Identify a true statement about switching costs.
A)The lower the switching costs, the easier it is for competitors to poach customers.
B)The higher the switching costs, the easier it is to convince customers to switch brands.
C)It is the loss in profit incurred by a firm for every buyer who switches to another brand.
D)It is the cost a firm has to pay to each buyer who switches to another brand for superior quality.

Question

Quizplus · Accepted Answer

Switching costs refer to the costs a customer incurs while switching from one brand to another. The higher the switching costs, the harder it is for customers to switch to a different brand, making it difficult for competitors to poach customers. Therefore, option A is the true statement. Option B is incorrect because higher switching costs make it difficult for customers to switch brands. Option C is incorrect because switching costs refer to the cost incurred by the customer, not the firm. Option D is incorrect because firms do not have to pay customers who switch to another brand.

Identify a True Statement About Switching Costs