Web Systems Design and Online Consumer Behavior [Electronic resources]

Yuan Gao

نسخه متنی -صفحه : 180/ 125
نمايش فراداده

Strategic Importance of Switching Costs: A LiteratureReview

The strategic importance of switching costs has been recognized and researched by several academic disciplines, primarily economics and marketing (Porter, 1980, 1985, 2001; Rumelt, 1987; Lieberman & Montgomery, 1988; Klemperer, 1987a, 1987b, 1995; Kotler, 1997; Shapiro & Varian, 1999; Hax & Wilde II, 1999, 2001). In the economics literature several researchers have studied the role of switching costs (Porter, 1980, 1985; Katz & Shapiro, 1985; Farrell & Saloner, 1986; Farrell & Gallini, 1988; Farrell & Shapiro, 1988; Klemperer, 1987a, 1987b, 1995; Shapiro & Varian, 1999; Shapiro, 2000). Klemperer uses theoretical models to show that in certain cases consumers face switching costs after choosing among products that were ex ante undifferentiated. As a result, in subsequent purchases rational consumers display brand loyalty when faced with a choice between functionally identical products. In their book Information Rules (1999), Shapiro and Varian emphasize that “switching costs are the norm, not the exception, in the information economy.” In the marketing field, as well, switching costs are identified as playing a key role in the process of creating strong customer loyalty (Kotler, 1997). This process, known as relationship marketing, involves all of the actions a firm can take to better understand and satisfy its customer. Jones et al. (2000) defined, then, a switching cost as any factor which makes it difficult or costly for consumers to change providers. Ping (1993, 1997, 1999), following Johnson’s (1982) concept structural constraints, uses the term structural commitment as a measure of the extent to which the customer has to remain in a relationship. Ping argues that structural commitment includes alternative attractiveness, investment in a relationship and switching cost. Fornell (1992), without proposing a formal definition of the concept, provides a list of factors that can constitute such barriers (i.e., if they are prevalent they will hinder customers trying to defect from a relationship): search costs, transaction costs, learning costs, loyal customer discounts, customer habit, emotional cost, cognitive effort and financial, social and psychological risk.