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

Author

Listed:
  • Hess, Mike

    () (IESE Business School)

  • Ricart, Joan E.

    () (IESE Business School)

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.

Suggested Citation

  • Hess, Mike & Ricart, Joan E., 2002. "Managing customer switching costs: A framework for competing in the networked environment," IESE Research Papers D/472, IESE Business School.
  • Handle: RePEc:ebg:iesewp:d-0472
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    File URL: http://www.iese.edu/research/pdfs/DI-0472-E.pdf
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    References listed on IDEAS

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    1. Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco.
    2. Joseph Farrell & Carl Shapiro, 1988. "Dynamic Competition with Switching Costs," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 123-137, Spring.
    3. Paul Klemperer, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 375-394.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    10. J. Yannis Bakos, 1997. "Reducing Buyer Search Costs: Implications for Electronic Marketplaces," Management Science, INFORMS, vol. 43(12), pages 1676-1692, December.
    11. Gallini, Nancy & Karp, Larry S, 1989. "Sales and Consumer Lock-In," Economica, London School of Economics and Political Science, vol. 56(223), pages 279-294, August.
    12. Economides, Nicholas, 1996. "Network externalities, complementarities, and invitations to enter," European Journal of Political Economy, Elsevier, vol. 12(2), pages 211-233, September.
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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.

    More about this item

    Keywords

    Strategy; customer switching costs; framework;

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M19 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Other

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