What are switching costs?
The main goal of customer satisfaction programs is to increase customer retention rates. Switching costs play a vital role in explaining the relationship between client fulfillment and loyalty and provide useful intuition.
Switching cost is a term used to describe the costs incurred by a customer to change the dealer for a particular product. It also includes the cost of switching between brands or products. These costs are primarily represented in terms of money. It means the price difference that the customer has to pay when switching to another supplier or brand. If the switching cost is exceeded, the switch will become more complicated or overpriced. Some of the types of switching costs are as follows:
- Financial cost
- The cost of time
- The cost of risk
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