Customer lock-in
Customer lock-in makes changing to an alternative supplier or system costly or inconvenient. It can arise from learning, compatibility, data migration, complementary products, contracts or network effects. It may support retention, but customers’ continuing purchases do not necessarily demonstrate satisfaction. Assess the durability and acceptability of the arrangement, available substitutes and the effect on long-term relationships.
Worked example
A business considering new software must allow for retraining and migration of historical data. Those switching costs can make it remain with the existing supplier even where an alternative has a lower subscription price.
Common mistake
Do not define lock-in as absolute inability to switch or assume a supplier must dominate the whole market. Distinguish switching barriers from genuine customer preference.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBL | Direct | September 2026–June 2027 |