Examine the Effects of Customer Satisfaction on Customer Loyalty: An Empirical Study in the Healthcare Insurance Industry in Hong Kong

Abstract

Aims: Customer loyalty, which is affected by satisfaction, brand preference and switching costs, is an important concept in service industries as it is known to increases market share and revenue while bringing down the cost of acquiring and retaining customers.  Healthcare insurance is one such service industry and it is currently the focus of attention in Hong Kong due to the introduction of an insurance-based healthcare plan for its citizens. In the past decade, a number of empirical studies related to healthcare have been conducted in Western countries. However, in order to acquire a better understanding of customer loyalty in the context of healthcare insurance in Hong Kong it was considered essential to conduct an in-depth study in that special administrative region of China. The objectives of the research were to determine the following: the direct effects of customer satisfaction on customer loyalty; the direct effects of customer satisfaction on brand preference; the direct effects of brand preference on customer loyalty; the direct effects of customer satisfaction on switching costs; the direct effects of switching costs on customer loyalty; the direct effects of switching costs on brand preference; the mediating effects of brand preference on the causal relationship between customer satisfaction and customer loyalty; the mediating effects of switching costs on the causal relationship between customer satisfaction and customer loyalty; and the mediating effects of brand preference on the causal relationship between switching costs and customer loyalty. Study Design: This study employed positivism paradigm, cross-sectional and quantitative study. Place and Duration of Study: The study was taken in Hong Kong between June 2011 and June 2012. Methodology: The research methodology of this study involved a questionnaire survey of over five hundred respondents and quantitative analysis of the collected data using structural equation modeling.  Results: The results indicate that: customer satisfaction has a positive direct effect on customer loyalty; customer satisfaction has a positive direct effect on brand preference; brand preference has a positive direct effect on customer loyalty; customer satisfaction has a positive direct effect on switching costs; switching costs have a positive direct effect on customer loyalty; switching costs have a positive direct effect on brand preference; the influence of customer satisfaction on customer loyalty is mediated by brand preference; the influence of customer satisfaction on customer loyalty is mediated by switching costs; and that the influence of switching costs on customer loyalty is mediated by brand preference. Conclusion: The research findings provide new and useful insights for the managers of healthcare insurance providers in Hong Kong that will help them understand their customers better.