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Concept
Switching barriers
Summary
Switching costs or switching barriers are terms used in microeconomics, strategic management, and marketing. They may be defined as the disadvantages or expenses consumers feel they experience, along with the economic and psychological costs of switching from one alternative to another. For example, when telephone service providers also offer Internet access as a package deal they are adding value to their service. A barrier to switching is then formed as swapping internet services providers is a time consuming effort. There are a range of different switching costs that fall under three main categories: procedural switching barriers, financial switching barriers, and relational switching barriers. Procedural switching barriers refer to the time and resources associated with changing to a new provider; financial switching barriers refer to the loss of financially measurable resources; and relational switching barriers look at the emotional inconvenience from the breaking of bonds and loss of identity.
Procedural switching barriers emerge from the buyer’s decision-making process and the execution of their decision. Procedural switching barriers consist of: economic risk, learning, and setup costs, evaluation, this type of switching cost primarily involves the expenditure of time and effort. There are a number of switching costs or facets that fall under procedural switching barriers. Uncertainty costs refer to the perceived likelihood of acquiring a lesser performance and quality when switching. They have the potential to prevent a customer from switching. Pre-switching search and evaluation costs refer to the time and effort costs associated with the search and evaluations required to make a switching decision. Post-switching behavioural and cognitive costs envision the time and effort needed to become familiar with a new service routine when switching occurs. Setup costs refer to the time and effort costs related to the process of establishing a new product for initial use or forming a relationship with a new provider.
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