marketing Marketing is the process of exploring, creating, and delivering value to meet the needs of a target market in terms of goods and services; potentially including selection of a target audience; selection of certain attributes or themes to empha ...

and

microeconomics Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics focu ...

, customer switching or consumer switching describes "

customer In sales, commerce, and economics, a customer (sometimes known as a client, buyer, or purchaser) is the recipient of a good, service, product or an idea - obtained from a seller, vendor, or supplier via a financial transaction or exchange for ...

s/ consumers abandoning a product or service in favor of a competitor". Assuming constant

price A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the c ...

product Product may refer to: Business * Product (business), an item that serves as a solution to a specific consumer problem. * Product (project management), a deliverable or set of deliverables that contribute to a business solution Mathematics * Produ ...

service quality Service quality (SQ), in its contemporary conceptualisation, is a comparison of perceived expectations (E) of a service with perceived performance (P), giving rise to the equation SQ=P-E. This conceptualistion of service quality has its origins in ...

, counteracting this behaviour in order to achieve maximal

customer retention Customer retention refers to the ability of a company or product to retain its customers over some specified period. High customer retention means customers of the product or business tend to return to, continue to buy or in some other way not defe ...

is the business of marketing,

public relations Public relations (PR) is the practice of managing and disseminating information from an individual or an organization (such as a business, government agency, or a nonprofit organization) to the public in order to influence their perception. Pu ...

and

advertising Advertising is the practice and techniques employed to bring attention to a product or service. Advertising aims to put a product or service in the spotlight in hopes of drawing it attention from consumers. It is typically used to promote a ...

. Brand switching—as opposed to

brand loyalty In marketing, brand loyalty describes a consumer's positive feelings towards a brand, and their dedication to purchasing the brand's products and/or services repeatedly, regardless of deficiencies, a competitor's actions, or changes in the envir ...

is the outcome of ''customer switching behaviour''.

Reasons

Variability in quality or market price fluctuations—especially a rise in

s—may lead customers to consult

price comparison Pricing is the process whereby a business sets the price at which it will sell its products and services, and may be part of the business's marketing plan. In setting prices, the business will take into account the price at which it could acqui ...

services where alternative suppliers may be offered. Declining customer satisfaction may be due to poor service quality but also—to a lesser degree—be a symptom of boredom with the brand of choice. Brand loyalty can be very strong, however, and the longer a commitment to a brand lasts, the stronger the ties will usually be. According to 2013 Nielsen study on customer loyalty, brand switching can happen for 5 main reasons, but mainly based on price considerations. The overall global averages are: # Better Price (41%) # Better Quality (26%) # Better Service Agreement (15%) # Better Selection (10%) # Better Features (8%) Because of the dominant role of pricing, market tactics like

penetration pricing Penetration pricing is a pricing strategy where the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth. The strategy works on the expectation that customers will switch to the new brand ...

have evolved to offer a convincing incentive for switching. Along with these are the factors like service inconvenience, poor location, ethical issues like hard selling or unsafe products and also change in customers' income levels. Another approach is the advertisement of

vaporware In the computer industry, vaporware (or vapourware) is a product, typically computer hardware or software, that is announced to the general public but is late or never actually manufactured nor officially cancelled. Use of the word has broade ...

that seemingly will offer newer or better features than established products without actually possessing any

innovation Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services. ISO TC 279 in the standard ISO 56000:2020 defines innovation as "a new or changed entit ...

Affected sectors

Switching is a significant business factor affecting

revenue In accounting, revenue is the total amount of income generated by the sale of goods and services related to the primary operations of the business. Commercial revenue may also be referred to as sales or as turnover. Some companies receive revenue ...

s for companies providing ''continuously delivered services'', as is the case for the

energy market Energy markets are national and international regulated markets that deal specifically with the trade and supply of energy. Energy market may refer to an electricity market, but can also refer to other sources of energy. Typically energy developme ...

as opposed to

sectors Sector may refer to: Places * Sector, West Virginia, U.S. Geometry * Circular sector, the portion of a disc enclosed by two radii and a circular arc * Hyperbolic sector, a region enclosed by two radii and a hyperbolic arc * Spherical sector, a po ...

providing products that stimulate non- or sparsely recurring purchase because of the durability of the product or a general orientation towards casual customers. Energy customer switching is a significant risk or success factor for

energy supplier The energy industry is the totality of all of the industries involved in the production and sale of energy, including fuel extraction, manufacturing, refining and distribution. Modern society consumes large amounts of fuel, and the energy indust ...

Serial switching

The term serial switcher was first coined by Charles Turner and David Alexander in their

Customer relationship management Customer relationship management (CRM) is a process in which a business or other organization administers its interactions with customers, typically using data analysis to study large amounts of information. CRM systems compile data from a r ...

course and then their CRM Pocketbook. It describes a person who continually moves his/her patronage from one company to another and highlights the ignorance of many organisations, including credit card companies, who strive for customer acquisition regardless of retention rates. By offering a range of financial incentives, such as free

balance transfer A balance transfer is the transfer of (part of) the balance (either of money or credit) in an account to another account, often held at another institution. It is most commonly used when describing a credit card balance transfer. How it works ...

s or interest free periods, a company may hope to attract new customers. This is superficially attractive to companies if it meets acquisition and competitive switching targets. In practice, however, a serial switcher will not contribute any profit if he/she does not stay long enough to provide a return on investments. The lesson is that lack of integration and analysis across the business allows bad decisions to be made.

References

Brand management Brands Branding terminology Business terms Switching Product management {{marketing-stub

Reasons

Affected sectors

Serial switching

See also

References