In
marketing
Marketing is the act of acquiring, satisfying and retaining customers. It is one of the primary components of Business administration, business management and commerce.
Marketing is usually conducted by the seller, typically a retailer or ma ...
and
microeconomics
Microeconomics is a branch of economics that studies the behavior of individuals and Theory of the firm, firms in making decisions regarding the allocation of scarcity, scarce resources and the interactions among these individuals and firms. M ...
, customer switching or consumer switching describes "
customer
In sales, commerce, and economics, a customer (sometimes known as a Client (business), client, buyer, or purchaser) is the recipient of a Good (economics), good, service (economics), service, product (business), product, or an Intellectual prop ...
s/
consumer
A consumer is a person or a group who intends to order, or use purchased goods, products, or services primarily for personal, social, family, household and similar needs, who is not directly related to entrepreneurial or business activities. ...
s abandoning a product or service in favor of a
competitor
Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, individ ...
".
Assuming constant
price
A price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, especially when the product is a service rather than a ph ...
,
product or
service quality, 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 (business), product or Service (economics), service. Advertising aims to present a product or service in terms of utility, advantages, and qualities of int ...
. Brand switching—as opposed to
brand loyalty
In marketing and consumer behaviour, brand loyalty describes a consumer's persistent positive feelings towards a familiar brand and their dedication to purchasing the brand's products and/or services repeatedly regardless of deficiencies, a ...
is the outcome of ''customer switching behaviour''.
Reasons
Variability in quality or market
price fluctuations—especially a rise in
price
A price is the (usually not negative) quantity of payment or compensation expected, required, or given by one party to another in return for goods or services. In some situations, especially when the product is a service rather than a ph ...
s—may lead customers to consult
price comparison
Pricing is the process whereby a business sets and displays 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 ...
services, where alternative suppliers may be offered. Declining
customer satisfaction
Customer satisfaction is a term frequently used in marketing to evaluate customer experience. It is a measure of how products and services supplied by a company meet or surpass customer expectation. Customer satisfaction is defined as "the number ...
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 a 2013 Nielsen study on ]customer loyalty
In marketing and consumer behaviour, brand loyalty describes a consumer's persistent positive feelings towards a familiar brand and their dedication to purchasing the brand's products and/or services repeatedly regardless of deficiencies, a co ...
, 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 have evolved to offer a convincing incentive
In general, incentives are anything that persuade a person or organization to alter their behavior to produce the desired outcome. The laws of economists and of behavior state that higher incentives amount to greater levels of effort and therefo ...
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 for vaporware
In the computer industry, vaporware (or vapourware) is a product, typically computer Computer hardware, hardware or software, that is announced to the general public but is late, never actually manufactured, or officially canceled. Use of the w ...
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 service (economics), services or improvement in offering goods or services. ISO TC 279 in the standard ISO 56000:2020 defines innovation as "a n ...
.
Affected sectors
Switching is a significant business factor affecting revenue
In accounting, revenue is the total amount of income generated by the sale of product (business), goods and services related to the primary operations of a business.
Commercial revenue may also be referred to as sales or as turnover. Some compan ...
s for companies providing ''continuously delivered services'', as is the case for the energy market
An energy market is a type of commodity market on which electricity, heat, and fuel products are traded. Natural gas and electricity are examples of products traded on an energy market. Other energy commodities include: oil, coal, carbon emission ...
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 ...
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 suppliers.
]
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 strategic process that organizations use to manage, analyze, and improve their interactions with customers. By leveraging data-driven insights, CRM helps businesses optimize communication, enhance cus ...
course and then their CRM Pocketbook.
See also
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References
Brand management
Brands
Branding terminology
Business terms
Switching
Product management
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