1777_Forecasting Customer Switching Intention in Mobile Service an Exploratory Study of Predictive Factors in Mobile Number Portabil | Logistic Regression | Survey Methodology

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Technological Forecasting & Social Change 75 (2008) 854 – 874

Forecasting customer switching intention in mobile service: An exploratory study of predictive factors in mobile number portability
Dong-Hee Shin a,⁎, Won-Yong Kim b

College of Information Sciences and Technology, Penn State University, Tulpehocken road, P.O. Box 7009, Luerssen Building, Reading, PA 19610-6009, USA b Ewha Womans University, Seoul, Korea 11-1 Daehyun-dong, Seodaemun-gu, Seoul, 120-750, Korea Received 21 March 2007; received in revised form 6 May 2007; accepted 7 May 2007

Abstract This study investigates switching barriers under the mobile number portability (MNP) in the U.S. mobile market. The structural equation modeling analysis is used to evaluate the causal model, and confirmatory factor analysis is performed to examine the reliability and validity of the measurement model. The logistic regression is used to investigate the effect of demographics on switching decision. The findings indicate that customer satisfactions, switching barriers, and demographics significantly affect subscribers' intent to switch. Among them, switching barriers had the most significant influence, which raises a question of the effectiveness of MNP. The MNP in the U.S. mobile market is intended to play an important role in lowering switching costs which can increase the level competition among providers. The findings, however, imply that subscribers still perceive switching barrier high, discouraging them from switching carriers. © 2007 Elsevier Inc. All rights reserved.
Keywords: Mobile number portability; Switching barrier; Switching behavior; Structural equation modeling

⁎ Corresponding author. Tel.: +1 610 396 6135; fax: +1 610 396 6024. E-mail addresses: dxs75@psu.edu (D.-H. Shin), wonykim@ewha.ac.kr (W.-Y. Kim). 0040-1625/$ - see front matter © 2007 Elsevier Inc. All rights reserved. doi:10.1016/j.techfore.2007.05.001

D.-H. Shin, W.-Y. Kim / Technological Forecasting & Social Change 75 (2008) 854–874


1. Introduction Mobile number portability (MNP) requires mobile carriers to allow customers to keep their telephone numbers when switching from one carrier to another. MNP was adopted in the U.S. in 2004 to address the perceived switching costs of changing one's telephone number when one changes service providers. The literature on switching cost shows that consumers will not switch their service providers if they are required to change their mobile numbers because it is both inconvenient and financially burdensome. The extent to which consumers invest in their telephone numbers, both personally and financially, outweighs the benefits that may be realized by switching service providers. By removing a barrier to customer switching in those markets where customers value their telephone numbers, number portability is intended to foster competition among service providers. Yet, as mobile carriers increase termination charges and introduce various switching barriers in response to MNP, it has been questioned whether a switching barrier is effectively lowered with the presence of MNP. An emergent question with MNP is whether subscribers are able to switch carriers without significant switching barriers. Although a growing body of research has examined users' intentions to adopt and use mobile services [1,2], very little research has been conducted on subscribers' actual switching behaviors in the context of MNP. There is a growing need to predict how switching barriers affect customer satisfaction and switching intentions. The theoretical framework built up around customer satisfaction and intentions must incorporate switching barriers [3] to redefine them in the context of MNP and answer such questions as “Who is switching and who is not?” and “How do switching barriers interact with satisfaction and deter switching intentions in the MNP regulation?” These questions are important because policymakers have asked whether MNP has produced positive benefits. Ex-ante evaluations of MNP carried out in several countries have produced detailed estimates of expected costs and direct benefits (e.g., strengthened competition and reduced prices). While researchers have suggested that MNP should have a range of potentially important effects [49], such as lower switching costs and barriers, few attempts have been made to quantify current switching intentions to predict future switching. In this light, this study investigates the role of switching barriers in the behavior of switching carriers and further explores the structural relationship among customer satisfaction, demographics, and switching intentions under the MNP policy. Previous studies [4,5] found a link between service quality and satisfaction, between satisfaction and customer loyalty, and between customer loyalty and retention. Other studies [6,1] show that when a switching barrier exists, customers tend not to switch even when customers are not satisfied with services. Given these empirically demonstrated relationships, it is worthwhile to test switching intention under the MNP policy by analyzing the effects of customer satisfaction and switching barriers on switching intention and the structural relationship among these factors on U.S. mobile service customers. The objectives of this study are (1) to identify variables that contribute to customers' switching in the mobile market; (2) to conduct an empirical analysis of the relative effects of MNP on customers' switching in order to predict the extent to which the switching intention is influenced by the level of perceived switching costs and whether switching costs moderate the satisfaction–retention linkages, as suggested by previous research [7]; and (3) to investigate the impact of demographics on switching intentions. The framework of this study allows for more facile forecasting in a market with environmental volatility. More accurate forecasting can enable both better technology policy analysis and more effective industry response. Thus, the results of this study contribute to the body of work surrounding subscribers in mobile markets and the regulation imposed to induce and increase competition.

is raised whether switching barriers have been effectively lifted and thus have subscribers benefited from MNP. and a greater range of services. While many researchers are questioning the intended effects of competition. inseparability. an emergent and the most fundamental question with MNP is whether subscribers are able to switch carriers without significant switching barriers. The main regulatory objectives of MNP have been the benefits for consumers and the increased competition among carriers. however. The availability of MNP has been thought to bring substantial benefits to subscribers: lower price. heterogeneity. the relationship between the factors and actual customers' switching intentions has not been extensively discovered yet. 3. the relationship between customer satisfaction and call qualities [12–14]. However. which has been occurring since 1998.-Y. U.1. . mobile number portability Number portability dates back to 1995 when the Federal Communication Commission (FCC) enforced this policy in local telephone service. Theoretical concepts of mobile telecommunication markets Many previous studies have investigated the relationship between customer satisfaction and customer loyalty [10. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 2. The hypotheses in this study are based on the relationships among the factors. In particular. greater choice.11]. W. whereas the top five big carriers have all added subscribers with MNP [9]. only 10 million subscribers have switched from one carrier to another according to data released by the FCC [8].S. and increased network spending. a fundamental and priori question needs to address the consumers' actual responses. 3. and perishability of characters. Due to inherent intangibility. incentives for longer contracts. Subscribers will also be able to choose the provider that best meets their needs without incurring switching costs by changing their phone numbers. higher quality. Shin. It may be inferred that churn did not increase significantly with the introduction of MNP because there was a positive impact (positive switching barrier) for consumers as operators engaged in aggressive customer retention strategies. however. The perception of switching barriers is key in the hypotheses. Service quality Service quality in the telecom industry is an important indicator to assess a firm's performance. MNP was first introduced in November 2003 in 100 metropolitan cities and expanded nationwide in May 2004.-H. SERVQUAL identifies determinants of perceived quality and indicates the arithmetic differences between customer expectations and perceptions across 22 measurement items. which lead this study to explore customers' switching intentions. The FCC later enforced local number portability between wireline service providers. service quality can be defined as a consumer's overall impression of the relative efficiency of the organization and its services. MNP would allow subscribers to take full advantage of the choices that become available in a more competitive telecommunication market. Furthermore. In the three years since MNP was expanded. which would lower prices. Since the primary goal of MNP lies in consumer benefit. The dominant conceptualization and measurement of service quality has been the SERVQUAL instrument developed by [16]. It was initially expected that 30 million subscribers would switch within the first year of MNP's introduction. small mobile carriers have not added subscribers significantly. and the relationship between switching demand and MNP [15]. better customer service. The question.856 D. including better deals on upgrade handsets.

which are generic across service contexts. Nevertheless. 3. A survey conducted by [17] found that mobile subscribers who perceived that operators differed in service levels were more likely to switch than those subscribers who did not see any difference among networks. pricing structure. Switching cost and perceived switching cost Customer switching refers to migration of customers from one provider to another. occur when a firm develops particular schemes. Switching cost can be explained in three categories [24]: learning costs occur if knowledge between brands is not transferable. One way to investigate switching costs will be simply to ask . Higher levels of customer satisfaction are associated with lower levels of switching intention. psychological.3. reliability.D. and psychological cost [21]. These different switching costs are collectively perceived by subscribers. Oliver [19] considered that customer satisfaction means customer reaction to the state of fulfillment and customer judgment of the fulfilled state. and introduced the expectancydisconfirmation model for studies of customer satisfaction in the retail and service industries. money. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 857 Using factor analysis. While the learning costs and transaction costs represent the social cost of brand switching. H2. convenience in procedures. such as loyalty benefits or withdrawal penalties. including time. the analysis did not go beyond the descriptive results to further postulate or explore what differences exist between the network operators and how the perceived difference affected switching intention. switching costs. The main factor determining customer satisfaction is the customers' own perceptions of service quality [20]. W. service quality has been measured by call quality. H3. based on all encounters and experiences [10]. social. Perceived switching cost is the degree to which an individual believes that switching service providers would incur certain cost to him or her [25]. the so-called perceived switching cost. According to Chang [23]. In the context of mobile services. and customer support [14]. initial costs are assumed to be the same across all carriers. Higher levels of service quality are associated with higher levels of customer satisfaction. Switching cost means the cost incurred when switching. 3. and contractual costs. SERVQUAL further is condensed into tangible. and safety-related nature [22]. These first period sales create the second period. insofar as there are potential losses perceived by subscribers when switching carriers. Oliver [19] defines satisfaction as a pleasant past-purchasing experience from a product or service given the anti-purchasing expectancy of the customer.-Y. to encourage retention of existing subscribers. which punishes subscribers who switch by creating intentional barriers [24]. or aftermarket. assurance. the following is hypothesized: H1. Switching costs exist whenever consumers face changeover costs in a market when switching from a purchased product to one of its substitutes.2. and is defined as perceived risk. when the subscriber makes a purchase decision. Thus. mobile devices. Satisfaction can be viewed as a function of all previous transaction-specific satisfaction [18]. value-added services. satisfaction refers to the customers' rating of the brand. Higher levels of perceived price are associated with higher levels of customer satisfaction. or purely pecuniary costs. such as loss of a financial. Shin. performance-related. transaction costs occur when changing providers. Customer satisfaction Overall. the contractual cost occurs with a firm's strategy.-H. and empathy dimensions.

858 D. transaction. ex-ante homogenous products may be ex post differentiated by switching cost after they have been bought [24]. which is usually referred to “loyalty” [30]. 26). Higher levels of perceived switching barriers are associated with higher levels of switching behavior. and psychological risks for the consumer as switching costs. H4. the notion of switching barriers has been spotlighted in recent marketing research due to its importance in customer retention and profits to service providers [6]. Subscriber lock-in Firms keep developing various strategies to gain control over access to subscribers in an attempt to achieve customer lock-in. Kim et al. and customers will behave as if brand-loyal. That is. switching cost is the factor that most directly influences customers' sensitivity to price level and so influences customer loyalty [29]. whereas the perceived switching barrier is a demand-side variable describing consumer perception. H6. 3. customers may be less inclined to switch when financial. While subscriber lock-in is often regarded as a concept similar to switching barrier. the distinction is clear: subscriber lock-in is a supplyside variable describing providers' efforts to create switching barriers. For services. Fornell [26] distinguishes search.5. in the presence of switching cost. In addition. it is reasonable to hypothesize that perceived switching barriers have a moderator effect on the relationship between customer satisfaction and switching intention (H6). as well as loyal customer discounts. Switching barrier Similar to switching cost. search.-Y. H5. cognitive effort and financial. W.4. Perceived switching cost rather than actual switching cost explains customer switching intention and affects the market outcome. In due course. [2] identify the positive role of switching barriers in customer retention in the Korean mobile phone industry. when customers are sensitive to product attributes such as quality. uncertainty will decrease price sensitivity. customers who might be expected to select from a number of functionally identical brands display brand loyalty. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 consumers at what price differentials they would switch. these costs can be used as attributes for market segmentation and targeting. Therefore.-H. For these reasons. and learning and emotional costs. Higher levels of perceived switching barriers moderate the relationship between customer satisfaction and switching intention. even when customers are less than satisfied with the provider [15]. and psychological costs are involved [27]. is that consumers often cannot estimate their non-financial switching costs correctly. It is logically understood that the switching barrier makes it difficult to switch service providers (H5). Patterson and Smith [28] also argue that switching barriers capture a substantial amount of the explained variance in “propensity to stay with focal service provider” (p. however. perceived switching costs constructed by carriers can be used strategically to retain customers. The problem. Shin. customer habit. which may be different from actual switching costs. . 3. Because these costs may vary with customer characteristics and the nature of the product. In addition. social.26]. Previous studies found that switching cost reduces customers' sensitivity to price and satisfaction level and that they perceive functionally homogenous brands as differentiated heterogeneous brands [29. Higher levels of switching cost are associated with higher levels of the switching barrier. therefore. their answers will reflect their perceived switching costs.

a provider competes for both existing and potential consumers. Switching costs thus generates consumer lock-in. The anxiety is likely to discourage females from switching from one carrier to another. Shin.33]. If it becomes known that providers will charge excess prices in the aftermarket. it can be hypothesized that male subscribers tend to switch more often than female. the perceived attributes of innovations. Carroll et al. While the tactics employed by various industries to seduce potential subscribers and retain existing subscribers will vary extensively across markets. [38] confirms the previous findings of demographics: males are more prone to switching carriers and age is negatively linked to switching (H8 and H9). situational factors. 3. The researchers also found that more educated people view mobile devices as lifestyle-related tools as well as task-oriented technologies. applying the gender difference of mobile use to switching intention. if any. H7. the provider may be able to increase the service price without a significant loss of subscribers. Gilbert et al. and loyalty programs.-Y. gender. User demographics and switching intention Studies of the adoption of new technologies have focused on an individual's socioeconomic characteristics. However. W. the impact of demographics on switching intention has received relatively little attention. or locked into. In any market. it has become an economic axiom that lower switching costs force competition for initial subscribers and liberate second period subscribers from a particular aftermarket. The most recent study by Ranganathan et al. and add value to their lifestyles. including contractual commitments. monopoly profits. providing the service price increase does not exceed the cost of switching providers. This approach forces subscribers to balance switching costs with the benefit of saving money in a competitor's aftermarket [31]. [37] found that females tend to show more techno-phobia and anxiety toward mobile technologies. [35] found that young mobile users use mobile services to satisfy their social and leisure needs. Few studies to date have identified which. well-educated. Higher levels of customer lock-in are associated with higher levels of the switching barrier. Past adoption studies also show that early adopters of new technologies tend to be young. technology clusters. industry claims suggest that potential subscribers provide the competitive discipline to resist overpriced products and services.6. each of these industry tactics represents various embodiments of switching costs and aftermarket monopolization.-H. and education). it is reasonable to hypothesize that young and more educated subscribers tend to show higher intention to switch than older subscribers (H8 and H10). The higher the cost of switching carriers within a particular market. subscriber lock-in can take many forms. the original purchase decision (H7). product-specific learning costs. search costs. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 859 As an effort at subscriber capture. Several studies have showed that female customers tend to experience higher levels of anxiety than males in using technologies [36]. This supports the reputation effects. . In this situation. bundling of services. Thus.D. consumers may avoid such costs by purchasing from a different provider during the first period. customer characteristics might be effective in predicting customer switching intention. the more the subscriber is captured. and richer than non-adopters. This attitudinal shift might influence people's switching intentions as well. While markets with high switching costs serve to retain existing subscribers. reinforce group identity. and the characteristics of innovations that influence adoption [32. males are more likely than females to be adopters of new technologies [34]. Although some research has highlighted the influence of demographics. allowing firms to earn above-competitive. In addition. This study examines whether customers' switching intentions differ with respect to their demographics (age.

Shin. factor analysis. [10]. a pretest and a pilot survey were conducted before the main survey.860 D.51 was used as an analytical tool. To assure content validity in the MNP context. Pretest and pilot survey To enhance the validity of the proposed model's measurement item. The respondents' ages ranged between 19 and 72. Male subscribers tend to show more intention to switch than female subscribers. A pilot survey was administered to revise and complement the survey questions.-Y. Similar items appear in Brynjolfsson and Smith [41]. H9. Since LISREL 8. and H10. Respondents were questioned as to whether or not they would switch (switch 1 = yes.1. W. and prices. The study adopted an approach to the measurement of customer satisfaction that is common in the literature of existing approaches to measurement of customer satisfaction. Five hundred and twelve valid survey responses were obtained by phone. Finally. which were adopted from Chen and Hitt [40]. service quality was assessed with a 3item scale that replicates the commitment scale developed by Cheong and Park [42].0 was used for descriptive statistical analysis. A logit model helps to understand the extent to which such factors influence a customer's choice of product. The telephone questionnaire was developed based on a previous study on MNP [5. Perceived price was measured with a 3-item scale. all of the constructs were subject to confirmatory factor analysis.99. 0 = no). H9. This model evaluates the influence of independent variables on an event.15]. 4. Age is negatively related to switching intention. In this analysis of the independent variables (continuous and dichotomous) in this study. The measurements of switching barrier and switching intention were both adopted from Kim et al. switching cost. Measurement All variables in the hypotheses were assessed with multi-item scales (Appendix A). each of the categories is assessed for its impact on the dependent variable (switching intention). Forty-nine customers with experience in mobile switching participated in the pilot survey through the web survey. either switch or not switch. 4. Survey design and variables Data for the present study were collected by a private market-research firm. service. H10. The content validity of the questionnaire items was verified through personal interviews with experts in the mobile industry. Logistic regression was used for H8.14. which conducted a standardized telephone survey among customers of mobile services in the U.-H. n = 520). lock-in. The survey questionnaire asked about subscribers' behaviors and reasons for switching carriers such as satisfaction. Three questions were used to measure switching barriers and customer lock-in. SPSS 10. Education has a positive effect on switching intention.12 years (S = 12.2. 4. The measurement scales of switching cost were adopted from Jones et al. and reliability analysis. faculty members of a marketing department reviewed a set of questionnaire items that were based on relevant previous research.S. . Customer satisfaction was measured with a 3-item scale designed to capture the overall satisfaction [39]. with a mean of 37. A pilot survey was conducted using the initial questionnaire items. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 H8. The SEM tool was used for the path analysis of H1 through H7. [6].

831 0.-Y. p = 0. which indicate the reliable measures of their respective constructs [43]. The reliability analysis of each factor is produced in Table 1.721 0. Drawing from service literature and qualitative interviews. 13 service quality items are condensed to three dimensions.7) in Cronbach's alpha coefficients. All independent variables show acceptable values (above 0.D. A measurement model was specified constraining the eight items to load on three factors as theorized (x 2 = 729. 5. AGFI = 0. Reliability and validity Cronbach's alpha is used to test the internal reliability of each of the composite constructs. W.801 0.809 0. Internal consistency measures estimate how consistently individuals respond to the items within a scale.832 0.-H.811 0.833 0.5.738 0. the hypothesized causal paths were estimated with SEM of LISREL.7339 Subscriber lock-in 0.05).9467 Switching barrier 0. switching cost is conceptualized to encompass three dimensions.3.873 0.792 861 Cronbach's alpha 0.000. CFI = 0.768 0. RMSEA = 0. eight of the initial 21 switching cost items were found to have acceptable psychometric properties.8389 Perceived price 0.829 0. 4.93. Shin.8894 Switching cost 0. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 Table 1 Convergent validity and internal consistency reliability Items Customer satisfaction CS1 CS2 CS3 SW1 SW2 SW3 LO1 LO2 LO3 PP1 PP2 PP3 SB1 SB2 SB3 SL1 SL2 SL3 Factor loadings 0.8941 Subscriber lock-in 0.4.813. The results with SEM show that six hypotheses were supported and one hypothesis was rejected at . All items were found to load strongly on the intended latent dimension.941 0. SEM and structural paths To test the structural relationships. Scale reliabilities were above 0.96.711 0. confirmatory factor analysis (CFA) and coefficient alpha were used to assess the reliability and unidimensionality of the scales in order to determine whether it was appropriate to operationalize each of the constructs as an index. Based on scale refining.914 0.859 0.743 4. GFI = 0.75 for all scales. Confirmatory analysis: LISREL measurement model In the data from the studies.719 0. Using factor reduction. df = 242.703 0.

001 0. logistic regression is used to denote whether demographics affect customers' switching intention.021 0. The model explains 68% of the variance in customer switching.862 D. According to the test of hypothesis 3. and 3. 5.121 − 4. The path coefficient of the switching barrier and switching intention show that the switching barrier is a key factor in subscribers' switching intention. It can be inferred that the perceived switching barrier reduces subscribers' sensitivity to the level of subscriber satisfaction. ⁎⁎p b 0.681 0.193 S.-H. 0.001. The result of hypothesis 6 suggests that the switching barrier has a moderator effect on customer satisfaction and switching intention. and H10. Using .192⁎ −0.248 4. however. the test of hypothesis 1 reveals that perceived price is not a significant factor affecting customer satisfaction.001 Result Accept Reject Accept Accept Accept Accept Accept p = 0.109⁎ 0. The results of hypotheses 4. implying an indirect effect on switching intention.193⁎ t-value 2. Together with hypotheses 1.05 (Table 2). Logistic regression is used as a tool to determine which of the factors identified in the switching intention were significant with regard to predicting switching intention. it can be said that if customers think that they are getting a high value from the service they receive in relation to price. customer satisfaction has a direct influence on switching intention.292 0.701 − 2. Logistic regression and demographics For the test of 8.E. and 53% of the variance in switching barriers.301 3.489⁎⁎ −0. suggesting that satisfied customers will more than likely not switch carriers.-Y. H9.05. This further implies the moderator role of switching barrier on the relationships between call quality and customer satisfaction.000 0.238 − 2. which negatively influence customer switching intention.197⁎ −0.281⁎⁎ −0. It can be said that the perceived price paid by subscribers is diluted by increased service quality and customer satisfaction. 6. W. they are more likely to be satisfied and more likely to stay with the current carrier. Shin. 2. There is a high level of explanatory power. Interestingly. These linkages confirm previous studies' findings that service quality and price directly influence customer satisfaction.175 −0. and 7 suggest that the switching barrier is influenced by customer lockin and the increased switching cost. The findings indicate that both customer satisfaction and switching barriers exhibited strong impacts on customers' attitudes toward and behaviors in switching mobile carriers. It suggests that customers having high switching costs tend not to switch even if they are not satisfied with the services delivered. which implies the insignificant effect of price on switching intention.261 − 0. 41% of the variance in customer satisfaction. Estimates 0. and between price and customer satisfaction. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 Table 2 The results of hypothesis tests Hypotheses H1 H2 H3 H4 H5 H6 H7 ⁎p b 0.103 0. Hypothesis 6 reflected the moderating effect of the perceived switching barrier of customer satisfaction and switching intention. The test of hypothesis 1 showed that service quality is significantly related to customer satisfaction.

the logistic regression method gives estimates of model coefficients that can be used to quantify the probability of subsidence. and education. p b 0. a 2 × 2 matrix was made (Fig. The fourth group (n = 124) represents a customer group that remains consistently with the current provider and will not switch. Although there are other appropriate methods (discriminant analysis. 7.330 binary data. These demographic findings call for further investigation.029 Wald X2 482. Customer type regarding switching intention.-Y.001 0. The first group (n = 141) is a customer group representing switching.22.06 39. Forecasting scenarios: switchers versus continuers In order to conduct dynamic analysis on the subscribers' behavior. no = 0).-H.).690 49. 0. 1). The overall model significance can be evaluated by the model X2 value. the odds ratio helps understand the relative importance of the independent variables.913 863 Odds ratio 1. such as other socio-economic factors that may affect the perceived ease of switching and the perceived importance of price in the subscribers' choice of mobile carrier. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 Table 3 The results of logistic regression B H8: Age H9: Gender H10: Education Model X2 H-L test X2 ⁎p b 0.171 0.22⁎⁎⁎ 60.001). . it was found that gender may not affect subscribers' decision on switching.031 0. ⁎⁎p b 0. Table 3 presents the results of the logistic regression analyses. These results provide considerable support for H8 and H10.189⁎⁎ 6790. Fig.01.910 1. ⁎⁎⁎p b 0. Further. gender. which is a contrast with the finding of Ranganathan et al.E. Two customer groups were divided into four groups (Fig. binomial regression. The H-L Goodness of Fit Test also indicates a significant fit (X 2 = 60.1. W. logistic regression analysis is an appropriate type of analysis since the dependent variable has only two values (yes = 1. etc.297 2.19⁎⁎⁎ S.D. which is significant (p b 0.012⁎⁎ 0. The second group (n = 121) is those who would remain without further switching. The third group (n = 116) is from the continuer (unswitching) group that intends to switch in the future. Dichotomous dependent variables are used in this study whether the customers switch carriers or stay with the current carrier. Based on the responses from the survey. and the variable regards future behaviors. Shin.001).05. The independent variables in this study are age. 1). −0. However. 1. this study performed additional statistical analyses on the collected samples by dividing them into several groups. which show that age and education have a direct impact on switching intention: younger subscribers and more educated subscribers are more prone to switching carriers because they appear to be better aware of switching provisions. [38].

Then.233 4.321 4. fees. Approximately 82% of subscribers were very or somewhat satisfied with their porting experience.320 0.323 5. and 12% switched because of a promotion of sale. Of those who switched.408 0.234 0. subscriber lock-in is the most significant factor discouraging subscribers from switching.002⁎⁎⁎ 0.05. 7.231 0.196 −3.D.020⁎⁎ 0. the continuing subscribers worried about hidden costs that included early termination fees (if subscribers switch carriers during the contract.218 0.D.1129 − . These continuing subscribers received a promotional discount when they selected the current carrier as a condition of a 2-year contract. Shin.243 0. Switching group versus continuer group The two most determining factors for the switching group to change carriers shown in Table 6 are price and the switching cost.441 Continuer group Mean 1. For the groups without future switching intention (Group 2 and 4).864 D. 0.391 2.027⁎ 0. In addition.404 4. switching barriers have influenced subscribers' decisions. most continuing subscribers felt the switching barriers higher than the switching group.071⁎ 0.002 ⁎⁎ 0.2543 3.015⁎⁎ 0. For the comparison of the switched group (Groups 1 and 2) versus the continuer group (Groups 3 and 4).390 68. for the investigation of future intention (Group 1 and 3). 0. ⁎⁎⁎p b 0. but it did lessen the hassles of switching. 44% responded they left for a better price on monthly service. subscribers should pay an early termination fee).84780 0.119 0. subscriber lock-in is the second important factor making subscribers stay with current carriers.1.141 2.341 0.275 2. switching barriers were not a significant factor.531 4. W.813 25.113 0.812 1. Unlike the commonly accepted notion.12 2.180 0.169 S. and memberships. Analyses show that subscribers who switched generally are satisfied with their new service and carriers.121 0. The continuing groups explained another hidden cost of fees to .272 0. Twenty-two percent switched because of coverage or service quality. logistic regression is used.1481 2.0012 ⁎⁎ 0. Service factors show a generally higher influence than switching barriers.231 0. Furthermore. ANOVA is used.001⁎⁎ 0. MNP was not by itself a reason for subscribers to switch carriers. On the other hand.440 0.-Y.811 6. the switched subscribers are well informed about MNP.1. Among switching barriers. the two factors that had been considered major reasons that would lead to widespread switching. In addition.274 0.132 4. ⁎⁎p b 0.822 1.123 2.11 6.331 3. multiple regression is used to investigate the factors blocking their switching intention. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 Table 4 ANOVA on switching Variable Switcher group Mean Usage time/week Call frequency/week Services in use Switching cost Subscriber lock-in Price Opportunity cost Call quality Subscriber service Value-added service 4.-H.938 S.221 4.003⁎⁎⁎ 0.451 0. Even after the MNP enforcement. Continuing subscribers have been locked in with long-term contracts.01.283 2.8123 −3. approximately 81% of subscribers indicated that length of porting met or exceeded expectations.205 0.172 0.241 4.810 3.610 1. Fourteen percent of respondents said that they stopped pursuing switching after they became aware of the early termination fee. In general.130 t-value p-value ⁎p b 0.

511 3.193⁎⁎ −3.444 Services Price Constant Log likelihood Chi-square ⁎p b 0.042 1.E. This observation is consistent with the following variable Table 5 Logistic regression analysis on independent variable of switching Factors Independent variables Switching (Group 1) B Switching barriers Switching cost Subscriber lock-in Opportunity cost Call quality Customer service Value-added service 0.092 1.842⁎⁎ 0.E.471⁎⁎ 0.253 − 3.344 0. the continuer group in general is less intrigued or prompted by lower prices. and hassle-less. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 865 keep the current number after switching carriers.124⁎ 0.012 − 5. but they think the lower price would be offset by a high switching cost and a move-in cost. In addition. They are not highly satisfied with current services nor think the service will be improved with other carriers.-H.942 0. the continuing group worried about a requirement to purchase a new handset compatible with the new carrier's network.923 0. the FCC allowed carriers to charge a fee to recover number porting costs. in general.038 1. logistic regression is used.541 0. . Most continuing subscribers had the simplistic notion that MNP would be free.019 1. timing.012 1.332 0. In particular. Subscribers from the continuer group are most likely to switch when switching barriers become low. as shown in the subscriber lock-in.621 0.263 Continuer group to intend (Group 3) B 0. ⁎⁎⁎p b 0.421 0.107 p-value 0.01. With MNP. immediate. These subscriber lock-in factors have heavily discouraged subscribers from changing carriers.001 0. They tend not to differentiate or discriminate different service quality other than voice. They just need to make a call when they need to.805 0. Approximately 3% of continuing subscribers responded that they would wait for a while until switching costs are lowered (Table 4).313 1. the subscribers in the continuer group are causal users who tend not to care about their numbers. People with future intention (Group 1 and 3) For Group 1 and Group 3.432 1.354 0. 9.773⁎⁎⁎ 5.2.D.441 0. Shin. Interestingly. supports the ANOVA analyses (Table 6). As for services.844 p-value 0.833 0. Subscribers' awareness of MNP was not high enough that they lacked a detailed understanding of the process. In fact.005 0.001 4.312 0.54 S.070 2. Subscribers in the continuer group perceive switching barriers to be higher than the switching group does.723 1.0152 0. In general. 2. subscriber lock-in is shown to be the biggest deterrent that keeps subscribers from switching.-Y. continuing subscribers rarely see mobile service as important.1.294⁎⁎ 0. In addition.820 173. and cost of porting.02 149.0593 0. These subscribers are interested in lower price (monthly fees).05.431 1. 2% of continuing subscribers are completely unaware of the existence of MNP. ⁎⁎p b 0.014 4.000⁎⁎⁎ 56. They have had little real experience with various value-added services. Logistic regression.742 S.0273 0. Interestingly.238 1.422 69.401⁎⁎ 0. Carriers charge this fee to subscribers or new carriers.143 0. subscribers from the continuer group are least likely affected by the service factor. W. it is consistent from a series of analyses that the continuer group is less concerned with levels of service quality and is less responsive to price change.681⁎ 4. 7.

01.133 1 0.842 0.002 1.021 0.043 0.214⁎⁎ R2 = 0.00⁎⁎ 0.442 8411. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 Table 6 Multiple regression of factors affecting switching barriers Switching Switching Subscriber Opportunity Call Subscriber Price Subscription Additional B cost lock-in cost quality service structure fee service fee Switching 1 Switching cost 0.012⁎⁎⁎ 0.039 0.045 Subscriber service 0.724 0.023 Intercept = 2.032 Price structure 0.052 0.065 0.097 1 0.1.036⁎ 0.593 0.311 0.140 Subscription fee 0.022 1 0.115 0.234 0.012 0.191 0.545 R = 0.-H.02 0.027 0.54⁎ 0.455 0.007⁎⁎ 0.119 0.043 0.045 ⁎p b 0.051 0.803 df 10 289 291 Mean square 235.032 0.012 0.052 0.143 0.840 27.020 1 0.036 0.029 0.079 0.311 0.023 0.01 0.399 0.126 0.-Y.33⁎⁎⁎ β Sr2 1 0. ⁎⁎p b 0.049 1 0. W.016 0.555 Opportunity cost 0.183 1 0. Shin. ⁎⁎⁎p b 0.313 7314.13 1.542 F 4.046 ANOVA summary table Sum of Squares Regression Residual Total 406.149⁎⁎⁎ 1 Subscriber lock-in 0.008⁎⁎ 0.05.741⁎⁎ Significance 0. .866 D.223 0.192 Call quality 0.64⁎⁎ 2.213 0.144 0.12⁎⁎ 0.023 Additional service fee 0.

there seems to be little effect of MNP at the individual subscriber level.-Y. VPN access. and by imposing the burden of hidden costs. Although there are no data available to compare pre-MNP and post-MNP. Also. subscribers in the switching group are willing to switch again if they find lower prices through promotions or special sales offers (Table 5). which implies that MNP does not have a direct effect on the subscribers' switching decisions. The switching group tends to more easily change current carriers if service quality falls short of these subscribers' expectations. However. and by increasing promotions through carriers' strategies.e. streaming media. move-in cost and loss cost have a direct effect. and m-commerce). In addition. game-on-demand.. rather. but not as significant as switching cost. the validated relationships of the factors in SEM imply that switching barriers are not a unidimensional concept. Among the identified switching barriers. The regulators' assumption was that MNP would enhance competition due to reduced switching costs. the switching group now sees services as a more important consideration than the switching barriers. because subscribers still feel the high level of switching barriers after the introduction of MNP. They tend to see mobile service as an additional means of communication and look for richer functionality and greater versatility. location-based services. by increasing termination charges. Call quality is the most vital factor for the continuer group to switch in the future. Subscribers without future switching intention For the group without future switching intention (Groups 2 and 4). This raises important implications for the effectiveness of MNP. Service qualities from different carriers become similar enough for customers not to differentiate service itself when choosing carriers. 7. 8. Through MNP. subscribers with switching experience are likely to switch again if they find lower prices. On the other hand. Shin. carriers have increased subscriber lock-in by making subscribers sign long-term contracts. This suggests that subscribers are likely to remain with their current carriers even when they experience only a low level of service satisfaction. there has been little effect on the competition in the mobile market. Service is also a significant factor. by increasing customer services. but there are different types of switching barriers—with unique . but this is not a significant factor.3. Among the identified switching barriers. although mobile carriers are aggressively introducing value-added services (i. MNP affects customer benefit indirectly by lowering prices. switching barriers are the least important factor for these subscribers. move-in cost and loss cost have a direct effect. MNP affected customer benefit indirectly by lowering prices. and through carriers' strategies such as promotions. they do not matter to customers as far as switching decisions are concerned (Table 6). Kim / Technological Forecasting & Social Change 75 (2008) 854–874 867 that the continuer group tends to see the value-added service as the least affecting factor. Despite the regulators' aspirations. These subscribers are also are tempted to switch carriers with better value-added services. It is inferred that service qualities are almost identical among carriers because almost every mobile carrier is striving to provide the best customer service possible in order to reduce customer churn. rather. As they have experience in switching and thus they know how to better deal with switching barriers. by increasing customer services. which implies that MNP does not have a significant effect on subscribers' switching decisions. Discussion The switching barrier is a major factor directly affecting subscribers' decisions about switching. multiple regression is used to investigate the switching barriers discouraging subscribers' switching intention. While price is found to be the important factor.-H.D. W.

This implication can be explained in two ways: (1) service qualities become almost identical among carriers (to the extent that customers do not switch just because of service qualities) because almost every mobile carrier is striving to provide the best customer service possible in order to reduce customer churn. Indeed. who report that switching cost has a moderator effect on the antecedent of customer satisfaction and customer loyalty. which then leads to neutralized customer satisfaction. it can be argued that the switching barriers that have been strategically set by carriers affect not only the subscribers' switching decision directly. Subscribers may see the increased switching cost and barrier as some form of commitment by the current carrier. which is called customer loyalty. Such examples include increased service quality and customer satisfaction. While this argument is partially consistent with the findings by Ayndin and Ozer [29].868 D. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 Fig. W. Shin.-Y. and customers with high switching barriers become insensitive to prices and service quality. but also other independent variables indirectly. it also shows the opposite direction of causality from the previous findings. effects on customer satisfaction.-H. which can be called positive switching barriers. and (2) therefore the issues of service quality and subscribers' satisfaction are offset by the increased switching barrier. Structural path results. The switching intention is likely to be reduced if customers feel a high level of perceived switching barriers. service quality. and perceived price in the MNP context. The finding that service quality is not as significant a factor as switching cost suggests that subscribers are likely to remain with their current carriers even when they experience only a low level of service satisfaction. The influence of customer satisfaction on their switching intention can be lowered in the presence of a perceived switching barrier. which show that customer satisfaction reduces sensitivity to price by lessening price elasticity [44] and minimizes customer switching from fluctuations in service quality [26]. It can be also expected that customers stay with their current carriers because of such positive relationships. 2. It can be inferred that mobile carriers have improved service quality since MNP went into effect to minimize subscriber churn rates. along with negative switching barriers such as customer lock-in [6]. .

the use of pricing tactics to deter subscribers' switching may not be effective because competitors can easily offer new pricing schemes to beat the temporary advantages in price level or price structure [14]. Meanwhile. Of the demographic variables.37]. although it must be pointed out that the mechanisms of customer switching are not completely understood [21].32. it is important to better understand customers' behavior and intention. this study provides an integrated framework to analyze the antecedents and consequences of switching intention in MNP.-Y. This study produces referential findings from research into the mobile market in terms of antecedents and consequences of switching costs in the U. it is found that gender may not affect subscribers' decisions on switching.S. age has a stronger association with switching compared to education. Shin. In this unpredictable new technology environment. younger subscribers are 1. This study thus enhances researchers and managers' understanding of switching costs. such as how other socio-economic factors may affect the perceived ease of switching and the perceived benefits of switching (Fig. the research cannot exclude the impact of country- . and (4) it focuses on customers of mobile services. These studies mostly ignored the overall context of mobile services. consumers' switching costs should be understood so providers in the market can create comprehensive marketing strategies. (3) it goes beyond satisfaction and intentions to explore heretofore unexamined attitudinal. By incorporating the influence of government telecom policy and firms' strategy. and customers' behavior. it can be inferred that customers can bear a certain degree of price difference as long as they perceive high-quality service rendered by their current carriers. The approach in this study produced country-specific results. and one seemingly plagued by churn. The findings also indicate that education level is positively linked to switching: subscribers with higher levels of education are relatively more prone to switching mobile carriers. and demographic characteristics of customers as possible predictors of switching intention. 2). with the rapid growth of the mobile phone market worldwide. it can also be seen that mobile service costs become more and more flat or neutralized as mobile carriers try to counter-offer to beat competitors' prices. regulations. (2) it examines the actual switching intention of subscribers'' mobile numbers. however. An important limitation of the abovementioned studies is that they investigated switching or retention and reported only the single effects of a mobile carrier's efforts on customer behavior. These demographic findings call for further investigation. While the low level of price effect can be explained as customers becoming less sensitive to the price level as compared to service quality.-H. However. which are a growing industry. which limit its generalizability findings as well as open up suggestions for future research. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 869 From the finding that the perceived price was found to be less significant than call quality and customer service. 9.911 times more likely to switch mobile carriers than older subscribers. One of the main characteristics of the mobile telecommunications sector is that the mobile services offered are complicated in terms of regulations and market situation to the extent of technological advancement. As the study was limited to a single country. behavioral. Contributions and implication: generalizability to other communications services Investigating customer switching and loyalty behavior in services has gained considerable attention in recent years [25. The odds ratio for age indicates that when holding all the other variables constant. The presented empirical study. W. however. such as policy. At the same time. not just their self-reported switching intentions. In the long run. this study contributes to the scholarly literature in a number of ways: (1) this research investigates the important work of identifying factors that affect customers' switching under the MNP policy. has some limitations.D.

10. the degrees of perceived service quality are found to be a more significant factor than the perceived price affecting a customer's satisfaction. According to Julander and Söderlund [50]. focusing on how and why customers switch carriers and how MNP enables or facilitates customers to switch without the significant burden of switching cost.-H. is not a unified construct but rather one with at least two distinct dimensions: positive and negative switching barriers.870 D. MNP has indirectly enhanced switching barriers through increased subscriber lock-in strategies and tactics [45]. a positive switching barrier is that customers stay with their current providers because of a perception that the provider is superior in services and products. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 specific factors. The results of this study confirm the existence of these two kinds of switching barriers in MNP: that customers stay with current providers because the subscribers are tolerant of small price differences or because they are happy with their current service. which influences the extent of intention to switch. In addition. The results of this study show that customer satisfaction and switching barriers are each found to have a direct effect on subscribers' intentions to switch. This could be solved with a multi-country study. The results also provide empirical support for linkages between satisfaction/switching and their subcomponents. maturity of the market. it can be inferred that carriers continue to improve customer satisfaction by restructuring price and by increasing service quality in order to reduce customer . this might prove hard as legislation was not being introduced simultaneously and. At the same time. Particularly. might hinder the validity of results. additional studies in other industries may strengthen the generalizability of the proposed constructs and framework. The results imply that MNP has not significantly contributed to the regulators' goal of removing switching barriers that have been prevalent in the subscribers' perceptions. and essentially assume that switching cost plays a role in protecting firms' existing customer base and gaining a competitive advantage [24]. Therefore. highly satisfied customers tend to show a high likelihood of staying and higher tolerance to price increases by providers or price decreases by competitors. Conclusion There is a lack of empirical research into the extent of customer switching or demand-side switching determinants in mobile markets. the results of this study are generated from a single industry. It was found that due to the moderating role of switching barriers. In the case of multiple sectors. The findings also show the moderating effects of perceived switching barriers on the relationships between customer satisfaction and switching intentions. W. This raises a question about the validity of MNP and whether it is being enforced and implemented in an effective way as it was intended and planned. This view is somewhat pro-industry. such as legislation. and regulators' roles.-Y. it can be inferred that subscribers' decisions about switching are not much influenced by the MNP requirement. switching intention. From the finding that subscribers seem to still feel high barriers in switching carriers. Shin. however. A negative switching barrier is that customers stay with their current providers because it is too expensive to leave the provider and there is a monopoly on the market or the provider is powerful. Instead. particularly in the MNP context. in the context of MNP. Many studies in marketing and retailing have focused on customer loyalty as a supply side component. focusing on how to build switching barriers and how to increase customer lock-in at the expense of subscribers' interests. given the rapid development of the industry. The present study has approached MNP from a customer perspective. which would help to control for the abovementioned effects. longitudinal studies investigating the role of customer switching intentions may overcome the constraints of multiple crosssectional studies.

industrially feasible. There is a discrepancy between the regulatory assumption held by the FCC and actual industrial/ market phenomena. MNP is not always and everywhere socially beneficial. who argue that positive gains from portability are actually offset by the carriers' inertia not to lose subscribers by increasing hidden costs and subscriber lock-in. The arguments of this study are partially consistent with the previous studies by Aoki and Small [46] and Reinke [47]. Empirically.D. and economically viable policy. Future studies may investigate a longitudinal assessment of consumer satisfaction to see the dynamic aspect of the cognitive process. future studies may further research this discrepancy. it is advisable for regulators not just to enforce MNP: they should rather seek to reduce the perceived switching barriers held by subscribers and raise customers'' awareness of MNP to have subscribers fully take advantage of MNP. Although MNP is designed to benefit consumers. MNP was not an option in most countries. it is also very likely for consumers to receive fewer benefits following a reduction in the cost of switching between carriers. W. the results of this study have a limited applicability when carriers are changing new conditions by altering the terms of service. thus rigorous methods were limited such as comparative. this study makes a suggestion to regulators: in order to develop socially desirable. it becomes possible that the corresponding increase in the marginal cost of production reduces consumer surplus and makes entrants and consumers worse off. therefore. This preliminary study forms the basis for further analysis. As argued [46]. The SEM for switching costs in this study suggests that other antecedents exist in the study context. which will also make it more convenient for end users to switch operators if their services do not meet customer expectations. since this study reveals the one moderator effect of switching barriers on the relationship between customer satisfaction . this study deliberately over-simplifies the relationships of the possible variables. This poses weaknesses for this study that it could have investigated more complicated relationships. At the time of this study. the mobile telecommunications sector is so dynamic with growing demand. Therefore. MNP has only recently been introduced in most countries so the time span is rather short for an empirical analysis. legally justifiable. it is rather difficult to forecast the potential magnitude of the MNP effects because of three reasons: Firstly. regulators can ensure MNP's effective implementation. That may be the reason that subscribers are insensitive to or even not aware of the price structure and switching condition as carriers keep changing the provisions related to switching and pricing. longitudinal. Luckily. Thirdly. very little data are publicly available on consumers' actual switching intention. As the goal of this study was to test the effect of switching cost and customer satisfaction on switching decisions.-Y. Shin.-H. Therefore. Secondly. and changing market structures that it is difficult to empirically isolate the effects of MNP. Limitations and future studies Although hypotheses were tested and confirmed.49] that investigated the effects of consumer ignorance of relevant pricing and suggested that MNP may deteriorate customers' price information. or dynamic analysis. Kim / Technological Forecasting & Social Change 75 (2008) 854–874 871 churn in response to MNP. 11. By understanding customers' switching intentions. This argument is in line with the previous research [48. Future research into the effect of MNP will benefit from the existence of time-series cross-section data from jurisdictions where MNP has been implemented. this study is vulnerable to the criticism of static analysis that this study analyzed customers' switching intention under certain conditions. changing technologies. such as the moderator effect of perceived switching cost on customer satisfaction and customer loyalty. Based on the findings here. this study must be considered exploratory regarding the role of switching barriers for switching intentions as well as attitudinal motivations.

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