Managing Customer Uncertainty in Making Service Offshoring Decisions

Abstract

Despite a long-standing interest in service offshoring from both academics and practitioners, the questions how and under what conditions customers react when a well-known national brand decides to outsource its services to an offshore service provider (OSP) is an understudied area. Drawing on cognitive consistency theory, we test a new construct called, “service offshoring fit” (SOF) that captures customer overall perceptual consistency in their memory networks between the focal firm and the OSP as indicated by the suitability, appropriability, and logicality of the alliance. Using 393 responses from a panel of customers of focal brands, we show that customer certainty mediates the relationship between SOF and intention not to switch by current customers. Our findings also reveal an inverted U-shaped relationship between marketing communications and customer certainty at different levels of SOF. Specifically, if firms communicate consumers’ benefits associated with offshoring, they can mitigate or avoid negative customer reactions (and subsequently increase customer certainty); however, after a certain point, such effects are reduced.