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, 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 f ...

consumer A consumer is a person or a group who intends to order, or uses 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, ind ...

". 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 t ...

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 * Prod ...

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 t ...

, 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. ...

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 ...

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

Reasons

Variability in quality or market

price fluctuation In finance, volatility (usually denoted by ''σ'') is the degree of variation of a trading price series over time, usually measured by the standard deviation of logarithmic returns. Historic volatility measures a time series of past market pri ...

s—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 acq ...

services where alternative suppliers may be offered. Declining

customer satisfaction Customer satisfaction (often abbreviated as CSAT) is a term frequently used in marketing. 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 of ...

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 The loyalty business model is a business model used in strategic management in which company resources are employed so as to increase the loyalty of customers and other stakeholders in the expectation that corporate objectives will be met or su ...

, 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 A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...

(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 In advertising, a hard sell is an advertisement or campaign that uses a more direct, forceful, and overt sales message, as opposed to a soft sell. The term is also used to describe aggressive sales techniques used by company representatives, part ...

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 service (economics), services or improvement in offering goods or services. ISO TC 279 in the standard ISO 56000:2020 defines innovation as "a ...

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 rev ...

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 develop ...

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 Energy customer switching is a concept stemming from the global energy markets. The concept refers to the action of one energy customer switching energy supplier, a switch is essentially seen as the free (by choice) movement of a customer. In a ...

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 work ...

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