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

  • Hess, Mike


    (IESE Business School)

  • Ricart, Joan E.


    (IESE Business School)

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    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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    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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    1. Joseph Farrell & Nancy T. Gallini, 1988. "Second-Sourcing as a Commitment: Monopoly Incentives to Attract Competition," The Quarterly Journal of Economics, Oxford University Press, vol. 103(4), pages 673-694.
    2. 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.
    3. Economides, Nicholas, 1996. "The economics of networks," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 673-699, October.
    4. Nicholas Economides, 1997. "Network Externalities, Complementarities, and Invitations to Enter," Industrial Organization 9701004, EconWPA.
    5. J. Yannis Bakos, 1997. "Reducing Buyer Search Costs: Implications for Electronic Marketplaces," Management Science, INFORMS, vol. 43(12), pages 1676-1692, December.
    6. Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 515-539.
    7. Michael Smith & Erik Brynjolfsson, 1999. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Computing in Economics and Finance 1999 1022, Society for Computational Economics.
    8. Nicholas Economides, 1998. "Competition and Vertical Integration in the Computing Industry," Working Papers 98-11, New York University, Leonard N. Stern School of Business, Department of Economics.
    9. 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.
    10. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
    11. Joseph Farrell and Carl Shapiro., 1988. "Dynamic Competition with Switching Costs," Economics Working Papers 8865, University of California at Berkeley.
    12. Paul Klemperer, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 375-394.
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