Rollover service contracts: the influences of perceived value, convenience, confusion and switching costs on consumer satisfaction and service loyalty

Abstract

ollover 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 contracts, followed by convenience, while consumer confusion – e.g. caused by lengthy and complex contracts – has the strongest negative effect on consumer satisfaction. The strongest relationships 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.