Switching Costs

AAA

DEFINITION of 'Switching Costs'

The negative costs that a consumer incurs as a result of changing suppliers, brands or products. Although most prevalent switching costs are monetary in nature, there are also psychological, effort- and time-based switching costs.

INVESTOPEDIA EXPLAINS 'Switching Costs'

Sustainable companies usually try to employ strategies that incur some sort of high cost in order to dissuade customers from switching to a competitor's product, brand or services. For example, many cellular phone carriers charge very high cancellation fees for canceling a contract. Cell phone carriers do this in hopes that the costs involved with switching to another carrier will be high enough to prevent their customers from doing so.

RELATED TERMS
  1. Goodwill

    An account that can be found in the assets portion of a company's ...
  2. Economic Moat

    The competitive advantage that one company has over other companies ...
  3. Comparative Advantage

    The ability of a firm or individual to produce goods and/or services ...
  4. Porter's 5 Forces

    Named after Michael E. Porter, this model identifies and analyzes ...
  5. Brand Equity

    The value premium that a company realizes from a product with ...
  6. Barriers To Entry

    The existence of high start-up costs or other obstacles that ...
Related Articles
  1. Competitive Advantage Counts
    Active Trading

    Competitive Advantage Counts

  2. Advertising, Crocodiles And Moats
    Professionals

    Advertising, Crocodiles And Moats

  3. Economic Moats: A Successful Company's ...
    Active Trading

    Economic Moats: A Successful Company's ...

  4. What is an economic moat?
    Investing

    What is an economic moat?

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center