Journal of Strategic Marketing
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Rollover service contracts: the influences of
perceived value, convenience, confusion and
switching costs on consumer satisfaction and
service loyalty
Muhammad Mohsin Butt, Stephen Wilkins, Joe Hazzam & Ben Marder
To cite this article: Muhammad Mohsin Butt, Stephen Wilkins, Joe Hazzam & Ben Marder
(2024) Rollover service contracts: the influences of perceived value, convenience, confusion
and switching costs on consumer satisfaction and service loyalty, Journal of Strategic
Marketing, 32:8, 1336-1356, DOI: 10.1080/0965254X.2024.2319831
To link to this article: https://doi.org/10.1080/0965254X.2024.2319831
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JOURNAL OF STRATEGIC MARKETING
2024, VOL. 32, NO. 8, 1336–1356
https://doi.org/10.1080/0965254X.2024.2319831
Rollover service contracts: the influences of perceived value,
convenience, confusion and switching costs on consumer
satisfaction and service loyalty
Muhammad Mohsin Butt
a
, Stephen Wilkins
b
, Joe Hazzam
c
and Ben Marder
d
a
Department of Marketing, Faculty of Business Administration, Institute of Business Administration Karachi,
Karachi, Pakistan; bFaculty of Business and Law, The British University in Dubai, Dubai, United Arab Emirates;
c
Staffordshire Business School, Staffordshire University, Stoke-on-Trent, UK; dUniversity of Edinburgh
Business School, The University of Edinburgh, Edinburgh, UK
ABSTRACT
ARTICLE HISTORY
Rollover contracts are agreements that automatically renew, or ‘roll
over’, when the contracted term is completed, unless the customer
has previously given notice to terminate the agreement. Although
ubiquitous, academic examination of this contract model is scarce,
and it is not known the extent to which rollover contracts influence
consumer satisfaction and individuals’ subsequent behaviors.
A conceptual model was developed and tested using structural
equation modeling. The data were obtained from a survey of 994
service consumers in the United States. Perceived value emerged as
the strongest enabler of consumer satisfaction with rollover con­
tracts, followed by convenience, while consumer confusion – e.g.
caused by lengthy and complex contracts – has the strongest
negative effect on consumer satisfaction. The strongest relation­
ships in our model are between satisfaction and staying intentions,
word of mouth, and future rollover acceptance with other firms and
products. The paper presents important theoretical contributions
and managerial implications.
Received 1 February 2022
Accepted 12 February 2024
KEYWORDS
Rollover contracts; service
loyalty; trust; competitor
homogeneity; consumer
inertia
Introduction
Service agreements that automatically roll over from one period to another are common in
service markets. Such contracts can be found for cell phone services; broadband; software
licenses; insurance; gym and sports club memberships; home security; and home maintenance
services. Unless a customer has given notice to terminate their agreement, upon completion of
the contracted term, the contract automatically renews or ‘rolls over’ for a further fixed term
(typically 12 months). Previous research on service contracts has been undertaken predomi­
nantly in the domains of law and consumer economics, but the psychological dimension of
buyer decision making has received surprisingly little attention from marketers. In addition to
filling a gap in the marketing literature, this paper addresses recent calls from practitioners and
journal editors for more research that is relevant, important and useful in informing business
practice (Jaakkola & Vargo, 2021; Jedidi et al., 2021).
CONTACT Stephen Wilkins
stephen.wilkins@buid.ac.ae
Supplemental data for this article can be accessed online at https://doi.org/10.1080/0965254X.2024.2319831
© 2024 Informa UK Limited, trading as Taylor & Francis Group
JOURNAL OF STRATEGIC MARKETING
1337
Contract renewals generate continued revenues for service providers, and due to
the costs of advertising, vetting applicants, setting up new accounts and initiating
new customers, it is far more profitable to retain existing customers, avoiding
churn, than acquire new customers (Wangenheim et al., 2017). Nonetheless, exist­
ing literature provides little understanding about what factors determine customer
satisfaction with their existing rollover contracts and its attitudinal and behavioral
outcomes. Therefore, it is critical for firms to understand the reasons why con­
sumers choose to rollover their contract, or to instead terminate their service
agreement.
Consumer satisfaction is generally assumed to be an essential antecedent of
behavioral loyalty in service contexts, yet it is known that satisfied consumers
sometimes switch provider, while dissatisfied consumers may continue making
repeat purchases, perhaps due to switching costs or consumer inertia (Curasi &
Kennedy, 2002). Thus, this research seeks to better understand the antecedents of
consumer satisfaction with their existing rollover contracts, and the extent to
which these antecedents and consumer satisfaction influence consumers’ post
consumption attitudes and behaviors. Our conceptual model is broadly anchored
on social exchange theory (J. J. Lee et al., 2014), while the theory of planned
behavior (Ajzen, 1985) and nudge theory (Thaler & Sunstein, 2008) is used to
support specific relationships.
Our contribution is manyfold. First, from a theoretical perspective, we provide
a deeper understanding of the influences affecting consumers’ satisfaction with roll­
over contracts and subsequent repurchase behavior, recognizing that these may
comprise a range of pull factors, some of which may be based on the principle of
reciprocity, and push factors, which may be associated with low perceived behavioral
control. Secondly, we also contribute to identifying boundary conditions by comparing
two types of services, and several potential moderating variables like trust, firm’s
reputation, demographics and customer relationship duration with the service provi­
der. Thirdly, by offering a conceptual model for analyzing the antecedents and con­
sequences of contract-based consumer satisfaction with service providers, we
encourage a future research agenda in services marketing that pays greater attention
to the terms and presentation of contracts between providers and consumers. From
a practical point of view, our study informs marketers that by implementing appro­
priate strategies, service firms may be able to reduce the number of customers
terminating their agreements and switching to competitors, or who might engage in
negative word of mouth.
The remainder of this paper is organized as follows. First, we review the limited
literature on automatic renewal contracts, mainly in the domains of law and consumer
economics, and then we present the study’s theoretical framework. Following this, we
turn to other relevant literature on services marketing, service loyalty, consumer decision
making, and consumer inertia, to support the development of our hypotheses. Then, we
describe and explain our methodology, before presenting the results of our data analysis,
undertaken using covariance-based structured equation modelling (SEM). We conclude
by summarizing and explaining our theoretical contributions and managerial implica­
tions, in particular considering the implications of our findings for services marketing
researchers and service firms.
1338
M. M. BUTT ET AL.
Literature review and hypotheses
A main objective of this study is to assess the extent to which repeat purchases
achieved as automatic renewals or extensions to service contracts, and positive word
of mouth, are influenced by consumer satisfaction with their existing rollover agree­
ment. Service providers typically review and reset prices and service terms every 12
months, and therefore most service contracts may be conceptualized as fixed term
contracts of 12 months duration, where customers have the option to automatically
renew/continue. There are, of course, exceptions; for example, utility companies
usually do not issue new agreements annually. Given the dearth of literature on
automatic renewal contracts in the marketing domain, we turned initially to research
published in the fields of law and consumer economics. Some of the research that
guided this study is presented in Table 1.
A preliminary study by Wilkins et al. (2023) considered consumers’ general attitudes
and disposition toward rollover contracts, which influence their purchase decisions. They
found that the desire for convenience had the strongest influence on consumer accep­
tance of rollover contracts, along with trust in the firm and perceived value. This study
further expands their work in several ways. First, this research is focuses on measuring
existing/experienced customers’ satisfaction with the rollover contract, and its potential
antecedents and multiple outcomes in a holistic model. One of the novel contributions of
this research is that it is likely to be one of the first studies to investigate consumers’
decision making on whether or not to renew (i.e. roll over) their service agreement at the
end of a contracted service term. Consumers’ attitudes and decision making may be quite
different before and after the consumer has experienced the service delivery, and at the
end of a service term, switching costs and consumer inertia may act as barriers to
switching provider (Gray et al., 2017). Thus, this research explores possible influences on
consumers’ contract renewal decisions, which have not previously been considered in the
literature.
Theoretical background
In this study, we use staying/repurchase intentions, word of mouth, and rollover accep­
tance as dimensions of customer service loyalty to a provider. In order to achieve
customer service loyalty, providers must develop enduring customer relationships that
are formed on the basis of reciprocity (Pervan & Johnson, 2003; Wilkins et al., 2023).
Individuals typically feel psychologically obligated to return favors or benefits given to
them (Kim & Lee, 2013). Social exchange theory has been useful in explaining the
consumer loyalty towards a service provider that results from valued exchanges between
firms and customers (J. J. Lee et al., 2014). Social exchange theory recognizes that in each
exchange or transaction, there is a cost and a reward for each party. For example, a timepoor consumer who values convenience may consent to signing an automatically renew­
ing contract if the firm provides quicker and less demanding requirements to set up the
new account. Similarly, if a firm provides a customer with a free service upgrade, the
customer may perceive that they are receiving better value for money, and the resulting
gratitude may translate into future behavioral loyalty intentions towards the service
provider.
JOURNAL OF STRATEGIC MARKETING
1339
Table 1. Key research on consumer contracts and automatic renewal clauses.
Source
Bisping and
Dodsworth
(2019).
Paper
type
Review
Key constructs or concepts
● Mobile phone
contracts
● Pricing structures
● Technology
● Renewing and termi­
nating contracts
Crawford et al.
(2011).
Case study
● Switching costs
● Customer retention
DellaVigna and
Malmendier
(2006).
Survey
● Consumer inertia
● Consumer overconfi­
Johnen (2017).
Review
Johnen (2019).
Conceptual
dence in predicting
future benefits
● Consumer inertia
● Consumer
procrastination
● Firm exploitation of
consumer inertia
● Contractual terms
● Consumer inertia
● Teaser rates and
back-loaded pricing
● Present-biased
consumers
Kock (2015).
Lunn (2013).
Review
Review
Wilkins, S., Hazzam, Survey
J., & Megicks,
P. (2023).
● Economic impacts of
Key findings
Contract duration, renewal of the agreement, and
unilateral modification are three elements of
automatically renewing long-term contracts that
define consumer protection. Regulatory
intervention varies across countries, and is
influenced by technological development,
geography, business considerations, and cultural
considerations.
Consumers with rollover contracts switch to
competitors less than consumers on standard or
fixed-term contracts.
Based on their actual visits, gym members who
choose a rolling monthly contract forgo savings by
not selecting an alternative tariff, and they are
more likely to stay enrolled beyond one year.
Competitive firms rely more frequently on backloaded pricing, such as teaser rates/discounts.
Consumers are overconfident about their future
probability to cancel after the teaser period. Firms
can then exploit consumer inertia by charging
higher prices.
Firms may use automatic renewal contracts to exploit
consumer inertia. Competitive firms frequently
offer less efficient contracts. The more a firm
designs contracts to exploit consumer inertia, the
higher are the benefits to more sophisticated
consumers who take advantage of these offers by
not procrastinating.
Argues that firms’ use of automatic renewal clauses
should be regulated because they may reduce
consumer choices; increase switching/termination
costs; hinder efficient termination; and increase
average prices.
automatic renewal
clauses
● Legislative impacts
of automatic
renewal clauses
● Decision making
Telecommunications markets present the consumer
with a decision-making environment that is
biases
● Switching costs
particularly likely to be prone to established biases
● Endowment effect
in consumer decision-making. Consumers’
● Status quo bias
inaccurate expectations of usage, or time
● Ambiguity aversion
inconsistent preferences, may contribute to
● Procrastination
consumers’ failure to select optimum contracts or
● Overconfidence bias
switch providers.
● Consumer attitudes The desire for convenience was found to have the
● Perceived value
strongest influence on consumer acceptance of
● Convenience
rollover contracts, but trust and perceived value
● Firm reputation
also influence consumers’ attitudes and behaviors.
● Trust
To maximize revenues, service firms should ensure
that agreements have an element of reciprocity.
The theory of planned behavior explains that sometimes individuals may have a goal or
desire, but for reasons beyond their control – such as the lack of information, ability, skills,
or time – they are unable to take the action that achieves the goal or desire (Ajzen, 1985).
In the theory of planned behavior, the factors that determine the individual’s perception
of how easy or difficult it is to perform a particular behavior are referred to as ‘perceived
behavioral control’. We use the logic of the theory of planned behavior to explain why
consumers may not always act in the rational way that we would expect. A consumer may
have a desire to switch provider – perhaps because they are not fully satisfied with the
1340
M. M. BUTT ET AL.
service quality received – but other factors encourage this individual to undertake
behavior that does not achieve their desire (Ajzen, 1985). For example, Gray et al. (2017)
identified competitor similarity, consumer confusion, and switching costs as factors that
may influence consumers when they are deciding whether or not to stay loyal to a firm.
Finally, nudge theory may be used to explain consumers’ behavior. Thaler and Sunstein
(2008, p. 6) define a nudge as, ‘any aspect of the choice architecture that alters people’s
behavior in a predictable way without forbidding any options or significantly changing
their economic incentives’. Thus, nudges may take the form of defaults, where pre-set
courses of action take effect if nothing is specified by the decision-maker. For example, if
a gym reminds a customer about their health and fitness goals, the customer may be
nudged to accept the new agreement without giving much attention to any changes in
price or terms.
Perceived value
Consumers determine perceived value by assessing the trade-off between the price paid
and the benefits received, which in turn influences their satisfaction and behavioral
loyalty, i.e. repurchasing the service (Boksberger & Melsen, 2011; M. Lee & Cunningham,
2001). In effect, consumer satisfaction results when an individual considers the price paid
as ‘fair’ for the benefits they received. Some individuals are prepared to pay a premium
price for a product they perceive as higher quality, or one that will deliver higher levels of
satisfaction (Nguyen et al., 2021). Consumers’ purchase decisions are typically influenced
by price and quality more than any other factors (Wilkins & Ireland, 2022). Indeed, Bisping
and Dodsworth (2019) claim that price is one of the most important aspects in consumers’
decision making when choosing a cell phone service. Umashankar et al. (2017) found that
in service industries as customers’ behavioral loyalty increases, so too does the emphasis
they place on price, so that price becomes a stronger determinant of perceived value than
rewards or convenience. Thus, we conceptualize perceived value as value for money.
H1: Perceived value is positively related to a consumer’s satisfaction with their auto­
matically renewing service agreement.
Convenience
Many consumers are interested in conserving time and effort, and therefore convenience
may be a key consideration to these individuals when purchasing services (Berry et al.,
2002). Consumers may require time to obtain information on different firms and products,
evaluate alternatives, and undertake the purchase transaction. Although consumers may
associate time usage with effort, effort actually comprises physical, cognitive and emo­
tional dimensions. For example, consumers may need to undertake calculations and exert
considerable mental effort to effectively compare and evaluate different cell phone tariffs.
A convenience-oriented consumer, who seeks to accomplish tasks in the shortest time
possible using the minimal amount of energy, may be attracted to automatic renewal
agreements. Not only do such agreements eliminate the need to obtain and evaluate
JOURNAL OF STRATEGIC MARKETING
1341
information on alternative providers and products (decision convenience), the payment
for repeat purchases usually occur automatically (transaction convenience). Various stu­
dies have found that convenience may influence consumers’ evaluations and behavioral
loyalty towards a service provider (Martínez & Del Bosque, 2013; Umashankar et al., 2017;
Wilkins et al., 2023).
H2: Convenience is positively related to a consumer’s satisfaction with their automati­
cally renewing service agreement.
Consumer inertia
Consumer inertia may be recognized as a psychological phenomenon, where the indivi­
dual holds a set of assumptions and beliefs that justify a disposition toward maintaining
the status quo by eliminating the need to consider other options or form new intentions
(Henderson et al., 2021). Nudge theory explains that consumer inertia may result from the
existence of default settings. Consumers with inertia continue purchasing the same brand
passively and without much thought (Gray et al., 2017). Inert consumers typically prefer to
avoid making new purchase decisions and transactions, and they may dislike having to
learn new service routines and practices, thus encouraging contract rollover. Some
consumers may be satisfied with their current provider because they perceive staying
with their current provider the safer option, rather than risking a worse service from a new
provider (R. Lee & Neale, 2012). When consumers have received a service that fulfils their
expectations and desires, they are less likely to spend time evaluating either their existing
provider or alternative providers, and more likely to renew their agreement without much
further thought.
H3: Consumer inertia is positively related to a consumer’s satisfaction with their auto­
matically renewing service agreement.
Confusion
Many service providers create contracts that are complex and difficult for consu­
mers to understand (Wilkins et al., 2023). Such agreements are often overly-long
and use considerable amounts of technical and legal language. For example,
Paypal’s terms of service agreement is approximately 50,000 words in length,
while Apple iTunes’ agreement is 14,500 words (Hudson, 2013). As a result, the
vast majority of service consumers do not read contracts in full before signing or
agreeing to their terms (Hillman, 2006), and some individuals may agree to auto­
matic contract renewal without realizing they have done so (Johnen, 2018). The
terms related to contract termination are often unclear or excessively demanding,
in terms of the required notice period and method of communication, which is
generally written. Some service providers make it difficult for customers to find the
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M. M. BUTT ET AL.
address, telephone number or email address needed to communicate with the
firm, so that individuals need to invest considerable time and effort to terminate
their agreement (Kovač & Vandenberghe, 2015).
H4: Consumer confusion is negatively related to a consumer’s satisfaction with their
automatically renewing service agreement.
Competitor similarity
Competitor homogeneity may exist in markets where product differentiation is
difficult or virtually impossible. Consumers will likely switch provider only if they
perceive the alternative provider as more attractive (Gray et al., 2017).
A competitor may, for example, offer a cheaper or higher quality product.
A consumer who perceives that competitors are similar, and that other firms are
unlikely to provide a superior service, may feel, on the basis of comparison with
possible alternatives, more content and satisfied with their existing provider, thus
providing them with a rationale for renewing their agreement (Patterson & Smith,
2003).
H5: Perceived competitor similarity is positively related to a consumer’s satisfaction
with their automatically renewing service agreement.
Switching costs
Most consumers consider switching costs in terms of the time, effort and economic costs
of changing provider. In service contexts, Jones et al. (2002) identified six dimensions of
switching costs: (1) time and effort needed to evaluate alternative providers; (2) time and
effort required to commence service delivery; (3) benefits and privileges lost by switching;
(4) loss of investments already made in the existing service relationship; (5) time and effort
needed to learn a new service routine; and (6) losses arising from low performance with
the new provider. A considerable body of research indicates that switching costs are
positively related to repurchase intentions (e.g. Burnham et al., 2003; Gray et al., 2017;
Jones et al., 2002; Kaur et al., 2012). Consumers who prefer to avoid the effort and
economic costs associated with switching supplier may seek to identify reasons that
support their decision to stay with the existing provider, and in focusing on the positive
aspects of their customer experience they will likely feel more satisfied.
H6: Switching costs are positively related to a consumer’s satisfaction with their auto­
matically renewing service agreement.
JOURNAL OF STRATEGIC MARKETING
1343
Consequences of consumer satisfaction
Previous research has indicated that service quality, reliability and dependability may be
key determinants of consumer satisfaction with service providers (Saroha & Diwan, 2020),
but the existing studies have not considered the effects of the service agreement on
consumer satisfaction. For example, some consumers may place a higher value on
convenience (offered by the rollover agreement) than service quality, and may be
influenced differently by switching costs and the availability of alternative providers
(Woisetschläger et al., 2011). A large body of literature has confirmed the relationship
between consumer satisfaction and desirable consequences, such as repeat purchases
and positive word of mouth (Watson et al., 2015). In service contexts, consumer involve­
ment may increase emotional and brand attachment, and service offerings that are
perceived by the consumer to save time, effort, and transaction costs, are more likely to
result in satisfaction that leads to positive post-consumption behaviors (Ahmad & Akbar,
2023; Yang & Peterson, 2004). Consumers learn from their personal experiences, and an
individual who has a positive experience with a provider with which they have an
automatically renewing agreement, is more likely to accept such agreements from
other firms in the future (Polo & Sesé, 2009).
H7: Consumer satisfaction with their service agreement is positively related to intention
to stay with their existing provider.
H8: Consumer satisfaction with their service agreement is positively related to favorable
word of mouth.
H9: Consumer satisfaction with their service agreement is positively related to future
rollover contract acceptance with other firms.
Figure 1 presents the proposed conceptual model.
Firm reputation and trust
Firm reputation and trust are particularly important to service providers, as the
intangibility of services makes it difficult for consumers to assess alternative pro­
viders and products (Wirtz & Lovelock, 2016). In particular, trust has been found to
commonly mediate the relationship between satisfaction and loyalty (Schirmer
et al., 2018). In their study examining consumers’ general attitudes and dispositions
toward automatic renewal agreements, Wilkins et al. (2023) found that
a consumer’s trust in a firm has a significant influence on their purchase intentions.
Furthermore, they found that firm reputation has an indirect effect on consumers’
decision making when moderated by trust. Hence, as post-hoc analysis, we
explored the possible role of firm reputation and trust as moderating influences
on the relationships between consumer satisfaction and our six predictors of
consumer satisfaction.
1344
M. M. BUTT ET AL.
Reciprocity
Perceived value
H1
Reputaon
Trust
Demographics
Duraon with provider
Consumers’ service loyalty
Convenience
H2
Staying inten!on
H7
Perceived behavioral control
H3
Consumer
sa!sfac!on
H8
Word of mouth
H9
Consumer iner!a
H4
Future rollover acceptance
Confusion
H5
Compe!tor similarity
H6
Switching costs
Figure 1. Proposed conceptual model.
H10a: Firm reputation moderates the relationships between consumer satisfaction and
its antecedents.
H10b: Trust moderates the relationships between consumer satisfaction and its
antecedents.
Demographic influences
It is widely recognized that individuals’ demographic characteristics may influence
their decision making and purchase decisions (Çakır & Balagtas, 2014; Polo & Sesé,
2009). Thus, as post-hoc analysis, we explored whether a consumer’s gender, age,
education (Sharma et al., 2012; Walsh et al., 2008), and length of time with their
current service provider, may act as moderating influences on the relationships
between consumer satisfaction and our six proposed antecedents of satisfaction.
The length of time that a consumer is with a service provider may have an influence
on the reported levels of consumer satisfaction because dissatisfied customers are
more likely to terminate their service agreement earlier (Chiao et al., 2008). Over
time, repeated or continued use of a service may result in consumers forming
consumption and repurchasing habits, and individuals may associate the feelings
of comfort resulting from their habitual behavior with satisfaction (Huang et al.,
2023; Woisetschläger et al., 2011).
H10c: Consumer gender moderates the relationships between consumer satisfaction
and its antecedents.
JOURNAL OF STRATEGIC MARKETING
1345
H10d: Consumer age moderates the relationships between consumer satisfaction and
its antecedents.
H10e: Consumer education moderates the relationships between consumer satisfaction
and its antecedents.
H10f: Length of time with the service provider moderates the relationships between
consumer satisfaction and its antecedents.
Methodology
Sample and data collection
The study population is consumers who obtain a service from a provider with which they
have already agreed automatic contract renewal. Data were collected using an online
survey questionnaire. The participants’ responses related to either their cell phone service
or gym/sports/leisure club membership (hereafter referred to only as ‘gym’). The cell
phone service was selected as a lower cost essential use product, while the gym was
considered as a higher cost discretionary spend product. Mechanical Turk (MTurk) was
used to collect data from respondents residing in the United States (US). Participant
quality control measures were employed through Turkprime (see Litman et al., 2017).
A total of 994 usable responses were obtained. Males accounted for 50.5% of the sample,
and females 49.3%, while seven individuals answered ‘Other or prefer not to say’.
Approximately 50% of the participants were below the age of 35 years; 44% were
between the ages of 35 and 60 years; and the remaining were above the age of 60.
More than 70% of the sample possess either an undergraduate or graduate degree, while
23% of the participants completed only high school or technical education.
Measures
With the exception of rollover acceptance, all of the measures used in this study are
validated, pre-existing scales adopted from the literature. The measurement scale for
perceived value was adopted fromSweeney and Soutar’s (2001) four-item scale for
measuring functional value, i.e. the utility derived from a product compared to the price
paid. The seven-item scale for convenience was adopted from Wilkins et al. (2023). The
scales for consumer inertia, consumer confusion, perceived competitor similarity, and
switching costs, were derived from Gray et al. (2017). The five-item scale for consumer
satisfaction was also obtained from Gray et al. (2017), but the items were rephrased to
make them specific to a cell phone service or gym membership. The scale measures the
consumer’s overall satisfaction with their service offering, in the context of satisfaction
with their service agreement. The scales for intention to stay and word of mouth were
adopted from R. Lee and Neale (2012) and Walsh and Beatty (2007) respectively. Finally,
the scales for firm reputation and trust were adopted from Keh and Xie (2009) and
Sichtmann (2007). The five-item scale for rollover acceptance was developed by the
1346
M. M. BUTT ET AL.
authors and subjected to pretesting with 20 pilot study participants. All of our survey
items are presented in Appendix 1, which is provided as an online supplementary file.
All of the validated measurement scales used in this research had previously demon­
strated satisfactory internal reliability (Cronbach’s alpha > 0.70). Our respondents used
a 7-point Likert scale for all items, where 1 = strongly disagree and 7 = strongly agree. The
survey questionnaire was subjected to pretesting with 20 consumers. The participants
completed the survey questionnaire and then provided feedback in one of two focus
groups. The survey instrument appeared to perform satisfactorily and no modifications
were made to the draft version, other than some minor rephrasing of the questionnaire’s
rubric. The final questionnaire is presented in Appendix 2, provided as an online supple­
mentary file.
Results
Preliminary data analysis
Skewness and kurtosis were examined to assess the normality of the data. For skewness
and kurtosis, a value of less than 8 is considered acceptable for a large data set (Kline,
2011). All of the observed variables in our model had a value of less than 3 for skewness
and kurtosis. The variables in our model were then tested for possible multicollinearity.
The results of multiple regression analysis indicated that the variance inflation factor (VIF)
values for all independent variables were well below the cut criterion of < 4 (O’Brien,
2007). As we collect data for two types of services, Gym and Cell phone, we first
conducted measurement invariance to test if we can compare the structural model across
these groups. To achieve this, a multigroup confirmatory factor analysis was conducted. In
the first step, we tested for the configural invariance. The results indicated that the data
has a good fit with the model: χ2 = 3677.86 (df = 1936, p < 0.01); χ2/df = 1.90; RMSEA = 0.03;
CFI = 0.95; GFI = 0.86; NFI = 0.90; and TLI = 0.94. Thus, configural invariance was achieved.
We then tested for metric invariance by constraining all the factor loadings. The nested
model comparison results suggest that the groups are not invariant (Δχ2 = 59.85, Δdf = 35,
p < .001). We proceeded further by following a step-by-step process of constraining factor
loadings, to identify the source of invariance across the groups. The results indicate that
out of 12 latent factors, 10 were fully invariant, 1 (staying intention) was partially invariant,
while rollover acceptance was not invariant across the groups. These results gave us
a weak invariant model, but it is considered sufficient to test if the structural relationships
in our model differ across groups (Byrne et al., 1989). It also allowed us to pool the data to
establish the convergent and discriminant validity of our sample (Hanson et al., 2006).
To establish convergent and discriminant validity, confirmatory factor analysis was
conducted using the AMOS software version 26. The results indicated that the data has
a good fit with the model: χ2 = 2143.10 (df = 968, p < 0.01); χ2/df = 2.21; RMSEA = .03;
CFI = .96; GFI = .91; NFI = .96; and TLI = .95 (also see Appendix 3 in the supplementary
online file). The common latent factor method was used to test for any bias in the
data. In this method, an unmeasured first order common latent factor (CLF) is added in
the measurement model. This new unmeasured latent factor is reflected by all the
existing indicators in the measurement model (Podsakoff et al., 2003). The standar­
dized factor loadings of all the measurement indicators are compared when CLF is
JOURNAL OF STRATEGIC MARKETING
1347
Table 2. Convergent and discriminant validity.
Perceived value
Convenience
Consumer inertia
Confusion
Competitor similarity
Switching costs
Satisfaction
Staying intention
Word of mouth
Future rollover
acceptance
Reputation
Trust
CR
.92
.90
.91
.94
.87
.80
.91
.79
.94
.84
AVE VAL CONV INER CONF SIM SWIT SAT STAY WOM ACC REP TRUS
.74
.85
.58
.24
.76
.78
.14
.13 .88
.82 −.15 −.30 .13
.90
.63
.07
.02 .22
.26
.79
.58
.19
.19 .43
.18
.14 .76
.67
.57
.35 .14 −.34
.09 .16 .84
.56
.46
.33 .25 −.36
.06 .26 .66 .75
.83
.50
.25 .13 −.31
.00 .18 .70 .69
.91
.58
.53
.25 .17 −.27
.09 .18 .73 .57
.53 .76
.88 .72
.91 .73
.29
.27
.56
.71
.21
.13
−.13
.03
−.26 −.03
.13
.14
.34
.34
.32
.35
.29
.28
.33
.22
.85
.55
.85
Notes: CR = composite reliability; AVE = average variance extracted; figures in italics on the diagonal are the square roots
of the average variance extracted.
present in the measurement model against the loadings without a CLF. The results
suggest that the difference in the standard loadings was between 0.007 and .15, which
are lower than the cut criterion of < .20 (Nystrand & Olsen, 2020).
Results of the measurement model (Table 2) indicate that all of the constructs achieved
values above the minimum cut criteria of > .70 for composite reliability (CR) and > 0.50 for
average variance extracted (AVE), thus establishing convergent validity (Yap & Khong,
2006). Fornell and Larcker’s (1981) test was used to establish discriminant validity. All of
the constructs have acceptable discriminant validity, as the value of the square root of
AVE of each construct is higher than its highest correlation with any other construct in the
model (Table 2). Thus, we conclude that all of the constructs in our measurement model
are valid, reliable, and distinct from one another (Yap & Khong, 2006).
Hypothesis testing
The results from the full structural model indicate that the data has a good fit with the
proposed model: χ2 (716) = 1916.20, p < 0.001; χ2/df = 2.26; RMSEA = 0.041; CFI = 0.95;
GFI = 0.90; NFI = 0.93; and TLI = 0.95. All of the paths are significant at p < 0.05. The
estimates of squared multiple correlations (R2) explain 49–55% of the variance of
endogenous constructs in our model. Table 3 presents the standardized estimate,
standard error and critical ratio related to each hypothesis tested.
We also conducted a multi group analysis to test if the correlation between the latent
constructs is different across two groups of customers (gym and cell phone users) (Table 4).
The results suggest that the constrained model fit slightly worse (χ2 (1432) = 3026.58, p <
0.001; χ2/df = 2.11; RMSEA = 0.034; CFI = 0.94; GFI = 0.86; NFI = 0.90; and TLI = 0.94) than the
unconstrained model (χ2 (1441) = 3062.18, p < 0.001; χ2/df = 2.12; RMSEA = 0.034;
CFI = 0.94; GFI = 0.86; NFI = 0.89; and TLI = 0.94). The chi square difference test also suggests
that the groups are different in terms of structural relationships (Δχ2 = 35.60, Δdf = 9,
p < 0.001). To test which paths are different across groups, we compare two models by
constraining and unconstraining each path individually. The results suggest that two paths
were significantly different between the cell phone and gym users. They were between
satisfaction with staying intention and satisfaction with word of mouth.
1348
M. M. BUTT ET AL.
Table 3. Hypothesis test results.
H1
H2
H3
H4
H5
H6
H7
H8
H9
Association
Perceived value to satisfaction
Convenience to satisfaction
Consumer inertia to satisfaction
Confusion to satisfaction
Competitor similarity to satisfaction
Switching costs to satisfaction
Satisfaction to staying intention
Satisfaction to word of mouth
Satisfaction to future rollover acceptance
Standard
error
.029
.038
.023
.020
.026
.037
.040
.043
.037
Standardized estimate
.492
.117
.070
−.310
.113
.081
.707
.730
.739
Critical ratio
15.91
3.94
2.29
−10.04
3.90
2.42
15.02
25.02
23.13
Result
Supported
Supported
Supported
Supported
Supported
Supported
Supported
Supported
Supported
All paths are significant at p < 0.05.
Table 4. Multigroup structural model path comparison.
Cell Phone
H1
H2
H3
H4
H5
H6
H7
H8
H9
Association
Perceived value to satisfaction
Convenience to satisfaction
Consumer inertia to satisfaction
Confusion to satisfaction
Competitor similarity to satisfaction
Switching costs to satisfaction
Satisfaction to staying intention*
Satisfaction to word of mouth*
Satisfaction to future rollover acceptance
S. Est.
.50
.12
.12
−.34
.08
.01
.68
.75
.72
S. Error
.036
.003
.003
.026
.033
.050
.059
.052
.050
Gym
C.R.
12.003
3.018
2.932
−8.359
2.325
.299
11.714
19.394
15.464
S. Est
.48
.10
.03
−.28
.12
.13
.72
.74
.75
S. Error
.046
.058
.032
.032
.041
.055
.055
.043
.053
C.R.
10.562
2.357
.691
−6.141
2.866
2.784
9.340
17.116
17.047
*paths are significantly different at p < 0.05 using chi square test of difference.
Moderation test results
Product type, firm reputation, trust, and the consumer’s gender, age, education, and
length of time with the current service provider were proposed as variables that may
moderate the relationships between consumer satisfaction and its antecedents.
Moderating effects were assessed using Hayes’ Process macro 3.5 model 1, with 5,000
bias corrected bootstrap samples and a 95% confidence interval. It was found that
product type and firm reputation do not moderate the relationships between consumer
satisfaction and its antecedents.
Consumer trust in the service provider moderates the relationships between perceived
competitor similarity and satisfaction, and switching costs and satisfaction. The condi­
tional effects are reported in Table 5. The results indicate that when perceived similarity is
low, consumers high on trust are most satisfied, and consumers low on trust are least
satisfied; however, when the perceived similarity is high, the interaction effect becomes
non-significant. Similarly, when switching costs are low, consumers high on trust are most
satisfied, and consumers low on trust are least satisfied; however, when the switching
costs are high, the interaction effect again becomes non-significant.
Education was found to moderate the relationships between satisfaction and value,
convenience, confusion, and switching costs. Non-degree holders are less satisfied than
degree holders when value and convenience are low, when confusion is high, or if there
are high switching costs. When individuals seek value and convenience, when individuals
feel less confused, or if switching costs are low, the non-degree holders are more satisfied
than the degree holders. Gender and age moderate the relationship between confusion
JOURNAL OF STRATEGIC MARKETING
1349
Table 5. Moderation analysis results.
Moderator
Trust
Predictor
Competitor similarity
Switching costs
Gender
Confusion
Age
Confusion
Level of education
Perceived value
Convenience
Confusion
Switching costs
Duration with provider
Perceived value
Condition
−1 SD
At the mean
+1 SD
−1 SD
At the mean
+1 SD
Female
Male
−1 SD
At the mean
+1 SD
No degree
Degree
No degree
Degree
No degree
Degree
No degree
Degree
<2 years
≥2 years
Effect
.19
.12
.05
.27
.17
.08
−.19
−.29
−.18
−.23
−.29
.66
.53
.90
.63
−.35
−.21
.39
.17
.64
.53
SE
.04
.02
.03
.06
.03
.04
.03
.03
.02
.01
.02
.04
.02
.11
.06
.04
.02
.07
.04
.03
.02
t
4.08
4.61
1.57
4.51
4.86
1.83
−7.16
−10.33
−6.78
−12.29
−10.96
14.42
20.32
8.17
10.10
−8.16
−9.98
5.07
4.13
16.42
18.69
p
.001
.001
.110
.001
.001
.067
.000
.000
.001
.001
.001
.000
.000
.000
.000
.000
.000
.000
.000
.000
.000
95% CI
.1034
.2943
.0729
.1808
−.0136
.1233
.1541
.3921
.1063
.2498
−.0058
.1728
−.2443 −.1394
−.3483 −.2371
−.2422 −.1335
−.2776 −.2012
−.3429 −.2388
.5744
.7553
.4971
.6034
.6861 1.119
.5123
.7592
−.4432 −.2714
−.2583 −.1734
.2393
.5410
.0920
.2579
.5677
.7218
.4828
.5961
and satisfaction. Females are more satisfied than males in high confusion situations, and
vice versa. Similarly, younger people are less satisfied in high confusion situations. Finally,
duration with the service provider moderates the relationship between value and satis­
faction. This finding is important because previous research has found that perceived
value and the length of consumer-provider relationships influence consumers’ attitudes
towards switching provider (Wang & Wu, 2012). Although the newer customers in our
sample tend overall to be less satisfied than older customers, the longer the time with the
provider, the weaker is the relationship between value and satisfaction. In summary, we
found partial support for H10b, H10c, H10d, H10e, and H10f.
Discussion
Based on past literature, we identified and empirically tested six likely antecedents of
rollover contract satisfaction, and three consequences of such satisfaction. Each of the
nine hypotheses (H1–H9) associated with relationships between the constructs of our
conceptual model are supported. The three relationships between consumers’ satisfac­
tion and service loyalty (H7, H8, H9) – measured by staying (repurchase) intentions, word
of mouth, and rollover acceptance – are the strongest in our model. Although this result
may be unsurprising given that there is much support in the literature for a link between
satisfaction and service loyalty (e.g. Ahmad & Akbar, 2023; Watson et al., 2015; Yang &
Peterson, 2004), it is an important finding in the context of service contract renewal since
even customers who are satisfied with their service provider could switch to a competitor
that develops a service innovation or offers a price discount. Thus, our results emphasize
the importance of consumer satisfaction in achieving consumer service loyalty.
Perceived value emerged as the strongest enabler of consumer satisfaction with roll­
over contracts, while consumer confusion – e.g. caused by lengthy and complex con­
tracts – has the strongest negative effect on consumer satisfaction. This was followed by
1350
M. M. BUTT ET AL.
convenience, as an important predictor of consumer satisfaction. Our findings that
perceived value and convenience are key drivers of consumer satisfaction with rollover
contracts may be compared to the findings of Wilkins et al. (2023), which found that
convenience and perceived value are key influences on consumers’ initial decision to
enter into automatic renewal agreements.
Service providers should focus on those constructs in our model that they have control
over. For example, in some service categories, firms may have little or no influence over
consumer inertia or perceived competitor similarity. As H1–H6 are each supported, this
suggests that service providers should deliver value and convenience, and emphasize this
to consumers in marketing communications. Further, providers should avoid using con­
tracts that are overly-long, complex, and difficult for consumers to understand as this will
lead to lower levels of satisfaction. Likewise, particularly for consumers who value con­
venience, providers may use a certain level of switching costs, so that the consumer
perceives they are saving time and effort by staying with their existing provider. However,
switching costs should not be extreme, as consumers may then perceive them as
unreasonable, resulting in lower levels of satisfaction.
The results of H10b–10f offer support for the moderating influences of consumers’
gender, age, level of education, trust in the service provider, and length of time with the
provider on some of the relationships in our model. The antecedent variables that are
most affected by these moderating influences are perceived value, confusion, and switch­
ing costs. Service providers may use this knowledge when targeting specific categories of
consumer. For example, a provider that sells its service to mainly young people will
generate lower levels of satisfaction if the service contract is perceived as confusing, as
young people are generally less willing to spend time and effort understanding long and
complex agreements compared to older people.
Theoretical contributions
By considering how service agreements may influence the antecedents of consumer
satisfaction, this research contributes to the academic literature by extending previous
research on consumer repurchase decision making and behavioral loyalty in services. First,
we offer a holistic model that includes key antecedents of consumer satisfaction with
rollover contracts, and the subsequent effects on staying intentions, word of mouth, and
future rollover acceptance with other firms and products. The results highlight that the
structure, presentation and contractual terms of service contracts may have an impact on
various antecedents of consumer satisfaction. Furthermore, the results suggest that
consumers may perceive automatic renewal at the end of a contracted period as
a contributor to value. When faced with the decision of whether to stay with the existing
provider or switch to a competitor, ‘rolling over’ the contract may save consumers the
time and effort needed for information searching and evaluation of alternative providers.
Second, our research sheds new light on the relationship between consumer satisfac­
tion and behavioral loyalty. While the extant research has focused on consumer inertia
and switching costs (Gray et al., 2017), no previous study has considered the impacts of
automatic contract renewal and the contractual terms associated with this – e.g. notice
periods, penalties and loss of benefits – on consumer repurchase/switching decision
making. We demonstrate that consumer satisfaction with rollover contracts is influenced
JOURNAL OF STRATEGIC MARKETING
1351
by both positive factors, such as value and convenience, and negative factors, such as
switching costs and confusion caused by lengthy and complex contracts.
Third, our findings reinforce the importance of reciprocity in service relationships. As
explained by social exchange theory, when making purchase decisions, consumers gen­
erally consider the potential rewards against the costs (J. J. Lee et al., 2014). Perceived
value, conceptualized as perceived value for money, was found to be the strongest
enabler of customer satisfaction. Interestingly, our results indicate that consumers may
perceive automatic contract renewal as either a reward (e.g. by providing convenience
and saving the individual time and effort) or a cost (e.g. limiting or constraining future
opportunities to switch provider).
Finally, our study reveals the potential benefits that firms may derive from consumers
having lower levels of perceived behavioral control. From a theoretical perspective, it
should be noted that firms may have the ability to influence consumers’ perceived
behavioral control in some areas, while in other areas they may not have the ability to
shape the consumers’ perceptions. In markets where it is difficult for firms to commu­
nicate a unique selling proposition, such as insurance or home security, consumers may
perceive that the time and effort needed to collect information and evaluate alternative
providers is unlikely to be worthwhile. It is interesting to note that the existence of
switching barriers may actually increase consumer satisfaction, as individuals may per­
ceive that automatic contract renewal has saved them time, effort and inconvenience.
Managerial implications
Our findings present a number of managerial implications. First, although it is universally
accepted that consumer satisfaction does not always lead to positive consumer behaviors,
the strongest relationships in our model are between satisfaction and staying intentions,
word of mouth, and future rollover acceptance with other firms and products. This implies
that firms will benefit from focusing on the achievement of consumer satisfaction. Firms
should identify the antecedents of satisfaction, and then develop and implement appro­
priate strategies that lead to these antecedents having a positive effect on satisfaction.
Our results show that perceived value for money has the strongest influence on consumer
satisfaction. Firms will likely benefit from undertaking market research, to identify custo­
mer needs and wants, particularly as the price-quality trade-off varies across products and
markets (Wilkins & Ireland, 2022).
Second, firms need to be aware of the seemingly negative factors that may positively
or negatively affect consumer satisfaction and consumers’ subsequent behaviors. Of
particular relevance to marketers are those antecedents of satisfaction over which they
have control, or which they may influence. Firms need to exercise considerable care when
designing consumer agreements and making decisions relating to switching costs and
barriers. Although confusion marketing that makes it very difficult for customers to
terminate their agreement may be profitable in the short term (Kasabov, 2015), it may
result in negative outcomes in the longer term, such as reputational damage. Lengthy and
complex contracts are likely to have a negative effect on consumer satisfaction, and even
if the consumer does not switch provider, their negative attitudes toward the firm may
translate into negative word of mouth, which may make it harder for the firm to recruit
new customers.
1352
M. M. BUTT ET AL.
Third, the results of this study serve as a reminder to marketers of the importance of
trust in services marketing. Even though a consumer has received satisfactory service in
the past, they will likely consider the likelihood of receiving good service in the future as
well. In particular, trust was found to moderate the relationship between switching costs
and satisfaction. It may be unwise for firms to try imposing unfair or unreasonable
switching costs on consumers, as this could lower the individual’s trust in the firm, and
subsequently also lower satisfaction. As well as behaving ethically, firms may use their
marketing communications with customers to remind them of the benefits and value they
receive, to develop and maintain strong firm-customer relationships.
Finally, our findings suggest that firms should consider various demographic features
of their customers. For example, firms that sell their products primarily to women, may
develop and implement different strategies to firms that sell predominantly to men.
Although our results found that confusion is negatively related to satisfaction, such
confusion has a lesser effect on female consumers. It was interesting to note that within
more confused customer groups, female respondents were more satisfied, compared to
male respondents. Similarly, age moderates the relationship between confusion and
satisfaction. As firms often focus on achieving rollover agreements with more profitable
mature consumers, the need for marketers to reduce ambiguity and confusion surround­
ing rollover contracts remains important.
Less educated consumers are less satisfied than more highly educated consumers
when value and convenience are low, when confusion is high, or if there are high
switching costs. To maximize the satisfaction of less educated customers, firms should
implement strategies that provide value and convenience, while also keeping agreements
simple and fair. Although our results also suggest that higher levels of satisfaction can be
achieved through having higher switching costs, such a strategy may be counterproduc­
tive, as we do not know if there is a linear relationship between high switching costs and
consumer satisfaction. A firm may not only retain customers, but also gain new customers,
and market share, by actively promoting simple and transparent contracts. This strategy
may be regarded as ethical behavior toward customers, and it may help a firm to
differentiate itself from competitors.
Limitations and future research
This study is the first of its kind, which developed and empirically tested a holistic
model that incorporates both antecedents and consequences of consumer satisfaction
with rollover contracts. Thus, this research has contributed to the literature in
a meaningful way. The results emphasize the importance of improving consumers’
perceived value of such contracts, and challenge the existing conception that inertia
and switching costs are the major factors considered in consumer repurchase decision
making, which influence customer attitudes, satisfaction, and behaviors toward roll­
over contracts. In addition, the results indicate that consumer confusion is a very
strong dissatisfier, suggesting that firms should focus on reducing confusion around
rollover contracts.
One of the limitations of our research is its cross-sectional design. Also, we only
considered consumers’ attitudes and behaviors toward two products, and in only
one country. Future studies may examine the effects of other factors that may have
JOURNAL OF STRATEGIC MARKETING
1353
an effect on consumer attitudes and behaviors, and such studies may involve
manipulations, to strengthen the findings. Researchers may also further explore
how increasing or decreasing confusion around renewal can impact upon consumer
perceptions and attitudes toward rollover contracts, as well as their subsequent
behaviors. Our model focused primarily on the identification and testing of enablers
of satisfaction, but future research could focus on identifying potential disablers or
barriers toward rollover acceptance. Future studies could also explore the extent to
which consumer decision making is influenced by personal values and circum­
stances. Finally, we acknowledge that multidimensional scales could have been
used for perceived value and convenience to have a more in-depth understanding
of the proposed relationships with customer satisfaction, and these may be used in
future research.
Disclosure statement
No potential conflict of interest was reported by the author(s).
ORCID
Muhammad Mohsin Butt
http://orcid.org/0000-0002-1894-243X
Stephen Wilkins
http://orcid.org/0000-0002-0238-1607
Joe Hazzam
http://orcid.org/0000-0003-4631-9167
Ben Marder
http://orcid.org/0000-0003-1641-2344
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