BUS 499 Module 3 Literature Review Example

What Research Says About Why Customers Leave Recurring Services: A Literature Review for a Pest Control Retention Study

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Business Administration Program, Aspen University

BUS 499: Senior Capstone

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Month Day, Year

What Research Says About Why Customers Leave Recurring Services: A Literature Review for a Pest Control Retention Study

The previous module set out three research questions and four hypotheses about why residential customers cancel quarterly service plans at Prairie Shield Pest Control, a composite company in Wichita, Kansas. Before collecting data, a researcher should know what others have already found. This review synthesizes research on why customers leave continuous services, organized around the factors the study will examine. It closes by identifying gaps and explaining how the review changed the study.

How the Search Was Conducted

I searched two business databases available through the Aspen library and Google Scholar, using combinations of terms such as customer switching, service retention, service failure, service recovery, payment timing and default enrollment. I then searched the reference lists of the most relevant articles for earlier work. I kept studies that examined why customers leave or stay with an ongoing service, or that tested one of the four factors in my hypotheses. I excluded studies of one-time purchases. The result is a small set of well-cited studies, described below by theme.

Theme 1: Why Customers Switch Services

Keaveney (1995) asked more than 500 service customers to describe the incident that led them to switch providers, across industries ranging from auto repair to dentistry, and grouped their accounts. Failures in the core service, such as mistakes or work that did not solve the problem, were the most common reason, followed by failures in the service encounter, such as rude or uncaring employees, and then by pricing. Many customers described more than one cause. Keaveney's findings suggest that price, which Prairie Shield's owners blame first, is a real but secondary factor, and that whether the service worked and how customers were treated matter more often.

Theme 2: Relationships and Encounters

Gutek et al. (1999) distinguished between service relationships, in which a customer repeatedly deals with the same provider, and service encounters, in which each interaction is with a different employee. In surveys of customers across several services, those in relationships reported greater trust, more satisfaction and stronger intentions to return than those who had only encounters, even with similar service. For Prairie Shield, routing software that sends a different technician each quarter may have turned relationships into encounters. This theme supports the second hypothesis about technician continuity.

Theme 3: When Something Goes Wrong

Smith et al. (1999) studied how customers evaluate service failures and the company's efforts to recover. Using experiments and a survey in restaurant and hotel settings, they found that satisfaction after a failure depends on whether the recovery matches the kind and size of the failure, including speed, apology and compensation, and that well-handled recovery can restore much of the lost satisfaction. In pest control, the most common failure is pests returning between visits. A fast callback that solves the problem is the recovery; a slow or ineffective one compounds the failure. This theme supports the third hypothesis about unresolved complaints.

Theme 4: How Payment Timing Feels

Gourville and Soman (2002) showed that the way people pay for a service affects how they experience its cost. When customers pay in a single sum, the cost feels large at the moment of payment, and its connection to later use weakens over time, making them more likely to stop using or renewing. When payments are spread evenly and tied to use, the cost and the benefit stay linked. A quarterly invoice of $129 arriving when a customer has seen no pests for months may feel like paying for nothing. This theme supports the first hypothesis about billing method.

Theme 5: The Power of Defaults

Madrian and Shea (2001) studied a large company that changed its 401(k) retirement plan so that new employees were enrolled automatically unless they chose otherwise. Participation rose dramatically compared with employees hired under the old system, who had to choose to enroll, and many automatically enrolled employees stayed at the default contribution rate. The study shows that inertia keeps people in whatever arrangement is presented as the default. Monthly automatic payment may retain customers partly because canceling requires action, while a quarterly invoice invites a decision. This raises an ethical point the study must address: retention driven by inertia is not the same as satisfaction.

Concept Matrix

The matrix shows that each hypothesis rests on at least one study, but none is supported by research in home services specifically. Bolton (1998), reviewed in the proposal, adds that customers early in a relationship give more weight to new experiences, which supports the fourth hypothesis about first-year customers.

Gaps in the Research

Three gaps stand out. First, most studies come from large firms or from industries such as telecommunications, banking and hospitality; little research examines small residential service companies. Second, the factors have usually been studied one at a time, while Prairie Shield's customers experience several at once. Third, few studies combine records of actual behavior with customers' own explanations. This capstone addresses all three on a small scale.

What the Review Changed

The review confirmed the four hypotheses but changed one. Smith et al. (1999) suggest that a failure followed by a fast, effective recovery may not increase cancellation at all, so hypothesis three will compare customers with unresolved complaints against both customers without complaints and customers whose complaints were resolved, rather than combining the last two groups. The review also added a question to the interview guide about whether customers would have stayed if billing had been monthly, prompted by the research on payment timing and defaults.

Conclusion

Research on continuous services points to failures in the core service and in personal treatment as the main reasons customers leave, with price playing a smaller role. One-to-one relationships, effective recovery, payment structures that link cost to benefit and default enrollment all appear to help keep customers. The next module designs a method to test these ideas with Prairie Shield's own records and customers.

References

Bolton, R. N. (1998). A dynamic model of the duration of the customer's relationship with a continuous service provider: The role of satisfaction. Marketing Science, 17(1), 45-65. https://doi.org/10.1287/mksc.17.1.45

Gourville, J., & Soman, D. (2002). Pricing and the psychology of consumption. Harvard Business Review, 80(9), 90-96.

Gutek, B. A., Bhappu, A. D., Liao-Troth, M. A., & Cherry, B. (1999). Distinguishing between service relationships and encounters. Journal of Applied Psychology, 84(2), 218-233. https://doi.org/10.1037/0021-9010.84.2.218

Keaveney, S. M. (1995). Customer switching behavior in service industries: An exploratory study. Journal of Marketing, 59(2), 71-82. https://doi.org/10.1177/002224299505900206

Madrian, B. C., & Shea, D. F. (2001). The power of suggestion: Inertia in 401(k) participation and savings behavior. Quarterly Journal of Economics, 116(4), 1149-1187. https://doi.org/10.1162/003355301753265543

Smith, A. K., Bolton, R. N., & Wagner, J. (1999). A model of customer satisfaction with service encounters involving failure and recovery. Journal of Marketing Research, 36(3), 356-372. https://doi.org/10.1177/002224379903600305