A cable TV company gives current customers a year-long discount for each new customer they bring to the cable company. Jose, a current customer, gets five of his friends to sign up for cable TV service with his provider so that he can receive discounts on his cable bill. The cable TV company is using a _____ strategy to create a barrier to entry.

Question

Quizplus · Accepted Answer

The cable TV company is using a network effect strategy, where the value of the service increases for both new and existing users as more people join the network. By offering discounts to current customers for bringing in new customers, the company enhances the value and appeal of its service, creating a barrier to entry for competitors.

A Cable TV Company Gives Current Customers a Year-Long Discount