Letters by Topic
Letters on Switching Costs
High switching costs lock customers in — once they use a product, switching to a competitor becomes financially or logistically costly, giving the company pricing power.
2002·Switching costs in insurance business
In insurance, once a customer has coverage, switching to another provider is cumbersome. This gives Berkshire Hathaway's insurance operations a significant advantage.
2011·Pricing power from customer lock-in
Businesses with high switching costs can maintain pricing power because customers are reluctant to change.
Explore the concept
Switching Costs is one of the ideas behind the ValueOS tools. See it applied to real companies.