Definition of Switching Cost

Switching cost is the cost that consumers bear while switching from an old brand, product, service, or supplier to a new one. The switching cost can be non-financial also. This cost includes psychological, time, distance, or effort-based costs. This cost can be high or low. If the consumer feels a high switching cost, it will perceive low value from the new brand, product, service, or supplier.


Example of Switching Cost:

Your current TV cable bill is $40 per month and you found a new supplier who is offering the same services for $30 per month. If the person switches to a new supplier, he will save $10 in it. But other than monetary cost, the non-financial cost is also important to consider before switching.

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