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Customer capabilities, switching costs, and bank performance

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  • Thomas H. Brush
  • Ramesh Dangol
  • Jonathan P. O'Brien

Abstract

Customers develop switching costs when they invest time and effort to develop capabilities required to optimally use a given product. Such capabilities are likely to be firm specific and cannot be transferred perfectly to competitors' product offerings. Customers who face switching costs are likely to remain with the same firm and consume complementary products that meet their needs. Thus, firms can achieve competitive advantage by exploiting customers' switching costs. In this paper, we hypothesize that the extent to which firms can benefit from customers' switching costs is contingent upon the firms' internal cross‐selling capabilities. We use online banking data to test our hypotheses and find that customers' switching costs contribute to banks' profitability only in the presence of high levels of internal cross‐selling capabilities. Copyright © 2012 John Wiley & Sons, Ltd.

Suggested Citation

  • Thomas H. Brush & Ramesh Dangol & Jonathan P. O'Brien, 2012. "Customer capabilities, switching costs, and bank performance," Strategic Management Journal, Wiley Blackwell, vol. 33(13), pages 1499-1515, December.
    • Handle: RePEc:bla:stratm:v:33:y:2012:i:13:p:1499-1515
    DOI: 10.1002/smj.1990
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    Citations

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    Cited by:

    1. Anders Pehrsson, 2019. "When are innovativeness and responsiveness effective in a foreign market?," Journal of International Entrepreneurship, Springer, vol. 17(1), pages 19-40, March.
    2. Dangol, Ramesh & Bahl, Mona & Karpak, Birsen, 2015. "Timing cooperative relationships with sequential capability development process to reduce capability development trade-offs," International Journal of Production Economics, Elsevier, vol. 169(C), pages 179-189.
    3. Dilashenyi Devi Selvarajah, 2018. "The Factor Influencing Brand Loyalty in Fashion Industry among Generation Y in Malaysia," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(4), pages 201-201, March.
    4. Hibbeln, Martin & Norden, Lars & Usselmann, Piet & Gürtler, Marc, 2020. "Informational synergies in consumer credit," Journal of Financial Intermediation, Elsevier, vol. 44(C).
    5. Rizkiah, Siti K. & Disli, Mustafa & Salim, Kinan & Razak, Lutfi A., 2021. "Switching costs and bank competition: Evidence from dual banking economies," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    6. Eriksson, Kent & Hermansson, Cecilia & Jonsson, Sara, 2019. "The viability of the bank advisory service business model - effects of customers' trust, satisfaction and loyalty on client-level performance," Working Paper Series 19/4, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    7. Eggenschwiler, Matthias, 2024. "A systematic literature review on the cluttered cross-selling and cross-buying subfield: A call to action," OSF Preprints 35kaj, Center for Open Science.
    8. Allen N. Berger & Christa H. S. Bouwman & Lars Norden & Raluca A. Roman & Gregory F. Udell & Teng Wang, 2024. "Piercing through Opacity: Relationships and Credit Card Lending to Consumers and Small Businesses during Normal Times and the COVID-19 Crisis," Journal of Political Economy, University of Chicago Press, vol. 132(2), pages 484-551.
    9. Chengyun Liu & Ziting Zhou & Kun Su & Ke Liu & Hui An, 2024. "Water risk and financial analysts' information environment: Empirical evidence from China," Business Strategy and the Environment, Wiley Blackwell, vol. 33(2), pages 1265-1304, February.
    10. Luciene Eberle & Gabriel Sperandio Milan & Celso Augusto de Matos, 2016. "Antecedents to Customer Retention in a Corporate Context," Brazilian Business Review, Fucape Business School, vol. 13(1), pages 1-23, January.
    11. Niloofar Abolfathi & Andrea Fosfuri & Simone Santamaria, 2022. "Out of the trap: Conversion funnel business model, customer switching costs, and industry profitability," Strategic Management Journal, Wiley Blackwell, vol. 43(9), pages 1872-1896, September.
    12. Mira Thoumy & Elie Abdallah, 2017. "Switching costs impact on customer retention in telecommunication," Competition and Regulation in Network Industries, , vol. 18(3-4), pages 198-216, September.
    13. Taiwen Feng & Dan Wang, 2016. "The Influence of Environmental Management Systems on Financial Performance: A Moderated-Mediation Analysis," Journal of Business Ethics, Springer, vol. 135(2), pages 265-278, May.

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