The role of economic and psychological costs in service elimination

Abstract

Service elimination (SE) requires systematic planning and execution to retain customers. However, service providers struggle with finding the best way to minimize customer churn following SE. This paper investigates the impact of economic and psychological costs on consumer reactions following SE with a scenario-based experimental design. The findings suggest that economic cost is positively related to churn and negatively related to satisfaction and commitment. Psychological cost decreases satisfaction and commitment, but does not affect churn. Interactions between costs show that psychological cost refines the impact of economic cost on customer reaction. This research contributes to the understanding of how SE impacts consumer behavior.