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Managing customer switching costs: A framework for competing in the networked environment

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Author Info

  • Hess, Mike

    ()
    (IESE Business School)

  • Ricart, Joan E.

    ()
    (IESE Business School)

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    Abstract

    Previous research argues that customer switching costs play an important role in the firm 's ability to retain customers and achieve competitive advantage.Research also indicates that in the increasingly networked environment,switching costs are changing in important ways.Despite switching costs 'recognized role in contributing to competitive advantage and their increasingly strategic characteristics in the expanding networked environment,we find a lack of coherence and completeness in the conceptual tools and models developed to understand their role and help effectively manage the phenomenon.In this paper we attempt to address these needs by expanding and refining the conceptualization of switching costs and developing a more comprehensive framework for managers.

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    Bibliographic Info

    Paper provided by IESE Business School in its series IESE Research Papers with number D/472.

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    Length: 32 pages
    Date of creation: 01 Oct 2002
    Date of revision:
    Handle: RePEc:ebg:iesewp:d-0472

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    Keywords: Strategy; customer switching costs; framework;

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    References

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    1. Nicholas Economides, 1997. "The Economics of Networks," Industrial Organization 9701002, EconWPA.
    2. Erik Brynjolfsson & Michael D. Smith, 2000. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Management Science, INFORMS, vol. 46(4), pages 563-585, April.
    3. Economides, Nicholas, 1996. "Network externalities, complementarities, and invitations to enter," European Journal of Political Economy, Elsevier, vol. 12(2), pages 211-233, September.
    4. Gallini, Nancy & Karp, Larry S, 1989. "Sales and Consumer Lock-In," Economica, London School of Economics and Political Science, vol. 56(223), pages 279-94, August.
    5. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
    6. Joseph Farrell and Nancy T. Gallini., 1987. "Second-Sourcing as a Commitment: Monopoly Incentives to Attract Competition," Economics Working Papers 8760, University of California at Berkeley.
    7. Farrell, Joseph & Shapiro, Carl, 1988. "Dynamic Competition with Switching Costs," Department of Economics, Working Paper Series qt1h02g9q4, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    8. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
    9. Klemperer, Paul, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 375-94, May.
    10. Joseph Farrell & Garth Saloner, 1985. "Installed Base and Compatibility With Implications for Product Preannouncements," Working papers 385, Massachusetts Institute of Technology (MIT), Department of Economics.
    11. J. Yannis Bakos, 1997. "Reducing Buyer Search Costs: Implications for Electronic Marketplaces," Management Science, INFORMS, vol. 43(12), pages 1676-1692, December.
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    Cited by:
    1. Choi, David Y. & Stack, Martin H., 2005. "The all-American beer: a case of inferior standard (taste) prevailing?," Business Horizons, Elsevier, vol. 48(1), pages 79-86.

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