The effects of service innovation on customer retention: An integration of customer satisfaction

Services are becoming driving forces of economies currently resulting in much attention on innovation of new services from firms to satisfy customer needs. Customer satisfaction and their behavioral intention play a critical role in firm´s performance and have been investigated carefully in both business and academic practices. Many previous studies have conducted to investigated the key role of service innovation on firm´s performance and firm´s competitiveness. But, few studies in the service literature have simultaneously examined the effects of service innovation on customer satisfaction as antecedents of customer retention, especially in telecommunication. This study focuses on addressing the end user issue of service innovation. This study examines service innovation from end consumers´ perspective. A data of 400 telecom service users sample from Vietnam is collected for empirical hypotheses testing of relationship among variables. The conceptual model investigates the relevant relationships among the constructs by using confirmatory factor analysis (CFA) and structural equation modeling (SEM). Findings show that two components of service innovation namely interactive and supportive are the key determinants of customer satisfaction and customer retention. The paper also includes a discussion on the theoretical and managerial implications of the research results.