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Switching costs are costs that are incurred by a customer to switch between products or services. The following are common types of switching costs.LearningThe time and expense of learning about a new product or service. If you purchase a new type of mobile device, you need to learn its interfaces.
IntegrationThe requirement to get a new product or service working with everything else you own. For example, importing your data into software.ConfigurationThe need to configure and customize the new product or service. DevelopmentThe need to create things for the new product or service. For example, the need to develop software to use a new database product.Productivity & EfficiencyA decrease in productivity and efficiency due to the process of learning and integrating a new product or service. For example, a salesperson works more slowly after switching to a new type of sales automation software.
Business DisruptionThe potential for your customer services, marketing or operations to go offline as you make changes or switch over.Risks associated with a new product or service. If you try a new shampoo, you may risk a bad hair day.Cancellation Fees Penalties charged by your current provider such as a cancellation fee. It is common for firms such as telecom companies to attempt to increase switching costs to retain customers, even if they are dissatisfied. Firms with high switching costs may have little incentive to improve customer satisfaction.|
| Type | | | Definition | Costs that are incurred by a customer to switch between products or services. | | Related Concepts | |
Marketing Economics
This is the complete list of articles we have written about marketing economics.
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A reasonably comprehensive guide to marketing economics.
An overview of bliss point, a marketing principle.
Why three firms usually dominate an industry.
A list of ways to compete in a crowded market.
A definition of market saturation with a few examples.
The difference between premiumisation and commodization.
The primary types of market position.
The common types of consumer goods.
A few sources of competitive advantage for businesses.
The common types of competitor.
A definition of experience economy with examples.
A definition of competitive position with examples.
A definition of trade secret with examples.
A definition of relative advantage with examples.
An overview of comparative advantage with examples and comparisons.
The common types of competitive threat.
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