In technology marketing, switching costs are a big barrier for startups. A customer will make drastic changes to their existing infrastructure … very rarely. Most often, customers will make incremental improvements to their infrastructure to support its business. Due to this reality, startups run into a steep hill when it tries to sell to customers without an in-depth understanding of switching costs. This is why low TCO (total cost of ownership) and “transparency” have been effective themes for B2B technology marketing. Transparency just refers to changing what goes on internally (e.g., how data is treated inside a box) without changing what a user or customer perceives externally.
Switching costs rarely get a lot of attention by vendors and customers alike when times are good. When the focus is on top line growth, customers assume that the downside of making a change (or, switch) is dwarfed by the upside of the new product. When the focus is overly placed on the bottom line (as it is during bad times), customers exaggerate the downside of making anything but a mandatory change and, thus, high switching costs become anticipated and feared.
Startups must incorporate a way to minimize the burdens of switching costs. That’s not a job you should let customers figure out. Do it for them. They’ll appreciate you for it. It’s no different than pleasing your boss. The more you can anticipate and do for them, the better off both of you will be.
- John
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