Switching Costs and Customer Retention
Customers from numerous firms regularly have the feeling of being "locked-in” in with their current provider due to the presence of switching costs. Switching costs are the onetime costs that customers associate with the process of switching from one provider to another (Burnham et al. 2003). They include customer perception of time, effort, and losses associated with provider switching. This presentation provides new insights into the effectiveness of this retention strategy.
It also shows which customer segments to target as a company. While it is obvious that customers with prior switching experience and provider expertise are less likely to be bound by switching costs, it is unclear whether customers differ with regard to switching costs perceptions depending on othercustomer characteristics (e.g., age, gender, income, risk aversion).
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Markus Blut is professor and chair in marketing at Aston Business School.
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