Make it Hard for Customers to Leave You

In business school, we learned the term “switching costs”.  Switching costs are the costs that a customer incurs if they want to switch vendors.  The wireless phone companies have that $175 or so fee if you terminate early (which is not the best example because it mostly represents payback for some of their sunk costs).  The document storage business (as you might have read about in Norm Brodsky’s Street Smart columns), charge if you want to take a box out of storage.  Other switching costs are more subtle such as if you wanted to change to new software (I can’t imagine changing CRM systems would be an easy task). I had breakfast last week with a very successful career salesperson that used to work for Caterpillar in the 70s.  He told me that in addition to great service (see below), his company used to have an IT department that functioned as the IT department for their clients.  Remember back then it cost a lot of money to purchase mainframes etc.  Do you think that customers thought about that when deciding on trying to save $10,000 from another machinery supplier?  You bet. Another switching costs is the degree of ease to do business with your company as well as great customer service.  Unfortunately, that cost is one that many clients don’t appreciate until they leave you and experience poor service. So next step is to give some thought about switching costs you can establish in your business.  Maybe it is the ability to get tough requests done or maybe it is some “added value” that you provided that is appreciated.  Just be careful to make it subtle and not something that might turn customers away