Switching Barrier
Why should customers switch to our product? New products pop-up every day in the market. But even if they’re cheaper or have more features, how frequently do we switch? Usually, not a lot. But why not? We know it’s difficult to switch despite the obvious benefit. This difficulty to switch to an alternative is the switching barrier.
We tend to forget that each product has a learning curve and a replacement cost. It takes a lot of time to get hands-on with a product. It takes even longer to develop an expertise to use the product at its peak efficiency. Learning a new product from scratch would involve investment of precious time and resources. The effort would be monumental if multiple employees use the product in an organisation. Hence, the replacement cost is an important consideration.
What are the factors we need to consider while building a good product? How do we incentivise the customer to cross the switching barrier? Let’s understand.
1. Improvement is required
This is the most intuitive factor. If our product is inferior or similar to existing alternatives, it’s unlikely the customer will switch. Hence, we need to identify customer pain points with existing solutions and fix those problems. Example: We’re unlikely to replace our car with another similar model unless it has completed it’s useful life. But if we have the option to switch to an automatic car, which is easier to learn and has a better fuel economy, most of us would. It is happening in the US where cars are predominantly automatic now.
2. Improvement where required
Enhancing features that the customer doesn’t care about is futile. The addition of delight features is also less likely to move the customer. We need to improve features that affect the customer’s experience, like pricing or performance features. Example: We would not switch our car for another with a better wiper, headlights, seat belts, etc. But if the car had better fuel economy, higher safety rating, etc., we would consider switching to another model.
3. Improvement multiple required
Slight improvements are unlikely to motivate a customer to switch. They will spend some time, money, etc. to replace the existing solution. There should be enough incentive for them to invest resources to make the switch. Various entrepreneurs, writers, and researchers suggest improvement in performance ranging from 2x to 10x as the minimum required to facilitate the change. Since each situation has its unique constraints, we can consider the replacement cost, perceived benefit, time, consumer behaviour etc., and make a calculated guess. Example: We need to switch to greener alternatives to save our environment. Let’s assume our vehicle emits X amount of CO2 every year. How motivated would we be to switch to a vehicle which emits 0.99X? How about 0.9X? How about 0.09X? Different people would switch at different levels but it’s obvious that higher the improvement, higher the motivation to switch. Hence, the product needs to be multiple times better than existing solution to motivate enough users to switch to make it viable.
Case-Study
I experienced this switching barrier problem as well. One of our team members in Scaler had to post an announcement on multiple Slack channels. She would often post the same message in 10+ channels. Searching channel names each time and then posting the message seemed cumbersome and wasteful.
To solve this problem I created a Slack bot. It would take the channel names and the message in the input command to make the post. It didn’t require repetitive search and would save a lot of time. I proudly shared the solution with the team member. I was waiting for the thank you message, but it never came.
Later I found out that she had not used the bot :( I asked her what happened but didn’t get any helpful response. To get a first-hand view of the situation, I tried to replicate her behaviour. As I tested the manual and bot approaches, I realised the time savings were ~1 minute. And she performs that operation twice a day. 2 minutes in an 8-hour work-day aren’t significant. So it didn’t necessitate a behaviour change. It was a shocker, but I was happy to have learned my lesson with a trivial task.
