Blog: Tuesday, 15 March 2016

Why do some customers stay loyal to their service provider, even if it regularly fails to deliver on its promises? PhD graduate Irene Consiglio of Rotterdam School of Management, Erasmus University (RSM) discovered that people with low self-esteem are hesitant to switch brands, even when their provider’s service quality is really low. Offering short-term contracts with lower commitments can help those consumers, and can be beneficial for companies to attract new customers too.

Not getting the service you paid for, such as a properly functioning internet connection, can be particularly stressful to customers. When service disruptions happen often and are poorly communicated by the provider, customers can start feeling exploited, powerless and angry, says researcher Irene Consiglio.

Low self-esteem

At first sight it would make perfect sense to just ditch the brand at the earliest possible moment and spring for a better offer elsewhere. But in her research, Consiglio found that, even when the costs and efforts for switching to a new provider are low, people with low self-esteem are unlikely to accept interesting offers made by other brands. People with high self-esteem on the other hand will more easily purchase a new subscription with another provider that offers better options, she found.

New relationships

Consiglio says this difference in switching behaviour can be explained by the anxiety and stress low self-esteem customers feel after service failures. It makes them wary of engaging in new relationships with other brands. But Consiglio’s research also shows that even unsatisfied customers with low self-esteem will switch if only the new provider offers contracts that come with lower commitment, such as shorter contract times or better possibilities to opt-out at any time.

Saturated markets

The researcher argues that offering those low-commitment contracts would be beneficial for both clients and companies. Customers with low self-esteem will feel less trapped in their current bad relationship and end this relationship more easily. At the same time, low-commitment contracts will also allow companies to draw away dissatisfied customers from other providers. And that is an interesting proposition in saturated markets like internet services, where every percentage of market share is fiercely fought for.

Dr. Irene Consiglio

Associate Professor

NOVA School of Business and Economics

Profile picture of Dr. Irene Consiglio

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