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  1. Hello!
    Can you please explain more on switching costs (the definition)? Especially why the switching costs for customers bargaining power is low and for suppliers – high?

    Thank you.

    • It is simply the bother and expense of switching suppliers.

      If there are high switching costs, then the buyer will be reluctant to switch. The supplier is in a relatively strong position.

      It used to be the case that switching mobile phone networks had a high switching cost because you would have to change your phone number. Networks knew that customers would be reluctant to do that. Now (in the UK, at least) users are entitled to keep their numbers when changing networks so users are more likely to decide to switch if there are small price differences.

    • Supplier led = when suppliers perceive linkages between separate sectors. For example, mobile phone operators see linkages between phone calls, data transmissoin, cloud services and begin to offer all.

      Market-led (or customer-led) is where consumers start to substitute one product with another. For example, conventional TV stations, iPlayer (catch-up over the internet) and Netflix.

      As far as I can see the distinction isn’t very important: both sides of the transaction have to be willing to trade.

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