Economists call them “switching costs” - the monetary, physical and convenience penalties that keep customers “loyal.”

For example, ordering a new computer is fairly easy. But transferring all your data, installing your software and getting it set up exactly the way you want is time consuming.

It’s a switching cost.

It used to be you were stuck with a single cell phone company if you wanted to keep your cell number.

That was a strong switching cost.

ChiefMarketer.com thinks the era of zero switching costs is here:

Zero switching costs, an economist’s ideal where consumers can buy products and services from multiple vendors without paying penalties for doing so, is increasingly becoming a reality. The Internet has given customers access not only to more information about products and services but also to tools to help them efficiently find, compare, and buy these products and services.

It takes a zero-switching-cost world to find out what your customers really think about you. Once exposed to this world, established companies quickly discover that their brands, distribution, and capital are inadequate to win — as has happened to Blockbuster in its battle against Netflix. Those 10 people may have waited behind me in line that time, but it’s safe to say that a number of them won’t be waiting in a Blockbuster again any time soon — if ever.

The point? A zero-switch customer isn’t bound by anything.

Low Loyalty.

Example: you might find a DVD player at an online store where you bought your last half-dozen home electronics, but the shipping cost could seem a little high.

A few clicks later, you’re at a competitor’s site discovering if you’re right or wrong.

In that environment, organizations increasingly saddle themselves with expensive methods of retaining customers - incentives like loyalty programs, purchase incentives, expensive guarantees, etc.

Yet all they’re truly doing is creating temporary loyalty (until a competitor one-ups them)

Enter Engagement.

Engaging customers (perhaps through shared values and passions) attaches a customer to a company instead of a product.

For example, If I’m one of the growing ranks of “green” consumers, I’m more likely to engage with a “green” company - and the highest marks will go to the one that proves its “greenness” through a two-way dialog.

You can advertise your greenness all you want - and it will have some effect - but it’s far more expensive (and far less reliable) than engagement marketing.

Engagement means you don’t force a perception on a customer as much as help them reach it themselves.

That’s longer-lasting loyalty than the temporary loyalty created by incentives and advertising campaigns.

In a world where consumers grow increasingly jaded by the barrage of messages meant to “grab attention” and differentiate similar products, the price of success via traditional “interrupt” marketing channels keeps rising.

Yet the costs of engagement keep falling.

In a zero-switch environment, engagement creates real loyalty, while interrupt channels create “temporary loyalty.”

Which returns the higher lifetime ROI?

Chief Marketer article source: Zero Switching Costs Are Here

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