Switching Costs
The costs a customer incurs when changing from one product or supplier to another. Includes financial costs, time, effort, learning curves, and loss of accumulated benefits.
Used in the Books
This term appears in 19 chapters:
"...ulti-source when possible (don't lock into exclusive partnerships) - Measure and reward performance (like legumes measuring nitrogen fixation) - Make switching costs low for you, high for cheaters - Share information about partner quality publicly Step 5: Plan for Endosymbiosis Carefully Why This Matters..."
"...os struggle as larger, better-capitalized entrants arrive. Climax stage: Market matures. Dominant platforms emerge (AWS, Visa, Salesforce, SAP). Switching costs entrench incumbents. Innovation slows to incremental improvements. Competition is brutal - climax communities are the most competitive ecosystems, no..."
"... requires different mental model (social, strategic) - Switching models = high cost (working memory cleared, rebuilt) - Batching similar work reduces switching cost Circadian optimization: - Makers peak: Morning for most (8 AM - 12 PM highest cognitive performance) - Managers peak: Afternoon acceptable (2-5 ..."
"... Diseconomies of scale in defense Digital territories: - Network effects mean 2× users provides >2× defensibility - Each additional user increases switching costs for all users (social graph, data portability, ecosystem lock-in) - Defensive moat strengthens with scale, not weakens - Result: Economies of scale i..."
"Customer Relationships (Priority: CRITICAL) - Low churn > new acquisition (recurring revenue model) - Integration depth creates switching costs - Support quality determines retention 3. Financial Reserves (Priority: HIGH) - Predictable recurring revenue enables planning - 12-18 months ..."
And 14 more chapters...
Biological Context
Switching costs parallel the costs organisms pay to change strategies or habitats: learning new foraging techniques, establishing new territories, losing accumulated local knowledge. High switching costs make organisms 'sticky' to current strategies even when alternatives might be better.
Business Application
Switching costs protect existing business relationships. Types include procedural (relearning), financial (contracts, lost loyalty points), and relational (personal connections). High switching costs justify customer acquisition investment.