A CASE STUDY INVESTIGATING IN CUSTOMER DEFECTION - DiVA
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A CASE STUDY INVESTIGATING IN CUSTOMER DEFECTION Master Thesis, 30hp, spring 2012 Department of Business studies, Uppsala University Supervisor: Nazeem Seyed Mohamed Authors: Karolina Wolnik and Amela Svraka
Transcript of A CASE STUDY INVESTIGATING IN CUSTOMER DEFECTION - DiVA
A CASE STUDY INVESTIGATING IN CUSTOMER DEFECTION Master Thesis, 30hp, spring 2012
Department of Business studies, Uppsala University
Supervisor: Nazeem Seyed Mohamed
Authors: Karolina Wolnik and Amela Svraka
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Abstract
This master’s thesis investigates the Swedish American Chamber of Commerce (SACC) in
Chicago, a non-profit organization, in order to aid it with customer defection. The chosen
literature contributes to a better understanding of customer behavior, and thus, customer
defection, by examining customer retention, customer defection, switching behaviors, and
different gaps that can occur in the relationship between a service supplier and its customers.
Through a systematic combining approach and empirical findings gained through semi-structured
interviews with both executives and defected customers, this study reveals that the main reason
for customer defection is a perceived lack of value in their membership to the SACC, along with
the sentiment that their business-oriented expectations are not being met. As for the SACC, the
Board members have a varied range of views as to the value of defected customers, though
overall, acquisition is prioritized over customer defection strategies.
Keywords: Customer defection; Service Quality; Relationship Quality; Value; Gap-model
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ACKNOWLEDGMENTS
This master’s thesis was written during the spring semester of 2012 at Uppsala University.
After spending a great amount of time exploring and studying customer defection, the authors
would like to thank their supervisor, Nazeem Seyed Mohamed, for his valuable support and
guidance throughout the process. Further thanks as well to the SACC Chicago office, whose
participation and insightful responses not only made this thesis possible, but also resulted in
an enjoyable collaboration. A thank you to all interview respondents as well, who provided
vital data, and to family and friends for their support. And finally, thank you to the thesis
committee for their guidance and great suggestions.
We hope you will enjoy reading this thesis.
Karolina Wolnik and Amela Svraka
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Table of Content
1.INTRODUCTION ......................................................................................................................... 6
1.1 PROBLEM BACKGROUND ...................................................................................................................... 7
1.2 PURPOSE .......................................................................................................................................... 7
1.3 RESEARCH QUESTION AND OBJECTIVES .................................................................................................. 8
1.4 THE CONTRIBUTION OF THE STUDY TO RESEARCH ..................................................................................... 8
1.5 SACC CHICAGO- CASE COMPANY ......................................................................................................... 8
2. LITTERATEUR REVIEW ............................................................................................................. 10
2.1 THEORY OF STRATEGY ....................................................................................................................... 10
2.2 INTRODUCTION TO THEORY ................................................................................................................ 10
2.3 CUSTOMER DEFECTION ...................................................................................................................... 11
2.3.1 Tremination factors .............................................................................................................. 11
2.3.2 Widening Gaps ..................................................................................................................... 11
2.3.3 Gap model by Parasuraman et al ......................................................................................... 12
2.4 MANAGEMENT ................................................................................................................................ 13
2.4.1 Service Quality ...................................................................................................................... 14
2.4.2 Relationship Quality ............................................................................................................. 14
2.4.3 Value ..................................................................................................................................... 15
2.5 THEORETICAL SUMMARY ................................................................................................................... 16
3. METHODOLOGY ...................................................................................................................... 19
3.1 APPROACH ...................................................................................................................................... 19
3.2 RESEARCH DESIGN ............................................................................................................................ 19
3.3 DATA COLLECTION............................................................................................................................ 20
3.4 SAMPLE COLLECTION ........................................................................................................................ 20
3.5 INTERVIEWS .................................................................................................................................... 21
3.6 OPERATIONALIZATION ....................................................................................................................... 22
3.7 RELIABILITY AND VALIDITY .................................................................................................................. 23
4. EMPIRICAL FINDINGS .............................................................................................................. 24
4.1 DEFECTED MEMBERS ........................................................................................................................ 24
4.1.1 Termination Factors ............................................................................................................. 24
4.1.2 Expected and Perceived Service ............................................................................................ 25
4.2 STATISTICAL FINDINGS ...................................................................................................................... 27
4.3 MANAGEMENT ................................................................................................................................ 30
4.3.1 Current View on Customer Defection ................................................................................... 30
4.3.2 Current Customer Defection Strategy .................................................................................. 31
4.3.3 Rejuvenation of the Board and Their Action Plan ................................................................ 32
4.3.4 Future networking abilities and events ................................................................................ 32
5. ANALYSIS ............................................................................................................................... 34
5.1 DEFECTED MEMBERS ........................................................................................................................ 34
5.1.1 Termination factors .............................................................................................................. 34
5.1.2 Precived and expceted service .............................................................................................. 35
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5.2 MANAGEMENT IMPROVEMENTS ......................................................................................................... 36
5.2.1 Hands-on tasks ..................................................................................................................... 36
5.2.2 Service and relationship quality............................................................................................ 37
5.2.3 Value ..................................................................................................................................... 38
6. CONCLUSIONS ........................................................................................................................ 39
6.1 FURTHER RESEARCH ......................................................................................................................... 40
REFERENCES ............................................................................................................................... 41
APPENDIX 1. MEMBERS BENEFITS ........................................................................................................... 44
APPENDIX 2. INTERVIEW SACC CHICAGO ................................................................................................. 47
Tabel 1. Respondents Background ............................................................................................... 47
Initial Outline questioner: Boards of directors ............................................................................... 48
APPENDIX 3. INTERVIEW DEFECTED MEMBERS ........................................................................................... 49
Tabel 2. Respondents Background ............................................................................................... 49
Initial Outline questioner: Defected members ............................................................................... 50
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1. Introduction
This section provides an introduction and explanation of the topic’s interest and importance.
It continues with a presentation of research question and objectives, ending with background
information about the case company and contribution to further research.
In the late 80’s the main literature and research regarding service organizations and customer
satisfaction was mainly focused on financial numbers, employees and the resources the
company had access to. There were not too many organizations focusing on the true meaning
of customer satisfaction and creating a better quality in the relationship between the service
supplier and its customers (Berry, 1983). During the 1990’s something changed. Companies
and organizations started to change their focus meaning that they became much more focused
and concerned about their customer’s satisfaction, providing value to the customers and think
about how the company would be able to achieve quality improvements. Firms started to
create so called “quality improvement programs” due to the fact that a clear link between
satisfied customers and higher quality was noticed. This generated higher consumption of
services among the customers which gave the companies bigger profits (Ibid:25). In the
Harvard Business Review the authors Grant and Schlesinger, started during 1995 to discuss
gaps that could occur in relationships between the service supplier and its customers if the
customer was not receiving the expected service he or she was paying for. Berry (1983) had
before that looked into what so called “full-potential profitability” really meant for managers.
His research showed how important it was for managers to look over how long their
customers tend to remain in the relationship and what were the biggest reasons for
termination.
The reason why service quality, relationship quality and meeting customers’ demands have
become highly relevant for companies is because of the high competition out on the market
(Grant & Schlesinger, 1995). To be able to keep customers, old and new ones, firms have
realized throughout decades that when meeting customers preferences and providing them
with the service they are expecting customer tend to show a great amount of loyalty (Ibid.)
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Recently researchers started to see a clear link between customer not receiving the expected
value and termination. This specific question has become of great importance in this field for
the management teams but also for researcher who are investigating in this specific topic, to
be able to see “how customer’s assessments of services influences their subsequent behavior”
(Bolton, 1998:45). Firms are now, as well as researchers, realizing the potential monetary
losses, as a result of discontinuation of these relationships however there haven’t been
devoted sufficient time to investigate in the termination of relationships (Athanasopoulou,
2009).
1.1 Problem background A case study of the Swedish American Chambers of Commerce (SACC) in Chicago gives an
opportunity to look further into this field. One of the authors completed an internship at the
case company which motivated the authors to look deeper into SACC as an organization. Due
to its non-profit nature, customer defection has a great impact on an organization like SACC,
as they are highly dependent on members to generate income so the business may operate; as
such, membership fees are essential for their survival. The organization plays an essential role
not solely for their members, as well as the continuous growth and development of
transatlantic relations between Swedish and American firms.
If not focusing on customer defections and allowing members to leave without gaining further
insight into their grounds for defection, the SACC that is going through this problem right
now ,could suffer even more in the long-term should further members share the same
sentiment and discontinue their membership. This would not only impair their operations, but
also have a detrimental effect on remaining members who would not be able to receive the
same level of business services that they expect, thus making the SACC less effective and
unable to fulfill its purpose.
1.2 Purpose The goal of this study is offer the SACC some insight into customer defection within the
service sector; more specifically, to help the Board of Directors understand why some of their
members have discontinued their membership. Further to investigate in their current strategy
towards preventing customer defection. The knowledge gained concerning reasons for
defection and its view in the organization can help the Chamber improve their business and
prevent future defection.
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1.3 Research question and Objectives
Research Question:
Which customers have terminated their memberships with the Swedish American
Chamber of Commerce in Chicago between the years of 2009 and 2011, and what
were the reasons behind these terminations?
Three main objectives were examined to explore this research question and fulfill the aim of
this case study:
What do the members say is the reason or reasons behind the discontinuation of their
memberships?
Are there any patterns among the members who have defected? For instance, does one
industry have more defectors than another?
What are the opinions among the Chamber’s Board concerning customer defection?
More specifically, does the Board of Directors value the importance of customer
defection strategies; what kind of strategy do they have; and which weaknesses exist
in this strategy?
1.4 The contribution of the study to research This study is not simply the fulfillment of the Chamber’s request, but may also serve to
contribute to literature in the field of customer behavior. Current literature indicates that
companies are realizing the loss of both financial and non-financial value inherent in customer
defections (Athanasopoulou, 2009). However, executives require more research-based
knowledge about why customers decide to defect to better run their businesses, which the
authors aim to contribute to through this case study. The goal of this study is to lay the
foundation for a better understanding of customer defection and how companies may combat
this growing trend.
1.5 SACC Chicago- Case company Across the United States, there are currently 19 Swedish American Chambers of Commerce
operating and interacting with over 2000 members. All of the chambers are non-profit
organizations and their main mission is to act as a “nationwide business network” for their
members by assisting with the establishment of connections with potential business partners
in the USA. The SACC was established in the United States in 1906; since then, it has
become an umbrella organization that serves both Swedish and American citizens. With its
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2000 members, the SACC is the second largest European Chamber of Commerce in the
United States. (www.sacc-usa.org).
During the late sixties, the SACC began operating in Chicago, Illinois. The Chicago Chamber
covers the states of Illinois, Indiana, Iowa, Missouri, and Wisconsin – with 43 million citizens
in total, this makes SACC Chicago the second largest Swedish American Chamber in the U.S.
Like the other Chambers, their purpose is to encourage and promote Swedish trade and
business; thus, they organize a wide variety of business events, at which members are given
the opportunity to develop and promote their businesses. Normally, there is one event or
meeting per month (sacc-chicago.org).
According to SACC Chicago, they offer many benefits to their members, such as a Business
Matchmaking Service, Corporate Branding, Marketing and Sales Programs, Custom Tailored
Trade Missions, Invitations to Swedish American Entrepreneurial Days and a Monthly
Membership E-Paper (please see appendix, page 44-46). There are different levels of
membership to better serve businesses: corporate memberships are for no more than five
individuals, business memberships are for up to three, individual memberships are for those
over the age of thirty-five, and Young Professional memberships are for students and
individuals under the age of thirty-five (sacc-chicago.org).
Membership Fee
Corporate membership $450.00
Business membership $275.00
Individual membership $140.00
Young Professional
membership
$50.00
Figure 1.1 Membership fees SACC Chicago (www.sacc-chicago.org)
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2. Litterateur Review
This section presents the theory of strategy, along with an introduction to the literature and
theories in this field. The chapter ends with a theoretical summery, highlighting the most
interesting and relevant themes found in the research.
2.1 Theory of Strategy The literature was found via the JSTOR, EBSCO and Google Scholar databases. Key words
consisted of; “customer defection”, “lost customers”, “consumer behavior”, “relationship
marketing”, “expected and perceived services”, “value”, “gap models”, etc. The chosen
literature mainly concerns customer retention, customer defection, and switching behavior, as
each of these topics contributes to the understanding of customer behavior, and, more
specifically, customer defection. Theory section has been rewritten several times due to the
systematic combining approach, which will be described later in the methodical part of the
paper.
2.2 Introduction to Theory “A lost customer is one who has established a relationship with the company but now has
terminated the relationship” (Homburg et al., 2007:461).
In comparison to literature regarding customer acquisition and retention, research pertaining
to customer defection is quite rare. Jet, researchers have found that attracting new customers
is five times more costly than retaining existing ones. Recently, companies have become more
aware of this dilemma, and have begun focusing on strategies to win back lost customers
(Athanasopoulou, 2009).
The following theory review was constructed from both the point of view of an organization
and of its customers. The section will begin to discuss the issue from the customer’s point of
view, also examining gaps that may occur between the customer and the organization. Since
the interviews conducted with the SACC defectors indicated that one of the primary reasons
for defection concerned perceived service quality, Parasuraman et al.’s (1985) Gap Model
was examined. The following part brings up theory pertaining to the managerial relationship
to the problem of customer defection, and delves into the most essential details that
management must concentrate on to improve.
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2.3 Customer defection
2.3.1 Tremination factors
Service quality is often identified as an attitude that is the result of the interaction between a
firm and its customer. When a customer is consuming a product or service, they are also
observing the company’s service performance, and their opinion of the quality of this service
will always be subjective (Shepard, 1999). Even though service quality affects behavior
intention and customer satisfaction, it does not always lead to behavior change (Ibid.)
Keaveney (1995) has demonstrated that even satisfied customers may terminate a relationship
to switch to a different company. For this reason, studies examining financial constraints, a
lack of alternatives, switching costs, and habits are also important, as these factors affect
loyalty. Keaveney (1995) developed the first model to explore, from the customer’s
viewpoint, why they switch or terminate relationships in service industries. This model
identifies eight principal factors: core service failures, service encounter failures, pricing,
inconvenience, employee response to service failures, attraction to competitors, ethical
problems, involuntary switching, and seldom mentioned incidences. Six of these factors are
manageable and can be organized to prevent customers to switch (Ibid.).
2.3.2 Widening Gaps
Parasuraman et al., (1985:44) explains that a widening gap is a “gap between the expected
service and the perceived service in different functions in a service company's production that
can be seen from two different perspectives; from a company’s perspective and from the
costumer’s point of view”. An important step for companies hoping to maintain or win back
defected customers is to determine the gap between market demand and the company’s
capacity to meet these demands, and understand why that gap is widening (Day, 2011).
When a company has a widening gap, their profitability is suffering, but they are also losing
future market competitiveness (Ibid). Once a company discovers such a gap, they must search
for ways to narrow it and repair the relationship with their customers in order to gain an
advantage over competitors. Day (2011: 183) claims that the main challenge for companies
who discover this is “to seize the opportunity for advantage out of the confusion created by
accelerating market complexity”.
Grönroos (1993:37) was the first to present a service quality model to explain how the
costumer perceives service quality and to determine how it can be influenced: “Perceived
quality of a given service will be the outcome of an evaluation process, where the consumer
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compares his expectations with the service he perceives he has received”. The quality of the
service therefore depends on two variables: expected service and perceived service. The
perceived service quality may depend on marketing activities such as advertising and pricing,
which are promises made to the customers that influence expected service. Grönroos (1993)
recommends that marketing activities should reflect a company exists technical and functional
quality, as increasing expectations may lead to customers becoming dissatisfied with the level
of service they receive. Grönroos model/research (1993) gives the reader a good overview
when it comes to receiving the expected service or not, but to get an even more deeper
understanding of the situation that can occur, Parasuraman et al., (1985) model will be used
for further explanation.
2.3.3 Gap model by Parasuraman et al
Parasuraman et al., (1985) have developed a service gap model that shows the different gaps
in a relationship between a company and its customers. The model raises two different aspects
of possible gaps: the customer’s vision and the company’s point of view.
Figure 2.1 Service Gap Model (Parasuraman et al., 1985)
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This model shows how the quality of service can be perceived. The different gaps in the
model show the customers assessment of the service quality that is being provided to them.
Three main factors have a great impact on how the customer perceives the service he or she is
buying: worth-of-mouth, personal needs and past experience. The service quality that a
customer gets from an organization depends on the “size and direction” of gap number 5.
Meaning, that if gap number 5 is too big, the service the company is providing its customers
with, is not meeting the expectations the customer initially had when he or she decided to buy
the service. A big gap between the expected and the perceived service can mean very risk full
business for the organizations and can end the relationship the organization have with their
clienteles. On the other hand, if gap number 5 is small, or does not exist at all, this means that
the company is doing a good job when it comes to meeting their customers’ expectations with
the service they are providing them with. But this does not mean that the company should stop
there and fill satisfied with their work, instead they should get even more engaged and try to
develop even more (Parasuraman et al., 1985).
Looking at the figure one can see that gap number 5 depends on all of the rest of the gaps in
the model. Meaning that GAP 5 = f(GAPl,GAP2,GAP3,GAP4). If gap number five turns out
to be rather big in a relationship the service supplier, in this case the company needs to look
over their internal actions. The management needs to look deeper into what they themselves
think that the customers are demanding from them and what service the customers actually
percives (gap 1), they need to translate the true meaning of service quality (gap 2), make sure
that they turn that translation into real service quality (gap 3) and get to know how good the
external communication really is compared to the service delivery (gap 4) (Ibid.)
2.4 Management According to Hart, Heskett & Sasser Jr (2000), the golden rule of business is not to be in the
position of losing customers; thus making management’s concentration and awareness of all
customers imperative. Reicheld (1996) states that ambitious managers and companies most
often want to link their business strategies to success stories, but in order to have success
stories, the Board of Directors and company as a whole must sometimes examine their past
failures. Today, many companies perform a “Root Cause Analysis”, which entails asking
themselves five times why customers have decided to terminate doing business with them or
why they have stopped consuming their products. This allows them to explore multiple
aspects and factors, rather than focusing on only one (Ibid.)
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Reichheld & Sasser (1990) not only stress the importance of winning back customers, but also
declare how vital these defected customers can be in providing insight towards improving
business. Tokman, Davis & Lemon (2007) underscore the value of implementing a zero-
defect culture within the organization, meaning that all employees understand the importance
of keeping customers and, as a collective, work towards that goal. This includes educating
employees about the problem of defection and establishing common objectives and initiatives
for a more cohesive approach.
2.4.1 Service Quality
Literature regarding service quality has demonstrated a correlation between behavioral
intention and service quality, where the perceived service quality influences the behavior
intentions and can signal whether or not a customer will defect (Zeithaml, Berry &
Parasuraman, 1985). When examining quality, it is often the company’s salespeople that play
the most critical role in the service delivery chain (Shepard, 1999). A large number of studies
have been conducted on this particular topic, but few studies have delved into service quality.
David Sheperd (1999) conducted a study regarding the link between personnel and service
quality; he deduced that when companies measure service quality of existing customers only,
they deprive themselves of the opportunity to pinpoint their competitive position. So, when
measuring service quality, taking defected customers into consideration is imperative for
prioritizing quality improvements.
2.4.2 Relationship Quality
In the field of Relationship Marketing, the Relationship Quality (RQ) has become an
important and popular topic. Roberts, Varki & Brodie (2003) stress that RQ is a better
predictor of behavioral intentions than service quality. There are four dimensions that indicate
the quality of a relationship: trust, satisfaction, commitment, and affective conflict (Roberts,
Varki & Brodie, 2003). The trust dimension is divided into credibility and benevolence trust,
where the former is based on customers’ belief in the firm’s sincerity, and the latter reflects
whether the company is concerned with the welfare of their customers. Satisfaction is a
customer’s cognitive and affective evaluation, grounded in their personal service experiences
with the firm. Commitment reflects the process of problem resolution, and the affective
conflict dimension is a negative indicator of RQ. The RQ thus demonstrates that managers
must not only focus on the quality of the service they provide, but also on the quality of their
customer relations.
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Satisfying the customer demands a great time investment. There are three steps that managers
must take into consideration to establish loyal, qualitative relationships with their customers:
they must clearly define their target customer, measure customer satisfaction in a variety of
methods, and understand the full meaning of the customer’s satisfaction in a qualitative
relationship (Jones & Sasser, 1995).
According to the authors Jones & Sasser (1995) when a customer is completely satisfied, he or
she tends to remain loyal to the relationship – thus, relationship quality is achieved. When the
customer is just satisfied, the company can easily lose the customer, meaning their loyalty
varies. Finally, if a customer is dissatisfied, they may stop being loyal and end the relationship
– thus the relationship quality is weak. Studies show that to maintain customers as completely
satisfied, the company must provide world-class service. Thus, customer-management
interaction must be high, with management not only taking customer demands into
consideration, but also determining how customers perceive the service they are being
provided. When it comes to relationship quality, it is crucial to consider that “the gap between
satisfied customers and completely satisfied customers can swallow a business” (Jones &
Sasser, 1995:2). Although much research has been conducted on this area, other researchers
have suggested that value, rather than quality, is the main factor in customer behavior and
loyalty (Roberts, Varki & Brodie, 2003).
2.4.3 Value
Researchers favoring the value concept claim that it is more flexible and adaptable in
explaining changes in consumer behavior, as quality is an absolute measure, whilst value is
relative. Research has shown that perception of value delivery can vary between managers
customers – however, researched refer to this as ‘fuzzy concepts’, as it is usually
conceptualized in relation to other concepts (Gallarza, Gil-Saura & Holbrook, 2011).
Hills & Jones (1998:88) state that, “value creation occurs when a firm is able to advance and
come up with something that is unique for its customers, something that fulfills and satisfies
the customer’s needs”. According to Reicheld (1996), the reason why many organizations and
firms fail and start losing customers is because they lose focus of this. Instead of focusing on
value creation, they examine different measurements and analyses and become purely profit-
driven, resulting in the adoption of short-term solutions when customers begin defecting. Yet,
defecting customers possess the most valuable information, as they have often had long
relationships with the company (Ibid.).
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A company’s value is composed of three different aspects: employees, processes, and
customers. A firm seeking to gain a competitive advantage must offer a greater value than
their competitors among these aspects. To do so, they must determine which aspects are
positive drivers in customer-value creation. Barriers, however, do exist that hinder such
exploration (T.R Lin & J. Lin, 2006). Errget & Ulaga (2002) explain that value creation can
be compared to competition: if a firm can deliver a better trade-off, where their products and
services offer more benefits than their competitors’, they offer a greater value and establish a
sustainable competitive advantage. Further, if a company aims for long-term profitability and
progress, they must focus on the creation of real value.
2.5 Theoretical Summary As stated in the introduction, the field of customer defection is far from fully explored
(Athanasopoulou, 2009). The main concepts found in the literature review are summarized in
the table below, which attempts to summarize the fundamental and most essential theoretical
findings into a guideline that may facilitate further investigation of problems and
opportunities. The left-hand box summarizes earlier literature on factors that have made
customers defect. The middle box summarizes what earlier researchers suggested
management should take into consideration in order to improve. The table is constructed as a
process, with the reader intended to follow the direction of the arrow, going from left to right.
The initial step is to investigate why customers have left, followed by an investigation of the
current management approach to identify the existing problem, and ending with making
improvements.
These concepts are intertwined and vital for understanding customer defection; they present
factors that greatly impact each other and customers in their decision to discontinue their
relationship with a company.
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Figure 2.2 Customer Defection
As stated, the left box summarizes earlier findings on why customers have decided to defect.
For instance the previously defined determination and switching factors by Keaveney (1995):
core service failures, service encounter failures, pricing, inconvenience, and employee
response to service failures, attraction by competitors, ethical problems, involuntary
switching, seldom mentioned incidences, financial constraints, lack of alternatives, switching
costs, and habits.
The second aspect of this section brings up the previously discussed gap between expected
and received (perceived) service. In this filed Parasuraman et al., (1985) gap model explains
this phenomenon in a very clear and precise way. The quality of the service that is being
offered to a company’s customers is essential and it has a strong connection to the “size and
direction” of gap number 5, which is the most important and relevant gap for this thesis due to
the choice of topic regarding customer termination. Meaning that if gap number 5 is too big,
the service the company is providing its customers with, is not meeting the expectations the
customer initially had when he or she decided to buy the service. A big gap between expected
and perceived service can be dangerous for the organizations, and it can sometimes swallow a
whole business meaning termination in the relationship between a company and its customers.
The middle box raises theories of management approaches towards customer defection with
the aim of reducing them. Hands-on management mainly incorporates full awareness of all
customers (both existing and defected), examining past failures, winning customers back,
benefiting from the insight defected customers provide, and establishing a zero-defect culture.
Defected Customer
• Termination factors
• Gap between Perceived and Expected service
Managment Approach
• Hands-on managment tasks
• Service quality and relationship quality
• Value
Improvements
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The second aspect concerns the quality of both the service and relationship, while
emphasizing the importance of measuring both. The third and final aspect of this section
concerns the value concept, stressing the importance of creating a better value than that
offered by competitors.
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3. Methodology
The following section will present the methodological choices for the study, including
research approach and design, data and sample collection methods, a detailed description of
the interview process, an empirical study description, and the limitations of the method.
3.1 Approach The approach in this paper is based on systematic combining, which is an abductive approach;
this method was selected as it aims to refine existing theories rather than invent a new one
(Dubois & Gadde, 2002). Through continued movement and development between an
empirical and theoretical world, the approach avoids forcing a chosen theory to fit with
reality, which also facilitates the avoidance of the author’s involvement. Theory, empirical
findings, and the case analysis evolve simultaneously (Ibid.). As previously stated, one of the
authors completed an internship at the case company, which allowed for an understanding of
the problem and situation. In the second step, the authors conducted research to find relevant
theories applicable to the case company. After the empirical study was conducted, the theories
were revisited for further exploration, which is reflected in the theoretical summary to
highlight the topics that were most relevant to the case company.
3.2 Research design
The study is both explanatory and exploratory, as it both explains the current situation within
the organization and its Board Members, and investigates the gap that exists between SACC
Chicago and its members, and also the gap that exists in the theory (Patel & Davidsson,
2003).
The research is based on a single case study of SACC Chicago and a portion of their defected
members. A single case study allows for a more in-depth understanding of the existing
problem and situation (Saunders et al., 2009), and can answer questions such as “why”,
“what” and “how” (Yin, 2003). This is a cross-sectional study based on interviews conducted
over a short time period of three months; this means that the study is descriptive and is used to
describe the case and define the problem the organization is facing (Saunders et al., 2009).
Organizational data was also used to map how many members had terminated their
membership, and to determine if there was a clear pattern within various industries. The data
mining from the SACC Directory was of quantitative nature, meaning that it was collected in
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numerical form with the aim of identification. The quantitative research was linked to the
empirical study when the investigated and analyzed collected data was turned into diagrams
and statistics. In this way, knowledge of the customer defection among the SACC was
deepened.
3.3 Data Collection The theoretical framework is based on secondary data like books, articles, and papers. To
avoid biased or inaccurate work, most of the publishers examined were well known. To form
a critical point of view, different sources have been used to view the literature. Further,
guidelines and information from lectures held at Ekonomikum at Uppsala University from
January to March 2012 proved to be applicable.
The data collection method for this study consisted of primary data gathered from interviews:
three were conducted with members of the Board of Directors of SACC Chicago, and twelve
were conducted with defected customers. As previously mentioned, secondary data was
gathered from the register of the SACC’s members, which went back three years. This made it
possible to count, compare, and categorize defected members, while the three year time
period ensured that interviews members had strong and clear memories of their experiences
with the Chamber. The time period was also chosen due to the amount of information that was
limited by the time restriction.
3.4 Sample Collection The three respondents for the interviews with members of the Board of Directors of SACC
Chicago were selected based on advice from the Executive Administrator for SACC Chicago
and the interning author. Each respondent was a member of both the Board of Directors and
the Membership Committee; the Board is the decision-making body of the SACC and has the
greatest impact on membership questions, thus making it crucial to investigate the members.
Two of the respondents had been on the Board for a long period of time, and thus had a great
deal of experience with existing, new, and old members. One of the respondents had been
recently elected to the Board, which meant that they could offer a fresh point-of-view. As for
the Membership Committee, they have been involved in the Swedish community in Chicago
for many years and have a varied set of knowledge in many fields. (For more information,
please see appendix page 47.) Due to distance constraints, these in-depth interviews were
conducted via Skype.
21
Of the twelve defected members that were interviewed, five participated in in-depth
interviews via Skype (three members who left in 2009 and two who left in 2010)1 and seven
were interviewed via email due to time constraints, four members left in 2009 and three in
2010. The respondents represented the different membership categories. (For more
information, please see the Appendix page 49.)
3.5 Interviews Each of the members that terminated their memberships with SACC Chicago between 2009
and 2011 were contacted via email three times over a period of three months to extend an
invitation to participate in the case study. Twelve defected members decided to participate.
The interviews were semi-structured, with key questions and themes prepared in advance.
This allowed the authors to maintain a clear purpose and direction throughout the research
process (Saunders et al., 2009). Each of the interview participants, both defected members and
the Board Members, opted to be anonymous. The initial interview guide (please see Appendix
page 48-50) provided a structure that ensured the coverage of all themes during the
interviews. At the same time, the open-ended questions allowed for flexibility, which
permitted for the exploration of new angles depending on the interview; respondents were
also able to define and describe specific situations, thus allowing for a deeper understanding
(Ibid.). Follow up questions were conducted with some defected members, mainly due to the
systematic combining approach. These were done via Skype or email, depending on
respondents’ time.
Skype interviews with members of the SACC Board of Directors and defected members
ranged from 45 to 60 minutes in length; a data recorder was used so that interviews could be
revisited, thus ensuring accurate interpretation and the ability to quote respondents. Such in-
depth interviews were valuable for the case study, as the primary aim of speaking with
defected members was to determine which specific behaviors caused them to terminate their
relationships; a questionnaire would have limited the scope and depth of their replies
(Saunders et al., 2009).
1 No members who left in 2011 were interviewed as the report from 2012 had not yet been published, and therefore it would be impossible to
compare the 17 lost members during that year.
22
3.6 Operationalization The initial request from the SACC was to aid them with their marketing channel strategy, and
to investigate which channels are more effective and attractive for their members. During the
author’s internship at the Chicago office, it was noted that a portion of members were
discontinuing their memberships. It was also observed that there was a diverse range of
opinions regarding customer defection among the Board of Directors. Due to this, the authors
determined that the study should instead focus on customer defection – a decision that the
SACC Chicago agreed with. Thus, the request changed to investigate customer defection
within SACC Chicago.
The two initial questions of investigation were why members were discontinuing their
membership and how the SACC in Chicago was managing and viewing their defection.
Jointly with this investigation, the authors examined relevant literature to better understand
current knowledge of customer defection: primarily, reasoning behind defection, and
secondarily, which strategies and models could aid an organization prevent defection. After
an extensive investigation of relevant literature, the initial theoretical framework was
completed; this included the part “Termination factors’ in the section “Defected members”
and the “Management” sections, which guided the main topics and questions to be explored in
the interviews. Please see the Appendix page 48-50 for the questions and their connection to
the theoretical concepts.
The interviews revealed that the main concerns were of perceived and expected service
quality. This information was later used in the critical analysis. In conjunction with the
gathering of empirical data, research of complementary theories was also conducted – most
notably of Parasuraman et al.’s (1985) Gap Model as it was the most relevant model for this
research. The primary focus was on Gap number 5 during the in-depth interviews, and was
used to examine why members had terminated their memberships to the SACC.
Both qualitative and quantitative data were collected and linked to each other to establish a
more thorough view of the problem. The in-depth interviews demonstrated the division in
opinion between the Board of Directors and defected members (Patel & Davidsson, 2003).
The theories presented in this case study not only offer a wider and deeper insight into the
field, but also ensure that the SACC Chicago benefits from the findings. The statistical survey
complemented the study by painting a broader picture of defecting members in terms of
membership levels and industries.
23
3.7 Reliability and validity While a case study limits generalizability (Saunders et al., 2009), this study aims to examine a
very specific situation. As such, an exploratory strategy is useful in achieving a richer
understanding of the problem, as it makes it possible to find new insight into the phenomenon
and answer the question of why (Ibid.). As Dubois and Gadde (2002:554) insist, “the
interaction between a phenomenon and its context is best understood through in–depth case
study”, thus strengthening the findings.
The main limitation regarding the empirical data is that it is based on both human
interpretations, and behaviors that can change over time. The respondents’ answers may not
be “objective”, as respondents could provide answers that lead them to appear in a “social
desirable role” (Saunders et al., 2009). The high trust dimension of the interviews, given the
internship and close relationship between one of the authors and the case company, combats
this bias. Further, the samples studied are not probability samples, as many potential
respondents opted not to participate; however, this does not make the data any less valuable.
24
4. Empirical findings
This section presents the statistics that represent the members who defected from 2009-2011,
followed by the empirical material amassed from the interviews with the Board and several
defectors. The findings are presented in line with the objective of the study, and structured in
accordance with the theoretical summary.
4.1 Defected Members Objective: What do the members say is the reason or reasons behind the discontinuation of
their memberships?
4.1.1 Termination Factors
The reason why many companies or individuals originally decided to join the SACC Chicago
was to enhance their relationships with Swedish companies and forge new relationship with
customers in the United States. After some experience with the Chamber, some of these
companies and individuals no longer believed that their membership would bring them any
benefits, and so opted not to renew their memberships when the time came.
Several members who previously held corporate or business memberships changed them to
individual memberships, as they perceived their involvement with the SACC as a way of
meeting Swedish people with a serious interest in the arts, rather than as being directly
beneficial to their companies.
Some of the interviewed defectors explained that the main reason for this was a lack of
perceived value in membership, particularly in a time of recession where unnecessary costs
needed to be eliminated. Other common reasons provided were that members moved or
retired, or that, despite enjoying the organized events and meetings, they simply no longer had
the time to participate. Other defectors commented that they found they were not receiving
much of a response from the SACC, and so decided to terminate their memberships. Some
other defectors found that they were part of too many organizations, and since the SACC was
one of their pricier memberships and did not seem to result in any business referrals, it was
not worth their time or expense.
Interestingly, one of the defected corporate members explains that their company perceived a
low interaction between their American firm and the Swedish firms working in the American
market. Other members echoed the sentiment of Swedes only using Swedish companies, and
another American member explained that those in the Swedish community did not take
25
advantage of the services provided by his company. He felt that the Swedes did not consider
that American corporate buyers were different than corporate buyers in other countries.
Further, he added that while his company used to approach Swedish firms that seemed to
demonstrate a capacity to grow in the U.S., it became impossible to make them invest in their
brand in an ‘American way’ once they had a Swedish President or Marketing Director for the
U.S. market. According to him, “the refusal to accept American branding campaigns as the
major competitive advantage has made cooperation impossible”, and several Swedish
companies that his company worked with lost out on great opportunities.
Another defected member declared that their company felt that the SACC had a very small
number of members, so “when you know them, you know if you can work with them. If you
cannot work with them, membership in SACC is worthless”. A common sentiment shared
amongst defectors was that the SACC focused on how to generate income for its member
organizations, but that the higher membership fees did not translate into more business
opportunities. Further, defectors have found that other countries’ Chambers of Commerce, for
example the German or the French Chamber, can offer greater opportunities, which has
resulted in them visiting these events instead.
Another member explains it like this: “I had huge problems getting Swedish clients in the
USA. Swedes think that they are great at advertising and marketing in the USA. Swedish
marketing firms, Swedish advertising agencies and Swedish companies have the idea that
whatever they do capture the American purchasing spirit. Unfortunately, that is a complete
misconception and therefore I don’t have many Swedish clients”.
The defected member than continuous: “Only, when Swedish companies use American
advertising agencies, they grow, take market share and take customers from their
competitors. My work is very successful doing just that but for some reason Swedes rather
believe that in future their Swedish advertising will break through and generate wealth. These
relationships that I have with Swedish companies have made me stay away from wasting time
with Swedish business people. Which have made me go to other country's business meetings”.
4.1.2 Expected and Perceived Service
Some defected members felt that they actively participated in the SACC, while others simply
received invitations and emails from the Chamber but never got involved, and still others did
not attend meetings or events as they felt that their participation did not pay off. One of the
interviewees explained that the SACC is like a social club, and that many people simply do
26
not have time to participate in each event due to time constraints. As other members
mentioned, their social calendar is already full, and what they need are more business-oriented
meetings. Others were dissatisfied with the offered benefits to membership as they were of no
particular interest to them specifically.
When examining members’ perceptions of service, their opinions were more varied. One
member from the food industry commented; “I don’t know if I received the service part of the
Chamber of Commerce. I’m in the food business, and I actually sell Swedish food so you
would think that I should get some value form the Chamber of Commerce. But I didn’t get
that. Like for example, the German Chamber of Commerce brings companies over here to
visit me and I have had the German Chamber of Commerce call me and let me know that they
have this trade show. They have arranged for four companies to come and visit me and to buy
my food. And I didn’t get that from SACC”.
Due to the lack of matching companies and their needs, members explained that they did not
think about contacting the Chamber when they needed help with something, even if it could
have been something that the Chamber could have helped them out with. In joining such an
organization, members were expecting to receive a more business-oriented service, but upon
working with the SACC, they did not end up perceiving that such was the case.
When asked whether or not defectors would consider rejoining the SACC, some replied yes
and others replied perhaps; the common sentiment amongst these groups was that they wanted
to be sure of the value of their membership. Interesting fact showed that no one actually said
no on considering rejoining the SACC. While none of the respondents felt that there had been
any problems during their membership, they felt that, due to the globalized nature of business,
the Chamber needed to establish relationships with companies in other countries. Further,
they felt that the Chamber ought to encourage Swedish businesses to look closer to the
services that firms in the USA have to offer.
27
4.2 Statistical Findings Objective: Are there any patterns among the members who have defected? For instance, does
one industry have more defectors than another?
Figure 4.1 Members between 2009-2011
(SACC Chicago Membership Directories, 2009-2011)
The largest loss of members occurred between 2009 and 2010, with the SACC losing 38
(18.27%) of its members. Between the years of 2009 and 2011, SACC Chicago lost 36
members (17.30%). Between 2010 and 2011, the SACC actually gained 2 new members,
resulting in a growth of 0.11%. The following figures illustrate the four different membership
categories and how they have changed over time:
Figure 4.2 Young Professional Members 2009-2011
(SACC Chicago Membership Directories, 2009-2011)
0
50
100
150
200
250
2009 2010 2011
Members between 2009 - 2011
Members between 2009 -2011
13,5
14
14,5
15
15,5
2009 2010 2011
YPC
YPC
28
Figure 4.3 Individual Members 2009-2011
(SACC Chicago Membership Directories, 2009-2011)
Looking at figure 4.3, one can see that the Chamber has only one more Young Professional
member in 2010 than in 2009 and 2011. Individual memberships, on the other hand, were
more varied. Between 2009 and 2010, the SACC lost 7 members. In 2011, however, they
experienced a growth of 19%, which lead to more members than in 2009.
Figure 4.4 Business Members 2009-2011
(SACC Chicago Membership Directories, 2009-2011)
0
10
20
30
40
50
60
70
2009 2010 2011
Business
Business
29
Figure 4.5 Corporate Members 2009-2011
(SACC Chicago Membership Directories, 2009-2011)
Figures 4.4 and 4.5 demonstrate a dramatic, negative change over the last three years.
Between 2009 and 2011, 23 Business members terminated their memberships, resulting in a
loss of 36.5%. Similarly, Corporate memberships dropped by 15.85% between 2009 and
2010, with 13 members terminating their memberships. Interestingly, membership did not
change going into 2011. However, as the Business and Corporate memberships are the most
profitable levels of membership for the Chamber, such significant decreases in memberships
represent a great loss.
Figure 4.6 Different Types of Businesse 2009-2011
(SACC Chicago Membership Directories, 2009-2011)
60
65
70
75
80
85
2009 2010 2011
Corporate
Corporate
0123456789
10
Different types of businesses between 2009-2011
30
Figure 4.6 depicts the eight main industries in which members who defected from SACC
Chicago between the years of 2009 and 2011 did business in: manufacturing, health care,
transport/material, finance/brokers, consultants, food industry, sales/trade and technology. It
is evident that most defectors (24.3%) worked in the health care sector, followed by
finance/brokers (21.6%). The consulting (16.21%) and transport industries (16.21%) also
represent two large losses in SACC membership. The remaining industries – manufacturing,
food, sales, and technology – only represented minor drops in membership.
4.3 Management Objective: What are the opinions among the Chamber’s Board concerning customer
defection? More specifically, does the Board of Directors value the importance of customer
defection strategies; what kind of strategy do they have; and which weaknesses exist in this
strategy?
4.3.1 Current View on Customer Defection
The SACC Chicago Membership Committee believes that members are defecting for a
number of reasons that come down to the membership life cycle. The Committee also feels
that the predominant reason for membership termination has been the economic downturn,
which resulted in some members changing their membership levels as companies and
individuals have critically examined their expenditures – this is made evident in the
significant drop in Corporate memberships. During a recession, high-cost business events like
the Golf Outing or the Lucia Luncheon are more difficult for members to justify.
Additionally, the Committee claims that fewer Swedes are moving to and from the United
States; with fewer individuals moving in a suffering economy, there is less opportunity to
entice new members. Communication with local Swedes has also been hampered by the
retirement of some senior Board members, who have made deep personal connections to the
community over time.
Overall, the Committee feels that members simply do not see enough potential or value in
their membership. Unfortunately, this fosters a downward slope and vicious cycle, whereby as
members drop out, networking opportunities decrease and thus membership value does as
well. This has lead the SACC to believe that members are not considering the long-term
effects of their membership when they defect: they are debating whether or not the
membership is something they can live without at the present time, rather than whether or not
their membership is helping the SACC survive or not. The Board is certain that members are
31
not defecting over service dissatisfaction or irrelevant work by the SACC, particularly as
there is no equivalent competitor for Swedes to turn to – they simply are not likely to join the
Chambers of another nation.
4.3.2 Current Customer Defection Strategy
The SACC has reached out to its existing members via letters soliciting opinions on what sort
of services they would like to see in the future, and comments on service satisfaction. While
not many members responded, a trend was still established where members preferred more
networking events and special events like the annual Lucia Luncheon and Golf Outing.
Respondents also felt that the SACC could improve communication and better explain the
value of each membership category.
As the Chamber believes that the value of membership is very subjective, they do not measure
service quality. Instead, event attendance is used as the measurement for service quality: if the
events offered are of high quality, attendance will be high.
There are daily interactions between the SACC and its members via telephone, which the
SACC believe are well-received and should be done more often. Yet, one Committee Member
explains; “But it is hard, some people say that they receive too much info meanwhile other say
that they don’t receive enough. Where is the middle?” The Committee is aware of the fact that
the membership question is the most difficult part that they have to deal with; the main
problem is always how to attract new members and while retain the existing ones.
One interview respondent stressed that the SACC needs to improve communication in terms
of explaining the value of the various membership levels, which is something that the
Chamber plans to concentrate on this year.
Further, the Chamber has found that while there are members who are very actively involved,
others are not. For the SACC to be successful, more individuals must actively contribute to
the organization and participate in events. However, many members face time constraints and
do not feel the need to contribute when they are so busy; while they may attend an even or
two, they have no interest in organizing any. As one of the Board members says, “event
quality is key. If members are engaged with our events then they will automatically improve
the quality of our relationship”.
32
4.3.3 Rejuvenation of the Board and Their Action Plan
Since the organization is volunteer-led and thus full of busy individuals, the Board considers
that there are more pressing issues to address than the analysis of defected members. As part
of an action plan this year, the SACC mailed out a brief survey to members who have not
been active; this was followed by a phone call to determine how members felt about the
Chamber, whether or not their service was lacking, if they were aware of current
programming, if they were interested in contributing to specific meetings, if they could
suggest any ideas, or if they were interested in becoming a Board member - this resulted in
contacted members feeling honored that the Chamber cared enough to contact them. The
SACC then took this information into consideration when planning their upcoming events and
happenings.
The SACC has stated that they are aware of the dilemma of decreasing memberships, and
determined that renewing the Board was imperative: “Many of the board members have been
part of the organization for a long time. In order for this to be a vibrant organization you
have to have vibrant and active directors who take a personal interest of actually doing
something. For much too long board members have seen being a part of the board just as
something nice without really realizing that it takes a little bit more than that if we want this
organization to survive and be the vibrating place that we all want it to be. A very important
rejuvenation of the board happened last January, where 8 new board members began and 5
old ones left. Now there needs to be a realization within the membership committee that
everyone needs to take turns and that the membership question overall, regarding old, new
and existing members becomes everyone’s concern”.
4.3.4 Future networking abilities and events
When looking at which members, old ones, new ones, existing ones, are being prioritized, the
answers within the Chamber vary. Some say that the issue is that members are not attending
events – members that are not overly visible to the SACC. They mean that the issue is not if
they are old, new, or existing ones – but that it has more to do with the fact that SACC is
unable to engage members and that needs to be prioritized. Some say it is very important to
keep the members who have been around for a long time and not lose them. But they feel that
it is even more important to gain new members that are satisfied with the organization. One of
the respondents said that, “In general SACC thinks that getting old members back is not
priority number one”.
33
What, then, can be improved by the Chamber? According to the SACC, events can be better
publicized, there could be more of them, and there could be more direct integration with
American businesses. The Chamber’s aim is to bring in interesting speakers, provide social
opportunities, and organize larger networking/business events. The major limitation is that of
time: the Board members feel that they are busy and do not necessarily have the time to
commit every week to analyzing and acting on improving the events off SACC.
34
5. Analysis
This section analyzes the empirical findings in relation to the theoretical concepts. It
identifies the weaknesses as well as opportunities for the management approach
(improvements), drawing on earlier theoretical finings. Initially the section discusses and
analyzes defector responses.
5.1 Defected Members
5.1.1 Termination factors
The main reasons that sum up why old members terminated their membership are that they
did not see the value of it at the time being, and that they did not get as great of a business
response as they thought they would. Also, they had to cut unnecessary expenses, and since
the SACC was expensive and did not result in any business referrals, it had to be cut from
their budgets. Members felt that it was not worth their time or finances: the expenses
compared to the expectations did not match. Zeithaml, Berry & Parasuraman (1985) claim
that the perceived service quality influences the behavior intentions and can signal whether a
customer will remain or defect - meaning in this case that the perceived quality was not
satisfying enough for some of the members. Some of the members moved or retired, some
simply did not have enough time anymore, but the main reason that was mentioned several
times by different defectors was that the company who was a member had huge problems
getting Swedish clients in the USA due to the fact that they felt that the Swedish members
tended to stick to the Swedish companies that were operating on the American market instead
of using American firms.
None of the participants felt that they had had any problems; they felt that the Chamber was
well run but needed to create more business relationships with other country's businesses.
When asking the old members if they could consider becoming a member again interesting
fact showed that no one said no. The old members could reconsider a renewing their old
memberships. However, one interesting aspect that an interviewed participant brought up was
that they had felt that the major focus of the SACC had been on how to generate income,
rather than providing their members with the benefits they were interested in. As the high fees
have not generated more business opportunities, members have felt that there are more
opportunities elsewhere. When discussing the costs and pricing during the interviews, some
35
defected members decided to downgrade their Corporate and Business memberships to the
cheaper, Individual membership level.
One can see that those companies and individuals who decided to join the SACC from the
first beginning had expectations of enhancing their relationships with Swedish companies and
meeting potential customers in the U.S. These members were looking to get business from
Swedish clients and create a business network. The second expectation was to meet Swedes
and to create a social network on a private level. Unfortunately, defected members did not feel
that their expectations were met.
When analyzing the question of whether the defected members would consider rejoining the
SACC the answer was pretty clear: they all wanted to be sure of the value for them.
The interviews indicated that customers were and are in it for different needs, some more
social other business oriented. From the amount of respondents in this case study there
seemed to be a tendency of Americans firms having a strong need of a business-oriented
approach. The services expected might thus this be different depending on the cultural
background. However, this would need a further investigation. Parasuraman et al.’s (1985)
Gap Model includes the aspect of customers having different needs and what then might be
interesting for an international organization as SACC is to as well investigate if the personal
needs have any cultural patterns.
5.1.2 Precived and expceted service
During the interviews, one of the past Corporate members stated that: “The relationships that
I have with Swedish companies have made me stay away from wasting time with Swedish
business people, which have made me go to other country's business meetings”. Another
explained the situations as follows: “The German Chamber of Commerce brings companies
over here to visit me and they have arranged for four companies to come and visit me and to
buy my food. And I didn’t get that from SACC”. This shows that if members do not receive the
service quality they expected, they will simply take their business to a competitor. This is in
line with Errget & Ulagas (2002) theory, which states that value creation can be compared to
competition. If a firm can manage to deliver a better trade-off, whose products and services
offer greater benefits; they can provide their customers with better value than their
competitors. In this case, a better value trade off has been offered from a competitor.
When analyzing the main gap in this case study, it is evident that it has to do with Gap 5 in
Parasuraman et al.’s (1985) Gap Model. Most of the interviewed members were expecting to
36
receive more business-oriented service, but they did not perceive that from the Chamber.
Meaning that there were mismatches between the expected and perceived service. Looking
back at the theory, Parasuraman et al. (1985:42) state that “a gap between the expected service
and the perceived service in different functions in a service company's production can be seen
from two different perspectives; from a company’s perspective and from the costumer’s point
of view”. Therefore it is important to take into consideration that this is the subjective point of
view from the old members of SACC Chicago.
The diagnosed gap between the demand on the market and the capacity of the Chamber needs
to be better understood and further examined, but the main reasons why the gap is widening is
due to the fact that members are not perceiving the expected business value that they thought
they would get by joining the Swedish American Chamber of Commerce in Chicago.
5.2 Management Improvements
5.2.1 Hands-on tasks
The interviews with the Board at the SACC show that there are various opinions as to the
degree the organization is aware and managing their old customers. Some stated that there
should be more time spent on investigating old customer defection; another claimed that the
focus should remain on customer acquisition. This inconsistency in opinions among the Board
of Directors indicates that there is not a common view of how to look at defected customers
and how vital it is for business. As Reichheld & Sasser, Jr. (1990) stress, it is important for
everyone to be aware of the problem and working in the same direction to achieve a common
goal. The organization is thus aware of the problem to an extent. One of the Board members is
charged with the responsibility of working with defected members, thus showing that they do
look into their past in order to examine failures. However, as previously established, if the
view of the importance of customer defection is not shared amongst the Board of Directors, it
will inhibit the value of time spent on investigating members that have defected. As Reichheld
& Sasser, Jr. (1990) state, the insight these lost members provide can help managers improve
their business. This information thus needs to be well managed.
There is still a strong focus on acquisition of new members, as first noted during the
internship, and later supported by interviews. Several respondents mentioned new customers.
The main reasons why they lost members, as stated by the respondents, are economic
downturn, lack of engagement, and time. However, they also do not believe that the members
37
saw the value of membership. This is due to the weak communication on what actually is in
there for them, which all respondents seemed to agree on.
5.2.2 Service and relationship quality
This view described above is thus a bit contradictory since the Chamber also believed that the
defected customers were satisfied with the service provided. As Jones & Sasser, Jr. (1995)
argue, there is a difference between satisfied and completely satisfied customers when it
comes to loyalty.
Examining the theory proposed by Jones & Sasser, Jr (1995), when a customer is completely
satisfied, they tend to stay very loyal in the relationship. This means that relationship quality
is achieved and that customer expectations are met. But, when the customer is just satisfied,
the company can easily lose the customer; if a customer is dissatisfied, this means that they
may stop being loyal, which could end the relationship completely. The members who
defected were in many cases just satisfied or dissatisfied, and that was why they decided to
terminate their relationships with SACC Chicago.
Jones & Sasser, Jr. (1995) explain that the interaction between the customer and management
must to be high. The management has to listen to their customers to find out how they
perceive the service they are being provided with, figure out what they are demanding, and
then provide them with that. “The gap between satisfied customers and completely satisfied
customers can swallow a business.” (Jones & Sasser, Jr, 1995:2). In this particular case, this
also indicates that the relationship quality is affected by poor service quality.
As Keaveney (1995) points out, even satisfied customers can switch or terminate a
relationship. Shepard (1999) claims that the customer always has a subjective point of view of
how good or bad the expected service quality is. Overall, it seems that there are some quality
and value improvements that can be made in this field. Especially when it comes to providing
the members with more business oriented services that can come in great hand for companies
that are member of SACC Chicago. Therefore, when measuring service quality, SACC
Chicago should include an analysis of the defected customers and their valuable opinions,
which can lead them to see what they need to prioritize when it comes to quality
improvements (David Sheperd, 1999). At this point, SACC is not measuring service quality
from defected customers, which makes it impossible for them to prioritize which quality
improvements need to be done. The qualities of the service provided have been an attempt to
38
find out what beliefs exist among current members - thus solely existing ones and not
defectors.
5.2.3 Value
Looking at the value concept, one can clearly see that most of the defected members felt that
they did not gain enough response or business referrals. They joined the Chamber due to the
expectation that there would be something in it for them, but when they saw that the
interaction between their American firm and the Swedish firms in the American market was
not high; they stopped seeing the value for themselves or their company. As Hills & Jones
(1998:88) state, that value occurs “when a firm is able to advance and come up with
something that is unique for its customers, something that fulfills and satisfies the customer’s
needs”. Further, Reicheld (1996) stress that the value that a customer perceives is the most
important factor when looking at the loyalty aspect in a relationship between an organization
and a customer. In this case, the Chamber was not able to advance or come up with
something exclusive enough for their members so that their expectations would be met and
fulfilled. All of the members who were more business-oriented rather than socially interested
in the Chamber, had a hard time seeing the value due to the lack of matching companies and
their needs with SACCs members. Old members explained that they did not think about
calling the Chamber when they needed help with something, even if it could have been
something that the Chamber could have helped them out with. This demonstrates that there
was potential for the Chamber to do something, but it also shows that the interaction between
some of the members and the Chamber was not particularly high.
Reicheld (1996) says that the main reason why many organizations and firms fail and start
losing customers is because they lose focus. They start to look at different measurements and
focus on analysis and profit instead of focusing on value creation. This seems to be ring true
with the SACC Chicago, as they grew more focused on their incomes as a non-profit
organization to survive, instead of focusing on fulfilling their purpose: coming up with
services that are of great value for their members. Listening to their old members, higher fees
did not generate more business opportunities. Being an old member or not, at the end of the
day everyone wants to be sure what type of value is in there for them and their businesses.
39
6. Conclusions
This last section will summarize the most important findings and further discuss their
implications in order to elaborate on future research on the topic of customer defection.
It is time for the SACC to make defected customers everyone’s concern and spend time
analyzing why members have and are leaving. Looking into the past and examining their
failures will bring new insight that will take them forward. Defected customers are the ones
with most information (Reicheld, 1996). This case study has made the initial step in
identifying the main problem regarding the current strategy towards customer defection, and
also investigated some of the defected customer’s reasons for their membership termination.
It has been noted that there are diverse views of how vital defected customers are, especially
the time to be spent on them. The SACC is still prioritizing acquisition over customer
defection strategies. This study has only investigated a portion of defectors - however, this
portion has provided a lot of valuable information for future improvements and advice on how
to win defected members back. A continued investigation in this field will increase the
understanding of what has been lacking, and provide greater knowledge for future
improvements. A first step for the SACC would be to design and structure an approach. The
strategy concerning defected customers needs to be improved, such as with the
implementation of a “zero defect culture”, where everyone in the organization shares a
common view and works toward a mutual goal.
The customers who have terminated their membership with the SACC in Chicago between the
years of 2009 and 2011 were in the manufacturing, health care, transport/material,
finance/brokers, consultants, food industry, sales/trade and technology industries. There were
some industries that had more defectors than others, primarily the health care sector, finance
and brokers, consultants, and people working in the transport business. These are the specific
sectors that SACC Chicago needs to concentrate on.
The main reason for termination amongst respondents was the SACC’s inability to create a
business network. There was a lack of value and business opportunities. It seems as many
people became members to score customers to their own businesses. Another conclusion that
can be drawn is that members have their social needs filled up - business oriented meeting is
what is needed. This fact should be an indicator to the SACC Chicago to concentrate more on
the business aspect and have a good and open dialogue with their members, and especially to
40
appeal more to business-oriented members. A minor indication of an cultural effect was also
noted, however further research have to be done in order to validate this data.
A clear pattern was that members felt that their memberships were lacking value. Once again,
the SACC needs to make sure that their members get value for the money they are paying on
their memberships. This aspect is very important in the long run: if members see the value in
the Chamber’s activities, they will decide to stay active within the organization and in that
way, the organization will be able to survive long-term. Again, the most important first step
for the SACC Chicago should entail working towards the same goal by making everyone on
the Board fully aware of this problem and becoming more business oriented in the activities
offered to members.
6.1 Further Research With the case study of the Chamber, the authors aimed to contribute to this field and make it
more interesting for further research. There are many more aspects in this field that one can
delve deeper into. Due to time restrictions, a comparison between SACC Chambers in other
U.S. cities was not been possible. However, this was considered since it could be of interest to
see whether these findings simply are a global trend and thus this not necessarily related to
solely the Chamber in Chicago. It thus a comprehensive study to conduct and the further
exploration of the remaining defected customer can as well give even more new insight. For
further research one can for example use cultural theory to investigate more in this specific
field. An investigation of the environmental effects would as well be suitable as further
research in order to see its impact on customer defection.
41
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44
Appendix 1. Members benefits
These are the main benefits which SACC offers to their member:
Business Matchmaking Service
We connect you to individuals within the network that can provide you with professional
services such as attorneys, bankers, real estate agents, marketing consultants etc. This is what
we call 'Business Matchmaking' and it has become one of our most popular services.
Informative Events and Networking
You will be invited to participate in SACC-Chicago's seminars, conferences and other
informative events. Meet many interesting speakers, special guest, and well-placed executives
and officials from the Americas and Sweden. Network with your colleagues in the rapidly
growing Swedish-American business community in Chicago. Meet and share information and
experiences with executives and members of many regional and bi-national chambers of
commerce and international business organizations in Chicago.
Corporate Branding, Marketing and Sales Programs
We put together corporate programs, which are custom-tailored branding, sales and/or
marketing programs for corporations that are looking to expand on the U.S. market, make
their brand(s) known, reach new customers and increase sales.
Custom Tailored Trade Missions
We custom tailor Trade Missions for companies interested in a new market. Through our local
chambers we ensure that products, services and information are presented in the right way to
the right people. Trade missions should be considered as a first step for companies to
evaluate their potential to establish/expand in the U.S. and for business regions to form
strategic alliances that are mutually beneficial for their region and their potential U.S.
partner(s) as well as attracting companies to their region.
45
Swedish American Entrepreneurial Days
SACC invites you to the Swedish American Entrepreneurial Days which has become the most
important trade and networking event providing a platform for trade, commerce and
investments between Sweden and the U.S. For the past ten years the Entrepreneurial Days has
enabled small-, medium- and large companies to connect and develop new business
relations. A key trade and networking event providing an effective platform for trade and
commerce between the U.S. and Sweden. The event is a prime venue for linking Swedish and
U.S. businesses. What makes this business to business event so worthwhile and successful is
that it brings together entrepreneurs and experts from a variety of fields-all sharing their
expertise and knowledge of the American and European markets.
Currents & eCurrents
We distribute Currents -a high quality journal with news and information relating to our
Swedish-American business network as well as regional Chamber events. Currents are read
with interest by more than 21,000 entrepreneurs and executives. Our electronic newsletter
eCurrents reaches more than 4,500 recipients.
J1 Visa Service
We offer a J-1 Trainee-Visa that provides young professionals with work experience abroad.
Member companies get access to SACC-USA's database with highly qualified trainee
candidates. A host company may also utilize the SACC-USA J1-Visa Service for internal
rotation or training programs.
Membership Directory
We publish an essential resource for Midwest Networking: the SACC-Chicago Membership
Directory.
SACC-Alliance
We offer member discounts on brand name products and services, and special rates on hotels
throughout the US and in Sweden.
46
SACC Membership Deals & Discounts Program
We offer a package of deals and discounts across the U.S and Sweden. We provide a balanced
package of airfare, lodging, supplies, advisory and IT/communication services, all essential
when doing transatlantic business. For more information please click here.
Source: www.sacc-chicago.org
47
Appendix 2. Interview SACC Chicago
Table 1. Respondents Background
Respondents Experience Type of interview
SACC Chicago VP of
Membership
Product group manager at
Astra-Zeneca, Finance and
Administration Manager at
Tetra Pak in Korea, President
of SWEA Chicago, Project
manager at the Swedish
Trade Council in Chicago.
In-depth semi-structured
interview
SACC Chicago Board of
Directors/ Membership
committee
Strategic Consulting
Services, senior consultant at
Edgewater Ranzal, double
major in economics and
international studies at
Northwestern University.
In-depth semi-structured
interview
SACC Chicago Executive
Administrator
Scandinavian Airlines, The
Swedish Trade Office,
Consulate General of
Sweden, South African
Consulate-General.
In-depth semi-structured
interview
48
Initial Outline questioner: Boards of directors
The questioner is solely made to facilitate the authors during the in deep interviews with the
respondents. The aim is to follow the respondents “story” and if necessary lead the discussion.
The purpose is also to connect the questions with figure 2.2 in the theoretical summary in
order to map the problem.
Hands-on management tasks
1. Do you devote time to your lost members? (Why, how much time? or why not?)
2. Are you trying to win back old members?
3. Do you think that the Chamber of Commerce should lay more focus on gaining back
customers that have decided to determinate their membership?
4. Do you have any strategies for lost customers? (What is it including?)
Service quality and relationship quality
5. Do you measure the service quality you provide?
6. Why do you believe these members have determined their relationship?
If so why? What is your experience?
7. Do you feel that the interaction between the chamber and its members is good and
active?
8. According to you, what can be improved by chamber regarding the service quality?
9. Do you feel that your members are committed and active members? Or passive?,
Why?
10. How would you describe your relationship with your members?
11. What can be done better from the chambers side regarding the relationship quality?
Value
12. Who do you think plays the most essential role when it comes to service delivery in
the SACC?
13. What do you do so that members feel that they gain value in return for the time and
money that they spend with SACC?
49
Appendix 3. Interview defected members
Tabel 2. Respondents Background
Respondents Experience Type of
Membership
Type of interview
Three old members
from the year of
2009, women,
ages between 35-65.
Health care, materials
handling, brokers.
Corporate,
Individual,
Business.
In-depth semi-
structured
Interview.
Two old members
from the year of
2010, men, ages 45-
70.
Car industry, logistics
and insurance.
Corporate,
Business.
In-depth semi-
structured
Interview.
Seven old members
between the year of
2009-2010, men and
women, ages 27- 55.
Consultants, trade
specialist, lawyers,
finance, students.
Corporate,
Individual,
Business, Young
Professional.
Shared their
experience through
mail.
50
Initial Outline questioner: Defected members
The questioner is solely made to facilitate the authors during the in deep interviews with the
respondents. The aim is to follow the respondents “story” and if necessary lead the discussion.
The purpose is also to connect the questions with figure 2.2 in the theoretical summary in
order to map the problem.
Termination factors
1. Why did you determine the membership at SACC?
2. Did you switch to another organization with similar service? If yes, how come? What
was the reason?
Gap between Expected and Perceived Service
1. The service that was provided, was it the service you expected?
2. What kind of service did you expect?
3. From were or whom was these expectations (promises) given?
4. Where you dissatisfied with the outcome of the service? (Why or why not?)
5. Where you dissatisfied with the interaction with SACC? (Why or why not?)
6. According to SACC, as a member of SACC Chicago there are different benefits to
gain, for example Business Matchmaking Service, Corporate Branding, Marketing
and Sales Programs, Custom Tailored Trade Missions, Invitation to Swedish
American Entrepreneurial Days and Monthly Membership E-Paper. Did you felt that
you gained these benefits? Which ones did you gain? Which ones did you not gain?
What could have been done better?
Gap between Expected and Perceived Service – Focus on Relationship Quality
1. When you were a member, how would you describe your relationship with the
chamber?
2. Did you feel that the interaction between you and the chamber was good and active?
3. Were you a committed and active member? Or a passive one? Why?
4. Did you rely on the organization?
5. Did you feel that SACC was enough concerned of your welfare?
6. Why or why not where you satisfied with the relationship towards SACC?
7. Where there any problems in the relationship?
8. If problems occurred, were you satisfied with the process of working them out?
9. What could have been done better from the chambers side regarding the relationship
quality?
