How do corporate reputation and customer satisfaction impact customer defection? A study of private energy customers in Germany

Abstract

Purpose: To analyze whether perceived corporate reputation and customer satisfaction are directly associated with customer intention. Design/methodology/approach: Using structural equation modeling, the study is based on the responses to a written questionnaire of 462 customers of a large German utility. Findings: A non‐significant and weak relationship was found between corporate reputation and switching intention. The postulated impact of customer satisfaction on customer switching intention was confirmed. Corporate reputation and customer satisfaction were found to be strongly correlated. Research limitations/implications: The sample includes only one company's customers, so the findings may not be generalized to other industries. Future research in other service industries is called for. Practical implications: The threat of customer defection in deregulated markets requires power supply companies to examine the marketing instruments and measures required to inhibit customer willingness to switch power suppliers. This study demonstrates the need to focus on monitoring and increasing customer satisfaction. Originality/value: The importance of reputation and satisfaction will ultimately be assessed on the basis of their customer‐related consequences and their economic relevance to companies. The construct of corporate reputation has attracted significant attention among marketing scholars, although almost no work can be found that focuses on the most important stakeholder group, namely customers. This paper addresses this research gap. The identification of context‐specific reputation and satisfaction effects on customer defection offers both practical implications for marketers and contributes to the theoretical knowledge base of an increasingly important domain in services marketing.