The effects of brand credibility on customer loyalty

Customer churn is an ever-growing issue in the relational services sector (e.g., retail banking, telecommunications), where business models ultimately depend upon long-term relationships with customers as the basis for profitability. Businesses in this sector have tended to view satisfaction and service quality as the key tools for increasing customer retention. The present study investigates the important additional role of the brand in managing the churn of current customers of relational services. Based on information economics, we propose specifically that the credibility of the brand underlies the role that the brand can play in this process. This research leads to the enhanced understanding that the brand has a significant role to play in managing long-term customer relationships, and details how the usual tools of customer relationship management, satisfaction and service quality, relate to brand credibility. Results from samples of retail bank and long distance telephone company customers indicate that brand credibility serves in a defensive role: it significantly enhances word-of-mouth and reduces switching behaviors among customers; these relationships are mediated by customer satisfaction and commitment. Implications of the study for theory and practice are discussed. (C) 2007 Elsevier Ltd. All rights reserved.