Switching costs are impediments or expenses that customers incur when deciding to use products from a different brand rather than continuing to use the similar or identical products offered by their current brand. In the life sciences, such switching costs may include:
- The fear of losing the money and time already invested in optimizing a vendor’s products to work with specific instrumentation
- Unhappiness over forgoing a long-term relationship with a favorite sales rep
- Unwillingness to buy products from vendors that do not have institutional purchasing agreements
- Concern over whether a product from a new vendor will work with an existing protocol
Companies that engender higher switching costs are better able to “lock in” customers. A greater degree of “lock in” may allow companies to pass along added costs to the customer without the risk of losing them to their competitors.
So what is the tipping point? How much is a scientist willing to put up with before incurring the psychological and monetary costs of switching? Gain insight to this conundrum in our 2008 report: Understanding Switching Dynamics: Maximizing Customer Retention in the Life Sciences. If you are interested in the report, call me—I can give you a sweet deal on this one.