Switching Costs and Apple’s Pie


Of course firms  try to do what they can to increase the switching costs for customers who might consider rivals’ products. Apple has been a master of this — all in the name of customer service. A recent article by Geoffrey Goetz describes why the Apple “ecosystem” is so hard to move away from. While this analysis suggests that the cost of switching isn’t nearly what people might imagine (less than $10), if people perceive the costs to be high, that may be all that matters. A recent study indicated that Apple has taken three times as many customers from Samsung as Samsung has taken from Apple. In this sense, the perceived switching costs would seem to run in Apple’s favor. While this analysis can be done on any industry, asking people in the classroom about switching smartphones is likely to unearth a rich discussion. This can be used to introduce five forces analysis and also illustrate how switching costs can be asymmetric in an industry and contribute to a favorable position for a given firm.

Contributed by Russ Coff

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