Switching costs

The money, time, training, integration work, or disruption a customer faces when changing a supplier or product. High switching costs may deter a change, but they do not guarantee retained customers or revenue.

Switching costs in practice

Hypothetical: a manufacturer considering a new component supplier must pay for retooling, test quality, and requalify the component before production can switch. Those costs may outweigh a lower quoted unit price. A different technology or a simpler qualification process could reduce the switching burden.

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