Inmarketing andmicroeconomics,customer switching orconsumer switching describes "customers/consumers abandoning a product or service in favor of acompetitor".[1] Assuming constantprice,product orservice quality, counteracting this behaviour in order to achieve maximalcustomer retention is the business of marketing,public relations andadvertising.Brand switching—as opposed tobrand loyalty is the outcome ofcustomer switching behaviour.
Variability in quality or marketprice fluctuations—especially a rise inprices—may lead customers to consultprice comparison services, where alternative suppliers may be offered. Decliningcustomer satisfaction may be due to poor service quality but also—to a lesser degree—be a symptom of boredom with the brand of choice.[1] 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 2013Nielsen study oncustomer loyalty, brand switching can happen for 5 main reasons, but mainly based on price considerations.[2] The overall global averages are:
Because of the dominant role of pricing, market tactics likepenetration pricing have evolved to offer a convincingincentive for switching. Along with these are the factors like service inconvenience, poor location, ethical issues likehard selling or unsafe products and also change in customers' income levels. Another approach is the advertisement forvaporware that seemingly will offer newer or better features than established products without actually possessing anyinnovation.
Switching is a significant business factor affectingrevenues for companies providingcontinuously delivered services, as is the case for theenergy market as opposed tosectors providing products that stimulate non- or sparsely recurring purchase because of the durability of the product or a general orientation towards casual customers.[1]Energy customer switching is a significant risk or success factor forenergy suppliers.
The termserial switcher was first coined by Charles Turner and David Alexander in theircustomer relationship management course and then their CRM Pocketbook.[3] It describes a person, who continually moves his/her patronage from one company to another and highlights the ignorance of many organizations, including credit card companies, who strive for customer acquisition regardless ofretention rates.
By offering a range of financial incentives, such as freebalance transfers 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.
