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Dissertation Report

On
A Study on Artificial Intelligence in Supply Chain Management

Submitted by
Diksha Agarwal

MBA-II (Operations)
Batch -2016-18

Under the guidance of


Prof. Dr. Ujwala Bairagi

Submitted to

"Savitribai Phule Pune University"

In partial fulfillment of the requirement for the award of Degree of


Master of Business Administration (MBA)

Submitted Through

MAEER’S

MIT School of Management, Kothrud Pune.


CERTIFICATE

This is to certify that Ms. Diksha Satish Agarwal of MAEER’s MIT School of
Management has successfully completed the Dissertation work titled A Study on Artificial
Intelligence in Supply Chain Management in partial fulfillment of requirement for the
award of Masters in Business Administration prescribed by the Savitribai Phule Pune
University

This Dissertation is the record of authentic work carried out during the academic year
2017 – 2018.

Prof. Dr Ujwala Bairagi Prof. Dr. Sayalee Gankar

Internal Dissertation Guide Director - MITSOM


DECLARATION

I, Ms. Diksha Satish Agarwal, hereby declare that this project is the record of
authentic work carried out by me during the academic year 2017 – 2018 and has not
been submitted to any other University or Institute towards the award of any degree.

Diksha Agarwal
16sMBA08
ACKNOWLEDGEMENT

I express my deep sense of gratitude to my guide Prof. Dr. Ujwala Bairagi for her valuable
help and guidance for the completion of this Paper. I thank her for the encouragement she
has given me during the project. I am also grateful to Director of MITSOM Prof. Dr.
Saylee Gankar for permitting me to utilize all the necessary facilities of the institution. I
would like to thank all other faculty members and staff of college for the co-operation and
help. Lastly I would like to express my deep appreciation towards my classmates and my
in deptness to my parents for providing the moral support and encouragement. I would like
thank Mr. Ketan Dekate and Mr. Omkar Kashikar from the bottom of my heart for
helping me in completing this project morally and motivating me towards completion from
time to time.

Diksha Agarwal
16SMBA08
INDEX
Sr No Detailed Contents Page No
1 Introduction 1
1.1 Scope 3
1.2 Objective 4
2 Literature review: 5
Background sources, internet references, models (if any), any other
supportive information.

3 Research methodology: 15
Research objectives, Research Design, Research Tool, Type of
research,

Sampling- Sampling break up and Size, Sample frame, Sampling


Element

Data –Type of Data with method/sources , Data collection- Procedure


displaying Flow chart

4 Data analysis and Findings 20


Tables and graphical representation along with findings

5 Suggestions/ Recommendations 32
6 Conclusions 34
7 Limitations: 37

APPENDIX / Closing Pages (without no.)

I Bibliography NA
Annexure (as applicable) - questionnaire, annual reports, any other
Ii NA
data from company/media.
1. INTRODUCTION

Switching Barriers are the obstacle faced by the customers while switching from one
product or service to another. They include Cost, contractual obligations, risks,
interruptions of services and Inconveniences. From the Seller’s perspective, switching
barriers may prevent customers from leaving and allowing higher prices to be imposed. In
some cases, firm establishes as many restrictions as legally permitted to make it difficult
for customers to leave a service.
From Customer’s perspective, switching barriers are an exposure that put the customer at
risk of higher prices, unfair terms, reduction in benefits and degradation of service. In many
cases, government regulate industries that are known for imposing artificial switching
barriers such as punitive fees or cumbersome processes for closing accounts.
Many research focus on why customers switch financial service organizations but there has
been very less study which gives information on why customers do not switch financial
service organizations, even though they have seriously intended to do so. Therefore in this
research we intend to present an analysis of literature and the responses by the customers
to develop a list of potential switching barriers for financial services. This will enable us to
ascertain not only the importance of each switching barrier but also to develop a more
parsimonious understanding of these barriers, through factor analysis.
The concept of switching barriers appeared and was taken into consideration rather late in
marketing literature. Its origin goes back to the 80s, in the field of the industrial economy,
related to the influence of switching costs on the market. There are several reasons for this
late emergency, the most important of which is the transition from a seller’s market towards
a buyer’s market. In a saturated market context, leading to intense competition, companies
are obliged to take care of their clientele to be able to increase their competitiveness and
ensure their profitability (Klemperer 1987). For that purpose, the existence of switching
barriers (SB) seems to be relevant. According to the activity sectors, we can identify several
factors of influence such as the differentiation of the product, the existence of loyalty
programs, the ownership of the technology, etc. which entail variable effects. These factors
often play a determining role in the customer loyalty development process (Fornell 1992).
Switching costs represents significant advantages for companies, such as price increase,
improvement in profitability and risk reduction (Narayandas 1998).
Interest in the concept increased recently and the research regarding this subject has
continued to increase since the early 90s. Switching Barriers facilitates the development of
a long-term relationship (Fornell 1992). Within the defensive marketing framework, their
building appears as an effective strategy for companies to retain their clientele. Currently,
the acquisition cost of a new customer continues to grow and so this strategy is being used
even more frequently. One main challenge for companies is to avoid the departure of the
customers considered as profit generators and to keep them for as long as possible
(Reichheld & al. 2000). The use of Switching Barriers has numerous advantages for
companies, but the consequences are often negative for the customers: price increase,
limitation of choice, acceptance of extended deadlines, etc.
Nowadays, many organizations, such as banks, are using switching barriers to retain their
customers (e.g., switching fees). The positive influence in the short term of such actions is
very clear, in particular in relation to the increase in customer retention (Julander &
Soderlund 2003; Lee & Feick 2001; Ranaweera & Prabhu 2003). However, there is no
consensus regarding the long-term effect of such barriers on dissatisfied customers‟ post-
purchase behavior, and on their loyalty in particular. Some studies show that switching
barriers may have a negative influence on customer loyalty (Colwell & Hogarth-Scott
2004) while other investigations show that there is a positive association between these
two constructs (Jones, Mothersbaugh & Beatty 2000; Julander & Soderlund 2003;
Ranaweera & Prabhu 2003).
1.1 Scope

In order to achieve long-term financial benefits, companies must design and deliver a
service that pleases customers, so they have a positive experience during the service
encounter (Lovelock, Patterson & Walker 2004). Yet, despite the consensus regarding the
importance of offering high quality services, service failure remains a problematic issue
for almost every business in the world (Ennew & Shoefer 2004) and increasing competition
puts pressure on businesses to improve the quality of services they offer in order to increase
the probability of retaining their customers.
To generate the new, potential clients for an Organization, marketers need to attract the
new customers from the existing customer base in the Market. They need to attract the
already existing customers of their competitors and increase the loyalty of existing
customers. For retaining already existing customer base companies put various barriers so
as to discourage the customers from switching to other brands. There could be various ways
which could result in the barrier for the customers which will prevent them to shift for the
services provided by other companies. This Research will enable marketers to understand
the different switching barriers faced by a Consumer so as to tackle the situation effectively
and lure the customers to use their services instead of their competitors.
This will also enable marketer to understand the Positive and Negative impact of the
switching barriers in the minds of customers
1.2 Objective
The main Objective of the research is to find out various different switching barriers
faced by the consumer while switching the service providers. This is to understand its
effect so that any financial organization should understand the consumers mindset
towards their strategy and also help them to strategize their step towards retention of their
current customers.

Following are some of the Objectives of the Research.

1) To Identify the various switching barriers faced by the consumers


2) Identifying the barriers as a positive as well as Negative barriers
3) Impact of the switching barriers on consumers
4) Identifying Consumers Behavior toward these barriers
5) Understanding the Mindset of the consumers towards these barriers
2. Literature Review
Research paper 1:
Title: The Impact of customer satisfaction on customer loyalty and intentions to
switch in the banking sector in Malaysia.
Author: Anantha Raj A. Arokiasamy
Year: 2014
Research Paper 2:
Title: Switching barriers in business-to-business services: a qualitative study
Author: Venkata K. Yanamandram
Year: 2006
Research Paper 3:
Title: Impact of Customer Satisfaction on Customer Loyalty and Intentions to
Switch: Evidence from Banking Sector of Pakistan
Author: Faizan Mohsan, Muhammad Musarrat Nawaz , M. Sarfraz Khan, Zeeshan
Shaukat, Numan Aslam,
Year: 2011

Abstract:

Keavenay (1995) identified eight major causes for dissatisfied customers to switch to
another supplier. Some causes are associated with feelings of dissatisfaction with the
service, but others were extrinsic or situational factors. However not all dissatisfied
customers engage in a switching behavior (Jones & Sasser 1995). Some of them will not
break the relationship with their suppliers because of switching barriers. As defined by
Jones, Mothersbaugh and Beatty (2000), a switching barrier is any factor that makes it
difficult or costly for customers to change providers. Switching barriers have been
classified differently according to various researchers.
Ping (1993) classified switching barriers as encompassing the following aspects for
customers: a) lack of an attractive alternative, b) high relationship investment and c) high
associated costs with switching to another attractive alternative.
Jones, Mothersbaugh and Beatty (2000) divides these switching barriers into: a)
interpersonal relationships and b) attractiveness of alternatives. Other researchers have
added another variable called “customer inertia”, which has been classified as a sort of
spurious loyalty (Bozzo 2002; Ranaweera & Neely 2003; White & Yanamandram 2004).
The concept of “customer inertia” means that customers might continue doing business
with the company even though they might have plenty of reasons to be dissatisfied (White
& Yanamandram 2004). For example, Colgate (1999) suggests that a very low percentage
of customers of financial institutions switch among businesses which might be an
indication of customers inertia or barriers to switching. Past researchers have used the
concept of customer inertia with two totally different meanings. Some used the concept to
show that customers do not switch due to a lack of attractive alternatives, high switching
cost or other switching barriers (Bozzo 2002). Other researchers established that
dissatisfied customers do not switch because of laziness or because they are
inactive/passive (Colgate & Lang 2001; Zeelenberg & Pieters 2004).
Panther and Farquhar (2004) concluded that dissatisfied customers with financial
service providers do not switch due to the following factors: (a) It is too much hassle to
change service providers, (b) They did not have the time to change or evaluate service
providers, (c) They were tied to the business because they had a product or other
commitment with their supplier, (d) They perceived all businesses in that product category
as similar, and (e) They have traditionally been with their current service provider and
intend to stay with them.
Julander and Soderlund (2003) proposed that switching barriers can be seen as positive
or negative. Hirschman (1970) explains these two concepts saying that positive switching
barriers are related to „wanting to be in a relationship‟ while negative switching barriers
are related to “having to be in a relationship”.
Suchen (2017) Types of switching costs include exit fees, search costs, learning costs,
cognitive effort, emotional costs, equipment costs, installation and start-up costs, financial
risk , psychological risk, and social risk . Customers face three types of switching costs:
(1) financial switching costs (e.g., fees to break contract, lost reward points); (2) procedural
switching costs (time, effort, and uncertainty in locating, adopting, and using a new brand
/ provider); and (3) relational switching costs (personal relationships and identification
with brand and employees)
INTRODUCTION:

Customer Satisfaction
Customer satisfaction is one of the most I mportant issue concerning business organization of all
types, which is justified by the customer oriented philosophy and the principles of continues
improvement in modern enterprise. For that reason, customer satisfaction should be measured and
translated into number of measurable parameter. Customer satisfaction measurement may be
considered as the most reliable feedback, providing client’ preferences and experiences in an
effective, direct, meaningful and objective way. Thus, customer satisfaction may be considered as
a base line standard of performance and a possible standard of excellence for any business
organization (Gerson, 1993).
Customer satisfaction is a complex construct. It has been defined in various ways (Besterfield,
1994; Barsky, 1995; Kanji and Moura, 2002; Fecikova, 2004). Recently, researchers have argued
that there is a distinction between customer satisfaction as related to tangible products and as
related to service experiences. This distinction is due to the inherent intangibility and perishes
ability of services, as well as the inability to separate production and consumption. Hence,
customer satisfaction with services and with goods may derive from, and may be influenced by,
different factors and therefore should be treated as separate and distinct (Veloutsou et al., 2005).
Customer satisfaction, for instance, is considered as a necessary condition for customer retention,
and assists in realizing economic goals like sales turnover and profit revenue (Zeithaml et al., 1990
; Berry and Parasuraman, 1991). Customer satisfaction is defined as “the customer’s response to
the evaluation of the perceived discrepancy between prior expectations and the actual performance
of the product/service as perceived after its consumption” (Tse and Wilton, 1988: 204). Indeed,
customer satisfaction has for many years been perceived as key in determining why customers
leave or stay with an organisation. Organisations need to know how to keep their customers, even
if they appear to be satisfied. Reichheld (1996) suggests that unsatisfied customers may choose
not to defect, because they do not expect to receive better service elsewhere. Additionally, satisfied
customers may look for other providers because they believe they might receive better service
elsewhere.

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Customer Loyalty
Customer loyalty can only be achieved after consistently meeting customer satisfaction. Time
constraint is almost a barrier to customer satisfaction as more and more unique ways are adopted
to meet the ever changing nature in the service industry. Organizations are developing advanced
methods to keep abreast with technology and how it affects the service industry. Customer
loyalty on the other hand is achieved after consistent record of meeting with clients over a period
of time and sometimes even exceeding customer expectations (Teich, 1997). Kotler et al. (1999)
states the cost of attracting a new customer may be five times the cost of keeping a current
customer happy. Gremler & Brown (1996) stated that the most important definition of customer
loyalty relating to this study; the degree to which a repeat customer shows signs of re-patronage
behavior, possesses a affirmative temperament toward the service provider, and considers only
using a single service provider when the intentions to re-purchase this service exists.
According to Bloemer & Kasper (1995), loyalty is interpreted as true loyalty rather than repeat
purchasing behavior, which is the actual re-buying of a brand, regardless of commitment.
Zeithaml et al. (1996) states loyalty is a multi-dimensional construct and includes both positive
and negative responses. However, a loyal customer may not necessarily be a satisfied customer.
Colgate et al. (1996) also noted that it is not always the case that customer defection is the
inverse to loyalty, while Levesque and Mc Dougall (1993) suggested that, “even a problem is not
solved, approximately half of the customers would remain with the firm”. This may be due to
switching costs, lack of perceived differentiation of alternatives, location constraints on choice,
time or money constraints, habit or inertia which are not related to loyalty (Bitner, 1990; Ennew
& Binks, 1996).
Consumers’ Behavioural Intentions
To compete successfully in today’s competitive marketplace, banks must focus on understanding
the needs, attitudes, satisfactions and behavioural patterns of the market (Kaynak and
Kucukemiroglu, 1992). Consumers evaluate a number of criteria when choosing a bank.
However, the prioritization and use of these criteria differs across countries, and thus cannot be
generalized. For example, in a study of Canadian customers in Montreal, Laroche and Taylor
(1988) found that convenience is the principal reason for bank selection, followed by parental
influence with respect to the status of the bank. In contrast, Kaynak and Kucukemiroglu's (1992)
study of the Hong Kong banking market discovered that customers choose their banks because of

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convenience, long association, recommendations of friends and relatives, and accessibility to
credit.
Social and technological change has had a dramatic impact on banking. These developments, such
as internationalization and unification of money markets and the application of new technologies
in information and communications systems to banking, have forced banks to adopt strategic
marketing practices. These have included offering extended services, diversification of products,
entry into new markets, and emphasizing electronic banking (Reidenbach, 1995; Mylonakis et al.,
1998). This greater range of services and products, along with improvements in communications
efficiency, could have a significant impact on customer satisfaction and consequent behavioural
intentions. As changes in the broad financial fields accelerate and business activities converge (i.e.,
the offering of insurance, financial planning, and share brokerage by a bank), it is imperative to
differentiate banking products from other similar or complementary ones that are offered by bank
affiliates or non-banks (Mylonakis et al., 1998).

Switching Barriers: Dissatisfaction of customers may lead them to switching behaviors.


Keavenay (1995) identified eight major causes for dissatisfied customers to switch to another
supplier. Some causes are associated with feelings of dissatisfaction with the service, but others
were extrinsic or situational factors. However not all dissatisfied customers engage in a switching
behavior (Jones & Sasser 1995). Some of them will not break the relationship with their suppliers
because of switching barriers. As defined by Jones, Mothersbaugh and Beatty (2000), a switching
barrier is any factor that makes it difficult or costly for customers to change providers. Switching
barriers have been classified differently according to various researchers. Ping (1993) classified
switching barriers as encompassing the following aspects for customers: a) lack of an attractive
alternative, b) high relationship investment and c) high associated costs with switching to another
attractive alternative. Jones, Mothersbaugh and Beatty (2000) divides these switching barriers into:
a) interpersonal relationships and b) attractiveness of alternatives. Other researchers have added
another variable called “customer inertia”, which has been classified as a sort of spurious loyalty
(Bozzo 2002; Ranaweera & Neely 2003; White & Yanamandram 2004). The concept of “customer
inertia” means that customers might continue doing business with the company even though they
might have plenty of reasons to be dissatisfied (White & Yanamandram 2004). For example,
Colgate (1999) suggests that a very low percentage of customers of financial institutions switch
among businesses which might be an indication of customers inertia or barriers to switching. Past

16
researchers have used the concept of customer inertia with two totally different meanings. Some
used the concept to show that customers do not switch due to a lack of attractive alternatives, high
switching cost or other switching barriers (Bozzo 2002). Other researchers established that
dissatisfied customers do not switch because of laziness or because they are inactive/passive
(Colgate & Lang 2001; Zeelenberg & Pieters 2004).
Panther and Farquhar (2004) concluded that dissatisfied customers with financial service providers
do not switch due to the following factors: (a) It is too much hassle to change service providers,
(b) They did not have the time to change or evaluate service providers, (c) They were tied to the
business because they had a product or other commitment with their supplier, (d) They perceived
all businesses in that product category as similar, and (e) They have traditionally been with their
current service provider and intend to stay with them.
Julander and Soderlund (2003) proposed that switching barriers can be seen as positive or negative.
Hirschman (1970) explains these two concepts saying that positive switching barriers are related
to „wanting to be in a relationship‟ while negative switching barriers are related to „having to be
in a relationship‟.
In terms of the positive or more reward-based type of switching barriers, businesses could
strengthen the interpersonal relationship between the customer and the supplier in order to keep
their customers (Berry & Parasuraman 1991; Tumball & Willson 1989). Colgate and Danaher
(2000) and Gwinner, Gremler and Bitner (1998) show that customers commit themselves to
establishing and developing relationships with a supplier that provides superior value benefits and
effective switching barriers are good examples of them. Such a relationship offers a lot of benefits
to the customer, such as social benefits (e.g., fellowship, personal recognition), psychological
benefits (e.g., reducing anxiety), economic benefits (e.g. discounts, time saving), and
customization (e.g., personalized service) (Berry 1995; Moon-Koo, Jong-Hyun & Myeong-Cheol
2004; Peterson 1995). A study done by Aldlaigan and Buttle (2005) that investigated customer
attachment to retail banks, divided this construct into three main areas: organizational credibility,
value congruency and relational values. The first relates to the level of trust that customers have
with their current banks. The second refers to the congruency of values between customers and
their banks. The last considers the personal relationships between customers and bank employees.

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With regard to the negative or more punitive type of switching barriers, businesses could use
„switching costs‟ and „lack of existing attractive alternatives‟ to prevent their customers from
exiting. Switching costs are customers‟ perceptions of the time, money and effort they expend
when changing service providers (Jackson 1985; Jones, Mothersbaugh & Beatty 2000; Kim, Kliger
& Vale 2003; Ping 1993). Studies have tested the association between switching costs and
repurchase intentions (Burnham, Frels & Mahajan 2003; Grace & O'Cass 2003; Jones,
Mothersbaugh & Beatty 2000; Nielson 1996; Ping 1993; Sharma & Patterson 2000) and several
researchers have concluded that switching costs are one of the most important reasons why
dissatisfied customers do not exit the business even though they may be dissatisfied (Beerli, Martin
& Quintana 2004; Burnham, Frels and Mahajan 2003; Caruana 2004; Colgate & Lang 2001).
The second variable called „lack of attractive alternatives‟ refers to customer perceptions
regarding the extent to which viable competing alternatives are available in the market place
(Jones, Mothersbaugh & Beatty 2000). Patterson and Smith (2003) see the existence of alternatives
as a key factor for switching. Several researchers have shown that when viable alternatives are
lacking, the probability of terminating an existing relationship decreases (Bendapudi & Berry
1997; Jones, Mothersbaugh & Beatty 2000; Sharma & Patterson 2000). Alternatively, when
customers perceive the existence of several attractive alternatives it is more likely that they will
switch (Bendapudi & Berry 1997; Jones, Mothersbaugh & Beatty 2000; Sharma & Patterson
2000). Therefore, if dissatisfied customers are unaware of the existence of other attractive
alternatives or if they do not perceive them as enticing, they are likely to stay in the relationship
(Patterson & Smith 2003).
The current research sets out to determine the dimensions that form the construct of switching
barriers for dissatisfied retail banking customers. The study considered five dimensions of
switching barriers, three of them are related to more positive categories of switching barriers (e.g.
organizational credibility, value congruency and relational values), while the other two are related
to more negative categories (e.g. lack of attractive alternatives and switching costs).

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Conclusion:

Once we have formulated the research problem the next step is to go through the literature
available. The preliminary task is very important and essential in order to acquaint ourself.
Literature review is an integral part of entire research process and makes valuable contribution to
every operational step. Though reviewing literature is time consuming and frustrating but also
rewarding.

It helps us to:

 Bring clarity and focus to our research problem.


 Improve our methodology.
 Broadens our knowledge.
 Contextualize our findings.

Procedure for reviewing the literature:

 Search for existing literature in your area of study.


 Review the literature selected.
 Develop a theoretical framework.
 Develop a conceptual framework.

For existing I have referred journal in pdf format provided by the company and have read various
articles on the internet. The primary study about the company helped me to understand how
company functions and what are the procedures, company follows.

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Switching Barriers Dimensions and Description
Definitions Dimensions
Organizational Credibility I have every confidence in this bank (Aldlaigan & Buttle
2005).
Relational Values I like to build relationships with the employees at this bank
(Aldlaigan & Buttle 2005).
Value Congruency I share the same values as this bank (Aldlaigan & Buttle
2005).
Switching Costs I am concerned about negative financial outcomes of
switching to another bank (Jackson 1985; Jones,
Mothersbaugh & Beatty 2000; Kim Kliger & Vale 2003;
Ping 1993).
Lack of Attractive Alternatives All banks are the same (Jones, Mothersbaugh & Beatty
2000).

Existing studies on the customer retention in the service are mainly focusing on the customer
satisfaction and the switching barrier [Dick & Basu, 1994; Gerportt, et al., 2001; Lee &
Cunningham, 2001]. Generally speaking, the customer with higher satisfaction tends to use that
service continuously. However, the necessity for the analysis on the other factors as other studies
shows that the customer satisfaction is not always significant to explain the customer retention
even it is an important factor having positive effect on the customer retention [Anderson, 1994;
Jones et al. 2002]. Recent studies identify that the switching cost, the interpersonal relationship,
the attractiveness of the alternatives and the recovery of the service are establishing the switching
barrier and have a large effect on the customer retention [Gwinner et al., 1998; Maute & Forrester,
1993; Smith & Bolton, 1998]. As the switching barrier gets higher and higher, the possibility of
sustaining the current service provider gets higher and higher, and the switching barrier acts the
adjustment variable between the customer satisfaction and the customer retention. Namely, the
customer retention rate can be different in the same level of the customer satisfaction when the

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switching barriers are different. Whereas accumulated result of the studies on the main effect and
the adjustment effect of the switching barrier are not sufficient [Colgate & Lang, 2001; Jones et
al., 2000; Lee & Cunningham, 2001].

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3. Research Methodology
INTRODUCTION:

It is very important to follow a proper and sequential procedure to do a research. The project
allotted to me has a lot of survey work so it was very essential to find out and decide in which
manner research should be done. If the market research is not done systematically then the
objectives said above cannot be achieved. For obtaining proper information the research conducted
should be controlled, rigorous, systematic, valid and verifiable, empirical and critical. Above
characteristics of any research made that very helpful to researcher.

STATEMENT OF PROBLEM:
The main problem in front of companies is to retain their customer base and acquire new customers
in this heavy competition. Companies put several barriers in order to prevent the customers from
switching to their competitors. This switching barrier create a huge impact on the customers mind.
Which decides their loyalty towards the organization. Therefore it is important to understand the
switching barriers levied on the customers by the company and its impact.

RESEARCH DESIGN:

Research design is overall strategy that you choose to integrate the different components of the
study in a coherent and logical way. It constitutes the blueprint for the collection, measurement
and analysis of data.

TYPES OF RESEARCH:

Research can be classified as follows:

 Basic Research
 Applied Research
 Problem oriented research

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 Problem solving
 Quantitative Research
 Qualitative Research

Based on Application:

Based on the application of research the research can be classified as:


a) Basic research
b) Applied research

Basic research:

Basic research involves developing and testing theories and hypotheses that are intellectually
challenging to the researcher but may or may not have practical application at the present time or
in the future. The knowledge produced through basic research is sought in order to add to the
existing body of research methods. For example - reading newspaper.

Applied research:

Applied research is done to solve specific, practical questions; for policy formulation,
administration and understanding of a phenomenon. It can be exploratory, but is usually
descriptive. It is almost always done on the basis of basic research.

Based On Objectives:

From the viewpoint of objectives, a research can be classified as


a) Descriptive
b) Co relational
c) Explanatory
d) Exploratory

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Descriptive research:

Descriptive research attempts to describe systematically a situation, problem, phenomenon,


service or program, or provides information about , say, living condition of a community, or
describes attitudes towards an issue.

Co relational research:

Co relational research attempts to discover or establish the existence of a relationship/


interdependence between two or more aspects of a situation.

Explanatory research:

Explanatory research attempts to clarify why and how there is a relationship between two or
more aspects of a situation or phenomenon.

Exploratory research:

Exploratory research is undertaken to explore an area where little is known or to investigate the
possibilities of undertaking a particular research study.
My research carries Descriptive and Qualitative research because I have to study the competitors
in financial sectors in Pune city.

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TYPE OF RESEARCH USED:

Qualitative research –
In Competitors study qualitative research is used for collecting, analyzing and interpreting data.
It is a method of inquiry employed in many different disciplines as per the requirement.

Inquiry Mode:
From the process adopted to find answer to research questions –
The two approaches are:

a) Structured approach
b) Unstructured approach

Structured approach:
The structured approach to inquiry is usually classified as quantitative research. Here everything
that forms the research process- objectives, design, sample, and the questions that we plan to ask
of respondents is predetermined.

Unstructured approach:
The unstructured approach to inquiry is usually classified as qualitative research. This approach
allows flexibility in all aspects of the research process.
In my research the inquiry mode used by me structured approach. The questionnaire is enclosed
in the Appendix’s.

Time of research:
The research was conducted for 2 months from 15th February to 15th March 2018.

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Type of Data:

Data used is Primary as well as Secondary type of data which is collected from different sources
through calling, E-mailing, by collecting all the details through Google and also through the
feedback obtained from the different people through questionnaire.
Total sample size: 100

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4. Data Analytics and Finding
The Result indicates reveal similar patterns in the two industries in respect to switching barriers.
The first of the four factors contains reasons related to apathy, the second fact contains negative
reasons for customers staying with their current service provider, the third factor related to
relationship variables and the final factor relates to service recovery. Results clearly indicate that
the first two factors are far more important than the latter two in terms of why customers stay even
when they want to seriously consider leaving.

Some of the most switching barriers faced by customers are as follows:

1. Exit fees – break/exit fees for service providers, utilities, banks, insurance and many more.
2. Search costs – efforts and costs associated with finding comparable alternatives.
3. Cognitive effort (or uncertainty) – time and specialized knowledge required to understand
differences between offerings.
4. Learning costs – time and effort required to master a different product.
5. Equipment, infrastructure costs – when switching requires you to replace or update
equipment, software or infrastructure.
6. Start-up or support costs – efforts and knowledge required to install or set-up new
equipment or software.
7. Financial risk – e.g. when switching requires a dedicated project (e.g. company-wide roll-
out of software).
8. Time & effort – exists most of the time unless the new solution is super intuitive.
9. Social risk – switching to a new environment at risk of losing existing relationships.
10. Emotional cost / psychological risk – loss aversion weighs stronger than gaining
something new.

Association between Switching Barriers and Customer Loyalty: Several studies have
shown a positive association between switching barriers and customer retention (Julander &
Soderlund 2003; Lee & Feick 2001; Ranaweera & Prabhu 2003). However, it is well known
that customer repurchase is not synonymous with customer loyalty. Customers may stop doing
business for different reasons (Jones & Sasser 1995). With regards to association between
switching barriers and customer loyalty, Colwell and Hogarth-Scott (2004) argued that

27
„hostage‟ behavior would decrease the likelihood of long-lasting relationships between
customers and businesses because customers would exit the business once they no longer felt
hostage to the relationship. On the other hand, other researchers have shown a positive
relationship between switching barriers and customer loyalty (Hirshcman 1970; Julander &
Soderlund 2003; Ranaweera & Prabhu 2003). For instance, Hirschman (1970) mentioned that
the likelihood of customer behavioural loyalty increases when the switching barriers are high
and in particular when the exit options are limited.
This study proposes that there are two different types of switching barriers -rewarding and
punitive ones- in line with Julander and Soderlund (2003). The investigation also proposes that
the influence of switching barrier on the loyalty of dissatisfied retail banking customers
depends on the type of switching barriers used by banks, but also on the dimension of loyalty
under study. Thus, the following guiding research question is proposed:
Q1. Is there an association between switching barriers and the attitudinal and behavioral loyalty
of dissatisfied retail banking customers?
With this in mind, the first propositions and hypotheses are formulated:
Proposition 1: The more rewarding switching barriers have a positive influence on both the
attitudinal and behavioral loyalty of dissatisfied retail banking customers.
H1-H6: There is a positive and direct association between the more rewarding switching
barriers and the attitudinal and behavioral loyalty of dissatisfied retail banking customers.
Proposition 2: The punitive switching barriers have a negative influence on both the attitudinal
and behavioral loyalty of dissatisfied retail banking customers.
H7-H10: There is a negative and direct association between the punitive switching barriers and
the attitudinal and behavioral loyalty of dissatisfied retail banking customers.
In addition the study conducted by Emanuelsson and Skoglund (2007) found that switching
barriers have a stronger influence on behavioral loyalty compare to the effect on attitudinal
loyalty. Thus, the next question, proposition and hypotheses were formulated:
Q2. Do switching barriers have a stronger effect on behavioral loyalty than on attitudinal
loyalty customers?
Proposition 3: The influence of the two types of switching barriers is stronger on the behavioral
loyalty of dissatisfied retail banking customers than on the attitudinal loyalty of those
customers.

28
H11-H12: The switching barriers have a stronger influence on behavioral loyalty than on
attitudinal loyalty.
Proposed Model: Based on the literature review, the investigation considered five switching
barriers components (three positive and two negative switching barriers), and two dimensions
of loyalty (attitudinal and behavioral). Consequently, six hypotheses are proposed for the first
proposition previously formulated and four for the other proposition. The arrows in Figure 1
indicate the direction of the association for each of the hypotheses. In addition two more
hypotheses were added related to the stronger or weaker influence of switching barriers on
attitudinal and behavioral loyalty. All 12 hypotheses were tested.

The model assumes associations among the variables participating in each group (switching
barriers or customer loyalty), but does not hypothesize about them, since the focus of the model
29
is on the association between groups. Our central concern relates to the influence of switching
barriers on customer loyalty.

Following are the interpretations of the questionnaire:

Total No of Respondent: 100

Age:

Age

45
35
5 15

20-25 26-30 31-35 36 AND ABOVE

Series 1
:

Majority of the Respondent who acquire financial services are from the range 36 and above.

Gender:

Gender

40% Male

60% Female

Majority for the respondent were Male.Majority of the Respondent were working in financial
sector and student.

30
Occupation:

Occupation

5%
20% Business
40%
Private sector Jobs
Govt. Job
Other

35%

Salary:

Earning/ Annum

40

35

15

10

2 LACS TO 5 LACS 6 LACS TO 10 LACS 11 LACS TO 15 LACS 16 LACS AND ABOVE

Earning per Annum

Majority of the respondent were having the package from 3 lacs to 5 lacs.

31
Types of Financial Services Acquired?

Types of financial services acquired

60

50

35

15
0

BANKING INSUARANCE MUTUAL FUNDS SECURITIES OTHERS

Series 1 Column1 Column2

People tend to buy only banking services as they are not aware or lack interest in investing in
other kind of financial services.

Organization from which financial services are acquired?

Current Financial Service Provider

35

25

20

10 10

HDFC ICICI KOTAK SBI OTHER

Series 1 Column1 Column2

Majority of the Respondent acquire the services from SBI.

32
Discrepancies found in services provided by the service provider?

Discrepancies Found

Yes
36%
40%
No
Maybe

24%

Around 40% of the Customer faces Discrepancies.

Ever Thought of switching to other financial services?

Thought of Switching

12%

Yes
No
28% Maybe
60%

Around 60% of the customer had a thought of switching to other financial services

33
Ever Switched to the other financial service provider?

Switched in past

25%
Yes
No
Maybe
9%
66%

Around 66% respondent don’t switch to other financial service provider.

If Yes then Why?

Better Return

Nil

Low performance

Many reasons

Terms and Conditions

Various charges being put up. Etc

34
Are you aware of Switching barrier being put up by an organization?

Awareness

5%
25%
Yes
No
Maybe

70%

People are unaware about the switching barriers they face being put up by the company.

Switching Barriers Encountered by the Company?

Switching Barrier

Apathy
14%
29% Exit fees
Financial risk
Time and Effort
29%
Social Risk
14% Other
3% 9% 2% All of the Above

people think switching to other financial services as a financial risk and they don’t trust other service
provider easily.

35
I find it easy to Overcome the barriers while switching the service providers.

Ease to Overcome the barriers


35

30

25

20

15 30 30 Sales
25
10

5 10
5
0
STRONGLY AGREE AGREE NEUTRAL DISAGREE STRONGLY
DISAGREE

Respondent has not thought of switching the financial services as a barrier and hence they find it easy in
overcoming issue.

Neccesity of switching barriers from customer point of view?

Necessity of switching Barrier

45

20
15 15

STRONGLY AGREE AGREE NEUTRAL DISAGREE STRONGLY DISAGREE

Series 1

Some People think barriers are necessary as they are coonsidering positive factors of the barriers and
some are considering it as negative.

36
Will ever return to previous service provider?

Willingness to Return to previous service


provider

16%
Yes

46% No
Maybe

38%

46% of the respondent are willing to return to theoier previous service provider

What Makes you stay with the same service provider?

Chart Title

52
45

30
26

10
5

SWITCHING COST TIME AND EFFORT APATHY SOCIAL RISK OTHER ALL OF THE
ABOVE

Series 1 Column1 Column2

There are Various reasons due to which the respondent stayed with their current service provider as
shown in above graph.

37
On the Scale of 1-10, How would you compare your current service provider with the past service
provider?

Rating to the Current Service provider

45

25
20
18

11 10
2 5 4 5

1 2 3 4 5 6 7 8 9 10

Series 1

38
5. Recommendations / Suggestions
This study shows that the Switching barriers are necessary for any company to sustain in
these competitive era but companies need to understand the difference between positive
barriers as well as Negative barrier implemented by them. They should also understand the
consumer’s behavior towards this barrier and therefore should implement only positive
barriers so that the customers should be loyal to company with their will and not by force.
The negative behavior could create the negative perception in the mind of the customer
and hence they might never return back to the company even if the services provided by
the company enhances.
Following are some of the factors that lead to the switching barriers of which an
organization should keep in consideration:
Factor 1: Organizational Credibility. This factor relates to the level of trust that customers
have toward their current banks. Higher levels of trust and credibility will reflect greater
customer attachment to their current bank, making it more difficult for them to want to
switch.
Factor 2: Value Congruency. This factor refers to the congruency of values between
customers and their banks. Customers would share similar values and ethical principles
and policies of investment among other things with the bank, and have a high level of
attachment with their current bank making it more difficult for them to engage in switching
behavior.
Factor 3: Switching Costs. This factor relates to the level of difficulty in switching to
another bank. Customers may want to switch to another bank but it may be difficult for
them to do so. They may have a product or two that may like, reason why they do not want
to switch to another bank at this time.
Factor 4: Lack of Attractiveness of other Alternatives. This factor refers to the lack of other
attractive alternatives for customers in the market. Customers may not switch to another
bank because they perceive that there is not another bank in the market that can offer the
high quality services they require.
Factor 5: Relational Values. This factor refers to the personal relationship between
customers and bank employees. Customers want to be recognized by their customer service
officer and they want to be treated well. Excellent relationships may lead to customers

39
valuing their current banks more highly and consequently making it more difficult for
customers to switch to another bank.

40
6. Conclusion:
 This study found there to be five types of switching barriers and supports a two dimensional
loyalty construct. Three of the dimensions could be associated with more positive or reward-
based switching barriers and two with more punitive types of switching barriers. The latter are
in line with the conclusions of previous past research (Aldlaigan & Buttle 2005; Kim, Kliger
& Vale 2003; Ping 1993). This underlying structure implies that it might be valid for banks to
use either punitive or more reward-based switching barriers to keep customers doing business
with them.
 In addition, the investigation provides new information in relation to the link between these
two types of switching barriers and the attitudinal and behavioral loyalty of dissatisfied retail
banking customers. The more rewarding switching barriers (e.g., organizational credibility,
value congruency and relational values) have a positive association with customer loyalty,
which is in line with the findings of Julander and Soderlund (2003). On the other hand the
punitive switching barrier of switching costs was shown to be negatively related to customer
loyalty. The lack of alternatives was not found to be associated with customer loyalty.
 The findings also suggest that both attitudinal and behavioral loyalties are highly correlated
and that switching barriers have a stronger effect on behavioral loyalty, in particular when
dealing with punitive switching barriers, such as switching costs. Considering these findings,
some managerial implications can be drawn. If banks that are facing high levels of customer
dissatisfaction want to retain their customers via the usage of switching barriers, it is
recommended that they use rewarding switching barriers because they will have a positive
effect on customer loyalty. Banks would increase customer retention in the short-term but it is
also likely that the customer will want to stay with the bank in the long-term. The usage of
punitive switching barriers, such as switching costs may have a positive influence on customer
retention in the short-term (Burnham, Frels & Mahajan 2003; Grace & O‟Cass 2003);
however, it would have a negative effect on customer retention in the long-term, especially
when the switching barrier no longer exists (Colwell & Hogarth-Scott 2004). Customers might
want to switch to another bank.

41
 The results demonstrate that banks should mainly use reward-based switching barriers to
prevent customers from switching to another bank, which is in line with the findings of
Vázquez-Carrasco and Foxall (2006) that claimed that positive switching barriers play a
greater role than the negative ones in determining customer satisfaction and retention. Banks
may be able to do this by increasing the level of customer trust, the value congruency and the
interpersonal relationship with customers. For instance, banks may sponsor charities and build
customer trust through public relations activities. If banks develop an image of a “good
corporate citizen” through public relations and publicity then their organizational credibility,
value congruency and relational values may improve in the eyes of customers. Banks could
also identify those customers who have a stronger perception towards either punitive or more
rewarding switching barriers. For them, banks might implement specific marketing strategies
that address that perception (e.g., customers with a strong positive perception towards
rewarding switching barriers could be given a more personalized service to develop a long-
lasting relationship).The implications of these findings for service provision in the banking
industry support the findings of Ranaweera and Prabhu (2003), that businesses should
implement policies and procedures to retain their customers by creating switching barriers that
add value to their services. To develop these barriers, banks may promote customers to become
co-creators of value as suggested by the new theory of service-dominant logic (Gummerson
2006; Kotler et al. 2003; Vargo & Lush 2004). To do so, banks should make sure they are in
constant communication with customers to improve the quality of the offering. Similarly, by
taking a positive approach to branding the image of their services and delivering feelings of
attachment based on trust and loyalty over time, the banking sector can ensure a more enduring
segment of brand loyal customers. On the other hand, implementing punitive brand switching
policies that prevent the customer from switching to a competitor have a negative (Barlow &
Moller 1996; Lovelock, Patterson & Walker 2004) effect on the feelings customers have
toward their bank.
 In terms of limitations of the study, first of all respondents in the sample were not treated
differently according to how they were classified by the bank in terms of their monetary value
per head to the bank. This is even more important considering the investigation undertaken by
Fernandes and Proenca (2008) that concluded that different situations coexist with different
consumers, which makes it harder to develop a general pattern to establish relationships with

42
customers. Hence it would be important to know if the conclusions vary depending on the type
of customer we are dealing with. This information would be very valuable to banks that choose
to treat individual customers differently according to the amount of money they are worth to
the bank. Another important limitation of the study is that it included dissatisfied customers
only. Future research may study the differences between dissatisfied and non-dissatisfied
customers regarding the influence of switching barriers on customer loyalty. Another area for
future research would be examining switching barriers in the online and offline banking
settings. This would be of particular interest in the banking context given the high adoption of
self-service technologies in this context.

43
7. Limitation
1) There are not many research paper available on this topics.
2) People i took as a sample proved to be of very reserved types as they were not ready to
share the information.
3) People were not also ready to fill the questionnaire as they gave many reason.
4) Those who agreed to give the information by filling the questionnaire wasn’t able to
understand the barriers they are facing and hence getting confused at various stages
while filling it.
5) Some of the secondary sources might have the copyrighted their information and
using them without permission can lead to various legal complications.
6) As during the secondary information gathering, we were totally dependent on
someone else’s effort. Primary researcher may have been biased or may have used
questionable methods to collect data; this can be pretty risky for outcomes based on
the secondary research being performed

44
FORMAT OF REFERENCES/ BIBLIOGRPAHY

BIBILIOGRAPHY:-
1. Journals :-
 The Impact of customer satisfaction on customer loyalty and intentions to switch in the
banking sector in Malaysia. (Anantha Raj A. Arokiasamy)
 Switching barriers in business-to-business services: a qualitative study (Venkata K.
Yanamandram(2006)
 The effect of switching barriers on customer commitment: an application to mobile phone
services (Klara Kövesi, Philippe Robert-Demontrond (2013))
 Service Quality, Relationship Quality and Customer Loyalty (Case Study: Banking
Industry in Iran) (2014)
 Impact of Service Quality on Customer Loyalty in the Hotel Industry: An Empirical Study
from Ghana (KOFI POKU, MARIAMA ZAKARI, AJARA SOALI (2013))
 Why Do They Leave? An Examination of The Reasons For Customer Defection in The
Business Banking Industry (Svetlana Bogomolova, Dr lenni Romaniuk (2005))
 Customer Loyalty in Financial Sector: A case study of Commercial Banks in Southern
Punjab (Syed Usman Ali Gillani , Dr. Abdul Ghafoor Awan (2014))

 A Research Proposal: The Relationship between Customer Satisfaction and Consumer


Loyalty (Jiana Daikh(2015))
 The Effect of Switching Barriers Types on Customer Loyalty (Fredy-Roberto Valenzuela
(2012))
 Applications Barriers to Entry and Exclusive Vertical Contracts in Platform
Markets(James Prieger , Wei-Min Hu (2010))
 The effects of customer satisfaction and switching barrier on customer loyalty in Korean
mobile telecommunication services. Telecommun Policy(Moon-Koo Kim (2014))
 Customer Satisfaction, Loyalty and Retention in Financial Services(Christopher Odindo,
James Devlin, (2012))
 The Effect of Satisfaction, Trust and Switching Barriers Service Provider on Customer

45
Loyalty (Mobile Phone Users of Iran Cell Campany In Iran)(Dr. Bahram Kheiry, Maryam
Alirezapour (2012))
 Impact of Customer Satisfaction on Customer Loyalty and Intentions to Switch: Evidence
from Banking Sector of Pakistan(( Faizan Mohsan, Muhammad Musarrat Nawaz , M.
Sarfraz Khan, Zeeshan Shaukat, Numan Aslam, (2011))
 On the relationship between perceived service quality, service loyalty and switching
costs(Ko de Ruyter and Martin Wetzels , Josée Bloemer (1997))
 The Effect of Switching Barriers on Customer Retention in Korean Mobile
Telecommunication Services (Moon-Koo Kim, Jong-Hyun Park, Myeong-Cheol Park
(2005))

Websites :-
https://www.emeraldinsight.com/doi/abs/10.1108/07363760110393001?fullSc=1&journalCode=jcm

http://www.clickandsave.eu/switching-barriers/

http://www.innovationtactics.com/switching-barriers-customers-love/

https://www.sciencedirect.com/science/article/abs/pii/S0148296310002079

46
Annexure:

Questionnaire

1. Name :
2. Age :
3. Gender : 1) Male 2) Female
4. Occupation : 1) Business 2) Private sector job 3) Govt. Jobs 4) Others
5. Salary: 1) 2-5 Lacs 2) 6-10 Lacs 3) 11-15 Lacs 4) 16 Lacs and above.
6. What kind of financial services do you acquire?

Banking
Insurance
Mutual Funds
Securities
Others

7. From which organization do you acquire financial services?

Hdfc
ICICI
Kotak
SBI
Other

8. Have you encountered any Discrepancy in services provided by the service provider?
Yes
No
Maybe
9. Have you ever thought of switching to any other financial service provider?
Yes
No
Maybe
10. Have you ever switched the financial service provider?
47
Yes
No
Maybe
11. If yes then why?_______________________________________
12. Are you aware about the switching barriers being implied by the companies?
Yes
No
Maybe
13. What switching barriers have you encountered by the company?

Apathy
Exit fees
Financial risk
Time and
Effort
Social Risk
Other
All of the
Above

14. I find it easy to Overcome the barriers while switching the service providers.
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree

15. Do you feel this barriers are necessary from the customer point of view?
Yes
No
Maybe

48
16. Will you ever return to the same service provider if the quality of services being enhanced
irrespective of the difficulties faced by you while switching the organization?
Yes
No
Maybe
17. What makes you stay with the same service provider who has not given you the exact
services as promised?

Switching Cost
Time and Effort
Apathy
Social Risk
Other
All of the Above

18. On a scale of 1-10, how would you compare your current service provider with the past
service provider?
19. Suggestions and Recommendation?

49