in switching
vendor. Therefore, relative attractiveness would influ-
(Burnham, Frels, & Mahajan, 2003). Loss costs involve
ence switching costs in terms of loss costs.
lost benefit costs and losses due to investments already
made in the current situation (Jones, Mothersbaugh, &
H5: Satisfaction has a positive effect on trust.
Beatty, 2002).
From the rational decision-making perspective of H6: Trust has a positive effect on switching costs.
status quo bias, transition costs correspond to the pro-
cedural switching costs (Burnham, Frels, & Mahajan, H7: Relative attractiveness has a positive effect
2003) and uncertainty costs correspond to the psycho- on switching costs.
logical switching costs (Burnham, Frels, & Mahajan,
2003). From the psychological commitment perspec-
tive of status quo bias, sunk costs correspond to the Consequence of CRC
loss costs (i.e., sunk costs) (Jones, Mothersbaugh, & Relationship marketing literature (Bendapudi & Berry,
Beatty, 2002). From the cognitive misperception per- 1997) explains price premium as a compensation for the
spective, loss aversion corresponds to the loss costs investment a vendor incurs in developing and main-
(i.e., lost benefit costs) (Jones, Mothersbaugh, & Beatty, taining relationship with the customers. Such invest-
2002). Switching costs thus create constraints that pre- ments may include the costs of prospecting, identify-
vent or discourage customers from switching vendors ing customer needs, modifying offerings to meet these
and thus increasing customers lock-in with the ven- needs, and monitoring performance. Customers who
dor. Bendapudi and Berry (1997) posited that switch- maintain (i.e., dedication based or constraint based) re-
ing costs motivate customers to maintain relationships lationships with the vendor are willing to pay more
(i.e., constraint-based relationships) with the current to the vendor as a pay off for the vendor’s investment
vendor. Yang and Peterson (2004) found that customer in maintaining the relationship (Bendapudi & Berry,
switching cost increases the resistance to change when 1997). CRC results from either dedication-based rela-
the satisfaction and perceived value with the online tionship development or constraint-based relationship
vendor are above average. development. Customers are willing to pay price pre-
mium when they focus on the service provided by a long-
H4: Switching costs have a positive effect on associated vendor rather than just the economics of
CRC. transaction (Smith & Brynjolfsson, 2001). Thus, those

KIM AND GUPTA 261

Psychology & Marketing DOI: 10.1002/mar
customers who are resistant to change in transaction from Spreng, MacKenzie, and Olshavsky (1996).
relationship with a current vendor are willing to pay Finally, items for trust were adopted items from Kim,
more to the vendor. Xu, and Koh (2004). All items used a 7-point Likert
scale (1 = strongly disagree, 7 = strongly agree), except
H8: CRC has a positive effect on the willingness willingness to pay more which used 7-point rating scale
to pay more. (1 = Not at all likely, 7 = Very likely).
Two marketing scholars and three online customers
Apart from the indirect effects of the three constructs reviewed the instruments to check for their face valid-
for dedication-based relationship development on the ity. Focus-group interviews with 16 people were con-
willingness to pay more through CRC, direct effects ducted to discuss and obtain feedback about the ques-
are also expected. Lopes and Galleta (2006) found that tionnaire with regards to the clarity of the questions,
those satisfied customers who perceive benefits in In- the length of the instruments, the format of the scales,
ternet transactions with a vendor are willing to pay and the content. The final list of items is presented in
more to the vendor. Customers are also willing to pay a Appendix.
premium to transact with a trustworthy Internet ven-
dor to prevent moral hazard in case the seller has the
opportunity to act opportunistically (Pavlou & Dimoka, Data Collection
2006). Customers are also willing to pay price premium
to ensure that relative benefits are actually provided. This study was conducted on an Internet bookstore be-
Price premium acts as a risk-sharing device to allay cause books belong to the category of low-touch prod-
opportunism that might increase disappointment cost ucts (Lynch, Kent, & Srinivasan, 2001) and vary less
(Singh & Sirdeshmukh, 2000). Apart from the indi- in quality as compared to other products. The online
rect effect of switching costs for constraint-based re- bookstore chosen for this study receives 120 000 vis-
lationship development on the willingness to pay more its daily and sells about 15 000 books daily. It is not
through CRC, the direct effect is also expected. Previ- a well-known online bookstore like Amazon.com, but a
ous studies (Lieberman & Montgomery, 1988) support relatively small vendor. Based on the sponsorship from
that vendor may be able to earn higher price if switch- the marketing manager of the bookstore, data were col-
ing costs are sufficiently high. lected for 4 days through the bookstore’s website, which
has a banner on its front page to publicize the survey
H9: Satisfaction has a positive effect on the will- and from that customers can click to go to the survey
ingness to pay more. website.
A total of 367 valid responses were obtained from the
H10: Trust has a positive effect on the willingness Internet survey. Sixty-three percent of the respondents
to pay more. were female. The majority of respondents are 20 to 39
years of age (76%). Most of them are students (37.3%),
H11: Relative attractiveness has a positive effect working professionals (32.8%), or housewives (16.3%).
on the willingness to pay more. The respondents are mostly experienced in using the
H12: Switching costs have a positive effect on the Internet with 95.6% of them having 4 or more years of
experience. The descriptive statistics of Respondent’s
willingness to pay more.
data are shown in Table 2.
Nonresponse bias was assessed by comparing the
sample of customers with the database of registered
RESEARCH METHODOLOGY
customers of the Internet bookstore. t-tests show that
the sample of customers and the population of regis-
Instrument Development tered customers did not differ significantly in terms
of age and purchase experience with the bookstore.
This study has adopted online survey research method- Mann–Whitney test also did not reveal any significant
ology using a questionnaire. The survey instrument
was developed by adopting existing validated scales
wherever possible. Items for relative attractiveness Table 2. Demographics of Respondents.
were adapted from Ping (1993) to the context of this
study. Similar to most previous studies, switching costs Demographic Variables Data
were conceptualized as a single-dimensional construct, Age (years) Mean (SD) 30.1 (18.0)
with scales adapted from Jones, Mothersbaugh, and Gender Female 231 (62.9%)
Beatty (2000) to reflect transition costs (SWC1), uncer- Male 136 (37.1%)
tainty costs (SWC2), sunk costs (SWC2), and loss costs Internet usage experience Mean (SD) 7.8 (2.6)
(SWC3). Items for CRC were modified from Pritchard, (years)
Havitz, and Howard (1999). Items for willingness to Purchase experience with Mean (SD) 6.4 (5.3)
pay more were adopted from Srinivasan, Anderson, and the bookstore (times)
Number of responses 367
Ponnavolu (2002). Items for satisfaction were adapted

262 INVESTIGATING ONLINE CUSTOMER’S RESISTANCE TO CHANGE

Psychology & Marketing DOI: 10.1002/mar
Table 3. Convergent Validity Testing. Table 4. Correlations between Latent Constructs.
Item Standard Loading t-Value AVE CR α Mean SD SWC CRC WPM TRS SAT REL

REL1 0.89 21.34 0.74 0.89 0.89 SWC 4.27 1.45 0.81
REL2 0.90 21.43 CRC 5.08 1.16 0.50 0.81
REL3 0.79 17.70 WPM 3.08 1.47 0.43 0.41 0.89
SWC1 0.79 17.46 0.66 0.88 0.88 TRS 5.60 1.05 0.10 0.53 0.12 0.86
SWC2 0.79 17.39 SAT 5.58 1.17 0.20 0.45 0.22 0.63 0.93
SWC3 0.86 20.00 REL 5.51 1.05 0.43 0.62 0.33 0.32 0.50 0.86
SWC4 0.82 18.39 Note: The diagonal line shows the square root of AVE for each con-
TRS1 0.83 19.10 0.74 0.89 0.89 struct.
TRS2 0.85 19.71
TRS3 0.91 21.83
SAT1 0.92 22.99 0.86 0.94 0.94
SAT2 0.95 24.13 (Figure 2). The testing results suggest that the struc-
SAT3 0.91 22.59 tural model adequately fits the data in comparison with
CRC1 0.84 19.30 0.66 0.85 0.85 the criteria suggested by Gefen, Straub, and Boudreau
CRC2 0.84 19.20 (2000). The normed χ2 is 2.28, which is below the de-
CRC3 0.76 16.99 sired cut-off value of 3.0. Root mean square of approx-
WPM1 0.83 19.26 0.79 0.92 0.91 imation (RMSEA) is 0.059, indicating a good fit since
WPM2 0.95 23.79
it is lower than 0.080, while Standardized Root Mean-
WPM3 0.90 21.58
square Residual (RMR) is 0.066, which is lower than
the cut off value of 0.08. The other statistics show that
structural model adequately fits the data: GFI = 0.92,
difference in gender ratio between the sample of cus- AGFI = 0.89, CFI = 0.98, and NFI = 0.97.
tomers and the population of registered customers. The results indicate that trust (H2), switching costs
(H3), and relative attractiveness (H4) have significant
positive effects on CRC, explaining 58% of the variance.
DATA ANALYSIS AND RESULTS CRC (H8) and switching costs (H12) have significant
positive effects on willingness to pay more, explaining
25% of the variance. Satisfaction (H5) has a signifi-
Instrument Validation cant effect on trust. Relative attractiveness (H7) has
a significant effect on switching costs. However, five
The data analysis was carried out in accordance with other hypotheses (H1, H6, H9, H10, and H11) were not
a two-stage methodology (Anderson & Gerbing, 1988) supported.
using LISREL. First, the covergent and discriminant
validity was assessed to validate the survey instru-
ment using confirmatory factor analysis (CFA). Con- DISCUSSION AND IMPLICATIONS
vergent validity can be established by examining the
standardized path loading, composite reliability (CR),
Cronbach’s α, and the average variance extracted (AVE) Discussion of Findings
(Gefen, Straub, & Boudreau, 2000). The standardized
path loadings were all significant (t-value > 1.96) and The results show several interesting findings. First,
greater than 0.7. The CR and the Cronbach’s α for all from the perspective of dedication-based relationship
constructs exceeded 0.7. The AVE for each construct development, trust and relative attractiveness (i.e.,
was greater than 0.5. The convergent validity for the causes of status quo bias in terms of control and compar-
constructs was supported (Table 3). ison with alternative, respectively) have significant ef-
Next, the discriminant validity of the measurement fects on CRC. Morgan and Hunt (1994) found a positive
model was assessed by comparing AVE for each con- relationship between trust and dedication-based rela-
struct with the squared correlations between that con- tionship maintenance as confirmed in this study. How-
struct and other constructs (Fornell & Larcker, 1981). ever, there have been conflicting findings in previous re-
As shown in Table 4, the square root of AVE for each search. Harris and Goode (2004) found that trust leads
construct (diagonal term) exceeded the correlations be- to dedication-based relationship maintenance such as
tween the construct and other constructs (off-diagonal loyalty and commitment. In contrast, Luarn and Lin
terms). Hence, discriminant validity of the instrument (2003) found that trust has no significant effect on com-
was established. mitment in the context of online traveling and video-on-
demand e-services. However, the results of this study
reveal that trust in an Internet vendor increases cus-
Hypotheses Testing tomers’ desire to maintain transaction relationships
with the vendor. Regarding the significant positive ef-
After establishing the validity of the measurement fect of relative attractiveness on CRC, previous stud-
model, structural model was examined using LISREL ies (Anderson & Narus, 1990; Kelley & Thibaut, 1978;

KIM AND GUPTA 263

Psychology & Marketing DOI: 10.1002/mar
Figure 2. Model testing results.
Normed χ2 = 2.28, RMSEA = 0.059, GFI = 0.92, AGFI = 0.89, CFI = 0.98, NFI = 0.97 (∗∗∗ p < 0.001, n.s. = not significant at the
0.05 level)

Sung & Choi, 2010) explain that customers may be de- dedication-based relationship or constraint-based rela-
pendent on the vendor and stay with the vendor because tionship, has a significant impact on willingness to pay
the relational outcomes, though not necessarily satis- more.
fying, are still better than alternatives. Thus, relative Fourth, among the antecedents of CRC, switching
attractiveness of Internet transaction with the vendor costs have a direct significant positive effect on will-
increases customers’ desire to maintain relationships ingness to pay more. Consistent with the finding in
with the vendor. this study, previous study (Leiberman & Montgomery,
Second, from the perspective of constraint-based re- 1988) have found that vendors are able to charge price
lationship development, switching costs (i.e., causes of premium if the switching cost is high. However, three
status quo bias in terms of transition costs, uncertainty other antecedents (trust, relative attractiveness, and
and risk, loss aversion, and sunk costs) have a sig- satisfaction) do not have significant direct effects on
nificant positive effect on CRC. Bendapudi and Berry willingness to pay more. This study conducted a me-
(1997) proposed switching costs from the perspective of diation testing (Baron & Kenney, 1986) as a post hoc
constraint-based relationship development. A number analysis to find the potential reason of this nonsignif-
of studies report that switching costs prevent customers icance. Table 5 shows that CRC acts as a full media-
from switching vendors, even if behavioral motivation tor between the three antecedents and the willingness
to switch exists (Singh & Sirdeshmukh, 2000). How- to pay more (as the relationships between TRS, REL,
ever, switching costs in the electronic marketplace are SAT, and WPM do not remain significant when CRC is
generally known to be low, as a competing firm is “just introduced).
a click away” (Friedman, 1999). This study shows that The testing results in Figure 2 show that satisfac-
switching costs may not necessarily be so low that they tion (i.e., cause of status quo bias in terms of regret
fail to deter customers from switching to another ven- avoidance) does not have a significant effect on CRC.
dor even in an Internet shopping context. Another mediation test shows the effect of satisfaction
Third, as a consequence of online customer reten- on CRC is fully mediated by trust. Trust does not have
tion, this study shows CRC has a positive significant a significant effect on switching costs. This could be
effect on willingness to pay more. This finding is simi- due to the fact that trust may reduce some components
lar to previous research (Srinivasan, Anderson, & Pon- of switching costs (e.g., loss costs such as benefit loss)
navolu, 2002) on relationship marketing, showing the of switching to another vendor but not other compo-
positive effect of customer loyalty on willingness to pay nents (e.g., transition costs, sunk costs, and uncertainty
more. Customer loyalty represents rather dedication- costs). Hence, an overall effect may not be seen. To test
based relationship of customer with a vendor. However, this argument, a post hoc analysis was conducted by
CRC results from either dedication-based relationship using only SWC4, which represents loss costs. The re-
development or constraint-based relationship develop- sults show that trust indeed has a significant effect on
ment. This study thus shows that CRC, regardless of this cost.

264 INVESTIGATING ONLINE CUSTOMER’S RESISTANCE TO CHANGE

Psychology & Marketing DOI: 10.1002/mar
Table 5. Mediation Testing Results.
Trust Relative Attractiveness Satisfaction
Independent Dependent Standard Independent Dependent Standard Independent Dependent Standard
Variable Variable Beta Variable Variable Beta Variable Variable Beta
TRS WPM 0.17∗∗∗ REL WPM 0.29∗∗∗ SAT WPM 0.19∗∗∗
TRS CRC 0.52∗∗∗ REL CRC 0.57∗∗∗ SAT CRC 0.36∗∗∗
TRS –0.05n.s. REL 0.09n.s. SAT 0.05n.s.
WPM WPM WPM
CRC 0.43∗∗∗ CRC 0.34∗∗∗ CRC 0.38∗∗∗
n.s. = not significant, ∗∗∗ p < 0.001

Limitations and Future Research dor, whereas pervious studies have approached it in
Directions through customer loyalty. As there are two types of re-
lationship between a vendor and returning customers
The results of this study should be interpreted in (Bendapudi & Berry, 1997), loyalty alone cannot ex-
the context of its limitations. First, the study is lim- plain those returning customers because it mainly fo-
ited to the context of a specific Internet bookstore. cuses on dedication-based relationship between the
It would be useful to replicate this study across customers and the vendor. Most of the previous re-
other Internet vendors to establish the robustness of search on loyalty identifies the antecedents mainly
the model results. Second, this study conceptualizes from dedication-based relationship development, such
switching costs as a single dimensional construct. How- as satisfaction (Cyer, 2008; Oliver, 1999), trust (Cyer,
ever, as discussed earlier, switching costs consist of 2008; Gefen, 2003), and Web site design (Mithas et al.,
different subtypes such as uncertainty costs, transi- 2007). They have neglected constraint-based relation-
tion costs, loss costs, and sunk costs. Future studies ship development and its effect on customer retention.
could conceptualize switching costs as a multidimen- Customers could be resistant to change in transaction
sional construct to examine in-depth effects of multi- relationship because of either dedication-based rela-
ple dimensions of switching costs on CRC. Third, this tionship or constraint-based relationship. Customers
study discussed how the identified antecedents of CRC would thus transact again with the same Internet ven-
can be used for dedication-based relationship develop- dor if they are resistant to changing their transaction
ment and constraint-based relationship development. relationships with the vendor, despite not having loy-
However, this study has not considered relevant rela- alty to the vendor.
tionship development construct. Future studies could Second, this study adds to literature by examining
develop and examine corresponding constructs and test theory-driven CRC for retaining customers in the con-
their effects on CRC. Fourth, future studies could con- text of electronic commerce. A few studies (Dick & Basu,
sider testing the relationship between CRC and cus- 1994; Kyle et al., 2004; Pritchard, Havitz, & Howard,
tomer loyalty within a nomological network. Fifth, the 1999; Taylor & Hunter, 2003) discuss the relationship
model was tested in an online context because of the between loyalty and CRC. However, little studies with
high failure rate of online loyalty programs and low empirical testing discuss how to increase CRC by iden-
costs in comparison and switching online. The results tifying its antecedents and how to use CRC as a means
of this study should be applied in offline context with for customer retention. Furthermore, literature lacks
caution. It is possible to conduct a study in the offline theoretical foundations that explain CRC (Lapointe &
context by modifying the model of this study to include Rivard, 2005). Based on status quo bias theory (Samuel-
other factors (e.g., convenience) in the model. Lastly, son & Zeckhauser, 1988), this study has identified three
because respondents were self-selected to participate antecedents of CRC in transaction relationship with an
in the survey, it seems that more committed consumers Internet vendor: relative attractiveness from compari-
would have participated in the survey. The mean value son with alternatives in rational decision making, trust
of transaction experience with the vendor is 6.4 (stan- from control in psychological commitment, and switch-
dard deviation [SD] = 5.3). The mean value of CRC ing costs from cost-related causes of status quo bias over
is 5.08 (SD = 1.16). However, this level of CRC and rational decision making, cognitive misperception, and
transaction experience would not affect the hypotheses psychological commitment. The first two antecedents
testing results significantly. can be used for dedication-based relationship develop-
ment while the last one can be used for constraint-based
relationship development.
Theoretical Implications This study further shows CRC and switching costs
This study offers several implications for theory and have positive significant effects on customer’s willing-
practice. From the theoretical perspective, first, this ness to pay more in the transaction relationship with
study introduces a new construct ‘CRC’ in electronic the vendor. This is additional contribution to the elec-
commerce research. This study approaches the is- tronic commerce literature as the current literature has
sue of online customer retention by introducing CRC only associated price premium with loyalty (Srinivasan,
in a transaction relationship with an Internet ven- Anderson, & Ponnavolu, 2002), reputation (Landon &

KIM AND GUPTA 265

Psychology & Marketing DOI: 10.1002/mar
Smith, 1998), trust (Ba & Pavlou, 2002), delivery speed cedural costs involve the expenditure of time, effort,
(Li & Lee, 1994), and convenience (Nault & Dexter, and economic resources incurred in switching (Burn-
1995). This study shows that switching costs could gen- ham, Frels, & Mahajan, 2003). Loss costs involve losses
erate price premium through the significant effect on due to investments already made in the status quo
willingness to pay more. The mediation effect of CRC for (Jones, Mothersbaugh, & Beatty, 2002). While procedu-
trust, satisfaction, and relative attractiveness to will- ral switching costs (e.g., setup costs and learning costs)
ingness to pay more also emphasizes the importance of may be negligible in a customer’s decision to switch
CRC. This is, thus, one of the first known theory-driven from one vendor to another, other types of switching
studies of CRC in e-commerce, examining the formation costs (e.g., loss costs) should not be neglected in elec-
of CRC and its consequence. tronic commerce. Hence, it is definitely worthwhile for
Another key research implication from this study an Internet vendor to invest in efforts that can increase
is in terms of status quo bias theory. Status quo bias the switching costs of its customers. Examples of such
theory has been applied to explain human behavior efforts include enhancing the trustworthiness of the
and decision making in general, as well as to illumi- vendor (for increasing psychological costs), providing
nate the broad context of customer choice. As an ex- customized services based on the analysis of individual
tension of previous research, this study has demon- requirements (for increasing loss costs), and enabling
strated how status quo bias theory can be applied to ex- customers to become familiar with Internet transac-
plain customer retention at the level of the transaction tions at its Web site (for increasing loss costs).
relationship with an Internet vendor. This study has Providing loyalty points also increase customer
also identified four directly and indirectly significant switching costs as the customer keeps coming back to
antecedents of CRC based on status quo bias theory. the site for using the accumulated loyalty points as a
This study extends the application of status quo bias discount or reduction in price of another product from
theory from economics and decision-making areas into the Web site. These points bind the customer to the site
the electronic commerce domain. and keep them coming back to the site. Vendors can
also increase switching costs by quoting two prices (ac-
Practical Implications tual price and discounted price) for each product. These
prices increase the reference prices of the customer
From the practice perspective, this study shows that making him perceive that they are receiving products
an Internet vendor can retain customers by instilling at a lower value. Another way of increasing switching
in them the resistance to change vendors in their on- costs is to make the Web site more attractive with easy
line transactions. Regarding online customer retention, to pay and check out options. Vendors can send SMS
first, this study also affirms earlier suggestions that to their customers providing list of new arrivals at the
trust leads to dedication-based relationships (Gefen, store (depending upon customer’s likes), thus being first
2003; Harris & Goode, 2004). Hence, it is definitely mover to attract the customer. The vendors can open a
worthwhile for Internet vendors to invest in efforts that virtual community at their store front whereby they al-
can enhance their trustworthiness as perceived by cus- low customers to interact with each other and obtain
tomers. Examples of such efforts include publicizing reviews and comments on the books of the store.
customer testimonies, deploying reliable product deliv-
ery systems, offering generous product return policies,
and providing good after-sales services through cus- CONCLUSION
tomer hotlines. Internet vendors can also improve their
trustworthiness by enhancing their Web site designs This research is among a limited few studies that at-
such as navigation design, visual design, and informa- tempt to explain online customer retention in terms of
tion design (Cyer, 2008). CRC in transaction relationships with an Internet ven-
Second, this study suggests that Internet vendors dor. If customers are resistant to change in their trans-
should enhance their attractiveness, compared to other action relationships with an Internet vendor, they will
competing vendors, for online customer retention. This return to the vendor for future transactions, despite not
suggests that Internet vendors should consider com- being loyal to the vendor. This study develops a theoret-
parison with other competitors in their business such ical model for CRC by bringing status quo bias theory
as delivering relatively higher quality products and ser- (Samuelson & Zeckhauser, 1988) to the forefront. This
vices to increase relative attractiveness. study highlights the significance of switching costs as
Third, this study affirms that the role of switching a key determinant of CRC. It affects online customer
costs in online customer retention cannot be under- retention though constraint-based relationship devel-
estimated, although it is known that switching costs opment. This study also highlights the significance of
are very low in the electronic marketplace (Friedman, trust and relative attractiveness as additional key de-
1999). There are several subtypes of switching costs terminants of CRC from the dedication-based relation-
such as psychological costs, procedural costs, and loss ship development perspective. Furthermore, this study
costs. Psychological costs mean those costs which in- indicates that CRC and switching costs lead to cus-
volve psychological or emotional discomfort due to the tomers’ willingness to pay more in transactions with
switching (Burnham, Frels, & Mahajan, 2003). Pro- the vendor. This study thus contributes to the electronic

266 INVESTIGATING ONLINE CUSTOMER’S RESISTANCE TO CHANGE

Psychology & Marketing DOI: 10.1002/mar
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and neglect. Journal of Retailing, 69, 321–49. REL2 Compared to shopping at
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of Industrial Economics, 49, 541–558. online bookstore.

268 INVESTIGATING ONLINE CUSTOMER’S RESISTANCE TO CHANGE

Psychology & Marketing DOI: 10.1002/mar
APPENDIX,
Continued

Construct Item Wording

SWC3 A lot of time and effort have

gone into developing
relationship with this
store.
SWC4 All things considered, I
would lose a lot if I were to
switch my shopping
activities here to another
online bookstore.
Trust (TRS) TRS1 This store keeps its promises
and commitment.
TRS2 This store cares about its
customers.
TRS3 This store is capable of doing
its job.
Satisfaction I am . . . with my
(SAT) transaction with this store.
SAT1 Unsatisfied . . . satisfied.
SAT2 Frustrated . . . contented.
SAT3 Annoyed . . . pleased.
Customer CRC1 I would not willingly change
Resistance my preference to buy
to Change books online at this store.
(CRC)
CRC2 I would not substitute this
store with another online
store for my book
purchases.
CRC3 Even if my close friends were
to recommend another
online store, I would not
change my preference for
purchasing books at this
store.
Willingness Would you pay the current
to pay WPM1 prices at this store if other
more online bookstores lower
(WPM) their prices to a level
slightly below those at this
store?
Would you pay the prices at
WPM2 this store if they are
increased slightly?
Would you pay the prices at
WPM3 this store if this store
raises its prices slightly
above those at other online
bookstores?

KIM AND GUPTA 269

Psychology & Marketing DOI: 10.1002/mar