Contractual Obligations Between Mobile Service Providers and Users

Contractual Obligations Between Mobile Service Providers and Users

Robert Willis (Lakehead University, Canada), Alexander Serenko (Lakehead University, Canada) and Ofir Turel (McMaster University, Canada)
DOI: 10.4018/978-1-60566-054-7.ch155
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Abstract

The purpose of this chapter is to discuss the effect of contractual obligations between users and providers of mobile services on customer loyalty. One of the unique characteristics of mobile commerce that distinguishes it from most other goods and services is the employment of long-term contractual obligations that users have to accept to utilize the service. In terms of over-the-counter products, sold in one-time individual transactions in wellestablished markets, a strong body of knowledge exists that suggests that businesses may enhance loyalty through the improvement of quality and customer satisfaction levels. With respect to mobile commerce, however, this viewpoint may not necessarily hold true given the contractual nature of business-customer relationships. In the case of mobile computing, it is suggested that loyalty consists of two independent yet correlated constructs that are influenced by different factors: repurchase likelihood and price tolerance. Repurchase likelihood is defined as a customer’s positive attitude towards a particular service provider that increases the likelihood of purchasing additional services or repurchasing the same services in the future (e.g., after the contract expires). For example, when people decide to purchase a new mobile phone, they are free to choose any provider they want. In other words, repurchase likelihood is not affected by contractual obligations. In contrast, price tolerance corresponds to a probability of staying with a current provider when it increases or a competitor decreases service charges. In this situation, individuals have to break the existing contractual obligations. Currently, there is empirical evidence to suggest that the discussion above holds true in terms of mobile computing. However, there are few well-documented works that explore this argument in depth. This chapter attempts to fill that void. This chapter will present implications for both scholarship and practice. In terms of academia, it is believed that researchers conducting empirical investigations on customer loyalty with mobile services should be aware of the two independent dimensions of the business-customer relationship and utilize appropriate research instruments to ensure the unidimensionality of each construct. With regards to practice, it is suggested that managers and marketers be aware of the differences between repurchase likelihood and price tolerance, understand their antecedents, and predict the consequences of manipulating each one. It is noted that overall loyalty is not the only multidimensional constuct in mobile commerce. Recently, it was emperically demonstrated that perceived value of short messaging services is a second-order construct that consists of several independent yet correlated dimensions (Turel et al., 2007)

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