Loyalty Management Consulting uses the services of QuickBite, which runs the employee cafeteria in the building and also caters business meetings at a discounted rate because of the volume of business it does with Loyalty. The other available cafeteria services do not provide catering. In this case, if Loyalty decides to terminate QuickBite's contract and shift to some other service, it is likely to create
A)high employment costs.
B)redemption costs.
C)favorable quality status.
D)complementary products.
E)high switching costs.

Question

Quizplus · Accepted Answer

Loyalty Management Consulting is likely to face high switching costs if it decides to terminate QuickBite's contract and shift to some other service. This is because QuickBite is catering discounted rates for business meetings due to the volume of business Loyalty gives them. Other available cafeteria services do not provide catering, which means that Loyalty would have to incur additional costs to find other catering services. This would not only create high switching costs but also interrupt the usual operations creating additional disruption.

Loyalty Management Consulting Uses the Services of QuickBite, Which Runs