Switching Costs: A Person’s #1 Reason for Not Trying Your Service

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People get comfortable with routines…even if they aren’t the most efficient. Sticking with a familiar inefficiency is often less daunting than switching to an unknown.

Many companies try to sell their products and services as an ‘easier’ or ‘time saving’ or ‘better’ way to do something, but even if your potential customers will save time and effort in the long-run, there are often huge switching costs that prevent them from making the leap.

Here is a personal example:

I was banking with an institution I had been unsatisfied with for years. Their fees were high, their customer service was awful and their practices were not very friendly. I was constantly complaining about them, but it took me forever to switch. Why? Because my whole life was tied to that bank. Even though I was miserable and there were much better banks for my needs, I was avoiding the time and pain it would take to switch my bills, PayPal account, credit cards and day-to-day routine. Besides, what if I took the time to switch and things didn’t improve? I felt like I’d be happier being unhappy with what I already know.

I finally switched when things got unbearable and another bank gave me the tools (and sat with me) to switch everything over effortlessly, but even then, it was a bit of a pain. I’m happier now, but it took a few years and being acutely dissatisfied for me to switch and I’m just an individual.

If you are selling to larger businesses, the switching costs are even higher. New processes, even if they are simpler, take new training. And for a large organization, this takes a big swath of time and money. People get used to the irritating workarounds for their inefficient systems. They learn shortcuts and tricks to beating the odds that become part of a daily routine.

Just the other day, I encountered a business that used Photoshop for their invoicing because they understood the tool and didn’t want to learn a new one! I even demonstrated how simple it was to use something like Freshbooks (I have no affiliation, but I use it and love it), but the business owner explained that this worked just fine and switching would mean he’d have to relearn and do a bunch of work to transfer all of his clients to the new platform. Even if this only took a few days, he didn’t see the advantage over the switching costs.

Sure, you may offer webinars, instructional videos and a support network that help with the training, but that could make switching seem even more complicated for your potential clients. Don’t fret, though, there ARE better approaches to helping people get over their fear of switching. Here are a few:

  1. Figure out a way to reduce or eliminate switching time automagically.
    WordPress does this incredibly well. In most cases, you can just point it at your old blog or upload a file and it will ‘suck in’ your posts, tags, comments, etc. so that you are up and running in no time.
  2. Acknowledge the switching costs up front.
    Don’t just say, “We’ll save you time”. That’s too vague. Your homepage is for new arrivals with doubts, so alleviate those doubts. Know the pain points of your potential customers and speak to them. Give time estimates.
  3. Give them an incentive.
    I’ve seen banks offer iPads to open a new account, but it doesn’t have to be that drastic. Free trials work, too. However, many people don’t get the chance to really try your product unless they switch completely (and many won’t switch until they try it – catch 22!), so give them test content or offer a one-on-one demo with their data.
  4. If you can’t eliminate time to switch, give clear, simple instructions step by step through the sign up process.
    Use screenshots and clear, short instructions to help your customers through the process so they aren’t left hanging at any point. It’s not talking down to them, it’s doing the legwork for them.
  5. Create a switching officer program…for free.
    Many people will give up privacy for convenience. Offer the ability to switch for them. “We’ll set you up so you are ready to go!” The upfront cost will pay off in the long run.

Of course, this only eliminates a few of the switching costs involved. Some more switching costs are:

  1. legacy systems (you can make sure your product is backwards compatible)
  2. training of staff (offering free training or creating a product that has incredibly intuitive UX helps)
  3. trust (this one is very complicated in today’s world of false-promises – it takes time and perseverance)
  4. costs (in the Photoshop invoice case, the business owner didn’t want to pay a monthly fee to merely invoice – you need to show how your cost can make your clients money)
  5. competition (when faced with the paradox of choice, a customer won’t switch at all. The choice should be crystal clear.)

But whether a potential customer needs to switch from something they hacked together or a competitor, you need to recognize that “we’re better” or “we save you time and/or money” isn’t enough to get over the ultimate barrier of switching. Recognizing this will help you see things from your customer’s point of view more clearly so you can help them faster.

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Categories: eMarketing, featured, marketing

Author:Tara Hunt

Strategist. Researcher. Interdisciplinarian. Founder, Lime Foundry + Buyosphere. Author, The Whuffie Factor. Speaker. Mother. Karaoke lover.

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One Comment on “Switching Costs: A Person’s #1 Reason for Not Trying Your Service”

  1. October 20, 2013 at 04:27 #

    Reblogged this on Skipper On Deck.

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