The effect of trust, communication, supplier's willingness to customize and switching costs towards customer retention in supplier relationship

Abstract

Customer retention and its antecedents are significant concerns to managers and suppliers in electronic industries. A lot of research have been extensively conducted on this issue in numerous contexts but research in the Malaysian electrical and electronic (E&E) industry is still scarce. The purpose of this study was to identify the effects of trust, effective communication, supplier’s willingness to customize and switching costs towards customer retention in supplier relationship. A total of 230 purchasing managers and supervisors of electronic manufacturing companies in the E&E industry in Malaysia participated in the study. Results of the partial least squares path analysis supported the hypotheses of this study regarding direct and indirect effects of supplier’s willingness to customize, effective communication, trust and switching costs on customer retention. Trust was found to have the mediating effects for the relationship between supplier’s willingness to customize, effective communication and customer retention. Switching cost has a moderating effect on the relationship between trust and customer retention. All dimensions of switching costs have different effects on retention, and financial switching costs has the highest moderating effect on the relationship between trust and customer retention. The findings of this research contribute to the empirical studies on the relationship marketing concept and social exchange theory in general and supplier’s willingness to customize, effective communication, trust, switching costs and customer retention particularly in the E&E sector in Malaysia. This study suggests the importance of knowledge of customer retention to assist managers of supplier companies to manage their customers effectively. Theoretical and managerial implications are discussed and a conclusion is drawn.